1. These are two revision applications filed before the Central Government (now transferred to the Appellate Tribunal under Section 131 B of the Customs, 1962) against the order in appeal Nos. S/49-1536/77 R dated 19-4-1979 and S/49-186/77 Bond dated 16-9-1978 passed by the Collector of Customs (Appeals), Bombay.
2. Briefly stated, the facts of the cases, as are apparent on record, are that M/s Bayer (India) Ltd. (hereinafter called the Appellant) imported 31 tonnes of the chemical-3 METHYL-4-NITROPHENOL by the steamer "Tigre" which entered the territorial waters of India on or about 30-3-1976, and the consignment was deposited in private bonded warehouse under the provisions of Section 60 of the Customs Act. The said importers also imported 20 tonnes of the chemical-THIOALCOBOL (2-ETHYLTHIO ETHANOL) by the Steamer "Vishwa Bandhan" which entered the territorial waters of India on or about 22-11-1975, and the said consignment was also deposited in the private bonded warehouse at Thane under the provisions of Section 60 of the Customs Act, 1962.
3. As per the averments made by the appellants, both these chemicals imported were meant for the manufacture of insecticides/pesticides and were dutiable at the time of their import, at the concessional rate of duty at the rate of 10% Adv. under the provisions of Notification No.26-Cus., dated 1-3-1968 issued by the Government of India, Ministry of Finance (hereinafter referred to as Notification No. 26) subject to the conditions specified therein plus auxiliary duty at the rate of 15%.
The said Notification No. 26 exempted chemicals for the manufacture of insecticides, pesticides and fungicides and felling under item No. 28 of the First Schedule to the Indian Tariff Act, 1934 (32 of 1934) when imported into India from so much of that portion of the duty of Customs leviable thereon, which was specified in the said Schedule as was in excess of 10% Adv. where the standard rate of duty was leviable. This notification was rescinded by the Government of India Notification No.70-Cus. dated 24-4-76.
4. As per the averments made by the appellants, at the time of the removal of the goods from the bonded warehouse on or about 26-5-1976 and 21-7-1977, they requested the Assistant Collector of Customs, Appraising Department to levy the duty at the rate provided under Notification No. 26 namely, 10% Adv. plus auxiliary duty at the rate of 15% Adv. since Notification No. 26 was in force on the date when these goods actually entered the territorial waters of India and become dutiable goods under Section 12 of the said Act. They also informed him that the bond for the production of the end-use certificate would be submitted to him before the assessment of the goods. As required under the said notification, the appellants also submitted to the Assistant Collector, the certificate No. P & I/46(5)/75/809 dated 11-2-76 issued by the Director General, Technical Development, New Delhi, confirming that the same chemical is required for the manufacture of insecticides/pesticides and that it is not produced in India. However, the Assistant Collector disregarded the request of the appellants and levied duty at the full statutory rate of 60% plus auxiliary duty at 15% leviable on chemicals. As the appellants needed the goods urgently for the production of insecticides, they paid the duty to the department under protest and cleared the goods from the bonded warehouse. Their claim of refund was illegally rejected by the Assistant Collector as well as the Appellate Collector.
5. In both these cases, there was a partial exemption by notification i.e. concessional rate of customs duty prevailed when the goods were imported and the goods were warehoused but before the goods were removed from the warehouse, the partial exemption was withdrawn.
6. In both these cases, the issue to be decided is whether the importers are entitled to the concession prevailing at the time of import (under the notification) or whether they are required to pay the full rate of duty prevailing at the time of removal from the warehouse.
7. Shri Dadi B. Engineer, Sr. Solicitor and Advocate for the Appellants drew our attention towards DB case of Bombay High Court M/s Sylvania & Laxman (77 B.L.R. 380). According to him, the principle that the levy of customs duty is relatable only to the taxing event (viz. import which means bringing the goods into the territorial waters of India) has been correctly decided by the Bombay High Court in this case. He further submitted that the DB judgement of the Bombay High Court in Synthetics and Chemicals (1981/E.L.T./414) has sought to explain Sylvania & Laxman's case by narrowing or whittling down the principles laid down in Sylvania & Laxman's case to cases of non-levy or total exemption. According to him, to the extent to which the said DB judgment in Synthetics and Chemicals case seeks to narrow down the principle, it is inconsistent with the basic position as laid down in certain Supreme Court, and Privy Council decisions. Almost all the reported decisions seem to agree on the point, "import" means "bringing goods into territorial waters of India" and that the taxing event is "import" or bringing of the goods within the Customs barrier, that Customs duty under the Customs Act, 1962 is charged on the goods imported into the country and that Section 12 of the Customs Act is the charging Section. He cited AIR 1963 S.C. 1760, 1962 BLR 466, AIR 1965 S.C. 1972 and AIR 1964 Madras 504 in support of his contention.
8. Referring to the Division Bench case in the Synthetic and Chemicals Ltd. (Supra), the learned counsel stated that this judgment upholds the principles laid down in Sylvanii and Laxman's case but states that the principle is attracted only when there is no chargeability at importation or total exemption at importation. According to him, it is not necessary to restrict the principles laid down in Sylvania and Laxman case to cases where there is no chargeability or total exemption at importation. He submitted that there is no indication in Sylvania and Laxman's judgment (both in the lower court and in appeal) that the principle laid down is restricted to cases where there is no levy or total exemption at the time of import. He further pointed out that it is clear that the concept of "chargeability" on the one hand and assessment or quantification of the amount payable on the other are separate and distinct. The stage of chargeability is over as soon as the goads are imported into the territorial waters of India. If, on that date, the importer is entitled to a certain exemption (be it total or partial) then the right to such exemption becomes a vested right which accrues to the importer and such vested right cannot be taken away by a procedural section like Section 15. Section 15 nowhere postulates or contemplates that the exemption available to the importers on the date of import has to be ignored while determining the customs duty. According to him, while determining the customs duty under Section 15, the effect of the notification of exemption has to be taken into account. The exemption has to be the one prevailing at the time of the taxing event (the import). He put emphasis on the point that the computation or the assessment or quantification of the amount of duty must be with reference to the right accrued to the importers on the date of import of goods. He drew our attention towards the Single Bench case of Bombay High Court in All India Medical Corporation v.Almeida (1981 E.L.T. 929). He also cited some of the cases under the Income Tax Law. In Kesoram Industries and Cotton Mills Ltd. v. C.W.T.(1965)-591. T.R. 767 : it was held that the liability to tax does not depend on assessment that ex-hypothesis has already been fixed; the assessment order only quantifies the liability which is already definitely and finally created by the charging Section. He also drew our attention towards the case Wallace Bros. v. Commissioner of Income Tax (16-ITR 240) in support of his contention that the liability to tax arises by virtue of the charging section alone and it arises not later than the close of the previous year though quantification of the amount payable is postponed. The last submission made by Sh. Engineer is that Section 15 of Customs Act is merely procedural in nature and only prescribes a formality for determining the rate of duty and the tariff value. According to him, the date of filing of a Bill of Entry for home consumption or the removal of the goods from a bonded warehouse has no bearing on the actual import of the goods which, under Section 12, is the chargeable or taxable event. The levy under the Customs Act is provided by Section 12 itself and it is held that the rate of duty applicable is that which is provided under Section 15(l)(b) of the Customs Act (viz. at the point of time that the goods are actually removed from the bonded warehouse), then to that extent the chargeability to customs duty would depend upon a post-importation event, namely, the actual removal of the goods from a bonded warehouse which event being a fluctuating and for fortuitous event, the levy of duty based on such an event would be irrational and arbitrary.
9. On the point of harmonious construction, Shri Engineer pointed out that even under Section 15, the exemption notification has to be taken into account when determining the rate of duty (looking to the provisions of Section 25). This being the position, even if Section 15 applies in a situation like the one presently under consideration, then in applying the principle of harmonious construction, Section 15 can be applied only by taking into account the exemption provision as prevailing at the time of the taxable event viz. import. If the principle of harmonious construction is not adopted, then Section 15, to the extent that it would conflict with the primary position regarding chargeability referred to above, would be ultra vires. He drew our attention towards the case of Supreme Court in Bengal Immunity Company v. State of Bihar (1955-6 S.T.C. 446) in support of his arguments and in support of the principles of harmonious construction.
10. Shri A.S. Sunder Rajan, Departmental Representative pointed out that most of the judgments cited by the learned counsel of the appellant are no longer good law and have been discussed and discarded in the later decisions of Supreme Court and the High Court. He drew our attention towards the decision in Prakash Cotton Mills (Pvt.) Ltd. (1979 E.L.T. 241) ; Synthetics and Chemicals Ltd. v. S.C. Coutinho and Ors. (1981 E.L.T. 414), Jain Sudh Vanaspati Ltd. y. Union of India (1983 E.L.T. 1688) in support of his contention that levy is not confined only to the import of the goods but extends to assessment.
According to him, Section 12 of the Customs Act cannot be read in isolation but along with Sections 14 and 15 of the Customs Act. Section 15(l)(b) of the Customs Act clearly lays down that the rate of duty and tariff valuation, if any, applicable to any imported goods, shall be the rate and value in force, in the case of goods cleared from a warehouse under Section 68 of the Act, on the date on which the goods are actually removed from the warehouse. In this case, the goods were actually removed from the warehouse on or about 26-5-1976 and 21-7-1977 when, admittedly, the benefit of the notification No. 26 stood withdrawn and, therefore, the assessment of these goods was rightly made as per the rate prevailing at that time. The question of harmonious construction does not arise in this case as the provisions of Section 15(l)(b) are clear and unambiguous. The analogy from the cases of Income Tax under the Income Tax Act could have been drawn only when there would not have been any relevant provision under the Customs Act. A perusal of Sections 12, 14 and 15 of the Customs Act, 1962 shows that they govern dutiable goods, valuation of the goods for the purpose of assessment and date for determination of rate of duly and tariff valuation of imported goods. The Act is a complete code in itself and, therefore, importing the decisions from other Acts like Income Tax and Sales Tax Acts is not warranted or justified.
11. We have considered the submissions made by both the parties. The entire argument of Sh. Engineer is based upon the decision of Bombay High Court given in the case of M.S. Sawhney v. Sylvania & Laxman Ltd. (Supra). In that case, a notification giving total exemption from the whole of the duty leviable was in force on 29-3-1967 when the ship entered the territorial waters of India. The said notification was in force only upto 31-3-1967. The bill of entry was filed on 27-4-1967, goods were cleared in June 1967. The demand of the Customs for levy of duty on the importer was quashed by the Bench because it took the view that the taxable event occurred when the goods entered the territorial waters of India, and the import was thus complete when the goods crossed the customs barrier which was prior to 31-3-1967. The Bench rejected the claim of the Customs that the date has to be determined in terms of Section 15 of the Act. It held that, reading Sections 2(23) and 2(27) import takes place when goods are brought into the territorial waters of India from a place outside India. It was also of the view that a clear distinction exists between the concept of chargeability and the concept of assessment or quantification of the amount payable by way of customs duty.
12. This judgment of Bombay High Court was discussed in a later judgment of that very High Court in Synthetics and Chemical Ltd. (Supra) and of the Delhi High Court in Jain Sudh Vanaspati Ltd. v.Union of India (Supra) and the views taken by the Bombay High Court in Sylvania & Laxman Ltd., were not taken as correct. Hon'ble Mr. Justice Rajinder Sacher of Delhi High Court in Jain Sudh Vanaspati Ltd. (Supra) observed that : "With all our respect to the learned judges, we are unable to agree.
Now Section 12(1) specifically provides that except or otherwise provided in the Act, duty of custom shall be levied at such rates as specified in Tariff Act. Now goods imported are dutiable goods, as being coveted by heading 39.01/0.6 in the Schedule to the Tariff Act. Then comes Section 15(1) which lays down in various clauses, the rate of duty, if any, applicable to any imported goods, and to relate it to a definite date with reference to a particular event, like presentation of Bill of Entry [vide clause (a)] or on the date when goods are actually removed from the warehouse [vide Clause (b)] or on the date of payment of duty [vide Clause (c)j. The learned judges in Sylvania case, with respect, omitted to notice that Section 15 does not only talk of the rate but also talks of the date with reference to which alone the rates can be calculated. In our opinion it would be wrong to read that Section 15 covers only the quantification but the date with reference to which has to be done could relate back to the earlier period of time when the ship had entered the territorial waters. Statute is clear that irrespective of the date when ship enters territorial waters calculation for the purpose of rate of duty must be done with reference to the date mentioned in Section 15 in various circumstances." 13. Reference to Section 2(25) of the Act to the definition of imported goods does not advance the matter for the appellant. The definition says that "imported goods" means any goods brought into India from a place outside India but does, not include goods which have been cleared for home consumption. Thus it is clear that the goods remain imported goods till they are cleared for home consumption, which cannot be done without complying with Section 15, and presenting a Bill of Entry under Section 46 of the Act. Therefore, the definition of imported goods would suggest that import is not complete for fiscal purposes at the time when the ship entered the territorial waters. Rather import is incomplete till the goods are cleared for home consumption.
"Serious and grave implications involved in accepting the argument that import should be deemed to be complete for the purpose of calculating the duty of custom the moment a ship enters the territorial waters of India.
It will be seen that there is no definition of territorial waters of India in the Customs Act, 1962. However, under the Territorial Waters Continental Shelf Act No. 80 of 1976 Section 2 defines the limit in relation to territorial waters, the continental shelf...to mean the limit of such waters, shelf ... Section 3(2) says the limit of territorial waters is the unit of every point of which is at a distance of 12 nautical miles from the nearest point of the appropriate base line. Section 3(3) empowers the Central Government whenever it considers necessary to alter the limits of territorial waters. Now if the argument of the counsel for the petitioner was to be accepted that import for fiscal purpose must be deemed to have taken place and rate of duty to be calculated with reference to that point of time when the ship enters the territorial waters of India grave and anomalous and unpredictable consequences can follow. As territorial waters extend upto 12 nautical miles from the base line the question as to and at what particular time a ship entered the territorial waters can always become a subject matter of debate and dispute between the importers and customs authorities. It is evident that there is no machinery with customs authorities to keep a check and to know the exact time when the ship enters the territorial waters." In order to appreciate the contention of the learned representative of the appellant, it is necessary to consider some of the provisions of the Customs Act viz. Sections 12, 14 and 15. Under Section 12, duty is payable on goods which are imported into India. Valuation for the levy of such duty is governed by Section 14 of the said Act, which states that a duty of customs is chargeable on any goods by reference to their value and the value of such goods shall be deemed to be as in the manner prescribed under Section 14. Therefore, goods have to be imported into India under Section 12 and charged to duty under Section 14 in accordance with the provisions of the Indian Tariff Act or any other law for the time being in force. Section 15 then enacts the date for determination of rate of duty and tar iff valuation of such imported goods. This section mentions three basic dates to be considered for the purpose of determination of rate of duty.- (i) when goods are entered for home consumption on the date on which a Bill of Entry in respect of such goods is presented ; (ii) 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 ; and (iii) in the case of any other goods, on the date of payment of duty.
Section 12 of the Customs Act cannot be read in isolation and it has to be read alongwith the provisions of Sections 14 and 15 of the Customs Act.
The Hon'ble Justice Rajinder Sacher of Delhi High Court in Jain Sudh Vanaspati Ltd. (Supra) commenting upon the decision given in Sylvania's case observed : "In Sylvania's case, it appears that the learned Judges omitted to notice that Section 15 does not only talk of the rate but also talks of the date with reference to which alone the rates can be calculated. It would be wrong to read that Section 15 covers only the quantification. The Sylvania's case has taken too extreme and untenable a view in not applying Section 15 of the Act." The Division Bench of Bombay High Court in a later decision in Synthetics & Chemicals case (Supra) accepted that the date of import (in loose sense) in the sense of entering the territorial waters of India has no relevance for determining the rate of duty which must be worked under Section 15 of the Act. The fact that rate of duty has to be calculated with reference to the date and point of the time mentioned in Section 15 of the Act stands concluded by the Supreme Court decision in Parkash Cotton Mills v. B. Sen and Ors. (A.I.R. 1979 S.C. 675). It has been observed : "It is thus clear requirement of Clause (b) of Sub-section (1) 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." 14. We find no feature to distinguish, the Supreme Court case Parkash Cotton Mills (Supra) and Delhi High Court case Jain Sudh Vanaspati (Supra) from the present case, where it has been held that the rate of duty applicable to imported goods is to be as per Section 15 of the Act, irrespective of the date of entry of the goods in the territorial waters of India. In the face of such authoritative pronouncement it is futile for the appellant to contend that the vital relevant date for determination of duty is the time when the goods entered the territorial waters of India.
15. In these circumstances, we find no merit in this appeal. The same is hereby dismissed.