1. This is a revision application to the Government of India under Section 131 of the Customs Act, 1962 (as then applicable) which in accordance with Section 131B(2) ibid, is to be proceeded with as if it were an appeal filed before the Tribunal. (It is hereinafter referred to for convenience as "the appeal"). After notice had been duly issued, the matter was taken up for hearing on 17th February, 1983.
2. This appeal relates to the levy of additional duty of customs under Section 3(1) of the Customs Tariff Act, 1975, on the aircraft tyres sent abroad by M/s. Indian Airlines (hereinafter referred to as "the appellants") and re-imported after being retreaded. The Customs authorities charged the re-imported tyres to basic customs duty under Section 2 of the Customs Tariff Act, 1975, read with the First Schedule thereto, and also to the additional duty (commonly referred to as "countervailing duty") under Section 3(1) ibid. However, the duty in both cases was calculated not on the assessable value of the tyres but on the cost of the retreading, plus insurance and freight charges. This was on the basis of notification No. 204-Cus., dated 2-8-1976, the relevant part of which reads as under :- "All articles when re-imported into India after having been exported for repairs, are exempt from so much of the duty of customs leviable thereon under the Customs Tariff Act, 1975 (51 of 1975), as is in excess of the duty of customs which would be leviable if the value of such re-imported goods were made up of the fair cost of repairs carried out (whether such cost is actually incurred or not), insurance and freight charges both ways." 3. The appellants have contended that the additional duty of customs should not have been levied on the tyres. In their Memorandum of Appeal, the ground of appeal was set out by them as follows :- "Since the tyres were retreaded and not new, no CVD+AD is leviable because this is chargeable only at the time of first importation in the country." During the hearing, Shri S.N. Mathur, arguing on their behalf, submitted that excise duty is chargeable only on new goods and not on repaired goods. In this connection he argued that there is no excise duty on retreaded tyres, and that the additional duty of customs under Section 3(1), being equal to the excise duty leviable, cannot be charged. Shri Mathur placed reliance on the judgment of the Supreme Court in the case of Delhi Cloth & General Mills Company Limited [SC 791 (V50.C119)] and quoted the observations of the Supreme Court on the interpretation of the term "manufacture". He contended that the retreading of tyres could not be considered as "manufacture", since retreaded tyres do not result in the emergence of new tyres. He also cited Bombay Collectorate Trade Notice No. 86, dated 29-5-1979 (Cencus, June, 1975-p. 289) wherein it was clarified that servicing, repairings or re-making of goods which are already in use without involving the manufacture of new articles did not constitute manufacture.
4. Shri Mathur also cited a judgment of the Bombay High Court in the case of Century Enka Ltd.,,(ECR-p. 177D) for the proposition that the goods totally exempted from Central Excise duty do not attract countervailing duty.
5. Shri Mathur therefore argued that the levy of countervailing duty on the retreaded tyres of the appellants was illegal and should be set aside.
6. On behalf of the Respondent Collector, Shri V.K. Sharma submitted that the issue involved was not whether retreading was a process of manufacture or not. What had been imported were tyres. A re-importation was also an importation. He submitted that the duty under Section 3(1) of the Customs Tariff Act was a customs duty. Tyres as such were not exempt from Central excise duty and therefore the judgment of the Bombay High Court cited by Shri Mathur was not relevant to the case.
Similarly, the Trade Notice had reference to the levy of Central excise duty and was not relevant in the circumstances of the present case.
Section 3(1) of the Customs Tariff Act provides for the levy of a customs duty equal to the excise duty for the time being leviable on a like article. The like articles in this case would be tyres falling within Item 16 of the Central Excise Tariff Schedule. The fact that these had been retreaded did not mean that they were not tyres. Due allowance had already been made for the fact of retreading; since the additional duty has been charged only on the basis of the repair charges, freight and insurance, and not on the full value of the tyres.
Shri Sharma accordingly urged that the orders of the Assistant Collector and the Appellate Collector were correct and should be sustained.
7. In order to appreciate the question for decision under section 3(1) of the Customs Tariff Act, 1975, relating to the levy of additional duty, is reproduced below :- "3. (1) Any article which is imported into India shall, in addition, be liable to a duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article.
Explanation.-In this section, the expression "the excise duty for the time being leviable on a like article if produced or manufactured in India" means the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India, or, if a like article is not so produced or manufactured, which would be leviable on the class or description of articles to which the imported article belongs, and where such duty is leviable at different rates, the highest duty." It will be clear that the additional duty is a duty of customs, leviable on imported articles. It is reliable to the act of importation but is equated to the excise duty for the time being leviable on a like article if produced or manufactured in India. However, it is essentially a duty of customs, and therefore caution is necessary in applying with reference to the duty concepts relating to a duty of excise. Thus, the procedure for levy and collection of excise duty are totally inapplicable to this additional duty, and it is the procedure relating to levy of customs duty which has to be applied. The value for the purpose of calculating the additional duty (when a corresponding excise duty is also leviable) is not the value as determined under Section 4 of the Central Excises and Salt Act ; in terms of Section 3(2) of the Customs Tariff Act, the additional duty is to be calculated on the assessable value of the imported articles as determined for the levy of basic duty plus the basic duty itself (and any other duty leviable in the same manner as the basic duty). It is therefore obvious that procedures and concepts relating to excise duty cannot be automatically applied with reference to the levy of additional (countervailing) duty.
8. The appellants have however proceeded on the basis that additional duty should be calculated exactly as if it were an excise duty. The judgments and the trade notice relied upon by the appellants, are mostly leviable to excise duty. [The judgment of the Bombay High Court in the case of Century Enka Ltd., of which the correct reference should have been 1982 ECR 177D (Bombay), has no application to the present case since that was with reference to a case where goods had been exempted from excise duty by a notification under Rule 8(1) of the Central Excise Rules, 1944]. As pointed out above, this assumption is not well-founded. From the wording of Section 3(1) of the Customs Tariff Act, reproduced in para 7 above, it will be seen that it is of very wide amplitude. It covers the case where a like article is actually being produced or manufactured in India. It also covers a case where a like article is not produced or manufactured; in that case the duty is leviable as leviable on the class or description of articles to which the imported article belongs. Where the duty is leviable at different rates, it is the highest duty which is leviable. Thus, ample provision has been made to ensure that the imported article gets charged to the additional duty so long as such a duty is leviable on a comparable indigenous article. The justification for such a provision from the point of view of industrial and taxation policy is obvious, and it is necessary to enlarge upon it. What is obvious is that if an excise duty is leviable on a particular class or description of article, a corresponding additional duty of customs is leviable on a comparable imported article.
9. The appellants have argued that their goods fall outside the mischief of the above provision because they are retreaded tyres. In other words, they have laid stress on the last process performed on their tyres, which is one of retreading or repair.
10. As pointed out above, the additional duty of customs is relatable to the act of importation. It has also been related to the class or description of articles to which the imported article belongs. The history of the imported article, as to whether it is new or old, in prime condition or repaired, while they would have relevance to the valuation of the article, would not affect the class or description to which the article belongs, and which is to be seen with reference to the relevant entries in the Central Excise Tariff Schedule. The relevant entry in the present case is Item No. 16, namely, "tyres" which has been amplified as follows :- "Tyres" means a pneumatic tyre in the maufacture of which rubber is used and includes the inner tube, the tyre flap and the outer cover of such a tyre." Thus the description does not per se rule out old or retreaded tyres, since these also fall within the class or description of "tyres". It is a different matter that a particular indigenous tyre, although it falls within the tariff item, is not chargeable to central excise duty by reason of the fact that the manufacturing process has already been completed at a previous stage of that particular tyre. This would no doubt be relevant if the question is whether one of charging it to excise duty. It is not, however, material with reference to the specific provision for levy of additional duty of customs under Section 3(1) of the Customs Tariff Act.
11. The weakness of the appellant's claim would be apparent if one were to consider the case of a retreaded tyre, or in fact any repaired article, which is not the subject of re-importation into India, but is being imported for the first time. If one were to go by the last process performed on certain article, it would follow that no additional duty of customs could be levied on it. The more trivial the final process carried out, the stronger would be the case to argue that it is not a process of "manufacture", and that the article is therefore not leviable to the additional duty of customs. Such an interpretation would obviously fly in the face of the very wide amplitude of Section 3(1) of the Customs Tariff Act, and we do not therefore find it to be a correct or convincing interpretation.
12. We observe that in the present case, the additional duty as well as the basic duty, has been charged not on the full value of the re-imported articles, but only on the repair charges, freight and insurance. Even in equity, apart from the legal position which has been explained above, the appellants have no case for further relief.
13. In the result, we hold that additional duty of customs was leviable on the tyres which are the subject matter of this appeal. We accordingly uphold the decision of the Appellate Collector and reject the appeal.