M/S. L. R. BROTHERS INDO FLORA LTD. versus COMMISSIONER OF CENTRAL EXCISE

[2020] 10 S.C.R. 1043

M/S. L. R. BROTHERS INDO FLORA LTD.

COMMISSIONER OF CENTRAL EXCISE

(Civil Appeal No. 7157 of 2008)

SEPTEMBER 01, 2020

[A. M. KHANWILKAR AND DINESH MAHESHWARI, JJ.]

Customs Act, 1962 – Central Excise Act, 1944 – s.3 –Appellant, 100% Export Oriented Unit (EOU) was engaged inproduction of cut flowers and flower buds – The 100% EOU isrequired to export all articles produced by it and was exemptedfrom payment of customs duty on the imported inputs used duringproduction of the exported articles vide exemption notification dated03.06.1994 – Under the said notification, exemption on levy ofcustoms duty was extended even to the inputs used in production ofarticles sold in domestic market – Thereafter, came amendednotification dated 18.05.2001, by which the customs duty in caseof non-excisable goods became leviable on inputs used forproduction, manufacturing or packaging, as if there was noexemption notification in place – The EXIM Policy 1997-2002provided that 100% EOU in floriculture sector was permitted tosell 50% of its produce in Domestic Tariff Area (DTA), subject toachieving positive net foreign exchange earning of 20% and uponthe approval of the Development Commissioner – The appellantwithout obtaining the approval of the Development Commissionerand without maintaining the requisite net foreign exchange earningmade DTA sales during 1998-99 to 2000-01 in contravention of theEXIM Policy – However, the appellant subsequently sought ex-postfacto approval from Development Commissioner – The AdditionalCommissioner, Central Excise issued show cause notice as to whycustoms duty, interest and penalty should not be imposed for theDTA sales made by the appellant in contravention of the EXIM Policy,that too after having availed exemptions under the exemptionnotification – The Additional Commissioner adjudged the showcause notice and held that the DTA sales were made withoutpermission and in contravention of the EXIM Policy and therefore,customs duty is leviable upon the appellant for the said sales – TheAppeal before the Commissioner was unsuccessful – In further

CDEF

Aappeal before CESTAT, the order of the authorities below wereconfirmed – The Supreme Court framed two questions: (i) Whethercustoms duty can be charged on the non-excisable goods producedin India and sold in DTA by an EOU ?; and (ii) Whether theamendment notification dated 18.05.2001, purporting to amend thecriteria for determination of duty on inputs, is prospective orBretrospective in its application ? – Held: The DTA sales pertainingto excisable goods made in conformity with the conditions of theEXIM policy are exigible to excise duty, but once there iscontravention of the condition(s) of the EXIM policy, irrespectiveof the goods produced being excisable or non-excisable, the benefitCunder the exemption notification is unavailable – In such situation,the very goods would become liable to imposition of customs dutyas if being imported goods – So, the demand in the present case,pertaining to the non-excisable goods (cut flowers) has rightly beenmade under the 1962 Act upon the imported inputs used in theproduction of goods sold in DTA in violation of condition(s) in theDEXIM Policy – So far as the amendment notification is concerned,it is settled proposition of law that all laws are deemed to applyprospectively unless either expressly specified to applyretrospectively or intended to have been done so by the legislature– An essential requirement for application of legislationEretrospectively is to show that the previous legislation had anyomission or ambiguity or it was intended to explain an earlier act –In absence of the above ingredients, legislation cannot be regardedas having retrospective effect – In the instant case, the amendmentnotification was not in clarificatory nature – Further, any ambiguityin regard to the date of application of the amendment thereto wouldFnecessarily have to be construed in favour of the State, unless shownotherwise by judicially acceptable parameters – Therefore, CESTAThas rightly upheld the levy of customs duty.

Dismissing the appeal, the Court

GHELD: Whether customs duty can be charged on the non-excisable goods produced in India and sold in DTA by an EOU?

1. The DTA sales pertaining to excisable goods made inconformity with the conditions of the EXIM policy are exigible toexcise duty, but once there is contravention of the condition(s)Hof the EXIM policy, irrespective of the goods produced being

excisable or non-excisable, the benefit under the exemptionnotification is unavailable. In such situation, the very goodswould become liable to imposition of customs duty as if beingimported goods. [Para 15][1062-D]

2. In the present case, the notification provides forexemption on import of inputs and at the same time prescribesfor adherence of certain conditions for availing the exemption.The notification further prescribes the rate at which the customsduty on the inputs used in the production of non-excisable goodssold in DTA is to be charged. Thus, the notification, having beenissued in exercise of delegated legislation under Section 25 ofthe 1962 Act, has to be understood as “any other law”. Resultantly,the appellant, having availed exemption under the notification,cannot evade customs duty on the imported inputs at the rateprescribed by the notification. [Para 17][1063-B-C]

3. The show cause notice points out that the appellantimported raw materials like “Live Rose Plants” and consumableslike fertilizers and planting materials, however, the appellantadvisedly chose to confine its argument to “cut flowers”, which,as contended, were grown on Indian soil and thus not amenableto customs duty. However, the demand made in the show causenotice “treating” cut flowers as deemed to have been importedwas only for the purpose of quantification of the customs duty onthe imported inputs and not imposition of the customs duty onthe domestically grown cut flowers as such. [Para 18][1063-D-E]4. priori, the demand in the present case, pertaining tothe non-excisable goods has rightly been made under the 1962Act upon the imported inputs used in the production of goodssold in DTA in violation of condition(s) in the EXIM Policy. [Para20][1064-C]

5. In case of excisable goods, even the present notificationtakes resort to Section 3 of the 1944 Act, as can be seen from thenotification dated 03.06.1994. Whereas, the provisions of the 1962Act are invoked only when the goods are non-excisable. In thepresent case, since the cut flowers are non-excisable goods, thedemand for payment of customs duty had rightly been made vide

Ashow cause notice under the provisions of the 1962 Act.[Para 22][1064-E-F]

Whether the amendment in terms of amended notificationdated 18.05.2001, purporting to amend the criteria fordetermination of duty on inputs, is prospective or retrospectiveBin its application?

6. The amended notification posits of carrying outamendments and substituting the charging clause of the inputsused in case of non-excisable goods. The language employed inthe notification does not offer any guidance on whether theCamendments as made were to apply prospectively orretrospectively. It is settled proposition of law that all laws aredeemed to apply prospectively unless either expressly specifiedto apply retrospectively or intended to have been done so by thelegislature. The latter would be case of necessary implicationand it cannot be inferred lightly. [Para 24][1066-A-B]D

7. The proviso to the charging section 3 of the 1944 Actprovides that an EOU making DTA sales shall be charged dutyas if the goods were imported into India and in value equal to thecustoms duty chargeable thereto. No doubt, the said provisionapplies only in cases of excisable goods, but the exemptionEnotification providing for similar duty by terms thereunder fornon-excisable goods, can be understood to have been made toequate the duty in case of excisable as well as non-excisable goods.Therefore, it must follow that the said provision was not an errorthat crept in but was intentionally introduced by the GovernmentFto determine the charging rate. That being the position prior toamendment, the amendment brought in cannot be said to beclarificatory in nature. [Para 28][1069-C-E]

8. In Vatika Township, Constitution Bench of this Court hasanalysed the principle concerning retrospectivity. It was madeGclear that an essential requirement for application of legislationretrospectively is to show that the previous legislation had anyomission or ambiguity or it was intended to explain an earlieract. In absence of the above ingredients, legislation cannot beregarded as having retrospective effect. [Para 30][1069-G; 1071-D]H

9. It is relevant here to advert to decision of ConstitutionBench of this Court in Commissioner of Central Excise, New Delhivs. Hari Chand Shri Gopal & Ors, wherein it has been held thatan exemption clause ought to be strictly construed according tothe language employed therein and in case of any ambiguity,benefit must go to the State. Applying the aforequoted dictum tothe present case, the appellant was obliged to comply with theconditions prescribed by the EXIM Policy, to avail the exemptionunder the stated notification; and failure to do so, must denudethem of the exemption so granted. Further, since the chargingrate prescribed under the exemption notification is underquestion, any ambiguity in regard to the date of application of theamendment thereto would necessarily have to be construed infavour of the State, unless shown otherwise by judicially acceptableparameters. [Para 32][1072-B-C; 1073-B-C]10. The next contention of the appellant is that Section 28of the 1962 Act cannot be invoked to extend the limitation asthere was no wilful mis-statement or suppression of facts on behalfof the appellant. In the fact situation of the present case, theappellant was issued show cause notice mentioning that it hadsuppressed the DTA sales of cut flowers to evade payment ofduty. Had the appellant in good faith believed that no duty waspayable upon the DTA sales of cut flowers, it would have soughtprior approval of the Development Commissioner, which it failedto do. Even in the letter seeking ex-post facto approval, theappellant claimed that they had not used any imported input suchas fertilizer, plant growth regulations, etc. in growing flowers soldin DTA, despite having imported green house equipment, rawmaterials like Live Rose Plants and consumables like plantingmaterials and fertilizers. Therefore, it prima facie appeared thatsuppression by the appellant was “wilful”. The burden of provingto the contrary rested upon the appellant, which the appellantfailed to discharge by failing to establish that the imported inputswere not used in the production of the cut flowers sold in DTA.In view thereof, the authorities below have rightly invokedSection 28 of the 1962 Act and allied provisions. [Paras 33 and34][1073-D, F-H; 1074-A]

ACommissioner of Income Tax (Central) – I, New Delhiv. Vatika Township Private Limited (2015) 1 SCC 1 :[2014] 12 SCR 1037; Commissioner of Central Excise,New Delhi v. Hari Chand Shri Gopal & Ors. (2011) 1SCC 236 : [2010] 13 SCR 820 – followed.

BUnion of India & Anr. v. IndusInd Bank Limited & Anr.(2016) 9 SCC 720 : [2016] 11 SCR 700 – relied on.Zile Singh v. State of Haryana & Ors. (2004) 8 SCC 1: [2004] 3 Suppl. SCR 400 – inapplicable.

Uniworth Textiles Limited v. Commissioner of CentralCExcise, Raipur (2013) 9 SCC 753 : [2013] 3 SCR 27 –referred to.

Cosco Blossoms Pvt. Ltd v. Commissioner of Customs,Delhi 2004 (164) ELT 423 (Tri.-Del.); Commissionerof Central Excise and Customs v. Suresh SyntheticsD2007 (216) ELT 662 (SC) – inapplicable.

Vikram Ispat v. Commissioner of Central Excise,Mumbai-III 2000 (120) ELT 800 (Tribunal-LB) –referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7157of 2008.G

From the Judgment and Order dated 17.07.2008 of the Customs,Excise and Service Tax Appellate Tribunal, Principal Bench, New Delhiin Customs Appeal No. 9 of 2008.

Ashok K. Srivastava, Sr. Adv., Rupesh Kumar, Ms. PankhuriHShrivastava, Rajeev Sharma, Ms. Neelam Sharma, Ms. Vasvi Nagar,

M/S. L. R. BROTHERS INDO FLORA LTD. v. COMMISSIONEROF CENTRAL EXCISE

Ms. Rekha Pandey, Ms. Rashmi Malhotra, B. Krishna Prasad, Advs.for the appearing parties.

The Judgment of the Court was delivered by

A. M. KHANWILKAR, J.

1. This appeal takes exception to the Final Order No. C/203/08dated 17.7.2008 passed by the Customs, Excise & Service Tax AppellateTribunal[1] in Customs Appeal No. 9 of 2008, whereby the customs dutylevied upon the appellant on the sale of cut flowers within the DomesticTariff Area[2] had been confirmed by the Tribunal.

2. The factual matrix leading to the present appeal is that theappellant - M/s. L.R. Brothers Indo Flora Ltd. is 100% Export OrientedUnit[3] and engaged in production of cut flowers and flower buds of allkinds, suitable for bouquets and for ornamental purposes. The 100%EOU is required to export all articles produced by it. As consequencewhereof, it is exempted from payment of customs duty on the importedinputs used during production of the exported articles, vide NotificationNo. 126/94-Cus dated 3.6.1994[4]. Under the said notification, exemptionon levy of customs duty had been extended even to the inputs used inproduction of articles sold in domestic market, in accordance with theExport-Import (EXIM) Policy and subject to other conditions specifiedby the Development Commissioner. To wit, upon payment of exciseduty in case of excisable goods; and in case of non-excisable goods,upon payment of customs duty on the inputs used for production,manufacturing or packaging of such articles at rate equivalent to therate of customs duty that would have been leviable on such articles, ifsuch articles were imported. The said notification was amended byNotification No. 56/01-Cus dated 18.5.2001[5], by which the customs dutyin case of non-excisable goods became leviable on inputs used forproduction, manufacturing or packaging, as if there was no exemptionnotification in place. The effect of this amendment was that the customsduty on inputs which was charged at the rate equivalent to the dutyleviable on final articles under the exemption notification, was nowchargeable at the rate specified for the inputs.

1 For short, “CESTAT”

2 For short, “DTA”

3 For short, “EOU”

4 For short, “the exemption notification”

5 For short, “the amendment notification”

A3. The EXIM Policy 1997-2002 provided that 100% EOU infloriculture sector was permitted to sell 50% of its produce in DTA,subject to achieving positive net foreign exchange earning of 20% andupon approval of the Development Commissioner. The appellant, withoutobtaining the approval of the Development Commissioner and withoutmaintaining the requisite net foreign exchange earning, made DTA salesBto the extent of Rs.38,40,537/- during 1998-99 to 2000-01 (upto December2000), in contravention of the provisions of EXIM Policy. Notably, theappellant subsequently sought ex-post facto approval from theDevelopment Commissioner vide letter dated 6.2.2001.4. Meanwhile, the Additional Commissioner, Central Excise,CMeerut-I issued show cause notice dated 16.3.2001 to the appellantto show cause as to why customs duty, interest and penalty should notbe imposed for the DTA sales made by the appellant in contravention ofthe EXIM Policy, that too after having availed the exemptions under theexemption notification on the import of green house equipment, rawDmaterials like Live Rose Plants and consumables like planting materialsand fertilizers. After according opportunity of being heard, the AdditionalCommissioner adjudged the show cause notice and held that the DTAsales were made without permission of the Development Commissionerand in contravention of the EXIM Policy and therefore, customs duty isleviable upon the appellant for the said sales. It was further held that theEappellant had wilfully suppressed facts and thus Section 28 of the CustomsAct, 1962[6] was invoked in the present case. The relevant extract of theOrder-in-Original dated 18.10.2001 passed by the AdditionalCommissioner, Central Excise, Meerut – I on the aforesaid findings isreproduced hereunder:F“3.1 I find that the party had imported the capital goods andalso imported raw materials like “Live Rose Plants” andconsumable like “Fertilizer and Planting Materials” during1996-97 to 2000-2001 and further that they madeclearances towards Domestic Tariff Area sales withoutGobtaining permission from the Competent Authority in thematter. On scrutiny of the records, it was observed that beforemaking any DTA sales it was required that 20% positive NetForeign Exchange Earning (NFEP) should have been achievedi.e. annual value of export should have been 20% more than

6 For short, “the 1962 Act”H

Rs.2,42,37,400/= (+) annual value of imports of raw materialsand consumables during the respective year and the said noticeehad exported the flowers worth Rs.91,92,000/= only which arewell 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., wasfixed for 10 years during which they were required to achieve62% value addition over and above the imports and other factorscontributing towards the foreign exchange gone out of the country.

As per the specific condition of the approval letter, the partywas required to export all of its production out of Indiasubject to permissible limit of Domestic Tariff Area Sales(herein after referred to as DTA Sales) and that, too, afterspecific permission from Development Commissioner ofthe EPZ concerned, on payment of applicable Customs &Central Excise duties. The Export Import Policy 1997-2002specifies the condition of DTA sales by an EOU.

In this regard, I reproduce below the contents of the relevantparas of Export Import Policy 1997-2002…..

3.3 Therefore, in view of the above legal provisions of the ExportImport Policy 1997-2002, it is amply clear that for earning DTAsales entitlement the EOU should fulfil the export obligations asprescribed in the letter of approval and also should have positiveNFEP which is 20% in case of floriculture units.

3.4 ..... As per Note 3 to paragraph 9.5 of the Export ImportPolicy, as discussed above, prorata annual value of imported capitalgoods (i.e. 1/5th of the total import of Capital Goods worthRs.12,11,87,000/- comes to Rs.2,42,37,400/-. Therefore, beforemaking any DTA sales it was required that 20% positive NFEPshould have been achieved i.e. the annual value of export shouldhave been 20% more than Rs.2,42,37,400/- + annual value ofimports of raw materials and consumable during the respectiveyear, whereas in all the four years since operation, the unit hadexported the flowers worth Rs.91.92 lakhs only which are well

below the prorata annual value of import of capital goods.Therefore, in view of the specific provisions of the ExportImport Policy 1997-2002, the unit was not entitled to sellany goods in DTA.

3.5 Moreover, the guidelines for sale of goods in the DTA byEOU are prescribed in Appendix 42 of Handbook of Procedure,Export Import Policy 1997-2002. Para (f) of the said Appendix 42reads as: “An application for DTA sale shall be accompanied by astatement indicating the ex-factory value of the goods produced(excluding rejects) and ex-factory value of goods actually exported.The statement shall be certified by an independent cost/chartered/cost and works accountant and endorsed by the Customs/CentralExcise Officer having jurisdiction over the unit. The Developmentcommissioner of the EPZ concerned will determine the extent ofDTA sale admissible in value terms and issue goods removalauthorization in terms of value and quantity for sale in DTA.”However in the present case as per records, the party failedto furnish the same application as well as permission, if anyto this department and did not follow the procedure as laiddown in the Hand Book of Procedure, Export Import Policy1997-2002.

3.6 Apart from the above, the floriculture EOU may Import CapitalGoods and Raw Materials, without payment of Customs duties interms of Custom Notification No. 126/94 dated 3.6.94 andaccordingly M/s. L.R. Brother Indo, Flora Ltd., have importedgreen house equipment, raw materials like Liver Rose Plants andConsumable like planting materials and Fertilizers under the saidnotification. Para 3 of the said Notification reads as under :- ....

3.7 Therefore, from the above provision, it is clear that the unitsworking under the said Notification may sell their produced goodsin DTA on payment of excise duty as leviable under Section 3 ofCentral Excise Act, 1944 if the goods are excisable and on paymentof full Customs duties leviable on such goods as if imported assuch if the goods are non excisable. Cut Flowers or Flower Budsare not covered under Central Excise Tariff Act, 1985 as Chapter6 which covers such types of Flowers in Customs Tariff left blankin Central Excise Tariff Act and, therefore, such types of Flowerswill be treated as non excisable in view of Section 2 (d) of the

Central Excise Act, 1944. Therefore, full Customs duties will beleviable on such Flowers, if sold in DTA treating such flowers asimported into India, in terms of Notification No. 126/94-Cus dated03.6.94. Further, M/s. L.R. Brothers Indo Flora Ltd., had madeDTA sales during the year 1998-99 to 2000-01 (upto December2000) in contravention to the aforesaid provisions. Further, theyfailed to show any permission from Development Commissionerfor sale of their goods in DTA. It appears that the DevelopmentCommissioner has granted no such permission to them, asthey have not earned the DTA sale entitlement due to verylow exports in comparison to high quantum of imports. ......3.8 I have also come to conclusion that M/s. L.R. Brothers IndoFlora Ltd., Behat Road, Saharanpur have contravened theprovisions of Import & Export Policy 1997-2002 and have notfulfilled the conditions of Notification No. 126/94 dated 3.6.94.Hence the party is liable to pay the full customs duty on cut flowerssold in DTA, treating the flowers imported as such into India.Further, the said M/s. L.R. Brothers Indo Flora Ltd., havebeen 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. incontravention of the provisions of Import Export Policy1997-2002, without payment of Customs duty, henceextended period of five years as provided under proviso tosection 28 of the Customs Act 1962 is invokable in theinstant case. Therefore, all obligations were cast on such largeundertaking to discharge the correct duty liability i.e. Customsduty amounting to Rs.9,98,177.00. Therefore, demand of Customsduty stands recoverable from them. They are also liable to payinterest @ 24% from the 1[st] day of the month succeeding themonth in which the duty ought to have been paid under Section28AB of the Customs Act, 1962. ....”

5. The Additional Commissioner, by way of aforesaid order,confirmed the demand of customs duty of Rs.9,98,177/- under Section28, interest at the rate of 24% under Section 28AB and penalty ofRs.9,98,177/- under Section 114A of the 1962 Act. The appellantunsuccessfully carried the matter in appeal before the Commissioner

A(Appeals), Customs & Central Excise, Meerut-I, wherein the Order-in-Original came to be confirmed by the Order-in-Appeal dated 29.7.2005by holding thus:

“5. ....... In the light of the above facts, I find myself in agreementwith the findings of the adjudicating authority that the appellantsBhave not earned the DTA sale entitlement due to very low exportsin comparison to high quantum of imports. Thus, the allegedcontravention of provisions of Import & Export Policy 1997-2002and non-fulfilling of the conditions of the Notification 126/94-Cusibid is fully established against them. Therefore, the demand ofCustoms duty along with interest in this case as per the impugnedCorder is justified.

As regards the imposition of penalty on the appellants, Ifind that the charges of contravention of provisions of Export &Import Policy 1997-2002 & Notification No. 126/94 Cus dt.03.06.94 stand proved against the appellants. They were awareDthat they were not entitled to make DTA sales of the subjectedgoods, even then they made DTA sales of the same to evadepayment of duty. Hon’ble Supreme Court in the case of GujaratTravancore Agency vs. Commissioner of Income Tax 1989 (42)ELT 350 (SC), has held that the penalty under Section 271(1)(a)Eof the Income Tax Act is civil obligation and unless there issomething in language of the statute indicating the need to establishelement of mensrea, it is generally sufficient to prove that defaultin complying with the statute has occurred.

In view of the ratio of the aforesaid judgment of Apex Court,Fthe penalty has been rightly imposed upon the appellant.

In view of the above, I find no infirmity in the order passedby the adjudicating authority and therefore disallow the appeal.”

6. The matter was further carried in appeal before CESTATwhereat the impugned order was passed confirming the order of theGauthorities below whilst also holding that amendment notification isprospective and cannot be applied to the present case. The relevantextract of the impugned order is reproduced below:

“5. We have carefully considered the submissions made from boththe sides. Irrespective of whether the DTA clearances of cut-Hflowers were, in contravention of the EXIM Policy or otherwise,

the cut-flowers being non-excisable goods, their DTA clearancewould attract, in terms of the provisions of para 3(a) of theexemption Notification No. 123/94-CUS., only the Custom Dutyinvolved on the inputs used in the production of the cut-flowers.The point of dispute is as to whether the Custom Duty payable onthe inputs used in the production of the cut-flowers which hadbeen cleared to DTA, is to be taken as an amount equal to CustomDuty chargeable on the import of cut-flowers, as such, or it shouldbe the actual Custom Duty on the inputs used in the production ofcut-flowers cleared to DTA.

5.1xxxxxxxxx

5.2 From reading of para 3(a) of the Notification No. 126/94-cusas it existed during the period of dispute i.e. during the periodprior to 18.5.01 – and as it existed during period w.e.f. 18-5-01, itis clear that during the period of dispute, the notification containeda machinery provisions for determining, the Custom Dutychargeable on the inputs used in the production of non-excisablegoods cleared to DTA and as per this machinery provision, theduty was to be in an amount equal to the Custom Duty chargeableon the finished goods, as if imported, as such. However, after theamendment of this Notification w.e.f. 18.5.01, the duty on theinputs used in the production of non-excisable goods cleared tothe DTA was to be calculated on actual basis. The amendment tothe Notification No. 126/94-CUS. w.e.f. 18.5.01 by the NotificationNo. 56/01 can have only prospective effect and it cannot be givenretrospective effect. In view of this, during the period of dispute,customs duty on the inputs used in the production of cut-flowerscleared to DTA has to be calculated as per the provisions of theNotification, as it existed during that period.

6. The Tribunal’s judgment in the case of Vikram Ispat (supra) isnot applicable to the fact of this case, as in the present case whatis being charged in respect of DTA clearances of the cut-flowersis not the customs duty on the cut-flowers, but the custom duty onthe inputs used in the production of those cut-flowers, which asper the provisions of Notification, as it existed at that time, wasequal to the Customs Duty chargeable on the import of cut-flowers,as such. In the Tribunal’s judgment in case of Zygo Flowers Ltd.(supra) and Cosco Blossoms Pvt. Ltd. (supra), the implications

Aof the wording of para 3(a) of the exemption notification duringthe period of dispute - “or where such articles [including rejects,waste and scrap material] are not excisable, on payment of CustomDuty on the said goods used for the purpose of production,manufacture or packaging of such articles in an amount equal tothe Custom Duty leviable on such articles, as if imported, as such”Bhad not been considered. If the Appellant’s view accepted, thewords “in an amount equal to the Custom Duty leviable on sucharticles, as if imported, as such” would become redundant. It iswell settled principle of interpretation of statute that statute hasto be construed without adding any words to it or subtracting anyCwords from it and an interpretation which makes part of thestatute redundant has to be avoided.

7. In view of the above discussion, we hold that the custom dutyhas been correctly charged in respect of DTA clearances of thecut-flowers and as such we find no infirmity in the impugned order.DThe appeal is accordingly dismissed.”

Thus, the levy of customs duty stood confirmed.

7. Being aggrieved, the appellant has approached this Court. Thethrust of the argument of the appellant is that according to Paragraph 3of the exemption notification, sales made in DTA would attract exciseEduty and since the cut flowers sold by the appellant are non-excisablegoods, no excise duty can be levied upon it. Further, according to thenotification, in case of non-excisable goods, the customs duty is leviableon the imported inputs. In the present case, since the cut flowers arehome grown, customs duty cannot be levied upon them and therefore,Fthe demand of customs duty cannot be sustained. Reliance is placed onthe decisions of CESTAT in Cosco Blossoms Pvt. Ltd vs. Commissionerof Customs, Delhi[7] and larger bench of Central Excise and Gold(Control) Appellate Tribunal[8] in Vikram Ispat vs. Commissioner ofCentral Excise, Mumbai-III[9]. It is then urged that the exemptionnotification predicates levy of customs duty on non-excisable goods soldGin DTA sales to the extent of the value of inputs and not to the extent ofthe value of final product. It is further urged that the amendmentnotification is merely clarificatory and hence it would apply

7 2004 (164) ELT 423 (Tri.-Del.)

8 For short, “the CEGAT”H9 2000 (120) ELT 800 (Tribunal-LB)

retrospectively. To buttress this submission, the appellant had placedreliance on Circular No. 31/2001-Cus dated 24.5.2001 issued by CentralBoard of Excise and Customs, New Delhi[10], which noted that the chargeof customs duty on the inputs equal to the duty leviable on the import offinal product is putting floriculture EOUs at disadvantageous position.The circular further envisages that the central excise notificationsprovided for recovery of duty on inputs procured duty free, whereas theexemption notification provided for recovery on inputs equal to duty onthe final product. That the amendment notification was issued to addressthis anomaly and to harmonise the central excise and customsnotifications. The appellant placed reliance on the Constitution Benchdecision of this Court in Commissioner of Income Tax (Central) – I,New Delhi vs. Vatika Township Private Limited[11], wherein it had beenobserved that whenever the legislator intends to confer benefit upon aperson, it must be presumed to have retrospective effect. The appellantrelied upon yet another decision of this Court in Zile Singh vs. State ofHaryana & Ors.[12 ]to contend that the substitution of clause whichclarifies about the intent of the legislature takes effect from the date ofenactment of original provision. The appellant would further urge thatSection 12 of the 1962 Act being the charging section, could only beapplied if the goods are imported into India and since the cut flowers arenot imported, the show cause notice issued under the provisions of the1962 Act is bad in law. In this regard, the appellant had placed relianceon Commissioner of Central Excise and Customs vs. SureshSynthetics[13]. The appellant further relied on the exposition of this Courtin Uniworth Textiles Limited vs. Commissioner of Central Excise,Raipur[14 ]to submit that Section 28 of the 1962 Act, extending limitation,can be invoked only in the case of deliberate default and urged that itcannot be invoked in the present case since there was no default.

8. Per contra, the respondent would urge that in the fact situationof the present case, the department has correctly levied the customsduty, as the DTA sales made were in contravention of the EXIM policyand the appellant had no permission from the Development Commissionerto clear the goods in DTA. The respondent further urged that the

10 For short, the “CBEC Circular”11 (2015) 1 SCC 1

12 (2004) 8 SCC 1

13 2007 (216) ELT 662 (SC)

14 (2013) 9 SCC 753

Aamendment seeks to bring about substantive change, whilst pointingout that the CBEC Circular in its opening paragraph speaks about“carrying out” the amendment. Further, the amendment must be appliedprospectively. Reliance is placed upon the decision of this Court in Unionof India & Anr. vs. IndusInd Bank Limited & Anr.[15], wherein it hasbeen held that if the provision is remedial in nature, it cannot be construedBas clarificatory or declaratory and has to be applied prospectively.

9. We have heard Mr. Rupesh Kumar, learned counsel for theappellant and Mr. Ashok K. Srivastava, learned senior counsel for therespondent.

C10. The issues that arise for consideration in this appeal are: (i)Whether customs duty can be charged on the non-excisable goodsproduced in India and sold in DTA by an EOU?; and (ii) Whether theamendment in terms of Notification No. 56/01-Cus dated 18.05.2001,purporting to amend the criteria for determination of duty on inputs, isprospective or retrospective in its application?D11. At the outset, it is apposite to refer to the stated notification.The relevant extract thereof reads as under:

“NOTIFICATION NO. 126/94-CUS DATED 3.6.1994

Exemption to import of specified goods for use in manufacture ofEexport goods by 100% E.O.Us. - In exercise of the powersconferred by sub-section (1) of section 25 of the Customs Act,1962 (52 of 1962), the Central Government, being satisfied that itis necessary in the public interest so to do, hereby exempts goodsspecified in Annexure-I to this notification (hereinafter referredFto as the goods), when imported into India, for the production ormanufacture of articles specified in Annexure-II for export out ofIndia or for being used in connection with the production,manufacture or packaging of the said articles specified inAnnexure-II for export out of India (hereinafter referred to asthe specified purpose) by hundred per cent Export OrientedGUndertakings approved by the Board of Approval for hundredper cent Export Oriented Undertakings, appointed by the notificationof Government of India in the former Ministry of Industry andCivil 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, fromthewhole of the duty of customs leviable thereon under the FirstSchedule to the Customs Tariff Act, 1975 (51 of 1975) andtheadditional duty, if any, leviable thereon under section 3 of thesecond mentioned Act, subject to the following conditions,namely :-

(1) the importer has been granted the necessary licence forthe import of the said goods;

(2) the importer, at the time of import of the said goods,produces to the Assistant Commissioner of Customs certificatefrom the Development Commissioner to the effect that theimporter has executed bond in such form and for such sumas may be prescribed binding himself-

(a) to bring the said goods into his unit and to usethem for the specified purpose; and

(b) to dispose of the said goods or the articlesproduced, manufactured or packaged in the unit orthe waste, scrap or remanents arising out of suchproduction, manufacture or packaging in the manneras may, if any, be prescribed in the Export-ImportPolicy and in this notification;…..

xxxxxx

3. Notwithstanding anything contained in this notification, theexemption contained herein shall also apply to the said goods whichon importation into India are used for the purposes of production,manufacture or packaging of articles and such articles (includingrejects, waste and scrap material arising in the course of production,manufacture or packaging of such articles) even if not exportedout of India are allowed to be sold in India under and in accordancewith the Export-Import Policy and in such quantity and subject tosuch other limitations and conditions as may be specified in thisbehalf by the Development Commissioner, on payment of duty ofexcise leviable thereon under section 3 of the Central Excisesand Salt Act, 1944 (1 of 1944) or where such articles (includingrejects, waste and scrap material) are not excisable, onpayment of customs duty on the said goods used for thepurpose of production, manufacture or packaging of such

Aarticles, in an amount equal to the customs duty leviableon such articles as if imported as such.)

Explanation.- For the purposes of this notification, “Export-ImportPolicy” means Export and Import Policy, 1[st]April, 1997 - 31[st]March,2002, published by the Government of India in the Ministry ofBCommerce Notification No. 1/1997-2002, dated 31[st]March, 1997,as amended from time to time. …..”

(emphasis supplied)

12. bare perusal of the above notification would evince thatapart from providing for duty free imports of inputs for an 100% EOU inCorder 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 theextent permissible by and in accordance with the EXIM policy. TheEXIM policy, at paragraph 9.9 provided that for earning an entitlementto make sales in DTA, the unit has to maintain positive net foreignDexchange earning. The calculation of net foreign exchange earning, asdefined at paragraph 9.29, is provided for at paragraph 9.5 of the Policy,which had to be done as prescribed in Appendix I of the Policy. In caseof cut flowers, it has been fixed at 20% since it would come within thecategory of “Products not covered above”.

E13. On combined reading of the notification with the conditionslaid down in the EXIM policy, it is clear that the fulfilment of the aforesaidconditions is condition precedent to become eligible to make DTAsales. Resultantly, if goods are cleared in DTA sales in breach of theaforesaid conditions, customs duty would be leviable, as if such goodswere imported goods.F

14. Reverting to the first question, the appellant lays emphasisthat the DTA sales made by an 100% EOU can only be amenable toexcise duty and show cause notice under the provisions of the 1962 Actcould not have been issued. This ground finds support in the decision oflarger bench of the CEGAT in Vikram Ispat (supra), which the appellantGrelies upon. In paragraph 16 of the said decision, it has been held asunder:

“16. Notification No. 2/95-C.E., dated 4-1-95 provides that thegoods manufactured and cleared by 100% E.O.U. to DTA willbe exempted from so much of duty of excise as is in excess of theHamount calculated at the rate of 50% of each of duty of customs

leviable read with any other notification for the time being in forceon the like goods produced or manufactured outside India, ifimported into India provided that the amount of duty payable shallnot be less than the duty of excise leviable on like goods producedor manufactured by the units in Domestic Tariff Area read withany relevant notification. It is, thus apparent that notification No.2/95 provides minimum limit of the rate of duty which has to bepaid by the 100% E.O.U. while clearing the goods to DTA andthis limit is provided by the duty of excise leviable on like goodmanufactured outside 100% E.O.U. However, if the aggregateof duty customs leviable on goods cleared by 100% E.O.U. ismore than the duty of excise leviable on like goods, 100% E.O.U.has to pay more duty. The Revenue wants to restrict the availmentof Modvat credit to the components of additional duty of customspaid under Section 3 of the Customs Tariff Act by bringing thefiction that 100% E.O.U. is place which is not in India and thesale therefrom within India is akin to import into India. We do notfind any substance in this view of the Revenue. The clearanceof the goods by 100% E.O.U. are not import in the termsin which it has been defined under Section 2 (23) of theCustoms Act, according to which import, with itsgrammatical and cogent expression means bringing intoIndia from place outside India. This is also apparent fromthe 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 customsduty under the Customs Act. If it is to be regarded asimport, then the duty has to be charged under Section 12of the Customs Act, read with Section 3 of the CustomsTariff Act. The Revenue, it seems is confusing the measureof the tax with the nature of the tax. The nature of the dutylevied on the goods from 100% E.O.U. is excise duty andnothing else, whereas for determining the quantum of dutythe measure adopted is duty leviable under Customs Actas held by the Supreme Court in many cases referred toabove.The method adopted by the law makers in recoveringthe tax cannot alter its character. Once it is held that theduty paid by the 100% E.O.U. in respect of goods clearedto any place in India is excise duty, the question of

dissecting the said duty into different components of basiccustoms duty, auxiliary duty, additional duty of Customs orany other customs duty does not arise. The proforma of AR-1A on which the reliance was placed by the learned D.R., cannotchange the legal position that the duty levied on 100% E.O.U. is aduty of excise and not customs duty.”

(emphasis supplied)

However, this exposition has no application to the fact situation ofthe present case, in as much as there had been no contravention ofconditions of EXIM Policy and the issue was only about the nature ofCtax, in case of goods otherwise amenable to excise duty.

15. Concededly, the DTA sales pertaining to excisable goods madein conformity with the conditions of the EXIM policy are exigible toexcise duty, but once there is contravention of the condition(s) of theEXIM policy, irrespective of the goods produced being excisable or non-Dexcisable, the benefit under the exemption notification is unavailable. Insuch situation, the very goods would become liable to imposition ofcustoms duty as if being imported goods.

16. We may now examine as to what would be the position incase of sale of non-excisable goods as per conditions specified underEthe EXIM policy. Assuming there was no contravention of the EXIMpolicy, in case of the goods cleared being non excisable, the Paragraph 3of the exemption notification would come into play and the duty wouldbe leviable on the inputs used in such goods. It is relevant to bear in mindSection 12 of the 1962 Act here, being the charging section, as is set outhereunder:F

“Section 12 – Dutiable Goods

(1) Except as otherwise provided in this Act, or any other law forthe time being in force, duties of customs shall be levied at suchrates as may be specified under the Customs Tariff Act, 1975 (51Gof 1975), or any other law for the time being in force, on goodsimported into, or exported from, India.

(2) The provisions of sub-section (1) shall apply in respect of allgoods belonging to Government as they apply in respect of goodsnot belonging to Government.”

It is clear from the above provision that the goods which areimported 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 onimport of inputs and at the same time prescribes for adherence of certainconditions for availing the exemption. The notification further prescribesthe rate at which the customs duty on the inputs used in the productionof non-excisable goods sold in DTA is to be charged. Thus, thenotification, having been issued in exercise of delegated legislation underSection 25 of the 1962 Act, has to be understood as “any other law”.Resultantly, the appellant, having availed exemption under the notification,cannot evade customs duty on the imported inputs at the rate prescribedby the notification.

18. The show cause notice points out that the appellant importedraw materials like “Live Rose Plants” and consumables like fertilizersand planting materials, however, the appellant advisedly chose to confineits argument to “cut flowers”, which, as contended, were grown on Indiansoil and thus not amenable to customs duty. However, the demand madein the show cause notice “treating” cut flowers as deemed to have beenimported was only for the purpose of quantification of the customs dutyon the imported inputs and not imposition of the customs duty on thedomestically 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 reliedupon the decision in Vikram Ispat (supra) and held that the cut flowerscleared in DTA sales cannot be charged with customs duty, withoutconsidering that the goods were non excisable. Notably, the Tribunalhad granted liberty to the authorities to charge customs duty upon theimported inputs, if used in production of the goods cleared in DTA, whichsupports the case of the respondent. Paragraph 5 of the aforesaid orderreads as under:

“5. It is well settled [2000 (120) E.L.T. 800] that goods producedin an EOU cannot be treated as imported goods and subjected tocustoms duty. The duty payable in respect of such goods is theduty of excise under Section 3 of the Central Excise Act, 1944.

ATherefore, the duty demand made in the impugned order underSection 28 of the Customs Act is not sustainable. Accordingly, weset aside the impugned order and allow the present appeal.However, we make it clear that revenue authorities will beat liberty to demand duty on the imported inputs, if any,used in the production of the cut-flowers in question.B

The appeal is disposed of as above.”

(emphasis supplied)

20. priori, the demand in the present case, pertaining to the non-excisable goods has rightly been made under the 1962 Act upon theCimported inputs used in the production of goods sold in DTA in violationof condition(s) in the EXIM Policy.

21. The decision of CESTAT in Suresh Synthetics (supra) is notapplicable to the present case. The goods in that case were PolysterTextured Yarn, which are excisable goods. The investigations were madeDas per provisions of the Central Excise Act, 1944[16], however, show causenotice was issued under provisions of the 1962 Act. Thus, it was heldthat the demand is not maintainable as it was made under defectiveshow cause notice.

22. In case of excisable goods, even the present notification takesEresort to Section 3 of the 1944 Act, as can be seen from the Paragraph3 of the notification extracted above. Whereas, the provisions of the1962 Act are invoked only when the goods are non-excisable. In thepresent case, since the cut flowers are non-excisable goods, the demandfor payment of customs duty had rightly been made vide show causeFnotice under the provisions of the 1962 Act.

23. Moving to the second question, the show cause notice wasissued to the appellant prior to the issuance of the amendment notification.In this backdrop, let us now examine the contention of the appellant thatthe amendment notification being retrospective in its application. Therelevant portion of the said notification is reproduced hereunder:G

“NOTIFICATION NO. 56 /2001-CUS DATED 18.5.2001

In exercise of the powers conferred by sub-section (1) of section25 of the Customs Act, 1962 (52 of 1962), the Central Government

H16 For short, “the 1944 Act”

being satisfied that it is necessary in the public interest so to do,hereby directs that each of the notifications of the Government ofIndia in the Ministry of Finance (Department of Revenue),specified in column (2) of the Table hereto annexed shall beamended or further amended, as the case may be, in the mannerspecified in the corresponding entry in column (3) of the said Table.

TABLE

24. As can be seen, the aforesaid notification posits of carryingout amendments and substituting the charging clause of the inputs used

Ain case of non-excisable goods. The language employed in the notificationdoes not offer any guidance on whether the amendments as made wereto apply prospectively or retrospectively. It is settled proposition of lawthat all laws are deemed to apply prospectively unless either expresslyspecified to apply retrospectively or intended to have been done so bythe legislature. The latter would be case of necessary implication andBit cannot be inferred lightly.

25. In this regard, the appellant has heavily relied upon the CBECCircular to contend that the Government intended to apply the notificationretrospectively as it was brought in to address an anomaly, which existedvis vis central excise notifications. The relevant portion of the CBECCCircular is extracted hereunder:

“Circular No. 31/2001-Cus, dated 24-5-2001

xxxxxxxxx

(xi) Duty on DTA Clearance of Non-Excisable Goods;D

25. At present, the EOUs and units operating under EPZ/STP/EHTP Schemes are allowed to sell finished products (includingrejects, waste & scrap) in the Domestic Tariff Area (DTA) onpayment of applicable excise duty as per proviso to Section 3 ofthe Central Excise Act, 1944. However, the same is applicable ifEthe goods being cleared into DTA are excisable goods. Under thepresent dispensation, the notifications providing duty free importof goods under the above said Schemes stipulate that where thefinished products (including rejects, wastes & scrap) sought to becleared in DTA are not excisable, such products are allowed toFbe cleared on payment of customs duty on the inputs used for thepurpose of production, manufacture, processing or packaging suchproducts in an amount equal to the customs duty leviable on suchproducts as if imported as such.

26. It has been brought to notice of the Board that in someCommissionerates, the floriculture units under the EOU SchemeGare being asked to pay duty equivalent to the customs duty leviableon finished goods as if imported as such, for clearance of cut-flowers, which is not an excisable commodity. It has also beenstated that the DTA units are not required to pay any duty for saleof cut-flowers, as the same are not excisable. This is stated to

have placed the floriculture units in EOUs at seriousdisadvantageous position vis-a-vis DTA units.

27. The matter has been examined. In the central excisenotifications governing duty free procurement by EOUs and unitsunder EPZ/STP/ETHP Schemes, there is provision to recoverduty on the inputs & consumables procured duty free underexemption notification, which have gone into production of non-excisable goods cleared into DTA. In the notificationsgoverning duty free import by EOUs and the EPZ/STP/EHTP units, the anomaly, however, exists inasmuch as thenotifications talk about payment of customs duty on theinputs used in the manufacture of articles in an amount equalto the customs duty leviable on such articles as if importedas such. In order to remove this anomaly, all the notificationsgoverning duty free import of goods by STP/EHTP/EPZ unitsand EOUs including those in Aquaculture and Agriculture sectorhave been amended so as to bring the provisions of thesenotifications in harmony with the provisions of correspondingCentral Excise notifications. Notification No. 56/2001-Cus, dated18-5-2001 may be seen for details.”

(emphasis supplied)

26. Upon bare reading of the circular, it can be noted that itdiscusses the mechanism in force before the amendment, the reason forbringing in the change and the changes brought in. The circular does notmention that the earlier methodology in force was deficient or devoid ofclarity in any manner. It rather says that the same was beingdisadvantageous to the EOU units as compared to the DTA units due tothe difference in charging rates in the respective circulars. Uponconsidering that, the amendment has been brought in to establish paritywith the excise notifications and to vindicate the disadvantage that earlierregime was causing to EOU units. Merely because an anomaly hasbeen addressed, it cannot be passed off as an error having been rectified.Unless shown otherwise, it has to be seen as conscious change in thedispensation, particularly concerning the fiscal subject matters. The word“anomaly” has been defined in Webster’s New Twentieth CenturyDictionary to mean “abnormality; irregularity; deviation from the regulararrangement, general rule or the usual method”.

A27. In the context of the subject circular, since it takes note of theprevious 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 mere mistake. Tocall the amendment notification clarificatory or curative in nature, it wouldrequire that there had been an error/mistake/omission in the previousBnotification which is merely sought to be explained.

28. To understand if the Government brought in the amendmentnotification to clarify that the articles were to be charged at the rate ofduty provided for inputs and not for the final articles, it would be necessaryto analyse the position prior to the amendment and to see if duty onCinputs 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 stoodduring the relevant period, which is set out hereunder:

“Section 3. Duties specified in the First Schedule and the SecondSchedule to the Central Excise Tariff Act, 1985 to be levied-

D(1) There shall be levied and collected in such manner as may beprescribed,-

(a) duty of excise on all excisable goods which are producedor manufactured in India as, and at the rates, set forth in theFirst Schedule to the Central Excise Tariff Act, 1985 (5 of1986);

(b) special duty of excise, in addition to the duty of excisespecified in Clause (a) above, on excisable goods specified inthe Second Schedule to the Central Excise Tariff Act, 1985 (5Fof 1986) which are produced or manufactured in India, as, andat the rates, set forth in the said Second Schedule.

Provided that the duties of excise which shall belevied and collected on any excisable goods which areproduced or manufactured,—

(i) in free trade zone and brought to any other placein India; or

(ii) by hundred per cent export-orientedundertaking and allowed to be sold in India,

shall be an amount equal to the aggregate of the dutiesof customs which would be leviable Under Section 12 of

the Customs Act, 1962 (52 of 1962), on like goodsproduced or manufactured outside India if imported intoIndia, and where the said duties of customs arechargeable by reference to their value; the value of suchexcisable goods shall, notwithstanding anythingcontained in any other provision of this Act, bedetermined in accordance with the provisions of theCustoms Act, 1962 (52 of 1962) and the Customs TariffAct, 1975 (51 of 1975).”

(emphasis supplied)

The proviso to the charging section of the 1944 Act provides thatan EOU making DTA sales shall be charged duty as if the goods wereimported into India and in value equal to the customs duty chargeablethereto. No doubt, the said provision applies only in cases of excisablegoods, but the exemption notification providing for similar duty by termsthereunder for non-excisable goods, can be understood to have beenmade to equate the duty in case of excisable as well as non-excisablegoods. Therefore, it must follow that the said provision was not an errorthat crept in but was intentionally introduced by the Government todetermine the charging rate, as discussed above. That being the positionprior to amendment, the amendment brought in cannot be said to beclarificatory in nature.

29. The decision of this Court in Zile Singh (supra) is of no availto the appellant. In as much as it was case of poor choice of words bythe draftsmen, which led to absurdity in interpretation and subsequentsubstitution of such words to make the intention clear. In the presentcase, as discussed above, there was no error present in the prevailingdispensation and it was policy decision to give relief to the EOU unitsfrom the date of its amendment.

30. In Vatika Township (supra), Constitution Bench of this Courthas analysed the principle concerning retrospectivity. The appellant heavilyrelies upon the observation made at paragraph 30 of the decision, whichreads thus:

“30. ... If legislation confers benefit on some persons butwithout inflicting corresponding detriment on some other personor on the public generally, and where to confer such benefitappears to have been the legislators’ object, then the presumption

Awould be that such legislation, giving it purposive construction,would warrant it to be given retrospective effect. …”.

The appellant clearly misinterprets the context of the aboveobservation by reading the same in isolation. To have betterunderstanding of the said principle, it is relevant to read the precedingBand subsequent paragraphs. We may here refer to Paragraph 32 of thesaid decision, which is extracted below:

“32. Let us sharpen the discussion little more. We may note thatunder certain circumstances, particular amendment can be treatedas clarificatory or declaratory in nature. Such statutory provisionsare labelled as “declaratory statutes”. The circumstances underwhich provisions can be termed as “declaratory statutes” areexplained by Justice G.P. Singh in the following manner:

“Declaratory statutes

The presumption against retrospective operation is notapplicable to declaratory statutes. As stated in CRAIES andapproved by the Supreme Court: ‘For modern purposes adeclaratory Act may be defined as an Act to remove doubtsexisting as to the common law, or the meaning or effect of anystatute. Such Acts are usually held to be retrospective. Theusual reason for passing declaratory Act is to set aside whatParliament deems to have been judicial error, whether in thestatement of the common law or in the interpretation of statutes.Usually, if not invariably, such an Act contains Preamble,and also the word “declared” as well as the word “enacted”.’But the use of the words ‘it is declared’ is not conclusive thatthe Act is declaratory for these words may, at times, be usedto introduced new rules of law and the Act in the latter casewill only be amending the law and will not necessarily beretrospective. In determining, therefore, the nature of the Act,regard must be had to the substance rather than to the form. Ifa new Act is ‘to explain’ an earlier Act, it would be withoutobject unless construed retrospective. An explanatory Act isgenerally passed to supply an obvious omission or toclear up doubts as to the meaning of the previous Act. Itis well settled that if statute is curative or merelydeclaratory of the previous law retrospective operation

is generally intended. The language ‘shall be deemedalways to have meant’ is declaratory, and is in plain termsretrospective. In the absence of clear words indicatingthat the amending Act is declaratory, it would not be soconstrued when the pre-amended provision was clearand unambiguous. An amending Act may be purelyclarificatory to clear meaning of provision of theprincipal Act which was already implicit. clarificatoryamendment of this nature will have retrospective effect and,therefore, if the principal Act was existing law which theConstitution came into force, the amending Act also will bepart of the existing law.”The above summing up is factually based on the judgments of thisCourt as well as English decisions.”

Upon reading the observations at Paragraph 30 and juxtaposedwith paragraph 32, it is crystal clear that an essential requirement forapplication of legislation retrospectively is to show that the previouslegislation had any omission or ambiguity or it was intended to explain anearlier act. In absence of the above ingredients, legislation cannot beregarded as having retrospective effect.

31. In IndusInd Bank (supra), this Court, while examining whetherthe amendment made to Section 28 of the Indian Contract Act, 1872was prospective or retrospective, has noted that the said provision isremedial in nature and not clarificatory, since prior to the amendment,the rights and liabilities accrued were sought to be taken away. Paragraph24 of the said decision is reproduced below:

“24. On conspectus of the aforesaid decisions, it becomes clearthat Section 28, being substantive law, operates prospectively, asretrospectivity is not clearly made out by its language. Beingremedial in nature, and not clarificatory or declaratory ofthe law, by making certain agreements covered by Section28(b) void for the first time, it is clear that rights andliabilities that have already accrued as result ofagreements entered into between parties are sought to betaken away. This being the case, we are of the view that both theSingle Judge and the Division Bench were in error in holding thatthe amended Section 28 would apply.”

AWe are in agreement with the respondent that this decision squarelyapplies to the present case as prior to the amendment, the DTA salesmade by the appellant have already attracted liability at the prescribedcharging rate, which in facts of the present case cannot be undone inreference to the subject amendment.B32. It is relevant here to advert to decision of Constitution Benchof this Court inCommissioner of Central Excise, New Delhi vs. HariChand Shri Gopal & Ors.[17], wherein it has been held that an exemptionclause ought to be strictly construed according to the language employedtherein and in case of any ambiguity, benefit must go to the State. It willbe useful to reproduce paragraphs 29 and 30 of the aforesaid decisionChereunder:

“29. The law is well settled that person who claims exemptionor concession has to establish that he is entitled to that exemptionor concession. provision providing for an exemption, concessionor exception, as the case may be, has to be construed strictly withDcertain exceptions depending upon the settings on which theprovision has been placed in the statute and the object and purposeto be achieved. If exemption is available on complying withcertain conditions, the conditions have to be complied with.The mandatory requirements of those conditions must beEobeyed or fulfilled exactly, though at times, some latitude canbe shown, if there is failure to comply with some requirementswhich are directory in nature, the non-compliance of which wouldnot affect the essence or substance of the notification grantingexemption.

F30. In Novopan India Ltd. this Court held that person, invokingan exception or exemption provisions, to relieve him oftax liability must establish clearly that he is covered by thesaid provisions and, in case of doubt or ambiguity, the benefitof it must go to the State. Constitution Bench of this Court inHansraj Gordhandas v. CCE and Customs held that (NovopanGIndia Ltd. case, SCC p. 614, para 16)

“16. … such notification has to be interpreted in thelight of the words employed by it and not on any otherbasis. This was so held in the context of the principle

H17 (2011) 1 SCC 236

that in taxing statute, there is no room for anyintendment, that regard must be had to the clear meaningof the words and that the matter should be governedwholly by the language of the notification i.e. by the plainterms of the exemption.” ”

Applying the aforequoted dictum to the present case, the appellantwas 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 chargingrate prescribed under the exemption notification is under question, anyambiguity in regard to the date of application of the amendment theretowould necessarily have to be construed in favour of the State, unlessshown otherwise by judicially acceptable parameters.

33. The next contention of the appellant is that Section 28 of the1962 Act cannot be invoked to extend the limitation as there was nowilful mis-statement or suppression of facts on behalf of the appellant.The decision of this Court in Uniworth Textiles (supra), has been reliedupon by the appellant. The same explains the situations in which Section28 of the 1962 Act can be invoked. It had been held in the said decisionthat the extension of limitation for period of five years can be doneonly in cases of deliberate default and not inadvertent non-payment. Itwas further held that the burden for proving mala fide conduct is on therevenue; and specific averments in that regard must find place in theshow cause notice.

34. In the fact situation of the present case, the appellant wasissued show cause notice mentioning that it had suppressed the DTAsales of cut flowers to evade payment of duty. Had the appellant in goodfaith 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 ex-post facto approval,the appellant claimed that they had not used any imported input such asfertilizer, plant growth regulations, etc. in growing flowers sold in DTA,despite having imported green house equipment, raw materials like LiveRose Plants and consumables like planting materials and fertilizers.Therefore, it prima facie appeared that suppression by the appellantwas “wilful”. The burden of proving to the contrary rested upon theappellant, which the appellant failed to discharge by failing to establishthat the imported inputs were not used in the production of the cut flowers

Asold in DTA. In view thereof, the authorities below have rightly invokedSection 28 of the 1962 Act and allied provisions.

35. In light of the foregoing discussion and observations, we areof the view that CESTAT has rightly upheld the levy of customs duty.

36. This appeal, therefore, deserves to be dismissed. It is soBordered. There shall be no order as to costs. Pending applications, if any,shall stand disposed of.

Ankit Gyan

Appeal dismissed.