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TMI Blog1993 (9) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... tification No. 262-Cus., dated October 11, 1958 in exercise of the power vested in it by Section 25 of the Act. The notification read thus : "Exemption to ocean going vessels other than vessels imported to be broken up : Ocean going vessels other than vessels imported to be broken up, are exempt from the payment of Customs duty leviable thereon : Provided that any such vessel subsequently broken up shall be chargeable with the duty which would be payable on her if she were imported to be broken up." 4.By a notification dated October 16, 1965 (Notification No. 162-Cus.) the Central Government substituted the proviso in the abovesaid notification. The substituted proviso reads thus : "Provided that the duty of Customs shall be levied on the vessel if it is broken up as if it were then imported to be broken up." 5.So far as the factual aspect is concerned, it would be sufficient if we refer to the facts in Jalyan Udyog : [iii] On April 24, 1968 the Chairman of the Shipping Corporation of India wrote to the Government of India seeking its permission to purchase two second-hand ships for operating between India and the Gulf and other destinations as `ocean-going vessels' (passeng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riate to read the public notice in full : "New Customs House, Ballard Estate, Bombay-38. No. 30 EXP. SUP. 258 INP. SUP. 260 SUPPLEMENT TO THE DAILY LIST OF IMPORT/EXPORTS, DATED 4-3-1984 Dated 1-3-1984 PUBLIC NOTICE Sub : Assessment of Foreign flag and Indian Flag Vessels for scrapping/Breaking purposes - Procedure Regarding - It is notified for the information of all concerned including Indian Ship Owners and of Metal Scrap Trade Corporation Ltd., Calcutta that the following procedure is laid down for the clearance of Indian Flag vessels sold for breaking/scrapping. The valuation of Indian Flag vessels cleared for breaking/scrapping will be on the basis of Current Import prices of similar vessels imported by M.S.T.C. for scrapping during the period of sale. For this purpose, the ship owners will have to approach M.S.T.C. and obtain a certificate from them regarding the current import price of similar vessels imported by them. In addition to this, movable gears and stores on the vessels, which are to be sold with the vessels, are to be assessed on merits on their appraised value. For this purpose, the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the M.S.T.C. is not necessary in their case. Alongwith the writ petition, the respondents filed a miscellaneous application for an interim direction permitting them to scrap/break the said ships on payment of the admitted duty. An interim direction was granted as prayed for on condition of paying the admitted duty and furnishing bank guarantee for the disputed amount. 8.Writ Petition No. 2326 of 1984 (filed by Jalyan Udyog and another) was allowed by the Division Bench on October 9, 1987 applying the principle of the decision rendered by a Full Bench of that Court in Apar Private Limited v. Union of India [1985 (22) E.L.T. 644] and another un-reported decision of a Division Bench in Writ Petition No. 14 of 1985 (Vishal Gomantak Shipping Corporation and Ors. v. Union of India) disposed of on April 22, 1987. The Division Bench held that inasmuch as M.S.T.C. was not the canalising agency in regard to ships imported prior to 1978, the authorities cannot insist upon the production of No Objection Certificate from the said Corporation for the purpose of grant of approval for disposal of ships for scrapping under Section 42(1) of the Merchant Shipping Act. The Division Bench held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the matter. It is true that the writ petition was filed by both these persons and both of them are respondents in these appeals but in view of the aforesaid circumstance, we do not think that there can be any valid objection to the hearing of the appeal without effecting service upon the second respondent. So far as other appeals are concerned, there is no such objection; service is complete therein. 10.S/Sri Harish Salve and G.L. Sanghi, learned counsel for the ship-owners urged the following contentions : a ship is imported only once into India. The import is when it first enters India and is registered in India according to law. It then becomes an Indian flag-bearing ship. There can be no second import of such ship into India. In Jalyan Udyog, the import of the ships was in the year 1968. There was no re-import or second import in the year 1982, 1983 or 1984. The Customs Act fixes the stage at which the duty is leviable viz., the date of import. The imported goods have to be valued with reference to such date. The rate applicable is the rate prevailing on that date. The exemption notification does not and cannot in law alter or change the stage at which and the point of ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect underlying the exemption notification would be better served by accepting the interpretation placed by the ship-owners upon the exemption notification. Sri Sanghi put forward a further submission that Section 15 applies only in the case of `tariff valuation' referred to in sub-section (2) of Section 14 and not in the case of valuation contemplated by sub-section (1) of Section 14. Inasmuch as the valuation of ships in this case has to be made under Section 14(1) and not under Section 14(2), says Sri Sanghi, neither Section 15 nor Section 46 is attracted. This, according to learned counsel, is an additional ground for holding that the ships concerned in Jalyan Udyog were imported in 1968 and for assessing the duty on the basis of the value and rate prevailing in that year. 11.Sri Dwivedi, learned Additional Solicitor General appearing for the Union of India disputed the correctness of the various submissions made by S/Sri Harish Salve and G.L Sanghi. According to him, the exemption notification is neither ambiguous nor does it admit more than one interpretation. It clearly says that where a ship is imported as an ocean-going vessel it is exempt from duty but if such vessel is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal trade where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer the sale". Sub-section (2) speaks of fixed tariff values. Under this sub-section "if the Central Government is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods". 15.Section 15 specifies the point of time with reference to which the rate of duty and tariff valuation of the imported goods is to be determined. In the case of goods entered for home consumption under Section 46, it is the date on which the Bill of Entry is presented and in the case of goods cleared from warehouse under Section 68, it is the date on which the goods are actually removed from the warehouse. In the case of any other goods, the relevant date is the date of payment of duty. Having regard to its relevance, it would be appropriate to set out the Section in its entirety : "15. Date for determination of rate of duty and tariff valuation of imported goods. The rate of duty and tariff valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in a form or method different from the form or method in which the statutory duty is leviable and any exemption granted in relation to any goods in the manner provided in this sub-section shall have effect subject to the condition that the duty of customs chargeable on such goods shall in no case exceed the statutory duty." Note : Sub-section (3) alongwith the explanation was inserted by the Amendment Act with effect from May 13, 1983. 17.Section 46 provides for the bill of entry and the procedure according to which it has to be filed. Section 143A occurring in Chapter 17 refers to deferment of duty. It provides for deferment of duty in the situation contemplated by it. Section 156 confers the Rule-making power upon the Central Government to carry out the purposes of the Act while Section 157 empowers the Board to make Regulations for the same purpose but subject to the Act and the Rules. According to Section 159, notifications issued under Section 25, among others, have to be laid before the Parliament in the prescribed manner and for the prescribed period. 18.As mentioned hereinabove, the Central Government had issued an exemption notification under Section 25 of the Act be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the said amendment. By virtue of the fiction created by the proviso in the notification, the vessel is deemed to have been imported for breaking-up on the date it is broken-up. It is well settled that where a fiction is created by a provision of law, the court must give full effect to the fiction, and as is often said, it should not allow its imagination to be boggled by any other considerations. Fiction must be given its due play; there is to be no half-way stop. According to this notification, therefore, the date relevant for determining the value and rate of the customs duty chargeable in the case of two ships concerned in Jalyan Udyog is the date on which they were broken-up. 20.We are, however, of the opinion that since the date of breaking-up is an uncertain event and may require an enquiry in each case and also because no ship can be broken-up or scrapped except under the prior permission granted by the Director General of Shipping, the date of breaking-up contemplated by the said proviso should be deemed to be the date on which the permission for scrapping/breaking is accorded by the Director General of Shipping. This clarification is made in the interest of certaint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... door Sabha (A.I.R. 1967 SC 691) and Hamdard Dawakhana v. Union of India (A.I.R. 1960 SC 554)] and also as a species of delegated legislation. Whether it is one or the other, it is a power given to the Central Government to be exercised in public interest. Such a provision has become a standard feature in several enactments and in particular, taxing enactments. It is equally well settled by now that the power of taxation can be used not merely for raising revenue but also to regulate the economy, to encourage or discourage as the situation may call for the import and export of certain goods as also for serving the social objectives of the State. [Vide Elel Hotels and Investment Ltd. v. Union of India (1989 (3) S.C.C. 698), Srinivasa Theatre and Ors. etc. etc. v. Government of Tamil Nadu and Ors. (1992 (2) S.C.C. 643) and Subhash Photographics v. Union of India 1993 J.T. (4) 116 = 1993 (66) E.L.T. 3 (S.C.)]. Since the Parliament cannot constantly monitor the needs of and the emerging trends in the economy and is in no position to engage itself in day-to-day regulation and adjustment of import-export trade accordingly, power is conferred upon the Central Government to provide for exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditional legislation or a species of delegated legislation : an exemption notification under Section 25 is not an executive act. No decision has been brought to our notice in support of the said contention - which is raised only in the written submissions. 24.For the above reasons, we see no reason to hold that the said notification travels beyond the four corners of Section 25. It is perfectly within the ambit of Section 25. 25.We are equally unable to agree that by virtue of the fiction contained in the exemption notification, the ship-owners are being made to pay a higher duty than the statutory duty. By a fortuitous combination of circumstances, it so happens that the value of the ship when it was imported in 1968 as an ocean-going vessel happens to be less than the value of the ship today when it has become junk and fit only for scrapping/breaking. On account of the steep rise in the prices of steel, such an unusual situation has come about but this circumstance in no way affects the validity of the notification. The notification shifts the date of import - in the case of a ship which is imported as an ocean-going vessel but is subsequently broken up - from the actual da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be broken-up. The notification was thus intended as a concession - an encouragement to acquisition and import of ocean-going vessels. The principle of the notification is "no duty on import of such vessels but when after plying for a number of years, they are scrapped, pay duty on the supposition that it is imported for breaking-up on the date it is broken-up". But for the fortuitous - and enormous - increase in the prices of steel world-wide, the roles would have been reversed : what is now contended by the Union of India would have been the contention of the ship-owners - if the Union of India were to take the opposite stand. The said fortuitous circumstance cannot, indubitably, make any difference to the interpretation to be placed upon the notification. We cannot, therefore, agree with the reasoning in the judgment under appeal or in the judgment of the Calcutta High Court in Ram Nivas Chaudhary. 27.Both the learned Additional Solicitor General and the learned counsel for the ship-owners cited certain decisions which may briefly be referred. It must, however, be stated that there is no decision of this court directly on the point. The only decisions are that of the Bombay Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same effect is the decision of the learned Single Judge of the Kerala High Court in Aluminium Industries v. Union of India [1984 (16) E.L.T. 183]. 30.A Division Bench of the Madras High Court has also taken a similar view in M. Jamal v. Union of India [1985 (21) E.L.T. 369]. It held that the chargeability of duty is determined when the goods are imported into the territory of India within the meaning of Section 12(1) of the Act. The Bench expressed certain another views which is not necessary to notice for the purpose of these appeals. 31.The counsel for the ship-owners stated that the principle of the Full Bench decision of the Bombay High Court in Apar is not relevant herein and that they place no reliance thereon. For this reason, we need not refer to the said decision or express any opinion on its correctness. 32.In Prakash Cotton Mills Pvt. Ltd. v. B. Sen [1979 (2) SCR 1142 = 1979 (4) E.L.T. (J 241) (S.C.)], it was held by this Court that where the goods are imported and stored in warehouse and the rate of duty is increased before the goods are cleared from the warehouse, the duty chargeable would be the one in force on the date of clearance of goods from the warehouse. 33 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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