TMI Blog1985 (10) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional duty payable under Section 2A of the Indian Tariff Act, 1934, or under Section 3 of the Customs Tariff Act, 1975, was Customs duty referred to in the charging section, namely, Section 12 of the Customs Act, 1962 ? 2. The facts leading to the filing of these two writ petitions are stated in the order of reference and we think it unnecessary to repeat the same. Suffice to note that on the dates when the goods in question entered the territorial waters of India from the foreign country as also on the day they were stored in the bonded warehouse, they were wholly exempt from payment of basic Customs duty under a notification issued by the Central Government (hereinafter referred to as Exemption Notification ) in exercise of its powers under Section 25(1) of the Customs Act, 1962 (hereinafter referred to as the Customs Act ). But, by the time these goods were sought to be removed from the bonded warehouse, the Exemption Notification was rescinded and the exemption granted thereunder was withdrawn. A Division Bench of this Court in Shawhney v. Sylvania Laxman (hereinafter referred to as Sylvania Laxman s case ) (77 Bom. L.R. 380) after referring to the observations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the said vessel. A bill of entry for the clearance of these goods was presented by the Respondents on 27th April 1967. The goods were actually cleared on 6th June, 1967. Accepting the contention of the Respondents that the goods were imported before 31st March 1967 upto which date the exemption granted under the said notification was operative, the Customs Authorities cleared the goods without levying any duty of customs. Later, on 23rd September, 1967 the Assistant Collector of Customs issued a notice to the Respondents to show cause why customs duty amounting to ₹ 1,40,558.75 due from them should not be levied. This demand was made on the footing that on the day when the bill of entry was presented and the goods were cleared, the exemption notification was no longer in force and the goods were chargeable to duties of customs. The Court held that as the taxable event occurs when the goods are imported into the territorial waters of India the chargeability of the goods to customs duty ha to be determined with reference to that date. As that event took place much prior to 31st March 1967 when the exemption notification was operative, the demand made by the Assistant Colle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uirement is that the goods are dutiable in the first instance. In other words, there must be chargeability to duty on the date of importation. Section 12 is the only charging section, which says that subject to the provisions of this Act, viz., the Customs Act, the rates of duty will be those mentioned in the Indian Tariff Act, 1934. Since the Tariff Act is subject to the provisions of the Customs Act, one has to read the Notification under Section 25(1) as on the date of actual importation, viz., 29th March, 1967. On that date there was total exemption, which means that the glass tubes in question were not dutiable goods at all on March 29, 1967, when actually imported. If that is so, can we apply the subsequent rate which is now prevalent after the 1st April, 1967, to these goods. The learned Judges pointed out that this cannot be done. The goods which were not liable to pay duty at all when imported cannot be subjected to the duty by the procedure to be adopted under Section 15 for clearance. (Emphasis supplied by us). On the basis of the judgment in Sylvania Laxman s case when it was argued for the Customs Authorities that the rate of customs duty also should be the rate wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Bench is not called for. We agree with Mr. Cooper that the Division Bench in Synthetics case did not disagree with the principle laid down in Sylvania Laxman s case. In fact, in arriving at the conclusion that although importation into India is complete on the date when the goods enter territorial waters, if they are not totally exempt from duty at that point of time and some customs duty is chargeable, those goods would be liable to the levy of customs duty at the rates in force on the dates mentioned in Section 15 of the Customs Act. In the later case the principle enunciated in Sylvania Laxman s case that the chargeability to customs duty under Section 12 (1) is to be determined with reference to the date on which the goods enter territorial waters of India was accepted. On that footing the Division Bench found that on the date when the goods were imported into territorial waters, were not wholly exempt from duty Customs duty but were chargeable to duty and therefore customs duty payable was to be computed and quantified at the rate prevalent on the dates mentioned in Section 15(1), i.e. the date on which they are cleared for home consumption. The Court pointed out that Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt with the view expressed in Sylvania Laxman s case and that they were of the view that it required reconsideration, in the light of the Supreme Court decisions in Empress Mills v. Municipal Committee, Wardha (AIR 1958 SC 341). In Re: Sea Customs Act (AIR 1963 SC 1760); Prabhal Cotton and Silk Mills v. Union of India (1982 E.L.T. 203); Shri Ramlinga Mills v. Assistant Collector of Customs (1983 E.L.T. 65) and Union of India Ors. v. Khalil (1970 Cr. L.J. 417) is further clear from what is stated in paragraph 20 of the order of reference extracted below : .........the decision in Sylvania s case (77 Bom. L.R. 380) followed by this Court in Synthetics case (1981 E.L.T. 414) is primarily based on the view that the event of importation takes place when the goods cross territorial waters and not when they come on the land and are either cleared from the warehouse or the bill of entry presented as required under Section 15(1) of the Customs Act, 1962 Inasmuch as the Bench in referring the case has observed that the view taken in Sylvania Laxman s case has to be reconsidered in the light of the above mentioned decisions, we proceed to consider the same. 6. The Customs Act is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot arise and no special order granting exemption from payment is necessary. Only where goods are not exempt under sub-section (1) of section 25 and the Central Government having regard to special circumstances deems it necessary exempt from payment of duty on goods on which duty is leviable would it be necessary to make a special order under sub-section (2) of section 25. Once exemption is granted under section 25(1) it would mean that as envisaged by section 12 of Customs Act, the exemption notification provides otherwise and the goods are not chargeable to duty under section 12. Thus section 25(1) of the Customs Act empowers the Central Government to exempt goods from levy of duty generally and under section 25(2) from payment of duty by a special order. If as provided under section 25(1) exemption is granted from the whole of the duty leviable on certain goods, customs duty itself is not leviable on such imported goods, no question of calculating the customs duty leviable at any particular rate specified either under the Customs Tariff Act or any other law for the time being in force arises. The crucial question, therefore, would be : When can the goods be said to be impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ude certain things which, but for the interpretation clause, they would not include ................... * * * * An interpretation clause which extends the meaning of a word does not take away its ordinary meaning........................... An interpretation clause of this kind is not meant to prevent the word receiving its ordinary, popular and natural sense whenever that would be properly applicable, but to enable the word as used in the Act when there is nothing in the context or the subject-matter to the contrary, to be applied to some things to which it would not ordinarily be applicable.** ** 10. It is true that in ascertaining the intention of the legislature in using a particular word, how the word is commonly understood must undoubtedly be given weight. If the word is used with reference to or in the context of a particular trade or business, it must receive the same meaning in which the particular trade or business understands it. In other words, the ordinary meaning of the word should be given effect to for the legislature could not have had the intention to mean otherwise. Where the Parliament being aware of the ordinary mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the definition clause may be given a go by and the word understood as is understood in common parlance. But then, as stated above, when the definition clause employs the word includes and enjoins that unless the context requires otherwise, it shall include as stated therein, the Court cannot, unless there are compelling circumstances and reasons having regard to the context in which the word defined is used, the interpretation clause cannot give a go by to the definition. The effort of the Court should be to give effect to the meaning intended by the Parliament as made clear by defining the words employed by it in the enactment unless the context otherwise requires . 12. Mr. Talyarkhan, learned Counsel for one of the petitioners-inter-venors placed reliance upon the decision of the Supreme Court in Vanguard Fire and General Insurance Company v. M/s. Fraser and Roass (AIR 1960 S.C. 971) where their Lordships have laid down (pages 974-975) : ......It is well settled that all statutory definitions or abbreviations must be read subject to the qualification variously expressed in the definition clauses which created them and it may be that even where the definition is exha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be given effect to. Where a word is defined in a Statute to mean a certain thing, wherever that word is used in that statute, it shall mean what is stated in the definition unless the context otherwise requires. 14. In our view having regard to the definition of the word India under the Customs Act with which we are presently concerned which is an inclusive definition and which is prefaced by the clause unless the context otherwise requires , the more appropriate principle that would apply is the one laid down by the Supreme Court. In S.K. Gupta v. K.P. Jain (1979) 3 SCC 54. In that case the Supreme Court considered the definition in section 2 of the Companies Act, 1956, which reads as follows : 2. In this Act, unless the context otherwise requires,- * * * * (29) modify and modification shall include the making of additions and omissions. That definition which is an inclusive definitions also employs the qualifying expression unless the context otherwise requires just as the Customs Act does in defining the word India . The Supreme Court observed (page 68): The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omprising only of the land mass. For certain purpose the country referred to as India may extend into the sea upto the limit of territorial waters or contiguous zone or continental shelf or exclusive economic zone or other maritime zones . Section 3(2) of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, provides that a distance of twelve nautical miles from the nearest point of low tide along the baseline of India constitute territorial waters of India. Whatever the word India may mean in common parlance and under other enactment s, for the purpose of the Customs Act it is made clear under the definition clause 27 of section 2 of Customs Act that, India includes territorial waters of India. Reading the two definitions together it would be manifest that if goods are brought into India, meaning thereby into the territorial waters of India from outside India, that is, from outside the territorial waters of India there is import of goods and the goods become imported goods . These definitions thus make it clear that no sooner than the goods are brought from outside the territorial waters of India into the territorial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this contention, it is necessary to notice the various steps required to be taken under the Customs Act for levy of duty on goods imported into India. As stated above, Section 12 declares that duties of customs shall be levied on all goods imported into India. The goods imported shall have to be valued under Section 14 and the duty payable shall have to be determined according to the rates specified under Section 15 of the Customs Act read with the Tariff Act. Every importer of goods is required under Section 46(1) of the Customs Act to make an entry with the proper officer by presenting a bill of entry for home consumption or warehousing in the prescribed form. The goods may be unloaded only at the approved place and under the supervision of the Customs Officer as laid down in Section 31 to 34 of the Customs Act. Section 29 prohibits the person-in-charge of a vessel or aircraft entering India from any place outside India from permitting the vessel or aircraft to call or land at any place other than customs port or a customs airport. Within twenty-four hours of arrival the person-in-charge is required by Section 30 to deliver an import manifest or an import report. The person-in-ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vied has to be determined as envisaged by Section 15. 19. Under all taxing statutes, whether Customs Act, Central Excise and Salt Act, Income-tax or Gift Tax or Estate Duty Act what has to be first determined is when exactly did the taxable event occur ? It is with reference to that point of time, that the chargeability or leviability of the tax or duty, as the case may be, has to be determined. That is the crucial date. In Wallace Brothers and Company Ltd. v. Commissioner of Income-tax (16 ITR 240) the Privy Council held (page 244) : The general nature of the charging section is clear. First, the charge for tax at the rate fixed for the year of assessment is a charge in respect of the income of the previous year , not a charge in respect of the income of the year of assessment as measured by the income of the previous year Second, the rate of tax for the year of assessment may be fixed after the close of the previous year and the assessment will necessarily be made after the close of that year. But the liability to tax arises by virtue, of the charging section alone, and it arises not later than the close of the previous year, though quantification of the amount payable is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oms barriers or their export outside the customs barriers. (Emphasis supplied) All these decisions make it clear that a taxing statute does not envisage that the taxable event, valuation of goods, income or estate as the case may be, rate of duty or tax and quantification of duty or tax should be completed at any single point of time, or with reference to one and only one point of time, nor that they must be necessarily postponed until all the stages are completed; nor that each of these events could not occur or each of these steps could not be taken at different points of time. Parliament taking cognizance of the fact and having regard to the nature of the levy of customs duty that the word levied occurring in section 12 has several connotations appears to have advisedly specified under different provisions of the enactment the different stages i.e. the stage when goods become chargeable to duty, the stage when the goods have to be valued and the stage when the duty has to be quantified. Under the Customs Act, chargeability is under Section 12, valuation of goods under Section 14 and the rates at which the duty should be assessed is under Section 15. As discussed above, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Art. 289(1). In that case the Supreme Court was discussing as to whether imposition of customs duty on import of goods is a tax on property, that is, on the goods or on the act of import of goods. The Court held that the taxable event is the act of import of goods into India and the duty is not on property as such, but on the act of importation of goods. The Court was not concerned in that case as to when the goods can be said to have been imported; nor did the Supreme Court, lay down that taxable event does not occur when the goods enter the territorial waters. What all the Supreme Court said was that the importer cannot take the goods beyond the customs barrier without first ful-filling the condition of payment of import duty. The Court was not required to consider sections 12, 14 or 15 of the Customs Act, 1962, and determine when the taxable event occurred. There can be no doubt that unless the duty is paid, dutiable goods cannot be carried across the customs barrier but that is not necessarily the time when the goods become chargeable and no opinion on that aspect was expressed on that aspect in that case. The Court only held that the payment of duty is a condition without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve decisions also make it clear that the taxable event may occur at one time and the duty chargeable upon that event occurring, may be quantified and collected at a later date but there is nothing in the Customs Act which indicates that the chargeability itself is postponed to a later date. What is postponed is quantification and collection and not chargeability. These decisions though rendered in the context of levy of excise duty lend support to the view we have taken, namely, while import duty is on the act of importation which is complete when the goods enter the territorial waters of India, the goods may be valued and the duty quantified and collected later as laid down in section 14 and 15 of the Customs Act. The rate itself can be fixed at a later date. But, what is crucial to be determined is: When was the act of importation complete ? And were the goods chargeable to duty at that point of time ? Once they are chargeable, they may be subject to duty on such value and at such rate as is laid in Sections 14 and 15 respectively and recovered in such manner as is laid down in the other provisions of the Customs Act. 27. If this essential distinction between chargeability and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doctrine has no place. 29. Another theory propounded is that only upon the goods forming part of the land mass they become imported goods. 30. Reference to the theory that goods become imported goods only when they form part of the land mass and not until then, made in In Re Sea Customs Act (AIR 1963 SC 1760) may now be examined in the context of the Customs Act, 1962. The Supreme Court in the said case was dealing with the Sea Customs-Act, on a comparison of the provisions in the Canadian and Australian Constitution with the provisions in the Constitution of India and considering the nature of the customs duty the Supreme Court observed: (page 1776) : ......Now, what is the true nature of an import or export duty ? Truly speaking, the imposition of an import duty, by and large, results in a condition which must be fulfilled before the goods can be brought inside the customs barriers, i.e. before they form part of the mass of goods within the country. Very strong reliance was placed on these observations of the Supreme Court to contend that only when the goods form part of the goods on the land mass the condition of payment of duty has to be fulfilled. According to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another port in New South Wales. The ship was about to discharge the paint there, and the consignee was willing to take delivery. While the ship was in the port, an arrangement was made between a person C, acting on behalf of the consignee, and the captain of the ship, whereby the paint was taken over for the use of the ship. No Customs entry was made in respect of the paint and it was not landed. By permission of the Customs Officer at the port, guarantee having been given by the captain to furnish a list of all dutiable stores consumed on the voyage to Melbourne, the next port of call, the ship left the port with the paint on board. No duty was paid in respect of this paint. In that case, the learned Judges construing a provision of the statute which did not define the word imported , held : .........that goods are imported whenever they are brought into port for the purpose of being discharged there. So far as the ship is concerned the goods have at that time arrived at their destination, and their character as goods imported into Australia cannot, I think, be effected by an agreement subsequently made under which they are not in fact landed at the port at which the ship a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction and effect to be given to the Customs Tariff Act and certain sections of the Customs Act, and proceeded to consider Section 4 of the Customs Tariff Act, 1894, which reads as follows : Section 4. Subject to the provisions of this Act and to the requirements of the Customs Act, Section 32 of the Revised Statutes as amended there shall be levied, collected and paid upon all goods enumerated or referred to as not enumerated in Sched. A to this Act the several rates of duties of customs forth and described in the said schedule and act opposite to each class respectively or charged thereon as not enumerated when such goods are imported into Canada or taken out of warehouse for the consumption therein. Section 34 of the Customs Act, 1886 (49 Vict. C. 32) with which the Court was concerned in that case laid down that every importer of goods by sea or from any place out of Canada shall within three days after the arrival of the importing vessel make due entry inwards of such goods and land the same. The importers of sugar made entry at the Montreal Customs House of the goods on May 2, 1895, when the goods were not subject to duty. The Court held (Page 740) : (I) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 31. And this construction appears to their Lordships to place a consistent, rational, and probable meaning on the whole of the sections referred to when read together............ The object of the definition in Section150 is not to define the port of importation, or the meaning of imported , but the time when the goods are to be deemed to be first imported. It would be seen that that decision turned on the interpretation of Section 150 of the Customs Act, 1886, which was in the following words : Sec. 150 (as amended by 52 Vict. C. 14, S. 12). Whenever, on the levying of any duty, or for any other purpose, it becomes necessary to determine the precise time of the importation of any goods, or of the arrival or departure of any vessel, such importation, if made by sea, coastwise or by inland navigation in any decked vessel, shall be deemed to have been completed from the time the vessel in which such goods were imported came within the limits of the port at which they ought to be reported, (underlined to draw attention to the distinction) by land or by inland navigation in any undecked vessel, then, from the time such goods were brought within the limits of Canada. (Em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted goods ? Is it when they enter the territorial waters of India ? Or is it when the vessel carrying the goods calls at any port in India ? Or is it when the goods are unloaded on the land mass of India ? If it could be any of these, then, in our view, the definition of the word India for the purpose of the Customs Act must clinch the issue. After all, words and expressions are defined in a statute to make the intention of the legislature explicit and precise where such words and expressions are susceptible of several meanings. The combined effect of the definitions of the words import and India under Sections 2(23) and 2(27) of the Customs Act, to our mind, is that import can be said to take place as soon as goods are brought into the territorial waters of India. The taxable event occurs, when, as laid down by Section 12, goods are imported into India and since India includes its territorial waters, the taxable event occurs no sooner than the goods enter the territorial waters of India and does not postpone till they are actually off loaded on the land mass or till the goods are valued under Section 14 or till the date for determining the rate at which the customs duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rters, clearly point out that the goods are imported into India no sooner than they enter the territorial waters of India, and according to the learned Counsel for the Customs authorities, only when they are sought to be cleared for home consumption. The provisions referred to in this regard are Sections 13, 21, 23, 31, 32, 33, 34, 37, 45, 46, 48, 49 and 53 and we may proceed to examine them. 38. Section 13 of the Customs Act, which deals with duty on pilfered goods, reads as follows : 13. Duty on pilfered goods. - If any imported goods are pilfered after the unloading thereof and before proper officer has made an order for clearance for home consumption or deposit in a warehouse, the importer shall not be liable to pay the duty leviable on such goods except where such goods are restored to the importer after pilferage. This provision absolves the importer of the liability to pay duty if the goods are pilfered before an order for clearance for home consumption or deposit in a warehouse, is made. In our view, the question of liability of the importer to pay duty on pilfered goods would not have arisen if the goods become liable for duty only when they were sought to be cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at any time before clearance for home consumption, which again would not have been necessary unless the goods had become imported goods earlier and became liable to duty. Sections 31, 32, 33 and 34 prohibit imported goods from being unloaded from vessel until entry inwards is granted and mentioned in import manifest or import report. They require goods to be unloaded at approved places only and under supervision of Customs officer. The legislature evidently made these provisions and placed restriction on these goods only because as per the definitions in the Act, the goods become imported goods even before they are unloaded; certainly much before the goods are sought to be cleared for home consumption and before they are unloaded. So, when does import occur ? Let us examine the Scheme of the Act to see at what point of time they acquire that character of imported goods . Section 37 empowers the proper officer to board any conveyance carrying imported goods , that is, even when the conveyance is afloat and even before the goods are unloaded. That would indicate that the goods become imported goods even while they are in the ship or the vessel. That is made further clear by wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It is significant to note that such goods are not exempted from the operation of Section 12, but by virtue of this and the other provisions of the Act are allowed to be transited without payment of duty. Similar provision is made in Section 54 in respect of goods imported into a customs port or customs airport but are intended for transhipment. It, as contended for the Customs authorities, the goods become imported goods only when they are sought to be cleared for home consumption or placed in such a position as to be mixed with the goods on the land mass, all the provisions referred to above would be rendered wholly redundant. They would not be imported goods and would not be liable to customs duty until they are actually cleared or sought to be cleared after being lodged in the warehouse. These provisions, in our view, make the legislative intent abundantly clear that the goods become imported goods no sooner than they enter the territorial waters of India, which provisions would have been wholly unnecessary if goods become liable to customs duty only at the time of clearance. 40. If the contention of Mr. Dalal that taxable event occur only when the goods are sought to be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be chargeable to customs duty as laid down under Section 12 of the Customs Act. But by value of some of the provisions referred to above, duty may not be leviable or remission or abatement of duty may be granted on these imported goods either because they are damaged, pilfered or not unloaded at the port or cleared for home consumption but transitted. The goods may not be chargeable to customs duty also because the Central Government chooses to exempt from duty by issuing a notification under Section 25 of the Customs Act. In this context, it is necessary to note the distinction between the notification under sub-section (1) of Section 25 of the Customs Act and an exemption notification issued under sub-section (2) of Section 25 thereof. Under sub-section (1) the Government may exempt absolutely or subject to conditions goods of any specified description from the whole or any part of duty of customs leviable thereon. Duty is leviable under Section 12 of the Customs Act and not under the Schedules of the Tariff Act. If duty is leviable under Section 12, then only for the calculation of the duty the Schedules of the Tariff Act become relevant and have to be looked into. A notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 or the rate at which the duty is payable under Section 15. Sections 14 and 15 would apply only in a case where duties of customs are leviable under Section 12 and the Customs Act or any other Act does not provide otherwise. In other words, if the Customs Act read with the notification issued under Section 25(1) thereof provides otherwise, duties of customs shall not be levied under Section 12 and consequently. Section 15 does not come into operation in respect of these goods and the question of valuation of the goods under Section 14 does not arise for the purpose of assessment. That is what this Court held in Sylvania Layman s case. 43. It was, however, contended that when goods are exempted from duty by a notification issued under Section 25, they are still chargeable to duty under Section 12, but at nil rate. It was argued that the effect of granting exemption under Section 25 from payment of the whole of customs duty leviable, the Customs Act does not render the imported goods free from chargeability. According to the learned Counsel, when the goods are wholly exempted from duty, in law, nil duty is still chargeable. The goods are chargeable to duty so long as they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other decisions of this Court (i) Synthetics and Chemicals Ltd. v. S.C. Coutinho and others (1981 Excise Law Times 414), discussed above and i(ii) New Chemi Industries Pvt. Ltd. and another v. Union of India and others (1981 Excise Law Times 920) have concurred with the view taken in Sylvania Laxman s case. The latter case was of imported goods which were partially exempt from duty on the date when the ship carrying them entered the territorial waters and that partial exemption was withdrawn subsequently. The learned Single Judge rejecting the claim of the importer for partial exemption from payment of customs duty on goods imported, referring to the decision in Synthetics and Chemicals Ltd. v. S.C. Coutinho and others observed : The Division Bench held that if the goods were totally exempted on the date of its entry, within the custom s barrier, then duty cannot be recovered merely because such total exemption was withdrawn on the date of the clearance, but in cases where there is only partial exemption available on the date of entry in the custom s barrier, then withdrawal of such partial exemption would make the importer liable to pay the normal duty, if on the date of clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrival at the railway station or departure therefrom or both which would not only lead to inconvenience but confusion, and would also result in inordinate delays and unbearable burden on trade both inter State and intra State. It is hardly likely that that was the intention of the legislature. Such an interpretation would lead to absurdity which has, according to the rules of interpretation, to be avoided. It must be noticed that that was a case arising under an enactment in which the words import and export were not defined and it was a case of terminal tax leviable under Section 66(1)(o). That provision authorised the imposition , of a terminal tax on goods or animals imported into or exported from the limits of a Municipality . It is in the context of such a tax that the words import into or within the Municipal limits were required to be construed by the Supreme Court in relation to goods in transit through the Municipal limits. The Supreme Court construing such a provision, observed : Import is not merely the bringing into but comprises something more i.e., incorporating and mixing up of the goods imported with the mass of the property in the local area. The co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 49. The next case referred to is In Re : Sea Customs Act (AIR 1963 S.C. 1760) in which the Supreme Court gave its opinion on special reference. As already noticed the Supreme Court held that the imposition of an import duty by and large results in a condition which must be fulfilled before the goods can be brought inside the customs barrier; duties of customs though they are levied with reference to goods, the taxable event is import of goods within the customs barriers. The Supreme Court was not concerned with the question whether the customs barrier lay at the outer limit of the territorial waters of India or at the point where the goods are cleared for home consumption on payment of duty. The Supreme Court was concerned with the question whether the duties of customs were on the goods or on the act of import and it was held that they were on import and not on the property, i.e. the goods. 50. In Prabhat Cotton and Silk Mills Ltd. v. Union of India (1982 E.L.T. 203) a Division Bench of the Gujarat High Court while considering the question whether landing charges are includible in the assessable value of the goods under Section 14 of the Customs Act held (Page 209) : . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not become export goods until they leave the territorial waters of India. We are unable to agree with the conclusion of the Gujarat, High Court that Section 12 in using the expression goods imported into India has reference to the land mass of India and not to the territorial waters of India. In that case the Court proceeded on that basis to consider as to how the assessable value of the goods should be arrived at under Section 14 and held (Page 210) : .........As per the analysis made by us, the price of the goods has to be determined (1) on the basis of the price at which ordinarily such goods are offered for sale, (2) such price is required to be determined with reference to the time and place of importation of goods (i.e. when they are unloaded on the land mass of India), (3) the price must be the price at which the goods are ordinarily sold or offered for sale in accordance with the international trade, and (4) the price must be genuine price between a commercial seller and a commercial buyer unrelated to each other ..................And the goods will have to be valued at the point of time of being unloaded on the land mass of India and at the place where they a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods derelict, jetsam, floatsam and wreck or goods lost, destroyed or abandoned, which we have referred to in detail and discussed above. The Gujarat High Court expressly referred to Sylvania Laxman s case (77 Bom. Law Reporter 380) and observed (Page 213) : Besides, the considerations which we have outlined in the earlier part of our judgment were not highlighted before the Bombay High Court. We are not prepared to uphold the contention of the petitioners on the basis of the aforesaid decision rendered by the Bombay High Court. It would be seen that while not expressly disagreeing with the judgment of this Court, the Court refused to apply that rule so far as the valuation of goods for the purpose of determining the duty payable was concerned. As noticed at the outset, the Division Bench of the Gujarat High Court was concerned with the point of time with reference to which the assessable value of the goods imported was to be arrived at and not with the question at which point of time the goods became imported goods and chargeable to duty. We must observe that the point of time with reference to which the assessable value of the goods envisaged by Section 14 has to be arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 12 which word takes within its ambit the chargeability, the assessment of the value of the. goods dealt with by Section 14, the determination and calculation of rate of duty dealt with under Section 15 and the recovery of duty for which provision is made under several other sections of the Customs Act. In our view, such an interpretation far from leading to any anachronism or incongruity gives full effect to all the relevant provisions of the Customs Act. 51. In Prakash Cotton Mills (P) Ltd. v. B. Sen (AIR 1979 S.C. 675) the Sup- reme Court was dealing with a case arising under Section 15(l)(b)of the Customs Act and in view of the devaluation of the rupee the Court had to decide at what rate the customs duty was to be calculated. Was it to be at the rate pre- valent on the date of removal from warehouse or was it to be at the rate in force on the date when the goods were unloaded on the land mass ? The Court held: It is thus the clear requirement of cl. (b) of sub-sec. (1) of Section 15 of the Act that the rate of duty, rate of exchange and tariff valuation applicable to any imported goods shall be the rate and valuation in force on the date on which the warehoused go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods were wholly exempt from duty when the ship arrived and the total exemption was withdrawn and partial exemption was all- owed before they were cleared for home consumption. The Court repelled the contention that the goods were imported into India no sooner than they ent- ered the Indian territorial waters and the notification totally exempting them was in force. We do not think it necessary to discuss this judgment at length for it overlooks the definition of the word India in Section 2(27) and equates im- port into India with presentation of the bill of entry. We do not think this view is sustainable. It is enough to note that the learned Judge himself on a more exhaustive consideration of the matter in Sundaram Textiles Ltd., Madurai v. Assistant Collector of Customs, Madras and another (1983 Excise Law Times 909), to which reference has been made above, conferred with the view expressed in Sylvania Laxman s case (1983 Mah. Law Journal 909) unhesitatingly declared : I do not think, I can stick to my old view which was arrived at without reference to these, decisions, all of which fully bring about the distinction between the chargeability under See. 12 and the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from time to time just as territorial waters. Section 111 (d) which authorises confiscation of goods and conveyances and imposition of penalties in respect of any goods which are imported or attempted to be imported or are brought within the Indian Customs Waters for the purpose of being imported contrary to any prohibition imposed by or under the Customs Act or any other law for the time being in force, in our view, does not in any way support the contention that the import is not complete until goods are unloaded on the land mass. It only lays down that no sooner than the goods are brought into the customs waters for the purpose of being imported, the provisions of the Customs Act are attracted and if they are not complied with would become liable to the penalties mentioned in Section 111 (d). It does not throw light on when the act of import of goods is completed, much less does it lead to the conclusion that import is not complete when the goods enter territorial waters of India. That provision does not militate against the conclusion we have reached that goods become imported goods when they enter territorial waters of India. 54. In Jain Shudh Vanaspati Ltd. v. Union of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin India which includes territorial waters of India. It is true that the moment ship with goods enters the territorial waters of India it would be subject to the control of the customs authorities and would also be subject to the provisions of the Customs Act and the provisions of prohibition and other restrictions placed on the import and the manner of import of those goods. But entry in the territorial waters, though amounting to import, yet will not for fiscal purposes, determine the date and time for the purpose of calculating the rate of duty which is leviable under the Customs Act and for which we have to look to Section 15 of the Act. (Emphasis supplied). We also agree with this view, but we find it difficult to accept that merely because the rate of duty has to be determined under Section 15 the question of chargeability of the goods to duty also should be determined with reference to the dates mentioned in Section 15. Chargeability is different from assessing the duty payable which has to be done with reference to the dates mentioned in Section 15 having regard to Section 14. Even as Sachar, J. has observed, the time of import of goods and the time for taxability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed having regard to the rates mentioned in Section 15 on the value of the goods assessed under Section 14, the whole scheme of the Act unfolds itself and everything would fall into its place. In observing that Synthetics Chemicals case (1981 E.L.T. 414) came to the correct conclusion that the rate prevalent on the day of clearance will apply under Section 15(l)(b) of the Customs Act and having come to above conclusion the Bench could not still have distinguished Sylvania Laxman s case and should have held it to be wrongly decided , we are afraid again the distinction between chargeability of goods to customs duty and the rate at which duty is leviable, was ignored. If the goods were wholly exempt from duty at the time when, they became imported goods and they so became no sooner than they entered the territorial waters of India, the question of the rate at which the duty payable should be calculated and collected would not arise; consequently no question of quantifying the duty with reference to the date of clearance for home consumption would arise in such a case. But, if they were only partially exempt from duty on that date, quantifying the amount of duty payable thereon would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court in N.B. Sanjana v. E.S. W. Mills (AIR 1971 S.C 2039)==1978 E.L.T. (J 399) (S.C.) made with reference to Rule 10 of the Central Excise Rules which provides that where duties or charges have been short-levied through inadvertence the persons chargeable with the duty or charge so short-levied shall pay the deficiency on a written demand by the officer being made within three months. The observation of the Supreme Court relied upon is (page 1704): That provision will apply even to cases where there has been a nil assessment in which case the entire duty later on assessed must be considered to be the duty originally short-levied. It must be noticed that the Supreme Court was making that observation with regard to goods which were dutiable goods and through inadvertence no duty was levied at all. Non-levying of duty on dutiable goods was also treated as short-levy. The Delhi High Court tears the observation of the Supreme Court from its context to hold that even after the goods are exempted under Section 25(1) they should be deemed and to be subject to nil duty. 55. The Delhi High Court further observed that in Sylvania Laxman s case the Bombay High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge to pass free of duty if he is satisfied that it has been in use for such minimum period as may be specified in the rules. He may also allow it to pass free of duty if he is satisfied that it is for the use of the passenger or his family. Section 80 further provides that where the baggage of a passenger contains any article which is dutiable or the import of which is prohibited and in respect of which a true declaration has been made under Section 77, the proper officer may, at the request of the passenger, detain such article for the purpose of being returned to him on his leaving India. In the context of these provisions it was held that unless the goods are brought into the country for the purpose of use, enjoyment, consumption, sale or distribution so that they are incorporated in and mixed up with the mass of the property in the country, they cannot be said to have been imported or brought into the country. This decision, in our view, is with reference to the special provisions contained in Sections 79 and 80 of the Act and does not, in any way, limit the ambit of Section 12, which deals with goods which are intended to be brought to the land mass of India and become importe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her take the goods from out of the provisions of .Section 12 the charge under the Section can arise and operate at a rate at any time after such entry and before the goods are cleared. While we agree that the goods continue to be imported goods from the moment they enter the territorial waters and until they are cleared for home consumption as defined in Section 2 of the Customs Act, the taxable event must occur at some particular point of time. We have to ascertain if duty was leviable with reference to the time when the taxable event occurred. Unless the legislature expressly provided otherwise, duty is leviable under Section 12 on goods imported at that point of time the duty is not imposed on the goods as such but on the act of importation. In our view if the goods acquire the character of imported goods as soon as they enter territorial waters of India, even as accepted in that judgment, the taxable event occurs, at that moment. The fact that they continue to be imported goods until they are cleared does not mean that taxable event occurs once again at any subsequent point of time or as and when they are sought to be cleared. The learned Single Judge also held (page 189) : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out unloading goods in a customs port also overlooks the specific provisions contained in Chapter VIII with regard to goods in transit. In all these cases, it is assumed that unless goods are so placed as to enter the main stream of trade and mix with the goods on the land mass, import is not complete. That, in our view, is not justified, having regard to the express provisions for warehousing of goods under the Customs Act. Even after the goods are kept in the warehouse and before they are cleared for home consumption, they could still be sold though in fact they would not become part of the goods on the land mass. If such goods could be treated as imported goods even though they are not cleared for home consumption and they ought to be so treated, as per the definition, there is no reason why any difficulty should be experienced in treating the goods as imported into India, no sooner than they enter the territorial waters of India. Sale, consumption or use is, no doubt, the object of importation and unless they are cleared for home consumption they do not mix with the goods on the land mass. But since they are imported goods the moment they enter the territorial waters, customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the goods are cleared for home consumption; hence the question as to at what rate the customs duty should be levied on such goods, does not arise. 61. Question No. 3 : The Customs Act is an Act to consolidate and amend the law relating to customs. Section 12 of the Customs Act envisages only levy of duties of customs and no other duties. It makes provision for levy of duties of customs at such rates as may be specified under the Customs Tariff Act, 1975 or any other law for the time being in force. Reference to the Customs Tariff Act, 1975 or any other law for the time being in force in Section 12 of the Customs Act is only for the purpose of rates at which duties of customs envisaged by the Customs Act are to be levied. Any other duty mentioned in the Customs Tariff Act or any other law for the time being in force would not be customs duty; those would be such other duties as are leviable under those enactment s. The countervailing duty envisaged under Section 2A of the Tariff Act on any article imported into India is in addition to the customs duty leviable thereon under Section 12 of the Customs Act. The provisions of the Customs Act, 1962 and the rules and regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emptions, any exemption from the levy of countervailing duty or additional duty would be an exemption granted by the Central Government in exercise of the powers conferred under sub-section (1) of Section 25 of the Customs Act read with the provisions of the respective enactment s. A notification under Section 25(1) of the Customs Act read with Section 3(6) of the Customs Tariff Act may exempt such goods wholly or partially from the levy of additional duty as well. When exemption is granted by the Central Government under Section 25(1) of the Customs Act, that can operate only in respect of such duty as is specifically mentioned in the particular notification. A notification under Section 25(1) exempting goods from levy of basic customs duty cannot by itself exempt such goods from the levy of countervailing duty or additional duty leviable under the Tariff Act or the Customs Tariff Act, 1975. Merely because goods are exempted from levy of basic customs duty leviable under Section 12 of the Customs Act, it does not follow that they are also exempt from levy of countervailing duty or additional duty; nor does exemption from levy of countervailing duty or additional duty, wholly or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods are cleared for home consumption, even then, it would have no effect in regard to the exemption from levy of basic customs duty. Basic customs duty would not be leviable thereon. If the goods partially exempt from the levy of basic customs duty and additional duty are sought to be cleared after the partial exemption was withdrawn in respect of only basic customs duty, then the basic customs duty will be chargeable under Sections 14 and 15 of the Customs Act at the value and the rates prevalent on the date of clearance. Likewise, if partial exemption from the levy of additional customs duty is withdrawn before the date of clearance of the goods they would be chargeable on the value and at the rates mentioned in Sections 14 and 15 of the Customs Act. In short, if the goods are wholly exempt from basic customs duty irrespective of whether they are exempt from the levy of additional duty, wholly or partially, they would still be exempt from the levy of basic customs duty, even if the exemption notification were withdrawn before the date of clearance of the goods. The crucial date for determining whether basic customs duty was leviable is the date on which the goods were i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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