Supreme Court of India
Commr.Of Customs,Mumbai-I vs M/S Seiko Brushware India on 4 September, 2015Author: R F Nariman

Bench: A.K. Sikri, Rohinton Fali Nariman









Despite service, nobody appears for the respondent.

We have heard Shri Arijit Prasad, learned counsel appearing on
behalf of the Revenue.

The issue in this appeal relates to the denial of the benefit
of Exemption Notification No. 34/98-Cus. dated 13.06.1998 which reads as

“In exercise of the powers conferred by sub-section (1) of
Section 3A of Customs Tariff Act, 1975 (51 of 1975), the Central Government
having regard to the maximum sales tax, local tax or any other charges for
the time being leviable on the like goods on their sale or purchase in
India, hereby specifies the rates of special additional duty as indicated
in column (3) in table below in respect of goods, when imported into India,
specified in corresponding entry in column(2) of the said table and falling
within First Schedule to the said Customs Tariff Act:” Against the relevant
entry ‘Nil’ rate has been specified for All goods falling under the said
First Schedule which are imported for sale as such, other than by way of
high sea sale and the importer at the time of importation or at the time of
clearances of warehoused goods for home consumption under the provisions of
Section 68 of the Customs Act, 1962 (no. 52 of 1962), as the case may,
makes a specified declaration to that effect in the Bill of Entry in the
manner specified below.

Provided that rate specified therein shall not apply if the
importer sells the said imported goods from a place located in an area
where no tax is chargeable on sale or purchase of goods.”

A reading of this Notification would show that exemption is
granted only in respect of such goods which the importer sells post
importation from a place located in an area where no tax is chargeable on
sale of goods.

The facts of the present case are that pig hair bristles that
were imported were sold in the years 1998-1999 and 1999-2000. Revenue
issued a show cause notice dated 26.03.2003 stating that since these pig
hair bristles were, in fact, sold without any sales tax been paid thereon,
the benefit of Exemption Notification dated 13.06.1998 would not be
available to the importer in the present case.

By a reply dated 17.10.2003, the importer essentially contended
that pig hair bristles may be exempted from sales tax but that did not mean
that they were not chargeable to sales tax.

In a detailed order dated 31.03.2004, the learned Commissioner,
after setting out the Notification dated 13.06.1998, and after hearing the
importer, ultimately came to the conclusion that an Exemption Notification
exempting pig hair bristles from tax would amount to a case where no tax is
chargeable on the sale of goods and therefore, the benefit of the said
Notification would not be available to the importer in the present case.

In an appeal against the said order by the importer/assessee,
the Customs, Excise and Service Tax Appellate Tribunal (hereinafter
referred to as ‘CESTAT’) vide its judgment dated 22.02.2005 has held in
favour of the assessee as follows: –
“We have heard both the sides and in our view, the contention raised by the
learned counsel deserves to be accepted. We find that the exemption
Notification issued by the Sales-tax Department of Delhi and UP state
opponent from where goods in question after import without payment of SAD
under Notification No. 34/98 detailed above, were sold only exempted the
payment of tax on the sale and purchase of the goods at that time and but
for these exemption notifications, the goods were otherwise chargeable to
Tax. It was only the payment of tax which was deferred/exempted under
those notifications for the period mentioned therein. The exemption
notification did not render the goods non-chargeable to tax, but only
allowed concession in the tax by way of exemption for some period.
Therefore, the appellants cannot be said to have sold the goods from the
places where no tax was chargeable on the sale/purchase of the goods and
thereby violated the condition contained in the above said exemption
Notification No. 34/98-Cus.

It was contended by Shri Arijit Prasad, learned counsel
appearing on behalf of the Revenue, that the CESTAT has not taken note of
Section 7 of The Delhi Sales Tax Act, 1975 (hereinafter referred to as
‘Act’) by which pig hair bristles were said to be in the nature of tax free

He further contended that in the present case, the CESTAT was
not correct in referring to an Exemption Notification. What was, in fact,
notified was the addition of Entry No. 67 to the Third Schedule of the Act
vide Notification dated 15.10.1996 which was wrongly referred to as an
Exemption Notification.

We find considerable force in the submission of Shri Arijit

Section 7 of the Delhi Sales Tax Act, 1975 reads as under: –
“7. Tax-free goods.-(1) No tax shall be payable under this Act on the sale
of goods specified in the Third Schedule subject to the conditions and
exceptions, if any, set out therein.
(2) The lieutenant Governor may by notification in the Official
Gazette, add to, or omit from, or otherwise amend, the Third Schedule
either retrospectively or prospectively, and thereupon the Third Schedule
shall be deemed to be amended accordingly:
Provided that no such amendment shall be made retrospectively
if it would have the effect of prejudicially affecting the interests of any

The imported goods, viz., pig hair bristles, find mention in
Entry 67 of the Third Schedule which reads as follows: –
“Pig hair bristles and paint brushes made of pig hair bristles.”

It will be noticed that the charging Section itself, viz.,
Section 3 of the Act, speaks of a dealer whose turnover during the year
immediately preceding the commencement of this Act exceeds the taxable
quantum as also every registered dealer liable to pay tax under this Act on
all sales effected by him on or after such commencement. It will, thus, be
seen that even the charging Section uses the expression “liable to pay

Correspondingly, Section 7, whose marginal note indicates that
the subject matter of the said section is tax free goods, also uses the
same expression as is used in Section 3, viz., “no tax shall be payable
under this Act”.

On a reading of Sections 3 and 7 of the Act, it becomes clear,
therefore, that so far as the imported item, viz., pig bristles is
concerned, no sales tax, in fact, is charged on the same. This being the
case, it is obvious that the proviso to the Notification dated 13.06.1998
gets attracted and since no tax is chargeable on the sale of such goods,
the said Exemption Notification will therefore, not apply.

We, accordingly, set aside the judgment of CESTAT and restore
that of the Commissioner. The appeal is disposed of accordingly.

……………………., J.
[ A.K. SIKRI ]

……………………., J.

New Delhi;
September 04, 2015.


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