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AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • — M.O Chinoy with C.M Mehta and R.J Gagrat.
  • — S. Ganesh with C.M Mehta and R.J Gagrat.
  • — A. Hidayatullah with C.M Mehta and R.J Gagrat.
  • — A.J Rana with C.M Mehta and R.J Gagrat.
  • — D.R Dhanuka with J.F Pochkhanawalla, D.H Mehta and Miss S.G Shah.
Judges
  • S.P Bharucha, J.
Acts
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • — M.O Chinoy with C.M Mehta and R.J Gagrat.
  • — S. Ganesh with C.M Mehta and R.J Gagrat.
  • — A. Hidayatullah with C.M Mehta and R.J Gagrat.
  • — A.J Rana with C.M Mehta and R.J Gagrat.
  • — D.R Dhanuka with J.F Pochkhanawalla, D.H Mehta and Miss S.G Shah.
Judges
  • S.P Bharucha, J.
Acts
See more information ...
Smart Summary

Structured Summary of the Provided Legal Opinion

Factual and Procedural Background

On 1 July 1977 the Central Government issued a notification under section 25 of the Customs Act, 1962, exempting palmoleine (Chapter 15 of the First Schedule to the Customs Tariff Act, 1975) from the whole of the customs duty specified in the First Schedule. The petitioners held a valid import licence for palmoleine and were shipped 362.932 metric tonnes aboard the S.S. "Accord." The vessel arrived within Indian territorial waters and its import manifest was registered and numbered on 18 January 1979. Entry inwards was granted on 29 January 1979.

On 1 March 1979 the Central Government issued another notification under section 25 of the Customs Act which exempted palmoleine from so much of the customs duty specified in the First Schedule as was in excess of 12.5% ad valorem and from the whole of the additional duty leviable under section 3 of the Customs Tariff Act. The petitioners filed a bill of entry on 9 March 1979. On 27 March 1979 the Customs authorities assessed the imported palmoleine to duty under the Customs Act at 12.5% ad valorem; the petitioners paid that duty under protest. The vessel berthed and goods were discharged on 28 March 1979.

The petition challenging the validity of the assessment order was filed on 20 April 1979. The opinion also addresses several other miscellaneous petitions with facts either identical or similar to those described above; for some of those, the imported goods were not liable to additional duty.

Legal Issues Presented

  1. Whether liability to pay customs duty under the Customs Act arises on the act of importation (when goods enter Indian territorial waters) such that a subsequent notification cannot alter the goods' non‑chargeability at the date of importation.
  2. Whether imported goods that are chargeable to additional duty under the Customs Tariff Act at the time they enter Indian territorial waters are thereby also chargeable to duty under section 12 of the Customs Act.
  3. Whether the Customs authorities could quantify and collect duty under section 15 of the Customs Act in circumstances where goods were not chargeable to duty under the Customs Act at the date of importation.
  4. Validity of the Customs assessment dated 27 March 1979 charging 12.5% ad valorem on the imported palmoleine and the effect of the notification of 1 March 1979 on that liability.

Arguments of the Parties

Petitioners' Arguments (Mr. Chinoy)

  • The taxable event creating liability to pay duty under the Customs Act is the act of importation; import occurs when goods are brought into Indian territorial waters (here: 18 January 1979).
  • On the date of importation (18 January 1979) the goods were totally exempt from payment of duty under the Customs Act and thus not chargeable to such duty.
  • A subsequent notification of 1 March 1979 could not alter the non‑chargeability existing at the date of importation.
  • Relied on two Division Bench judgments of this Court: M.S. Shawhney v. Sylvania and Laxman Ltd. (77 Bom. LR 380) — holding that import takes place on entry into territorial waters and charging section is section 12(1) of the Customs Act — and Synthetics and Chemicals Ltd. v. S.C. Coutinho (1981 ELT 414) — which affirmed the ratio in Sylvania's case.

Respondents' Arguments (Mr. Dhanuka)

  • At the time the goods entered Indian territorial waters they were chargeable to additional duty (a customs duty) and therefore were not duty free at that time.
  • Because the goods were chargeable to additional duty, the petitioners were liable to pay duty quantified under section 15 of the Customs Act.
  • Section 12 of the Customs Act covers duties of customs which include duties under the Customs Tariff Act; both Acts must be read together. Emphasised section 3(6) of the Customs Tariff Act, which directs that provisions of the Customs Act and its rules, including those relating to exemptions, shall apply so far as may be to duty chargeable under section 3 of the Tariff Act.
  • Relied on the judgment of Pendse, J. in Kirloskar Cummins Ltd. v. The Union of India (Misc. Petition No. 559 of 1975 decided on 12th September, 1979) to support the view that customs duty and additional (countervailing) duty are branches of taxation on imports and considered together for the purposes of exemption notifications.
  • Asserted that the ratio of Sylvania and Synthetics conflicted with certain Supreme Court judgments (reported at AIR 1958 SC 341; AIR 1963 SC 1760; (1979) 2 SCC 174 / AIR 1979 SC 675), although he conceded that, as counsel in this Court, he was bound by the Division Bench decisions.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
M.S. Shawhney v. Sylvania and Laxman Ltd. (77 Bom. LR 380) — Division Bench Held that the words 'import' and 'India' in the Customs Act definition mean import takes place when goods are brought into Indian territorial waters; section 12(1) is the charging section under the Customs Act; the taxable event is importation, not presentation of bill of entry. The court regarded this Division Bench decision as forming part of the binding precedent in this Court and described its combined effect (with Synthetics) as establishing that section 12 is the only charging section for duties under the Customs Act; the court treated the Sylvania ratio as binding for the issues before it.
Synthetics and Chemicals Ltd. v. S.C. Coutinho (1981 ELT 414) — Division Bench Affirmed the ratio in Sylvania: that liability to pay customs duty arises on importation and goods not liable to duty when imported cannot be subjected to it by later procedure under section 15. The court accepted that Synthetics affirmed Sylvania and treated the combined effect as binding law in this Court for the present matters.
Kirloskar Cummins Ltd. v. The Union of India (Misc. Petition No. 559 of 1975; Pendse, J., decided 12 Sept 1979) Held that customs duty and additional/countervailing duty are two branches of taxation on imported goods; in context of an exemption notification the judge considered the implication that both duties should be regarded together and observed that section 12 provides for levy of duty as provided under the Indian Tariff Act. The court considered Pendse, J.'s reasoning but concluded that the Kirloskar judgment did not affect its conclusion because Kirloskar was focused on the interpretation of a particular exemption notification and did not highlight the statutory distinction that duty under the Customs Act is charged under section 12 while additional duty is charged under the Tariff Act.
AIR 1958 SC 341 (Supreme Court) The opinion notes these Supreme Court decisions were said by respondents' counsel to be in conflict with the Division Bench decisions; the specific rules or principles from this report are not detailed in the provided opinion. The court recorded that counsel for respondents submitted there was a conflict, but also recorded counsel's concession that he was bound by the Division Bench decisions of this Court; the Supreme Court reports were not analysed in detail in the opinion.
AIR 1963 SC 1760 (Supreme Court) The opinion notes this Supreme Court decision was relied upon by respondents' counsel as conflicting with the Division Bench decisions; the provided opinion does not specify the rule or principle from this case. The court noted the asserted conflict but proceeded on the basis that, within this Court, the Division Bench precedents were binding; the Supreme Court report was not further discussed in the text.
(1979) 2 SCC 174 / AIR 1979 SC 675 (Supreme Court) Referenced by respondents' counsel as authority allegedly conflicting with the Division Bench decisions; no detail of the principle is provided in the opinion. The court recorded the assertion of conflict but observed that respondents' counsel conceded he was bound by the Division Bench judgments; the Supreme Court decisions were not relied upon in the court's analysis in the opinion.

Court's Reasoning and Analysis

The court examined the competing contentions and the interplay between the Customs Act and the Customs Tariff Act.

1. The court accepted the combined effect of the Sylvania and Synthetics Division Bench decisions as stating that section 12 of the Customs Act is the charging section for duties under that Act, and that for any duty under the Customs Act to be payable the goods must be chargeable to such duty on the date of importation (i.e., the taxable event is importation, not the presentation of the bill of entry).

2. The court then addressed whether the fact that additional duty is leviable under section 3(1) of the Customs Tariff Act meant that the imported goods were thereby chargeable to duty under section 12 of the Customs Act. The court concluded that they were not. It reasoned that duty under the Customs Act and additional duty under the Tariff Act are chargeable under different statutes; therefore it was not good law to treat liability to additional duty as ipso facto creating liability under section 12 of the Customs Act.

3. The court bolstered this conclusion by reference to subsection (6) of section 3 of the Customs Tariff Act (section 3(6) of the Tariff Act), observing that it distinguishes between "the duty chargeable under this section" (i.e., under section 3 of the Tariff Act) and "duties leviable under that Act" (i.e., the Customs Act). The textual distinction in section 3(6) supported the court's view that additional duty and Customs Act duty are not to be equated automatically.

4. The court considered the Kirloskar case (Pendse, J.) relied upon by the respondents, noting that the learned judge there concluded that customs duty and additional duty were two branches of taxation and, in the context of an exemption notification, treated the duties together. However, the court observed that Kirloskar's observations must be read in the context of the specific question before Pendse, J., and that the judgment did not emphasize the statutory distinction between section 12 (Customs Act) and section 3 (Tariff Act). Accordingly, the court concluded Kirloskar did not affect the court's conclusion in the present matters.

5. The court noted that respondents' counsel submitted certain Supreme Court decisions were in conflict with the Division Bench jurisprudence, but counsel conceded he was bound by the Division Bench decisions in this Court; accordingly, the court proceeded in accordance with Sylvania and Synthetics.

6. The court applied its conclusion (that additional duty does not render goods chargeable under section 12 of the Customs Act) to the petitions before it, and indicated that the conclusion also covered other miscellaneous petitions with similar facts.

Holding and Implications

Core Ruling: The court allowed the petitions specified in its orders and held that additional duty leviable under the Customs Tariff Act does not automatically render imported goods chargeable to duty under section 12 of the Customs Act; the statutory distinction between duties under the two Acts must be recognized, and the Division Bench authorities (Sylvania and Synthetics) are binding in this Court for the issues before it.

Direct disposition (orders made):

  • Misc. Petition No. 959 of 1979: Petition made absolute in terms of prayers (a) and (b), with costs.
  • Misc. Petition No. 1043 of 1979: Petition made absolute in terms of prayers (a) and (b), with no order as to costs.
  • Misc. Petition No. 1981 of 1979: Petition made absolute in terms of prayers (a), (b) and (c), with no order as to costs.
  • Misc. Petition No. 2757 of 1979: Petition made absolute in terms of prayers (a) and (b), with no order as to costs.
  • Misc. Petition No. 2769 of 1979: Petition made absolute in terms of prayers (a) and (b), with no order as to costs.
  • Misc. Petition No. 2117 of 1979: Petition made absolute in terms of prayers (a), (b) and (c), with no order as to costs.

Implications: The immediate consequence is that the listed petitions were allowed in the specific terms set out above. The opinion applied and followed the Division Bench precedents (M.S. Shawhney v. Sylvania and Synthetics and Chemicals Ltd. v. S.C. Coutinho) in reaching its conclusion and distinguished the Kirloskar decision on its facts. The opinion does not set out or proclaim a broader new precedent beyond applying those binding Division Bench decisions to the petitions before the Court.

Order accordingly.

Show full summary ...

    Krishna Oilcake Industries And Others v. S.R Patankar, Asstt. Collector Of Customs And Others

    1. The facts stated relate to the first mentioned petition in the title. On 1st July, 1977 a notification was issued under section 25 of the Customs Act, 1962, whereby the Government of India exempted palmoleine falling within Chapter 15 of the First Schedule to the Customs Tariff Act, 1975, when imported into India, from the whole of the duty of customs leviable thereon specified in the First Schedule. The petitioners, holding a valid import licence in respect of palmoleine, were shipped 362.932 MTs thereof by the S.S “Accord”. On 18th January, 1979 the vessel arrived within Indian territorial waters and its import manifest was registered and numbered. On 29th January, 1979 entry inwards was granted to the vessel. On 1st March, 1979 a notification was issued under section 25 of the Customs Act whereunder the Central Government exempted, inter alia, palmoleine from so much of that portion of the duty of customs leviable thereon specified in the First Schedule of the Customs Tariff Act, 1975, as was in excess of 12.5% ad valorem and the whole of the additional duty leviable thereon under section 3 of the Customs Tariff Act. On 9th March, 1979 a bill of entry in respect of the imported palmoleine was filed by the petitioners' clearing agents. On 27th March, 1979 the Customs authorities assessed the said goods to duty under the Customs Act at 12½% ad valorem, which the petitioners paid under protest. On 28th March, 1979 the vessel berthed and the said goods were discharged. This petition was filed on 20th April, 1979 whereby the validity of the assessment order is challenged.

    2. It was contended by Mr. Chinoy, learned counsel for the petitioners, that the liability to pay duty under the Customs Act arises on the act of importation. This was the taxable event. The import took place when the said goods crossed Indian territorial waters, i.e, on 18th January, 1979. On that day the said goods were totally exempt from payment of duty under the Customs Act, and were not chargeable to such duty. The subsequent notification of 1st March, 1979 did not alter the position of their non-chargeability. Mr. Chinoy relied upon 2 judgments of Division Benches of this Court. In M.S Shawhney v. Sylvania and Laxman Ltd. . 77 Bom. LR 380., it was held that the combined effect of the words ‘import’ and ‘India’ in the definition section of the customs act was that import took place when the goods were brought into the territorial waters of India. The only charging section in respect of duty under the Customs Act was section 12(1) thereof. Such chargeability arose by reason of that section. Such chargeability was not to be confused with the quantification of the amount or assessment of duty under the Customs Act. It was impossible to accept the view that the taxable event took place only when the bill of entry was presented or thereafter. In Synthetics and Chemicals Ltd. v. S.C Coutinho . 1981 ELT 414., the ratio of the decision in Sylvania's case was affirmed. It was held that in order that any duty under the Customs Act should be made payable the primary or basic requirement was that the goods should be chargeable to such duty on the date of importation. Goods which were not liable to duty when imported could not be subjected to duty by the procedure under section 15 of the Customs Act.

    3. It was submitted by Mr. Dhanuka, learned counsel for the respondents, that at the time the said goods entered Indian territorial waters they were admittedly, chargeable to additional duty. This was a customs duty. The goods had not, therefore, at the time been duty free. That being so, the petitioners were liable to pay duty upon the said goods quantified under section 15 of the Customs Act. In his submission, section 12 covered duties of Customs which included duties under the Customs Tariff Act. Both the Customs Act and the Customs Tariff Act had to be read together and as if they were part of each other. Great stress was placed upon section 3(6) of the Customs Tariff Act, which reads thus:

    “S. 3(6) The provisions of the Customs Act, 1962, and the rules and regulations made thereunder, including those relating to drawbacks, refunds and exemption from duties, shall, so far as may be, apply to the duty chargeable under this section as they apply in relation to the duties leviable under that Act.”

    4. Mr. Dhanuka also placed great stress upon the judgment of my brother Pendse in Kirloskar Cummins Ltd. v. The Union of India . Misc. Petition No. 559 of 1975 decided on 12th September, 1979.. I shall refer to it in due course.

    5. It was also Mr. Dhanuka's submission that the ratio of the Sylvania and Synthetics judgments was in conflict with three judgments of the Supreme Court (reported in AIR 1958 SC 341 : AIR 1963 SC 1760 and (1979) 2 SCC 174 : AIR 1979 SC, 675). He fairly conceded, however, that so far as this Court was concerned he was bound by these Division Bench judgments.

    6. The combined effect of the Sylvania and Synthetics judgments is that section 12 of the Customs Act is the only charging section in respect of duties under the Customs Act. If imported goods are chargeable to duty under the Customs Act, reference must next be made to section 15 for its quantification. Section 12 mentions duties of customs. Duty is defined by section 2(15) as being a “duty of customs leviable under this Act.”

    7. Additional duty is leviable on imported goods by reason of section 3(1) of the Customs Tariff Act. It reads thus:

    “S. 3(1) Any article which is imported into India shall, in addition, be liable to a duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article.”

    8. Can it be said that because additional duty is chargeable on the imported goods, the imported goods are chargeable to duty under section 12 of the Customs Act? I think not. Since duty under the Customs Act and additional duty are chargeable under different statutes, it cannot, in my view, be good law to hold that because imported goods are chargeable to additional duty they are, ipso facto, chargeable to duty under the Customs Act, under section 12 thereof.

    9. This view is bolstered by reading sub-section (6) of section 3 of the Customs Tariff Act, upon which Mr. Dhanuka placed reliance. It makes a clear distinction between “duty chargeable under this section”, i.e, section 3 of the Customs Tariff Act, and “duties leviable under that Act”, i.e, Customs Act.

    10. I now turn to the judgment in Kirloskar's case. The petitioners therein manufactured diesel engines and utilised imported components. The components imported were liable to duty under the Customs Act at the rate of 50% ad valorem. The duty for import of complete diesel engines under the Customs Act was 27½% ad valorem and countervailing duty was also chargeable under section 2A of the Indian Tariff Act. (This is now called additional duty under section 3 of the Customs Tariff Act.) An exemption notification was issued whereby component parts of machinery when imported were exempted from so much of the customs duty leviable thereon under the Indian Tariff Act as was in excess of the rate applicable under the Indian Tariff Act to the machinery when imported complete. The Customs authorities took the view that the expression customs duty used in the notification meant not merely the duty under the Customs Act, referred to in section 2 of the Indian Tariff Act, but also additional (or countervailing) duty under section 2A thereof and assessed the petitioners accordingly. The petitioners challenged the validity of that assessment in the writ petition that came up for hearing before Pendse, J. It was urged that additional duty was really a part of customs duty, both are recovered under the provisions of the Indian Tariff Act and there is a close connection or inter-relationship between the provisions of the two Acts. The learned Judge held that the cumulative effect of the provisions of the Customs Act and the Indian Tariff Act was that both customs duty and additional duty were two branches of taxation on the import of goods. The learned Judge went on to say, “……Mr. Manjrekar is right in his contention that section 12 provides for levy of duty as provided under the Indian Tariff Act and it is not permissible to split out the duty under section 2 and 2A into different categories.”

    11. There can be no doubt that duty under the Customs Act and additional duty are customs duties in that they, are duties upon goods brought into India from abroad. What the learned Judge was considering was the implication of the notification whereunder exemption was granted from “so much of the customs duty leviable thereon under the Indian Tariff Act.…” His observation in the sentence quoted must be read in the context of the question before him. It does not appear to have been there highlighted that duty under the Customs Act was chargeable under section 12 thereof while additional duty was chargeable under the Tariff Act. The judgment does not, then, affect the conclusion that I have come to.

    12. I am informed by counsel that this conclusion covers the facts and all the contentions in Misc. Petition No. 1043 of 7979.

    13. I am informed by counsel that in Misc. Petitions Nos. 1981 of 7979, 2757 of 7979, 2169 of 7979 and 2117 of 7979 the facts are similar to those mentioned above but the imported goods therein were not liable to additional duty. The only contention there raised in support of the respondents' case is the incorrectness of the Sylvania and Synthetics' judgments. Mr. Dhanuka has fairly conceded that in this court he is bound by the judgments. It is agreed that my conclusion covers these petitions.

    14. I pass the following orders:

    15. In Misc. Petition No. 959 of 7979 the petition is made absolute in terms of prayers (a) and (b), with costs.

    16. In Misc. Petition No. 1043 of 7979 the petition is made absolute in terms of prayers (a) and (b), with no order as to costs.

    17. In Misc. Petition No. 1981 of 1979 the petition is made absolute in terms of prayers (a), (b) and (c), with no order as to costs.

    18. In Misc. Petition No. 2757 of 7979 the petition is made absolute in terms of prayers (a) and (b), with no order as to costs. In Misc. Petition No. 2769 of 7979 the petition is made absolute in terms of prayers (a) and (b) with no order as to costs.

    19. In Misc. Petition No. 2117 of 1979 the petition is made absolute in terms of prayers (a), (b) and (c), with no order as to costs.

    Order accordingly.
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    Comments

    Krishna Oilcake Industries And Others v. S.R Patankar, Asstt. Collector Of Customs And Others
    (Sep 20, 1982)