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Tuesday, September 22, 2015

pig hair bristles - no sales tax - since no tax is chargeable on the sale of such goods, the said Exemption Notification will therefore, not apply. = denial of the benefit of Exemption Notification No. 34/98-Cus. dated 13.06.1998 which reads as follows:- “In exercise of the powers conferred by sub-section (1) of Section 3A of Customs Tariff Act, 1975 (51 of 1975), the Central Government having regard to the maximum sales tax, local tax or any other charges for the time being leviable on the like goods on their sale or purchase in India, hereby specifies the rates of special additional duty as indicated in column (3) in table below in respect of goods, when imported into India, specified in corresponding entry in column(2) of the said table and falling within First Schedule to the said Customs Tariff Act:” Against the relevant entry 'Nil' rate has been specified for All goods falling under the said First Schedule which are imported for sale as such, other than by way of high sea sale and the importer at the time of importation or at the time of clearances of warehoused goods for home consumption under the provisions of Section 68 of the Customs Act, 1962 (no. 52 of 1962), as the case may, makes a specified declaration to that effect in the Bill of Entry in the manner specified below. Provided that rate specified therein shall not apply if the importer sells the said imported goods from a place located in an area where no tax is chargeable on sale or purchase of goods.”= Section 7 of the Delhi Sales Tax Act, 1975 reads as under: - “7. Tax-free goods.-(1) No tax shall be payable under this Act on the sale of goods specified in the Third Schedule subject to the conditions and exceptions, if any, set out therein. (2) The lieutenant Governor may by notification in the Official Gazette, add to, or omit from, or otherwise amend, the Third Schedule either retrospectively or prospectively, and thereupon the Third Schedule shall be deemed to be amended accordingly: Provided that no such amendment shall be made retrospectively if it would have the effect of prejudicially affecting the interests of any dealer.” The imported goods, viz., pig hair bristles, find mention in Entry 67 of the Third Schedule which reads as follows: - “Pig hair bristles and paint brushes made of pig hair bristles.” It will be noticed that the charging Section itself, viz., Section 3 of the Act, speaks of a dealer whose turnover during the year immediately preceding the commencement of this Act exceeds the taxable quantum as also every registered dealer liable to pay tax under this Act on all sales effected by him on or after such commencement. It will, thus, be seen that even the charging Section uses the expression “liable to pay tax”. Correspondingly, Section 7, whose marginal note indicates that the subject matter of the said section is tax free goods, also uses the same expression as is used in Section 3, viz., “no tax shall be payable under this Act”. On a reading of Sections 3 and 7 of the Act, it becomes clear, therefore, that so far as the imported item, viz., pig bristles is concerned, no sales tax, in fact, is charged on the same. This being the case, it is obvious that the proviso to the Notification dated 13.06.1998 gets attracted and since no tax is chargeable on the sale of such goods, the said Exemption Notification will therefore, not apply. We, accordingly, set aside the judgment of CESTAT and restore that of the Commissioner. The appeal is disposed of accordingly.

                                                                'REPORTABLE'
                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 216 OF 2007

COMMISSIONER OF CUSTOMS, MUMBAI-I              ... Appellant

                                   VERSUS

M/S SEIKO BRUSHWARE INDIA                      ... Respondent



                               J U D G M E N T

R. F. NARIMAN, J.

            Despite service, nobody appears for the respondent.

            We have heard Shri Arijit Prasad, learned counsel  appearing  on
behalf of the Revenue.

            The issue in this appeal relates to the denial  of  the  benefit
of Exemption Notification No. 34/98-Cus. dated  13.06.1998  which  reads  as
follows:-

            “In exercise of the  powers  conferred  by  sub-section  (1)  of
Section 3A of Customs Tariff Act, 1975 (51 of 1975), the Central  Government
having regard to the maximum sales tax, local tax or any other  charges  for
the time being leviable on the like goods  on  their  sale  or  purchase  in
India, hereby specifies the rates of special additional  duty  as  indicated
in column (3) in table below in respect of goods, when imported into  India,
specified in corresponding entry in column(2) of the said table and  falling
within First Schedule to the said Customs Tariff Act:” Against the  relevant
entry 'Nil' rate has been specified for All goods  falling  under  the  said
First Schedule which are imported for sale as such, other  than  by  way  of
high sea sale and the importer at the time of importation or at the time  of
clearances of warehoused goods for home consumption under the provisions  of
Section 68 of the Customs Act, 1962 (no. 52  of  1962),  as  the  case  may,
makes a specified declaration to that effect in the Bill  of  Entry  in  the
manner specified below.

            Provided that rate specified therein  shall  not  apply  if  the
importer sells the said imported goods from  a  place  located  in  an  area
where no tax is chargeable on sale or purchase of goods.”


            A reading of this Notification  would  show  that  exemption  is
granted only in  respect  of  such  goods  which  the  importer  sells  post
importation from a place located in an area where no tax  is  chargeable  on
sale of goods.

            The facts of the present case are that pig  hair  bristles  that
were imported were sold in  the  years  1998-1999  and  1999-2000.   Revenue
issued a show cause notice dated 26.03.2003 stating  that  since  these  pig
hair bristles were, in fact, sold without any sales tax been  paid  thereon,
the  benefit  of  Exemption  Notification  dated  13.06.1998  would  not  be
available to the importer in the present case.

            By a reply dated 17.10.2003, the importer essentially  contended
that pig hair bristles may be exempted from sales tax but that did not  mean
that they were not chargeable to sales tax.

            In a detailed order dated 31.03.2004, the learned  Commissioner,
after setting out the Notification dated 13.06.1998, and after  hearing  the
importer, ultimately came to the conclusion that an  Exemption  Notification
exempting pig hair bristles from tax would amount to a case where no tax  is
chargeable on the sale of goods and  therefore,  the  benefit  of  the  said
Notification would not be available to the importer in the present case.

            In an appeal against the said order  by  the  importer/assessee,
the  Customs,  Excise  and  Service  Tax  Appellate  Tribunal   (hereinafter
referred to as 'CESTAT') vide its judgment  dated  22.02.2005  has  held  in
favour of the assessee as follows: -
“We have heard both the sides and in our view, the contention raised by  the
learned counsel deserves  to  be  accepted.   We  find  that  the  exemption
Notification issued by the  Sales-tax  Department  of  Delhi  and  UP  state
opponent from where goods in question after import without  payment  of  SAD
under Notification No. 34/98 detailed above, were  sold  only  exempted  the
payment of tax on the sale and purchase of the goods at that  time  and  but
for these exemption notifications, the goods were  otherwise  chargeable  to
Tax.  It was only the payment  of  tax  which  was  deferred/exempted  under
those  notifications  for  the  period  mentioned  therein.   The  exemption
notification did not render  the  goods  non-chargeable  to  tax,  but  only
allowed concession  in  the  tax  by  way  of  exemption  for  some  period.
Therefore, the appellants cannot be said to have sold  the  goods  from  the
places where no tax was chargeable on the sale/purchase  of  the  goods  and
thereby violated  the  condition  contained  in  the  above  said  exemption
Notification No. 34/98-Cus.

             It  was  contended  by  Shri  Arijit  Prasad,  learned  counsel
appearing on behalf of the Revenue, that the CESTAT has not  taken  note  of
Section 7 of The Delhi Sales Tax  Act,  1975  (hereinafter  referred  to  as
'Act') by which pig hair bristles were said to be in the nature of tax  free
goods.

            He further contended that in the present case,  the  CESTAT  was
not correct in referring to an Exemption Notification.  What was,  in  fact,
notified was the addition of Entry No. 67 to the Third Schedule of  the  Act
vide Notification dated 15.10.1996 which  was  wrongly  referred  to  as  an
Exemption Notification.

            We find considerable force in  the  submission  of  Shri  Arijit
Prasad.

            Section 7 of the Delhi Sales Tax Act, 1975 reads as under: -
“7. Tax-free goods.-(1) No tax shall be payable under this Act on  the  sale
of goods specified in the Third  Schedule  subject  to  the  conditions  and
exceptions, if any, set out therein.
      (2) The lieutenant  Governor  may  by  notification  in  the  Official
Gazette, add to, or omit  from,  or  otherwise  amend,  the  Third  Schedule
either retrospectively or prospectively, and thereupon  the  Third  Schedule
shall be deemed to be amended accordingly:
            Provided that no such amendment shall  be  made  retrospectively
if it would have the effect of prejudicially affecting the interests of  any
dealer.”

            The imported goods, viz., pig hair  bristles,  find  mention  in
Entry 67 of the Third Schedule which reads as follows: -
“Pig hair bristles and paint brushes made of pig hair bristles.”

            It will be noticed  that  the  charging  Section  itself,  viz.,
Section 3 of the Act, speaks of a dealer  whose  turnover  during  the  year
immediately preceding the commencement  of  this  Act  exceeds  the  taxable
quantum as also every registered dealer liable to pay tax under this Act  on
all sales effected by him on or after such commencement.  It will, thus,  be
seen that even the charging Section  uses  the  expression  “liable  to  pay
tax”.

            Correspondingly, Section 7, whose marginal note  indicates  that
the subject matter of the said section is tax  free  goods,  also  uses  the
same expression as is used in Section 3, viz.,  “no  tax  shall  be  payable
under this Act”.

            On a reading of Sections 3 and 7 of the Act, it  becomes  clear,
therefore, that  so  far  as  the  imported  item,  viz.,  pig  bristles  is
concerned, no sales tax, in fact, is charged on the same.   This  being  the
case, it is obvious that the proviso to the  Notification  dated  13.06.1998
gets attracted and since no tax is chargeable on the  sale  of  such  goods,
the said Exemption Notification will therefore, not apply.

            We, accordingly, set aside the judgment of  CESTAT  and  restore
that of the Commissioner.  The appeal is disposed of accordingly.


                                       ........................., J.
                                       [ A.K. SIKRI ]



                                       ........................., J.
                                       [ ROHINTON FALI NARIMAN ]

New Delhi;
September 04, 2015.



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