The High Court of Madras, in a recent decision confirmed the order of the Settlement Commission in which the levy of SAD (Special Additional Duty) was removed and instead, the Additional Excise Duty (ADE) was directed to be levied on goods imported under the Additional Duty of Excise Act. The Court was considering a petition in which the petitioners contended that the levy is beyond the authority of law.
The Department initiated proceedings against the petitioners, who imported lining and interlining materials alleging that they are not eligible to concessional rates rate of duty under Customs Notification No.21 of 2002 since the goods imported were not used in the manufacture of textile garments but diverted to domestic market in contravention of the said notification with an intention to evade payment of customs duty. Accordingly, the Department issued Show-cause notices containing proposals such as the petitioners are bound to pay equal amount of duty under section 114A of the Act along with interest and the goods are liable to be confiscated.The proceedings were challenged before the Settlement Commission, where they admitted the offence, but submitted that they were asked to pay basic customs duty as applicable plus CVD at 16% plus Special Additional Duty (SAD) at 4%.Based on the provisions of Section 3A(5) of the Customs Tariff Act, 1975, the petitioners contended that SAD will not apply to the goods chargeable to additional duties levied under Section 3(1) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957.
The Settlement Commission accepted the contentions raised by the petitioners and held that SAD is not applicable to the said goods. However, the Commission also directed the Department to collect 8% of Additional Duty of Excise from the petitioners. The petitioners challenged the above order before the High Court contending that there is no provision to demand payment of 8% equal to excise duty leviable under the ADE Act, since effective rate of additional duty of customs (equal to excise duties leviable) is only 16% and not 24%.Therefore, according to the petitioners, the Commission had gone beyond the notification.
The court found that before the settlement commission, the petitioners have already admitted the fact that the levy of additional duty of excise is valid.
While confirming the order impugned, the single bench of the Court held that “As rightly pointed out by the learned Standing counsel for the Revenue, the additional duty leviable and the power to levy the Additional Duty of Excise is traceable to sub-section (5) of Section 3 of the Customs Tariff Act, 1975, (referred supra), which gives power to the Government to levy such additional duty as would counter balance the sales tax on a like article on its sale in India.”
“Admittedly, the goods which were imported by the petitioner were meant to be used for manufacture and the petitioners availed the benefit of the exemption notification. This condition having been violated and the goods having been cleared to the domestic area and the petitioner having accepted their mistake, theadditional duty of excise is leviable in terms of sub-section (5) of Section 3 of the Customs Tariff Act. The exemption which is sought to be granted by the Budget Notification pertains to the duty leviable under sub-section (1) of Section 3 of the Customs Tariff Act and there is no reference to the additional duty of excise leviable in terms of sub-section (5), the object of which has not only been elucidated in the statutory provision, and explained by the Hon’ble Supreme Court in the case of Attesee, (supra).”
Read the full text of the Judgment below.
