Delhi High Court
The Modern Mills Limited vs Union Of India And Others on 1 January, 1800
Equivalent citations: 1980(6)ELT639(DEL)
JUDGMENT B.N. Kirpal, J.
1. This judgment will dispose of Civil Writ No. 954 of 1978 and Civil Writ No. 953 of 1978.
2. In this writ petition the petitioners are challenging the levy of export duty on the groundnut oil meal protein portion of the compound feed being exported by the petitioners.
3. The compound animal feed which is exported is comprised of an intimate mixture of several (solvent) oil extraction meals as well as wheat bran, Such Compound animal feeds have distinct identity of their own and the commodity exported is known in the international market as "Indian compound feed".
4. The dispute in the present case is in respect of the period prior to coming into force of the Customs Tariff Act, 1975. The export tariff schedule during the period relevant to this writ petition, namely, 9-1-1969 to 2-8-76 did not contain any entry with regard to duty on animal feed or compound animal feed. There were, however, three entries relating to oilcakes and meals being item 18 (groundnut cake), item 19 (decoiled groundnut meal) and item 21 (oil cakes other than groundnut and copra oil cakes).
5. The Government of India issued a notification No. 137, dated 28th September, 1968. By the said notification it was notified that mixed feed containing oil cakes was exempted from so much of the customs duty as was in excess of that leviable on such oilcake content under the second schedule of the Indian Tariff, Act, 1934. Certain disputes arose as to whether the expression mixed feed used in the aforesaid notification' could also cover compound animal feed of the type exported by the petitioners. The Central Board of Excise and Customs issued a Tariff Ruling No. 35 of 1969 dated 27th August, 1969 after studying the position carefully. According to it such animal feeds would not attract the imposition of any export duty. The relevant portion of the Customs Ruling was as follows :-
"The Board has under consideration the liability of "compound animal feeds" to export duty under items 18, 19 and 21 of the Export schedule. These feeds are of different types like feeds for cattle, feeds for poultry, feeds for sheep etc. and are essentially compounded out of oil cakes and meals, rice and wheat bran, fish and meat meal, "maize, gluten, molasses, vitamins etc. in varying proportions. As these feeds are compounded materials in which oil cake or meal is only one of the raw materials and these are commercially, known as cattle feed, poultry feed, etc. these should be taken as such for assessment. As there is no entry in the Export Tariff for animal feeds, these will not attract any export duty."
The petitioners were making their exports of such animal feed from Marmagoa. The Customs authorities during the year 1969-70 assessed the compound animal feeds at Nil duty on the basis of the declarations by the petitioners in their shipping documents pending a Chemical test to be made of the goods by the Customs Authorities for the purposes of verifying the correctness of the said declarations. These assessments were made under section 17(4) after bonds and letters of guarantee were taken. These were subsequently returned when the Assistant Collector came to the conclusion that the said feeds were not dutiable. This practice was altered with effect from 1st May, 1970. The petitioners were then required to produce test certificates regarding the composition of the product. Such certificates were submitted by the petitioners. According to the petitioners the said certificate would show that once the different types of raw materials were mixed together what emerged was a new product having distinct physical, Chemical and commercial characteristic and the said product, namely, compound animal feed was treated under a separate characteristic trade name i.e. Indian Compound Feed. For the next 4 1/2 years the petitioners along with other exporters were allowed to effect duty free shipments of large quantities of compounded animal feeds. On 28th February, 1974 the Central Board of Direct Taxes amended their earlier tariff Ruling dated 27th August 1969. According to the petitioners, notwithstanding the said amendment, it continued to export such feed free of duty because the said amendment letter dated 28th February, 1974 itself confirmed the nondutiable nature of the compounded animal feeds.
6. The grievance of the petitioners arose when the Assistant Collector of Customs, for the first time, passes an order in April, 1977 and levied export duty on the declared groundnut extraction content of the said feed. Aggrieved by the levy of such duty on the content of the groundnut extract the petitioners preferred an appeal to the Appellate Collector, Customs, Bombay. The Appellate Collector dismissed the said appeal. On that the petitioners filed revision petition before the Government of India. The revision petition was rejected by order dated 5th July, 1978. By the said order it was accepted that the export tariff at the material time did not contain any entry conforming to the description of compound feed or animal feed. The first respondent, however, sought to apply the provisions of Section 19 of the Customs Act, 1962 (hereinafter referred to as `the Act') and came to the conclusion that the levy of duty was justified. It held that the compound feed which was exported consisted of several articles and one of the articles, namely, groundnut meal was liable to duty at the rate of Rs. 125 per metric tonne. The first respondent also did not accept the other contentions of the petitioners.
7. The orders passed in revision are now being challenged before us in the present writ petition. Two main contentions urged or behalf of the petitioners are that the provisions of section 19 of the Act are not applicable to the present case, and secondly, the principle of promissory estoppel can be invoked by it and by applying the said principle the respondents ought to be prevented from levying and recovering the impugned duty on export.
8. Relevant portion of section 19 of the Act reads as follows :-
"Except as otherwise provided in any law for the time being in force, where goods consist of a set of articles, duty shall be calculated as follows :-
(a) articles liable to duty with reference to quantity shall be chargeable to that duty;
(b) articles liable to duty with reference to value shall, if they are liable to duty at the same rate, be chargeable to duty at that rate, and if they are liable to duty at different rates, be chargeable to duty at the highest of such rates;
(c) articles not liable to duty shall be chargeable to duty at the rate at which articles liable to duty with reference to value are liable under clause(b) :"
In our opinion the said provision is not applicable to the goods in question at all. As is evident from a plain reading of the section that the said provision can be invoked only where the goods, on which duty is to be levied, consist of a set of articles liable to different rates of duty. Use of the expression `set of articles' is very material. Had the legislature used the words `raw material' or `components' the position may have been different. It appears to us that by using the expression `set of articles' the legislature meant that the set of articles must retain their distinct individual indintity. The expression `set of articles' is not to be equated with or regard as `raw material or `components' of the goods. If different types of materials are mixed together and a new product results and if the identity of the materials so mixed is lost them the provisions of section 19 would not be applicable. Light is thrown on the interpretation of the section by referring to the proviso of the said section. The proviso contemplates duty being levied on the accessories of and spare parts of any article when duty is leviable on the article itself. It seems to us that the question of spare part or accessory of an article would arise only if the article referred to in the expression `set of articles' was to have its won individual identity. The proviso certainly does not contemplate spare part or an accessory of a raw material.
9. It is quite evident that the Central Government had decided and made known to the entire public that such animal feed would not be liable to export duty. It has been averred that because of the said tariff clarification the petitioners effected exports on the basis that no duty was payable. It is contended, and in our opinion rightly, that the provisions of promissory estoppel are attracted in the present case. The petitioners have rightly relied upon the well-known decision of M/s. Motilal Padampat Sugar Mills Co. Ltd. v. The State of Uttar Pradesh and others, . It has been stated that while entering into contracts with foreign buyers the petitioners took into consideration the non-dutiable nature of the commodity in fixing the price. It is further alleged that the profit margin of the commodity was very meager and the additional liability would necessarily result in a loss to the shipper. It appears that a representation against such levy had been filed by the Polish Consulate with the Ministry of Commerce. No reply affidavit has been files on behalf of the respondents and the said allegations contained in the writ petition are not denied. Having represented to the exporters that in law, no export duty is leviable on such animal feed the Government is clearly stopped from charging any such duty subsequently as the petitioners had acted to their detriment on the basis of such representation.
10. We are of the opinion that the principles of promissory estoppel are clearly applicable to the present case and the respondents cannot be permitted to levy and recover export duty on any portion of the animal feed exported by the petitioners.
11. Mr. Kataria has relied upon the decision reported as Scindia Steam Navigation Co. Ltd. v. Union of India, . The Madras High Court in that case was construing the provisions of section 21 of the Sea Customs Act. In our view the said case has no bearing because the provision of law being interpreted by Madras High Court was different. The Madras High Court was dealing with the interpretation of section 21 of the Sea Customs Act which is not in pari material with section 19 of the Customs Act, 1962. Section 21 of the Sea Customs Act applies to goods where any article liable to duty under that Act forms "a part or ingredient" thereof. The word "ingredient" is conspicuous by its absence in section 19 of the Customs Act.
12. We accordingly allow the writ petition, quash the order dated 5th July, 1978 and restrain the respondents from levying any export duty in respect of the consignments of "Indian compound feed" shipped by the petitioners between 8th January, 1969 to 2nd August, 1976. The petitioners would be entitled to costs. Counsel fee Rs. 500/-