Holding

The additional duty is leviable at the rate specified for "textured yarn produced out of base yarn" and not at the rate for "other textured yarn".

Summary

M/s. Goodyear India Ltd. imported nylon woven dipped diffusion resistance fabric and paid the additional duty levied under the Customs Tariff Act, 1975. The importer claimed a refund, contending that the goods fell under the exemption Notification No. 55/78 as "textured yarn produced out of base yarn" and should attract the lower duty rate specified for that description. The Customs, Excise and Gold (Control) Appellate Tribunal agreed that the goods were of that description but nonetheless imposed the higher rate applicable to "other textured yarn". On appeal, the Supreme Court held that when the goods are classified as "textured yarn produced out of base yarn", the additional duty must be levied at the rate fixed for that specific description, not the higher rate for other textured yarn, interpreting the Explanation to Section 3(1) of the Customs Tariff Act. The Court set aside the Tribunal's order and allowed the appeal, directing that the lower duty rate apply.

Issues considered

Whether the additional duty on imported textured yarn produced out of base yarn should be levied at the rate specified for that description or at the higher rate for other textured yarn under Notification No. 55/78.
How the Explanation to Section 3(1) of the Customs Tariff Act, 1975 should be interpreted when multiple duty rates exist for different descriptions.
Whether the Tribunal erred in applying the higher duty rate despite finding the goods fell under the specific description.

Legislation cited

Central Excises and Salt Act, 1944s. First Schedule
Customs Tariff Act, 1975s. 3(1), s. 3(3)

Subjects

Customs dutyAdditional dutyExcise dutyNotification exemptionTextured yarnStatutory interpretationRefund of dutyAppellate TribunalSupreme Court

Judgment

A M/S. GOODYEAR INDIA LTD. ~- .
v.'
COLLECTOR OF CUSTOMS, BOMBAY

JANUARY 27, 1997

B [A.M. AHMADI, 0. AND S.P. BHARUCHA, J.]

Customs Tariff Act, 1975/Additional Duty Rules, 1976 :

S. 3(1), Explanation/Rule 2:-Exemption Notification No. 55 dated
C 1.3.1978-lmported nylon yam fabrics described as "Nylon Woven Dipped
Diffusion Resistance Fabric Goodyear Code E02NN"-Levy of additional
excise duty-Importer claiming the goods covered by the exemption notifica-
tion under the category "textured yam produced out of base yam"-Tribunal
holding that though the imported article fell under the said description
additional duty would be leviab/e at the rate specified in the notification for
D "other textured yam"--Held, additional duty leviab/e on the imported goods
is that specified against the description "textured yam produced out of base
yam" and not that specified against "other textured yam".

The appellant imported bulknylon yarn fabric, described in the bill
E of entry as "Nylon Woven Dipped Diffusion Resistance Fabric, Goodyear
Code E02NN" and cleared the same upon payment of duty as levied. Later,
on the basis of exemption Notification No. 55 dated l.3.1978 the appellant
claimed refund of additional excise duty, levied under s.3 of the Customs
Tariff Act, 1975. The case of the appellant was that the goods fell under
the description "textured yarn produced out of the base yarn" as
F enumerated at sl. No. 1, column (2) of the Table to the notification, and
as such the duty would be levied as prescribed in corresponding column
(3) of the said Table. Revenue rejected the claim and ultimately the
appellant filed an appeal before the Customs, Excise and Gold (Control)
Appellate Tribunal. The Tribunal Found that the goods fell under the
G description "textured produced out of base yarn", but held that duty was
payable at the rate specified in the notification in respect of "other textured
yarn". Aggrieved, the appellant filed the present appeal.

It was contended for the appellants that the Tribunal having held >-
that the imported goods were textured yarn produced out of base yarn, in
H requiring the appellants to pay additional duty at a rate specified in the
:· 556
MIS QOOD YEAR INDIA v. COLLECTOR OF CUSTOMS 557

' ~ notification for "other textured yarn". For the Revenue it was contended A
that the goods were textured yarn in respect. of which the Notification
prescribed different rates of duty; and, therefore, in view of Explanation
to s. 3 (1) of the Tariff Act, the duty was rightly levied.

Allowing the appeal and setting aside the judgment and order of the
Tribunal, this Court B

HELD : 1.1. The imported goods, as found by the Tribunal fall in the
category of "textured yarn produced out of base. yarn'', and, therefore, the
additional excise duty that is leviable is that specified against the descrip-
tion in the Table of the Notification No. 55178 and they cannot be made C
liable to additional duty at the rate specified for "other textured.yarn", that .
is to say, for textured yarn that does not fulfil the description of beiµ{
/
produced out of base yarn. [562-D-E] /
/
1.2. Explanation to s.3 (1) of the Customs Tariff Actllefines the
expression "the excise duty for the time being leviable on a" like article if D
produced or manufactured in India. It means the excise duty for the time
being in force which would be leviable on a like article produced or
manufactured in India. If a like article is not produced or manufactured
• in India, the expression means the excise duty which would be leviable on
the class or description of articles to which the imported article belongs; .E
and where such excise duty is at different rates, the expression means the
highest rate of duty. [567-E-FJ

Thennax P1ivate Ltd. v. Collector of Cu$toms (Bombay) New Customs
House, [1992] 4 SCC 440, relied on.
F
CIVIL APPELLATE JURISDICTION: Ci~il Appeal No. 3632 of
1986.

From the Judgment and Order dated 16.4.86 of the Customs Excise
and Gold (Control~Appellate Trihunal, New Delhi in A. No. 1333/80-D) G
(Order No. 233/86-D).

S. Ganesh, Amit Bansal for M/s . .TBD & Co. for the Appellant.

M.S. Usgaonkar, Additional Solicitor General, VK Verma, S.D.
Sharma, Hemant Sharma for the Respondent. H
'
558 SUPREME COURT
\
REPORTS [1997] 1 S.C.R.
A The Judgment of the Court was delivered by

BHARUCHA, J. The appeal arises upon a judgment delivered by the
Customs, Excise and Gold (Control) Appellate Tribunal. The appellants
imported bulked nylon fabric. The bill of entry described the imported
goods as being Nylon Woven Dipped Diffusion Resistance Fabric,
B Goodyear Code E02 NN. The imported goods were cleared upon payment
of duty as demanded. The appellants then claimed refund of the additional
duty paid by them as now stated. The claim having been refused by the
authorities below, the Tribunal was moved.

c The Customs Tariff Act, 1975, prescribes in Section 3 for the lery of
additional duty equi11 to excise duty. Sub-section (1), its Explanation and
sub-section (2) of Section 3 are relevant, and they read thus :

"3. Levy of additional duty equal to excise duty. - (1) Any article
which is imported into India shall, in addition, be liable to a duty
D (hereafter in this section referred to as the additional duty) equal
to the excise duty for the time being leviable on a like article if
produced or manufactured in India and if such excise duty on a
like article is leviable at any percentage of its ~alue, th~ additional
duty to which the imported article shall be so liable shall be
calculated at that percentage of the value of the imported article.
E
Explanation. - In this section, the expression "the excise duty for
the time being leviable on a like article if produced or manufac-
tured in India" means the excise duty for the time being in force
which would be leviable on a like article if produced or manufac-
F turer in India or, if a like article is not produced or manufactured,
which would be leviable on the class or description of articles to
which the imported article helongs, and whe~e such duty at dif- •
ferent rates, the highest duty.

xxx xxx xxx
G
(3) If the Central Government is satisfied that it is necessary in
the public interest to levy on any imported articL (whether on such
article duty is leviable under sub-section (1) or not) such additional
/

duty as would counter balance the r,xcise duty leviable on any raw
H materials, components and ingredients of the same nature as, or
/
/
MIS GOOD YEAR INDIA v. COLLECTOR OF CUSTOMS [BHARUCHA, J.] 559
I similar to those, used in the production or manufacture of such A
I article, it may, by notification in the Official Gazette, direct that
such imported article shall, in addition, be liable to an additional
duty representing such portion of the excise duty leviable on such
raw materials, components and ingredients as, in either case, may
be determined by rules made by the Central Government in this
B
behalf."

Under the provisions ofSectiou 3(3) of the Customs Tariff Act, the
Additional Duty Rules, 1976, have been framed. Rule 2 states that for the
purposes of Section 3(3) "the additional duty leviable on any imported
article specified in column (2) of the Table annexed hereto shall be equal c
to th excise duty for the time being leviable on the material specified in the
corresponding entry in column (3) of the said Table to the extent that
material is used in the manufacture of the imported article". The Table
reads thus :

"TABLE D

S.No. Name of article Name of material
1. Fabrics Containing more than to per cent Synthetic fibre and
by weight of synthetic fibre or yarn. yarn.
2. ··································································· ··························" E
In exercise of the powers conferred by Rule 8 of the Central Excise
Rules. 1944, the Central Government, by Notification No. 55/78 dated 1st
March, 1978, (hereinafter called "the said notification") exempted textured
yarn of the description specified in column (2) of the Table thereto falling
under sub-item II (i)(b) of Item No. 18 of the First Schedule to the Central
F
Excises and Salt Act, 1944, from so much of the excise duty leviable thereon
as was in excess of the duty specified in the corresponding entry in column
(3) of that Table. The Table read thus :

THE TABLE G
S.No. Description Rate of duty
l. Textured yarn produced The duty for the time being leviable
out of Base yarn. on the base yarn if not already paid
plus five rupees per kilogram.
H
,,,,
'

560 SuPREME COURTREPORTS (1997] 1 S.C.R.
A 2. Other textured yarn (Rs. per kilogram)
(a) Polyamide (nylon)
Textured yarn -

B
(i) bel.ow 38.5. deniers
(ii) 38.5 deniers and above
but below 88 deniers
63.80

56.80
\ '

(iii) 88 deniers and above
. 49.80
but below 121 deniers
(iv) 121 deniers and above
42.80
c but below 165 deniers
(v) 165 deniers and above 24.60
xxx xxx xxx

Explanation I. - "base yarn" means yarn falling under sub-item II(i)(a) of
D Item No. 18 of the First Schedule to the Central Excises and Salt Act, 1944
(1 of 1944), from which texturned yarn has been produced;

The Tribunal noted the contention on behalf of the appellant that
E the yearn in question fell under S. No. 1 aforementioned and not under S.
No. 2(a)(v), and the basis for the contention, namely, that the supplier of
the imported goods .had bought base yarn and subjected it to the process
of air-bulking to produce the textured yarn that was imported. The
Tribunal stated, counsel "contends that the description of the article
p relevant to the present case is textured yarn produced out of base yarn and
not other textured yarn in notification 55178. This contention has, in our
opinion, substance". The Tribunal went on to add, "The description of the
article in the First Schedule to the Central Excises and Salt Act is Textured
yarn. 'Textured yarn produced out of base yarn' is merely descriptive of
process of manufacture. For duty purposes, notification No. 55/78
G describes and fixes a different concessional rate of duty for textured yard
produced out of base yarn separately from other textured yarn. This itself
shows that textured yarn is liable to excise duty at different rates, depend-
ing on the process of manufacture. The excise leviable on textured
polyamide yarn of above 750 deniers would depend on the process of
H manufacture. It.is Rs. 6.50 (SL No. 3(b)(vi) of notification No. 28.75 CE)
MIS GOOD YEAR INDIA v. COLLECTOR OF CUSTOMS !BHARUCHA, .I.] 561

plus Rs. 5 per kg. (Col. 3 against SI. No. 1 of notification 55/78 CE), if such A
'f" ~ textured yarn is produced out of base yarn. If it is produced otherwise, the
rate of duty is Rs. 24.60 per kg. (SI. No. 2(a)(v) of notification 55/78). In
such a situation, the yarn content of the imported fabrics would attract duty
at the higher rate viz., Rs. 24.60 per kg. (plus special excise duty as may be
applicable."
B
Learned counsel for the appellants submitted that once the Tribunal
~
., had come to the conclusion that the imported goods were textured yarn
produced out of bases yarn, only that amount of additional duty was
payable thereon as was specified against the description "textured yarn
produced out of base yarn" in the Table of the said notification. There was c
no question then of requiring the appellants to pay additional duty at a rate
specified in the notification for "other textured yarn".

The learned Additional Solicitor General, appellant for the Revenue,
placed reliance upon the Explanation to Section 3(1). In his submission, D
the imported goods were textured yarn in respect of which the said
.... notification prescribed different rates of duty; therefore, under the Ex-
planation to Section 3(1), the highest duty thereon was that which was
payable by the appellants.

Section 3 requires that an article imported into India shall be liable E
to additional duty equal to the excise duty for the time being leviable on a
like article if produced or manufactured in India. The expression "the
excise duty for the time being leviable on a like article if produced or
manufactured in India" has been defined by the Explanation to Section
3(1). It means the excise duty for the time being in force which would be F
leviable on a like article produced or manufactured in India. If a like article
is not produced or manufactured in India, the expression means the excise
duty which would be leviable on the class or description of articles to which
the imported article belongs; and where such excise duty is at different
rates, the expression means the highest rate of duty. Section 3(3) enables
the Central Government, in the public interest, to levy on an imported G
article such additional duty as would counterbalance the excise duty levi-
able on raw materials, components and ingredients of the same nature as
-.\ are used in the manufacture of such article or are similar thereto. The
-I
Central Government may, by notification in the Official Gazette, direct that
an imported article shall bear additional duty representing such portion of H
562 SUPREME COURT REPORTS [1997] 1 S.C.R.
A the excise duty leviable on such raw materials, components and ingredients
as it may by rules determine. It is in exercise of the power conferred by
Section 3(3) that the Additional Duty Rules, 1976, have been framed and
they specify that additional duty shall be imposed on fabrics containing
more than 10 per cent by weight for synthetic fibre or yarn which shall be
equivalent to the excise duty leviable on the synthetic fibre and yarn used
B
therein.

Insofar as the imported goods are concerned, they fall, as the
Tribunal has found, in the category of "textured yarn produced out of base
yarn". In respect of "textured yarn produced out of base yarn" the excise
C duty that is Ieviable is that specified against that description in the Table
of the said notification. The Explanation to Section 3(1) says of an article
which is not produced or manufactured in India that the expression "excise
duty for the time being leviable on a like article if produced or manufac-
tured" means that duty which would be leviable on the class or description
D of articles to which· the imported article belongs. Since, admittedly, the '·
imported goods fall within the description "textured yarn produced out of
base yarn", the additional duty that is payable thereon is that specified
against that description in the Table of the said notification and they cannot
be made liable to additional duty at the rate specified for "other textured
yarn", that is to say, for textured yarn that does not fulfil the description of
E being produced out of base yarn.

We are fortified in the view that we take by the decision of this Court
in 171ennax Private Ltd. v. Collector of Customs (Bombay) New Customs
House, [1992] 4 S.C.C. 440 The relevant paragraph is reproduced :
F
"Shri A.K. Ganguly, on behalf of the Revenue raises a contention
that, even assuming that the goods filfil the conditions of the
notification referred to earlier, the CVD rate applicable would be
80 per cent by virtue of the Explanation to Section 3(1) of the C.T.
Act. He submits that the goods imported by the assessee ae "parts
G of refrigerating and air-conditioning equipment". They are charge-
able at different rates of duty accordingly as they fall under item
with serial No. 4 (80 per cent) or that with serial No. 5 (nil) or
that with serial No. 6 (20 per cent) or that with serial Nos. 7 and
,.. .

8 (25 per cent). In such a situation, he says, the provisions of the
H Explanation to Section 3(1) are attracted and hence the assessee
MIS GOOD YEAR INDIA v. COLLECTOR OF CUSfOMS (BHARUCHA, J.] 563

will be liable to duty at the highest rate .of 80 per cent. We are lath A
to permit the department to raise at this stage a fresh contention
not taken before the Tribunal or earlier. That apart, we do not
think it is well founded. It is no doubt true that Item 29-A of the
Schedule to the C.E Act is very wide and covers various articles.
The notification also deals with various categories of articles falling B
under that item. But there has been no dispute at any stage that
the goods we are concerned with fall under item with serial No.
8(3) of the notification. So far as the category of goods is con-
cerned, there is only one rate of duty mentioned in the notification.
The fact that certain other parts of refrigerating and air-condition-
ing appliances and machinery may fall under item with serial No. C
4(1) or elsewhere cannot attract the higher duty on the goods
presently under consideration. The Explanation to the notification
(sic Section 3(1) is applicable only where goods of exactly the same
description attract different rates of duty. See, in this connection, the
decisions on analogous provision in Collector of Customs v. Westem D
India Plywood Manufacturing Co. Ltd., [1989] Supp. 2 S.C.C. 515
and Collector of Customs v. Hansur Plywood Works, (1989) Supp.
2 S.C.C. 520. We, therefore, reject this contention. (Emphasis
supplied.)

We are, therefore, of the view that the Tribunal was in error and that E
the judgment and order under appeal must be set aside.

The appeal is allowed. The judgment and order under appeal is set
aside.

No order as to costs. F
R.P. Appeal allowed.