Kerala High Court
George Joseph Fernandez And Ors. vs Government Of India And Anr. on 25 July, 1989
Equivalent citations: AIR1989KER328, 1990(27)ECC237, 1989(24)ECR712(KERALA), AIR 1989 KERALA 328
Author: K.T. Thomas
Bench: K.T. Thomas
ORDER K.T. Thomas, J.
1. Petitioners are trading in "Outboard Motors" which they import from foreign countries and sell to users in India. Outboard motors are used for fitment with fishing boats and hence their consumers are the fishermen operating such boats for fishing operations. Duty is levied on such outboard motors under the Customs Act at the time of clearance when they reach Indian Ports. The Government of India, in exercise of power under Section 25(1) of the Customs Act, issued notification dt. 27-4-1988 exempting outboard motors imported into India by "any State Fisheries Corporation" from customs duty leviable in excess of the amount calculated at the rate of twenty five per cent ad valorem and also from the whole of the additional duty thereon payable under the Customs Tariff Act, 1975. The said notification is challenged in these original petitions on the ground that the exemption so granted is discriminatory, arbitrary and hence illegal. According to the petitioners, the classification envisaged in the notification as between the State Fisheries Corporations on the, one hand and other importers on the other is violative of Article 14 of the Constitution.
2. As per the import policy enunciated by the Government, outboard motor is an item allowed for import by all persons under open general licence. However, customs duty was imposed on the article at different rates during different years. Exemption under Section 25(1) granted to the outboard motors imported by the State Fisheries Corporation (for short 'the Corporation') varied in percentage from year to year. In 1987 when the duty was fixed at 45% (basic duty) plus 40% (auxiliary duty), the Corporation was to pay duty only at the rate of 40% + 25% + 10% (additional C. V. duty). In a revision made during the same year when the total duty was fixed at 90%, the rate applicable to the Corporation was 80%. But by notification dt 27-4-1988 when the rate of duty was fixed at 90%, the Corporation was to pay only a basic duty of 25%. Of course, the margin was slightly reduced by notification dt. 1-3-1989, when the total duty for all importers was fixed at 80%, the Corporation needs pay only 35%.
3. Though there is no Fisheries Corporation as such in the State of Kerala, a State level Apex Federation was formed which is called "Matsyafed" which made some imports of outboard motors to be sold to fishermen. The result is that Matsyafed can now sell outboard motors at a far reduced price when compared with the price offered by the petitioners and other similarly situated traders. Hence it became difficult for the petitioners to compete with Matsyafed in the matter of sale of outboard motors. It was in the aforesaid background that petitioners approached this Court praying for appropriate reliefs.
4. It is contended that the consequence of the huge difference in the rate of customs duty payable by the Corporation or Federation vis-a-vis the rate of duty payable by other persons, they are practically ousted from the trading field and hence the petitioners are discriminated against without any rational basis having no nexus with the object sought to be achieved. It is also contended that no public interest is sought to be achieved by exempting the Corporation or Federation in such a large measure. The Corporation does not form a class by itself and there is no rhyme or reason for discriminating the petitioners and the Corporation or Federation in the matter of customs duty, contended the petitioners.
5. No counter has been filed on behalf of the respondents. Government of India is the first respondent in the original petitions and the other respondent is the Collector of Customs, Cochin. The benefit of the exemption primarily enures to Matsyafed and other Corporations of different States, but none of them is made a party in these proceedings. The non-joinder of any of those bodies is sought to be justified on the ground that the reliefs claimed in the original petitions are only intended to benefit the petitioners and not to affect such exempted parties. Reference was made to the decision in G.M.S.C Rly. v. A.V.RT Siddhanti, (AIR 1974 SC 1755) in support thereof. That was a case for issuing a writ of mandamus directing the Secretary of the Railway Board to fix the inter se seniority of the petitioners. A contention was raised by the respondents in the said case that employees who were likely to be affected by the decision in the case were not made parties and hence their nonjoinder would be fatal to the maintainability of the petition. The Supreme Court has held that since no list or order fixing seniority of the petitioners vis-a-vis any particular individual was being challenged, the employees who were likely to be affected were, at the most, only proper parties and not necessary parties. I doubt whether the said principle is of any justification for the non-joinder of Matsyafed or other bodies which will be directly affected by granting the reliefs prayed for in these original petitions.
6. Be that as it may, the question whether the classification made by the notification is bad in law can be considered de hors the nonjoinder of the affected parties. Learned counsel for the petitioners made an endeavour to have maximum leverage from the absence of counter-affidavit filed on behalf of the Union of India. He contended that the burden is on the Government to support the classification with facts and data and the absence of even a counter-affidavit puts the Government at a very disadvantageous position. No doubt, the absence of counter-affidavit from the first respondent is a factor which will enure to the advantage of the petitioners. But the advantage gained by the petitioners therefrom is not enough to set at naught the effect or result of the notification as per which exemption was granted to the Corporation.
7. Power to make the exemption has been Conferred on the Government by Section 25 of the Customs Act. Such exemption can be made if the Central Government is satisfied that it is necessary in the public interest so to do. The exemption envisaged should be in respect of "goods of any specified description" from the whole or any part of duty of customs leviable thereon. It was not contended that Government cannot exempt goods imported by the Corporation in exercise of the power conferred by Section 25(1). A Constitution Bench of the Supreme Court has held in Orient Weaving Mills (P) Ltd. v. Union of India, (AIR 1963 SC 98) that a notification issued under Rule 8(1) of the Central Excise Rules, 1944 is not bad in so far as they exempt certain classes of persons and not classes of goods from excise duty because the exemption in such cases would be with reference to such goods as come within the description of excisable goods. The said sub-rule is worded identically with Section 25(1) of the Customs Act. This might be the reason which dissuaded the learned counsel for the petitioners from contending that the notification does not exempt specified goods but only specified persons or bodies.
8. Learned counsel for the petitioners invited my attention to the following observation made by another Constitution Bench of the Supreme Court in a recent judgment in Liberty Oil Mills v. Union of India (in Civil Appeal No. 1924/80 and connected appeals) :
"It is true that the State dons the robes of a trader which it enters the field of commercial activities and ordinarily it can claim no favoured treatment".
However, the Supreme Court added that there may be clear and good reason for making a departure and upheld the exemption granted by the Government of India for State Trading Corporation in regard to the rate of customs duty levied on the import of edible oils. If the exemption has to stand legal scrutiny, it must pass the test whether the Government was satisfied that its grant was necessary in public interest. The notification says that the Central Government was satisfied that it is necessary in the public interest so to do. Evidently the object is to protect the interest of State Fisheries activities whether the Corporation uses outboard motors by fitting them to boats used for fishing operations directly or through fishermen or even by sale of such goods to fishermen. There is no legal hurdle in presuming that the Government was satisfied of the public interest involved since the Government so expressed in the notification itself. Of course, the party who challenges the vice of the notification can establish that notwithstanding the statement in the notification there is no occasion or ground for the Government to have such satisfaction. In Hindustan Paper Corporation Ltd. v. Government of Kerala, (AIR 1986 SC 1541), the Supreme Court considered the validity of Section 6 of the Kerala Forest Produce (Fixation of Selling Price) Act, 1978 which empowered the Government to exempt the sale of any forest produce to any company owned by the Government or to any co-operative society registered under the Kerala Co-operative Societies Act, 1969. It was held that the provision granting exemption in favour of Government companies and the co-operative societies is not unconstitutional. Venkataramiah, J. (as his Lordship then was) observed in the judgment as follows (at p. 1546) :
"Thus it cannot be said that the provision is either arbitrary or unreasonable even though the Government industries may be rivals in trade to the industries in the private sector. The preference shown to Government. companies under Section 6 of the Act cannot be considered to be discriminatory as they stand in a different class altogether and the classification made between Government companies and others for the purposes of the Act is a valid one. Same is the case with the Clause (b) which gives power under Section 6 of the Act to the Government to exempt sales of forest produce in favour of co-operative societies up to the limit mentioned therein".
9. Though learned counsel for the petitioners contended, particularly in the absence of any counter-affidavit, that the Government have not succeeded in showing that the notification was issued in public interest, there is no material on record to hold that the impugned notification was not in public interest. The same yardstick was adopted by the Supreme Court in Hindustan Paper Corporation's case (cited supra) for repelling the argument that the notification impugned in that case was not made in public interest.
For the aforesaid reasons, I dismiss these original petitions. No costs.
Issue carbon copy on usual terms.