1984 (12) TMI 65 - SC - Customs

Levy of customs duty on newsprint - Validity of the imposition of import duty on newsprint imported from abroad under section 12 of the Customs Act 1962 - crippling the freedom of speech and expression guaranteed under article 19(l)(a) and article 19(l)(g) of the Constitution - Classification of newspapers for purposes of granting exemption is done in the public interest having regard to relevant considerations. HELD THAT - It is no doubt true that some of the petitioners have also questioned the validity of the levy prescribed by the Customs Tariff Act 1975 itself. But we are of the view that it is unnecessary to quash it because of the pattern of the legislative provisions levying customs duty which authorise the Government in appropriate cases either to reduce the duty or to grant total exemption under section 25 of the Customs Act 1962 having regard to the prevailing circumstances and to vary such concessions from time to time. The Governmental practice in the matter of customs duties has made the law imposing customs virtually a hovering legislation. Parliament expects the Government to review the situation in each case periodically and to decide what duty should be levied within the limit prescribed by the Customs Tariff Act 1975. Hence the validity of the provision in the Customs Tariff Act 1975 need not be examined now. Since it is established that the Government has failed to discharge its statutory obligations in accordance with law while issuing the impugned notifications issued under section 25 of the Customs Act 1962 on and after March 1 1981 the Government should be directed to re-examine the whole issue relating to the extent of exemption that should be granted in respect of imports of newsprint after taking into account all relevant considerations for the period subsequent to March 1 1981. We adopt this course since we do not also wish that the Government should be deprived of the legitimate duty which the petitioners would have to pay on the imported newsprint during the relevant period. In the result in view of the peculiar features of these cases and having regard to article 32 of the Constitution which imposes an obligation on this court to enforce the fundamental rights and article 142 of the Constitution which enables this court in the exercise of its jurisdiction to make such order as is necessary for doing complete justice in any cause or matter pending before it we make the following order in these cases 1. The Government of India shall reconsider within six months the entire question of levy of import duty or auxiliary duty payable by the petitioners and others on newsprint used for printing newspapers periodicals etc. with effect from March 1 1981. The petitioners and others who are engaged in newspaper business shall make available to the Government all information necessary to decide the question. 2. If on such reconsideration the Government decides that there should be any modification in the levy of customs duty or auxiliary duty with effect from March 1 1981 it shall take necessary steps to implement its decision. 3. Until such redetermination of the liability of the petitioners and others is made the Government shall recover only Rs. 550 per MT on imported newsprint towards customs duty and auxiliary duty and shall not insist upon payment of duty in accordance with the impugned notifications. The concessions extended to medium and small newspapers may however remain in force. 4. If after such redetermination it is found that any of the petitioners is liable to pay any deficit amount by way of duty such deficit amount shall be paid by such petitioner within four months from the date on which a notice of demand is served on such petitioner by the concerned authority. Any bank guarantee or security given by the petitioners shall be available for recovery of such deficit amounts. 5. If after such redetermination it is found that any of the petitioners is entitled to any refund such refund shall be made by the Government within four months from the date of such redetermination. 6. A writ shall issue to the respondents accordingly in these cases. The petitions are accordingly allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

- Whether the imposition of customs duty on imported newsprint under the Customs Act, 1962, and the Customs Tariff Act, 1975, violates the freedom of speech and expression guaranteed under Article 19(1)(a) of the Constitution.

- Whether the classification of newspapers into small, medium, and large for the purpose of levying customs duty is violative of Article 14 of the Constitution.

- Whether the notifications issued under Section 25 of the Customs Act, 1962, are valid and whether they can be challenged on grounds applicable to administrative actions.

- Whether the levy of customs duty on newsprint constitutes a burden that affects the freedom of the press.

2. ISSUE-WISE DETAILED ANALYSIS

- Relevant Legal Framework and Precedents

The legal framework involves the Customs Act, 1962, the Customs Tariff Act, 1975, and the Finance Act, 1981, which collectively impose customs and auxiliary duties on newsprint. The relevant constitutional provisions are Articles 19(1)(a), 19(1)(g), and 14. Precedents considered include Sakal Papers v. Union of India and Bennett Coleman & Co. v. Union of India, which address the freedom of the press and the impact of economic measures on this freedom.

- Court's Interpretation and Reasoning

The Court recognized the critical role of the press in a democratic society and emphasized that any restriction on the press must be scrutinized carefully. It acknowledged that while the government has the power to levy taxes, such levies should not infringe upon the fundamental rights guaranteed by the Constitution. The Court noted that the imposition of customs duty on newsprint could potentially affect the circulation of newspapers, thereby impacting the freedom of speech and expression.

- Key Evidence and Findings

The Court examined historical data on the imposition of customs duties on newsprint and its impact on newspaper circulation. It noted that the cost of newsprint constitutes a significant portion of newspaper production costs and that any increase in duty could lead to higher newspaper prices and reduced circulation. The Court also considered the classification of newspapers for duty purposes and found it to be based on rational criteria aimed at supporting smaller newspapers.

- Application of Law to Facts

The Court applied constitutional principles to assess whether the customs duty on newsprint constituted an unreasonable restriction on the freedom of the press. It evaluated the government's justification for the duty, including revenue generation and foreign exchange conservation, and found them inadequate in light of the fundamental rights involved.

- Treatment of Competing Arguments

The petitioners argued that the duty infringed upon their rights under Article 19(1)(a) and Article 19(1)(g), while the government contended that the duty was necessary for revenue and foreign exchange conservation. The Court found the government's arguments insufficiently justified and emphasized the need for a careful balance between fiscal needs and constitutional freedoms.

- Conclusions

The Court concluded that the imposition of customs duty on newsprint, as it stood, was not justified given the lack of consideration for its impact on the freedom of the press. It directed the government to reconsider the levy in light of relevant constitutional principles and the specific circumstances of the newspaper industry.

3. SIGNIFICANT HOLDINGS

- Verbatim Quotes of Crucial Legal Reasoning

"Freedom of the press is the heart of social and political intercourse. The press has now assumed the role of the public educator making formal and non-formal education possible in a large scale, particularly in the developing world."

- Core Principles Established

The Court reaffirmed that while the government can levy taxes, such levies must not infringe upon fundamental rights, particularly the freedom of speech and expression. It emphasized that any restriction on the press must be carefully scrutinized and justified.

- Final Determinations on Each Issue

The Court held that the notifications issued under Section 25 of the Customs Act, 1962, were subject to judicial review and could be challenged on grounds of unreasonableness. It directed the government to reconsider the levy of customs duty on newsprint, taking into account its impact on the freedom of the press and the specific circumstances of the newspaper industry.