In the Customs and Central Excise Tariffs the Schedules containing rate of duty mostly have a positive rate of duty but for many items there are entries which are nil or free or blank. These entries are not often consistent amongst themselves and not also with the legal framework in the Customs and Central Excise Law. This is the issue on which I am writing here.
In the Central Excise Tariff blank occurs in the following entries: In the Central Excise Tariff Nil occurs in some entries such as the following :
Chapter-2 for Meat and Edible Meat Offal
such as Meat of bovine animal fresh, meat of rabbit, (duty column)
meat of swine …..Nil
Chapter-3 for fish, etc. …Nil
Chapter-4 for Diary produce such as milk, butter, honey,
fresh cheese ….Nil
Chater-5 – product of human origin such as human hair
Bovine semen, ivory …Nil
Chapter-6, Live trees, plants cut flowers, roses, carnations …Nil
Chapter-7, Edible vegetables like Potatoes …Nil
Chapter-8, Edible fruits such as coconut, melons, oranges, grapes ..Nil
Chapter-9, Tea, Coffee, Mate and Spices: 09 01 11 & 09 01 12 Coffee caffeinated or decaffeinated
and Roasted or not roasted ..Nil
Chapter 24 onwards till the end there are ‘nil’ duties
in some of the items and positive duties in most items
In the Customs Tariff there are no blanks and there are no nil duties also though the exemptions contain nil duty. However, there are entries called free on several occasions such as
1002 00 Rye – Of seed quality and others ..Free
1003 00 Barley – of seed quality and others ..Free
1004 00 Oats – of seed quality and others ..Free
1008 10 Buckwheat – of seed quality and others ..Free
1008 30 Canary – of seed quality and others ..Free
1008 90 Other cereals– of seed quality and others ..Free
2716 00 00 Electricity energy ..Free
8443 99 10 Automatic documents feeders of copying machines ..Free
8443 99 20 Paper feeders of copying machines ..Free
8443 99 30 Sorters of copying machines ..Free
There are some others also which are free.
The following points emerge from the above data
(a) In Customs Tariff only the description ‘free’ occurs and it means only nil duty but there is no Nil or Blank.
(b) In Excise Tariff all the two descriptions ‘nil’ & ‘blank’ occur. But all the three descriptions namely ‘nil’, ‘blank’ & ‘free’ mean the same thing that there is no positive rate of duty attached to the tariff item.
(c) ‘Nil’ has been given for items which are not at all manufactured such as horses, ass, cow, mango, wheat, etc. which are in any case undoubtedly not manufactured products. At the same time ‘Nil’ has been written for large number of manufactured items also.
(d) ‘Blank’ has also been given for items which are unmanufactured such as rice, wheat, Soya Bean, Ground Nut, Linseed, Cotton Seed, Vegetable seeds, etc. which are not manufactured items. At the same time ‘Blank’ has been written for manufactured items also such as electrical energy and tea. So ‘Blank’ has been written for both manufactured and unmanufactured goods.
(e) Thus ‘Nil’ & ‘Blank’ have been used for both manufactured as well as unmanufactured products on a random basis. There is no differentiation that one can make between nil and blank.
(f) ‘Blank’ also means that it is a positive tariff item as given in the Additional Notes (c) in Central Excise quoted above. The Additional Notes in Customs, also quoted above, does not refer to ‘Blank’ since there is no ‘Blank’ entry in Customs.
(g) All unmanufactured products mentioned in the Central Excise Tariff must be deleted. There is no place for unmanufactured products in the Central Excise Tariff. If one remembers the old Central Excise Tariff which was not based on Brussels Trade Nomenclature (BTN) and Customs Cooperation Council Nomenclature (CCCN), one would know that only the excisable goods were mentioned in the Tariff. There were only 68 specific heads of goods and there was no place in the tariff for horses, asses and mangoes. That was a really logical and legally valid tariff.
(h) Harmonisation of Central Excise and Customs Tariff done improperly.
While it was right that the government felt that the Central Excise Tariff and the Customs Tariff must be harmonized, the harmonization has not been done in the proper manner. In the process of harmonization what was lost site of is that they are not fundamentally in harmony. The taxable event for Central Excise duty is the act of manufacture. The taxable event for Customs duty is the act of import or export. There is no question of complete harmonization between the two. Harmonization should have been limited only to those items which should find place in Central Excise Tariff to begin with. If something cannot find a place legally in the Central Excise Tariff, there is no question of mentioning it in the Central Excise Tariff just for the sake of harmonization. This effort in harmonization losing the legal background has created this legal absurdity.
(i) ‘Nil’ is also a rate of duty.
There are judgments to establish that. They are the following,
CCE vs. Wazir Sultan 1996 (83) ELT 3 (SC) Para 3 and 12
CCE vs. United Traders 1999 (113) ELT 426 (T)
(j) Everything in tariff is not excisable
Some analysts entertain the view that whatever is in the Tariff is excisable. They derive their support from the words in the definition of the Excisable Goods in the Section 2 (d) of Central Excise Act which is as follows:-“excisable goods” means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise. From there these analysts conclude that what is included in the Schedule is excisable even if it is horses or birds. But such an analysis misses the expression, “as being subject to a duty of excise”. The moment there is a reference to the excise duty , immediately the reference comes to the Entry 84 of the List -1 of the Constitution which is as follows:-“Entry 84. Duties of excise on tobacco and other goods manufactured or produced in India” This means duty of excise is only on goods manufactured. There are umpteen judgments of the Supreme Court that excise duty is on the act of manufacture. Manufacture is vitally relevant for Excise duty. The Entry says duty on excise is on tobacco and other goods manufactured. Tobacco is the only unmanufactured products mentioned in the Entry. Obviously all other unmanufactured products are out of consideration.
(k) To be excisable it should be in the tariff and also be manufactured
It has been stressed in numerous other Supreme Court Judgments that even if some items are mentioned in the Tariff, if they not are not found to be manufactured, they cannot be regarded as leviable to Excise duty. The judgements are the following:
CCE vs Markfed Vanaspati, 2003(153)ELT 491 (SC), Moti Laminates vs CCE, 1995 (76) ELT 241 (SC), Hyderabad Industries vs UOI, 1995 (78) ELT 641 SC, COMMISSIONER OF C. EX., LUCKNOW versus WIMCO 2007 (217) E.L.T. 3 (S.C.). So the conclusion from the judgments is that goods are excisable not by Tariff Entry alone. They have to be, first and foremost, manufactured and marketable products.
(l) Emergency powers to increase rate of duty in the Tariff Act shows anomalous use of “Nil” and “Blank”.
In this analysis it is relevant to note the Emergency Powers in the Tariff. They are given in the Central Excise Tariff Act, 1985. Here we find that the duty can be increased during emergency only for items where the rate of duty is ‘Nil’ and not where the rate of duty is ‘Blank’. There does not seem to be any logic in it. The intention of the Government cannot be that where the rate of duty is blank it cannot be increased. When ‘Nil’ & ‘Blank’ have the same impact on the rate of duty namely that both are ‘zero rate of duty’, such a differentiation between ‘Nil’ & ‘Blank’ in the Emergency Power must have been out of oversight. Thus if the word ‘Nil’ is used everywhere this sort of anomaly would not arise.
So the overall conclusion is the following:
(i) All Entries in the Central Excise Tariff which are for unmanufactured goods must be removed from the Central Excise Tariff as they are not excisable.
(ii) In the Excise Tariff only NIL should be there. All entries of Blank should be abolished. ‘Nil’ & ‘Blank’ should not be written interchangeably. Nil is the proper expression which means that the goods and basically excisable and the Government at the present moment does not want to charge any duty on it. ‘Blank’ should not occur any where because it is redundant and therefore it creates confusion and litigation. One expression which is good enough should prevail rather than other redundant expressions. ‘Nil’ has an advantage over ‘Blank’ because in exemption notification the expression ‘Nil’ is there and not ‘Blank’ such as the general exemption No.6/2006-C.E. dated 1.3.2006 as amended which contains all Nil entries but no Blank. In the Customs exemptions also the expressions are Nil.
(iii) In the Customs Tariff the expression ‘Free’ should be replaced by ‘Nil’. That will bring symmetry between the expressions in Customs and Central Excise Tariff.
(iv) Thus in place of three expressions , ‘Nil’, ‘Blank’ & ‘Free’ there should be only one expression - ‘Nil’.
Former Member CBEC