S.C.R.COMMISSIONER OF CUSTOMS, BANGALORE-1 versus M/S MOTOROLA INDIA LTD. on 5 September 2019

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SUPREME COURT REPORTS

[2019] 12 S.C.R.

ACOMMISSIONER OF CUSTOMS, BANGALORE-1

v.

M/S MOTOROLA INDIA LTD.

(Civil Appeal No. 10083 of 2011)

BSEPTEMBER 05, 2019

[ARUN MISHRA, M. R. SHAH AND B. R. GAVAI, JJ.]

Customs Act, 1962:

ss. 130 and 130E - Appeal against orders passed by Customs,CExcise and Service Tax Appellate Tribunal (CESTAT) - Whetherappeal would lie u/s. 130 before High Court or u/s. 130E beforeSupreme Court, in the facts of the present case - Held: Appeal toSupreme Court against the order of CESTAT would lie only if anyquestion having relation to the rate of duty is involved in the appealor if it relates to value of goods for the purpose of assessment orDclassification of goods or whether the goods were covered byexemption notification - In all other cases appeal would lie beforeHigh Court - The question to be determined in the present appealwas neither related to rate of duty nor to valuation of goods norclassification of goods nor coverage under the exemptionEnotification - The appeals also did not involve any question of lawof general public importance applicable to a class or category ofassesses as a whole - Therefore, in the present case, the appealswere maintainable u/s. 130 before High Court and would not lieu/s. 130E to Supreme Court.

FAllowing the appeal, the Court

HELD: 1. Upon a conjoint reading of ss. 130 and 130E ofCustoms Act, 1962, it could be seen that an appeal shall lie tothe High Court u/s. 130 against every order passed in appealby the Appellate Tribunal, if the High Court is satisfied that theGcase involves a substantial question of law. The only exceptioncarved out is that an appeal shall lie before this Court u/s. 130Eand shall not lie before the High Court against the order relating,amongst other things, to the determination of any questionhaving relation to the rate of duty of customs or to the value ofgoods for the purposes of assessment. Thus, only if any questionH

having relation to the rate of duty is involved in an appeal or ifit relates to value of goods for the purpose of assessment, theappeal would lie to this Court and in all other cases it would liebefore the High Court. [Para 9 and 10] [625-A-C]

2. The Legislature has carved out only followingcategories of cases to which it has intended to give a specialtreatment of providing an appeal directly to this court. “(i)determination of a question relating to a rate of duty; (ii)determination of a question relating to the valuation of goodsfor the purpose of assessment; (iii) determination of a questionrelating to the classification of goods under the Tariff and whetheror not they are covered by an exemption notification; and (iv)whether the value of goods for purposes of assessment shouldbe enhanced or reduced having regard to certain matters thatthe said Act provides for.” [Para 16] [629-D-F]

3. In the present case, it could clearly be seen that the onlyquestion that is involved is whether the assessee had violatedthe conditions of the exemption notification by not utilizing theimported materials for manufacturing of the declared final productand was, therefore, liable for payment of duty, interest andpenalty. Neither any question with regard to determination of rateof duty arises nor a question relating to valuation of goods forthe purposes of assessment arises in the present case. Theappeals also do not involve determination of any questionrelating to the classification of goods, nor do they involve thequestion as to whether they are covered by the exemptionnotification or not. Undisputedly, the goods are covered by thesaid notification. The only question is as to whether the assesseehas breached the conditions which are imposed by thenotification for getting exemption from payment of the customsduty or not. The appeals do not involve any question of law ofgeneral public importance which would be applicable to a classor category of assessees as a whole. The question is purelyinter-se between the parties and is required to be adjudicatedupon the facts available. Therefore, the High Court was notjustified in holding that the appeals are not maintainable underSection 130 of the Customs Act but are tenable before this Courtunder Section 130E of the Customs Act. [Paras 17 and 18] [629-G-H; 630-A-C]

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ANavin Chemicals Manufacturing & Trading CompanyLtd. v. Collector of Customs (1993) 4 SCC 320 : [1993]2 Suppl. SCR 326 ; Steel Authority of India Ltd. v.Designated Authority, Directorate General of Anti-Dumping & Allied Duties (2017) 13 SCC 1 : [2017]

6 SCR 598 - relied on.B

Case Law Reference

CCIVIL APPELLATE JURISDICTION : Civil Appeal No. 10083of 2011.

From the Judgment and Order dated 21.04.2011 of the HighCourt of Karnataka at Bangalore in CSTA No. 2 of 2007.

WithDCivil Appeal Nos. 7021, 7022 of 2019, 7524 of 2014, 9245 of2015.

Ms. Pinky Anand, ASG, Balbir Singh, Sr. Adv., Rajesh Rawal,Ms. Iti Sharma, Puneet Sharma, Ashwani Kumar, Dhruv Agarwal,EMs. Shirin Khajuria, Shekhar Vyas, Ms. Sunita Rani Singh, Ms. KirtiDua, Chakitan V. S. Papta, M. Khairati, B. Krishna Prasad, Nikhil Goel,Joseph Pookkatt, D. Pahuja (for M/S. Ap & J Chambers), Nishant Joshi,Nikhil Varshney, S. S. Shroff, Kumar Visalaksh, Udit Jain, Archit Gupta,Harish Pandey, Mahfooz A. Nazki, V. Lakshmikumaran, Ms. CharamyaLakshmikumaran., Aditya Bhattacharya, Hemant Bajaj, Ms. IshitaFMathur, Ms Apeksha Mahta, Ms. Monica Kasturi, R. Parthasarathy,Advs. for the appearing parties.

The Judgment of the Court was delivered by

B. R. GAVAI, J.

G1. Leave granted in S.L.P.(C) No. 29444/2012 and S.L.P.(C) No.12755/2015.

2. A short question that arises for consideration in these appealsis, as to whether an appeal from the order of Customs, Excise andService Tax Appellate Tribunal (hereinafter referred to as theH"CESTAT"), involving an issue regarding violation of conditions contained in customs exemption notification, would lie before the High Court underthe provisions of Section 130 of the Customs Act, 1962 (hereinafterreferred to as the "Customs Act") or to this Court under the provisionsof Section 130E of the Customs Act.

3. The facts in the present matter are not in dispute. For the sakeof convenience, we would refer to the facts in Civil Appeal No. 10083/2011, inasmuch as the impugned judgment and order(s) in all otherconnected appeals are passed following the judgment and order passedby the Karnataka High Court in CS TA No. 2/2007.

4. The assessee is a leading manufacturer of pagers. Theassessee is entitled to the benefit of Notification No. 30/1997-Customsdated 01.04.1997 (hereinafter referred as the said “notification”) bywhich the materials imported into India for the manufacturing of thepagers were exempted from whole of the customs duty leviable in theFirst Schedule of the Customs Tariff Act, 1975 and further whole ofthe additional duty leviable thereon under Section 3 of Customs TariffAct, 1975. As per the scheme framed under the said notification, thegoods imported under the actual user condition were required to be usedonly for the manufacture of the declared final product. A specificintelligence was received by the Director of Revenue Intelligence tothe effect that the assessee had stopped manufacturing of pagers andhence a certain portion of the duty free material imported under theScheme had been written off in their books of accounts. The officersof the DRI, therefore, took up further investigation in the matter. Theassessee was called upon to submit the list of such unutilized items,which are imported under the said notification and lying unutilized. Theassessee submitted a list of such unutilized items with requisite detailsand sought for further time to link unutilized items to the bill of entry atthe relevant assessable value. It was further informed by the assesseethat they have ceased to manufacture pagers and as such materialshave become obsolete insofar as they are concerned.

5. Not satisfied with the contention of the assessee, theCommissioner of Customs, Bangalore, issued a Notice to the assessee,calling upon it to show cause as to why the customs duty amounting toRs. 96,17,498/- along with interest at the rate of 24% per annum andthe penalty should not be recovered from it. After following theprocedure prescribed, the Commissioner of Customs passed an Orderin Original on 30.04.2002 thereby, holding that the assessee was liable A

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Ato pay the aforesaid amount of Rs. 96,17,498/- along with interest andpenalty. Being aggrieved thereby, the assessee preferred an appealbefore the CESTAT. The CESTAT allowed the appeal. Being aggrievedthereby, the Commissioner of Customs, Bangalore preferred an appealbefore the Karnataka High Court under the provisions of Section 130of the Customs Act. At the stage of final hearing of the appeal, theBassessee raised a preliminary objection contending therein, that the orderimpugned before the High Court amongst other things, also relates tothe rate of duty of customs and as such the appeal under Section 130of the Customs Act was not tenable before the High Court and theappeal will have to be preferred before this Court under the provisionsCof Section 130E of the Customs Act.

6. The Division Bench of the High Court held that it was calledupon to decide whether the terms and conditions of the said notificationhave been complied with by the assessee or not and whether the levyof duty, interest and penalty were legal or not and whether the CESTATDwas justified in setting aside the levy of duty, interest and penalty andall these questions were related to determination of the rate of duty.The Division Bench of the High Court, therefore, held that the appealunder Section 130 of the Customs Act was not tenable before the HighCourt but would be tenable under Section 130E of the Customs Actbefore this Court. Being aggrieved thereby, the Revenue is in appealEbefore this Court.

7. We have heard Ms. Pinky Anand, learned Additional SolicitorGeneral appearing on behalf of the appellant-Revenue and Mr. BalbirSingh, learned Senior Counsel appearing on behalf of the respondent-assessee.F

8. For appraising the rival contentions, it would be apposite torefer to Section 130 and Section 130E of the Customs Act, 1962 (as itexisted prior to its amendment by the Finance Act, 2018). They readas follows:G“130. Appeal to High Court-

(1) An appeal shall lie to the High Court from every order passedin appeal by the Appellate Tribunal on or after the 1st day ofJuly, 2003 (not being an order relating, among other things, tothe determination of any question having a relation to the rate ofHduty of customs or to the value of goods for purposes of assessment), if the High Court is satisfied that the case involvesa substantial question of law.

(2) The Principal Commissioner of Customs or Commissioner ofCustoms or the other party aggrieved by any order passed bythe Appellate Tribunal may file an appeal to the High Court andsuch appeal under this sub-section shall be - (a) Filed within one hundred and eighty days from the date onwhich the order appealed against is received by thePrincipal Commissioner of Customs or Commissioner ofCustoms or the other party; (b) Accompanied by a fee of two hundred rupees where suchappeal is filed by the other party;

(c) In the form of a memorandum of appeal precisely statingtherein the substantial question of law involved.

(2A) The High Court may admit an appeal after the expiry ofthe period of one hundred and eighty days referred to in clause(a) of sub-section (2), if it is satisfied that there was sufficientcause for not filing the same within that period.

(3) Where the High Court is satisfied that a substantial questionof law is involved in any case, it shall formulate that question.

(4) The appeal shall be heard only on the question so formulated,and the respondents shall, at the hearing of the appeal, be allowedto argue that the case does not involve such question:

Provided that nothing in this sub-section shall be deemed to takeaway or abridge the power of the Court to hear, for reasons tobe recorded, the appeal on any other substantial question of lawnot formulated by it, if it is satisfied that the case involves suchquestion.

(5) The High Court shall decide the question of law so formulatedand deliver such judgment thereon containing the grounds onwhich such decision is founded and may award such cost as itdeems fit.

(6) The High Court may determine any issue which- (a) has not been determined by the Appellate Tribunal; or A

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(b) has been wrongly determined by the Appellate Tribunal, byreason of a decision on such question of law as is referredto in sub-section(1).

(7) When an appeal has been filed before the High Court, it shallbe heard by a bench of not less than two Judges of the HighCourt, and shall be decided in accordance with the opinion ofsuch Judges or of the majority, if any, of such Judges.

(8) Where there is no such majority, the Judges shall state thepoint of law upon which they differ and the case shall, then, beheard upon that point only by one or more of the other Judgesof the High Court and such point shall be decided according tothe opinion of the majority of the Judges who have heard thecase including those who first heard it.

(9) Save as otherwise provided in this Act, the provisions of theCode of Civil Procedure, 1908 (5 of 1908) relating to appeals tothe High Court shall, as far as may be, apply in the case ofappeals under this section.

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130E. Appeal to the Supreme Court-An appeal shall lie to theSupreme Court from- (a) Any judgment of the High Court delivered-

(i) In an appeal made under Section 130; or

(ii) On a reference made under Section 130 by the AppellateTribunal before the 1[st] day of July, 2003;

(iii) On a reference made under Section 130A,

in any case which, on its own motion or on an oral applicationmade by or on behalf of the party aggrieved, immediately afterthe passing of the judgment, the High Court certifies to be a fitone for appeal to the Supreme Court; or (b) Any order passed [before the establishment of the NationalTax Tribunal] by the Appellate Tribunal relating, among otherthings, to the determination of any question having a relation tothe rate of duty of customs or to the value of goods for thepurposes of assessment.”

COMMISSIONER OF CUSTOMS, BANGALORE-1 v.M/S MOTOROLA INDIA LTD. [B. R. GAVAI, J.]

9. Upon a conjoint reading of the aforesaid provisions, it couldthus be seen that an appeal shall lie to the High Court against everyorder passed in appeal by the Appellate Tribunal, if the High Court issatisfied that the case involves a substantial question of law. The onlyexception carved out is that an appeal shall lie before this Court andshall not lie before the High Court against the order relating, amongstother things, to the determination of any question having relation to therate of duty of customs or to the value of goods for the purposes ofassessment.

10. It could thus clearly be seen that, only if any question havingrelation to the rate of duty is involved in an appeal or if it relates tovalue of goods for the purpose of assessment, the appeal would lie tothis Court and in all other cases it would lie before the High Court.

11. However, the issue is no more res integra. In a catena ofthe judgments, right from the judgment of this Court in the case of NavinChemicals Manufacturing & Trading Company Ltd. vs. Collector ofCustoms, reported in (1993) 4 SCC 320, the position has been clarified.We may gainfully refer to paragraphs 6, 7 and 11 of the said judgmentwherein, this Court considered the provisions of Section 130 and Section130E of the Customs Act. They read thus:

“6. It is, upon a plain reading of the section, clear that appealsagainst orders which involve ‘determination of any questionhaving a relation to the rate of duty of customs or to the valueof goods for purposes of assessment’ are specially treated andare required to be heard by a Special Bench. This is what sub-section (3) of Section 129-C provides. Appeals in other mattersare to be heard by a Bench consisting of one judicial memberand one technical member, subject to the provisions of sub-section(4). Sub-section (4) carves out an exception to the generalprovisions of sub-section (2) and provides that a member ofCEGAT sitting singly can hear appeals in the matters enumeratedtherein provided that they are not cases where the ‘determinationof any question having a relation to the rate of duty of customsor to the value of goods for purposes of assessment’ is inquestion.

7. The controversy, therefore, relates to the meaning to be givento the expression ‘determination of any question having a relationto the rate of duty of customs or to the value of goods forpurposes of assessment’. It seems to us that the key lies in the AB

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words ‘for purposes of assessment’ therein. Where the appealinvolves the determination of any question that has a relation tothe rate of customs duty for the purposes of assessment thatappeal must be heard by a Special Bench. Similarly, where theappeal involves the determination of any question that has arelation to the value of goods for the purposes of assessment,that appeal must be heard by a Special Bench. Cases that relateto the rate of customs duty for the purposes of assessment andwhich relate to the value of goods for the purposes of assessmentare advisedly treated separately and placed before SpecialBenches for decision because they, more often than not, are ofimportance not only to the importers who are parties thereto butalso to many other importers who import or propose to importthe same or similar goods. Since the decisions of CEGAT in suchmatters would have wide application they are, by the terms ofthe statute, to be rendered by Special Benches. The phrase“relation to” is, ordinarily, of wide import but, in the context ofits use in the said expression in Section 129-C, it must be readas meaning a direct and proximate relationship to the rate of dutyand to the value of goods for the purposes of assessment.

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11. It will be seen that sub-section (5) uses the said expression‘determination of any question having a relation to the rate ofEduty or to the value of goods for the purposes of assessment’and the Explanation thereto provides a definition of it ‘for thepurposes of this sub-section’. The Explanation says that theexpression includes the determination of a question relating tothe rate of duty; to the valuation of goods for purposes ofFassessment; to the classification of goods under the Tariff andwhether or not they are covered by an exemption notification;and whether the value of goods for purposes of assessmentshould be enhanced or reduced having regard to certain mattersthat the said Act provides for. Although this Explanation expresslyconfines the definition of the said expression to sub-section (5)Gof Section 129-D, it is proper that the said expression used inthe other parts of the said Act should be interpreted similarly.The statutory definition accords with the meaning we have givento the said expression above. Questions relating to the rate ofduty and to the value of goods for purposes of assessment areHquestions that squarely fall within the meaning of the said E

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COMMISSIONER OF CUSTOMS, BANGALORE-1 v.M/S MOTOROLA INDIA LTD. [B. R. GAVAI, J.]

expression. A dispute as to the classification of goods and as towhether or not they are covered by an exemption notificationrelates directly and proximately to the rate of duty applicablethereto for purposes of assessment. Whether the value of goodsfor purposes of assessment is required to be increased ordecreased is a question that relates directly and proximately tothe value of goods for purposes of assessment. The statutorydefinition of the said expression indicates that it has to be readto limit its application to cases where, for the purposes ofassessment, questions arise directly and proximately as to the rateof duty or the value of the goods.

12. It could thus clearly be seen that, this Court, while consideringthe provisions of Section 130 and Section 130E of the Customs Act,has held that where an appeal involves determination of any questionthat has relation to customs duty for the purpose of assessment or wherean appeal involves determination of any question that has relation tothe value of goods for the purposes of assessment, such cases will haveto be treated separately and have to be given special treatment.

13. Recently, again this Court, in a decision, in the case of SteelAuthority of India Ltd. Vs. Designated Authority, Directorate Generalof Anti-Dumping & Allied Duties, reported in (2017) 13 SCC 1, hasreiterated the same position. It would be appropriate to refer to para18 of the said judgment which reads as follows:

“18. Section 130-E(b) of the Act provides for a direct appeal tothe Supreme Court against an order of the Appellate Tribunal,broadly speaking, on a question involving government revenue.This seems to be in view of the fact that the order that wouldbe under appeal i.e. (order of the Appellate Tribunal) may gobeyond the inter se dispute between the parties and effect upona large number of assessees. The issue, in such an event, surelywill be one of general/public importance. Alternatively, thequestion raised or arising may require interpretation of theprovisions of the Constitution. Such interpretation may involve afresh or a relook or even an attempt to understand the true andcorrect purport of a laid down meaning of the constitutionalprovisions that may come into focus in a given case. It is onlysuch questions of importance, alone, that are required to bedecided by the Supreme Court and by the very nature of the AB

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Aquestions raised or arising, the same necessarily have to involveissues of law going beyond the inter partes rights and extendingto a class or category of assessees as a whole. This is thelimitation that has to be understood to be inbuilt in Section 130-E(b) of the Act which, in our considered view, would also beconsistent with the role and jurisdiction of the Supreme Court ofBIndia as envisaged under the Constitution. Viewed from theaforesaid perspective, the jurisdiction of the Supreme Court underSection 130-E(b) of the Act or the pari materia provisions of anyother statute would be in harmony with those contained in ChapterIV of Part V of the Constitution.”

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14. It could thus be seen that, this Court has found that whenan order of the Appellate Tribunal would go beyond inter se disputesbetween the parties and may affect a large number of cases, such anissue will be one of general public importance. It has further been foundthat certain questions raised or arising may require interpretation of theDConstitution. It is held that only such questions of general publicimportance alone are required to be decided by this Court. It has furtherbeen held that, by the very nature of a question raised or arising, thesame necessarily has to involve issue of law going beyond the interpartes rights and extending to a class or category of assessees as awhole.E

15. This Court in the case of Steel Authority (supra), afterconsidering the earlier judgments of this Court, carved out certainconditions which are required to be satisfied before admitting an appealunder Section 130E of the Customs Act. It will be apposite to refer toparagraphs 21 and 22 of the said judgment. Paragraphs 21 and 22 readFthus:

“21. On the basis of the discussion that has preceded, it musttherefore be held that before admitting an appeal under Section130-E(b) of the Customs Act, the following conditions must besatisfied:G

(i) The question raised or arising must have a direct and/orproximate nexus to the question of determination of theapplicable rate of duty or to the determination of the valueof the goods for the purposes of assessment of duty. Thisis a sine qua non for the admission of the appeal before thisHCourt under Section 130-E(b) of the Act.

(ii) The question raised must involve a substantial question oflaw which has not been answered or, on which, there is aconflict of decisions necessitating a resolution.

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(iii) If the Tribunal, on consideration of the material and relevantfacts, had arrived at a conclusion which is a possibleconclusion, the same must be allowed to rest even if thisBCourt is inclined to take another view of the matter.

(iv) The Tribunal had acted in gross violation of the procedureor principles of natural justice occasioning a failure ofjustice.

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22. The above parameters, which by no means should beconsidered to be exhaustive, may now be applied to the case ofthe parties before us to decide the primary question indicated atthe outset of the present order, namely, whether this appealdeserves to be admitted.”

16. We are of the considered view that the Legislature hascarved out only following categories of cases to which it has intendedto give a special treatment of providing an appeal directly to this court.

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“(i) determination of a question relating to a rate of duty;

(ii) determination of a question relating to the valuation of goodsfor the purpose of assessment; E

(iii) determination of a question relating to the classification ofgoods under the Tariff and whether or not they are coveredby an exemption notification;

(iv) whether the value of goods for purposes of assessmentshould be enhanced or reduced having regard to certainmatters that the said Act provides for.”

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17. Reverting to the present case, it could clearly be seen thatthe only question that is involved is whetsher the assessee had violatedthe conditions of the exemption notification by not utilizing the importedmaterials for manufacturing of the declared final product and was,therefore, liable for payment of duty, interest and penalty. Neither anyquestion with regard to determination of rate of duty arises nor a questionrelating to valuation of goods for the purposes of assessment arises inthe present case. The appeals also do not involve determination of anyquestion relating to the classification of goods, nor do they involve the G

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Aquestion as to whether they are covered by the exemption notificationor not. Undisputedly, the goods are covered by the said notification.The only question is as to whether the assessee has breached theconditions which are imposed by the notification for getting exemptionfrom payment of the customs duty or not. The appeals do not involveany question of law of general public importance which would beBapplicable to a class or category of assessees as a whole. The questionis purely inter-se between the parties and is required to be adjudicatedupon the facts available.

18. In that view of the matter, we find that the High Court wasnot justified in holding that the appeals are not maintainable under SectionC130 of the Customs Act but are tenable before this Court under Section130E of the Customs Act.

19. In the result, the appeals are allowed and the impugned orderspassed by the High Court are set aside. The appeals are remitted backto the High Court for de novo consideration of the appeals on theirDown merits.

20. In the facts and circumstances of the case, there shall beno order as to costs.

EKalpana K. Tripathy

Appeals allowed.

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