Expression ‘for use’ means intended for use: HC

Ratnagiri Impex Pvt. Ltd. Vs Commissioner of Customs (Karnataka High Court)

The Supreme Court in Dalmia Dadri Cement Ltd. supra while considering the expression ‘for use’ in Section 5(2)(a)(v) of the Punjab General Sales Tax Act held that the aforesaid expression means intended for use. It was further held that inability to prove the actual use or the fact that use was some purpose in addition to that stated in the certificate of the use is irrelevant. It was further held that if the intention of the legislature was to limit the exemption only to such goods sold as were actually used by the undertaking in generation and distribution of electrical energy, the phraseology used in exemption clause would have been different such as ‘goods actually’ used or ‘goods used’.

 It is well settled in law that exemption Notification has to be interpreted strictly and the burden of proving applicability is on the assessee to show that his case comes within the parameters of exemption clause or exemption Notification. It is equally well settled legal proposition that if ambiguity in exemption Notification is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the assessee and it must be interpreted in favour of the revenue. [See: DILIP KUMAR supra]. From conjoint reading of the entry made in the Notification dated 01.03.2002 as well as the Circular issued by the Ministry of Finance and the decision of the Supreme Court in Dalmia Dadri Cement Ltd., it is evident that the expression ‘for use’ means intended for use. In Entry 252 A, the expression ‘for use’ has been used, which means intended for use as well. The Notification does not stipulate a condition of proof for end use in order to claim exemption. It is pertinent to mention here that wherever the benefit of a Notification is granted subject to condition of actual use, in such a case, the Notification has used the words ‘only, exclusively or entirely’. In this connection, we may refer to Entry 250 in the Notification dated 01.03.2002, which grants exemption subject to actual use and adherence to concessional rate of duty as a condition in the Notification. In view of the Circular issued by the Finance Department, dated 11.01.2005, it is evident that the Entry in question does not suffer from any ambiguity and does not impose any condition of actual use. The tribunal therefore, erred in law in holding that the appellant is not entitled to the benefit of exemption Notification.

Even otherwise, there is ample material on record to show that the goods were used in tea, coffee and rubber plantation sector viz., the communication dated 04.08.2007 and 12.09.2007 issued by Joint Agricultural Director and the Government of Karnataka, Department of Agriculture, communication dated 20.07.2007 issued by Andhra Pradesh State Agro Industries Development Corporation Limited and the statements given by the dealers that the goods are meant to be used in tea, coffee and rubber plantation. Therefore, the submission made by learned counsel for the revenue that the goods were used for non plantation sectors and the appellant was guilty of suppression of facts does not deserve acceptance as the documents referred to supra were filed before the authorities. It is also pertinent to note that the tribunal has not recorded any finding that the goods in question were used for non plantation sectors. Even otherwise, the exemption Notification does not stipulate a condition of proof of end use.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

This appeal under Section 130 of the Customs Act, 1962 (hereinafter referred to as the Act for short) has been filed against the order dated 10.07.2018 passed by Customs, Excise and Service Tax Appellate Tribunal, Bangalore (hereinafter referred to as ‘the tribunal’ for short). The appeal is admitted on the following substantial questions of law:

(i) Whether the Hon’ble Tribunal was correct in interpreting the expression “for use in specified Plantation sector” as “actual use in specified Plantation sector” by disregarding the decision of the Supreme Court in the case of State of Haryana vs. Dalmia Dadri Cement Ltd. Wherein “for use” has been interpreted to mean capable of use?

(ii) Whether the Hon’ble Tribunal was right in denying the benefit of S.No.252A of the Notification No.21/2002 cus dated 01.03.2002 to multi utility / general purpose goods which are capable of use in the specified plantation sector by importing the condition of actual use in the specified plantation sector not contained in the Notification?

2. Background facts leading to filing of this appeal briefly stated are that the assessee is engaged in the business of import and trading of equipments / appliances meant for use in agriculture, horticulture, coffee and tea plantations, forestry etc. The appellant imports the goods through Inland Container Deport ICD) and Air Cargo Complex, Bangalore. The appellants during the period from 01.12.2003 to 31.03.2007 imported hi-tech appliances i.e., sprayers, power weeders, Tea Pruners and Mist Blowers, classifiable under Chapter Heading 8424 8100, 8433 1190, 8414 5920 and 8201 6000 respectively availing the benefit of concessional rate of duty expended to specified goods imported for the use in plantation center. The aforesaid goods were imported by availing the benefit of concessional rate of duty at the rate of 5% as contained in Sl.No.252 (A) of Notification No.21/2002 cus dated 01.03.2002 as amended vide Notification No.175/2003 dated 10.12.2003. The imported goods were sold by the appellant to the dealers who in turn sold the goods to the customers. The impugned goods being multi utility goods are capable of being used in plantation as well as other sectors. It is the case of the appellant that appellant implemented the dealers by way of Circulars and letters that the same shall be sold for use in plantation sector only. The dealers in turn sold the goods to customers in specified plantation sector as well as other sectors such as agriculture, sericulture, forestry, hospitals, government organization, hotels, and resorts etc.

3. The respondents issued a show cause notice dated 04.12.2007 proposing to demand differential duty of Rs.1,30,22,441/- by denying the benefit of Sl.No.252 (A) of Notification 21/2002 on the ground that the appellants have sold the impugned goods through their sales showroom, dealers and under various subsidy schemes to customers for their use in sectors other than specified plantation sector. The appellants filed a reply to the show cause notice and was afforded an opportunity of personal hearing. The Commissioner of Customs passed on order dated 31.08.2008 and raised a demand of duty of Rs.1,30,22,441/- and imposed the penalty. The appellants thereupon filed an appeal before the tribunal. The tribunal by an order dated 10.07.2018 inter alia held that entry at Sl.No.252A of Notification dated 01.03.2003 grants the benefit of concessional rate of duty to machinery or equipment specified in list 32A for use in the plantation sector viz., tea, coffee and rubber plantation. It was further held that the exemption Notification is applicable purely for tea, coffee and rubber plantations and some of the goods are capable of being used in other sectors as well and therefore, the exemption will not be available to the appellant. It was also held that there is no ambiguity that said Notification has been issued for exempting goods for use in a particular sector and the appellant is guilty of suppression of facts as the factum of sale or use in other sectors was never disclosed to the department by the appellant. The department conducted an enquiry and the facts came to its notice and therefore, the extended period has been rightly invoked to levy the tax. Accordingly, the appeal was partly dismissed and order of the Commissioner of Customs, Bangalore was upheld. Being aggrieved, by the order of the tribunal, this appeal has been filed.

4. Learned Senior counsel for the appellant submitted that a sum of Rs.1,30,22,441/- was demanded as duty from the appellant. However, it is pointed out that the material was placed before the authorities evidencing the use of goods in tea and coffee sector. It is pointed out that goods worth Rs.73,53,920/-were supplied to the departments of agriculture in the State of Karnataka and Andhra Pradesh respectively. It is also pointed out that goods worth Rs.5,09,854/- were supplied to customers / dealers in and around Bangalore, whereas goods worth Rs.51,58,667/- were supplied to dealers / customers all over India. Reference has also been made to the material placed before the authorities viz., the communication dated 04.08.2007 as well as 12.09.2007 of the Joint Agricultural Director, Government of Karnataka stating that goods supplied by the appellant were used in coffee, tea, coconut and arecanut plantations sector.

5. Our attention has also been invited to communication dated 20.07.2007 issued by Andhra Pradesh State Agro Industries Development Corporation Limited stating that appellant has supplied knapsack sprayers under the government subsidy schemes and the goods were used to spray pesticides, insecticides on different crop like paddy, wheat, pulses, ground nut, cotton, chilies and other field crops. Learned Senior counsel for the appellant also referred to the statements given by the dealers wherein they had stated that goods are available at the reduced rate and the same is meant to be used in tea, coffee and other plantation sector. It is further submitted that there has been no suppression on the part of the appellant and the Notification does not stipulate a condition for proof of end use. It is also urged that the issue involved in this appeal have already been answered in favour of the assessee by the Supreme Court in ‘STATE OF HARYANA VS. DALMIA DADRI CEMENT LTD.;’2004 (178) E.L.T. 13 (SC) as well as Circular issued by Central Board of Direct Taxes (C BDT) dated 11.01.2015. Reliance has also been placed on decision of the High Court of Madhya Pradesh in ‘PRAKASH METAL CRAFTS INDUSTRIES VS. CCT.; 2016 (337) E.L.T. 342 (MP).

6. On the other hand, learned counsel for the revenue submitted that majority of the sales were effected by the appellant to the customers, which were meant for use in non plantation sectors such as hospitals, hotels, resorts, government organizations, agriculture, horticulture, forestry etc. and therefore, the appellant is not entitled to any relief. It is further submitted that the exemption Notification dated 01.03.2002 is applicable only to a particular sector viz., coffee, tea and rubber plantations. It is also pointed out that the appellant has sold a very small portion of goods imported in conformity with its declaration along with the Bills of Entry and the majority of the goods have been sold directly or indirectly through its vendors to various sectors such as hospitals, forestry, landscaping and horticulture etc. It is further submitted that exemption Notification has to be interpreted strictly and there is no scope for liberal construction and in case of any ambiguity in the exemption Notification, the benefit of the same has to be given in favour of the revenue. In support of aforesaid submissions, reliance has been placed on decisions of the Supreme Court in ‘RAJASTHAN SPINNING AND WEAVING MILLS LTD. BHILWARA VS. COLLECTOR OF CENTRAL EXCISE JAIP UR, (1995) 4 SCC 473 and constitution bench of the Supreme Court in ‘COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI VS. DILIP KUMAR AND COMPANY, AIR 2018 SC 3603.

7. We have considered the submissions made by learned counsel for the parties and have perused the record. The period of dispute in question is 01.12.2003 to 31.03.2007. In exercise of powers under Section 25(1) of the Act, the Central Government by a Notification has exempted the goods imported into India mentioned therein. Entry 252A of the aforesaid Notification, which is relevant for the purpose of controversy involved in this appeal, reads as under:

8. The relevant extract of List 32A reads as under:

(1) machinery for coffee plantation sector, namely:-

(2) Machinery for tea plantation sector, namely::-

(i) tea bagging machine, falling under tariff item 8422 30 00 (ii) Tea packaging machine, falling under tariff item 8422 30 00 (iii) color sorting machine, falling under sub­heading 8433 70 (iv) Tea leaf cutting-rolling machine, falling under tariff item 8438 80 40 (v) Mechanical harvester, falling under tariff item 8433 59 00 (vi) Tea pruning machine, falling under tariff item 8201 60 00 (vii) Mist blower, falling under tariff item 8414 59 20 (viii) Sprayer, falling under tariff item 8424 81 00 (ix) Rotary shifter falling under sub heading 8433 60 (x) Lateral cyclone winnower falling under sub-heading 8433 60 (ix) Dividing bypass falling under sub-heading 8438 80.

9. The Ministry of Finance issued a Circular dated 11.01.2005, in which the issue with regard to eligibility of general purpose labeling machine under Notification dated 01.03.2002 for use in textile industry was discussed and the Board thereafter took the decision vide Circular dated 11.01.2005, which reads as under:

Decision: The Board deliberated upon the language of the Notification. The expression used in the Notification is good for use in the textile industry”. The Notification, therefore, does not appear to restrict the concession to only those machinery or equipment which was ‘specifically designed for use’ in the textile industry. The Notification allows the import of general purpose machinery also as listed in List 30 so long as they are capable of use in textile industry. It has accordingly been decided that ‘general purpose labeling machine’ was eligible for exemption under S.No.250 of Notification No.21/2002 cus dated 01.03.2002, if it could also be used in the textile industry.

10. The Supreme Court in Dalmia Dadri Cement Ltd. supra while considering the expression ‘for use’ in Section 5(2)(a)(v) of the Punjab General Sales Tax Act held that the aforesaid expression means intended for use. It was further held that inability to prove the actual use or the fact that use was some purpose in addition to that stated in the certificate of the use is irrelevant. It was further held that if the intention of the legislature was to limit the exemption only to such goods sold as were actually used by the undertaking in generation and distribution of electrical energy, the phraseology used in exemption clause would have been different such as ‘goods actually’ used or ‘goods used’.

11. It is well settled in law that exemption Notification has to be interpreted strictly and the burden of proving applicability is on the assessee to show that his case comes within the parameters of exemption clause or exemption Notification. It is equally well settled legal proposition that if ambiguity in exemption Notification is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the assessee and it must be interpreted in favour of the revenue. [See: DILIP KUMAR supra]. From conjoint reading of the entry made in the Notification dated 01.03.2002 as well as the Circular issued by the Ministry of Finance and the decision of the Supreme Court in Dalmia Dadri Cement Ltd., it is evident that the expression ‘for use’ means intended for use. In Entry 252 A, the expression ‘for use’ has been used, which means intended for use as well. The Notification does not stipulate a condition of proof for end use in order to claim exemption. It is pertinent to mention here that wherever the benefit of a Notification is granted subject to condition of actual use, in such a case, the Notification has used the words ‘only, exclusively or entirely’. In this connection, we may refer to Entry 250 in the Notification dated 01.03.2002, which grants exemption subject to actual use and adherence to concessional rate of duty as a condition in the Notification. In view of the Circular issued by the Finance Department, dated 11.01.2005, it is evident that the Entry in question does not suffer from any ambiguity and does not impose any condition of actual use. The tribunal therefore, erred in law in holding that the appellant is not entitled to the benefit of exemption Notification.

12. Even otherwise, there is ample material on record to show that the goods were used in tea, coffee and rubber plantation sector viz., the communication dated 04.08.2007 and 12.09.2007 issued by Joint Agricultural Director and the Government of Karnataka, Department of Agriculture, communication dated 20.07.2007 issued by Andhra Pradesh State Agro Industries Development Corporation Limited and the statements given by the dealers that the goods are meant to be used in tea, coffee and rubber plantation. Therefore, the submission made by learned counsel for the revenue that the goods were used for non plantation sectors and the appellant was guilty of suppression of facts does not deserve acceptance as the documents referred to supra were filed before the authorities. It is also pertinent to note that the tribunal has not recorded any finding that the goods in question were used for non plantation sectors. Even otherwise, the exemption Notification does not stipulate a condition of proof of end use.

In view of preceding analysis, the substantial questions of law framed by this court are answered in favour of the appellant and against the revenue. In the result, the order dated 10.07.2018 passed by the tribunal imposing the duty of Rs.1,30, 22,441/- and levying a penalty of Rs.1,30, 22,441/- on the appellant is quashed.

In the reSult, appeal iS allowed.