L. R. Brothers Indo Flora Ltd. Vs. Commissioner of Central Excise (Supreme Court)
The appellant being a 100% EOU and into manufacture of cut flowers, without obtaining the approval of the Development Commissioner and without maintaining the requisite net foreign exchange earning, made DTA sales to the extent of Rs.38,40,537/ during 1998-99 to 200001 (upto December 2000), in contravention of the provisions of EXIM Policy. Notably, the appellant subsequently sought ex-post facto approval from the Development Commissioner vide letter dated 6.2.2001.
Show cause issued as to why customs duty, interest and penalty should not be imposed for the DTA sales made by the appellant in contravention of the EXIM Policy, that too after having availed the exemptions under the exemption notification concerned on the import of green house equipment, raw materials like Live Rose Plants and consumables like planting materials and fertilizers.
After according opportunity of being heard, the Additional Commissioner adjudged the show cause notice and held that the DTA sales were made without permission of the Development Commissioner and in contravention of the EXIM Policy and therefore, customs duty is leviable upon the appellant for the said sales. It was further held that the appellant had wilfully suppressed facts and thus Section 28 of the Customs Act, 1962 was invoked in the present case. Demand subsequently confirmed by Commissioner Appeals as well as CESTAT leading to present Civil Appeal.
Held:
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. The exemption notification, having been issued in exercise of delegated legislation under Section 25 of the 1962 Act, 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 (where resulting product cleared in DTA was non-excisable).
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 expost 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.
An essential requirement for application of a legislation retrospectively is to show that the previous legislation had any omission or ambiguity or it was intended to explain an earlier act. In absence of the above ingredients, a legislation cannot be regarded as having retrospective effect.
The circular (discussing amendment on charging rate) does not mention that the earlier methodology in force was deficient or devoid of clarity in any manner. It rather says that the same was being disadvantageous to the EOU units as compared to the DTA units due to the difference in charging rates in the respective circulars. Upon considering that, the amendment has been brought in to establish parity with the excise notifications and to vindicate the disadvantage that earlier regime was causing to EOU units. Merely because an anomaly has been addressed, it cannot be passed off as an error having been rectified. Unless shown otherwise, it has to be seen as a conscious change in the dispensation, particularly concerning the fiscal subject matters.
If the Government brought in the amendment notification to clarify that the articles were to be charged at the rate of duty provided for inputs and not for the final articles, it would be necessary to analyse the position prior to the amendment and to see if duty on inputs chargeable at the rate of final articles was an error that crept in. The said provision was not an error that crept in but was intentionally introduced by the Government to determine the charging rate. That being the position prior to amendment, the amendment brought in cannot be said to be clarificatory in nature.
CESTAT has rightly upheld the levy of customs duty.
