[Oral Judgment]. - The Petitioners are a partnership firm duly registered under the Partnership Act, 1932. The petitioners carry on business as manufacturers of chemicals, surgical instruments, insecticides, etc. at Bombay. In exercise of the powers conferred under Section 25 of the Customs Act, 1962, the Central Government has published a Notification dated 30th March, 1974 in the Official Gazette exempting several goods including Endosulfan from payment of customs duty on their importation into India. The notification came into force on April 1, 1974 and was to remain in operation till July 1, 1974. Under the relevant customs tariff the duties of customs payable on Endosulfan was at the rate of 75% ad valorem, but under the notification published on March 30, 1974, an exemption of that portion of duty as was in excess of 20% ad valorem was granted. The petitioners relying upon the notification imported from Rotterdam, Germany, 7250 kilograms of Endosulfan at a price of Rs. 3,02,265/-.
2. The consignment was shipped by s.s. Datjan and the ship crossed into Indian Territorial Waters and the Indian Customs Frontier on June 17, 1974. An order of entry inward under Section 31 of the Customs Act was granted to the ship on June 17, 1974. The Bombay Port Trust declared June 25, 1974 to June 29, 1974 as the free delivery period and the general landing date in regard to the cargo brought by the ship as June 25, 1974. After discharging the cargo the ship sailed from Bombay on June 26, 1974. For the purpose of clearance of the consignment of Endosulfan the petitioners’ Clearing Agent M/s. Tulsidas Khimji Private Limited presented a Bill of Entry dated June 29, 1974 to the Customs Authorities. The Department does not accept that it was presented on June 29, 1974, but claims that it was presented only on July 2, 1974 and for the purpose of this petition I will proceed on the assumption that the Bill of Entry was presented on July 2, 1974. The petitioners furnished to the Customs Authorities all relevant documents pertaining to the shipment of the consignment and requested the clearance for home consumption by granting exemption in accordance with the notification which was in force till July 1, 1974. The Customs Authorities declined to give advantage of the notification to the petitioners as the Bill of Entry was presented after expiry of the notification published on March 30, 1974. As the petitioners urgently needed the goods, the petitioners agreed to make payment of 25% of the duty and to execute a bond in favour of President of India for securing the balance of duty if found payable by the Customs Authorities on a detailed consideration. Accordingly, the petitioners executed a bond on August 27, 1974 and 25% of the duty was paid on September 6, 1974 and the goods were cleared.
3. The Customs Authorities served a show cause notice dated September 5, 1974 on the petitioners calling upon them to pay the short levied duty in respect of the goods cleared by the petitioners. On receipt of this show cause notice, the petitioners made representation to the Government of India on September 12, 1974. The petitioners represented that though the earlier notification expired on July 1, 1974 a fresh notification in identical terms was published on July 9, 1974 and in any view of the matter the petitioners should be given advantage of the subsequent notification. The petitioners also claim that they are entitled to the advantage of the earlier notification as the Bill of Entry was presented on June 29, 1974. The representation was turned down by the Government of India on October 16, 1974. Thereafter the petitioners sent a reply to the show cause notice served by the Customs Authorities and the reply was sent on October 22, 1974. Subsequently, the petitioners received another notice from the Assistant Collector on October 29, 1974, stating that no answer was given to the show cause notice and the Department would proceed on the basis that the petitioners have nothing to say in the matter. The petitioners thereafter sought a personal hearing and ultimately the Assistant Collector passed an order January 4, 1975 holding that the petitioners are liable to pay an amount of Rs. 1,57,732.50 as duty short-levied and for realisation of that amount the Department would proceed to enforce the bond executed by the petitioners. The petitioners have filed this petition under Article 226 of the Constitution to challenge the legality and validity of that order.
4. Mr. Chinoy, the learned counsel appearing in support of the petition, has raised three or four submissions to challenge the legality of the impugned order. The learned counsel submitted that the demand notice and the impugned order are without jurisdiction as the petitioners were entitled to the advantage of the notification both on the date of import and the presentation of Bill of Entry on June 29, 1974. The learned counsel further submitted that the impugned order indicates non-application of mind and while coming to the conclusion the Assistant Collector has violated the principles of natural justice. Mr. Chinoy also submitted that the impugned order threatening to enforce the bond goes beyond the terms of the bond executed by the petitioners. The principal submission of the learned counsel is that the exemption was available on the date of import of the goods and that advantage cannot be denied even assuming that the Bill of Entry was presented after the expiry of the period of notification. Mr. Dhanuka, the learned counsel appearing on behalf of the Department, on the other hand, submitted that there is ample evidence on record to establish that the Bill of Entry was presented after expiry of the period of notification on July 2, 1974. Mr. Dhanuka submitted that the crucial date for determination of the rate of duty is the presentation of the Bill of Entry and not the date of import of the goods.
5. In view of these rival submissions, the principal question which falls for determination is whether the petitioners are entitled to the advantage of the notification dated March 30, 1974 even though the Bill of Entry was presented on July 2, 1974. As stated hareinabove I am proceeding to consider the merits of the submission of the petitioners on the basis that the Bill of Entry was presented only on July 2, 1974, that is, after the exemption period under notification dated March 30, 1974 was over. Before considering the submission of Mr. Chinoy, it is desirable to quote the relevant portion of the notification dated March 30, 1974:
“G.S.R. No. 153E. - In exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods, specified in the Table annexed hereto, when imported into India in a commercially pure form-
(a) so much of that portion of the duty of customs leviable thereon which is specified in the First Schedule to the Indian Tariff Act, 1934 (32 of 1934), as is in excess of 20 per cent. ad valorem, where the standard rate of duty is leviable:
(b) so much of that portion of the duty of customs leviable thereon which is specified in the aforesaid First Schedule, as is in excess of 10 per cent ad valorem, where the preferential rate of duty is leviable ;
Provided that nothing contained in this notification shall apply to any patent or proprietory preparation containing any of the goods specified in the said Table as an ingredient thereof”.
TABLE
| Sl. No. | Common Name | Chemical Name |
| 1 | 2 | 3 |
| * * * | * * * | * * * |
| 16 | Endosulfan | 6, 7, 8, 9, 10, 10-Hexachloro-1, 5, 5, 6, 9, 9a-Hexahydro-6, 9-methano-2, 4, 3, Benzol-dioxathiepin-3-oxide. |
| * * * | * * * | * * * |
Relying upon the terms of this notification, Mr. Chinoy submitted that the consignment crossed the Indian Customs Frontier on June 17, 1974 and on that date admittedly the notification was in operation and the petitioners are entitled to claim advantage of that notification. To appreciate the submission of the learned counsel it is necessary to set out the provisions of Sections 12 and 15 of the Customs Act, 1962 which are incorporated in Chapter V of the Act dealing with levy of, and exemption from, customs duties. Sections 12 and 15 read as under:
“12. (1) Except as otherwise provided in this Act, or any other law for the time being in force, 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, on goods imported into, or exported from India.
(2) The provisions of sub-section (1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government."
“15. (1) The rate of duty, rate of exchange 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 45, 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.
(2) The provisions of this section shall not apply to baggage and goods imported by post.
(3) For the purpose of section 14 and this section-
(a) “rate of exchange” means the rate of exchange determined by the Central Government for the conversion of Indian currency into foreign currency or foreign currency into Indian currency;
(b) “foreign currency” and “Indian currency” have the meanings respectively assigned to them in the Foreign Exchange Regulation Act, 1947."
6. Mr. Chinoy did not dispute that under Section 15, the rate of duty or the rate of exchange applicable to the imported goods shall be the rate of valuation in force on the date on which the bill of entry is presented. But what the learned counsel says is that the duty is levied on imported goods under Section 12(1) of the Act and it provides that duty shall be levied at such rates as may be specified under the Indian Tariff Act or any other law for the time being in force, on goods imported into India. The learned counsel submitted that it is necessary to read both the Sections 12 and 15 together and it is necessary to determine the two different concepts provided by the two sections. The plain reading of the two sections makes it clear that while Section 12 is a charging section, Section 15 provides for the computation of the duty. These sections came for consideration before a Division Bench of this Court in a judgment reported in (1975) 77 Bom. L.R. 380 in the case of M.S. Shawhney v. Messrs. Sylvania and Laxman Ltd. It would be advantageous to set out few facts which has given rise to that decision. By a notification dated September 3, 1966 the Government of India granted exemption to glass tubes used in the manufacture of fluorescent lamps from customs duty. The exemption granted was to remain in force up to and inclusive of March 31, 1967. The respondents in that case imported goods by vessel which arrived at Bombay on March 29, 1967. On the same date upon the filing of the import manifest the Customs Authorities granted entry inward for the vessel. A bill of entry was presented on April 27, 1967 and the goods were actually cleared on June 6, 1967. The question which arose for consideration before the Division Bench was whether the goods attracted customs duty as the bill of entry was presented only on April 27, 1967, that is, beyond the period of exemption. The Division Bench held that under Section 12 (1) of the Customs Act chargeability in respect of levy of Customs duty arises when the goods are imported into India. The combined effect of the definition of the words ‘Import’ and ‘India’ under Section 2 (23) and Section 2 (27) of the Customs Act is that import takes place when goods are brought into the territorial waters of India from a place outside India. There is nothing in the Act which indicates that the chargeability in respect of levy of customs duty is postponed until a bill of entry is presented. The Division Bench held that there is clear distinction between the concept of chargeability in respect of customs duty and the concept of assessment or qualification of the amount payable by way of customs duty. The Division Bench after quoting the observations of the Privy Council in Wallace Brothers & Co. Ltd. v. Commr. of Income Tax, 50 Bombay Law Reporter 482, P.C., observed as follows:
“These observations fully justify the clear distinction that exists inter alia between changeability in respect of a tax or duty and the quantification of the amount payable in respect thereof. The only charging section in respect of levy of customs duty is Section 12 (1). 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, on 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 is stated above. That event in the present case took place much prior to March 31, 1967 when the exemption notification was operative. Such chargeability in respect of levy of customs duty ought not to be confused with quantification of the amount or assessment thereof as provided under the scheme of the Act. Section 15 of the Act specifies the date for determination of rate of duty and tariff valuation of goods imported. In case of goods entered for home consumption under S. 46 the rate of duty applicable to any imported goods shall be the rate in force on the date on which a bill of entry in respect of such goods is presented under that section.The assessment has to be made as provided in S. 17 of the Act. What Ss. 15 and 17 provide is to determine the rate at which duty is leviable and to quantify the amount payable by way of duty, but this is entirely different from ”chargeability" under the Act. Chargeability arises simply by reason of S. 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."
Mr. Chinoy relying upon the decision submitted that the controversy involved in this petition stands concluded by the judgment. The learned Counsel submitted that the exemption was available to the petitioners on the date of import of the goods into the territorial waters of India and merely because the period of exemption has expired on the date of presentation of bill of entry the petitioners cannot be denied the advantage of the notification. The submission appears to be sound and requires to be upheld.
7. Mr Dhanuka, the learned Counsel appearing on behalf of the respondents, on the other hand, submitted that a plain reading of Section 15 makes it clear that the rate of duty shall be the rate in force on the date on which a bill of entry is presented. Mr. Dhanuka submitted that it is wholly irrelevant to refer to Section 12 of the Act for computation or determination of rate of duty. The learned Counsel further submitted that under Section 15 of the Act the on}y relevant date is the presentation of bill of entry for determination of customs duty. In support of the submission the learned counsel relied upon a decision of the Supreme Court reported in A.I.R. 1979 Supreme Court 675 = 1979 E.L.T. (J 241) in the case of M/s. Prakash Cotton Mills (P) Ltd. v. B. Sen and others. The learned Counsel also submitted that in view of the decision of the Supreme Court the ratio laid down by the Division Bench of this Court no longer holds good. In view of the submission, it is necessary to consider the facts and submission made before the Supreme Court to find out the exact dictum laid down in that case. The importers, before the Supreme Court, obtained licences for the import of nylon yarn. The yarn was imported to Bombay on the basis of a letter of credit in favour of the foreign suppliers. When the shipment arrived the importers received the bill of lading and other documents of title from the bankers on or about August 23, 1965 and paid for the same. The bill of entry was lodged on the same date and the goods were assessed for duty by the Customs Authorities at a certain figure. The importers stored the goods in the warehouse on December 22, 1965. Thereafter the Indian rupee was devalued on June 6, 1966 and the Customs (Amendment) Ordinance, 1966 was promulgated on July 7, 1966 by which Sections 14 and 15 of the Customs Act were amended. The grievance of the importers was that thereafter the goods were allowed to be cleared on payment of enhanced duties according to the amended provisions of the Act. The importers paid the duty under protest and applied for refund of excess payment on the ground that the amended law was not applicable as the consignments had been received, stored and assessed to duty before the promulgation of the ordinance. The claim for refund was turned down and the importers approached the Supreme Court in appeal by special leave. The Supreme Court observed in paragraph 4 of the judgment that the question which arises for consideration was whether the Customs Authorities were justified in applying the rate of duty according to the rate prevalent on the date of their actual removal from the warehouse. The Supreme Court held in paragraph 6 of the judgment as follows :
“It is thus clear that the requirement of clause (b) of sub-sec. (l) of section 15 of the Act that the rate of duty, rate of exchange and tariff valuation applicable to any imported goods shall be the rate and valuation in force on the date on which the warehoused goods are actually removed from the warehouse.”
It is clear from the judgment of the Supreme Court that the only question decided by the Supreme Court was whether the rate of duty prior to amendment or subsequent to amendment can be applied in respect of goods imported prior to the date of amendment. The question of availability of exemption issued under notification published under Section 25 of the Act did not fall for consideration of the Supreme Court. The Supreme Court was required to determine the relevant date for determination of rate of duty and the question which was answered by the Division Bench of this Court in the case of M.S. Shawhney v. M/s. Sylvan and Laxman Ltd. (supra) did not come up for consideration. In these circumstances, the submission of Mr. Dhanuka that the decision of the Division Bench of this Court no longer holds good is not sound and cannot be entertained. It is clear and it is also not disputed Mr. Chinoy that the rate of duty would be one prevalent on the date of presentation of the bill of entry as provided by Section 15 of the Act. But what is crucial is whether the advantage of exemption can be made available to the petitioners where admittedly the goods were imported while the notification of exemption was in operation and that question did not arise for consideration before the Supreme Court. The submission of Mr. Chinoy is sound and in judgment the dictum laid down by the Division Bench of this Court is in no way affected or shaken by the decision of the Supreme Court.
8. Mr. Dhanuka then submitted that the decision of the Division Bench would have no application to the facts of the present case as the case before the Division Bench was of total exemption while in the present case what is granted by the exemption notification is the exemption of that portion of duty which is in excess of 20% ad valorem. The submission is that the decision of the Division Bench would be applicable only in case of total exemption or payment of nil duty and not in case of partial exemption. This submission has no merit and must be rejected. It is clean that the concept of changeability and assessment or quantification of the amount payable are distinct. The stage of chargeability is over as soon as the goods are imported into the territorial waters of India. On That date the petitioners were entitled to certain exemption and that exemption was available as soon as the import took place. The bill of entry was presented subsequently after expiry of the date of notification and the duty could be that which would be payable at the rate prevalent on the date of presentation of the bill of entry. But in my judgment that would not take away the right accrued to the petitioners to claim advantage of the notification available on the date of import of the consignment into the territorial waters of India. The rate of duty under Section 15 of the Act may fluctuate and the amount of duty would be determined with reference to the date of presentation of the Bill of Entry as provided under Section 15. But Section 15 nowhere provides that the exemption available to the importers on the date of import has to be totally ignored while determining the customs duty. It is possible that due to the fluctuation of the rate of duty the importers may be required to pay something more than what was necessary on the date of import. But such computation or assessment or quantification of the amount must be with reference to the right accrued to the importers on the date of import of goods. Merely because the period of notification was over on the date of presentation of bill of entry would not disentitle the importers from claiming the exemption available under that notification.
9. Mr. Chinoy, in this connection, invited my attention to an unreported judgment of the learned Single Judge in Misc. Petition No. 340 of 1970 decided on February 26, 1975. An identical notification came for consideration before the learned Single Judge in that case. The consignment in that case arrived at Bombay on August 20, 1968 and the consignment was thereafter kept in the Bombay Port Trust Warehouse. The Customs duty leviable on the item was 60% ad valorem but under the notification dated October 12, 1968 exemption was granted from payment of customs duty in excess of 27-1/2% ad valorem. The goods arrived within the territorial waters of India prior to the date of notification but were cleared from the warehouse subsequent to the date of notification some time between December, 1968 and June, 1969. The importer claimed advantage of the notification on the ground that the crucial date for determination of the customs duty under Section 15 of the Act was the date of removal or clearance of the goods from the warehouse and as the notification was in existence on that date the petitioners are liable to pay duty only at the rate of 27-1/2% ad valorem. The Customs Authorities disputed the claim of the petitioners claiming that the notification was not in existence on the date when the goods were imported into the Indian territorial waters and that being the crucial date the importers would not be entitled to the advantage of the notification merely because it was in existence on the date of clearance of the goods. The learned Single Judge accepted the contention of the Department and relied upon the decision of the Division Bench in M.S. Shawhney v. Messrs. Sylvania and Laxman Ltd. (supra) and observed that the act of importation was complete when the goods crossed the customs barrier and as the exemption was not available on that date the petitioners could not claim advantage of the notification. On behalf of the importers it was contended before the learned Single Judge that the decision of the Division Bench has no application as that was a case of total exemption and, therefore, the charging Section 12 did not come into operation in that case. This submission was turned down by the Single Judge holding that even under Section 15 of the Act the Customs Authorities have to consider what is the rate of duty only after taking into consideration the question whether on the date of importation of the goods the notification of exemption was applicable or not. I am in total agreement with the view taken by the learned Single Judge and in my judgment there is no distinction between the case of total exemption and partial exemption and it is not permissible to by-pass the dictum of the Division Bench on that count. In my judgment, the ratio laid down by the Division Bench squarely applies to the facts of the case and the demand notice and the impugned order passed by the Assistant Collector is totally illegal and unjust. In these circumstances, the petitioners are entitled to the relief claimed in the petition.
10. In the result, the petition succeeds and the rule is made obsolute in terms of prayer (b) of paragraph 23 of the petition. In the circumstances of the case, there will be no order as to costs.
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