By TIOL News Service

MUMBAI, FEB 24, 2015: THERE are 10 appeals filed by various importers. The issue involved in all these appeals is common and it relates to levy of anti dumping duty on Compact Fluorescent Lamps (CFL) imported from China in SKD form and in different consignments and at different ports.

The case of the department is that all the importers imported CFL in SKD condition without payment of Anti-dumping duty leviable on CFL vide Customs Notification No. 138/2002-Cus dated 20/12/2002.

Investigation revealed that one of the importerswas importing glass tubes with base from China at Kandla port and holders with wire and populated PCBs for CFL at Mumbai. The CFLs were being assembled at their factory by soldering the above goods. All the components put together constituted CFL in SKD form and as per Rule 2(a) of the General Interpretative Rules of the Customs Tariff Act, 1975, the same merited classification as CFL under CTH 8539 3110 and not as components of CFL under CTH 8539 9010 as claimed by the appellant. Similar modus operandi, it is alleged, was followed by other importers too.

The goods were confiscated; Anti-dumping duty of Rs. 76,97,68,897/- was confirmed along with interest thereon and equivalent amount of penalty was also imposed on M/s. Samay under Section114A and a penalty of Rs. 1 crore was imposed on Shri Ramesh Patel, Director of M/s. Samay under Section 112(a) ibid.

Likewise orders were passed in respect of the other importers too and all of them are in appeal before the CESTAT.

Incidentally, in the matter of stay applications filed by M/s Samay Electronics Pvt. Ltd. & Sh. Ramesh Patel , the Division Bench had held that the case was prima facie in favour of the appellants and had accordingly waived the pre-deposit of entire duty & penalty and granted a stay from recovery. We reported this order as 2008-TIOL-2212-CESTAT-MUM.

The Bench had then mentioned - since the revenue involved is very heavy, we grant an early hearing and fix the matter for final hearing on 18th November 2008.

Be that as it may, the appeals of the above mentioned appellants and eight others were heard in the month of October 2014 and final orders were passed recently – and they trudged a different path…

Extensive submissions were made by both sides replete with case laws.

The Bench crystallised the submissions made and inter alia observed thus –

Whether, with the expiry of Notification 138/2002-Cus dated 10/12/2002 w.e.f 20/12/2006, recovery proceedings for escaped anti-dumping duty could be initiated or continued or not?

++ A similar issue came up for consideration by a Larger Bench of this Tribunal in the case of Surana Metals & Steels (I) Ltd. 2007-TIOL-1373-CESTAT-MAD-LB. The Larger bench noted that, there cannot be a greater all pervasive saving clause than Section 38A and concluded that the provisions of Section 38A of the Central Excise Act, 1944 inserted by Section 131 of the Finance Act, 2001 are applicable in respect of the obligations and liabilities incurred under Rules 96ZO and 96ZP before they were omitted by Rule 7 of the Central Excise Rules, 2001, notwithstanding the omission of Section 3A w.e.f 11/05/2001 by the Finance Act, 2001. Section 159A of the Customs Act is identical in its wordings and scope to Section 38A of the Central Excise Act, 1944 and was inserted into the Customs Act, 1962 vide Section 113 of the Finance Act, 2001 and vide Section 114 of the said Finance Act, 2001, the action taken were validated as if the provisions of Section 159A were in force at all material times w.e.f. 01/02/1962 onwards till the enactment of Finance Act, 2001, notwithstanding anything contained in any judgment, decree or order of any Court, Tribunal or authority. In other words, Section 159A of the Customs Act, is in pari materia with Section 38A of the Central Excise Act, 1944, and, therefore, the Larger Bench decision in the case of Surana Metals & Steels (I) Ltd. (supra) would apply with full force in the facts of the present case also.

[Shree Bhagwati Steel Rolling Mills vs. Commissioner of Central Excise, Chandigarh 2007-TIOL-13-HC-P&H-CX .Mittal Alloys vs. Commissioner of Central Excise, Chandigarh 2013-TIOL-1118-HC-P&H-CX also refers]

++ In the present case, the anti-dumping duty Notification expired. Expiry is also one form of supercession or recission or repeal, the effect being the same as the latter. Therefore, the contention of the appellants that adjudication proceedings cannot continue after the expiry of anti-dumping duty Notification for recovery of any escaped duty liability or imposition if any penalty, is without any merit and we reject this contention totally. Therefore, the Commissioner of Customs is well empowered to initiate, continue and conclude, any proceedings to determine the liability when the anti-dumping duty Notifications were in force and any liability which has arisen during the currency of the anti-dumping duty Notification cannot be wiped out merely because the Notification expired or ceased to exist. With the retrospective application of sub-section (8) of Section 9A of the Customs Tariff Act, the provisions of Section 159A of the Customs Act would apply in respect of the proceedings relating to anti-dumping duty as well and, therefore, the argument that after expiry of the anti-dumping notification proceedings cannot be initiated has no legal basis and we reject this contention.

DGAD clarification of April, 2006- relevance

++ Reliance has been placed on the clarification given by DGAD in April, 2006 about the scope of levy of anti-dumping duty on CFL to say that the said levy applies only on complete, ready to use CFL and not on CFL imported in CKD/SKD condition. This argument is not tenable for two reasons. The clarification has been issued in 2006 in respect of a levy imposed in 2002. Therefore, the said clarification is not contemporaneous as to have any persuasive value. Secondly, the levy is governed by the Customs Notification 128/2002-Cus. In the said notification as also in the notification issued by the DGAD recommending the levy, the expression used is “compact fluorescent lamp falling under Chapter 85 of the First Schedule to the Customs Tariff Act”. It is these words used in the notification, which are unambiguous and clear, that would prevail for the purposes of the levy rather than any clarification issued in this regards, that too, after a considerable lapse of time. It is a settled position that the law has to be interpreted strictly in accordance with the language employed. Nothing has to be read in or nothing has to be excluded while interpreting the plain terms of the statute. As stated by the Privy Council [Crawford vs. Spooner. (1846) 6 Moore PC i]- “we cannot aid the Legislature's defective phrasing of an Act, we cannot add or mend and, by construction, make up deficiencies which are left there.” Therefore, no reliance can be placed on the said circular for interpretation of the anti-dumping duty notification.

Rule 2(a) of General Interpretative Rules - classification:

++ The contention of the appellant is that the present proceedings seek to levy anti-dumping duty on the goods under importation by invoking the provisions of Rule 2(a) of the General Interpretative Rules whereas in respect of basic Customs duty or countervailing duty, the notice does not seek to treat the goods imported as complete CFLs but accept the position that they are parts of CFL. This contention is also not valid. There are different types of Customs duty levied under different Acts or Notifications. There is a duty of Customs chargeable under Section12 of the Customs Act, 1962. There is an additional duty of Customs leviable under Section 3(1) of the Customs Tariff Act, 1975, equivalent to the duty applicable on domestically produced goods. Further, under Section 3(3) of the Customs Tariff Act, additional duty can be levied on raw materials, components and ingredients that go into the manufacture of imported goods. Further anti-dumping duty can be levied under Section 9A of the Customs Tariff Act, 1975. Merely because the levy of customs duty under Section 12 of the Customs Act, 1962 arise on the importation on the articles into India, it does not mean that the Customs Tariff Act cannot provide for the charging of any duty which is independent of the Customs duty leviable under the Customs Act. Anti-dumping duty is one such levy, which is independent of the duty of Customs charged under Section 12 of the Customs Act or the duty levied under Section 3 of the Customs Tariff Act. That does not mean that if any liability arises on account of levy of anti-dumping duty under Section 9A, separate and independent proceedings cannot be instituted by the department against the importer.

Rule 2(a) of General Interpretative Rules – whether can be invoked for levy of ADD

++ The first requirement is to ascertain whether the goods under importation conforms to the description specified in the anti-dumping duty Notification. In other words, the goods have to be classified under the Customs Tariff Act first before levying anti-dumping duty. General Rules of Interpretation of the Schedule to the Import Tariff says “classification of the goods in the schedule would be governed by the following principles”. In the present case, Rule 2(a) is relevant… From the above Rule, it is evident that for the purposes of classification, an incomplete or unfinished article, if as presented, has the essential character of a complete or finished article, it would be covered by the heading pertaining to the complete or finished article. The second part of the Rule makes it clear that the reference would also include to the article presented unassembled or disassembled. Thus, for the purpose of Customs classification, these Rules shall apply and if by applying these Rules, the imported goods become classifiable under Chapter 85, the provisions of anti-dumping notification shall also apply, as per the clear and unambiguous wordings of the notification levying anti-dumping duty.

++ Anti-dumping duty is levied on articles dumped into country of the description specified in the notification and falling under the corresponding tariff items mentioned against them. Section 9A forms part of the Customs Tariff Act and therefore, the Rules of Interpretation, which is an integral part of the Schedule in the Customs Tariff Act would apply in respect of the levy under Section 9A as well. Further, as per Rule 2(g) of the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, the expression “article” has the meaning assigned to it in the Customs Tariff Act, 1975, Rule 2(a) of the General Rules of Interpretation which is an integral part of the said Act defines the meaning of the term “article”. Thus as per the statutory provisions relating to anti-dumping duty, the said levy would apply not only to complete articles but also to incomplete articles or articles, unassembled or disassembled, if as presented the incomplete article has the essential character of the complete article. In other words, the scheme of levy of anti-dumping duty under the Customs Tariff Act, 1975, does not envisage or prescribe a separate set of principle of classification for the purposes of the said levy. The General Rules of Interpretation of the Tariff would apply equally for the levy of basic customs duty under the Customs Act, Additional Duty of Customs under Section 3 of the Customs Tariff Act as well as Anti-dumping duty under section 9A of the Customs Tariff Act. Therefore, the contention of the appellant about the inapplicability of Rule 2(a) of the general interpretative rules for levy of anti-dumping duty has to be rejected as it is contrary to the statutory provisions, which are loud and clear.

Confirmation of demand u/s 28 of CA, 1962 r/w s.9A of CTA, 1975 – whether legal:

++ This contention is bereft of any logic in view of the retrospective amendment made to Section 9A of the Customs Tariff Act, 1975 by inserting sub-section (8) vide Finance Act, 2009. As per the newly introduced sub-section, the provisions of the Customs Act, 1962 and the Rules and Regulations made thereunder including those relating to the date for determination of rate of duty, assessment, non-levy, short levy, refunds, interest, appeals, offences and penalties shall, as far as may be, apply to the duty chargeable under this section (that is, 9A) as they apply in relation to duties leviable under that Act (that is, Customs Act). Further vide Section 102 of the said Finance Act, validation of the actions taken under Section 9A of the Customs Tariff Act has also been provided as if the provisions of sub-section (8) existed at all times and recovery shall be made of all such amounts of duty or interest or penalty, fine or other charges which have not been collected as if the amendment made by the said section had been in force at all times. This validation of the action is for the period commencing on/and from 01/01/1995 and ending with day on which Finance (No.2) Bill, 2009 got the Presidential assent. Therefore, there is no merit in the contention that Section 28 of the Customs Act cannot be invoked for recovery of anti-dumping duty which has escaped the levy.

Limitation:

++ From the documents seized and the statements recorded, it is clear that the appellants intended to import complete CFL and they deliberately played a subterfuge to split the consignments and importing them under different consignments or through different ports. Such action on the part of the appellants is a fraud perpetrated on the exchequer. An act of fraud on Revenue is always viewed seriously. Argument that demand is hit by limitation is not tenable.

"Circumventing" ADD:

++ Another contention raised is that the provisions relating to circumvention of anti-dumping duty were brought into the statute only in January, 2012 and therefore, no proceedings could be initiated if the importers tried to circumvent the anti-dumping duty. The ordinary meaning of circumvention is ‘to go around, to by-pass or to avoid'. It is different from tax evasion. There is a world of difference between tax avoidance and tax evasion. Tax avoidance implies complying with the provisions of law but defeating the intention of law by taking advantage of the loopholes in the law. Tax evasion means avoidance of tax through illegal means or fraud and is undertaken by employing unfair means. We have already noted that the transactions involved fraud or unfair/illegal means by manipulation of documents and by artificial splitting of consignments with a clear intent to evade anti-dumping duty. Therefore circumvention and evasion cannot be equated. [ Mc Dowell & Co. Ltd. vs. The Commercial Tax Officer [1986 AIR 649, 1985 SCR (3) 791] relied upon.]

The case laws cited by the appellants were distinguished by placing reliance on the apex court decision in Al Noori Tobacco Products – 2004-TIOL-85-SC-CX inasmuch as it was held that the facts involved in the present case were substantially different from those obtaining in the various cases relied.

Conclusion:

++ Goods imported by the three appellants, namely, M/s. Samay Electronics Pvt. Ltd., M/s. Wipro Ltd., and M/s. Amar Energy Systems merits classification as CFL in SKD/CKD form falling under Chapter 85 of the Customs Tariff Act and, therefore, they were correctly leviable to anti-dumping duty in terms of Notification 128/2002.

++ As regards the imports made by M/s. Sunora Electronics Industries, Morbi and M/s. Shell & Pearl Ceramics Ltd., these two imports are by different, independent legal entities and each one of them is an importer in its own right. Further, the goods imported by M/s. Shell & Peal Ceramics Ltd., after importation were sold to M/s. Sunora Electronics Industries, Morbi. M/s. Shell & Pearl Ceramics Ltd. is not a dummy/front firm. They placed orders and paid for the goods which they imported and after importation, they sold the goods to M/s. Sunora Electronics Industries. Therefore, it is not possible to club these imports together and say that they constitute one single consignment so as to merit classification under CTH 8539 3110. Therefore, the principle of clubbing would fail in respect of the imports made by M/s. Sunora Electronics Industries and M/s. Shell & Pearl Ceramics Ltd. It might be possible that there was an understanding between the two parties. But such an understanding is not against any law and the transaction undertaken does not violate the provisions of the Customs Act in any way. Therefore, the demand for anti-dumping duty in respect of imports made by M/s. Sunora Electronics Industries and M/s. Shell & Pearl Ceramics Ltd. cannot be sustained in law and we hold accordingly.

++ It is a settled position in law that fine can be imposed only when goods are available for redemption. In case the goods are not available for redemption, the question of imposing any fine would not arise at all. Accordingly, we set aside the redemption fine imposed by the adjudicating authority in respect of the goods which are not available for confiscation. However, in respect of goods which have been seized and released provisionally to the appellant under bond and bank guarantee, fine is leviable and accordingly, in those situations, the imposition of fine has to be upheld.

++ As regards the penalties imposed, once the demand is confirmed under section 28 read with section 9A on account of fraud, penalty under section 114A is mandatory and cannot be waived. Therefore, the imposition of penalty on the appellants can not be faulted. In as much as penalty has been imposed on the importing firm under section 114A, which is quite substantial, we are of the view that separate penalties on the partner/Director/employees of the appellant firm is not warranted. Accordingly we set aside the penalties imposed on the officials of the appellant firms.

The appeals were disposed of.

(See 2015-TIOL-394-CESTAT-MUM)