++ Wherever the Notifications prescribed conditions, which were merely procedural in nature, but did not involve the payment of any duty of excise on the inputs, the Court interpreted the Notifications in favour of the assessee, in view of the fact that an importer could not comply with those procedural formalities. But, wherever the Notifications imposed either (i) a condition that the input used for the manufacture of the exempted goods, should have suffered a duty or (ii) a condition that duty ought to have been paid and CENVAT credit not claimed, the Court interpreted such Notifications in favour of the Revenue (except perhaps in the case of AIDEK and SRF).
++ A Notification such as the one bearing No.030/2004 dated 9.7.2004, which merely stipulates a condition that no CENVAT credit ought to have been availed in respect of the duties paid on the inputs, is in no way different from a Notification, which stipulates a condition that the inputs ought to have suffered a duty and no CENVAT credit should have been claimed on the same.
++ Report of the GATT Penal in respect of dispute between USA and Canada is of no assistance. Apart from the fact that a report of the GATT Panel is not binding on the High Court, it is also to be pointed out that the Court is concerned in this case only with an interpretation to be given to an exemption notification. The exemption notification has to be read and understood in the context of the power of exemption available under the statute.
++ Merely because an organization representing the interests of domestic manufacturers made a representation to the Government, the amendments issued to the exemption notification cannot be said to be a malafide exercise of power. As a matter of fact by the impugned amendment notifications dated 17.07.2015 and 21.07.2015, the Government had done something that may hit some of the domestic manufacturers also. A domestic manufacturer who would have otherwise been entitled to the benefit of the exemption notification dated 9.7.2004, may not any more be entitled to the benefit of the notification, unless he satisfies the newly incorporated proviso and the Explanation. Therefore, the amendments cannot be seen in isolation.
++ Contention that a condition precedent and a condition subsequent are different and condition precedent cannot be expected to be complied with by an importer - Though the argument has a sound logical basis, it does not have a legal basis. If an exemption notification is absolute and unconditional, all domestic manufacturers, will be entitled to the benefit of the same. As a consequence, the importers will also be entitled to the benefit of the same.
++ Neither Section 3 of the Customs Tariff Act, 1975, nor Article III of GATT required that an importer should be placed in a more advantageous position than the domestic manufacturer. The only requirement under GATT and even under Section 3 of the Customs Tariff Act is that the importer should not be put to a disadvantageous position than the domestic manufacturer. But what the petitioners want is to place the importer in an advantageous position. This is not permissible.
++ A challenge to a condition prescribed in an exemption notification can be tested only on very limited parameters. None of the parameters is satisfied in this case. The exemption notifications dated 17.07.2015 and 21.07.2015 are issued in exercise of the power conferred by Section 5A. Section 5A(1) itself empowers the Central Government to grant exemption either absolutely or subject to such conditions as they may stipulate. If the Central Government has the power to grant exemption subject to certain conditions, they have the power even to modify the conditions. This is why neither the source of power nor the method of exercise of such power is questioned by the writ petitioners. The impugned amendments are not in excess of the delegated power conferred under Section 5A(1). Therefore, at the outset, the amendments are not ultra vires Section 5A(1).
++ The amendments are not ultra vires Section 3 since the importers are not placed in a more disadvantageous position than that of the domestic manufacturers. By prescribing certain conditions for availing the benefit of exemption, the impugned amendments treat even the domestic manufacturers differently. Placing the importers on par with those domestic manufacturers who do not get the benefit of the exemption notification, does not strike at the root of Section 3. Therefore, the notifications do not offend Section 3.
++ Once it is found that the impugned notifications do not offend Section 5A(1) of the Central Excise Act or Section 3 of the Customs Tariff Act or even Article 14 of the Constitution, the petitioners cannot successfully maintain the challenge.
++ We are supposed to take an importer to be a domestic manufacturer of a like product by a deeming fiction. To this extent, the law is very clear and all the learned counsel for the petitioners are correct. Thereafter, the next question that we should ask is as to whether all domestic manufacturers would automatically be entitled to the benefit of the exemption notification. In respect of the exemption notifications that are absolute and unconditional, all domestic manufacturers will be entitled to the benefit of the exemption notification. Therefore, the importers will also be entitled. But, insofar as exemption notifications that are conditional in nature, the respondents will have to see whether all domestic manufacturers will automatically get exemption or some of them may not get exemption due to non fulfillment of the conditions prescribed in the notification. If some of them are not entitled, due to non fulfillment of the conditions, the importers, for whom it is impossible of complying with those conditions, are also not entitled to the benefit. It is this position that is sought to be clarified by the impugned amendment notifications dated 17.7.2015 and 21.7.2015. Hence, there are no merits in the writ petitions.
(See 2015-TIOL-2550-HC-MAD-CX)
