Customs, Excise & Service Tax Appellate Tribunal1 in Customs Appeal No. 9 of 2008, whereby the customs duty levied upon the appellant on the sale of cut flowers within the Domestic Tariff Area2 had been confirmed by the Tribunal.

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7157 OF 2008
M/s. L. R. Brothers Indo Flora Ltd.        … Appellant
Versus
Commissioner of Central Excise         …Respondent
J U D G M E N T
A. M. Khanwilkar, J.
1. This   appeal   takes   exception   to   the   Final   Order   No.
C/203/08 dated 17.7.2008 passed by the Customs, Excise &
Service Tax Appellate Tribunal1
 in Customs Appeal No. 9 of 2008,
whereby the customs duty levied upon the appellant  on the sale
of   cut   flowers   within   the   Domestic   Tariff   Area2
  had   been
confirmed by the Tribunal.
2. The factual matrix leading to the present appeal is that the
appellant ­ M/s. L.R. Brothers Indo Flora Ltd. is a 100% Export
1 For short, “CESTAT”
2 For short, “DTA”
2
Oriented Unit3
  and engaged in production of cut flowers and
flower buds of all kinds, suitable for bouquets and for ornamental
purposes.   The   100%   EOU   is   required   to   export   all   articles
produced by it. As a consequence whereof, it is exempted from
payment of customs duty on the imported inputs used during
production of the exported articles, vide Notification No. 126/94­
Cus dated 3.6.19944
.  Under the said notification, exemption on
levy of customs duty had been extended even to the inputs used
in production of articles sold in domestic market, in accordance
with   the   Export­Import   (EXIM)   Policy   and   subject   to   other
conditions specified by the Development Commissioner. To wit,
upon payment of excise duty in case of excisable goods; and in
case of non­excisable goods, upon payment of customs duty on
the inputs used for production, manufacturing or packaging of
such articles at a rate equivalent to the rate of customs duty that
would have been leviable on such articles, if such articles were
imported. The said notification was amended by Notification No.
56/01­Cus dated 18.5.20015
, by which the customs duty in case
of   non­excisable   goods   became   leviable   on   inputs   used   for
3 For short, “EOU”
4 For short, “the exemption notification”
5 For short, “the amendment notification”
3
production,   manufacturing   or   packaging,   as   if   there   was   no
exemption notification in place. The effect of this amendment was
that the customs duty on inputs which was charged at the rate
equivalent   to   the   duty   leviable   on   final   articles   under   the
exemption notification, was now chargeable at the rate specified
for the inputs.
3. The EXIM Policy 1997­2002 provided that a 100% EOU in
floriculture sector was permitted to sell 50% of its produce in
DTA, subject to achieving positive net foreign exchange earning of
20% and upon approval of the Development Commissioner. The
appellant,  without  obtaining the approval  of  the Development
Commissioner and without maintaining the requisite net foreign
exchange   earning,   made   DTA   sales   to   the   extent   of
Rs.38,40,537/­   during   1998­99   to   2000­01   (upto   December
2000), in contravention of the provisions of EXIM Policy. Notably,
the appellant subsequently sought ex­post facto approval from
the Development Commissioner vide letter dated 6.2.2001.
4. Meanwhile, the  Additional Commissioner, Central  Excise,
Meerut­I issued a   show cause notice dated 16.3.2001 to the
appellant to show cause as to why customs duty, interest and
4
penalty should not be imposed for the DTA sales made by the
appellant   in   contravention   of   the   EXIM   Policy,   that   too   after
having availed the exemptions under the exemption notification
on the import of green house equipment, raw materials like Live
Rose   Plants   and   consumables   like   planting   materials   and
fertilizers.   After   according   opportunity   of   being   heard,   the
Additional Commissioner adjudged the show cause notice and
held that the DTA sales were made without permission of the
Development Commissioner and in contravention of the EXIM
Policy and therefore, customs duty is leviable upon the appellant
for the said sales. It was further held that the appellant had
wilfully suppressed facts and thus Section 28 of the Customs
Act, 19626
 was invoked in the present case.  The relevant extract
of   the   Order­in­Original   dated   18.10.2001   passed   by   the
Additional   Commissioner,   Central   Excise,   Meerut   –   I   on   the
aforesaid findings is reproduced hereunder:
“3.1 I find that the party had imported the capital
goods   and   also   imported   raw   materials   like   “Live
Rose   Plants”   and   consumable   like   “Fertilizer   and
Planting Materials” during 1996­97 to 2000­2001 and
further that they made clearances towards Domestic
Tariff  Area   sales  without  obtaining  permission   from
the Competent Authority in  the matter.  On scrutiny
of the records, it was observed that before making any
6 For short, “the 1962 Act”
5
DTA sales it was required that 20% positive Net Foreign
Exchange Earning (NFEP) should have been achieved i.e.
annual value of export should have been 20% more than
Rs.2,42,37,400/=   (+)   annual   value   of   imports   of   raw
materials and consumables during the respective year
and   the   said   noticee   had   exported   the   flowers   worth
Rs.91,92,000/=   only   which   are   well   below   prorata
annual value of Import of capital goods.
3.2 I also find that as per condition of the approval
letter No. 119(1994)EOB/34/94 dated 04.5.94, issued by
Govt.   of   India,   Ministry   of   Industries,   Department   of
Industrial   Development,   Secretarial   for   Industrial
approval, MUCC Section, New Delhi, the bonding period
of M/s. L.R. Brothers Indo Flora Ltd., was fixed for 10
years during which they were required to achieve 62%
value  addition over  and  above  the  imports  and  other
factors contributing towards the foreign exchange gone
out of the country. As per the specific condition of the
approval letter, the party was required to export all
of its production out of India subject to permissible
limit   of   Domestic   Tariff   Area   Sales   (herein   after
referred to as DTA Sales) and that, too, after specific
permission   from  Development  Commissioner  of   the
EPZ concerned, on payment of applicable Customs &
Central Excise duties. The Export Import Policy 1997­
2002 specifies the condition of DTA sales by an EOU.
In this regard, I reproduce below the contents of
the relevant paras of Export Import Policy 1997­2002…..
3.3  Therefore, in view of the above legal provisions of
the Export Import Policy 1997­2002, it is amply clear
that for earning DTA sales entitlement the EOU should
fulfil the export obligations as prescribed in the letter of
approval and also should have a positive NFEP which is
20% in case of floriculture units.
3.4  ..... As per Note 3 to paragraph 9.5 of the Export
Import Policy, as discussed above, prorata annual value
of imported capital goods (i.e. 1/5th of the total import of
Capital   Goods   worth   Rs.12,11,87,000/­   comes   to
Rs.2,42,37,400/­.   Therefore,   before   making   any   DTA
sales  it   was  required  that   20%   positive  NFEP  should
have been achieved i.e. the annual value of export should
have been 20% more than Rs.2,42,37,400/­ + annual
value of imports of raw materials and consumable during
the respective year, whereas in all the four years since
operation,   the   unit   had   exported   the   flowers   worth
Rs.91.92 lakhs only which are well below the prorata
6
annual value of import of capital goods.  Therefore,   in
view of the specific provisions of the Export Import
Policy  1997­2002,  the  unit  was  not   entitled  to   sell
any goods in DTA.
3.5  Moreover, the guidelines for sale of goods in the
DTA by EOU are prescribed in Appendix 42 of Handbook
of Procedure, Export Import Policy 1997­2002. Para (f) of
the said Appendix 42 reads as: “An application for DTA
sale shall be accompanied by a statement indicating the
ex­factory value of the goods produced (excluding rejects)
and   ex­factory   value   of   goods   actually   exported.   The
statement   shall   be   certified   by   an   independent
cost/chartered/cost and works accountant and endorsed
by   the   Customs/Central   Excise   Officer   having
jurisdiction   over   the   unit.   The   Development
commissioner of the EPZ concerned will determine the
extent of DTA sale admissible in value terms and issue
goods   removal   authorization   in   terms   of   value   and
quantity for sale in DTA.” However in the present case
as per records,  the  party  failed to  furnish  the  same
application   as   well   as   permission,   if   any   to   this
department and did not follow the procedure as laid
down in the Hand Book of Procedure, Export Import
Policy 1997­2002.
3.6  Apart from the above, the floriculture EOU may
Import   Capital   Goods   and   Raw   Materials,   without
payment   of   Customs   duties   in   terms   of   Custom
Notification   No.   126/94   dated   3.6.94   and   accordingly
M/s. L.R. Brother Indo, Flora Ltd., have imported green
house equipment, raw materials like Liver Rose Plants
and Consumable like planting materials and Fertilizers
under the said notification. Para 3 of the said Notification
reads as under :­ ....
3.7  Therefore, from the above provision, it is clear
that the units working under the said Notification may
sell their produced goods in DTA on payment of excise
duty as leviable under Section 3 of Central Excise Act,
1944 if the goods are excisable and on payment of full
Customs duties leviable on such goods as if imported as
such   if   the   goods   are   non   excisable.   Cut   Flowers   or
Flower Buds are not covered under Central Excise Tariff
Act,   1985   as   Chapter   6   which   covers   such   types   of
Flowers in Customs Tariff left blank in Central Excise
Tariff Act and, therefore, such types of Flowers will be
treated as non excisable in view of Section 2 (d) of the
Central Excise Act, 1944. Therefore, full Customs duties
7
will be leviable on such Flowers, if sold in DTA treating
such   flowers   as   imported   into   India,   in   terms   of
Notification   No.   126/94­Cus   dated   03.6.94.   Further,
M/s. L.R. Brothers Indo Flora Ltd., had made DTA sales
during   the   year   1998­99   to   2000­01   (upto   December
2000)   in   contravention   to   the   aforesaid   provisions.
Further,   they   failed   to   show   any   permission   from
Development   Commissioner   for   sale   of   their   goods   in
DTA. It appears that the Development Commissioner
has   granted   no   such   permission   to   them,   as   they
have not earned the DTA sale entitlement due to very
low   exports   in   comparison   to   high   quantum   of
imports. ......
3.8  I have also come to conclusion that M/s. L.R.
Brothers Indo Flora Ltd., Behat Road, Saharanpur have
contravened   the   provisions   of   Import   &   Export   Policy
1997­2002   and   have   not   fulfilled   the   conditions   of
Notification No. 126/94 dated 3.6.94. Hence the party is
liable to pay the full customs duty on cut flowers sold in
DTA, treating the flowers imported as such into India.
Further, the said M/s. L.R. Brothers Indo Flora Ltd.,
have been indulged in wilful suppression of facts, as
aforesaid,   and   sold   the   said   goods  viz.,   cut   flowers
falling  under  Ch.  S.H.   No.  0603.10   of   the   Customs
Tariff, in D.T.A. in contravention of the provisions of
Import Export Policy 1997­2002, without payment of
Customs duty, hence extended period of five years as
provided under proviso to section 28 of the Customs
Act 1962 is invokable in the instant case. Therefore,
all obligations were cast on such a large undertaking to
discharge   the   correct   duty   liability   i.e.   Customs   duty
amounting   to   Rs.9,98,177.00.   Therefore,   demand   of
Customs duty stands recoverable from them. They are
also liable to pay interest @ 24% from the 1st day of the
month succeeding the month in which the duty ought to
have been paid under Section 28AB of the Customs Act,
1962. ....”
(emphasis supplied)
5. The Additional Commissioner, by way of aforesaid order,
confirmed the demand of customs duty of Rs.9,98,177/­ under
Section 28, interest at the rate of 24% under Section 28AB and
8
penalty of Rs.9,98,177/­ under Section 114A of the 1962 Act.
The appellant unsuccessfully carried the matter in appeal before
the Commissioner (Appeals), Customs & Central Excise, MeerutI, wherein the Order­in­Original came to be confirmed by the
Order­in­Appeal dated 29.7.2005 by holding thus:
“5.  ....... In the light of the above facts, I find myself
in   agreement   with   the   findings   of   the   adjudicating
authority that the appellants have not earned the DTA
sale entitlement due to very low exports in comparison to
high   quantum   of   imports.   Thus,   the   alleged
contravention of  provisions  of  Import   & Export  Policy
1997­2002   and   non­fulfilling   of   the   conditions   of   the
Notification 126/94­Cus ibid is fully established against
them. Therefore, the demand of Customs duty along with
interest   in   this   case   as   per   the   impugned   order   is
justified.
As   regards   the   imposition   of   penalty   on   the
appellants, I find that the charges of contravention of
provisions   of   Export   &   Import   Policy   1997­2002   &
Notification No. 126/94 Cus dt. 03.06.94 stand proved
against the appellants. They were aware that they were
not entitled to make DTA sales of the subjected goods,
even then they made DTA sales of the same to evade
payment of duty. Hon’ble Supreme Court in the case of
Gujarat Travancore Agency vs. Commissioner of Income
Tax 1989 (42) ELT 350 (SC), has held that the penalty
under Section 271(1)(a) of the Income Tax Act is a civil
obligation and unless there is something in language of
the statute indicating the need to establish element of
mensrea, it is generally sufficient to prove that a default
in complying with the statute has occurred.
In view of the ratio of the aforesaid judgment of
Apex Court, the penalty has been rightly imposed upon
the appellant.
In view of the above, I find no infirmity in the
order passed by the adjudicating authority and therefore
disallow the appeal.”
9
6. The matter was further carried in appeal before CESTAT
whereat the impugned order was passed confirming the order of
the   authorities   below   whilst   also   holding   that   amendment
notification is prospective and cannot be applied to the present
case. The relevant extract of the impugned order is reproduced
below:
“5. We have carefully considered the submissions
made from both the sides. Irrespective of whether the
DTA clearances of cut­flowers were, in contravention of
the EXIM Policy or otherwise, the cut­flowers being nonexcisable goods, their DTA clearance would attract, in
terms of the provisions of para 3(a) of the exemption
Notification   No.   123/94­CUS.,   only   the   Custom   Duty
involved on the inputs used in the production of the cutflowers. The point of dispute is as to whether the Custom
Duty payable on the inputs used in the production of the
cut­flowers   which   had   been   cleared   to   DTA,   is   to   be
taken as an amount equal to Custom Duty chargeable on
the import of cut­flowers, as such, or it should be the
actual   Custom   Duty   on   the   inputs   used   in   the
production of cut­flowers cleared to DTA.
5.1 xxx xxx xxx
5.2  From reading of para 3(a) of the Notification No.
126/94­cus as it existed during the period of dispute i.e.
during the period prior to 18.5.01 – and as it existed
during period w.e.f. 18­5­01, it is clear that during the
period of dispute, the notification contained a machinery
provisions for determining, the Custom Duty chargeable
on the inputs used in the production of non­excisable
goods   cleared   to   DTA   and   as   per   this   machinery
provision, the duty was to be in an amount equal to the
Custom  Duty  chargeable  on  the  finished  goods,   as  if
imported, as such. However, after the amendment of this
Notification w.e.f. 18.5.01, the duty on the inputs used in
the production of non­excisable goods cleared to the DTA
was to be calculated on actual basis. The amendment to
the Notification No. 126/94­CUS. w.e.f. 18.5.01 by the
Notification No. 56/01 can have only prospective effect
and it cannot be given retrospective effect. In view of this,
10
during the period of dispute, customs duty on the inputs
used in the production of cut­flowers cleared to DTA has
to be calculated as per the provisions of the Notification,
as it existed during that period.
6.  The Tribunal's judgment in the case of  Vikram
Ispat (supra) is not applicable to the fact of this case, as
in the present case what is being charged in respect of
DTA clearances of the cut­flowers is not the customs
duty on the cut­flowers, but the custom duty on the
inputs used in the production of those cut­flowers, which
as per the provisions of Notification, as it existed at that
time, was equal to the Customs Duty chargeable on the
import   of   cut­flowers,   as   such.   In   the   Tribunal's
judgment in case of Zygo Flowers Ltd. (supra) and Cosco
Blossoms   Pvt.   Ltd.  (supra),   the   implications   of   the
wording of para 3(a) of the exemption notification during
the period of dispute ­ “or where such articles [including
rejects, waste and scrap material] are not excisable, on
payment of Custom Duty on the said goods used for the
purpose   of   production,   manufacture   or   packaging   of
such articles in an amount equal to the Custom Duty
leviable on such articles, as if imported, as such” had not
been considered. If the Appellant's view accepted, the
words “in an amount equal to the Custom Duty leviable
on such articles, as if imported, as such” would become
redundant. It is well settled principle of interpretation of
statute that a statute has to be construed without adding
any words to it or subtracting any words from it and an
interpretation   which   makes   a   part   of   the   statute
redundant has to be avoided.
7.  In view of the above discussion, we hold that the
custom duty has been correctly charged in respect of
DTA clearances of the cut­flowers and as such we find no
infirmity   in   the   impugned   order.   The   appeal   is
accordingly dismissed.”
Thus, the levy of customs duty stood confirmed.
7. Being aggrieved, the appellant has approached this Court.
The thrust of the argument of the appellant is that according to
Paragraph 3 of the exemption notification, sales made in DTA
would attract excise duty and since the cut flowers sold by the
11
appellant are non­excisable goods, no excise duty can be levied
upon it. Further, according to the notification, in case of nonexcisable goods, the customs duty is leviable on the imported
inputs.   In   the   present   case,   since   the   cut   flowers   are   home
grown, customs duty cannot be levied upon them and therefore,
the demand of customs duty cannot be sustained. Reliance is
placed on the decisions of CESTAT in Cosco Blossoms Pvt. Ltd
vs.   Commissioner   of   Customs,   Delhi7
  and   larger   bench   of
Central Excise and Gold (Control) Appellate Tribunal8
 in Vikram
Ispat  vs.  Commissioner  of  Central  Excise,  Mumbai­III9
. It is
then   urged   that   the   exemption   notification   predicates   levy   of
customs duty on non­excisable goods sold in DTA sales to the
extent of the value of inputs and not to the extent of the value of
final product. It is further urged that the amendment notification
is merely clarificatory and hence it would apply retrospectively.
To buttress this submission, the appellant had placed reliance on
Circular No. 31/2001­Cus dated 24.5.2001 issued by Central
Board of Excise and Customs, New Delhi10, which noted that the
charge of customs duty on the inputs equal to the duty leviable
7 2004 (164) ELT 423 (Tri.-Del.)
8 For short, “the CEGAT”
9 2000 (120) ELT 800 (Tribunal-LB)
10 For short, the “CBEC Circular”
12
on the import of final product is putting floriculture EOUs at a
disadvantageous position. The circular further envisages that the
central   excise   notifications   provided   for   recovery   of   duty   on
inputs procured duty free, whereas the exemption notification
provided   for   recovery   on   inputs   equal   to   duty   on   the   final
product. That the amendment notification was issued to address
this anomaly and to harmonise the central excise and customs
notifications. The appellant placed reliance on the Constitution
Bench decision of this Court in  Commissioner  of Income Tax
(Central)   –   I,   New   Delhi   vs.   Vatika   Township   Private
Limited11,   wherein   it   had   been   observed   that   whenever   the
legislator intends to confer benefit upon a person, it must be
presumed to have retrospective effect. The appellant relied upon
yet another decision of this Court in  Zile  Singh   vs.  State  of
Haryana & Ors.12 to contend that the substitution of a clause
which clarifies about the intent of the legislature takes effect from
the date of enactment of original provision. The appellant would
further urge that Section 12 of the 1962 Act being the charging
section, could only be applied if the goods are imported into India
11 (2015) 1 SCC 1
12 (2004) 8 SCC 1
13
and since the cut flowers are not imported, the show cause notice
issued under the provisions of the 1962 Act is bad in law. In this
regard, the appellant had placed reliance on  Commissioner  of
Central   Excise   and   Customs   vs.   Suresh   Synthetics13.   The
appellant   further   relied   on   the   exposition   of   this   Court   in
Uniworth   Textiles   Limited   vs.   Commissioner   of   Central
Excise,   Raipur14 to submit that Section 28 of the 1962 Act,
extending limitation, can be invoked only in the case of deliberate
default and urged that it cannot be invoked in the present case
since there was no default.
8. Per   contra,   the   respondent   would   urge   that   in   the   fact
situation of the present case, the department has correctly levied
the customs duty, as the DTA sales made were in contravention
of the EXIM policy and the appellant had no permission from the
Development   Commissioner   to   clear   the   goods   in   DTA.   The
respondent further urged that the amendment seeks to bring
about a substantive change, whilst pointing out that the CBEC
Circular in its opening paragraph speaks about “carrying out” the
amendment.   Further,   the   amendment   must   be   applied
13 2007 (216) ELT 662 (SC)
14 (2013) 9 SCC 753
14
prospectively. Reliance is placed upon the decision of this Court
in Union of India & Anr. vs. IndusInd Bank Limited & Anr.15
,
wherein it has been held that if the provision is remedial in
nature, it cannot be construed as clarificatory or declaratory and
has to be applied prospectively.
9. We have heard Mr. Rupesh Kumar, learned counsel for the
appellant and Mr. Ashok K. Srivastava, learned senior counsel for
the respondent.
10. The issues that arise for consideration in this appeal are: (i)
Whether   customs   duty   can   be   charged   on   the   non­excisable
goods produced in India and sold in DTA by an EOU?; and (ii)
Whether the amendment in terms of Notification No. 56/01­Cus
dated   18.05.2001,   purporting   to   amend   the   criteria   for
determination of duty on inputs, is prospective or retrospective in
its application?
11. At the outset, it is apposite to refer to the stated notification.
The relevant extract thereof reads as under:
“NOTIFICATION NO. 126/94­CUS DATED 3.6.1994
Exemption   to   import   of   specified   goods   for   use   in
manufacture   of   export   goods   by   100%   E.O.Us.   ­  In
exercise of the powers conferred by sub­section (1) of
section 25 of the Customs Act, 1962 (52 of 1962), the
15 (2016) 9 SCC 720
15
Central Government, being satisfied that it is necessary
in the public interest so to do, hereby exempts goods
specified in Annexure­I to this notification (hereinafter
referred to as the goods), when imported into India, for
the  production  or  manufacture  of  articles   specified  in
Annexure­II for export out of India or for being used in
connection   with   the   production,   manufacture   or
packaging of the said articles specified in Annexure­II for
export out of India (hereinafter referred to as the specified
purpose)   by   hundred   per   cent   Export   Oriented
Undertakings   approved   by   the   Board   of   Approval   for
hundred   per   cent   Export   Oriented   Undertakings,
appointed by the notification of Government of India in
the   former   Ministry   of   Industry   and   Civil   Supplies,
(Department   of   Industrial   Development)   No.
S.0.163(E)/RLIU/10(2)76, dated the 3rd March, 1976 or
the Development Commissioner concerned as the case
may be, from the whole of the duty of customs leviable
thereon under the First Schedule to the Customs Tariff
Act, 1975 (51 of 1975) and the additional duty, if any,
leviable thereon under section 3 of the second mentioned
Act, subject to the following conditions, namely :­
(1)   the   importer   has   been   granted   the   necessary
licence for the import of the said goods;
(2) the importer, at the time of import of the said
goods,   produces   to   the   Assistant   Commissioner   of
Customs   a   certificate   from   the   Development
Commissioner   to   the   effect   that   the   importer   has
executed a bond in such form and for such sum as
may be prescribed binding himself­
(a) to bring the said goods into his unit and to
use  them for the specified purpose; and
(b) to dispose of the said goods or the articles
produced, manufactured or packaged  in   the
unit or the waste, scrap or remanents arising
out   of   such   production,   manufacture   or
packaging   in  the  manner  as  may,   if  any,  be
prescribed in the Export­Import Policy and in
this notification;…..
xxx xxx xxx
3. Notwithstanding   anything   contained   in   this
notification, the exemption contained herein shall also
apply to the said goods which on importation into India
are used for the purposes of production, manufacture or
16
packaging of articles and such articles (including rejects,
waste   and   scrap   material   arising   in   the   course   of
production, manufacture or packaging of such articles)
even if not exported out of India are allowed to be sold in
India under and in accordance with the Export­Import
Policy and in such quantity and subject to such other
limitations and conditions as may be specified in this
behalf by the Development Commissioner, on payment of
duty of excise leviable thereon under section 3 of the
Central Excises and Salt Act, 1944 (1 of 1944) or where
such articles (including  rejects,   waste   and   scrap
material)   are  not  excisable,  on  payment  of   customs
duty   on   the   said   goods   used   for   the   purpose   of
production,   manufacture   or   packaging   of   such
articles,   in   an   amount   equal   to   the   customs   duty
leviable on such articles as if imported as such.)
Explanation.­  For   the   purposes   of   this   notification,
"Export­Import Policy" means Export and Import Policy,
1
st April,   1997   ­   31st March,   2002,   published   by   the
Government   of   India   in   the   Ministry   of   Commerce
Notification No. 1/1997­2002, dated 31st March, 1997, as
amended from time to time. …..”
(emphasis supplied)
12. A bare perusal of the above notification would evince that
apart from providing for duty free imports of inputs for an 100%
EOU in order to export all the goods produced or manufactured
by it, in addition, it also gives liberty to the 100% EOUs to clear
their   goods   in   DTA   to   the   extent   permissible   by   and   in
accordance with the EXIM policy. The EXIM policy, at paragraph
9.9 provided that for earning an entitlement to make sales in
DTA,   the   unit   has   to   maintain   positive   net   foreign   exchange
earning.   The   calculation   of   net   foreign   exchange   earning,   as
defined at paragraph 9.29, is provided for at paragraph 9.5 of the
17
Policy, which had to be done as prescribed in Appendix I of the
Policy. In case of cut flowers, it has been fixed at 20% since it
would come within the category of “Products not covered above”.
13. On   a   combined   reading   of   the   notification   with   the
conditions laid down in the EXIM policy, it is clear that the
fulfilment of the aforesaid conditions is a condition precedent to
become  eligible  to   make  DTA  sales.  Resultantly,   if   goods  are
cleared   in   DTA   sales   in   breach   of   the   aforesaid   conditions,
customs duty would be leviable, as if such goods were imported
goods.
14. Reverting to the first question, the appellant lays emphasis
that the DTA sales made by an 100% EOU can only be amenable
to excise duty and show cause notice under the provisions of the
1962 Act could not have been issued. This ground finds support
in the decision of larger bench of the CEGAT in  Vikram  Ispat
(supra), which the appellant relies upon. In paragraph 16 of the
said decision, it has been held as under:
“16. Notification   No.   2/95­C.E.,   dated   4­1­95
provides that the goods manufactured and cleared by a
100% E.O.U. to DTA will be exempted from so much of
duty of excise as is in excess of the amount calculated at
the rate of 50% of each of duty of customs leviable read
with any other notification for the time being in force on
the like goods produced or manufactured outside India,
18
if imported into India provided that the amount of duty
payable shall not be less than the duty of excise leviable
on like goods produced or manufactured by the units in
Domestic Tariff Area read with any relevant notification.
It is, thus apparent that notification No. 2/95 provides a
minimum limit of the rate of duty which has to be paid
by the 100% E.O.U. while clearing the goods to DTA and
this limit is provided by the duty of excise leviable on like
good manufactured outside 100% E.O.U. However, if the
aggregate of duty customs leviable on goods cleared by
100% E.O.U. is more than the duty of excise leviable on
like goods, a 100% E.O.U. has to pay more duty. The
Revenue wants to restrict the availment of Modvat credit
to the components of additional duty of customs paid
under Section 3 of the Customs Tariff Act by bringing the
fiction that 100% E.O.U. is a place which is not in India
and the sale therefrom within India is akin to import into
India. We do not find any substance in this view of the
Revenue. The clearance of the goods by 100% E.O.U.
are   not   import   in   the   terms   in   which   it   has   been
defined   under   Section   2   (23)   of   the   Customs   Act,
according to which import, with its grammatical and
cogent  expression  means  bringing   into  India  from  a
place  outside   India.   This   is  also  apparent   from   the
fact   that   when   the   goods   are   cleared   from   100%
E.O.U.   to   any   place   in   India,   central   excise   duty
under Section 3(1) of the Central Excise Act is levied
and not the customs duty under the Customs Act. If
it is to be regarded as import, then the duty has to be
charged  under  Section  12  of  the  Customs  Act,  read
with   Section   3   of   the   Customs   Tariff   Act.   The
Revenue,   it   seems   is  confusing  the  measure  of   the
tax with the nature of the tax. The nature of the duty
levied on the goods from 100% E.O.U. is excise duty
and   nothing   else,   whereas   for   determining   the
quantum   of   duty   the   measure   adopted   is   duty
leviable under Customs Act as held by the Supreme
Court in  many cases referred to above. The  method
adopted   by   the   law   makers   in   recovering   the   tax
cannot  alter   its  character.  Once   it   is  held  that  the
duty   paid   by   the   100%   E.O.U.   in   respect   of   goods
cleared   to   any   place   in   India   is   excise   duty,   the
question   of   dissecting   the   said   duty   into   different
components   of   basic   customs   duty,   auxiliary   duty,
additional   duty   of   Customs   or   any   other   customs
19
duty  does not arise.  The proforma of AR­1A on which
the   reliance   was   placed   by   the   learned   D.R.,   cannot
change the legal position that the duty levied on 100%
E.O.U. is a duty of excise and not customs duty.”
(emphasis supplied)
However, this exposition has no application to the fact situation
of   the   present   case,   in   as   much   as   there   had   been   no
contravention of conditions of EXIM Policy and the issue was only
about the nature of tax, in case of goods otherwise amenable to
excise duty.
15. Concededly,  the  DTA  sales  pertaining  to  excisable  goods
made in conformity with the conditions of the EXIM policy are
exigible to excise duty, but once there is contravention of the
condition(s)   of   the   EXIM   policy,   irrespective   of   the   goods
produced being excisable or non­excisable, the benefit under the
exemption notification is unavailable. In such a situation, the
very goods would become liable to imposition of customs duty as
if being imported goods.
16. We may now examine as to what would be the position in
case of sale of non­excisable goods as per conditions specified
under the EXIM policy. Assuming there was no contravention of
the EXIM policy, in case of the goods cleared being non excisable,
the Paragraph 3 of the exemption notification would come into
20
play and the duty would be leviable on the inputs used in such
goods. It is relevant to bear in mind Section 12 of the 1962 Act
here, being the charging section, as is set out hereunder:
 “Section 12 – Dutiable Goods
(1)      Except as otherwise provided in this Act, or any
other law for the time being in force, duties of customs
shall be levied at such rates as may be specified under
the Customs Tariff Act, 1975 (51 of 1975), or any other
law for the time being in force, on goods imported into, or
exported from, India.
(2)         The provisions of sub­section  (1)  shall apply in
respect of all goods belonging to Government as they
apply in respect of goods not belonging to Government.”
It is clear from the above provision that the goods which are
imported shall be charged as specified under the Customs Tariff
Act, 1975 or “any other law”, unless exempted under the 1962
Act or by “any other law”.
17. In the present case, the notification provides for exemption
on   import   of   inputs   and   at   the   same   time   prescribes   for
adherence of certain conditions for availing the exemption. The
notification further prescribes the rate at which the customs duty
on the inputs used in the production of non­excisable goods sold
in DTA is to be charged. Thus, the notification, having been
issued in exercise of delegated legislation under Section 25 of the
1962 Act, has to be understood as “any other law”. Resultantly,
21
the appellant, having availed exemption under the notification,
cannot evade customs duty on the imported inputs at the rate
prescribed by the notification.
18. The   show   cause   notice   points   out   that   the   appellant
imported raw materials like “Live Rose Plants” and consumables
like   fertilizers   and   planting   materials,   however,   the   appellant
advisedly chose to confine its argument to “cut flowers”, which,
as contended, were grown on Indian soil and thus not amenable
to customs duty. However, the demand made in the show cause
notice “treating” cut flowers as deemed to have been imported
was only for the purpose of quantification of the customs duty on
the imported inputs and not imposition of the customs duty on
the domestically grown cut flowers as such.
19. The decision of CESTAT in the case of  Cosco   Blossoms
(supra) is of no avail to the appellant. In that case, the tribunal
had relied upon the decision in Vikram Ispat (supra) and held
that the cut flowers cleared in DTA sales cannot be charged with
customs   duty,   without   considering   that   the   goods   were   non
excisable.   Notably,   the   Tribunal   had   granted   liberty   to   the
authorities to charge customs duty upon the imported inputs, if
22
used in production of the goods cleared in DTA, which supports
the case of the respondent.  Paragraph 5 of the aforesaid order
reads as under:
“5.  It  is well settled [2000 (120) E.L.T. 800] that
goods   produced   in   an   EOU   cannot   be   treated   as
imported goods and subjected to customs duty. The duty
payable in respect of such goods is the duty of excise
under   Section   3   of   the   Central   Excise   Act,   1944.
Therefore, the duty demand made in the impugned order
under Section 28 of the Customs Act is not sustainable.
Accordingly, we set aside the impugned order and allow
the present appeal.  However,   we  make   it   clear   that
revenue authorities will be at liberty to demand duty
on   the   imported   inputs,   if   any,   used   in   the
production of the cut­flowers in question.
The appeal is disposed of as above.”
(emphasis supplied)
20. A priori, the demand in the present case, pertaining to the
non­excisable goods has rightly been made under the 1962 Act
upon the imported inputs used in the production of goods sold in
DTA in violation of condition(s) in the EXIM Policy.
21. The decision of CESTAT in  Suresh   Synthetics (supra) is
not applicable to the present case. The goods in that case were
Polyster   Textured   Yarn,   which   are   excisable   goods.   The
investigations were made as per provisions of the Central Excise
Act,   194416,   however,   show   cause   notice   was   issued   under
16 For short, “the 1944 Act”
23
provisions of the 1962 Act. Thus, it was held that the demand is
not maintainable as it was made under a defective show cause
notice.
22. In  case  of   excisable   goods,  even  the   present   notification
takes resort to Section 3 of the 1944 Act, as can be seen from the
Paragraph 3 of the notification extracted above. Whereas, the
provisions of the 1962 Act are invoked only when the goods are
non­excisable.  In the present case, since the cut flowers are nonexcisable goods, the demand for payment of customs duty had
rightly been made vide show cause notice under the provisions of
the 1962 Act.
23. Moving to the second question, the show cause notice was
issued to the appellant prior to the issuance of the amendment
notification. In this backdrop, let us now examine the contention
of   the   appellant   that   the   amendment   notification   being
retrospective in its application. The relevant portion of the said
notification is reproduced hereunder:
“NOTIFICATION NO. 56 /2001­CUS DATED 18.5.2001
In exercise of the powers conferred by sub­section (1) of
section 25 of the Customs Act, 1962 (52 of 1962), the
Central Government being satisfied that it is necessary
in the public interest so to do, hereby directs that each of
the   notifications   of   the   Government   of   India   in   the
Ministry of Finance (Department of Revenue), specified in
24
column (2) of the Table hereto annexed shall be amended
or further amended, as the case may be, in the manner
specified in the corresponding entry in column (3) of the
said Table.
TABLE
Sr.No Notification No.
and Date
Amendment
(1) (2) (3)
xxx Xxx xxx
8. 126/94­Cus
dated   the   3rd
June, 1994
In the said notification,­
(a)   in   the   first   paragraph,   in
condition   (6),   after   clause   (d),
the following shall be inserted,
namely:­
" (e) permit destruction of rejects
and  waste  without  payment  of
duty within the unit, or outside
the   said   unit,   where   it   is   not
possible   or   permissible   to
destroy the same within the said
unit, in the presence of Customs
or Central Excise officer.";
(b)   in   paragraph   2,   in   the
proviso,   for   the   words   and
figures   "duty   of   15%   ad
valorem", the words and figure
"duty of 5% ad valorem" shall be
substituted;
(c)  in   paragraph   3,   in   clause
(a), for the words "on payment
of   customs   duty   on   the   said
goods used for the purpose of
production,   manufacture   or
packaging   of   such   articles   in
an   amount   equal   to   the
customs duty leviable on such
articles   as   if   imported   as
such.",   the   following   shall   be
substituted, namely:­
"customs   duty   equal   in
amount   to   that   leviable   on
25
inputs   obtained   under   this
notification   and   used   for   the
purpose   of   production,
manufacture   or   packaging   of
such   articles,   which   would
have   been   paid,   but   for   the
exemption   under   this
notification,   shall   be   payable
at   the   time   of   clearance   of
such articles.
….."
(emphasis supplied)
 
24. As can be seen, the aforesaid notification posits of carrying
out amendments  and  substituting the charging clause of the
inputs   used   in   case   of   non­excisable   goods.   The   language
employed   in   the   notification   does   not   offer   any   guidance   on
whether the amendments as made were to apply prospectively or
retrospectively. It is a settled proposition of law that all laws are
deemed to apply prospectively unless either expressly specified to
apply retrospectively or intended to have been done so by the
legislature. The latter would be a case of necessary implication
and it cannot be inferred lightly.
25. In this regard, the appellant has heavily relied upon the
CBEC Circular to contend that the Government intended to apply
the notification retrospectively as it was brought in to address an
26
anomaly, which existed vis a vis central excise notifications. The
relevant portion of the CBEC Circular is extracted hereunder:
“Circular No. 31/2001­Cus, dated 24­5­2001
xxx xxx xxx
(xi)  Duty on DTA Clearance of Non­Excisable Goods;
25.  At present, the EOUs and units operating under
EPZ/STP/EHTP   Schemes   are   allowed   to   sell   finished
products   (including   rejects,   waste   &   scrap)   in   the
Domestic   Tariff   Area   (DTA)   on   payment   of   applicable
excise duty as per proviso to Section 3 of the Central
Excise Act, 1944. However, the same is applicable if the
goods being cleared into DTA are excisable goods. Under
the present dispensation, the notifications providing duty
free   import   of   goods   under   the   above   said   Schemes
stipulate   that   where   the   finished   products   (including
rejects, wastes & scrap) sought to be cleared in DTA are
not excisable, such products are allowed to be cleared on
payment of customs duty on the inputs used for the
purpose   of   production,   manufacture,   processing   or
packaging   such   products   in   an   amount   equal   to   the
customs duty leviable on such products as if imported as
such.
26.  It has been brought to notice of the Board that
in some Commissionerates, the floriculture units under
the EOU Scheme are being asked to pay duty equivalent
to   the   customs   duty   leviable   on   finished   goods   as   if
imported as such, for clearance of cut­flowers, which is
not an excisable commodity. It has also been stated that
the DTA units are not required to pay any duty for sale of
cut­flowers, as the same are not excisable. This is stated
to have placed the floriculture units in EOUs at a serious
disadvantageous position vis­a­vis DTA units.
27.  The matter has been examined. In the central
excise notifications governing duty free procurement by
EOUs and units under EPZ/STP/ETHP Schemes, there
is   a   provision   to   recover   duty   on   the   inputs   &
consumables   procured   duty   free   under   exemption
notification,  which have  gone into production  of nonexcisable goods cleared into DTA.  In  the  notifications
governing   duty   free   import   by   EOUs   and   the
EPZ/STP/EHTP  units,  the   anomaly,  however,   exists
inasmuch as the notifications talk about payment of
customs duty on the inputs used in the manufacture
27
of  articles  in  an  amount equal  to  the  customs  duty
leviable  on   such  articles  as   if   imported  as   such.  In
order   to   remove   this   anomaly,   all   the   notifications
governing duty free import of goods by STP/EHTP/EPZ
units   and   EOUs   including   those   in   Aquaculture   and
Agriculture sector have been amended so as to bring the
provisions   of   these   notifications   in   harmony   with   the
provisions of corresponding Central Excise notifications.
Notification No. 56/2001­Cus, dated 18­5­2001 may be
seen for details."
(emphasis supplied)
26. Upon a bare reading of the circular, it can be noted that it
discusses the mechanism in force before the amendment, the
reason for bringing in the change and the changes brought in.
The circular does not mention that the earlier methodology in
force was deficient or devoid of clarity in any manner. It rather
says that the same was being disadvantageous to the EOU units
as compared to the DTA units due to the difference in charging
rates   in   the   respective   circulars.   Upon   considering   that,   the
amendment has been brought in to establish parity with the
excise notifications and to vindicate the disadvantage that earlier
regime was causing to EOU units. Merely because an anomaly
has been addressed, it cannot be passed off as an error having
been rectified. Unless shown otherwise, it has to be seen as a
conscious change in the dispensation, particularly concerning
the fiscal subject matters. The word “anomaly” has been defined
28
in   Webster's   New   Twentieth   Century   Dictionary   to   mean
“abnormality;   irregularity;   deviation   from   the   regular
arrangement, general rule or the usual method”.
27. In the context of the subject circular, since it takes note of
the previous arrangement and distinguishes it from the excise
notifications, the meaning has to be taken as deviation from the
regular arrangement, which by no stretch of imagination can be
treated as a mere mistake. To call the  amendment notification
clarificatory or curative in nature, it would require that there had
been   an   error/mistake/omission   in   the   previous   notification
which is merely sought to be explained.
28. To   understand   if   the   Government   brought   in   the
amendment notification to clarify that the articles were to be
charged at the rate of duty provided for inputs and not for the
final articles, it would be necessary to analyse the position prior
to the amendment and to see if duty on inputs chargeable at the
rate of final articles was an error that crept in. In this regard, we
may refer to Section 3 of the 1944 Act as it stood during the
relevant period, which is set out hereunder:
29
“Section 3.  Duties specified in the First Schedule and
the Second Schedule to the Central Excise Tariff Act,
1985 to be levied­
(1) There shall be levied and collected in such manner as
may be prescribed,­
(a) a duty of excise on all excisable goods which are
produced or manufactured in India as, and at the
rates, set forth in the First Schedule to the Central
Excise Tariff Act, 1985 (5 of 1986);
(b) a special duty of excise, in addition to the duty of
excise specified in Clause (a) above, on excisable
goods   specified   in   the   Second   Schedule   to   the
Central Excise Tariff Act, 1985 (5 of 1986) which are
produced or manufactured in India, as, and at the
rates, set forth in the said Second Schedule.
Provided  that  the  duties  of  excise  which  shall  be
levied and collected on any excisable goods which are
produced or manufactured,­­
(i)   in  a  free  trade  zone  and  brought  to  any
other place in India; or
(ii)   by   a   hundred   per   cent   export­oriented
undertaking and allowed to be sold in India,
shall   be   an   amount   equal   to   the   aggregate   of   the
duties   of   customs   which   would   be   leviable   Under
Section 12 of the Customs Act, 1962 (52 of 1962), on
like goods produced or manufactured outside India if
imported   into   India,   and   where   the   said   duties   of
customs  are  chargeable  by  reference  to  their  value;
the   value   of   such   excisable   goods   shall,
notwithstanding   anything   contained   in   any   other
provision   of   this   Act,   be  determined   in   accordance
with the provisions of the Customs Act, 1962 (52 of
1962) and the Customs Tariff Act, 1975 (51 of 1975).”
(emphasis supplied)
The proviso to the charging section of the 1944 Act provides that
an EOU making DTA sales shall be charged duty as if the goods
were imported into India and in value equal to the customs duty
chargeable thereto. No doubt, the said provision applies only in
30
cases of excisable goods, but the exemption notification providing
for similar duty by terms thereunder for non­excisable goods, can
be understood to have been made to equate the duty in case of
excisable as well as non­excisable goods. Therefore, it must follow
that the said provision was not an error that crept in but was
intentionally   introduced   by   the   Government   to   determine   the
charging rate, as discussed above. That being the position prior
to amendment, the amendment brought in cannot be said to be
clarificatory in nature.
29. The decision of this Court in  Zile  Singh  (supra) is of no
avail to the appellant. In as much as it was a case of poor choice
of   words   by   the   draftsmen,   which   led   to   absurdity   in
interpretation and a subsequent substitution of such words to
make   the   intention   clear.   In   the   present   case,   as   discussed
above, there was no error present in the prevailing dispensation
and it was a policy decision to give relief to the EOU units from
the date of its amendment.
30. In  Vatika   Township  (supra), Constitution Bench of this
Court has analysed the principle concerning retrospectivity. The
31
appellant heavily relies upon the observation made at paragraph
30 of the decision, which reads thus:
“30. ...  If   a   legislation   confers   a   benefit   on   some
persons but without inflicting a corresponding detriment
on some other person or on the public generally, and
where to confer such benefit appears to have been the
legislators' object, then the presumption would be that
such   a   legislation,   giving   it   a   purposive   construction,
would warrant it to be given a retrospective effect. …”.
The   appellant   clearly   misinterprets   the   context   of   the   above
observation by reading the same in isolation. To have a better
understanding of the said principle, it is relevant to read the
preceding   and   subsequent   paragraphs.   We   may   here   refer   to
Paragraph 32 of the said decision, which is extracted below:
“32. Let us sharpen the discussion a little more. We
may note that under certain circumstances, a particular
amendment can be treated as clarificatory or declaratory
in   nature.   Such   statutory   provisions   are   labelled   as
“declaratory statutes”. The circumstances under which
provisions can be termed as “declaratory statutes” are
explained by Justice G.P. Singh in the following manner:
“Declaratory statutes
The presumption against retrospective operation
is not applicable to declaratory statutes. As stated in
CRAIES and   approved   by   the   Supreme   Court:   ‘For
modern purposes a declaratory Act may be defined as
an Act to remove doubts existing as to the common
law, or the meaning or effect of any statute. Such Acts
are usually held to be retrospective. The usual reason
for   passing   a   declaratory   Act   is   to   set   aside   what
Parliament   deems   to   have   been   a   judicial   error,
whether in the statement of the common law or in the
interpretation of statutes. Usually, if not invariably,
such an Act contains a Preamble, and also the word
“declared” as well as the word “enacted”.’ But the use
32
of the words ‘it is declared’ is not conclusive that the
Act is declaratory for these words may, at times, be
used to introduced new rules of law and the Act in the
latter case will only be amending the law and will not
necessarily be retrospective. In determining, therefore,
the   nature   of   the   Act,   regard   must   be   had   to   the
substance rather than to the form. If a new Act is ‘to
explain’   an   earlier   Act,   it   would   be   without   object
unless construed retrospective. An explanatory Act is
generally passed to supply an obvious omission or
to   clear   up   doubts   as   to   the   meaning   of   the
previous Act. It is well settled that if a statute is
curative or merely declaratory of the previous law
retrospective  operation  is generally intended. The
language ‘shall be deemed always to have meant’ is
declaratory, and is in plain terms retrospective. In
the   absence   of   clear   words   indicating   that   the
amending   Act   is   declaratory,   it   would   not   be   so
construed   when   the   pre­amended   provision   was
clear  and  unambiguous.  An  amending  Act may  be
purely   clarificatory   to   clear   a   meaning   of   a
provision   of   the  principal   Act  which   was   already
implicit. A clarificatory amendment of this nature will
have retrospective effect and, therefore, if the principal
Act was existing law which the Constitution came into
force, the amending Act also will be part of the existing
law.”
The   above   summing   up   is   factually   based   on   the
judgments of this Court as well as English decisions.”
Upon reading the observations at Paragraph 30 and juxtaposed
with   paragraph   32,   it   is   crystal   clear   that   an   essential
requirement for application of a legislation retrospectively is to
show that the previous legislation had any omission or ambiguity
or it was intended to explain an earlier act. In absence of the
above ingredients, a legislation cannot be regarded as having
retrospective effect.
33
31. In  IndusInd   Bank  (supra),   this   Court,   while   examining
whether   the   amendment   made   to   Section   28   of   the   Indian
Contract Act, 1872 was prospective or retrospective, has noted
that the said provision is remedial in nature and not clarificatory,
since prior to the amendment, the rights and liabilities accrued
were sought to be taken away. Paragraph 24 of the said decision
is reproduced below:
“24. On a conspectus of the aforesaid decisions, it
becomes clear that Section 28, being substantive law,
operates prospectively, as retrospectivity is not clearly
made out by its language.   Being  remedial  in  nature,
and   not   clarificatory   or   declaratory   of   the   law,   by
making certain agreements covered by Section 28(b)
void   for   the   first   time,   it   is   clear   that   rights   and
liabilities   that   have   already   accrued   as   a   result   of
agreements entered into between parties are sought
to  be  taken  away.   This being the case, we are of the
view that both the Single Judge and the Division Bench
were in error in holding that the amended Section 28
would apply.”
We   are   in   agreement   with   the   respondent   that   this   decision
squarely applies to the present case as prior to the amendment,
the   DTA   sales   made   by   the   appellant   have   already   attracted
liability at the prescribed charging rate, which in facts of the
present   case   cannot   be   undone   in   reference   to   the   subject
amendment.
34
32. It is relevant here to advert to a decision of Constitution
Bench of this Court in Commissioner of Central Excise, New
Delhi vs. Hari Chand Shri Gopal & Ors.17
, wherein it has been
held that an exemption clause ought to be strictly construed
according to the language employed therein and in case of any
ambiguity,   benefit   must   go   to   the   State.   It   will   be   useful   to
reproduce   paragraphs   29   and   30   of   the   aforesaid   decision
hereunder:
“29. The law is well settled that a person who claims
exemption   or   concession   has   to   establish   that   he   is
entitled   to   that   exemption   or   concession.   A   provision
providing for an exemption, concession or exception, as
the case may be, has to be construed strictly with certain
exceptions depending upon the settings on which the
provision has been placed in the statute and the object
and purpose to be achieved.  If  exemption  is available
on complying with certain conditions, the conditions
have   to   be   complied   with.   The   mandatory
requirements of those conditions must be obeyed or
fulfilled exactly, though at times, some latitude can be
shown,   if   there   is   a   failure   to   comply   with   some
requirements  which   are  directory  in  nature,  the  noncompliance   of   which   would   not   affect   the   essence   or
substance of the notification granting exemption.
30.  In  Novopan   India   Ltd.  this  Court   held   that  a
person,   invoking   an   exception   or   exemption
provisions,   to   relieve   him   of   tax   liability   must
establish   clearly   that   he   is   covered   by   the   said
provisions   and,   in   case   of   doubt   or   ambiguity,   the
benefit   of   it   must   go   to   the   State.  A   Constitution
Bench of this Court in Hansraj Gordhandas v. CCE and
17 (2011) 1 SCC 236
35
Customs held that (Novopan India Ltd. case, SCC p. 614,
para 16)
“16. … such a notification has to be interpreted
in the light of the words employed by it and not
on   any   other   basis.   This   was   so   held   in   the
context of the principle that in a taxing statute,
there is no room for any intendment, that regard
must be had to the  clear meaning of the words
and  that  the  matter  should  be  governed  wholly
by   the   language   of   the  notification   i.e.   by   the
plain terms of the exemption.” ”
Applying   the   aforequoted   dictum   to   the   present   case,   the
appellant was obliged to comply with the conditions prescribed
by the EXIM Policy, to avail the exemption under the stated
notification;   and   failure   to   do   so,   must   denude   them   of   the
exemption so granted. Further, since the charging rate prescribed
under   the   exemption   notification   is   under   question,   any
ambiguity in regard to the date of application of the amendment
thereto would necessarily have to be construed in favour of the
State,   unless   shown   otherwise   by   judicially   acceptable
parameters.
33. The next contention of the appellant is that Section 28 of
the 1962 Act cannot be invoked to extend the limitation as there
was no wilful mis­statement or suppression of facts on behalf of
the appellant. The decision of this Court in  Uniworth  Textiles
36
(supra),   has   been   relied   upon   by   the   appellant.   The   same
explains the situations in which Section 28 of the 1962 Act can
be   invoked.   It   had   been   held   in   the   said   decision   that   the
extension of limitation for a period of five years can be done only
in cases of deliberate default and not inadvertent non­payment.
It was further held that the burden for proving mala fide conduct
is on the revenue; and specific averments in that regard must
find place in the show cause notice.
34. In the fact situation of the present case, the appellant was
issued a show cause notice mentioning that it had suppressed
the DTA sales of cut flowers to evade payment of duty. Had the
appellant in good faith believed that no duty was payable upon
the DTA sales of cut flowers, it would have sought prior approval
of the Development Commissioner, which it failed to do. Even in
the letter seeking ex­post facto approval, the appellant claimed
that they had not used any imported input such as fertilizer,
plant growth regulations, etc. in growing flowers sold in DTA,
despite having imported green house equipment, raw materials
like Live Rose Plants and consumables like planting materials
and   fertilizers.   Therefore,   it   prima   facie   appeared   that
suppression by the appellant was “wilful”. The burden of proving
37
to the contrary rested upon the appellant, which the appellant
failed to discharge by failing to establish that the imported inputs
were not used in the production of the cut flowers sold in DTA. In
view thereof, the authorities below have rightly invoked Section
28 of the 1962 Act and allied provisions.
35. In light of the foregoing discussion and observations, we are
of the view that CESTAT has rightly upheld the levy of customs
duty.
36. This appeal, therefore, deserves to be dismissed. It is so
ordered.     There   shall   be   no   order   as   to   costs.   Pending
applications, if any, shall stand disposed of.
................................., J.
(A.M. Khanwilkar)   
….............................., J.
(Dinesh Maheshwari)
New Delhi;
September 1, 2020.