TMI Blog1995 (2) TMI 440X X X X Extracts X X X X X X X X Extracts X X X X ..... ded under Chapter 89, Heading 89.08 and sub-heading 8908.00 of Customs Tariff Act, 1975. The duty is leviable at 40 per cent ad valorem plus ₹ 1,400/- per Light Displacement Tonnage (L.D.T.). Note 2 of the Chapter reads as follows : 2. In heading No. 89.08 Light Displacement Tonnage (L.D.T.) means L.D.T. in metric tonnes as per Builder s Registered L.D.T. referred to in the Stability Book or the Builder s certificate at the time of initial commissioning of the vessel or the floating structure : Provided that in case of any change in the L.D.T., the highest of the L.D.T. indicated in any of the documents referred to above shall be taken for the purpose of levy of duty. 3. The petitioners in all these petitions have challenged the constitutional validity of Note 2 in Chapter 89 which has been reproduced hereinabove. In three petitions, i.e., Special Civil Application Nos. 640 of 1990, 4968 of 1990 and 4707 of 1989, the petitioners have also prayed for quashing and setting aside the order passed by the Assistant Collector by which the petitioners have been asked to pay import duty calculated on the basis of highest L.D.T. indicated in one of the documents. In these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e L.D.T. registered in the Stability Book or the Builder s certificate. It is also an undisputed fact that the department has levied and collected the customs duty and the additional duty of customs not on the basis of the actual weight of the ship when it was brought into India. It has been levied and collected on the basis of the weight indicated in Stability Book or Builder s certificate which is the highest L.D.T. reflected in the documents relating to the ship. In three petitions, i.e., Special Civil Application Nos. 640 of 1990, 4968 of 1990 and 4707 of 1989, the Superintendent of Customs assessed the duty on the basis of highest L.D.T. indicated in the Stability Book. While in the case of Special Civil Application No. 935 of 1990, the Superintendent of Customs assessed the duty on the basis of actual L.D.T., that is to say, he took into consideration the removals indicated in the Memorandum of Agreement relating to the purchase of ship and in other documents. Therefore, a show cause notice demanding differential amount of duty was issued and the Assistant Collector as per order dated January 29, 1990 confirmed the demand. Except with the variation in the factual aspect as re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which reads as follows : 15. Date for determination of rate of duty and Tariff valuation of imported goods. - (1) The rate of duty and Tariff valuation if any, applicable to any imported goods, shall be the rate and valuation in force - (a) in the case of goods entered for home consumption under Section 46 on the date on which a bill of entry in respect of such goods is presented under that section; (b) in the case of goods cleared from a warehouse under Section 68, on the date on which the goods are actually removed from the warehouse; (c) in the case of any other goods, on the date of payment of duty : Provided that if a bill of entry has been presented before the date of entry inwards of the vessel by which the goods are imported, the bill of entry shall be deemed to have been presented on the date of such entry inwards. (2) The provisions of this section shall not apply to baggage and goods imported by post. Section 22 of the Act provides for abatement of duty on damaged or deteriorated goods. Section 23 of the Act provides for remission of duty on lost, destroyed or abandoned goods. Section 128 of the Act provides for appeals against any decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a vessel. What should be the rate of duty and how the same is to be measured and levied is certainly within the competence of the Parliament. Customs Tariff Act, 1975 provides for measure of duty. The impugned Note 2 lays down the rule of evidence for the purpose of levying the duty. As far as measure of duty is concerned, the Legislature has ample power to provide measure for recovery of taxes. In this connection, reference may be made to a decision of the Supreme Court in the case of Khyerbari Tea Co. v. State of Assam, reported in AIR 1964 SC 925. In para 21 of the reported decision, it is inter alia observed as follows : It may be conceded that when the legislature constructs a machinery for the recovery of the taxes which it is within its competence to impose, the said machinery should have some rational or intelligent connection with the tax. ... Consideration of administrative convenience as well as considerations or facility in recovering the tax cannot be treated as irrelevant in this context. Again in Para 23 of the reported decision, it is, inter alia, observed that the method of collection does not affect the essence of duty but only relates to the machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence may be adopted for the purpose of determining the measure of the levy. Any standard which maintains a nexus with the essential character of the levy can be regarded as a valid basis for assessing the measure of the levy. Thus, all that is required to be seen is as to whether the measure of levy has any nexus with the essential character of the levy. If a standard or a measure which maintains a nexus with the essential character of the levy then it has to be regarded as valid basis for assessing the measure of levy. 11. In view of the aforesaid settled legal position, it is not possible to agree with the contention raised by the learned Counsel for the petitioners that Note 2 of Chapter 89 of the Customs Tariff Act, 1975 is not within the competence of the Central Government. 12. The learned Counsel for the petitioners submitted that Note 2 occurs in Schedule I to the Customs Tariff Act, 1975 while charging section is in text of the Act. In his submission, when there is conflict between the text of the statute and the provisions of the Schedule to the Act, the provisions contained in text of the Act must prevail. In this connection reliance is placed on the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding export duties. It is under this power conferred upon the Parliament by the Constitution that the Customs Act, 1962 and Customs Tariff Act, 1975 have been enacted. As indicated hereinabove, no deeming fiction has been created by the Legislature while inserting Note 2 in Chapter 89 of First Schedule to the Customs Tariff Act, 1975. All that has been done by the Legislature is to provide machinery or measure for assessing the levy of import duty. In the entry as it existed at the relevant time, duty was based on value as well as on quantum of goods imported. Note 2 has removed the difficulties in ascertaining the L.D.T. for the purpose of levy of duty. In respect of a vessel imported into India for the purpose of breaking up, there could be different weight in respect of different vessels. Such different weights are bound to be reflected in the document relating to the vessel. Some of such documents are - (1) Stability Book, (2) Builder s certificate at the time of commissioning of vessel, (3) Memorandum of agreement between the parties as regards sale or purchase of the vessel, (4) Surveyor s report as regards actual weight of the vessel at the time of import and (5) Certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of uncertainty. III. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it. A tax upon the rent of land or of houses, payable at the same term at which such rents are usually paid, is levied at the time when it is most likely to be convenient for the contributor to pay ; or, when he is most likely to have wherewithal to pay. Taxes upon such consumable goods as are articles of luxury are all finally paid by the consumer, and generally in a manner that is very convenient for him. He pays them by little by little, as he has occasion to buy the goods. As he is at liberty, too, either to buy, or not to buy, as he places, it must be his own fault if he ever suffer any considerable inconveniency from such taxes. The aforesaid cannons of taxation have been approvingly referred to be a Full Bench of this Court in the case of Calico Mills v. Union of India, reported in 1983 (1) GLR 1. In view of the aforesaid settled legal position and the basic principles as regards cannons of taxation, the contention that by inserting note, the Parliament has enacted something which is beyond its competence cannot be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... administration of levy and collection of tax. In this connection, reference may be made to a decision of the Supreme Court in the case of M/s. Khadi Village Soap Industries Assn. v. State of Haryana Ors., reported in JT 1994 (5) SC 233 wherein it is held that in matters of taxation, the test applicable for striking down a taxing provision should be one of palpable arbitrariness. In the instant case, on the contrary, the Note introduces reasonableness, certainty and convenience to both the importer as well as to the assessing authority. There is no substance in the contention that the note is unreasonable, arbitrary or discriminatory. 16. It was contended that Note 2 contained in Chapter 89 is clarificatory in nature. In the submission of the learned Counsel for the petitioners, tariff item contained in Heading 89.08 in sub-heading 8908.00 is very clear. Therefore, the import duty should be assessed only by referring to tariff item and therefore, Note 2 should be considered as redundant. The argument on the face of it is fallacious. Implicit assumption in the argument is that the Parliament has inserted Note without any meaning. This submission is against the basic cannons of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w cause notice is under challenge. The Assistant Collector has taken into consideration the Memorandum of Agreement wherein L.D.T. is noted as 6040 MT as per the original papers of the ship. This has been taken as the basis for assessing the import duty applying Note 2 of Chapter 89. In this connection, the Assistant Collector has observed as follows : According to Chapter Note at Sr. No. 2 of Chapter 89 for the purpose of assessment, L.D.T. at the time of initial commissioning of the vessel is required to be adopted in this case, because the L.D.T. is changed on account of subsequent removables of the articles from the ship, and the party has claimed the assessment of changed L.D.T. of 5578.8 MT. It is evident that the Assistant Collector has taken the highest L.D.T. noted in the original papers of the ship. It is true that there is no specific reference to the Stability Book or Builder s certificate. But the order has to be read in light of the controversy raised before the Assessing Authority and in light of the provisions which were relied upon by the parties. The substance of the order is that in case of change in L.D.T. after the initial registration of the vessel, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin a week would not be applicable. In this view of the matter, the argument based on the provisions of Section 15 and the proviso to Section 15(1) is not required to be considered. The argument is that the requirement of entry inwards would be in respect of conveyance only. As indicated hereinabove, what is imported is goods and not conveyance. The goods may be vessel, but it is not imported as a conveyance. The vessel itself being goods, it comes on its own. It is not being conveyed in any other conveyance. It is concluded by decision of Hon ble Supreme Court in the case of Chowgule Company Pvt. Ltd. v. Union of India, reported in 1987 (28) E.L.T. 39 (S.C.) that vessel is goods within the meaning of the term goods defined in the Act. Therefore, the argument that the provisions regarding date of entry inwards which is in relation to the vessel is not relevant at all. The date of determination of rate of duty would be the presentation of the bill of entry and the bill of entry should be presented as provided under Section 46(1) on the date when the goods have been imported and are ready for inspection by the Port Officer. In the instant case, the goods were ready for inspection ..... X X X X Extracts X X X X X X X X Extracts X X X X
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