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Dhiraj Lal H. Vohra And Others v. Union Of India And Others
Factual and Procedural Background
The petitioner imported components/parts of ball bearings from the foreign supplier M/s Impex Matel Lucka, Warszawa (Poland) through its Indian agent. Orders were placed during January–February 1988 and irrevocable letters of credit for ₹13,07,830 were opened on 13 July 1988. The goods were shipped on 31 December 1988 under Bill of Lading No. 9 and Invoice No. 06/222/71154. The vessel entered Indian territorial waters at Madras port on 20 February 1989 and filed its import manifest the same day, but a strike prevented cargo handling.
The petitioner presented a Bill of Entry for home consumption on 27 February 1989; it reached the appraising section on 28 February 1989. The vessel berthed and “entry inwards” was formally granted on 2 March 1989. Meanwhile, with effect from 1 March 1989, the relevant customs duty was substantially increased—from a pre-tariff liability of ₹15,73,611.05 to a post-tariff liability of ₹1,80,46,092.64.
Invoking Article 32, the petitioner sought (i) a writ directing assessment at the duty rate prevailing on 20 February 1989 (or alternatively 27 February 1989) and release of goods on that basis; or (ii) a declaration that Section 15(1)(a) of the Customs Act, 1962 is unconstitutional. Earlier interim orders of the Supreme Court had permitted conditional release of the goods and their storage in the petitioner’s godown under lock and key.
Legal Issues Presented
- What is the “relevant date” under Section 15 of the Customs Act, 1962 for determining the applicable rate of duty when the vessel arrives before, but obtains “entry inwards” after, a tariff change?
- Can the petitioner rely on interim judicial orders or Section 58 (private warehousing) to claim assessment at a rate other than that fixed by Section 15(1)(a)?
- Is Section 15(1)(a) of the Customs Act, 1962 violative of Articles 14, 19(1)(g), 21, 265 and 300-A of the Constitution?
Arguments of the Parties
Petitioner’s Arguments
- The vessel had entered Indian waters and was ready to discharge cargo on 20 February 1989; therefore duty prevailing on that date should apply.
- At the very least, the duty rate on 27 February 1989—the date the Bill of Entry was presented—should govern.
- Interim orders of the Supreme Court allowing storage in the petitioner’s godown, read with Section 46(5) and Section 58 of the Customs Act, justified treating the goods as warehoused and assessing duty on the date of their eventual removal.
- Section 15(1)(a) is unconstitutional because it creates arbitrary results and violates the cited fundamental rights.
Respondents’ Arguments
The opinion does not contain a detailed account of the respondents’ legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| M. Jhangir Bhatusha v. Union of India, 1989 Supp (2) SCC 201; (1989) 3 SCR 356 | Constitutionality of Section 15(1) of the Customs Act, 1962 | The Court relied on this Constitution Bench decision to reaffirm that Section 15(1) is valid and not violative of constitutional provisions. |
Court's Reasoning and Analysis
The Court examined Sections 15, 31 and 46 of the Customs Act, 1962:
- Under Section 15(1)(a), the relevant date for duty on goods “entered for home consumption” is the date the Bill of Entry is presented. However, the proviso deems a Bill of Entry presented before “entry inwards” to have been presented on the date of such entry inwards.
- Section 31(1) prohibits unloading until “entry inwards” is granted; Section 46(3) permits presentation of a Bill of Entry only after the import manifest is filed.
- As “entry inwards” and filing of the import manifest both occurred on 2 March 1989, the Bill of Entry is statutorily deemed presented on that date. Earlier events—arrival in territorial waters on 20 February 1989 and presentation of the Bill of Entry on 27–28 February 1989—are irrelevant for Section 15 purposes.
- The interim orders allowing storage of goods were intended merely to mitigate demurrage and cannot override statutory provisions or be treated as licensing a private warehouse under Section 58. Accepting the petitioner’s theory would enable importers to manipulate duty liabilities and prejudice revenue.
- Relying on the Constitution Bench ruling in Jhangir Bhatusha, the Court rejected the constitutional challenge to Section 15(1).
Holding and Implications
Holding: The writ petitions are dismissed. Section 15(1) of the Customs Act, 1962 is upheld as constitutional. The applicable rate of duty is the rate prevailing on 2 March 1989, the date of entry inwards.
Implications: The petitioner must pay duty at the post-1 March 1989 rates before clearance. The decision reaffirms the statutory scheme of Section 15 and limits the effect of interim judicial orders on customs assessments. No new precedent is set, but the judgment reinforces existing principles governing the determination of the relevant date for customs duty.
K. Ramaswamy, J.— These writ petitions under Article 32 raise common question of law arising from same set of facts between the same parties though for different consignments. Hence they are disposed of by common judgment. The petitioner seeks writ of mandamus or any appropriate directions that the component/parts of ball bearings imported from foreign supplier M/s Impex Matel Lucka, Warszawa (Poland) are liable to excise duty prevalent as on February 20, 1989 and to release the goods on payment thereof or in the alternative to declare Section 15(1)(a) ultra vires Articles 14, 19(1)(g), 21, 265 and 300-A of the Constitution. The facts are that the petitioner placed in January-February 1988 an order with the Indian agent of the foreign supplier M/s Impex Matel Lucka, Warszawa, to supply ball bearings and irrevocable letters of credit were opened on July 13, 1988 for Rs 13,07,830. The foreign supplier shipped the goods in M/s Stefan Czarniecki under bill of lading No. 9 and invoice No. 06/222/71154 dated December 31, 1988. The ship arrived on February 20, 1989 at Madras port and was ready to discharge the cargo. It delivered the import manifest under No. 116 on the even date but due to continued strike the cargo could not be handled. On February 27, 1989 the petitioner presented the bill of entry “for clearance of goods for home consumption” and it was entered at No. 012036 which was received in the appraising section of the group on February 28, 1989. The ship arrived into the port and was berthed on March 2, 1989. The entry inward was granted on March 2, 1989. From March 1, 1989 the rate of excise duty was altered. It was increased at 150 per cent ad valorem plus Rs 300 per piece for certain sizes and for other sizes duty was raised to 150 per cent ad valorem plus weight-based duty. The result was that pre-tariff duty was Rs 15,73,611.05 while as per the new tariff levy effective from March 1, 1989, the difference came to Rs 1,80,46,092.64.
2. Shri Salve, learned senior counsel for the petitioner contended that the ship had entered into the Indian waters on February 20, 1989 and was ready to discharge the cargo, waiting clearance into the port and due to reasons beyond the control of the ship or the petitioner the goods could not be cleared until March 2, 1989 by which date the rate of levy was materially changed. As the cargo was ready for discharge from the ship from the Indian territorial waters from February 20, 1989 the duty prevailing as on that date shall be the proper duty. Since the petitioner presented the bill of entry for clearance of the goods for home consumption on February 27, 1989 which was received by the appraising section on February 28, 1989, that would be at least the proper date for determination of the rate of levy. We find no force in the contention. Section 15 of the Customs Act of 1962 for short ‘the Act’ prescribes the rate of duty and tariff valuation on imported goods thus:
“15. (1) The rate of duty and tariff valuation, if any, applicable to any imported goods, shall be the rate and valuation in force,—
(a) in the case of goods entered for home consumption under Section 46, on the date on which a bill of entry in respect of such goods is presented under that section;
(b) in the case of goods cleared from a warehouse under Section 68, on the date on which the goods are actually removed from the warehouse;
(c) in the case of any other goods, on the date of payment of duty:
Provided that if a bill of entry has been presented before the date of entry inwards of the vessel by which the goods are imported, the bill of entry shall be deemed to have been presented on the date of such entry inwards.”
(emphasis supplied)
Section 15(2) is not relevant for the purpose of the case hence omitted.
“31. Imported goods not to be unloaded from vessel until entry inwards granted.— (1) The master of a vessel shall not permit the unloading of any imported goods until an order has been given by the proper officer granting entry inwards to such vessel.
(2) No order under sub-section (1) shall be given until an import manifest has been delivered or the proper officer is satisfied that there was sufficient cause for not delivering it.
(3) Nothing in this section shall apply to the unloading of baggage accompanying a passenger or a member of the crew, mail bags, animals, perishable goods and hazardous goods.
(emphasis supplied)
46. Entry of goods on importation.— (1) The importer of any goods, other than goods intended for transit or transhipment, shall make entry thereof by presenting to the proper officer a bill of entry for home consumption or warehousing in the prescribed form:
Provided that if the importer makes and subscribes to a declaration before the proper officer, to the effect that he is unable for want of full information to furnish all the particulars of the goods required under this sub-section, the proper officer may, pending the production of such information, permit him, previous to the entry thereof: (a) to examine the goods in the presence of an officer of customs, or (b) to deposit the goods in a public warehouse appointed under Section 57 without warehousing the same.
(3) A bill of entry under sub-section (1) may be presented at any time after the delivery of the import manifest or import report as the case may be:
(5) If the proper officer is satisfied that the interests of revenue are not prejudicially affected and that there was no fraudulent intention, he may permit substitution of a bill of entry for home consumption for a bill of entry for warehousing or vice versa.”
(emphasis supplied)
Sub-sections (2) and (4) are omitted as being irrelevant.
3. It is clear from a bare reading of these relevant provisions that the due date to calculate the rate of duty applicable to any imported goods shall be the rate and valuation in force, in the case of the goods entered for home consumption under Section 46, is the date on which the bill of entry in respect of such goods is presented under that section and in the case of goods cleared from a warehouse under Section 68, the date on which the goods are actually removed from the warehouse. By operation of the proviso if a bill of entry has been presented before the date of entry inwards the bill of entry shall be deemed to have been presented “on the date of such entry inwards” but would be subject to the operation of Sections 46 and 31(1) of the Act. Section 46(1) provides that the importer of any goods, other than goods intended for transit or transhipment, shall make entry thereof by presenting to the proper officer a bill of entry for home consumption or warehousing in the prescribed form and it may be presented under sub-section (3) thereof at any time after delivery of the import manifest. Section 31(1) provides that the master of the vessel shall not permit the unloading of any imported goods until an order has been given by the proper officer “granting entry inwards” to such vessel and no order under sub-section (1) shall be given until an import manifest has been delivered or the proper officer is satisfied that there was sufficient cause for not delivering it. Granting entry inwards on delivery of import manifest and the date of arrival of the vessel into port admittedly are on March 2, 1989 and the Master of the vessel made a declaration in this behalf that they would discharge the cargo on March 2, 1989 therefore, the relevant date under Section 15(1)(a) is the date on which entry inwards after delivery of import manifest was granted to discharge the cargo for the purpose of the levy of the customs duty and rate of tariff. The contention, therefore that the ship entered Indian territorial waters on February 20, 1989 and was ready to discharge the cargo is not relevant for the purpose of Section 15(1) read with Sections 46 and 31 of the Act. The prior entries regarding presentation of the bill of entry for clearance of the goods on February 27, 1989 and their receipt in the appraising section on February 28, 1989 also are irrelevant. The relevant date to fix the rate of customs duty, therefore, is March 2, 1989. The rate which prevailed as on that date would be the duty to which the goods imported are liable to the impost and the goods would be cleared on its payment in accordance with the rate of levy of customs prevailing as on March 2, 1989.
4. It is next contended by Shri Salve that this Court by order dated April 11, 1989 directed to release the goods subject to certain conditions and directed the petitioner to keep them in the petitioner's godown and by further order dated September 12, 1989 this Court directed the customs authorities to put lock and key to the godown of the petitioner in which the goods were stored. This Court by further order dated May 11, 1992 directed the respondents to release the goods on certain conditions i.e the petitioner's paying an amount equal to twice the invoice value of the goods or to furnish bank guarantee for the same. This Court by further order dated August 11, 1992 directed the government to consider sympathetically the facts and circumstances of the case and if possible to scale down the duty to a figure bearing a reasonable correlation to the value of the goods imported and that the representation is still pending consideration. Based on these subsequent events a further contention has been raised that by operation of sub-section (5) of Section 46 this Court could give a proper direction to slash down the rate of duty or may direct to levy the duty prevailing as on the date of the release treating the goods under Section 15(1)(b) of the Act read with Section 68 of the Act. We have given our due consideration but find it difficult to accede to the contention. It would be clear that the rate of duty and tariff valuation on the imported goods covered under Section 15(1)(a) is the date on which the bill of entry is presented under Section 46 read with Section 31 while the rate of duty and tariff valuation in respect of the goods covered under Section 15(1)(b) is the rate prevailing on the date on which the goods are actually removed from the warehouse under Section 68. The manifest intention would, therefore, be clear that there should be a declaration in the prescribed form by the importer of his intention to clear the goods either for home consumption or keep the goods in public warehouse. The purpose of granting interim directions was to relieve the petitioner from payment of needless demurrage which would not be converted as a substitute to statutory compliance of the operation of Section 15(1)(a) read with Section 46 or Section 15(1)(b) read with Section 68 of the Act, as the case may be. Once the statutory declaration required either under Section 15(1)(a) or 15(1)(b) has been made, it is determinative and the due date is the relevant date mentioned in the relevant provision for imposition of customs duty and rate of tariff. In this behalf a contention has been raised by Shri Salve that under Section 58 of the Act it is permissible to the Customs Collector to grant licence to a private warehouse wherein the dutiable goods imported by or on behalf of the licensee or any other imported goods in respect of which facilities for deposit in a public warehousing are not available may be deposited without payment of duty. The directions of this Court may be treated to be under Section 58. The arrangement under Section 58(1) appears to be to meet certain eventualities. To grant licence to private warehouse is an exception wherein dutiable goods or other imported goods may be kept in deposit. The normal rule is that they shall be kept in public warehouse. If the interim directions of the court are taken to be substitute for the statutory operation of the relevant provisions, the interest of the Revenue would be prejudicially affected and the fraudulent conduct and acts done in furtherance thereof would get legitimacy to avoid payment of duty and tariff prevailing as on either dates on which the bill of entry was presented or the goods are actually removed from the warehouse. It would be easy for an importer to have the goods imported, get an order from the court to keep them in private warehousing till either the rate of tariff is reduced or the price of the goods are substantially increased by creating artificial scarcity in the market which would jeopardise the economy of the country. Accordingly we are of the considered opinion that the importer cannot be permitted to circumvent the law through judicial process which is otherwise impermissible under the Act.
5. Accordingly we find no force in the contention and it is rejected. The contention of the petitioner that Section 15(1) of the Act is ultra vires the provisions of the Constitution is no longer res integra. A Constitution Bench of this Court in M. Jhangir Bhatusha v. Union of India 1989 Supp (2) SCC 201, (1989) 3 SCR 356 upheld the validity of Section 15(1) and we do not find it necessary to once again traverse the contention de novo. This Court, as seen, by order dated August 11, 1992 directed that the respondent may consider the case sympathetically. It is open to the Government to consider the same and pass an appropriate order. Subject to the above observations the writ petitions are dismissed but, however, without costs.
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