Supreme Court

L.R. Brothers Indo Flora Ltd. vs. Commissioner of Central Excise

MANU/SC/0664/2020

01.09.2020

Customs

All laws are deemed to apply prospectively unless either expressly specified to apply retrospectively

Present appeal takes exception to the Final Order passed by the Customs, Excise & Service Tax Appellate Tribunal, whereby the customs duty levied upon the Appellant on the sale of cut flowers within the Domestic Tariff Area had been confirmed by the Tribunal.

The thrust of the argument of the Appellant is that, according to Paragraph 3 of the exemption Notification No. 126/94-Cus dated 3.6.1994 as amended vide Notification no. 56/01-Cus dated 18th May, 2001, sales made in DTA would attract excise duty and since the cut flowers sold by the Appellant are non-excisable goods, no excise duty can be levied upon it. Further, according to the Notification, in case of non-excisable goods, the customs duty is leviable on the imported inputs. In the present case, since the cut flowers are home grown, customs duty cannot be levied upon them and therefore, the demand of customs duty cannot be sustained.

The Appellant lays emphasis that, the DTA sales made by an 100% EOU can only be amenable to excise duty and show cause notice under the provisions of the 1962 Act could not have been issued. Concededly, the DTA sales pertaining to excisable goods made in conformity with the conditions of the EXIM policy are exigible to excise duty, but once there is contravention of the condition(s) of the EXIM policy, irrespective of the goods produced being excisable or non-excisable, the benefit under the exemption notification is unavailable. In such a situation, the very goods would become liable to imposition of customs duty as if being imported goods.

In the present case, the Notification provides for exemption on import of inputs and at the same time prescribes for adherence of certain conditions for availing the exemption. The Notification further prescribes the rate at which the customs duty on the inputs used in the production of non-excisable goods sold in DTA is to be charged. Thus, the Notification, having been issued in exercise of delegated legislation under Section 25 of the Customs Act, 1962, has to be understood as "any other law". Resultantly, the Appellant, having availed exemption under the Notification, cannot evade customs duty on the imported inputs at the rate prescribed by the notification.

It is relevant here to advert to a decision of Constitution Bench of this Court in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal and Ors. wherein it has been held that, an exemption Clause ought to be strictly construed according to the language employed therein and in case of any ambiguity, benefit must go to the State.

Notification posits of carrying out amendments and substituting the charging Clause of the inputs used in case of non-excisable goods. The language employed in the Notification does not offer any guidance on whether the amendments as made were to apply prospectively or retrospectively. It is a settled proposition of law that, all laws are deemed to apply prospectively unless either expressly specified to apply retrospectively or intended to have been done so by the legislature. The latter would be a case of necessary implication and it cannot be inferred lightly.

The Appellant was obliged to comply with the conditions prescribed by the EXIM Policy, to avail the exemption under the stated notification; and failure to do so, must denude them of the exemption so granted. Further, since the charging rate prescribed under the exemption Notification is under question, any ambiguity in regard to the date of application of the amendment thereto would necessarily have to be construed in favour of the State, unless shown otherwise by judicially acceptable parameters.

In the fact situation of the present case, the Appellant was issued a show cause notice mentioning that, it had suppressed the DTA sales of cut flowers to evade payment of duty. Had the Appellant in good faith believed that no duty was payable upon the DTA sales of cut flowers, it would have sought prior approval of the Development Commissioner, which it failed to do. Even in the letter seeking ex-post facto approval, the Appellant claimed that, they had not used any imported input such as fertilizer, plant growth Regulations, etc. in growing flowers sold in DTA, despite having imported green house equipment, raw materials like Live Rose Plants and consumables like planting materials and fertilizers. Therefore, it prima facie appeared that, suppression by the Appellant was "wilful".

The burden of proving to the contrary rested upon the Appellant, which the Appellant failed to discharge by failing to establish that the imported inputs were not used in the production of the cut flowers sold in DTA. In view thereof, the authorities below have rightly invoked Section 28 of the 1962 Act and allied provisions. CESTAT has rightly upheld the levy of customs duty. Appeal dismissed.

Relevant

Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal and Ors. MANU/SC/0955/2010

Tags : Customs duty Levy Validity

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