By TIOL News Service

BANGALORE, FEB 25, 2009: THE appellants imported kits required for conversion of motor-spirit of diesel driven vehicles into Compressed Natural Gas (CNG) or Propane or LPG driven vehicles and claimed benefit of serial No.229 of Notification No.21/2002-Cus dated 01.03.2002 and paid the duty accordingly. Later they claimed refund of additional customs duty on six Bills of Entry amounting to Rs.23,22,948/-. The ground cited by the appellant was that in the said serial no. of the Notification 21/2002-Cus against column No. 5 remark “_” is mentioned and claimed that no additional duty is payable. But the lower authority rejected the refund claim stating that such a remark does not mean that no additional customs duty is payable. The Commissioner (Appeals) also upheld the order of the lower authority.

With the result the appellant approached the Tribunal. In the course of hearing before the Tribunal, the Chartered Accountant who represented the appellant stated that wherever there is additional duty of customs, the rate of duty is mentioned, for example against serial nos. like 226, 228, the rate is given as 16%. Further, he referred to the General Rules for interpretation (In fact from the facts available in the Final Order “of the First Schedule” was not mentioned before the Tribunal by the authorized representative), wherein at para 3 (“of the General Explanatory Notes” which is again not mentioned before the Tribunal), it is stated that ‘in any entry if no rate of duty is shown in column 5, the rate shown under column 4 shall be applicable’. The Tribunal basing on this Rule of Interpretation, observed that in the instant case, since the rate shown in column 4 is 5%, duty paid in excess of 5% would be available as refund to the appellant.

The moot point is whether this Rule of Interpretation cited by the Appellant’s authorized representative, which is applicable to the First Schedule to the Customs Tariff can be made applicable to interpret the exemption notifications. In the Customs Tariff, column 4 stands for standard rate or the tariff rate and column 5 stands for ‘preferential areas’. In the Customs Tariff, except for a few chapters where specific rates of duties are prescribed for preferential areas, for a vast majority of goods classified under the Tariff column No. 5 is represented by “_”. According to Rule 3 of General Explanatory Notes of the General Rules for interpretation of the First Schedule, in such instances, the rate of duty prevailing at column No. 4 would be applicable (Of course, this is again subjected to exemption notifications issued by the Government of India for specified preferential areas). However, column No. 5 of the General Exemption Notification 21/2002-Cus stands for ‘Additional duty rate’. In this Notification, for a vast majority of items, at column No. 5 it is either mentioned as “_” or “Nil”. The question that arises is whether “_” and “Nil” are one and the same or is there any distinction between the two.

In the instant case before the Tribunal, at S.No. 229, against column No. 5 it is mentioned as “_”. While the lower authorities took the stand that as the goods are not exempt from excise duty there is no exemption for additional duty of customs in lieu of excise, the Tribunal interpreted that the rate prevailing at column No. 4 should be made applicable as per General Rules of Interpretation. It appears the positions adopted by the Tribunal as well as the Lower authorities may be erroneous in view of the Apex Courts Ruling in CCE, JAIPUR vs M/s MEWAR BARTAN NIRMAL UDYOG [2008-TIOL-188-SC-CX] wherein the Apex Court held that Rules of Interpretation applicable to classification of goods cannot be made applicable to exemption notifications. It was observed by the Apex Court that an exemption notification has to be interpreted strictly. In view of this Ruling, the decision rendered by Tribunal relying on the General Rules of Interpretation for interpreting the Exemption Notification may be erroneous and could be considered as rendered per incuriam.

(See 2009-TIOL-341-CESTAT-BANG in 'Customs')