Bombay High Court
Jain Shudh Vanaspati Limited vs S.R. Patankar, Asstt. Collector Of ... on 28 October, 1987
Equivalent citations: 1988(15)ECC180
JUDGMENT Pendse, J.
1. This is an appeal preferred by the original petitioners against the judgment dated September 20, 1982 delivered by the learned single Judge in Miscellaneous Petition No. 602 of 1979 declining the relief sought by the appellants for direction to the respondents to cancel six assessment orders passed on March 13, 1979 subjecting the import of goods to Customs duty. The facts which gave rise to filing of the petition are not in dispute and are required to be briefly stated to appreciate the grievance of the appellants.
2. The petitioner is a public limited company and carries on business of manufacture and sale of refined and hydrogenated oil, soaps and gas. The Government of India notified the import policy for April 1978 - March 1979 and import of various items under the Open General Licence was permitted subject to conditions governing importation thereof. One of the item permitted to be imported under the O.G.L. was palm oil. The Government of India, Ministry of Commerce, issued Notification No. 126 on July 1, 1977 prescribing that the imported palm oil would be totally exempted from payment of Customs duty. The petitioners secured import licence on June 23, 1979 and in pursuance thereof entered into two firm contracts for import of palm oil. A total quantity of 2902.3001 Metric Tons of Palm oil was loaded on ship M.V. 'Dolphin II' by the party in Penang and the vessel arrived within the territorial waters of India and was registered at the Bombay Front Line at 10.30 hours on February 27, 1979. On February 28, 1979 the Shipping Agents submitted the Import General Manifest, which was duly registered and was displayed on notice board of Collector of Customs, Bombay. On February 28, 1979 the petitioner's clearing agents filed with the Customs authorities six bills of entries for clearance of the imported goods for home consumption. The entry inwards of the vessel was not granted and the goods could not be discharged as the Bombay Port Trust informed the vessel's agents on February 23, 1979 that the vessel would have to wait for about 65 days to secure berth for unloading the goods. This delay was due to the acute congestion in the Bombay Port. On February 27, 1979, the day on which the vessel entered the Indian territorial waters, the import of Palm oil was totally exempted from Customs duty.
3. On and from March 1, 1979 as a result of the Union Budget proposals, for the year 1979-80 a levy of import duty at the rate of 12.5% and valorem was proposed on certain specified edible oils and thereafter Notification No. 42 was issued levying duty at 12.5% ad valorem on palm oil. In view of the inability of the Bombay Port Trust to grant berthing facilities to the vessel, the vessel's agents decided to proceed with the journey to Karachi sometime after February 28, 1979. The vessel returned from Karachi on March 6, 1979. The Customs authorities thereupon insisted that the imported goods could be cleared only on payment of Customs duty at 12.5% ad valorem. The petitioners informed the Customs authorities claiming that the goods were imported on February 27, 1979 when the vessel entered Indian territorial waters and the subsequent levy of duty with effect from March 1, 1979 cannot be recovered in respect of the imported goods. The contention of the petitioner was turned down and the assessing authority passed an order levying Customs duty on March 13, 1979. The petitioners then approached this Court by filing petition under Article 226 of the Constitution of India on March 20, 1979 and the grievance of the petitioners is that on the date of the import of the goods palm oil was totally exempted from payment of Customs duty and therefore levy of duty by the Customs authorities was without any authority of law.
4. Before the learned single Judge, the facts set out hereinabove were not disputed, but it was contended on behalf of the respondents that the entry of the vessel into Indian territorial waters on February 27, 1979 was irrelevant as the vessel left the Indian territorial waters without discharging the cargo and thereafter re-entered the territorial waters only on March 6, 1979. It was claimed on behalf of the Customs authorities that the import took place only on March 6, 1979 and on that date the goods were liable to payment of duty. The learned single Judge relying upon the decision reported in 77 Bom. L.R. 380 = 1987 (30) ELT 126 (Bom.), M.S. Shawhney v. M/s. Sylvania and Laxman Ltd. and 1981 E.L.T. 414 Synthetics and Chemicals Ltd. v. S.C. Coutinho held that the goods entered the Indian territorial waters on February 27, 1979 and that was the taxable event. The learned Judge further held that as the vessel left the Indian territorial waters without discharging the cargo, the imported goods lost their characteristics and when the vessel re-entered the territorial waters on March 6, 1979 the goods were reimported and therefore liable to duty. The learned Judge felt that as soon as the vessel left for Karachi Port and thereby crossed the Indian territorial waters, the goods were exported within the meaning of Section 2(18) of the Customs Act. On the strength of this finding, the petition was dismissed and that judgment is under challenge.
5. Shri Rana, learned counsel appearing on behalf of the appellants, submitted that the goods entered Indian territorial waters on February 27, 1979 and on that date taxable event occurred and the goods acquired the characteristic of imported goods. The learned counsel submitted that in view of the exemption notification, the imported goods were not liable for payment of any Customs duty on February 27, 1979. The learned counsel urged that the finding of the single Judge that the goods were exported when the ship left for Karachi Port is clearly erroneous and consequently it could not have been held that the goods are imported only on March 6, 1979 when the ship re-entered Indian territorial waters. We find considerable merit in the submission of the learned counsel.
6. Before examining the question as to whether the imported goods were exported merely because the vessel left the Indian territorial wasters to proceed to Karachi Port, it is necessary to make reference to the decision of the Full Bench of this Court, which exhaustively considered the question as to when can the event of importation occurs under the provisions of the Customs Act, 1962. The decision is reported in 1985 (22) E.L.T. 644 Apar Private Ltd. and Others v. Union of India and Others. Four questions were referred to the Full Bench as it was felt that the decision in Sylvania and Laxman (77 Bom. L.R. 380) requires reconsideration. The four question were :
1. Under the Customs Act, 1962, when can the event of importation be said to occur ?
2. At what point of time or date the rate of Customs duty to which imported goods are liable was to be determined under the Customs Act, 1962 ?
3. Whether it would make any difference to the answer to the second question in cases where at the date of import the goods were totally exempt from duty, either basic or additional, as against being partially exempt from such duty ?
4. Whether the countervailing or additional duty payable under Section 2A of the Indian Tariff Act, 1934, or under Section 3 of the Customs Tariff Act, 1975, was Customs duty referred to in the charging section, namely, Section 12 of the Customs Act, 1962.
The answer of the Full Bench on the first question was that the goods became imported goods as soon as they entered the territorial waters of India and the taxable event occurs under Section 12 of the Customs Act when the goods are brought into the territorial waters of India. The Full Bench held that from that moment the goods are imported goods and continued to be imported goods as defined in Section 2(25) until they are cleared for home consumption, as they acquired the characteristics of imported goods within the meaning of Section 12 no sooner they entered the territorial wasters of India and became subjected to the levy of Customs duty. It was further held that the chargeability does not remain suspended until they are cleared for home consumption. In view of the decision of the Full Bench, it is no longer open to contend that the goods were not imported when the ship entered Indian territorial waters on February 27, 1979. The learned single Judge was therefore right in concluding that the import did take place on February 27, 1979 when the vessel entered the Indian territorial waters, and if the goods acquired the characteristics of imported goods on that date, then the goods were obviously not liable to payment of any Customs duty in view of the exemption Notification No. 126, dated July 1, 1977.
7. Shri Sethna, learned counsel appearing on behalf of the Department, very vehementally urged that the concept of taxable event occurring on February 27, 1979 is totally irrelevant to consider whether the Department can recover the Customs duty. The learned counsel submitted that taxable event may have occurred on February 27, 1979 in view of the decision of the Full Bench of this Court, but the liability to pay the duty arises only when the goods are unloaded at the Port. In other words, the submission is that the decision of the Full Bench restricts the taxable event only for the purpose of Section 12 of the Customs Act and that event has no relevance while considering the determination or realisation of duty when the goods are unloaded and cleared for home consumption. We are afraid we are unable to appreciate any merit in this submission. It is impossible to conceive that there can be different taxable events in respect of imported goods. The taxable event occurs the moment the goods entered the territorial waters of India and there cannot be different taxable events for different purposes. Section 12 of the Customs Act is the charging section and the right to recover duty flows from that section. It would be misreading of the decision of the Full Bench to suggest that the taxable event determined by the Full Bench can be postponed till the goods are cleared for home consumption. In our judgment, it is not open to suggest that the goods were not imported on February 27, 1979.
8. Shri Rana submitted that once it is fund that the goods were imported on February 27, 1979, then the finding of the learned single Judge that the goods were exported within the meaning of Section 2(18) of the Customs Act as soon as the vessel left Indian territorial waters for proceeding to Karachi Port is erroneous. The learned counsel urged that the goods, which had acquired characteristics of imported goods cannot lose that characteristics merely because the vessel left Indian territorial waters. The question for our determination is whether the goods can be said to be exported merely because the vessel, on which it was loaded, left Indian territorial wasters for proceeding to Karachi Port. It is necessary in this connection to ascertain what is the exact concept of expression "export" and "exported goods" under the provisions of the Customs Act. The expression "export" as defined in Section 2(18) means with its grammatical variations and cognate expressions taking out of India to a place outside India. Expression "export goods" defined under Section 2(19) means any goods which are to be taken out of India to a place outside India. Exporter in relation to any export goods means owner or any person holding himself out to be the exporter. Section 33 prescribes that except with the permission of the proper officer, no export goods shall be loaded at any place other than a place approved under Clause (a) of Section 8 for the loading of such goods. Under Section 8(a) the Collector of Customs approves proper places in any Customs port or Customs airport or coastal port for loading of goods for export. Section 41 provides that the person incharge of a conveyance carrying export goods shall, before departure from a Customs station, deliver to the Customs Officer an export manifest in the prescribed form. The person delivering the export manifest is required to subscribe to a declaration to the truth of its contents. Section 42 demands that the person incharge of a conveyance, on which export goods are loaded at a Customs station, shall not permit the conveyance to depart until written order to that effect has been given by the proper officer. Section 50 requires the exporter of goods to make entry thereof by presenting to the proper officer a shipping bill if the goods are exported in a vessel or aircraft and the bill of export if the goods are exported by land. Section 51 provides that the goods entered for export would be assessed and charges recovered only after the officer is satisfied that the goods are not prohibited goods and the exporter has paid duty. The goods could be exported only after the clearance has been given by the concerned officer. Chapter XIV of the Customs Act deals with confiscation of goods and conveyances and imposition of penalties, and Section 111 onwards provide levy of penalty for export of goods not in accordance with provisions of the Customs Act. These provisions clearly lay down that it is not permissible to export goods without following the procedure prescribed under the Act. Section 2(33) defines "prohibited goods" and means any goods the import or export of which is subject to any prohibition under the Act or any other law in force, and Section 2(39) defines expression "smuggling" in relation to any goods as any act or omission which would render such goods liable to confiscation under Section 111 or Section 113 of the Customs Act.
9. The careful analysis of various provisions of the Customs Act leaves no manner of doubt that it is not permissible to export prohibited goods without following the procedure prescribed under the Act. It is obvious that mere physical removal of goods from the territorial waters of India would not lead to the conclusion that the goods are exported. The goods can be said to have been exported only when the goods are removed beyond the limits of Indian territorial waters by following the procedure prescribed under the Customs Act. In case any goods are removed without following the procedure, then the act would amount to smuggling and cannot be described as export of goods. The expression "export of goods" as understood under the Customs Act means removal of the goods beyond the territory of India in accordance with the provisions of the Customs Act, that is after securing the requisite permission and removing the goods from the Customs station after payment of duty. In this background it is obvious that when the vessel on which the imported goods were loaded in the present case, left the Indian territorial waters to proceed to Karachi Port, the imported goods did not lose the characteristics acquired on importation and by no stretch of imagination can be termed as "exported goods". We are unable to share the view of the learned single Judge that as soon as the vessel left the Indian territorial waters after February 27, 1979 the goods were exported. The vessel was compelled to leave the Indian territorial waters due to congestion in Bombay Port and it is futile to suggest that the goods were exported as soon as the vessel left the territorial waters. The goods can be said to be exported only when the goods are taken beyond the limits of Indian territorial waters by following the procedure prescribed under the Customs Act and it is not in dispute that such procedure was not undertaken when the ship left for Karachi Port. Therefore, in our judgment, it is not possible to hold the goods were exported after February 27, 1979.
10. Shri Sethna urged that the goods lost the characteristic of "imported goods" as soon as the ship left for Karachi Port. We are unable to accede to this submission. The characteristic acquired by the goods on crossing the territorial waters cannot be wiped out merely because the conveyance, on which the said goods were loaded, leaves Indian territorial waters in view of the difficulty in securing berthing accommodation.
11. Once the finding that the imported goods were exported after February 27, 1979 is set aside, then the consequential finding that the goods were imported on March 6, 1979 when the vessel re-entered the territorial waters of India cannot be sustained. The taxable event occurred when the vessel entered the Indian territorial waters on February 27, 1979 and it is not in dispute that on that date the imported goods were totally exempted from payment of Customs duty. It is, therefore, obvious that it is not open for the Customs authorities to levy and recover Customs duty on such imported goods on an erroneous basis that the goods were imported only on March 6, 1979 when the duty at 12.5% ad valorem was leviable. In our judgment, the learned single Judge was in error in refusing the relief to the petitioners.
12. Accordingly, appeal is allowed and the impugned judgment dated September 20, 1982 in Miscellaneous Petition No. 602 of 1979 is set aside and the petition is made absolute in terms of prayer (a). The respondents shall pay the costs of the appellants.
The Bank guarantee and the bond furnished by the appellants in pursuance of the interim order passed by this Court to stand discharged.
Shri Sethna applies for stay of the operation of the order of discharging of the bank guarantee and the bond for a period of eight weeks. Request refused.
13. Shri Sethna orally applies for certificate to file appeal before the Supreme Court. Certificate refused.