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29 July 2016

Exemptions – Obligations after recession of notification

Recently two different High Courts in India have, in separate decisions, considered the question of continuation of obligations, under the exemption notifications, after the said notification has been rescinded.

 

Obligations when not continuous

Madras High Court has held that for the medical equipments imported duty free under Notification No. 64/88-Cus., the obligations under the notification can no longer be enforced for the period after the same has been rescinded.

The Court in this regard, in its decision in the case of  Seashore Hospitals Ltd., relied upon Supreme Court decisions in the cases of Titaghur Paper Mills Co. Ltd. and State of Rajasthan v. Mangilal Pindwal, and rejected the contention of the department that the obligation was a continuous one.

 

Transfer of duty free goods after recession of notification

Similarly it has been held that duty free goods transferred after exemption notification is rescinded, will not oblige the transferee to fulfill conditions of such notification. The transferee had purchased trawlers in an auction, after which it had sent the same for ship breaking. As per the terms of Notification No. 133/87-Cus., the trawlers were exempt from payment of duty provided the same are not sent for ship breaking.
 
The High Court, on reading of Section 159A(c) of the Customs Act, held that the liability of duty cannot be saved and demanded from the transferee as they had purchased the trawlers after rescission of the notification. The Court, in its decision in the case of Sadiq Brothers Marine Works, was of the view that in the absence of Notification No. 133/87-Cus., at the time of transfer of vessel for breaking up, liability thereunder could not have been acquired or incurred, to attract clause (c) of Section 159A.