5. W.P 6706 of 1979 DD 2-1-1986 - Hegde & Golay v. Collector of C.E & C. (Aff) 9. 77 BLR 380 - Shawney v. Sylvania and Laxman (Dist) 10. 1986 (1) SCC 581 - Prakas v. State of Gujarat (Ref) 11. 16 ELT 183 - Aluminium v. Union of India (do) 12. AIR 1938 PC 15 - Ford Motor v. Secretary of State (Dist) 13. 10 ELT 203 - Prabhat Cotton v. Union of India (Foll) 14. 12 ELT 661 - Bharatiya Plastic v. Union of India (do)

Mr. G.K Shevgoor & Mr. K.G Raghavan for Petitioners

Mr. K. Shivashankar Bhat, Central Govt. Standing Counsel for Respondents.

Puttaswamy, J.:—

On a reference made by Hakeem, J. these cases were posted before us for disposal.

2. As common questions of law arise for determination in these cases, we propose to dispose of them by a common order.

3. The petitioners are manufacturers of polythene products, for the manufacture of which they import a base material called High Density Polythelene Moulding Power (HDPM) from United States of America, Brazil, Korea and other foreign countries. The material bought by the petitioners from their foreign sellers is transported by ocean going ships under Cost, Insurance, Freight (CIF) contracts and are delivered at one or the other sea port of the Country. From the concerned sea port, evidently at the request of the petitioners the HDPM was further transported by rail or road to Bangalore at which place the same was kept at the bonded warehouse of the customs department of Government of India to ensure payment of import duty under the Customs Act of 1962 (Central Act No. 52 of 1962) (the Customs Act). As to the payment of import duty payable on such HDPM, the petitioners claim that the demands made or to be made by the revenue were unauthorised in whole or part. But, when the petitioners found, that at least many of them, if not all, were in conformity with the Customs Act and the subsidiary provisions made thereunder, they have approached this Court under Article 226 of the Constitution challenging the provisions themselves and the consequent action of the authority thereunder.

4. Among others, the petitioners have challenged the validity of Section 15 of the Customs Act, Section 3 of the Customs Tariff Act of 1975 (Central Act No. 51 of 1975) (Tariff Act) and the Bill of Entry (Forms) Regulation of 1976 (Regulations). Apart from these, the petitioners have claimed various other reliefs on diverse grounds. We wilt notice and deal with them in due course setting out any additional facts that are necessary to appreciate them.

5. While issuing rule nisi in each case, this Court had made interim orders on uniform terms, however, safeguarding the interests of both sides. Both sides have complied with the interim orders made by this Court and the imported goods have been cleared in terms of the interim orders and the consequential orders made by the authority.

6. In Writ Petition No. 21445 of 1983 the respondents have filed their detailed return and the same has been adopted by them as their return in all other cases. In their return the respondents have repudiated the challenges to the provisions noticed earlier and have justified the actions of the authorities.

7. Sriyuths G.K Shevgoor and K.G Raghavan, learned Advocates have appeared for the petitioners. When we refer to the name of any one learned Counsel hereafter, we should be understood as referring to the names of the other learned Counsel also.

8. Sri K. Shivashankar Bhat, learned Central Government Senior Standing Counsel has appeared for the respondents.

9. Both sides in their elaborate arguments extending for four days have relied on a large number of rulings in support of their respective cases and we will refer to them at the appropriate stages.

10. First, the petitioners have attacked Section 15 of the Customs Act as beyond the legislative competence of the Union Parliament. Second, they have attacked that provision as violative of Articles 14, 246, 265, 300A and 301 of the Constitution without, however, elaborating either of the grounds. But, at the hearing learned Counsel for the petitioners, in our opinion, very rightly did not pursue the challenge to Section 15 of the Customs Act, which itself justifies us to reject the same.

11. As the petitioners have not elaborated and pursued their challenge to Section 15 of the Customs Act, we do not consider it necessary to set out the rules of interpretation of entries in the 7th Schedule to the Constitution in any detail, discuss and apply them to the question. But, on the application of those well settled rules, we are firmly of the view that the Customs Act and Section 15 thereof has been enacted by Parliament by virtue of the powers derived by it from Article 246(1) read with Entry 83 of List-1 (Union List) of the 7th Schedule to the Constitution and is within its legislative competence. We are of the view that Section 15 of the Act regulating the determination of the rates of duty and tariff valuation of imported goods is not violative of Articles 14, 246, 265, 300A and 301 of the Constitution. We see no merit in this challenge of the petitioners and we reject the same.

12. The petitioners have challenged Section 3 of the Tariff Act as beyond the legislative competence of the Union Parliament and as violative of Article 14 of the Constitution.

13. Sriyuths Shevgoor and Raghavan have urged that Section 3 of the Tariff Act was beyond the legislative competence of the Union Parliament.

14. Section 12 of the Customs Act, the charging Section under that Act, declares that duties of Customs shall be levied at such rates as may be specified under the Tariff Act or in any law for the time being in force on goods imported into or exported from India. The Customs Act and the Tariff Act must be read together and they really form one enactment. Both these Acts really deal with one and the same topic or subject. In Khandelwal Metal and Engineering v. Union of India (Khandelwal's case)1 a Division Bench of the Delhi High Court consisting of Rajinder Sachar (as His Lordship then was) and Aggarwal, J. on the inter-relation of the two Acts expressed thus:

“……..Customs Act and Coustoms Tariff Act form a composite legislation and the one cannot be effectuated without having resort to the other ……..

17. In our opinion the charging Section 12 of the Customs Act only provides that duties of customs shall be levied at rates as may be specified in the Customs Tariff Act. The computation of the duty is provided by Section 2 of the Tariff Act read with Schedule. The Customs Act remains incomplete without the Tariff Act. Charging Section in Customs Act provides no computation of duty. For computation of duty you have to go to the Tariff Act. It is as if both the provisions are provided in one Act. There can be no question of splitting them up. They are one integrated whole. Thus the charging section and the computation provisions together constitute an integrated code and as explained in CIT v. B.C Srinivasa Setty (1981) 128 ITR 294, where the charging Section of the Income-tax Act and the computation Section were said to constitute an integrated code and it was explained that a transaction to which these provisions apply cannot be understood without making a reference to the other.”

In (1985) 3 SCC 620 : AIR 1985 Supreme Court 1211 : 20 ELT 2222 the Supreme Court has affirmed this decision, from which it follows that the Tariff Act which necessarily includes Section 3 of that Act, without an iota of doubt, was within the legislative competence of the Union Parliament. We see no merit in this contention of the petitioners and we reject the same.

15. Sri Raghavan has contended that the Tariff Act and Section 3 of that Act, in particular was not a levy on imports and was not a law authorising the levy under Article 265 of the Constitution.

16. We have to state this contention only to be rejected on its own unsustainability. We have earlier found that the Tariff Act read with Customs Act was a law dealing with levy of duties or taxes on imports and exports. When that is so, it is inconceivable to hold that it is net a law authorising the levy of duties or taxes on imports. We see no merit in this contention of the petitioners either.

17. Sri Raghavan has contended that Section 3(2) of the Tariff Act that authorises levy of additional duty by including the customs duty on imported Articles subjected to import duty on percentage basis stipulated in Section 14 of the Customs Act and not in respect of Articles subjected to a fixed rate of import duty was discriminatory and had no rational basis for the same and was violative of Article 14 of the Constitution.

18. Sri Bhat has urged that by any test Section 3(2) of the Tariff Act was not violative of Article 14 of the Constitution.

19. The true scope and ambit of Article 14 of the Constitution has been explained by the Supreme Court in a large number of rulings. In Ram Krishna Dalmia v. Mr. Justice S.R Tendolkar* . AIR 1958 SC 538., re-The Special Courts Bill 19784, majority opinions in Twyford Tea Company Limited v. State of Kerala . 1970 1 SCC 189 and R.K Garg v. Union of India . 1981 4 SCC 675 the Supreme Court had summarised the scope and ambit of Article 14 of the Constitution and its application to taxation measures. Bearing the principles enunciated in these cases we will examine the challenge based on Article 14, however first ascertaining the true scope and ambit of the Section itself on which a controversy was raised before the authorities as also before us to the effect that Customs duty cannot be included in the determination of additional duty under Section 3(2) of the Tariff Act.

20. Section 3 of the Tariff Act, the true scope of which as also challenged arises, reads thus:

“3. Levy of additional duty equal to excise duty — (1) An 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.

Explanation — In this Section, the expression “the excise duty for the time being leviable on a like article if produced or manufactured in India” means the excise duty for the time being in force which would be leviable on a like article if produced or manufactured in India or, if a like article is not so produced or manufactured, which would be leviable on the class or description or articles to which the imported article belongs and where such duty is leviable at different rates, the highest duty.

(2) For the purpose of calculating under this Section the additional duty on any imported article, where such duty is leviable at any percentage of its value, the value of the imported article shall, notwithstanding anything contained in Section 14 of the Customs Act, 1962 (52 of 1962) be the aggregate of —

(i) the value of the imported article determined under sub-section (1) of the said Section 14 or the tariff value of such article fixed under sub-section (2) of that Section, as the case may be; and

(ii) any duty of customs chargeable on that article under Section 12 of the Customs Act, 1962 (52 of 1962) and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but not including the duty referred to in sub-section (1).

(3) If the Central Government is satisfied that it is necessary in the public interest to levy on any imported article whether on such article duty is leviable under sub-section (1) or not such additional duty as would counter-balance the excise duty leviable on any raw materials, components and ingredients of the same nature as, or similar to those, used in the production or manufacture of such article, it may, by notification in the Official Gazette, direct that such imported article shall, in addition, be liable to an additional duty representing such portion of the excise duty leviable on such raw materials, components and ingredients as, in either case, may be determined by rules made by the Central Government in this behalf.

(4) In making any rules for the purposes of sub-section (3) the Central Government shall have regard to the average quantum of the excise duty payable on the raw materials, components or ingredients used in the production or manufacture of such like article.

(5) The duty chargeable under this Section shall be in addition to any other duty imposed under this Act or under any other law for the time being in force.

(6) The provisions of the Customs Act, 1962 (52 of 1962) and the rules and regulations made thereunder, including those relating to drawbacks, refund and exemption from duties, shall so far as may be, apply to the duly chargeable under this Section as they apply in relation to the duties leviable under that Act.”

While Section 2 of the Tariff Act stipulates the rates of customs duty leviable on imports and exports Section 3 of the Tariff Act regulates the levy of additional duty on imported goods. On the scope of Section 3(1) the Supreme Court in Khandelwal's case has expressed thus:

“…………Section 3(1) provides that any article which is imported into India shall, in addition, (that is, in addition to the duty of customs for which rates are specified in Section (2) be liable to an additional duty “equal to the excise duty for the time being leviable on a like article produced or manufactured in India.”

Section 3(2) does no more than to declare that such imported articles on which duty is leviable at any percentage of its value, the value of such article as determined under Section 14 of the Customs Act and the customs payable thereon by law shall be aggregated. Without any doubt in determining the additional duty under Section 3(2) of the Tariff Act, the Customs duty dutiable on the articles had to be included and additional duty levied only on that basis. On the language of Section 3(2) of the Tariff Act exemplified in the prescribed form of Bill of Entry, the authorities were wholly justified in including the customs duty also in determining the additional duty. While this disposes of the contention of the petitioners based on the construction of Section 3(2) of the Tariff Act, we must now examine its constitutionality.

21. Section 3 of the Tariff Act levies additional duty on all imported goods. But, in the computation of additional duty, two modes are adopted with due regard to the nature of goods. The imported goods dealt under Section 3(2) of the Tariff Act are different from the goods dealt under Section 3(1) of that Act. The characteristics of the two are not one and the same. If that is so, the basis for imposition of additional duty must necessarily be different. When that is so, it is inconceivable to hold Section 3(2) of the Tariff Act violates Article 14 of the Constitution. Even otherwise, we are clearly of the view that it is a case of valid classification and passes the twin tests of valid classification and does not violate Article 14 of the Constitution. On the application of the principles that are now settled and summarised in the cases noticed by us earlier, we have no hesitation in holding that Section 3(2) of the Tariff Act does not violate Article 14 of the Constitution. We, therefore, reject this challenge of the petitioners.

22. Sri Raghavan had urged that the benefit of exemptions granted by Government under the Central Excises and Salt Act of 1944 (Excise Act) on similar manufactured goods in the Country was bound to be allowed in the payment of import duty leviable on the import of similar goods as ruled by a Division Bench of the Bombay High Court in Century Enka Limited v. Union of India . 10 ELT 64. (Century Enka's case).

23. Sri Bhat has urged that benefit of exemptions granted under the Excise Act cannot be claimed under the Customs Act and the enunciation in Century Enka's case was opposed to the principles enunciated by the Supreme Court in Khandelwal's case.

24. The Customs Act along with the Tariff Act, the Rules made under those Acts and the exemption or other Notifications issued thereunder form a complete code in itself. The chargeability, assessments, exemptions and recoveries of customs and exports are exclusively regulated by the Customs Act and the Tariff Acts. Section 25 of the Customs Acts empowers Government to exempt in whole or in part the Customs duty on imports in the public interest. Section 5 of the Tariff Act empowers Central Government to lower the rates of customs duty to give effect to trade agreements. The exemptions granted under the Excise Act which regulates the levy of excise duty or a tax on manufactured goods in the Country is a separate and distinct enactment. The exemptions granted under the Excise Duty either in whole or in part are for the purpose of that Act only and they cannot on any principle be the basis for claiming exemptions under the Customs Act. On these basic factors, we find no merit in the claim of the petitioners.

25. We are also of the view that the ruling of the Supreme Court in Khandelwal's case which repudiated the claim of the importer of brass scrap for not levying import duty on the ground that the same was not produced in India and was not dutiable to excise duty, can only be understocd in the manner we have expressed earlier.

26. In Century Enka's case a Division Bench of the Bombay High Court consisting of Kanade and Pendse, JJ. has upheld a similar claim urged for the petitioners in these words:

“7. Shri Govilkar then argued that Section 3 of the Customs Tariff Act makes reference to the additional duty and it is something different from the countervailing duty. In our judgment, the submissions only deserve to be stated to be rejected. The Learned Counsel then argued that the exemption notification on which reliance is placed by the petitioners was issued under the provisions of the Central Excise Rules, 1944 and that cannot be used for claiming the advantage under the provisions of the Customs Tariff Act. The submission is totally devoid of merits. Section 3 enables the department to levy countervailing duty provided the excise duty is leviable on article if manufactured in India. The plain reading of Section 3 makes it clear that countervailing duty under Section 3 cannot be levied on an article imported into India if such article manufactured in India is exempted from the payment of excise duty. The provisions of Section 3 has to be read with the provisions of Central Excise Act and the liability to levy the countervailing duty would depend upon the fact as to whether such an article is liable to pay excise duty. In these circumstances, it is futile to urge that the exemption notification issued under the Central Excise Act can have no bearing to determine liability to pay-countervailing duty under the Customs Tariff Act”.

What has been expressed here is opposed to the enunciation made by the Supreme Court in Khandelwal's case and therefore, we cannot follow the same. In Hegde and Golay Limited v. The Collector of Central Excise and Customs . W.P No. 6706 of 1979 dated on 2-1-1986. Rajasekhara Murthy, J. has expressed the same view with which we are in respectful agreement. We will also assume that Khandelwal's case does not overrule the enunciation of the Bombay High Court in Century Enka's case and examine the same on that basis also.

27. With great respect to the learned Judges that decided Century Eaka's case we are of the considered opinion that the same runs counter to the provisions of the Customs and Tariff Acts and the legal principles underlying the levy of duties or taxes on imports and excise duty on manufactured goods in the Country. For these and other reasons stated by us earlier with great respect to their Lordships of the Bombay High Court that decided Century Enka's case, we regret our inability to subscribe to their views.

28. The petitioners have challenged the validity of the Bill of Entry (Forms) Regulations of 1976 (‘Regulations) as made in excess of the powers of the Customs Act.

29. Sriyuths Shevgoor and Raghavan have urged that the Regulations and the forms providing for inclusion of ‘landing charges’, in particular, was beyond the power of the authority that framed them and was not for purposes of the Customs Act.

30. The source of power for making the regulations as also the regulations omitting the forms prescribed under Regulation No. 3 thereto read thus:

“In exercise of the powers conferred by Section 157, read with Section 46 of the Customs Act, 1962 (52 of 1962) and in supersession of the Bill of Entry Regulations, 1971, the Central Board of Excise and Customs hereby makes the following regulations, namely:

1. Short title and commencement - (1) These regulations may be called the Bill of Entry (Forms) Regulations, 1976.

(2) They shall come into force on the date of their publication in the official Gazette.

2. Definition - In these regulations, “form” means a form appended to these regulations.

3. Form of Bill of Entry—The Bill of Entry to be presented by an importer of any goods for home consumption or for warehousing or for ex-bond clearance for home consumption shall be in Form-I or Form II, or Form III as the case may be.

Explanation - In this regulation, “Goods” does not include those goods which are intended for transit or transhipment.”

As set out in the preamble, the Central Board of Excise and Customs (Board) in exercise of the powers conferred on it by Sections 157 and 46 of the Act has framed the Regulations. The Board—Central Board of Excise and Customs—is constituted and functioning under an Act called the Central Boards of Revenue Act, 1963 (54 of 1963).

31. While challenging the Regulations framed by the Board, the petitioners have not impleaded that authority as a party respondent in any of these cases. In the absence of the petitioners impleading the Board and notifying that authority, we cannot examine the challenge of the petitioners to the Regulations and we must reject the same on that ground. But, we will assume that the Board is also a part and parcel of the Union or Government of India, impleaded as a party in these cases and its absence or presence does not make any difference and adjudge the validity of the Regulations on that basis.

32. Section 157 of the Customs Act expressly empowers the Board to frame regulations prescribing the forms of bills of entries. The Board has framed the Regulations by virtue of the powers conferred by Section 157(2) of the Act and for purposes of the Act only. Section 46 of the Act also provides for filing a bill of entry by an importer in the form prescribed by the Board. An examination of the ‘forms’ prescribed by the Board shows that they are made for purposes of the Act. We find no merit in the challenge of the petitioners to the Regulations or the forms prescribed by the Board.

33. We will however examine the claim of the petitioners for excluding landing charges from the assessable value of imported goods independently on which considerable time was expended before us, which we must confess with a sense of sorrow and pain was out of all proportion to the negligible and smallness of the claim. But, notwithstanding the same, we allowed full opportunity to the learned Counsel for the petitioners.

34. Sri Raghavan has urged that import was completed when the ship carrying the imported goods crosses the territorial waters of India and the assessable value had to be determined on the CIF contract price forwarded by the ‘foreign sellers’ excluding the ‘landing charges’.

35. Sri Bhat had urged that on a true construction of Section 14 of the Act or otherwise, the claim of the petitioners for excluding landing charges was untenable.

36. The Customs Act repealing the Sea Customs Act, 1878, the Inland Bonded Warehouses Act, 1896, the Land Customs Act, 1924 and Section 15 of the Aircraft Act, 1934 which earlier regulated duties of customs on imports and exports in the Country is a consolidating and Amending Act. In consolidating and amending, the said Act had removed the deficiencies noticed in the working of the earlier enactments which were in force for a long period and had decidedly improved on them. In fiscal legislation, in our Country, it is even considered by many as a model enactment.

37. Section 14 of the Customs Act enacted to regulate the valuation of goods for purposes of assessment, amended by Act 20 of 1966 reads thus:

“14. Valuation of goods for purposes of assessment-(1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be-

(a) the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be in the course of international 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 for sale;

Provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under Section 46, or a shipping bill or, bill of export, as the case may be, is presented under Section 50;

(b) where such price is not ascertainable, the nearest ascertainable equivalent thereof determined in accordance with the rules made in this behalf.

(2) Notwithstanding anything contained in sub-section (1), 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 valuss for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with referee to such tariff value.”

(3) For the purposes of this Section

(a) “rate of exchange” means the rate of exchange—

(i) determined by the Central Government, or

(ii) ascertained in such manner as the Central Government may direct,

for the conversion of Indian currency into foreign currency or foreign currency into Indian currency;

(b) “foreign currency” and “Tndian currency” have the meanings respectively assigned to them in the Foreign Exchange Regulation Act, 1973 (46 of 1973).”

Section 14(1) with which we are primarily concerned provides that for purposes of the Tariff Act which must be read with the Customs Act, the duty of customs chargeable on any goods by reference to their value, shall be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international 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 for sale. The value had to be determined at the time and place of importation. The time and place of importation can never be where the ship crosses the territorial waters but must naturally be at the sea port where the goods are actually delivered by the shipmaster. When the shipmaster delivers goods to the importer-buyer who takes their delivery he must necessarily pay the landing charges. Without payment of landing charges, the importer does not and cannot take delivery of the goods at all. We are of the view that this is the true import of Section 14(1) of the Customs Act, which is only made specific in the Customs Valuation Rules of 1963 and the form of Bill of Entry prescribed by the Board. We are, therefore, of the view that ‘landing charges’ cannot be excluded and the assessment cannot be made on the CIF value of goods. Any attempt to do so, is clearly opposed to Section 14 of the Act.

38. But, Sri Raghavan had laid great emphasis on the term ‘in the course of international trade’ occurring in Section 14(1)(a) of the Customs Act and has urged that inclusion of landing charges would be a post importation activity and cannot be included in the assessable value of goods.

39. We are of the view that the terms ‘in the course of international trade’ on which considerable reliance had been laid by Sri Raghavan does not make any real difference to the question at all as every import from another country is really in the course of international trade. We see no merit in this contention of Sri Raghavan either.

40. In M.S Shawhney v. Sylvania and Laxman Limited . 77 Bombay Law Reporter 380. on which very strong reliance was placed by Sri Raghavan, the facts in brief were these:

(i) In exercise of the powers conferred by Section 25 of the Customs Act, Government by its Notification dated 3-9-1966 wholly exempted ‘glass tubes’ used in the manufacture of fluorescent lamps from the whole of import duty upto and inclusive of 31-3-1967. Sylvania and Laxman Limited (Sylvania) on the basis of an import licence issued in its favour imported ‘glass tubes’ used in the manufacture of fluorescent lamps from U.S.A which were shipped in per s.s, ‘Steel Fabricator’. The said ship arrived at the port of Bombay on 29-3-1967 and the shipmaster on the same day filed the ‘import manifest’ under the Customs Act before the competent officer;

(ii) But, the Importer-Sylvania filed the ‘bill of entry’ under the Customs Act before the authorised officer on 27-4-1967 who allowed their clearance on 6-6-1967 accepting its plea that they were entitled for the benefit of exemption notification dated 3-9-1966 issued by Government;

(iii) Some time later the customs authorities initiated proceedings under the Customs Act and levied a sum of Rs. 1,40,558-75 as import duty on Sylvania on the said imported goods which was challenged by Sylvania before the High Court of Bombay in a Writ Petition under Article 226 of the Constitution. Kania, J. allowed the said Writ Petition of Sylvania taking the view that the import was complete on or before 31-3-77 and, therefore, they were entitled for exemption in terms of the notification dated 3-9-1966;

(iv) On appeal by the revenue a Division Bench of that Court consisting of Kantawal, CJ and Tulzapurkar, J. (as His Lordship then was) affirmed the decision of Kania, J. concurring with his Lordship's views, inter alia expressing thus:

“…. …. …. ….As provided in that section duties of customs shall be levied at such rates as may be specified under the Indian Tariff Act, 1934, or any other law for the time being in force, in goods imported into, or exported from India. Thus, the levy of customs duty either in respect of import or export of goods is under this section and such levy is subject to other provisions of the Act or any other law for the time being in force. The chargeability in respect of levy of customs duty arises when the goods are imported into India, i.e, when they cross the customs barriers as stated above. That event in the present case took place much prior to March 31, 1967 when the exemption notification was operative……………. Chargeability arises simply by reason of Section 12(1) of the Act and that takes place only when the goods are imported into India, i.e into the territorial waters of India…………….

…There is nothing in any of the provisions to indicate that the chargeability in respect of levy of customs duty is postponed until a bill of entry is presented.”

In this case, the Court was only considering as to when the import would be complete, that too for the purposes of an exemption notification and not of valuation of goods for the purposes of assessment under Section 14 of the Customs Act or otherwise. In Shawhney's case the Court was not called upon to consider the true scope and ambit of Section 14 of the Act and in any event the inclusion or exclusion of landing charges which is the precise question that arises before us. We are, therefore, of the view that the ratio in Shawhney's case even if correct, does not really bear on the point. Even otherwise, we are of the view that the observations in that case in particular that extracted by us cannot be read out of context as urged for the petitioners (vide: Prakash Amichand Shah v. State of Gujarat . 1986 1 SCC 581.). In passing it is useful to notice that Aluminium Industries Limited v. Union of India . 16 ELT 183 Kerala. Menon, J. examining a similar question has dissented from the view expressed in Shawhney's case. We are, however, of the view that for deciding the question that arises before us viz., whether the landing charges are includible or not it is not necessary for us to examine the correctness of either of the rulings and pronounce on the same.

41. What has been decided by the Privy Council in Ford Motor Co. of India Ltd. v. Secretary of State . AIR 1938 PC 15. and various other rulings relied on by both sides interpreting Section 30 of the Sea Customs Act, the language of which was entirely different, do not really bear on the point.

42. In Prabhat Cotton and Silk Mills Limited v. Union of India . 10 ELT 203 Gujrath. and Bhartiya Plastic Udyog v. Union of India . 12 ELT 661 Delhi. the High Courts of Gujarat and Delhi have expressed a similar view. We are in respectful agreement with the views expressed by their Lordships in these cases.

43. On the foregoing discussion, we hold that the contention of the petitioners that landing charges are not includible in the determination of customs duty under Customs Act has no merit and we reject the same.

44. The petitioners have urged that under the Customs Act Government from time to time had issued notifications one of which was Notification No. 184 Customs dated 2-8-1976 (Annexuce-F) exempting packages or containers from payment of import duty and the authorities were bound to give effect to them.

45. Sriyuths Shevgoor and Raghavan have urged that in determining the customs duty the authority was bound to allow exemption from Customs Duty on packages and containers as provided in the notifications issued by Government from time to time.

46. Sri Bhat without disputing the various notifications issued by Government contends that the same had to be examined by the authority in the first instance.

47. On the packages and containers the petitioners claim is founded on the notifications issued by Government under Section 25 of the Customs Act. Whether that claim is well founded or not has to be examined and decided in the first instance by the authority under the Act. As the Authority had not examined and decided the same we must only direct the authority to do that.

48. At the preliminary hearing the petitioners had urged that they were liable to pay auxiliary duty at 15% and not at 20% demanded by the authority. But, in the Petition or at the hearing this has not been pursued by the petitioners. We, therefore, refrain to examine the same and issue any direction on the same.

49. We now sum up our conclusions:

(a) Section 15 of the Customs Act, 1962, Section 3(2) of the Customs Tariff Act of 1975 and the Bill of Entry (Form) Regulations, 1976 are valid.

(b) In determining the additional duty under Section 3(2) of the Customs Tariff Act the customs duty paid on High Density Polythelene Moulding Powder is includible.

(c) Landing charges are includible in the levy of customs duty.

(d) The claim of petitioners for exemption packages and containers requires examination by the authority under the Act.

On the above conclusions, the respondents are entitled to recover the whole of additional duty under Section 3(2) of the Tariff Act and customs duty on landing charges from bank guarantees furnished by the petitioners in pursuance of the interim orders made by this Court. But, on bank guarantees that represent packing material, the same had to be modulated only in terms of the determination to be made on that claim.

50. In the light of our above discussion, we make the following orders and directions:

(i) We direct the Assistant Collector — Respondent-2 to examine the claim of the petitioners for exemption from payment of import duty on packages and containers in terms of notification issued by Government under Section 25 of the Customs Act and make appropriate orders in accordance with law and observations made in this order.

(ii) We dismiss these Writ Petitions in all other respects. With this the respondents are free to recover the whole of the additional duty under Section 3(2) of the Tariff Act and customs duty on landing charges from bank guarantees furnished by the petitioners and otherwise in accordance with law. But, on bank guarantee that represents packing material we direct Respondent No. 2 to modulate the same in terms of the determination to be made by him on that claim.

51. Writ petitions are disposed of in the above terms. But, in the circumstances of the cases, we direct the parties to bear their own costs.