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Bombay High Court
Bombay Chemicals Pvt. Ltd. vs Appellate Collector Of Customs on 1 January, 1800
Equivalent citations: 1990 (49) ELT 190 Bom
Bench: R Bhatt


JUDGMENT

1. The Petitioners, in this Petition have challenged the Orders passed by Respondents Nos. 1 to 3, in relation to the import of certain chemicals, on which duty has been levied without the Petitioners getting the benefit of the exemption allowed under a Notification dated 1st March 1968, being Exh. A, to the Petition. The Petition only involves the interpretation of this Notification dated 1st Mach 1968, and the same is set out below :-

NOTIFICATION

(Customs)

G.S.R. No. In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts chemicals for the manufacture of insecticides. pesticides and fungicides and falling under Item 28 of the First Schedule to the Indian Tariff Act, 1934 (32 of 1934) when imported into India –

(i) from so much of that portion of the duty of customs leviable thereon, which is specified in the said Schedule, as is in excess of 10 per cent ad valorem where the standard rate of duty is leviable;

(ii) from the whole of the duty of customs leviable thereon, specified in the said Schedule, where the preferential rate of duty is leviable.

2. The Exemption referred to in the foregoing paragraph shall be available, if and only if, the following conditions are fulfilled, namely:-

(i) the importer in each case produces a certificate from the Directorate General of Technical Development or, in the case of importation by firms which are classified as falling in the Small Scale Sector, from the Director of Industries of the State concerned to the effect that the chemicals are required for the aforesaid manufacture and are not produced in India.

(ii) the importer, by the execution o bond in such form and i n such sum, as may be specified by the Assistant Collector of Customs, to have been used for the aforesaid purpose, an amount equal to the difference between the duty leviable on such quantity but for exemption contained herein and that already paid at the time of importation.

3. Nothing contained in this notification shall affect the exemption given under any other notification of the Government of India for the time being in force, from the standard rate of duty, or, as the case may be, the preferential rate of duty in respect of the goods referred to in this notification.

4. The short facts which are necessary for determination in this Petition are that the Petitioners are engaged in the business inter alia of manufacturers and suppliers of insecticides, pesticides and fungicides and for the purpose of manufacture of the same, the Petitioner import into India from the United Kingdom and other foreign countries raw materials including High Boiling Tar Acid, and Chlorinated High Boiling Tar acid MKU type. These are for the sake of brevity (hereinafter referred to as “the Chemicals”). These chemicals which are imported by the Petitioners are for the manufacture of disinfectant fluids. These disinfectant fluids are marketed and sold by the petitioners inter alia under the trade name of `Biokem’ which is also the registered trade mark of the Petitioners. It is the case of the Petitioners that these chemicals possess bactericidal and fungicidal properties and accordingly are insecticides, pesticides and fungicides, and entitled to the exemption of duty under the aforesaid Notification dated 1st March 1968.

5. However, when the goods were imported the Customs authorities have levied duty upon these chemicals without granting the exemption under the Notification, being Exh. A, to the Petition on the ground that these chemicals are not in fact being used for what is termed,”agricultural purposes”. The Orders of the Customs authorities are annexed to the Petition as Exhs. H, and I, being the Orders of the Assistant Collector of Customs. An appeal was filed from the said orders before the Appellate Collector of Customs, Bombay, whose Order in appeal is dated 20th October 1969, which is a composite Order in respect of all the appeals from all the order passed under Exhs. H and I, and is annexed as Exh. L to the Petition. After the Order of the Appellate Collector of Customs, dated 20th October 1969, the Petitioners have come to this Court challenging the said Orders substantially on the ground that the Respondents had no jurisdiction not to exempt these goods under the Notification, Exh. A to the Petition, as the Petitioners had duly complied with all the conditions laid down in the said Notification dated 1st March 1968, and that in fact, the chemicals were imported by the Petitioners fall within the purview of the said Notification, dated 1st March 1968, being Exh. A to the Petition.

6. Under the Notification dated 1st March 1968, being Exh. A to the Petition, an exemption was granted for chemicals for the manufacture of insecticides, pesticides and fungicides and falling under Item 28 of the First Schedule to the Indian Tariff Act, 1934, when imported into India from the duty as mentioned in sub-clause (1) and (2) of the said Notification. However, this exemption could only be granted if the conditions mentioned in paragraph 2 of the said Notification were complied with and only on such compliance. Paragraph 2 states that the exemption referred to above shall be available, if, and only if the following conditions are fulfilled, namely : – (i) the importer in each case produces a certificate from the Directorate General of Technical Development or, in the case of importation by firms which are classified as falling in the Small Scale Sector, from the Director of Industries of the State concerned to the effect that the chemicals are required for the aforesaid manufacture and are nor produced in India; (ii) the importer, by the execution of bond in such form and in such sum, as may be specified by the Assistant Collector of Customs, binds himself to pay, on demand, in respect of such quantity of the chemicals as is not proved to the satisfaction of the Assistant Collector of Customs to have used for the aforesaid purpose, an amount equal to the difference between the duty on such quantity but for the exemption contained herein and that already paid at the time of importation.

7. After the issue of the said Notification dated 1st March 1968, being Exh. A to the Petition, a public Notice dated 25th September 1968, which is annexed as Exh. C, to the affidavit in rejoinder dated 29th June 1973 filed on behalf of the Petitioners. Under this Public Notice the attention of the trade was invited to the aforesaid Notification dated 1st March 1968 and to the condition mentioned in paragraph 2 thereof and it was stated that in respect of units registered with the Director General Technical Development, the bond to be executed should incorporate the condition for production of the end-use certificate from the Director General Technical Development and in case of small scale units, the bond incorporate the condition of production of a certificate from the Director of Industries of the State concerned in respect of the actual use of the material.

8. No, in the present case, it is not disputed on behalf of the Respondents by Mr. C.J.Shah that the Petitioners have complied with the conditions mentioned in paragraph 2 of the Notification dated 1st March 1968, read with the public Notice dated 25th September 1968, being Exh. C, to the affidavit in rejoinder, dated 29th June 1973. That is to say that it is not disputed on behalf of the Respondents that the Petitioners have duly complied with all the conditions necessary for the grant of the exemption under the Notification dated 1st March 1968, being Exh.A to the Petition. What is urged on behalf of the Respondents is that on a proper interpretation of Exh.A to the Petition, the exemption is only granted where such chemicals are used for what is termed in the affidavit in reply dated 10th July 1970 as `chemical intermediates’ for manufacture of insecticides pesticides and fungicides, and that the certificates issued by the Director General of Technical Development, Government of India, are not conclusive. This argument on behalf of the Respondents is only to be sought to be rejected f or the simple reason that the exemption Notification dated 1st March 1968, being Exh.A to the Petition, itself mentions the conditions upon which exemption is to be granted. Those conditions are mandatory and it cannot therefore be argued that when the mandatory conditions are complied with they are not to be conclusive in so far as the granting of exemption is concerned or that the Customs authorities have a right to sit in Judgment over the certificates which are obligatory to be furnished to the Customs authorities for the purpose of obtaining the exemption. In my view, the Customs authorities have no jurisdiction whatsoever to sit in appeal over the certificates which have been granted by the Director General of Technical Development or the Director of Industries, as the case may be Customs authorities save and except, when it can be contended that these certificates have been obtained by fraud or under some mistake. In the present case,it is not the case of the Respondents that the certificates which have been obtained by the Petitioners and copies of which are annexed to the Petition and to the affidavit in rejoinder, have been obtained by fraud or under a mistake. In my view, therefore, once these certificates have been obtained by fraud or under a mistake. In my view, therefore, once these certificates have been produced and the conditions mentioned in paragraph 2 of the Notification dated 1st March 1968, have been complied with, read along with the Public Notice dated 25th September 1968, then it was obligatory upon the Customs authorities to grant the exemption under Exh.A to the Petition. In the Orders which have been annexed in the Petition both the Assistant Collector of Customs as well as of the Appellate authorities no reasons have been given as to why they did not upon the certificates so produced. In fact, there is only an averment in the affidavit in reply that these certificates are not conclusive. I had directed Respondent No. 1 to make an affidavit stating his reasons for passing the Orders Exh. L, to the Petition and dated 20th October 1969. In response thereto an affidavit dated 19th April 1975, has been filed by Respondent No. 1 in which he has stated that the exemption Notification cannot be liberally interpreted and should be restricted to its literal meaning. I am unable to appreciate this approach of th 1st Respondent. There is no question of the 1st Respondents interpreting the Notification, Exh. A to the petition, dated 1st March 1968. Once conditioned ,mentioned in paragraph 2 of the said Notification are complied with, it was obligatory upon him to grant the exemption thereunder. He was not entitled to sit in judgment over the certificate produced by the petitioners and although an opportunity was given to him to state buy an affidavit to be filed as to what the Respondents had to say in connection with the certificates furnished he has not chosen to do so and has without any material on record refused the exemption to th Petitioners. In my opinion, it was erroneous on the part of Respondents Nos. 1 to 3, not to grant the exemption to th Petitioners, once the conditions mentioned in paragraph 2 of the Notification, Exh. A, dated 1st March 1968, were complied with, I am not in the present case concerned with the question as to whether in fact, the Notification applies only to use of chemicals for agricultural purposes as sought out to be made no behalf of the Respondents. It is quite clear on a plan interpretation of Exh. A, that the exemption is bound to be granted once conditions mentioned therein are complied with and which in fact is not disputed in this case.

9. In the result, therefore these orders are liable to be set aside on the simple ground that there was no jurisdiction in Respondents Nos. 1 to 3 to consider th interpretation of the exemption Notification Exh. A to the Petition and what is meaning was, once th condition mentioned in paragraph 2 of the said Notification, were complied with.

10. Another contention no behalf of the petitioners, in th alternative was, that in any event chemicals fall with in the purview of another exemption Notification, Exh. B, to the petition as being drugs or medicines. It is unnecessary for me to consider this question in the view that I have already taken.

11. Mr. Shah no behalf of the Respondents has urged that the petitioners had a further remedy of proceeding in revision under Section 131 of the Customs Act and that this Petition should be dismissed on the preliminary ground that the Petitioners have not chosen the alternative remedy to proceeding in revision. In my view, the Petitioners were entitled to come to this Court at this stage as there was no jurisdiction in the Respondents Nos. 1 to 3 to pass the Orders which they have done. No questions of disputed facts are in any way involved in the present case and an ultimate decision of the Court is inevitable. The Petitioners have complied with certain conditions which is not disputed by the Customs authorities and in that view of th matter the Customs authorities had no jurisdiction not to grant the exemption. I, therefore, reject the preliminary contention no behalf of the Respondents.

12. In the result I, Therefore, allow th Petition , make the Rule absolute in terms of prayers (a) and (b) and set aside the Orders Exhs, H, I and L annexed to the said petition and direct the Respondents to refund to the petitioners the Customs duty amounting to Rs.7,08,083/- recovered by the Respondents from the Petitioners, on or before 25th August 1975. The Respondents to pay to the Petitioners the cost of this Petition.


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