Are the words "duty leviable" and "duty payable" synonymous or connote the same meaning, especially when both have been well defined by the Central Excise, Customs and Gold Control Tribunal (CEGAT) and the high courts in several rulings and orders?

There is a marked difference between the two when the question of recovering additional customs duty is involved.

However, recently it has come to light that the customs staff did not differentiate between the two meanings leading to writing off of recoverable countervailing duty (CVD) running into several thousand crores over a decade. According to well-placed sources this was allegedly being done deliberately by a section of senior officers at the Mumbai Custom House who were aware of the losses generated due to the wrongful CVD waiver that was allowed in the last three years.

The complainant has claimed that though the issue was brought to the notice of senior customs officials they preferred to ignore it allegedly with the blessings of the mandarins in the Central Board of Excise and Customs (CBEC).Due to this alleged ignorance of the law the issue that arises now is how to recover the duty that has been foregone wrongly. The CVD is equivalent to the central excise duty leviable on `like or similar' product produced domestically and is collected as part of customs duty. This is being done in order to protect the domestic manufacturers of items that are also imported. CVD on imports is levied under the provisions of the Customs Tariff Act, 1975 as additional customs duty along with rest of the import duties, including the auxiliary ones that are collected under the provisions of the Customs Act, 1962. The issue agitated at present involves the exemptions offered to domestic manufacturers of like or similar items which attract CVD if imported. Do such exemptions, either partial or whole, offered by central excise department through specific notifications also become applicable in case of CVD? It is believed that the customs staff had waived the CVD wherever an excise exemption notification existed by invoking the provisions of a customs notification 89/92. The notification provides that CVD or additional customs duty should be levied on the imports at the same rate as specified in the central excise tariff.

Sources claim that the interpretation of this provision was read by the customs staff wrongly. They reportedly decided to waive the CVD in case if an exemption notification existed for a like or similar item in the central excise tariff. Thus, while notification 89/92 provided a yardstick for levying CVD, the customs arrived at the conclusion that it was recoverable by them or payable by the importers at the rates that are leviable after invoking the provisions of a central excise exemption notification and thus the CVD was waived. However, much before the introduction of notification 89/92, the issue had come to the fore in 1985-86 when in one of the several judgements by the CEGAT and the various high courts it was upheld that wherever the CVD equivalent to central excise duty specified in the First Schedule of the Customs Tariff Act, 1975 is `leviable', the rate of CVD alone is specified. The first ever case that had come up before the CEGAT around 1986 is between the collector of customs, Mumbai v/s Parekh Dye-Chem Industries Pvt Ltd wherein the bench had observed while defining the word `levy' under section 3 of the Customs Tariff Act, 1975 that "the additional duty `leviable' under section 3 of the CTA, 1975 is the duty leviable in terms of the First Schedule to the Central Excise and Salt Act, 1944, regardless of any exemption from such levy." This, in other words, mean that the central excise tariff rates are merely the yardstick for specifying the rate at which CVD should be recovered.A similar issue was raised again in 1987 by Inarco Ltd before the CEGAT when again the party had sought partial exemption of additional duty on imported goods from additional duty of customs on the grounds that an central excise exemption notification allowing like benefits existed.Here too, it was held by the CEGAT bench that "following the judgements of the supreme court and the Karnataka high court, that appellants could not claim refund of additional duty which was custom duty based on notification issued under rule 8(1) of the Central Excise Rules, 1944 when the notification has no reference to customs duty." Besides, a division bench the Mumbai high court, in the case between Vijay Prataprai Mehta and the Union of India, noted in its ruling that when the additional duty is equal to excise duty, the latter is only a yardstick to calculate the additional duty under the Customs Act and the exemption under the Central Excise and Salt Act, 1944 cannot automatically exempt the additional duty under the Customs Act, 1962.

The court also noted that based on this observation the benefit of notification 89/92 which was referred to by the petitioner's representative cannot be allowed to the company. The court observed that `the exemption granted by the central government either fully or partially under rule 8(1) of the Central Excise Rules, 1944 does not automatically stand extended to `additional duty' chargeable under section 12 of the Customs Act, 1962 read with section 3(1) of the Customs Tariff Act, 1975'. It further said that `the exemption notification issued under the Central Excise and Salt Act, 1944 read with rule 8 of the Central Excise Rule, 1944 will apply only to exemptions under the Central Excise and Salt Act, 1944 and unless there is specific notification regarding additional duty under the Customs Act, 1962, the benefit of central excise notification cannot be allowed for the latter purpose.' This order is in existence for a long period and departmental staff was required to know. Even the CBEC was required to issue clarification in this regard asking all the field formations to recover CVD regardless of the existence of central excise exemption notification.However, some senior officers arrived at the conclusion that the provision of CTA also specifies that the leviable CVD can also be exempted if similar exemptions are available to domestic manufacturers of similar items. This means that if the central excise duty is waived on any article because of a notification, and the duty payable by the manufacturer became `nil' due to it, the same standard should be applied for an imported item and the CVD should not be recovered. The difference is between the definition of words leviable and payable. It was well defined by the high courts and the CEGAT. Though in the case of Vijay Pratap Rai, the supreme court has been moved by the concerned party and the case is pending, the apex court has not granted any interim reliefs there by making the ruling of the Mumbai high court binding. This, brought to the notice of the Customs authorities three years ago, remained unheeded and the CVD which needed to be recovered at the rates equivalent to the ones specified in the Central Excise Tariff was written off.

In fact, it is being written off for well over a decade now and the losses are running into several thousand crores. The law does not provide for recovery of dues that were wrongfully forgone in 10 years. It only provides for the recovery of dues that were foregone in the last six months. Though the issue was raised almost 36 months ago, will the department be able to recover what was foregone in the last 42 months? If not, then at least now all the imports that attract CVD are required to be cleared subject to payment of CVD regardless of the existence of any central excise notification. Besides, the government will be required to fix responsibility for the lapse which has resulted in huge wrongful losses to the exchequer due to the wrong interpretation of law by the authorities that were required to implement it rightly.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.