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Choksi Tube Company Ltd. v. Union Of India And Others
WP (C) No. 1583 of 1986 — S.P. Bharucha, J.
Factual and Procedural Background
The writ petitioners imported stainless steel strips that arrived in Bombay on 6 September 1976. They cleared the goods for home consumption on 16 September 1976 and 30 September 1976 after availing themselves of the customs-duty exemption contained in Exemption Notification No. 256-Cus/76 issued under Section 25(1) of the Customs Act, 1962.
On 10 and 11 January 1977 the Customs authorities issued show-cause notices asserting that the width of the strips exceeded that permitted by Notification 256-Cus/76 and proposing recovery of duty at the unexempted rate. While those proceedings were pending, Exemption Notification No. 27/77 (24 February 1977) granted exemption to stainless steel strips of a width exceeding 127 mm and thickness of 3.175 mm and above.
On 25 March 1977 the petitioners requested the Central Board of Excise and Customs to extend to them the same special exemption that had just been granted to Ahmedabad Advance Mills Ltd. by a letter dated 19 March 1977 under Section 25(2). Their request was rejected on 20 May 1978 without reasons, and a separate plea for retrospective application of Notification 27/77 was rejected on 23 June 1978.
The petitioners pursued statutory appeals within the Customs hierarchy and then before the Central Excise and Gold (Control) Tribunal, all without success. They therefore filed the present writ petition in the Supreme Court (alongside civil appeals) claiming that denial of equal treatment violated Article 14 of the Constitution.
Despite repeated directions dated 11 March 1992, 30 October 1996, and 28 November 1996, the respondents never filed a counter-affidavit to the writ petition, although they did file one in the connected civil appeals.
Legal Issues Presented
- Whether the Government’s refusal to grant the petitioners the same customs-duty exemption under Section 25(2) of the Customs Act that was granted to Ahmedabad Advance Mills Ltd. is arbitrary and violative of Article 14 of the Constitution.
- Whether an importer similarly situated to a beneficiary of a special exemption can claim a right to identical treatment notwithstanding the discretionary wording of Section 25(2).
Arguments of the Parties
Petitioners’ Arguments
- The Government’s refusal to extend the special exemption given to Ahmedabad Advance Mills Ltd. constitutes unequal treatment in breach of Article 14.
- The petitioners’ imports were identical in nature and contemporaneous with those of the favoured mills; no relevant distinguishing circumstance exists.
- The absence of reasons for differential treatment underscores arbitrariness and necessitates judicial intervention.
Respondents’ Arguments
- A notification under Section 25(2) is purely discretionary and cannot be claimed as a matter of right by other importers.
- No detailed justification for the differential treatment was provided; counsel for the respondents, however, did not attempt to defend the failure to file a counter-affidavit or to articulate reasons for differential treatment.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court noted that the respondents had been repeatedly directed to file a counter-affidavit explaining the basis for extending a special exemption to Ahmedabad Advance Mills Ltd. while denying identical relief to the petitioners. Their persistent failure to do so led the Court to infer that no public-interest consideration or exceptional circumstance, as required by Section 25(2), differentiated the two importers.
Because the respondents neither asserted that the petitioners’ goods differed in any material respect nor identified any public-interest rationale, the Court concluded that the petitioners were entitled, under Article 14, to the same exemption accorded to the mills. The discretionary power under Section 25(2) must be exercised in a non-arbitrary manner consistent with constitutional equality.
Consequently, the Court directed the Customs authorities to extend to the petitioners the benefit granted in the Government’s letter dated 19 March 1977 covering 735.787 MT of stainless steel strips imported by Ahmedabad Advance Mills Ltd. The duty already paid by the petitioners corresponds to the duty now adjudged payable; nonetheless, the authorities may verify the calculations and recover any shortfall, which the petitioners undertook to pay. The bank guarantee furnished for differential duty was ordered to stand discharged.
Holding and Implications
The writ petition is allowed. The respondents must accord the petitioners the same customs-duty exemption that was granted to Ahmedabad Advance Mills Ltd. The connected civil appeals are accordingly disposed of. No order as to costs.
Implications: The decision enforces the constitutional mandate of equal treatment in the exercise of the Government’s discretionary power under Section 25(2) of the Customs Act. While it grants relief only to the present petitioners, it signals that similarly situated importers cannot be arbitrarily denied concessions extended to others.
S.P Bharucha, J.—
WP (C) No. 1583 of 1986
The writ petitioners imported stainless steel strips. The stainless steel strips arrived at Bombay on 6-9-1976. They were cleared for home consumption on 16-9-1976 and 30-9-1976. They were cleared giving them the benefit of exemption from customs duty as provided by Exemption Notification No. 256-Cus/76 issued under the provisions of Section 25(1) of the Customs Act, 1962. On 10-1-1977 and 11-1-1977, the writ petitioners received notices to show cause why they should not be charged duty at the unexempted rate on the ground that the width of the said strips was in excess of that permitted by the said exemption notification.
2. On 24-2-1977, Exemption Notification No. 27/77 was issued giving an exemption from customs duty to stainless steel strips of a width exceeding 127 mm and of a thickness of 3.175 mm and above.
3. On 25-3-1977, the petitioners wrote to the Central Board of Excise and Customs with reference to a notification that had specially been issued in favour of M/s Ahmedabad Advance Mills Ltd., Navsari, Bombay, who had imported identical stainless steel strips at about the same time as the petitioners. The petitioners submitted that they should be treated on a par with the said mills. The notification that was issued in favour of the said mills was dated 19-3-1977. It exempted in the public interest 735.787 MTs of stainless steel strips imported by the said mills from customs duty leviable thereon in the same manner as prevailed under Exemption Notification No. 256-Cus/76. The representation made by the petitioners on 25-3-1977 was rejected on 20-5-1978; no reason for the refusal was assigned. The petitioners also sought the benefit of Exemption Notification No. 27/77 dated 24-2-1977 to be applied to them retrospectively. This was refused on 23-6-1978 on the ground that the exemption could not be issued so as to have retrospective effect. The petitioners had been pursuing the statutory appeals provided under the Customs Act in respect of the demand made upon them for duty on 10-1-1977 and 11-1-1977 as aforestated. Having failed before the authorities, they preferred an appeal before the Central Excise and Gold (Control) Tribunal. The Tribunal also indicated that, in the circumstances, no relief could be granted to them.
4. Along with the appeals that they filed against the order of the Tribunal, the petitioners filed this writ petition. They set out the facts as aforestated and averred that the action of the Board in declining to give to them the relief that had been given in identical circumstances to the said mills was arbitrary and against the provisions of Article 14 of the Constitution. The petitioners prayed for a writ directing the respondents to consider the case of the petitioners and give to them the relief that had been given to the said mills.
5. On 10-3-1992 and 11-3-1992 this writ petition and the civil appeals were part heard before this Court. On 11-3-1992, the Court noted that no counter-affidavit had been filed to the writ petition; that, having regard to the averments in the writ petition, a counter-affidavit was necessary; and that the counter-affidavit should be filed within 8 weeks. No affidavit having been filed, the matter was adjourned on 30-10-1996. On 28-11-1996, it was adjourned again, it being made clear that this would be the last opportunity. Despite the clear terms of the order dated 11-3-1992, no affidavit in reply to the writ petition has been filed up to date. An affidavit has been filed in reply to the civil appeals. There too the ground of arbitrariness has been taken and the reply is that a notification under Section 25(2) of the Customs Act is in the discretion of the Government and cannot be claimed as a matter of right.
6. We must record that with usual fairness, Mr Mohan, learned counsel for the respondent, has not attempted to justify the action of the respondents in not filing a counter and in not ascribing a reason for treating the said mills in a fashion different from that in which the petitioners have been treated.
7. It is not the case of the respondents that the import made by the said mills was in any way different from that made by the petitioners. There is no indication as to why the petitioners have been treated differently from the mills. Where power under Section 25(2) is exercised to grant a special exemption from payment of duty, under circumstances of an exceptional nature to be stated in such order, we would have expected the respondents to state on affidavit what it was that moved them in the public interest to grant such exemption and what was the exceptional nature of the circumstances that attached to the imports made by the said mills. Having regard to the determined stand of the respondents not to state their case on paper, we must assume that there was neither any public interest nor any circumstances of exceptional nature involved and that others placed in circumstances similar to that in which the said mills were placed must have the same benefit as was advanced to the said mills. Accordingly, we must direct the respondents to grant to the petitioners the same benefit that was granted to the said mills by the letter dated 19-3-1977 written by M. Jayaraman, Under-Secretary to the Government of India, Department of Revenue and Banking to the Collector of Customs, Bombay on 19-3-1977 on the subject of “Exemption from payment of customs duty import of 735.787 MT of hot rolled stainless steel strips by the Ahmedabad Advance Mills Ltd., Bombay”.
8. The petitioners had paid customs duty when the goods were cleared and that duty is the duty that would be payable having regard to our order. It shall, however, be open to the respondents to make the requisite verification and claim from the petitioners any shortfall, if any, which Mr Salve, on behalf of the petitioners, states that the petitioners shall pay. The bank guarantee given by the petitioners for the differential duty amount pursuant to the orders of this Court shall now stand discharged.
9. The writ petition is allowed accordingly. There shall be no order as to costs.
CAs Nos. 4165-4167 of 1986
10. Having regard to the order that we have made on the writ petition, the civil appeals shall be treated as disposed of.
11. There shall be no order as to costs.
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