TMI Blog1982 (9) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... be called the 1975 Act). Goods having been received the petitioner presented their bill of entry for clearance to the Customs Authorities. The petitioners claim that they were entitled to clear the goods by paying rate of duty under entry No. 73.15(1) in the schedule to 1975 Act, which is 60% (effective 35% in view of exemption notification dated 18-6-1977). The Customs Authorities however, refused to clear the goods at this rate because according to it the goods imported by the petitioner are covered by the Heading 73.15(2) of the schedule of 1975 Act, where the rate of duty is 300% (effective 220% because of exemption notification dated 15-7-1977). 3. The heading 73.15(2) in Customs Tariff Act reads as under: 73.15 Description of Articles Rate of duty (a) Standard (b) Preferential area Central Excise Tariff Items (1) (2) (3) (4) Alloy Steel and high Carbon Steel in the form mentioned in Heading No. 73.06/07 to 73.14 Not elsewhere specified(i) (a) 60% Coils for the rerolling, bars (including bright bars)(ii) rods, sheets, and plates of stain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is importing stainless steel circle which really means sheet cut to non-rectangular shape. So there does not seem to be any justification to say as to why stainless steel circles would not be included in 73.15(2) read with 73.13, clause (n) of Note 1 of Chapter 73. Mr. Sen the learned counsel for the petitioner sought to urge that non-rectangular does not mean circle bscause there is no angle in the circles. According to the counsel non-rectangular only means that the form is not rectangular but that the form necessarily must have some angle, otherwise clause (n) of Note 1 is inapplicable. We cannot agree. Now when clause (n) says that sheets or plates are to be taken to apply to sheets which have been cut to non-rectangular shape we must give it the obvious meaning i.e., the shape which is not rectangular. The additional requirement urged by Mr. Sen that the shape must be in a form which must necessarily have an angle reads something extra not found in the definition. A non-rectangular shape may be in the form of circle, may be of a shape having different angles like being quadrangular, or Hexagon. But on no reasonable interpretation of this definition while if exclude sheets c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er alloys contains the description of the plates, sheets and circles separately. The suggestion is that as sheets and circles are separately mentioned sheets cannot include circle. We are unable to agree. 7. It is no doubt true that in these two articles of the Excise Act both sheets and circles are described separately, but then the description of an article under the Excise Act cannot be taken as covering and determining the meaning of the said item under the Customs Act. Mere fact that sheets and circles have been defined separately does not necessarily mean that sheets under the Customs Act cannot be said to include circles. In this connection one cannot ignore that under Chapter 73 Note 1(n) specifically has said that sheets are to be applied to sheets cut to non-rectangular shape making it clear that the legislature meant to include circles under the heading of 73.15(2). It is also of interest to note that both under items 26A and 27 of the First Schedule of Excise Act the rate of duty is the same for sheets and circles being Rs 2,000/- per M.T. and Rs. 1450/- per M.T. respectively. We are mentioning this to show that even though sheets and circles have been defined separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference because what the legislature is doing is to impose a standard rate of duty of 300%. The duty payable may naturally vary with the quality of the article. May be if stainless steel is of prime quality it will be valued more with the result that the rate of duly may be more on that particular consignment and similarly it may be less if goods imported are of defective stainless steel. Thus duty payable will be less because of the value of goods and not because it is of any quality. The rates of duty prescribed for under various Heads of the Customs Tariff Act, 1975 are with reference to the shapes and forms of the various types and not with reference to their condition or quality. All items of alloy steel and high carbon steel in the form mentioned from 73.06/07 to 73.14 fall under Heading 73.15 irrespective of whether they are prime quality or of defective seconds quality. To take an instance billets mentioned in heading 73.06/07 if made of stainless steel would fall under heading 73.15(1) whether of prime quality or of defective seconds. This is because billets as such is not specifically mentioned in 73.15(2) and, therefore, will be covered by 73.15(1) but it will make n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oing an exercise in futility because persons like the petitioners would then only be liable to pay lower rate of duty. This would be attributing illogicality and absurdity to the legislature a situation which can never be contemplated. The only rational answer to this is that the legislature did not mention quality in the amended 73.15 because such a requirement is foreign to the Customs Tariff Act and hence totally unnecessary. This aspect of argument, therefore, fails. 11. Though Mr. Sen was not able to point out any provision in the Tariff Act of 1975 wherein any classification was made between prime quality and secondary quality of goods he nevertheless urged that such a classification was made in the various import policies and the trade understood the articles for import to be classified into prime and secondary and, therefore, the same principle should be applied in interpreting a heading in the Customs Tariff Act. In that connection our attention was drawn to the import policy of 1980-81; Appendix 6 which contains items which are on the banned list. In the said appendix item 4 deals with all grades of carbon steel and item No. 7 deals with all second grade/defective/cutti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for interpretation of the first schedule of the Act of 1975 clearly go against this contention of Mr. Sen. Thus Rule 2 for the interpretation of schedule of the Act, 1975 states that any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that as imported, the incomplete or unfinished article has the essential character of the complete or finished article. Thus according to this rule even an unfinished article will be included in the heading provided it has the essential character of finished article. Thus the circles which are imported by the petitioners have certainly an essential character of complete article. The fact that it is unfinished in the sense that it is defective or has some dents cannot take it away out of the purview of the main heading. Thus 73.15(2) when it talks of the stainless steel circle must be held to include all stainless steel circles irrespective of whether it is of prime or secondary grade quality. Mr. Sen referred to Dunlop India Ltd. v. Union of India - (AIR 1977 SC 597). In that case the Supreme Court came to the conclusion that no reasonable person could come to the conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nably bear and one of them which was in favour of Revenue was adopted, the court has no jurisdiction to interfere rarely because the other interpretation favourable to the subject appears to the court as the better one to adopt.' (A.I.R. 1963 SC 1319). In that case the dispute was whether feed oats fell within item 42 i.e., fodder, grain, or under item 32 i.e. grain. The Customs authorities held that the goods imported fell within item 32 and the importers had undoubtedly no licence to import under that heading. The learned Judges of the High Court however, held that entry 32 reading grain had to be read as excluding all grain which would be fodder and as the petitioner had imported oats for horses feed, the proper item within which the goods imported fell were item 42 fodder etc. The Supreme Court set aside the judgment of the High Court because it held that it cannot be said that the view taken by the Customs authorities was such which no reasonable person can adopt. It is also well to remember that the court dealing with the petition under Article 226 is not sitting in appeal over the decision of the Customs authorities vide Girdhari Lal v. Union of India (A.I.R. 1964 SC 1519). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and strict construction. It must be remembered that it is only when there is some equivocation or ambiguity about a word or provision that the rule of strict construction or narrow construction in favour of the subject is to be applied but if there is no ambiguity and the act or omission falls clearly within the mischief of statute then the construction of penal statute will not differ from that of any other, see : Maharaj Book Depot v. State of Gujarat, 1979 (1) SCC 295 at 301." 15. "Although the common distinction, 'as Pollock C.B. said in Nichelson v. Fields' taken between penal Acts and remedial Act that the former are to be construed strictly and the others are to be construed liberally, is not a distinction, perhaps, that ought to be erased from the mind of a judge," yet the distinction now means little more than `that penal provisions, like all others, are to be fairly construed according to the legislative intent as expressed in the enactment, the courts refusing on the one hand to extend the punishment to cases which are not clearly embraced in them, and on the other equally refusing by any mere verbal nicety, forced construction, or equitable interpretation to exonerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court that 'retrospective legislation may be enacted is not now open to question'. (Vide S.T. Swaminar v. Comer. H.R. C.E. AIR 1963 SC 966 at 975). "It is well settled that within its competence, a legislature has the power to make a law imposing a tax retrospectively or validate defective laws by subsequent legislation, or even past, unlawful collection, the power of validation being ancillary to and included in the power to legislate on a particular subject." (See AIR 1974 SC 1533). 20. The next objection was that the Act was discriminatory as it has arbitrarily chosen a date, namely 1-1-1981, from which date the Act had been made effective retrospectively. The explanation given for this date by Mr. Bhandare was that the objections as to the stainless steel being covered by heading 73.15(2) was raised when Bill of Entry was presented in January 1981. The stand of the respondents is that earlier to this date the Customs had never permitted the stainless steel circles to be imported under the heading 73.15(1) and it was only because of the direction given by this court that the Customs authorities were now permitting the same to be imported under 73.15(1). As there was vast d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be recovered, are all matters within the competence of the Legislature, and in dealing with the contention raised by a citizen that the taxing statute contravenes Art. 19, courts would naturally be circumspect and cautious". (para 12 of Rai Ramkrishna case (supra.). It is relevent to note that in the above said case the period covered by the retrospective operation of the Act was between 1950 and 1961 and yet this retrospectivity was not held to amount to imposing restrictions which were not reasonable and not in public interest. In the present context the period of retrospectivity is only one year, for which there is proper reason. Earlier importers of stainless steel circles had to pay duty under 73.15(2). We say this because though it was sought to be suggested by Counsel for the petitioners that prior to the Amendment Act the stainless steel circles were being imported and charged under 73.15(1), no specific reference or material was placed before us to show that the Customs authorities ever permitted stainless steel circles to be imported under sub-heading 73.15(1). The matter became dubious only when petitions were filed in the courts urging that the stainless steel circles a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure to refrain from making any changes during the financial year. This is because the position of foreign exchange varies so much and the requirement and the considerations of national economy are so urgent that it would be trespassing on the legislative and the administrative field if courts were to hold that a rate of duty or tax was immutable for any particular period. As a practical measure there would always be some parties whose contracts are outstanding. If the spacious argument was carried to its logical end then no change could be made in the rates because some one or the other may always be affected. And if this argument was countenanced then the Government or legislature could be held to ranson by parties entering into long term contracts at the existing rates of duty and then insisting that no change be made in those rates till all the contracts are executed, which may take years for completion. To take an illustration if A enters into a contract with B to import goods for the next five years of item falling under 73.15(2), at present the duty payable is 300%. But could with any sense of rationality be it urged that if the Government tomorrow was of the opinion that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e form of import or export licence. Where this is the case, the parties will usually provide in the contract which of them is to apply for the necessary licences and what is to happen if the application is refused (Vide Daruka Co. v. Union of India : AIR 1973 SC 2711 at 2716 and 2718) The reluctance and self restraint to be exercised by courts when dealing with the validity of taxation laws including excise was brought out well in Patton v. Bardy : (184 U.S. 608) wherein the U.S. Supreme Court observed : "But so long as the legislation is not colorable merely, but is confined to the enactment of what is in its nature strictly a tax law, and so long as none of the constitutional rights of the citizen are violated in the directions prescribed for enforcing the tax, the legislation is of supreme authority. Taxes may be and often are oppressive to the persons and corporations taxed, they may appear to the judicial mind unjust and even unnecessary, but this can constitute no reason for judicial interference." ... "It is not the province of the judiciary to inquire whether the excise is reasonable in amount or in respect to the property to which it is applied. These are matters in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be in a position to pass on the tax to the buyer and, therefore, this retrospective legislation was unreasonable. While noting that the sales tax is according to the accepted notions intended to be passed on to the buyer the Supreme Court negatived the contention that this situation would make the Act incompetent or unreasonable, the court observed : - "But it is not an essential characteristic of a sales tax that the seller must have the right to pass it on to the consumer, nor is the power of the legislature to impose a tax on sales conditional on its making provision for sellers to collect the tax from the purchasers. Whether a law should be enacted imposing a sales tax, or validating the imposition of sales tax when the seller is not in a position to pass it on to the consumer, is a matter of policy and does not affect the competence of the legislature." [Vide J.K. Jute Mills Case (supra)]. Mr. Sen seems to suggest that there is a distinction between a situation where the Act having been struck down as unconstitutional is later on validated by the Parliament. He says that there is no unreasonableness because as a matter of fact tax was always there though it had been struc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposition that even taxation measures must satisfy the test of reasonable restriction under Article 19. Broadly stated that proposition is unexceptionable but as mentioned in that very judgment, 'when the validity of a tax law is challenged a State would be entitled to rely on the fact that the revenue raised by tax law served the public purpose and that is the basic justification for being treated as a reasonable restriction on the individual's fundamental right under Article 19(1)(g) and Article 304(b). In the present case the only challenge is to the retrospective operation of the Act by a period of over a year which considering the matter that doubt was cast on the recovery of the custom duty under a particular head cannot be said to be in any way unreasonable.' That the complaint of retrospectively in support of argument of unreasonableness of legislation of customs has always received short shrift is clear from the following observations made by Higgins, J. in Sargood Brothers v. The Commonwealth and another [1910 (II) C.L.R. 250 at 305] :- "We have been reminded of the doctrine that Parliament is to be presumed not to intend to interfere with vested rights. But, in apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Port authorities for the use of cranes and winches. Under the Customs Act the Central Board of Excise and Customs has provided the Bill of Entry (Forms) Regulations, 1976. The said form prescribes the assessable value on the basis of value of the goods as loaded with landing charges. In the petition challenge has been made to these landing charges. One part of the challenge was on the assumption as if the landing charges are already included in the invoice made out by the foreign supplier and are paid directly by the shipping company to the Port authorities. This argument was, however, not pressed for the simple reason that factually that is not correct. The dispute really is not that landing charges have been paid to the Port authorities and the petitioner is being asked to pay second time. The real dispute relates to whether the landing charges should be included in assessable value of a consignment imported into India for computing the customs duty payable thereon. Varying with the items landing charges normally amount to 3/4% of the C.I.F. value of the goods imported. Section 14 of the Customs Act provides for valuation of goods for the purpose of assessment and lays down tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and place at which value should be calculated. Valuation has to be calculated with reference to the place and time at which goods are ordinarily sold. This situation obviously arises after the goods have been put at the port and after paying landing charges. The argument of the petitioners suffers from being too hypertechnical as well as being impracticable. In this connection a reference may be made to Ford Motor Company of India Ltd. v. Secretary of State (AIR 1938 PC 15) wherein the court interpreted that the price at the time and place of importation could not be taken to be 'Ex ship'. It observed that the argument that the cartage charges should be analysed so as to eliminate the proportionate cost of the journey from the boundary of the port to the railway station in Bombay, is not in their Lordships' view necessitated by the phrase 'place of importation'. The court also observed that the Legislature intended to exclude post-importation expenses need not be doubted, but it had to do this in a practicable manner without undue refinement, and it must be taken to have regarded the phrase which it employed as sufficient for the purpose if taken in a reasonable sense. Reliance by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsable to the existence of the entire thing, then, as importation itself...................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 concept of 'import' as implying something brought for the purpose of sale or being kept is supported by the observations of Kelly C.B. in Harvey v. Corporation of Lyme Regis. (1869) 4 Ex. 260 at p. 262 (P)......... The ordinary meaning and purport of the words is perfectly clear, namely, that tolls are to be paid on goods substantially imported; that is, in fact, carried into the port for the purpose of the town and neighbourhood." 26. Similarly, In re : Sea Customs Act, S. 20 (AIR 1963 SC 1760) the Supreme Court held that "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. Such a condition is imposed by way of the exercise of the power of the Union to regulate the manner and terms on which goods may be brought into the country f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be a sound exercise of discretion to refuse to interfere in a petition under Art. 226 unless there are good grounds therefor, (see Union of India v. T.R. Varma, A.I.R. 1957 S.C. 882). This position was accepted in A.V. Venkateshwaran v. Ramchand Sobha Wadhwani and another (A.I.R. 1961 S.C. J 506) though it was pointed out that the rule that the party who applies for the issue of a high prerogative writ should, before he approaches the Court, have exhausted other remedies open to him under the law, is not one which bars the jurisdiction of the High Court to entertain the petition or to deal with it, but is rather a rule which Courts have laid down for the exercise of their discretion. It is true that in Venkateshwaran's case (supra) the Supreme Court refused to set aside High Court judgment which had granted the writ petition even though the party had not moved the Central Government in revision, but that was as the court clarified that it took into account the peculiar circumstances of the case that the High Court had already exercised its discretion in granting the writ. The court emphasised this matter when it said that "it would be remembered that the question is not wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 of the Customs Act. Section 17 further provides that for assessment of duty after the bill of entry has been presented such goods shall be examined and tested by the proper officer and after such examination and testing the duty, if any, leviable shall be assessed. For this purpose the officer can ask for various things about catalogue, the documents and other necessary material. Though the said Section permits the appropriate officer to assess the duty on the basis of the documents produced but if it is found subsequently on examination or testing that any statement in such entry of document is not true the goods may without prejudice to any other action be reassessed to duty. Section 18 provides for provisional assessment of duty if security is furnished by the importers for the payment of difference if any between the finally assessed duty and provisionally assessed duty. It will thus be seen that the statement of the importers as to the value of the goods which have been mentioned in the invoice or the bill of entry or the nature or quality of goods are not to be accepted automatically but are subject to scrutiny and inspection by the appropriate officer. Thus it can happen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this court claiming that they were only liable to pay duty at the rate of 45% and not at 220% as was demanded by the Customs Authorities. This Court permitted the goods to be released on paying the admitted duty and giving a bond for the disputed amount and only 50% of bank guarantee for the disputed amount. Thus the petitioners were able to get their goods released by paying duty in cash only about 1/5th of what they have been found liable to pay as per our decision of today. Even the bank guarantee only covers 50% of the disputed duty, and whether realisation of the rest of the disputed amount will cause no problem in the lap of future. The result has been that the Revenue has been deprived of these substantial amounts of the duty for all this period for which the stay has operated. Because the amounts involved were very substantial and was | causing | anxiety | for | the | budget | estimates with consequential train of administrative problems that it was considered serious enough for the Parliament to have allocated special urgent time to pass the Amendment Act 15 of 1982. That the sole reason why the Parliament had to rush through the Amendment Act 15 of 1982 was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de out. The argument normally put forth by the parties for asking for interim stay that if duty has been paid in between and ultimately the writ petitions are allowed it will lead to multifarious proceedings and long delay in getting back the refund is answered shortly that the Courts have full powers and will in such a case exercise its discretion to issue a mandamus directing the refund of the duty which it finds has been recovered under an illegal levy. In this connection reference may be made to Firm A.I.B. Mehtab Malid and Co. v. State of Madras and another (A.I.R. 1963 S.C. 928) whereafter holding Rule 16(2) of the Madral General Sales Tax (Turnover and Assessment) Rules 1939 as invalid a writ was issued by the Supreme Court not only to refrain from enforcing any of provision of Rule 16(2) but further directing the sales tax authorities to refund the tax illegally collected. 31. Another aspect should also be borne in mind. In the normal course the challenge to any entry in schedule may be common in the case of many importers who are dealing with the same articles. An order passed in one case will naturally become a precedent for passing similar interim orders in large numbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction of manifest perversity it would be a proper exercise of discretion for the courts to decline to pass interim orders staying the recovery of the duty of customs or excise or tax which has been imposed, during the pendency of the writ petition. 33. We may mention that at the time of admission interim orders were obtained to the effect that the Port Authorities may allow the goods to be removed without the petitioner paying the full demurrage charges subject to the furnishing of bond and further security/bank guarantee. Mr. Chopra, the learned counsel for the Port Authorities makes a grievance that the Port Authority is not concerned with the alleged dispute between the Customs Authority and the petitioners and that it has a right to recover the demurrage charges for the delay in clearing the goods whosoever may be at fault. He refers in this connection to Port of Bombay v. I.G. Supplying Co. (AIR 1977 SC J 622) and specially to the observations that 'even though the delay in clearing the goods was not due to the negligence of the importer for which he could be held responsible yet he cannot avoid the payment of demurrage as the rates imposed are under the authority of l ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
