Jindal Drugs Limited vs The Commissioner of Customs (Export)

This appeal by the assessee challenges the order passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench, Mumbai in Appeal No.C/1024/2008 dated 26th September, 2013. The Tribunal''s order raises the following substantial questions of law :

"(a) Whether in the facts and circumstances of the case, the Appellate Tribunal is right in holding that Menthol Crystals are subject to spice cess under the Spices Cess Act, 1986 ?

(b) Whether in the facts and circumstances of the case the Appellate Tribunal is right in holding that Menthol Crystals are spices within the meaning of Section 2(n) of the Spices Board Act, 1986 ?

(c) Whether in the facts and circumstances of the case, interest under Section 28AB of the Customs Act, 1962 is payable on the spice cess under Spice Cess Act, 1986 ?

(d) Whether in the facts and circumstances of the case, the demand for spice cess was barred under Section 28 of the Customs Act, 1962?

The appellants were served with a show cause notice dated 13th July, 2007, calling upon them as to why export cess totally amounting to Rs.1,65,75,364/-at 0.50% on the export of the products viz. spices stated to be covered by the Act and the tariff, should not be recovered on the export. The show cause notice also proposed to levy interest and penalty.

The show cause notice alleged that the assessee, with their intention to delay the recovery of export cess, filed a civil writ petition in the Delhi High Court and that the goods exported by them are covered by the expression "mint" and an export cess at 0.50% is leviable on the export of the same in terms of the Ministry of Commerce Notification dated 6th November, 1987 and amended by further Notification dated 8th December, 1988 issued under the provisions of the Spices Board Act, 1986.

It was alleged that the Director (Marketing) Spices Board, Cochin, had addressed certain communication and that is how the show cause notice was addressed and issued.

The show cause notice was replied and order in original was passed on 19th June, 2008. The assessee-appellant approached the Tribunal against this order and which has been dismissed.

Mr. Sreedharan, learned senior counsel appearing on behalf of the assessee raised several contentions. He firstly submits that there is no question of any cess on menthol crystal. He would submit that the appellant''s product is not covered by the Act of 1986 and no levy of cess on export thereof could, therefore, have been claimed. The products menthol crystal exported by the assessee are not manufactured from peppermint as falsely alleged and held. Mr. Sreedharan thus has raised the issue of applicability of the Act levying cess and would submit that for the Act to be applicable, the Tribunal ought to have determined the appellant''s product to qualify as spice. The entire process has been enumerated in the Memo of appeal before the Tribunal and equally in this appeal. In the circumstances, the cryptic order of the Tribunal and with a one paragraph reasoning is wholly unsatisfactory. The appeal, therefore, deserves to succeed.

Mr. Jetly appearing on behalf of the Revenue on the other hand would submit that the Tribunal has concluded that the definition of the term "spice" clearly covers mint and cess is payable as per the Spices Cess Act, 1986. Mr. Jetly would submit that there is no parallel which can be drawn from Chapter 9 of the Customs Tariff heading excluding mint from spices and inserting a separate chapter for classification of menthol crystals / menthol. Even if the Spices Cess Act, 1986, has been repealed, that repeal does not confer any benefit on the assessee as the Repeal Act has no retrospective applicability. That is how the Tribunal rightly dismissed the assessee''s appeal and affirmed the order in original. Consequently, this appeal must also be dismissed.

In the five paragraph order of the Tribunal, paragraphs 1 to 4 are devoted to the facts. Even in recording facts, the Tribunal noted that the assessee contended that it is engaged in the manufacture of menthol / menthol crystals and classified the products under Customs Tariff Heading 2906 11 00. The contention of the Revenue was that as per the Spices Cess Act, 1986, the appellants are required to pay export cess at the rate of 0.50% ad valorem on export of mint in any form, including menthol crystals and to the menthols. If the Tribunal was of the view that the cess was demanded by the show cause notice and on the footing that the product exported by the appellant is covered by the Spices Act, 1986, then, it ought to have addressed the appellant''s contentions in some details. If the stand of the assessee was that manufacture of menthol crystals / menthol and classified in the Customs Tariff does not qualify for being included in the term "spice" and covered by the Spices Act, 1986, then, the Tribunal should have held that the product of the appellant is included in the Spices Act as well. However, the Tribunal only refers to the definition of the term "spice" and which appears to be inclusive. If what is exported by the appellants is mint, then, the show cause notice and the demand could have been confirmed provided the Tribunal was cautious enough to deal with all the contentions of the assessee.

The Tribunal has noted that the term "spice" means the spices defined in the schedule and as per the schedule to the Spices Board Act, 1986. As per the schedule at Sr. No. 20, mint is mentioned and that there is a classification below that the spices in any form, including curry powder, spice oil, oleoresins and other mixtures where spice content is predominant. The argument of the Revenue before the Tribunal as noted in paragraph 4 is that the appellants are manufacturing menthol crystals which are predominantly mint.

If one peruses the show cause notice, it is apparent that the allegations therein proceed on the footing that the appellants are exporting what is styled as "spice". However if the show cause notice allegations are perused they would reveal that the assessee has exported various consignments of the product described as menthol BP / USP and as menthol crystals BP / USP in the shipping bills. The Ministry of Commerce Notification is relied upon so as to claim the export cess. That is on the footing that the goods mint are one of the spices on which export cess is leviable. All types of menthols are covered within the expression "mint" and export cess leviable has also been paid on the export of the goods by the exporters. The show cause notice proceeds on the footing that the assessee does not seem to dispute this position because it made several representations to the Ministry. However, we do not find that the matter has proceeded on any admitted position and particularly by the assessee. Had it been the position, there was no need for the adjudicating authority to have rendered a specific finding and which is to be found in the order in original. There are extensive conclusions and which have been rendered. In the circumstances, the correctness of these findings and founded on the conclusion that menthol BP / USP and menthol crystals BP / USP can be assessed as spice ought to have been considered by the Tribunal in appropriate details.

The rival contentions give rise to several issues, some of which only have been noted by us above. It is only to conclude that a short cryptic reasoning may not always serve the purpose. The ends of justice are not met by such shortcuts and resorted to by judicial Tribunals.

In the circumstances instead of this Court being required to go into all the details and depriving parties of a valuable right of appeal, that we are of the opinion that the impugned order deserves to be quashed and set aside and the matter remitted and restored to the file of the Tribunal for a decision afresh on merits and in accordance with law.

As a result of the above discussion, the appeal succeeds. The impugned order is quashed and set aside. The assessee''s appeal is restored to the file of the Tribunal for being decided afresh and on merits and in accordance with law. While deciding and in terms of our directions, the Tribunal shall not influence itself by its earlier conclusions. All facets of the controversy, including whether the export cess is leviable on the export of the product dealt with by the assessee, if at all the cess was leviable what is the impact of the repeal of the enactment in that regard by the Parliament ought to be considered by the Tribunal afresh and after considering the rival contentions. All contentions of both sides of these issue and some others which may arise during the course of hearing of the appeal are kept open. We have not expressed any opinion thereon.

This appeal is, accordingly, allowed. No costs.