Legal principle

A merely procedural condition in an exemption notification, which an importer cannot possibly comply with, cannot deprive the importer of the benefit of exemption from additional customs duty, and where imported goods are consumed in manufacture without the duty incidence being passed on, refund must be paid to the importer under proviso (a) to Section 27(2).

Court decision

The Court held the refund applications had been wrongly rejected and that the petitioners were entitled to exemption from additional customs duty; it made rule absolute in terms of prayer (a), directing the respondents to grant the refunds listed in Exhibit 'O' to the petitioners with the benefit of proviso (a) to Section 27(2), but rejected the claim for interest and made no order as to costs.

Facts

Solar Pesticides Pvt. Ltd. (formerly Hypro Pesticides), a Bulsar-based small-scale manufacturer of the fungicide Copper Oxychloride, regularly imported copper scrap as a raw material under concessional customs duty under Notification No. 122/78 backed by end-use bonds. Countervailing (additional) customs duty was nonetheless levied because, being importers rather than Indian manufacturers, the petitioners could not comply with the Chapter X, Central Excise Rules procedure required by exemption Notifications 35/81-CE and 173/84--CE (later 177/88-CE) for excise exemption on copper scrap used in making chemicals. Their 31 refund applications for the period 3-5-1982 to 18-11-1986 were rejected by the Assistant Collector of Customs, and those rejections were challenged in this Article 226 petition.

Key provisions

• Section 27(2), Customs Act, 1962 — Claim of refund duty
• Section 11B, Customs Act, 1962 — Power of Central Government to notify goods