Gujarat High Court
Rajindra Dyeing And Printing Mills vs Union Of India on 8 May, 1992
Equivalent citations: 1993(67)ELT217(GUJ)
Author: G.T. Nanavati
Bench: G.T. Nanavati
JUDGMENT G.T. Nanavati, J.
1. The Petitioner-company is a manufacturer of textiles. It exports textiles and is registered with the Reserve Bank of India as a registered exporter. The textiles which are exported by the petitioner are manufactured out of excisable goods or goods which are chargeable to import duty. In 1982-83, the petitioner shipped polyester fabrics and sarees under three shipping bills. One consignment was meant for Aden and other two for Jeddah. In manufacture of the said goods, the petitioner had used excisable goods liable to excise duty. The petitioner submitted shipping bills to the Proper Officer, who, after satisfying himself about the nature of the goods, and payment of duty thereon, made an order permitting clearance and loading of the goods for exportation. The goods were then loaded in vessel named CHERRY CHENTAK, on or about 3rd January 1983. In respect of one consignment, the Bill of Lading was issued on 1st January 1983, and in respect of other two, the Bills of Lading were issued on 5th January 1983. The petitioner endorsed the Bills of Lading in favour of foreign buyers and negotiated the documents through a Bank. It also realised the price of the goods. Pursuant to the written order passed by the Proper Officer, the vessel left the customs station but while it was still in the territorial waters of India, it met with an accident on 7-3-1983 and sank off Bombay beyond the limits of the port but within the territorial waters of India. Alongwith the vessel, the goods shipped by the petitioner also sank.
2. It is the petitioner's case that it had completed all the formalities for exporting the goods and even the ownership in the goods had passed on to the foreign buyers. The price of the goods was realised and the Government earned foreign exchange. Thus, it became entitled to the benefit of the export incentives, like cash incentive, replenishment licence, refund of excise duty and drawback of duty relatable to fibre, yarn and like contents used in the manufacture of fabrics. It, therefore, applied to the Government and other authorities for granting those benefits to the petitioner. The petitioner has been granted cash incentive and replenishment licence. The petitioner's claim for refund of excise duty has also been granted. However, the petitioner's claim for drawback of duty was rejected by the Assistant Collector of Customs by his order dated 3-5- 1983 on the ground that the vessel carrying the goods sank within the territorial waters of India, and hence, "export" within the meaning of Section 2(18) read with Section 2(27) of the Customs Act, 1962, did not take place. The petitioner filed an appeal to the Collector of Customs but that was also rejected on 31-8-1983. The appeal filed to the Government of India was also dismissed on 31-12-1984. The petitioner has, therefore, approached this court challenging those orders and for obtaining a writ of Mandamus directing the respondents to grant drawback of duty to which it became entitled under the Customs and Central Excise Duties Drawback Rules, 1971 (hereinafter referred to as "the Drawback Rules").
3. The learned Counsel for the petitioner contended that the petitioner had completed all the formalities which it was required to complete so as to export the said goods, including payment of duty thereon. The title to the goods had passed to the foreign buyer. The price of the goods was paid by the buyers and the Government of India earned foreign exchange to that extent. Therefore, in the context of the Drawback Rules, it can be said to have exported the goods notwithstanding subsequent sinking of the vessel alongwith the export goods within the territorial waters of India. It was further submitted that "India", in the context of the Drawback Rules, would mean the landmass of India. On the other hand, it was contended by the learned Standing Counsel for the respondents that unless the export goods are taken out of the territorial waters of India to a place outside the territorial waters of India, they cannot be said to have been exported as contemplated by the Drawback Rules and therefore the petitioner has been rightly denied the drawback available on exported goods.
4. The Customs Act which governs export of goods from India defines the term "export" and according to that definition it means taking out of India to a place outside India. "Export goods" are defined in Section 2(19) as meaning "any goods which are to be taken out of India to a place outside India. " "India" is defined by Section 2(27) as including "territorial waters of India". Section 12 of the Customs Act provides for levy of duty on goods imported into or exported from India. Section 14 provides for valuation of goods for purposes of assessment. The value of such goods is to be determined on the basis of 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. Section 16 provides for the date for determination of rate of duty and tariff valuation of export goods. It is either the date on which the shipping bill or the bill of export is presented, or the date of payment of duty. As required by Section 50, the exporter of any goods has to make an entry thereof by presenting to the Proper Officer in the case of goods to be exported in a vessel a shipping bill. If the Proper Officer is satisfied that the goods exported are not prohibited goods, and the exporter has paid the duty, he has to make an order under Section 51 permitting clearance and loading of goods for exportation. After entry outwards is granted by the Proper Officer, the Master of the vessel can permit loading of export goods. The person incharge of the vessel carrying export goods has to deliver to the Proper Officer an export manifest. The vessel cannot depart from the Customs Station until a written order to that effect is given by the Proper Officer under Section 51. The Act has made a provision for drawback of duty on exported goods. Though it is not necessary for the purpose of this case, it may be stated that Section 75 provides for drawback on imported materials used in the manufacture of goods which are exported. In exercise of that power, and also the power available under the Central Excises and Salt Act, the Central Government has framed Drawback Rules. In this case we are concerned with drawback of excisable materials used in the manufacture of goods which were sought to be exported.
5. Rule 2(a) of the Drawback Rules defines "Drawback" as follows :
"Drawback in relation to any goods manufactured in India and exported, means-
(1) the rebate of duty chargeable on any imported materials or excisable materials used in the manufacture of such goods in India :
(ii) the rebate of duty of excise chargeable under the Central Excise Act on the goods specified in Schedule I."
The term "export" is defined by Rule 2(c) as under :
"Export" with its grammatical variations and cognate expressions, means taking out of India to a place outside India and includes loading of provisions or store or equipment for the use on board a vessel or aircraft proceeding to a foreign port."
6. This Court in Prabhat Cotton & Silk Mills Ltd. v. Union of India - 1982 (10) E. L. T. 203, interpreting Section 12 of the Act, has taken the view that the expression "goods exported from India" cannot mean goods exported from the territorial waters of India. It cannot mean goods exported from the hypothetical line drawn on the boundary of the Indian territorial waters. It is susceptible to only one interpretation viz. the goods exported from the`landmass' of India. Once this view is taken in the context of exportation from India, the expression `imported into' which forms a part of the expression `imported into or exported from India" cannot carry any other meaning; the expression India must mean landmass of India whether it is in the context of `exportation from India' or `importation into India' of goods within the meaning of dutiable goods in the context of Section 12(1) of the Act. We would have followed this decision without further discussion had it been a case of importation of goods. In that case, there was an import of goods and the question which had arisen for consideration was whether landing charges levied by the port authorities for unloading of imported goods can be included in the assessable value of the said goods for the purpose of computation of the customs duty. It was thought that no other interpretation was possible.
7. The Madras High Court in Lucas TVS v. Assistant Collector of Customs, 1987 (28) E. L. T. 266, has also taken the same view while dealing with a question relating to export of goods. In that case the question which had arisen for consideration was at which stage goods can be treated as having been exported out of India for the purpose of drawback allowance claimable under Section 75 of the Customs Act. What had happened in that case was that after the cargo was loaded in the ship by which the gods were to be exported, it caught fire and some of the goods were destroyed. The entire consignment of destroyed and damaged goods was unloaded and the said goods were then sold by public auction. The exporter then claimed drawback of the duty paid on articles which were originally imported and used in the manufacture of the exported goods. This claim was disallowed by the authorities and, therefore, the matter was taken to the Madras High Court. After referring to the relevant provisions of the Act and the Drawback Rules, and also the decisions of different High Courts, dealing with the question as to when goods can be said to have been imported, the Madras High Court observed that there was no reason why the view taken with respect to importation of goods should not be accepted even while dealing with the question of export as the concept of the `export' out of the territorial waters of India does not fit in with the scheme of the Act. The Madras High Court also referred to the Full Bench decision of the Bombay High Court in Apar Pvt. Ltd. v. Union of India 1985 (22) E. L. T. 644, which has taken a contrary view that the event of importation occurs when the goods from a place outside India enter the territorial waters of India and observed that even the Full Bench of the Bombay High Court was not inclined to apply the logic of that decision to a case of export. It has held that as the goods loaded in a ship pass out of control of the exporter after they are duly cleared under Section 51, the goods must be treated as having been exported for the purpose of claiming drawback allowance under Section 75 of the Act and, it would be enough for the exporter to show that the goods were out of his control and were on their way to the country of destination. Though we are no in agreement with the reason given in support of this view that as the customs duty is payable on export, and if the export takes place only at the place where the territorial waters of India ceases, then strictly speaking, the customs duty will have to be collected only at that place, which is almost an impossibility, because provision for collection of duty can be made prior to, at the time of or subsequent to the taxable event, we do agree with the view that the concept of India does not fit in with the scheme of the Act. We may only add that it does not fit in with the scheme of granting of drawback as contemplated by the Act and the Drawback Rules.
8. Not only with respect to import but with respect to export also, the Bombay High Court has taken a contrary view in V. M. Salgaocar and Brother Pvt. Ltd. v. Union of India and other 1987 (30) E. L. T. 251, the Bombay High Court has held that export of goods takes place only when such goods are taken our of India, i.e. taken out from the territorial limits of India to a place outside India. In that case, the exporter had presented a shipping bill to the customs authorities on 8-3-1985. Duty was paid on the iron ore which was to be exported, and the customs authorities granted entry outwards to the ship on 11th March 1985. On the same day, an order directing clearance and loading of customs goods was made under Section 51 of the Customs Act. Loading began on 19-3-1985 and was completed on 21-3-1985. The vessel sailed for the foreign destination on 25th March, 1985. Export of iron ore was subject to duty of customs till 16th March, 1985. However, by notification dated 17th March 1985, which came into force on the midnight of 16/17th March, 1985, iron ore was exempted from whole duty of customs leviable thereon when exported out of India. The exporter, therefore, claimed a refund of the amount of duty paid by it. The authorities rejected the claim for refund on the ground that the crucial date for the purpose was the date on which the shipping bill was presented, or the date on which the entry outwards was granted. The Bombay High Court, after referring to the definitions of "export", "export goods" and "India" as contained in sub-sections (18), (19) and (27), respectively, of Section 2, and the provisions of Sections 12 and 16 of the Act, held that the said provisions lead to only one conclusion that export of goods can be said to have taken place only when such goods are taken out of the territorial limits of India to a place outside India. In taking this view, the Bombay High Court was influenced by the distinction between the concept of chargeability and the concept of assessment of quantification of the amount payable by way of customs duty, and also the difference between `export goods' and `exported goods'. Though it is true that under Section 12 duty is payable on exported goods and not on export goods, and that export becomes complete only when such export goods cross the territorial boundaries of India on their way to a place outside India, we do not think that the interpretation placed by the Bombay High Court is correct for all purposes. In that case, the Court was not concerned with drawback allowable under the Act and the Rules. With due respect, the Bombay High Court has overlooked the aspect that the process of export commences much earlier and becomes complete when they cross the territorial waters of India. Different situations may arise when the export goods are in the process of exportation and even in the context of Section 12 different meanings may be required to be given to the words "exported goods". Though it is possible to agree with the view that the customs duty levied on export goods may have to be refunded if the process of exportation is not completed for certain reasons when the goods do not go out of the territorial waters of India, it cannot be said that it must be so held in all the cases.
9. In Ulhas Oil and Chemical Industries Pvt. Ltd. v. H. M. Singh 1988 (36) E. L. T. 462, the Bombay High Court followed its earlier decision in V. M. Salgaocar's case (supra).
10. The Customs Act, inter alia, provides for levy of customs duty. The purpose of levying duty appears to be to raise revenue and to regulate foreign trade and commerce. Goods are imported for the purpose of making them available in the country. By levying duty on such goods, not only revenue is earned but inflow of such goods is regulated. When goods are exported, they cease to be available for use in the country. Levying of duty thereon not only helps in earning revenue but it also helps in regulating outflow of goods and in earning foreign exchange. The purpose of granting drawback is also to encourage export by making Indian goods more competitive in international market. They are in the nature of export incentives. Another aspect required to be considered is that in view of the provisions of law, import or export does not be considered is that in view of the provisions of law, import or export does not take place at one point of time. The process of importation and exportation is spread over a period of time. In case of import, it would start when a ship carrying goods enters the territorial waters of India and when the goods are landed and cleared for home consumption. In case of export, it would commence, if not earlier, when the goods are loaded after entry outwards is granted and the ship is permitted to depart, certainly when it leaves the port and it will end when the ship goes out of the territorial waters. Terms "export" and "India", as used in the Act and the Drawback Rules, should be interpreted in this context and, in our opinion, "India" should be interpreted to mean landmass of India as it is as that point of time that the goods go out of the control of the person exporting them and goods cease to be available for consumption within the country. We are taking this view in the context of goods being exported from the landmass of India and we are stating this for the reason that it is possible to visualise export of goods even from the territorial waters. If oil taken out from offshore oil wells is directly exported then such a situation may arise.
11. The term "exported" appearing in Rule 2(a) of the Rules, therefore, will have to be interpreted in this context and in such a manner that it achieves the purpose for which the rule has been made. In our opinion, for the purpose of Rule 2(a), it will have to be held that when the export goods go out of control of the person exporting them and they cease to be available for consumption within the country, they can be said to have been exported. Therefore, though the term "India" is defined by the Act as including "territorial waters of India" in the context of the Drawback Rules, the term "India" will have to be interpreted to mean landmass of India only. The exclusive and wider definition of "India" does not fit in the context of the Drawback Rules, and, therefore, it will have to be interpreted as stated above so as to achieve the object of granting drawback. This interpretation also gets support from the definition of the term "export" contained in Rule 2(c) itself. "Export", as defined by the said Rules, includes loading of provisions or store or equipment for the use on board a vessel or aircraft proceeding to a foreign port. Thus the export goods which are loaded in a vessel or aircraft and, if they are meant for use on board such a vessel or aircraft, then they are to be treated as exported goods, though such goods are used while the vessel or aircraft is still within the territorial waters of India. Such goods, even though they have not gone out of the territorial waters of India, are to be treated as exported goods.
12. In the view that we are taking it will have to be held that the petitioner company had exported the goods which were loaded by it in the vessel named CHERRY CHENTAK on or about 3rd January, 1983 but sank on 7-3-1983 alongwith the said vessel within the territorial waters of India. The view taken by the Assistant Collector, the Collector of Customs and the Government will have to be regarded as erroneous. Therefore, the orders passed by them will have to be quashed and they will have to be directed to grant drawback of duty to the petitioner- company as permissible under the Rules.
13. In the result, this petition is allowed. The impugned orders passed by the Assistant Collector, the Collector of Customs and the Government (Annexures "A", "B" and "C" to the petition) are quashed and set aside and a writ of Mandamus shall issue directing the respondents to grant drawback to the petitioner-company in respect of the aforesaid goods to the extent permissible under the Rule is made absolute accordingly with no order as to costs.