M/S. MOTIRAM TOLARAM AND ANR. ETC. ETC.versusTHE UNION OF INDIA AND ANR.

 A             MIS. MOTIRAM TOLARAM AND ANR. ETC. ETC.
                                          v.
                        THE UNION OF INDIA AND ANR.

                                  AUGUST 5, 1999

 B               [B.N. KIRPAL, A.P. MISRA AND R.P. SETHI, JJ.]


           Customs Tariff Act, 1975:

             S.3-Additional duty on polyvinyl alcohol-Notification No. 185 of
 C    1983-Assessees claiming benefit of the Notification and contending to pay
      excise duty of l 0% ad valorem, instead of normal duty of 40fJ/rr-Held, under
      s.3, rate of duty would be only that which an Indian manufacturer would pay
      under the Excise Act on a like article-When under the provisions of Excise
      Act an assessee wants to claim benefit of an exemption/notification, then
/ D   onus is on him to prove· and show that the conditions, if any, which are
      imposed by the exemption/notification have been satisfied-On imported
      polyvinyl alcohol, vinyl acetate monomer has not been subjected to the ,
      appropriate amount of duty payable under Indian law-It is only if this
      payment had been made that Notification No. 185 of 1983 would have been
      applicable-Because this condition has not been satisfied, assessees can not
 E    get the benefit of the Notification-Appropriate amount of duty would mean
      the duty payable under the Central Excise and Salt Act or under Customs
      Tariff Act.

           Hyderabad Industries Ltd. v. Union of India, (1999)108 ELT 321 SC
 F    at page 326, relied on.

            The Union of India v. The Commercial Tax Officer West Bengal and
      Ors., (1955) 2 SCR 1076 and Collector of Central Excise, Patna v. Usha
      Martin Industries, (1997) 7 SCC 47, cited.

 G          CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3977 of 1988
      Etc. Etc.

            From the Judgment and Order dated 6.1.88 of the Bombay High Court
      in A. No. 1472of1987.

           Dipankar P. Gupta, Prashant Bhushan, Ramesh Singh Jaitley, S. Goswami,
 H                                        82
                      MOTIRAM TOLARAM v. U.0.1.                                 83
Ms. Bina Gupta, and Ms. Vanita Bhargawa for the Appellants.                           A
     C.S. Vaidyanathan, Additional Solictor General, N.K. Bajpai and K.C.
Kaushik for P. Parmeswaran for the Respondents.
                                 l
      The following Order of the Court was delivered :
                                                                                      B
     Normally it is the assessee who does tax planning but this is a case
where one finds that it is the Revenue which has done tax collection planning.

      The appellants imported consignments of polyvinyl alcohol on which
additional duty under Section 3 of the Customs Tariff Act was sought to be
imposed. The contention of the appellants before the authorities was that             C
polyvinyl alcohol when manufactured in India from vinyl acetate monomer, on
which appropriate amount of duty has been paid, is subjected to a concessional
rate of excise duty of I 0% ad valorem, instead of the normal duty of 40%,
and, therefore, the appellants should also be required to pay the additional
duty at this reduced rate.                                                            D
       When the case came up for hearing before the C.E.G.A.T., it came to the
conclusion that the appellants were not entitled to the benefit of the notification
whereby reduced rate of duty could be paid. It was held by the Tribunal that
Excise Notification of Exemption could not apply while determining the duty
payable under Section 3 of the Customs Tariff Act. One other reason given             E
by one of the Members of the Tribunal in deciding against the appellants was
that the rate which is leviable under Section 3 of the Customs Tariff Act is
the one which is provided in the Schedule of the Excise Act and, therefore,
if there is any exemption which is granted the same would not be applicable.

       Before dealing with ~he contentions raised by the learned counsel              F
before us, we wish to make it clear that on the correct interpretation of Section
3 of the Customs Tariff Act it is now settled that the rate of duty would be
only that which an Indian manufacturer would pay under the Excise Act on
a like article See Hyderabad Industries Ltd. v. Union of India, (1999) 108 ELT
321 SC at page 326. The aforesaid conclusion ofC.E.G.A.T does not appear              G
to be correct.

      The Excise Notification on which reliance is placed by the appellants is
Notification No. 185 of 1983 which reads as follows:

            "In exercise of the powers conferred by sub-rule (I) of Rule 8 of         H
    84                       SUPREME COURT REPORTS [1~99) SUPP. 1 S.C.R.

A           the Central Excise Rules, 1944, the Central Government hereby exempts
            Polyvinly Alcohol, falling under item No. l 5A of the First Schedule
            to the Central Excises and Salt Act, 1944 (I of 1944) and manufactured
            from Vinyl Acetate Monomer, from so much of the duty of excise
            leviable thereon under the said Act at the rate specified in the said
            First Schedule, as is in excess of the amount calculated at the rate of
B           ten per cent ad valorem.

                Provided that such Polyvinyl Alcohol is manufactured from Vinyl
            Acetate Monomer on which the appropriate amount of the duty of
            excise under Section 3 of the said Central Excises and Salt Act or the
            Additional duty under Section 3 of the Customs Tariff Act, 1975 (51
c           of 1975), as the case may be, has been paid.

                This notification shall be in force upto and inclusive of the 30th
            day of September, 1983."

          It was submitted by Shri Dipankar P Gupta as well as Shri Prashant
D   Bhushan and other counsel appearing on behalf of the appellants that in India
    there was only one manufacturer of polyvinyl alochol and this commodity can.
    be produced only from vinyl acetate monomer and this Indian manufacturer
    was in fact paying duty at the rate of l 0% ad valorem and it is only this duty
    which can be charged from the appellants. It was contended that for the
E   purpose of Section 3 of the Customs Tariff Act we have to imagine that the
    appellants are manufacturing thai item in India from vinyl acetate monomer
    on which appropriate duty of excise has been paid and, therefore, it is the
    concessional rate of duty which should be charged.

          Shri C.S. Vaidyanathan, ASG submitted that an exemption notification
p   should be strictly construed and in this connection he placed reliance on _the
    observations of this Court in The Union of India v. The Commercial tax
    Officer. West Bengal and Others, [1955] 2 SCR 1076 at page 1088.

          The Exemption Notification No. 185 of 1983 provides that the
    manufacturer of polyvinyl alcohol would not be required to pay excise duty
G   in excess of l 0% ad valorem if on the raw material used, nainely, vinyl acetate
    monomer appropriate amount of duty of excise has been paid under the
    provisions of the Central Excises and Salt Act or additional duty has been
    paid under Section 3 of the Customs Tariff Act. This is the condition which
    has to be complied with before reduced duty can be paid.

H         When under the provisions of the Excise Act an assessee wants to
                        MOTIRAM TOLARAM v. U.0.1.                               85
   claim benefit of an exemption notification, then the onus is on him to prove       A
   and show that the conditions, if any, which are imposed by the exemption
   notification have been satisfied. In the notification in question, the condition
-- for getting the benefit of the lower rate of duty is that on the raw material
   used appropriate amount of duty has been paid here. If perchance or for any
   reason, the manufacturer of polyvinyl alcohol in India is unable to prove or       B
   show that the same has been manufactured from vinyl acetate monomer on
   which appropriate amount of duty of excise has been paid, then the said
   manufacturer would not be entitled to get the benefit of the said notification.
   That in fact the sole Indian manufacturer may have been able to prove in
   every case that appropriate duty-paid raw material has been used in the
   manufacture of polyvinyl alcohol, does not mean that the requirement of            C
   proving the same is dispensed with.

          It is no doubt true that for the purpose of Section 3 of the Customs
    Tariff Act, one has to assume that the importer of polyvinyl alcohol had
,., actually manufactured the same in India. One can further assume, possibly
    without any difficulty, that the said polyvinyl alcohol has been manufactured     D
    from vinyl acetate monomer, but it is not possible to assume or presume or
    imagine that the raw material used is the one on which appropriate amount
    of duty of excise has been paid in India. The condition which is contained
    in the said Notification has to be fulfilled in order to get the benefit of the
    Notification. There is a lim9' to which one can extend the fiction. It is not     E
    possible to assume that on the polyvinyl alcohol which is imported it must
    be presumed that excise duty has been paid on the vinyl acetate monomer.

        It appears to us that the Excise Notification No. 185 of 1983 was
  deliberately worded in such a way that the importer of polyvinyl alcohol, who
  may not be able to prove that on the raw material appropriate duty in India         F
  has been paid, will not be able to get the benefit of the concessional rate of
  duty. It has to be borne in mind that the normal duty which is payable on
  polyvinyl alcohol is 40%. That is the rate of excise duty which would be
  payable by an Indian manufacturer of polyvinyl alcohol who is unable to
  show that he has complied with the condition contained in the proviso,              G
  namely, use in the manufacture of vinyl acetate monomer on which appropriate
  amount of duty has been paid. Similarly an importer of polyvinyl alcohol
  would be required to pay under the Section 3 duty at the rate of 40% because
  on the polyvinyl alcohol imported duty under Sections 3 of the Central
  Excises and Salt Act or additional duty under Sections 3 of the Customs Tariff
  Act has not been paid on the vinyl acetate monomer used in the manufacture          H
    86                        SUPREME COURT REPORTS [1999] SUPP. I S.C.R.

A   of polyvinyl alcohol. If it was possible to have shown that duty-paid vinyl
    acetate monomer had been used in the manufacture of imported polyvinyl
    alcohol, then the benefit of Excise Notification No. I 85 of 1983 would have
    been available. It is possible that vinyl acetate monomer manufactured in
    India .is exported and the same is used in the manufacture of polyvinyl alcohol
B   which, in turn, is imported into this country in which case the importer would
    be able to show that the condition stipulated in the said notification has been
    complied with.

           It is contended by Shri Prashant Bhushan that on the polyvinyl alcohol
    imported by the appellants, raw material used was vinyl acetate monomei: on
C   which duty under the Indian Jaw has been paid. He submits that the appropriate
    duty being nil because it was not manufactured in India, therefore it must be
    regarded as if appropriate duty had been paid relying upon Collector of
    Central Excise, Patna V. Usha Martin Industries, [1997] 7 sec 47, and the
    appellants would be entitled to the benefit of the Notification in question. We
    are unable to agree with this co~tention. Vinyl acetate monomer is an item
D   which is manufactured in India and a rate of excise duty is leviable thereon.
    On the polyvinyl alcohol which has been imported, vinyl acetate monomer
    has..not been subjected to the appropriate amount of duty payable under the
    Indian law. It is only if this payment had been made that the Notification No.
    I 85 of I 983 would have been applicable. Appropriate amount of duty would
E   mean the duty payable under the Central Exci~es and Salt Act or under the
    Customs Tariff Act. Because this condition had not been satisfied in the
    present case, therefore, the appellants are unable to get the benefit of the said
    Notification.

         For the aforesaid reasons, we do not find any merit in these appeals.
F   The same are dismissed.

          No order. i;lS to costs.

          CIVIL APPEAL NO. 3977 OF I 986
          (with Civil Appeal No. 4090/88)
G
          For the reasons stated above, these appeals are also dismissed.

          No order as to costs.

    RP.                                                         Appeals dismissed.

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