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 JUDGMENT 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 JUDGMENT
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.
[ A.K. SIKRI ]
New Delhi; September 04, 2015.