Madras High Court
M/S.The Bell Match Company vs The Commissioner Of Customs ... on 13 July, 2021
W.A.(MD)No.1265 of 2021
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 13.07.2021
CORAM:
THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM
AND
THE HONOURABLE MRS.JUSTICE S.ANANTHI
W.A.(MD)No.1265 of 2021
and
C.M.P.(MD)Nos.5297 & 5300 of 2021
M/s.The Bell Match Company,
Rep. By its Partner R.Vasanth Raja Singh,
No.2/180, Managaseri Village,
Malli (via), Srivilliputhur Taluk,
Virudhunagar District. : Appellant
Vs.
1.The Commissioner of Customs (Preventive),
Headquarters, No.1, Williams Road,
Cantonment,
Trichy – 620 001.
2.The Joint Commissioner of Customs (Preventive),
Office of the Additional Commissioner of Customs,
Mandapam Road,
Ramanathapuram – 623 503. : Respondents
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1/14
W.A.(MD)No.1265 of 2021
PRAYER: Writ Appeal filed under Clause 15 of the Letters Patent,
praying to set aside the order dated 04.03.2019, in W.P.(MD)No.18976 of
2018 and allow the writ appeal.
For Appellant : Mr.A.K.Jayaraj
For Respondents : Mr.R.Aravindan
JUDGMENT
***************
[Judgment of the Court was delivered by T.S.SIVAGNANAM, J.]
This appeal by the assessee is directed against the order dated
04.03.2019 in W.A.(MD)No.18976 of 2018.
2.The said writ petition was filed by the appellant for issuance of
a Writ of Certiorarified Mandamus, to quash the order-in-original bearing
No.06/2018-19 (JC) dated 25.06.2018, passed by the second respondent.
The writ petition was dismissed by the impugned order and aggrieved by
the same, the assessee is before us by way of this Writ Appeal.
3.The facts which are necessary for the disposal of this writ
appeal are set out as hereunder:
3.1.The appellant is a 100% export oriented unit (EOU) having
purchased certain machinery from another 100 % EOU M/s.Eutrabell
India, Sivakasi, vide invoice dated 21.12.2012. The petitioner relied upon
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W.A.(MD)No.1265 of 2021
explanation II to Notification No.23/2003-CE, which treated goods
supplied by one EOU to another EOU as imported goods. The appellant
availed the benefit of Notification No.52/2003 dated 31.03.2003, by
which, the Central Government in exercise of its powers under Section
25(1) of the Customs Act, 1962 [the Act for brevity] granted certain
exemptions, subject to fulfillment of certain conditions.
3.2.The officials of the Directorate of Revenue Intelligence,
Madurai Sub Regional Unit conducted verification in the business
premises of the appellant and as a result of which, show cause notice
dated 29.01.2018, was issued to the appellant, stating that the appellant
has failed to fulfill the conditions regarding installation of the machinery
in terms of Notification No.52/2003 and therefore, the exemption availed
under Notification No.52/2003 was proposed to be denied; the
machineries proposed to be confiscated; a sum of Rs.15,78,485/- to be
demanded as duty, apart from proposing to impose penalty. The appellant
submitted their reply after which, the impugned order was passed by the
second respondent, confirming the proposal in the notice.
3.3.Though the appellant had an effective alternate remedy of
filing an appeal before the Commissioner of Customs [Appeals], the
appellant chose to file a writ petition on the ground that the show cause
notice as well as the order-in-original demanding duty and imposing
penalty is without jurisdiction. The contention advanced by the appellant
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W.A.(MD)No.1265 of 2021
was that Notification No.52/2003, stood amended by Notification No.
34/2015, by which, certain conditions contained in paragraph 3 of
Notification No.52/2003 was substituted. Paragraph No.3 of the
Notification No.52/2003 dated 31.03.2003, reads as follows:
“(3) The unit executes a bond in such form and
for such sum and with such authority, as may be
specified by the said officer, binding himself,-
(a) to bring the said goods in to the unit or and
use them for the specified purpose mentioned in clauses
(a) to (e) in the opening paragraph of this notification;
(b) ....
(c) ....
(d) to pay on demand-
(I) an amount equal to duty leviable on the
goods and interest at a rate as specified in the
notification of the Government of India in the Ministry of
Finance (Department of Revenue) issued under Section
28AB of the said Customs Act on the said duty from the
date of duty free import of the said goods till the date of
payment of such duty, if-
(i) in the case of capital goods, such goods are
not proved to the satisfaction of the said officer to have
been installed or otherwise used within the unit, within a
period of one year from the date of import or
procurement thereof or within such extended period not
exceeding five years as the said officer may, on being
satisfied that there is sufficient cause for not using them
as above within the said period, allow;”
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W.A.(MD)No.1265 of 2021
3.4.By virtue of the amendment in Notification No.34/2015
dated 25.05.2015, the above clause stood substituted as follows:
“In the said notification,-
(i) in condition (3) in clause (d) in sub-clause (I),
for items (i) and (ii), the following items shall be
substituted, namely:-
“(i) in the case of capital goods, such goods are
not proved to the satisfaction of the said officer to have
been installed or otherwise used within the unit, within
the period of validity of the Letter of Permission (LoP);
(ii) in the case of goods other than capital
goods, such goods as are not proved to the satisfaction of
the said officer to have been used in connection with the
production or packaging of goods for export out of India
or cleared for home consumption within the period of
validity of the Letter of Permission (LoP);”
3.5.Thus, in terms of the amended notification in the case of the
capital goods proved to the satisfaction of the officer to have been
installed or otherwise used in the unit within the validity of Letter of
Permission, the benefit of Notification No.52/2003 would inure in favour
of the importer. The question raised by the appellant in their reply to the
show cause notice was that the amended Notification No.34/2015, being
a notification in substitution of the relevant clause in Notification No.
52/2003 is deemed to be retrospective.
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W.A.(MD)No.1265 of 2021
3.6.The learned Single Bench though accepted that under
normal circumstances, a notification or a statute which is being
substituted is deemed to be retrospective, declined the relief to the
appellant on the ground that the liability which had crystallized in the
impugned order is an accrued liability, the correctness of which is to be
decided in this appeal.
4.We have elaborately heard Mr.A.K.Jayaraj, learned Counsel
appearing for the appellant and Mr.R.Aravindan, learned Counsel
appearing for the respondents.
5.As noticed above, there is no dispute as to the fact that the
condition imposed with regard to the date of installation or period within
which installation has to take place stood amended by Notification No.
34/2015 dated 25.05.2015. In the said amended notification, it has been
specifically stated that the amendment is by way of substitution. If such
is the position, we need to consider as to what would be the effect of a
substituted resolution or the substituted notification. This issue is no
longer res integra and has been considered in several decisions and one
of which being 2018 (364) E.L.T. 27 (Mad.) [Mehler Engineered
Products India Pvt. Ltd., Vs. Union of India], wherein after
considering a catena of decisions on the point, it was held that after a
subsequent act amends an earlier one in such a way as it incorporates
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W.A.(MD)No.1265 of 2021
itself or a part of itself into the earlier, the Act must be construed as
'retrospective'. The operative portion of the judgment reads as follows:
“8.To be noted that the notification uses the
word 'substituted'. The word 'substituted' has been used
to mean that wherever in the notification dated
21.10.2015, the Entry 5402 occurs, it shall be substituted
with Entry 5402 47.
9.1. ....
9.5. In the case of Government of India v. Indian
Tobacco Association reported in 2005 (187) E.L.T. 162
(S.C.) while dealing with the exemption notification which
was issued by way of substitution, it was held as follows:
“15.The word 'substitute' ordinarily
would mean 'to put (one) in place of another' or
'to replace'. In Black's Law Dictionary, Fifth
Edition at page 1281, the word 'substitute' has
been defined to mean 'to put in the place of
another person or thing' or 'to exchange'. In
Collins English Dictionary, the word 'substitute'
has been defined to mean to serve or cause to
serve in place of another person or thing; 'to
replace (an tom or group in a molecule) with
(another atom or group); or a person or thing
that serves in place of another, such as a player
in a game who takes the place of an injured
colleague'.
16.By reason of the aforementioned
amendment no substantive right has been taken
away not any penal consequence has been
imposed. Only an obvious mistake was sought
to be removed thereby.
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W.A.(MD)No.1265 of 2021
17.There cannot furthermore be any
doubt whatsoever that when a person is held to
be eligible to obtain the benefits of an
exemption notification, the same should be
liberally consumed.”
10.The legal principles deducible from the above
decisions is that if subsequent Act amends an earlier one
in such a way as it incorporate itself or a part of itself into
the earlier, the Act must be construed as 'retrospective'.
This is so, because, the word “substituted” would mean 'to
put one in the place of another' or 'to replace'. Thus, on
account of such substitution whatever consequences which
have to follow would naturally be applicable to the
assessee by such substitution. Thus, notification dated
22.02.2016 in Notification No.51 of 2016 – Cus.(ADD)
having substituted Entry 5402 47 in the notification dated
21-10-2015 bearing Notification No.51 of 2015, it would
mean that the Entry in the Notification dated 21-10-2015
shall be 5402 47 for all purpose and it shall be so with
effect from 21-10-2015.”
6.In the case of Commissioner of Central Excise, Chennai II
Commissionerate Vs. S.P. Fabricators Pvt. Ltd., and Ors. reported in
MANU/TN/6295/2018, it has been held as follows:
“18.The Hon'ble Supreme Court in the case of
Government of India vs. Indian Tobacco Association
[MANU/SC/0502/2005 : 2005 (187) E.L.T. 162 (S.C.)
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W.A.(MD)No.1265 of 2021
explained the meaning of the word 'substitute' on the
following lines:
“15.The word “substitute” ordinarily
would mean “to put (one) in place of another”, or
“to replace”. In Black's Law Dictionary, Fifth
Edition, at page 1281, the word “substitute” has
been defined to mean “To put in the place of
another person or thing”, or “to exchange”. In
Collins English Dictionary, the word “substitute”
has been defined to mean “to serve or cause to
serve in place of another person or thing”, “to
replace (an atom or group in a molecule) with
(another atom or group)”; or “a person or thing
that serves in place of another, such as a player in
a game who takes the place of an injured
colleague.”
19.Thus, the 'substitution' by way of an
amendment dated 31.12.2008 has to be read to put in
place instead of the Rule, which was in existence prior to
the said Notification. In other words, it has to be read as a
replacement of an existing Rules.
20.The Hon'ble Supreme Court in the case of Zile
Singh vs. State of Haryana and Others [(2004) 8 SCC pg.1
brought about the distinguishing features between
'substitution' and 'supersession' and explained the same as
under:-
“24.The substitution of one text for the
other pre-existing text is one of the known and
well-recognised practices employed in
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W.A.(MD)No.1265 of 2021
legislative drafting. “Substitution” has to be
distinguished from “supersession” or a mere
repeal of an existing provision.
25.Substitution of a provision results in
repeal of the earlier provision and its
replacement by the new provision (see
Principles of Statutory Interpretation, ibid.,p.
565). If any authority is needed in support of
the proposition, it is to be found in West
U.P.Sugar Mills Assn.v. State of U.P. [(2002)2
SCC 645], State of Rajasthan v. Mangilal
Pindwal [(1996) 5 SCC 60], Koteswar Vittal
Kamath v. K.Rangappa Baliga and Co.[(1969)1
SCC 255] and A.L.V.R.S.T.Veerappa Chettiar v.
S.Michael [AIR 1963 SC 933]. In West
U.P.Sugar Mills Assn. Case a three Judge Bench
of this Court held that the State Government by
substituting the new rule in place of the old one
never intended to keep alive the old rule.
Having regard to the totality of the
circumstances centring around the issue the
Court held that the substitution had the effect of
just deleting the old rule and making the new
rule operative. In Mangilal Pindwal case, this
Court upheld the legislative practice of an
amendment by substitution being incorporated
in the text of a statute which had ceased to exist
and held that the substitution would have the
effect of amending the operation of law during
the period in which it was in force. In Koteswar
case, a three-Judge Bench of this Court
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W.A.(MD)No.1265 of 2021
emphasised the distinction between
'supersession' of a rule and 'substitution' of a
rule and held that the process of substitution
consists of two steps: first, the old rule is made
to cease to exist and, next, the new rule his
brought into existence in its place.”
7.The Hon'ble Division Bench of this Court in the case of
Commissioner of Central Excise, Chennai – IV Vs. M/s. Kone
Elevators India Pvt. Ltd., [2019-TIOL-1542-HC-MAD-CX] had taken
note of the decision in the case of S.P.Fabricators Ltd., and dismissed
the appeal filed by the revenue.
8.This being the legal position, we need to see as to whether the
second respondent had properly interpreted the same. In fact, in the
reply to the show cause notice, the appellant has specifically mentioned
that the machinery has been installed or otherwise used within the unit
within a period of validity of Letter of Permission, which was valid till
22.07.2019. While dealing with the said issue, the second respondent has
stated that the amended Notification No.34/2015, does not have any
retrospective effect and it is effective only from the date of issue ie.,
25.05.2012. This finding rendered by the second respondent is on a
wrong understanding of the legal provision.
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W.A.(MD)No.1265 of 2021
9.In the counter affidavit filed in the writ petition, the
department has misapplied the explanation to Section 25 of the Act with
regard to the coming into force of a notification. There appears to be no
dispute as to on what date the notification was published, but, when was
it given effect to by operation of law. Then, it has to be held that the
notification is retrospective, as it is an amendment by substitution. The
learned Single Bench has considered this aspect and has observed that it
is true that the notification reads that it is a substitutive amendment, but
has denied the relief to the petitioner on the ground that it is an accrued
liability. Admittedly, on the date when the show cause notice was issued
dated 29.01.2018, the exemption notification stood amended by issuance
of Notification No.34/2015. Therefore, the question of treating the
amount of duty as an accrued liability is incorrect.
10.Therefore, for the above reasons, we hold that the order
impugned in the writ petition is without jurisdiction. In the result, the
writ appeal is allowed and the order passed in the writ petition is set
aside. Consequently, the writ petition is allowed and the order-in-original
is quashed. It appears that Special Leave Petitions are pending against
the judgment of the Karnataka High Court on the same issue. In the
event the decision on the retrospectivity or prospectivity is held to be
otherwise then, the reasons given by us above, it would be open to the
revenue to work out its remedy in accordance with law. However, there
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W.A.(MD)No.1265 of 2021
shall be no order as to costs. Consequently, connected miscellaneous
petitions are closed.
[T.S.S., J.] & [S.A.I., J.]
13.07.2021
Index : Yes / No
Internet : Yes / No
MR
Note: In view of the present lock down owing to COVID-19
pandemic, a web copy of the order may be utilized
for official purposes, but, ensuring that the copy
of the order that is presented is the correct copy,
shall be the responsibility of the advocate/litigant
concerned.
To
1.The Commissioner of Customs (Preventive),
Headquarters, No.1, Williams Road,
Cantonment,
Trichy – 620 001.
2.The Joint Commissioner of Customs (Preventive),
Office of the Additional Commissioner of Customs,
Mandapam Road,
Ramanathapuram – 623 503.
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W.A.(MD)No.1265 of 2021
T.S.SIVAGNANAM, J.
AND
S.ANANTHI, J.
MR
JUDGMENT MADE IN
W.A.(MD)No.1265 of 2021
13.07.2021
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