Page 1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.7189 OF 2005

M/S. JASWAL NECO LTD. … APPELLANT

VERSUS

COMMISSIONER OF CUSTOMS,

VISAKHAPATNAM ...RESPONDENT

J U D G M E N T

R.F. Nariman, J.

1.The appellant is engaged in the manufacture of pig iron.

The appellant imported Low Ash Metallurgical (LAM) Coke

under seven Bills of Entry, against four advance licenses

without payment of basic customs duty (BCD) levied under

Section 12 of the Customs Act, 1962, special customs duty

(SCD) levied under Section 68 of the Finance Act, 1996, special

additional duty (SAD) levied under Section 3A of Customs Tariff

Act, 1975 and Anti-dumping duty (ADD) levied under Section

9A of the Customs Tariff Act, 1975 during the period June 1998

to August 1998, which were exempt from duty vide (i)

1

Page 2 Notifications No. 30/97 Cus dated 1.4.1997, (ii) Sr. No.4 of

Notification No.12/97 Cus dated 1.3.97, (iii) Sr. No.3 of the

Notification No.34/98-Cus dated 13.6.1998, and (iv) Notification

No.41/97-Cus dated 30.4.97 respectively.

2.At the time of import, the appellant furnished a bond

containing an undertaking to pay duty on imported goods

cleared under Notification No.30/97 and 41/97 in the event of

failure to fulfill its export obligation.

3.It is an admitted position that the appellant failed to fulfill

its export obligation in the terms of the exemption notifications.

The entire LAM so imported has instead been used by the

appellant in its factory for the manufacture of pig iron.

4.Demand of duty of Rs.7.21 crores was sought to be

raised. The break up of demand of Rs.7.21 crores is as under:

1.Basic Customs Duty Rs.1.01 crores

2.Antidumping Duty Rs.5.00 crores

3.Special Customs Duty Rs.0.50 crore

4.Special Additional Duty Rs.0.66 crore

5.Cess Rs.0.02 crore

Total Rs.7.21 crores.

2

Page 3 5.Pending final adjudication of the show cause notice by the

Commissioner, the appellant duly paid the entire duty payable

towards BCD, SAD and SCD after considering partial exports

already made. The appellant did not make any payment

towards ADD.

6.The Commissioner of Customs vide Order dated

4.11.2004 confirmed the duty demand of Rs.3.37 crores and

imposed a penalty of Rupees Twenty lakhs. According to the

learned Commissioner, since the appellant after issuance of the

show cause notice paid duty of Rs.1,66,18,563/-, the differential

duty to be paid amounted to Rs.1,70,98,510/-. Further, interest

on the said amount at 24% was also held to be payable.

7.The appellant appealed to CESTAT. Vide the impugned

judgment dated 18.8.2005, CESTAT partly allowed the appeal

by remanding the matter to the original authority to calculate

duty, interest, and penalty in accordance with the findings

contained in its judgment. The basic difference between

CESTAT’s judgment and that of the Commissioner is that

interest was reduced from 24% to 15%, but the Anti-dumping

3

Page 4 duty was increased by applying the higher rates specified by

the final Notification No.69 of 2000.

8.Shri Lakshmikumaran, learned advocate for the appellant

did not dispute before us that the appellant failed in its export

obligations and was, therefore, not liable to be exempted so far

as customs duty is concerned. He, therefore, conceded that

basic customs duty and the special customs duty as well as

special additional duty was payable by the appellant. However,

he disputed that Anti-dumping duty was payable at all stating

that the appellant was exempt under Notification No.69 of 2000.

He further argued that no interest is chargeable on any of the

four duties inasmuch as the bond that was furnished under

Notification No.30 of 1997 did not stipulate that in the event of

default, interest would become payable. Further, according to

him, it is clear that the assessment in the present case is only

provisional and that being the case, even if the provisions of the

Customs Act are made applicable insofar as Anti-dumping duty

is concerned, under the Customs Act itself there was no

provision for collection of interest for the period in dispute as

Section 18 was amended to include such a provision only

4

Page 5 prospectively with effect from 2006. He further argued, that in

any case Anti-dumping duty could not be added for purposes of

computing customs duty, special customs duty and special

additional duty. Also no penalty is imposable inasmuch as

nothing contumacious was done by the appellant and the

export obligation could not be fulfilled only because of bonafide

commercial impossibility. It is contended that nothing has been

diverted to the domestic tariff area and sold in that area, and

the entire imports made have been used by the appellant

captively in its factory for the manufacture of pig iron. He

further argued that he could not be worse off in an appeal filed

only by the appellant herein to CESTAT and that on the

assumption that the appellant was liable to pay Anti-dumping

duty, they should only pay the said duty at the lower rate

prescribed by the Commissioner as Revenue had not appealed

to the Tribunal against the Commissioner’s order.

9.Shri Radhakrishnan, learned senior counsel appearing on

behalf of the revenue countered the aforesaid submissions and

submitted that the exemption contained in the Anti-dumping

duty Notification 69 of 2000 was only prospective and, hence

5

Page 6 Anti-dumping duty had to be paid for the relevant period. He

further submitted that interest in any case was payable as

Notification No.30 of 1997 independently levied a charge of

interest. Further, he also supported the Commissioner’s order

and the Tribunal so far as the various other aspects of this

appeal are concerned.

10.We have heard learned counsel for the parties. In order to

appreciate the first submission of Shri Lakshmikumaran,

namely, that Anti-dumping duty in the present case ought to be

nil, we set out the relevant Notifications –

“Notification: 22/98-Cus. Dated 06-May-1998

Metallurgical coke originating in or exported

from China PR – Anti-dumping duty

In exercise of the powers conferred by sub-section

(2) of section 9A of the Customs Tariff Act, 1975 (51

of 1975), read with rule 13 of the Customs Tariff

(Identification, Assessment and Collection of

Anti-dumping Duty on Dumped Articles and for

Determination of Injury) Rules, 1995, the Central

Government on the basis of the preliminary findings

of the designated authority, published in the Gazette

of India, Extraordinary, Part I, Section 1, dated the

20

th

March, 1998 that there is dumping in respect of

the Metallurgical coke falling under Heading No.

27.04 of the First Schedule to the said Act, and

originating in or exported from China PR, hereby

imposes on the said Metallurgical coke originating in

6

Page 7 or exported from China PR, and imported into India,

an anti-dumping duty at the rate of one thousand

eight hundred rupees per metric tonne.

This notification shall have effect upto and inclusive

of the 5

th

day of November, 1998.”

“Notification: 82/98/Cus. Dated 27-Oct-1998

Metallurgical coke originating in, or exported

from, China PR – Anti-dumping duty –

Notification No. 22/98-Cus. Rescinded

In exercise of the powers conferred by sub-section

(2) of section 9A of the Customs Tariff Act, 1975 (51

of 1975), read with rule 13 of the Customs Tariff

(Identification, Assessment and Collection of

Anti-dumping Duty on Dumped Articles and for

Determination of Injury) Rules, 1995, the Central

Government hereby rescinds the notification of the

Government of India in the Ministry of Finance

(Department of Revenue), No. 22/98-Customs,

dated the 6

th

May, 1998, published in the Gazette of

India, Extraordinary, Part II, Section 3, Sub-section

(i) vide G.S.R. 243 (E), dated the 6

th

May, 1998.”

Notification: 81/98-Cus. Dated 27-Oct-1998

Metallurgical coke (Metcoke) originating in, or

exported from, China PR – Anti-dumping duty

“Now, therefore, in exercise of the powers conferred

by sub-section (1) of section 9A of the said Customs

Tariff Act, read with rules 18 and 20 of the Customs

Tariff (Identification, Assessment and Collection of

Anti-dumping Duty on Dumped Articles and for

Determination of Injury) Rules, 1995, the Central

Government, after considering the aforesaid

findings of the Designated Authority, hereby

imposes on Metcoke falling under heading No.

27.04 of the First Schedule to the said Customs

Tariff Act, originating in or exported from China PR

7

Page 8 and imported into India, an anti-dumping duty

calculated at a rate as equivalent to the difference

between Rs. 4673 and the landed value of Metcoke,

per metric tonne;

2.The anti-dumping duty imposed under this

notification shall be levied with effect from the date

of imposition of provisional duty i.e. 6

th

of May,

1998.”

11.The final Notification dated 27.10.1998 was challenged by

the Pig Iron Manufacturers Association. By its judgment

reported in Pig Iron Manufacturers Association v.

Designated Authority, Ministry of Commerce, 2000 (116)

ELT 67 (Tribunal), the Tribunal passed the following order:-

“12.In the light of the above discussions and

findings based on the data available on record, we

pass the following orders:-

1.All imports of metcoke exported from or

originating in the People’s Republic of China to

India be subjected to anti-dumping duties at the

following rates as indicated against each exporter:-

1.China National Coal Industry : 18.35US$

Import/Export (Group) Corporation.

2. China National Mineral Import and : 24.51US$

Export Corporation.

3. Shanxi Coal Import Export Group: 19.22US$

Corporation. (Minmetal Group).

4.Ningxia Xiacheng Import & Export: 24.95 US$

Corporation.

5.China North Industries Corporation.: 22.69 US$

8

Page 9 6.Shanghai Pacific Chemicals (Group): 19.22 US$

Corporation Ltd.

7.All other exporters. : 24.95 US$

2.Subject to these modifications, the final

findings dated 27

th

August, 1998 of the D.A. are

confirmed. The Corrigendum dated 2

nd

September,

1998 is set aside.”

12.Pursuant to the Tribunal’s judgment, the Central

Government issued a Notification dated 26.5.2000 as follows:-

“Now, therefore, in exercise of the powers conferred

by sub-section (1) of Section 9A read with

sub-section (6) of Section 3 of the said Customs

Tariff Act and sub-section (1) of Section 25 of the

Customs Act, 1962 (52 of 1962), and in

supersession of the notification of the Government

of India in the Ministry of Finance (Department of

Revenue) No. 81/98- Customs, dated the 27

th

October, 1998 [ G.S.R. 644 (E), dated the 27

th

October, 1998], except as respects things done or

omitted to be done before such supersession, the

Central Government hereby imposes on Metcoke

falling under heading No. 27.04 of the First

Schedule to the said Customs Tariff Act, originating

in, or exported from, China PR and imported into

India, by the exporters mentioned in column (2) of

the Table hereto annexed, an anti-dumping duty of

an amount equivalent to the rate indicated in

column (3) of the said Table, converted into Indian

currency with reference to the rate of exchange as

in force on the date on which a bill of entry is

presented under section 46 of the said Customs

Act, 1962 (52 of 1962).”

9

Page 10 S. No. Name of the Exporter Rate per metric tone

(1) (2) (3)

1. China National Coal Industry US$ 18.35

Import/Export (Group) Corporation

2. China National Mineral Import and US$ 24.51

Export Corporation.

3. Shanxi Coal Import Export Group US$ 19.22

Corporation. (Minmetal Group)

4. Ningxia Xiacheng Import & Export US$ 24.95

Corporation

5. China North Industries Corporation US$ 22.69

6. Shanghai Pacific Chemicals (Group) US$ 19.22

Corporation Ltd.

7. All other exporters. US$ 24.95

Nothing contained in this notification shall apply to

imports of Metcoke by a manufacturer of pig iron or

steel using a blast furnace if he follows the

procedure set out in the Customs (Import of Goods

at Concessional Rate of Duty for Manufacture of

Excisable Goods) Rules, 1996.”

13.The bone of contention in the present appeal is the last

paragraph of this Notification.

10

Page 11 14.It is clear that under Rule 20(2)(a) of the Customs Tariff

(Identification, Assessment And Collection of Antidumping Duty

on Dumped Articles and For Determination of Injury) Rules,

1995, where a provisional duty has been levied and where the

designated authority has recorded a final finding of injury or

threat of injury and the further finding that the effect of imports

in the absence of provisional duty would have led to injury, the

Anti-dumping duty may be levied from the date of imposition of

provisional duty. In the present case, therefore, it will be

noticed that the final Notification dated 27.10.1998 is said to

come into force from the date of the first Notification dated

6.5.1998 imposing provisional duty in the present case. It is

clear that as the final Notification dated 27.10.1998 has been

superseded by the Notification dated 19.5.2000, the appellant

would have had to pay Anti-dumping duty at the rate of US$

24.95 per metric tonne as indisputably it falls within Item No.7

of the said Notification.

15.It will be noticed that the exception carved out in the

Notification dated 19.5.2000 was pursuant to a minutes of

meeting dated 25.11.1999 by the Secretary (Steel) and

11

Page 12 representatives of Mini Blast Furnace producers of Metallurgical

Coke. These minutes of meeting state as follows:-

“The Representatives of IMCOM (Indian

Metallurgical Coke Manufacturers Association) said

that IMCOM represents both the petitioners i.e. M/s.

BLA Industries and Industries and Commerce

Association in the anti dumping duty petition against

import of metcoke of Chinese origin. They

explained that while anti dumping duty was

essential for the survival of the domestic coke

producers, the blast furnaces have never been their

principal customers and it was not their intention to

harm the blast furnaces industry.

5.After detailed deliberations it was agreed

between Indian Metallurgical Coke Manufacturers

Association (IMCOM) and Association of Indian Mini

Blast Furnaces (AIM) that the blast furnace units

were not the principal market that the domestic coke

producers cater to. The market to which the

domestic coke producers cater to companies

ferrous and non-ferrous foundries, ferro alloys

producers, soda ash producers, zinc usmelting units

some other chemical units and various SSI units.

6.Since the imposition of the anti dumping duty

the blast furnace units had to resort to import from

expensive sources like Russia, Japan etc. In view

of this it was suggested by the AIM that the blast

furnace units could be exempted from paying ADD

on import of metallurgical coke of Chinese origin,

provided this import is for actual use by the blast

furnace units. The list of blast furnace units which

will be covered by this exemption is also enclosed.

7.Considering the financial difficulty of the

members of AIM, IMCOM agreed that they have no

objection if the government exempts the blast

12

Page 13 furnace industry from the purview of the

anti-dumping duty. Metcoke will be imported under

OGL with Actual user Conditions for blast furnace

industry without ADD. IMCOM reiterated that while

the continuation of the ADD on metcoke of Chinese

origin is vital for the survival of the indigenous coke

manufacturers they also agreed that the exemption

of the blast furnace units from ADD was vital for

their survival.”

16.On reading these minutes it becomes clear that

Anti-dumping duties that had been imposed upon the Blast

Furnace Industry had an adverse impact upon the industry and

that the intention of levying an Anti-dumping duty was not to

harm their interests. Paragraphs 6 and 7 of the said minutes in

particular seem to suggest that the exemption that was

contemplated by the minutes of such Blast Furnace units was

something that could take place only in the future.

17.Quite apart from this, it is clear that no exception was

carved out before 19.5.2000 in favour of Blast Furnace

Manufacturers either when the provisional Anti-dumping duty

was first imposed or when the final Notification dated

27.10.1998 was issued. It is clear that the last part of the

Notification dated 19.5.2000 creating an exception in favour of

13

Page 14 persons like the appellant has no reference to the earlier

proceedings in the case and is obviously intended to apply only

prospectively. This is also clear from the language used in the

said clause – ‘nothing contained in the Notification “shall apply

to imports” …. Using a Blast Furnace “if he follows” the

procedure set out in the Customs “import of goods at

concessional rate of duty for manufacture of excisable goods”

Rules, 1996’. The language of the aforesaid clause applies

only in futuro and we are afraid that Shri Lakshmikumaran’s first

argument must, therefore, fail.

18.However, Shri Lakshmikumaran is on firmer ground when

he submitted before us that the Commissioner has held that the

appellant is liable to pay Anti-dumping duty only under the

Notification dated 27.10.1998. The rate prescribed in the said

Notification is lesser than the rate that would apply under the

Notification dated 19.5.2000. As there was no appeal by the

revenue against this finding of the Commissioner, the Tribunal

could not have enhanced the rate at which the appellant would

have to pay Anti-dumping duty in the appellant’s own appeal.

The appellant cannot be worse off by reason of filing an appeal.

14

Page 15 To this limited extent, the appellant succeeds and the Tribunal’s

order is set aside. The appellant will have to pay Anti-dumping

duty calculated at the rates specified only in Notification No.

81/98 dated 27.10.1998.

19.It was argued by Shri Lakshmikumaran that the appellant

was not liable to pay interest on any of the customs duties for

which it was held liable by the Commissioner’s order. He

referred us to Notification No.30 of 1997, the relevant part of

which reads as follows:

“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 materials imported into India, against an

Advance Licence with Actual User Condition in

terms of para 7.4 of the Export & Import Policy

1997-2002 notified by the Government of India in

the Ministry of Commerce vide Notification

No.1/1997-2002 dated the 31

st

March, 1997

(hereinafter referred to as the said licence), from the

whole of the duty of customs leviable thereon which

is specified in the First Schedule to the Customs

Tariff Act, 1975 (51 of 1975) and from the whole of

the additional duty leviable thereon under Section 3

of the said Customs Tariff Act, subject to the

following conditions namely:-

(i)xxx xxx

15

Page 16 (ii)That the importer at the time of clearance of

the imported materials executes a bond with

such surety or security and in such form and

for such sum as may be specified by the

Assistant Commissioner of Customs binding

himself to pay on demand an amount equal to

the duty leviable, but for the exemption, on the

imported materials in respect of which the

conditions specified in this notification have

not been complied with, together with interest

at the rate of twenty-four percent per annum

from the date of clearance of the said

materials.”

20.A reading of this Notification makes it clear that interest at

the rate of 24% per annum is only liable to be paid if at the time

of clearance of the imported materials the importer executes a

bond in which such interest is stated to be payable. We have

been shown the bond executed in the present case. It says

nothing about any interest that is payable in case the conditions

of the Notification No.30 of 1997 are not met. On this short

ground alone, it is clear that no interest is payable on any of the

customs duties that are due from the appellant.

21.It was also argued by Shri Lakshmikumaran that Section

101 of the Finance Act, 2009 has been given a retrospective

16

Page 17 application with effect from 1.1.1995. Section 9A sub-section

(8) as substituted with effect from 1.1.1995 reads as follows:-

“(8)The provisions of the Customs Act, 1962 (52

of 1962) and the rules and regulations made

thereunder, including those relating to date of

determination of rate of duty, assessment, non-levy,

short levy, refunds, interest, appeals, offences and

penalties shall, as far as maybe, apply to the duty

chargeable under this section as they apply in

relation to duties leviable under that Act.”

22.Even though the Customs Act would necessarily become

attracted to Section 9A of the Customs Tariff Act insofar as

Anti-dumping duty is concerned, learned counsel further

submitted that the Customs Act itself contained no provision for

levy of interest until 13.7.2006. Section 18(3) was added only

with effect from 13.7.2006 and reads as follows:-

“(3)The importer or exporter shall be liable to pay

interest, on any amount payable to the Central

Government, consequent to the final assessment

order under sub-section (2), at the rate fixed by the

Central Government under Section 28AB from the

first day of the month in which the duty is

provisionally assessed till the date of payment

thereof.”

23.It is clear that on the facts of the present case the

provisional assessment had been made in 1998 and the final

17

Page 18 assessment only on 4.11.2004 by the Commissioner. Both

these dates being prior to 13.7.2006, Shri Lakshmikumaran is

right and no interest is chargeable under Section 18 of the

Customs Act, for the period in question.

24.In Commissioner of Customs (Preventive) v. Goyal

Traders, (2014) 302 ELT 529, the Gujarat High Court has held

as under:-

“17. In the present case, we find that prior to

introduction of sub-section (3) of Section 18 of the

Act in the present form, there was no liability to pay

interest on difference between finally assessed duty

and provisionally assessed duty upon payment of

which the assessee may have cleared the goods. It

was only with effect from 13.7.2006 that such

charging provision was introduced in the statute.

Upon introduction therefor such provision created

interest liability for the first time w.e.f. 13.7.2006. In

absence of any indication in the statute itself either

specifically or by necessary implication giving

retrospective effect to such a statutory provision, we

are of the opinion that the same cannot be applied

to cases of provisional assessment which took

place prior to the said date. Any such application

would in our view amount to retrospective operation

of the law.”

We respectfully agree with the aforesaid view. In addition,

it is clear that this Court has held that the levying of interest can

18

Page 19 only be by a substantive provision (See: J.K. Synthetics Ltd. v.

Commercial Taxes Officer, (1994) 4 SCC 276 at paragraph

16), thereby making it clear that such levy can only be

prospective.

25.Further, in India Carbon Ltd. v. State of Assam, (1997)

6 SCC 479, this Court held:-

“11. Section 9(2-A) makes applicable to the

assessment, re-assessment, collection and

enforcement of Central sales tax the provisions

relating to offences and penalties contained in the

State Acts as if the Central sales tax was a State

sales tax. But Section 9(2-A) makes no reference to

interest.

12.There is no substantive provision in the

Central Act requiring the payment of interest on

Central sales tax. There is, therefore, no

substantive provision in the Central Act which

obliges the assessee to pay interest on delayed

payments of Central sales tax.

13.Now, the words "charging or payment of

interest" in Section 9(2) occur in what may be called

the latter part thereof. Section 9(2) authorises the

sales tax authorities of a State to assess, reassess,

collect and enforce payment of the Central sales tax

payable by a dealer as if it was payable under the

State Act; this is the first part of Section 9(2). By the

second part thereof, these authorities are

empowered to exercise the powers they have under

the State Act and the provisions of the State Act,

including provisions relating to charging and

payment of interest, apply accordingly. Having

19

Page 20 regard to what has been said in the case of Khemka

& Co., it must be held that the substantive law that

the States' sales tax authorities must apply is the

Central Act. In such application, for procedural

purposes alone, the provisions of the State Act are

available. The provision relating to interest in the

latter part of Section 9(2) can be employed by the

States' sales tax authorities only if the Central

Act makes a substantive provision for the levy and

charge of interest on Central sales tax and only to

that extent. There being no substantive provision in

the Central Act requiring the payment of interest on

Central sales tax the States' sales tax authorities

cannot, for the purpose of collecting and enforcing

payment of Central sales tax, charge interest

thereon.

14.The requirement of the 1st respondent's sales

tax authorities that the appellants should pay

interest at the rate of 24% p.a. on delayed payment

of Central sales tax under the provisions of Section

35(A) of the State Act must, therefore, be held to be

bad in law.”

26.Given the aforesaid, it is clear that no interest is

chargeable on any of the customs duties that are payable on

the facts of the present case.

27.It now remains to consider whether Anti-dumping duty can

be included in calculating special customs duty and special

additional duty.

20

Page 21 28.Special customs duty is levied under Section 68 of the

Finance Act No.2 of 1996, which reads as follows:-

“68. Special duties of customs. – (1)In the case

of goods mentioned in the First Schedule to the

Customs Tariff Act, or in that Schedule, as amended

from time to time, there shall be levied and

collected as a special duty of customs, an amount

equal to two per cent of the value of the goods as

determined in accordance with the provisions of

section 14 of the Customs Act.

(2)Sub-section (1) shall cease to have effect

after the 31

st

day of March, 1999, and upon such

cesser, section 6 of the General Clauses Act, 1897)

shall apply as if the said sub-section had been

repealed by the Central Act.

(3)The special duties of customs referred to in

sub-section (12) shall be in addition to any duties of

customs chargeable on such goods under the

Customs Act or any other law for the time being in

force.

(4)The provisions of the Customs Act and the

rules and regulations made thereunder, including

those relating to refunds and exemptions from

duties shall, as far as may be, apply in relation to

the levy and collection of the special duties of

customs leviable under this section in respect of any

gods as they apply in relation to the levy and

collection of the duties of customs on such goods

under that Act or those rules and regulations, as the

case may be.”

21

Page 22 29.Similarly, special additional duty is levied under Section

3A of the Customs Tariff Act inserted by the Finance Act of

1998. Section 3A reads as under:-

“Special additional duty.- (1)Any article which is

imported into India shall in addition be liable to a

duty (hereinafter referred to in this section as the

special additional duty), which shall be levied at a

rate to be specified by the Central Government, by

notification in the Official Gazette, having regard to

the maximum sales tax, local tax or any other

charges for the time being leviable on a like article

on its sale or purchase in India:

Provided that until such rate is specified by

the Central Government, the special additional duty

shall be levied and collected at the rate of eight per

cent of the value of the article imported into India.

Explanation.-In this sub-section, the

expression “maximum sales tax, local tax or any

other charges for the time being leviable on a like

article on its sale or purchase in India” means the

maximum sales-tax, local tax, other charges for the

time being in force, which shall be leviable on a like

article, if sold or purchased in India, or if a like

article is not so sold or purchased which shall be

leviable on the class or description of articles to

which the imported article belongs.

(2)For the purpose of calculating under this

section the special additional duty on any imported

article, the value of the imported article shall,

notwithstanding anything contained in section 14 of

the Customs Act, 1962 or section 3 of this Act, be

the aggregate of –

(i)the value of the imported article determined

under sub-section (1) of section 14 of the Customs

22

Page 23 Act, 1962 (52 of 1962) or the tariff value of such

article fixed under sub-section (2) of that section, as

the case may be;

(ii)any duty of customs chargeable on that article

under section 12 of the Customs Act, 1962), and

any sum chargeable on that article under any law

for the time being in force as an addition to, and in

the same manner as, a duty of customs, but not

including the special additional duty referred to in

sub-section (1); and

(iii) the additional duty of customs chargeable on

that article under section 3 of this Act.

(3)The duty chargeable under this section shall

be in addition to any other duty imposed under this

Act or under any other law for the time being in

force.

(4) The provisions of the Customs Act, 1962 (52 of

1962), and the rules and regulations made

thereunder, including those relating to refunds and

exemptions from duties shall, so far as may be,

apply to the duty chargeable under this section as

they apply in relation to the duties leviable under

that Act.

(5)Nothing contained in this section shall apply to

any article, which is chargeable to additional duties

levied under sub-section (1) of section 3 of the

Additional Duties of Excise (Goods of Special

Importance) Act, 1957 (58 of 1957).”

30.Section 3(2) of the Customs Tariff Act as it stood at the

relevant time reads as under:

23

Page 24 “(2)For the purpose of calculating under this

section, the additional duty on any imported article,

where such duty is leviable at any percentage of its

value, the value of the imported article shall,

notwithstanding anything contained in Section 14 of

the Customs Act, 1962 (52 of 1962), be the

aggregate of-

(i)The value of the imported article determined

under sub-section (1) of the said Section 14 or

the tariff value of such article fixed under

sub-section (2) of that section, as the case

may be; and

(ii)Any duty of customs chargeable on that article

under Section 12 of the Customs Act, 1962

(52 of 1962), and any sum chargeable on that

article under any law for the time being in

force as an addition to, and in the same

manner as, a duty of customs”

31.Similarly, Section 3A(2) dealing with special additional

duty as it stood at the relevant time reads as under:-

“(2)For the purpose of calculating under this

section the special additional duty on any imported

article, the value of the imported article shall,

notwithstanding anything contained in section 14 of

the Customs Act, 1962 or section 3 of this Act, be

the aggregate of –

(i)The value of the imported article determined

under sub-section (1) of section 14 of the

Customs Act, 1962 (52 of 1962) or the tariff

value of such article fixed under sub-section

(2) of that section, as the case may be;

24

Page 25 (ii)Any duty of customs chargeable on that article

under section 12 of the Customs Act, 1962 (52

of 1962), and any sum chargeable on that

article under any law for the time being in

force as an addition to, and in the same

manner as, a duty of customs; and

(iii)The additional duty of customs chargeable on

that article under section 3 of this Act.”

32.It will be noticed that additional duty and special additional

duty would include “any sum chargeable on that article under

any law for the time being in force as an addition to, and in the

same manner as, a duty of customs”. What has been

contended before us is that these words would refer only to a

surcharge provision and not to a provision which levies an

independent duty, as the relevant words are “an addition” and

not “in addition”. This argument has considerable force. For

example, the Finance Act of 1963 made a distinction between a

surcharge on duties of customs and a regulatory duty of

customs. Sections 23 and 24 of the said Act are set out

hereinbelow:-

“23. Surcharge on duties of customs.

(1)In the case of goods chargeable with a duty of

customs which is specified in the First Schedule

25

Page 26 to the Tariff Act as amended by this Act or any

subsequent Act of Parliament, or in that

Schedule read with any notification of the Central

Government for the time being in force, there

shall be levied and collected as an addition to,

and in the same manner as, the total amount so

chargeable, a sum equal to 10 per cent of such

amount:

Provided that in computing the total amount

so chargeable, any duty chargeable under

Section 2A of the Tariff Act or Section 24 of

this Act shall not be included.

(2) Sub-section(1) shall cease to have effect after

the 31

st

day of March, 1964 except as respects

things done or omitted to be done before such

cesser; and Section 6 of the General Clauses

Act, 1897 shall apply upon such cesser as if the

said sub-section had then been repealed by a

Central Act.

24. Regulatory duty of customs.

(1) There shall be levied and collected, with effect

from such date as may be specified in this behalf by

the Central Government by notification in the Official

Gazette, on all goods mentioned in the First

Schedule to the Tariff Act as amended by this Act or

any subsequent Act of Parliament, a regulatory duty

of customs which shall be –

(a) twenty-five per cent of the rate, if any, specified

in the said First Schedule read with any notification

issued under Section 3A or sub-section (1) of

Section 4 of the Tariff Act; or

(b) ten per cent of the value of the goods as

determined in accordance with the provisions of

Section 14 of the Customs Act, 1962 whichever is

higher:

26

Page 27 Provided that different dates may be specified by

the Central Government for different kinds of goods.

(2) Sub-section (1) shall cease to have effect

after the 31

st

day of March, 1964 except as

respects things done or omitted to be done

before such cesser; and Section 6 of the General

Clauses Act, 1897 shall apply upon such cesser

as if the said sub-section had then been repealed

by a Central Act.

(3) The duty of customs leviable under this

section in respect of any goods referred to in

sub-section (1) shall be in addition to any other

duty of customs chargeable on such goods under

the Customs Act, 1962.

(4) The provisions of the Customs Act, 1962 and

the rules and regulations made thereunder,

including those relating to refunds and

exemptions from duties, shall, as far as may be,

apply in relation to the levy and collection of the

regulatory duty of customs leviable under this

section in respect of any goods as they apply in

relation to the levy and collection of the duties of

customs on such goods under that Act or those

rules and regulations.

(5) Every notification issued under sub-section

(1) shall, as soon as may be after it is issued, be

placed before each House of Parliament.”

33.It will be noticed that the very words “as an addition to,

and in the same manner as” used in Section 3(2) and 3A(2) of

the Customs Tariff Act have been used in Section 23 of the

Finance Act of 1963 when what was sought to be levied was

27

Page 28 only a surcharge. By way of contrast, Section 24(3) when it

levies a different duty – a regulatory duty of customs – uses the

expression “in addition”. It is clear, therefore, that what is

referred to in Section 3(2) and 3A(2) is only a surcharge or an

additional duty of customs. The words “in the same manner”

also point to the same conclusion. It is clear on a reading of the

Customs Tariff (Identification, Assessment And Collection of

Antidumping Duty on Dumped Articles and For Determination of

Injury) Rules, 1995, that Anti-dumping duty apart from being a

separate levy from a levy of customs duty is also levied in a

completely different manner from that of customs duty.

34.We may add, that after 2002, Sections 3(2) and 3A(2)

have been amended with effect from 1.3.2002 so as to

expressly not include Anti-dumping duty. The amended Section

3(2) reads as follows:-

“(2)For the purpose of calculating under this

section, the additional duty on any imported article,

where such duty is leviable at any percentage of its

value, the value of the imported article shall,

notwithstanding anything contained in Section 14 of

the Customs Act 1962 (52 of 1962), be the

aggregate of –

28

Page 29 (i)The value of the imported article determined

under sub-section (1) of the said Section 14 or the

tariff value of such article fixed under sub-section

(2) of that section, as the case may be; and

(ii)any duty of customs chargeable on that article

under Section 12 of the Customs Act, 1962 (52 of

1962), and any sum chargeable on that article

under any law for the time being in force as an

addition to, and in the same manner as, a duty of

customs, but does not include –

(a)the special additional duty referred to in

section 3A;

(b)the safeguard duty referred to in sections 8B

and 8C;

(c)the countervailing duty referred to in section 9;

(d)the anti-dumping duty referred to in section

9A; and

(e)the duty referred to in sub-section (1)”

The amended Section 3A(2) reads as follows:-

“(2)For the purpose of calculating under this

section the special additional duty on any

imported article, the value of the imported

article shall, notwithstanding anything

contained in section 14 of the Customs Act,

1962 or section 3 of this Act, be the aggregate

of –

(i)The value of the imported article determined

under sub-section (1) of section 14 of the

Customs Act, 1962 (52 of 1962) or the tariff

value of such article fixed under sub-section

(2) of that section, as the case may be;

(ii)Any duty of customs chargeable on that article

under section 12 of the Customs Act, 1962 (52

of 1962), and any sum chargeable on that

article under any law for the time being in

force as an addition to, and in the same

29

Page 30 manner as, a duty of customs, but does not

include-

(a)the safeguard duty referred to in sections 8B

and 8C;

(b)the countervailing duty referred to in section 9;

(c)the anti-dumping duty referred to in section

9A;

(d)the special additional duty referred to in

sub-section (1); and

(iii)the additional duty of customs chargeable on

that article under section 3 of this Act.”

35.The relevant budget circulars of the Finance Bill 2002 and

2003 respectively read as follows:-

“Miscellaneous

1.Doubts have been expressed about the

method of computing the additional duty of

customs (CVD) under section 3 of the

Customs Tariff Act, 1975. The doubt raised is

on the point that whether anti-dumping duty,

safeguard duty and other duties etc. should be

taken into account while computing the CVD.

In this regard, it is clarified that for computing

the CVD, only the value of the imported article

as determined under section 14 of the

Customs Act, 1962, including the landing

charges, if any and the basic customs duty

chargeable at the rates specified in the First

Schedule to the said Customs Tariff Act (read

with any notification for the time being in force

in respect of the basic customs duty) needs to

be taken into account. Other duties such as

anti-dumping duty, safeguard duty, etc. should

not be taken into account.”

30

Page 31 “In the explanatory notes for the last year’s

budget it was clarified that for computing the

CVD, only the value of imported article as

determined under section 14 of the Customs

Act, 1962, including the landing charges, if

any and the basic customs duty chargeable at

the rates specified in the First Schedule to the

Customs Tariff Act (read with any notification

for the time being in force in respect of the

basic customs duty) needs to be taken into

account. Other duties such as anti-dumping

duty, safeguard duty, etc. should not be taken

into account. A view has been expressed that

section 3A of the Customs Tariff Act does not

permit such interpretation. To place the matter

beyond doubt, it is proposed to amend section

3 and section 3A of the Customs Tariff Act so

as to make it very clear that for computation of

additional duty of customs, only the c.i.f. price,

landing charges and basic customs duty will

be included. Similarly for determining special

additional duty of customs (SAD), only the

c.i.f. price, landing charges, basic customs

duty and the additional duty of customs will be

included. Other duties such as anti-dumping

duty safeguard duty, etc. shall not be taken

into account. This amendment will have effect

from 1.3.2002.”

36.Though it is stated that the object of the amendment is to

clarify and set at rest doubts, it is not necessary to decide

whether this amendment is clarificatory and, therefore,

retrospective in view of what has already been held by us

above.

31

Page 32 37.As far as penalty is concerned, we feel that the appellant

before us has not diverted goods meant for export to the

domestic tariff area. We are satisfied that market

considerations made it difficult, if not impossible, for the

appellant to fulfill its export obligations and are, therefore, of the

view that the penalty imposed in the present case ought to be

set aside.

38.The appeal is, accordingly, allowed in the aforesaid terms

and the judgment of CESTAT is set aside.

……………………J.

(A.K. Sikri)

……………………J.

(R.F. Nariman)

New Delhi;

August 4, 2015.

32