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Bakul Cashew Company Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtChennai High Court
Decided On
Case Number Writ Petition No. 3676 of 1981
Judge
Reported in1984(2)ECC289; 1985LC207(Madras)
AppellantBakul Cashew Company
RespondentUnion of India (Uoi) and ors.
DispositionPetition allowed
Cases ReferredCommissioner of Police v. Gordhandas Bhanji
Excerpt:
customs - export duty--exemption--promissory estoppel--tariff item--tapioca chips, whether animal feed covered by item 21--letter to one exporter by government that tapioca chips are not animal feed--whether department estopped from levying duty on export of tapioca chips by assessee--writs under constitution--whether department can rely on reasons not stated in order in writ of certiorari--constitution of india, article 226--customs act (52 of 1962), section 25--customs tariff act (51 of 1975), schedule ii, item 21. - - it entered into a new venture of exporting tapioca chips to foreign countries in order to help the poor agriculturists of kerala. in exercise of the powers conferred by sub-section (1) of section 25 of the customs act, 1962 (52 of 1962), the central government, being..........for the petitioner, is that there is absolutely no justification for holding that the tapioca chips exported would fall under the definition of 'animal feed' in item no. 21 of the second schedule to the customs tariff act, 1975. it is not uncommon that tapioca chips are taken by human beings. relying upon very many materials produced before me, it is urged that it is human food. more than this, on 4th april, 1977, the collectorate of customs and central excise, cochin, had made it very clear to one of the exporters m/s. peirce leslie india ltd., cochin 3, that no duty was payable on export of tapioca chips, but leviable to cess at 1/2 per cent ad valorem. this undoubtedly would constitute a representation or holding out to the trade, and, therefore, this is a clear case of.....
Judgment:
ORDER

Mohan, J.

1. This is a petition for the issue of a writ of certiorari to quash the order of the first respondent dated 2nd June, 1981, and made in order No. 370-B/81.

2. The facts leading to the writ petition are as follows: The petitioner-firm carries on business in the manufacture of cashew kernels at Quilon and has got branch offices in Bangalore and a few other places. It entered into a new venture of exporting tapioca chips to foreign countries in order to help the poor agriculturists of Kerala. The firm also earned valuable foreign exchange for India thereby. The contract of sale and export was with Messrs. Gramania B.V. Rotterdam, through their brokers in India for the export of 5,000 tonnes of tapioca chips in the first instance. The size of the tapioca chips to be exported was to the range of 1.5 per cent (large size). The firm submitted the necessary papers for clearance with the customs authorities. Clearance was granted on 2nd February, 1978. Accordingly, a quantity of 5,000 tonnes of tapioca chips was exported on board the vessel 'M. V. Evia' from the port of Mangalore. The customs authorities did not assess the goods to any export duty, and therefore, the goods were cleared for export without any duty.

3. In accordance with the terms of the contract, the buyer had the option to demand for 5 per cent more or less of the contracted quantity, and in this case, the buyer wanted a further quantity of 5 per cent. Accordingly, another quantity of 250 tonnes of tapioca chips was exported on 13th February, 1978. At that stage, the customs authorities demanded export duty on the second consignment at the rate of Rs. 125 per tonne. The petitioner being left with no option, paid the export duty under protest without prejudice to its right to claim refund. The demand for refund was also made by the petitioner-firm on 8th July, 1978.

4. Subsequent to the export of 5,000 tonnes of tapioca chips on 2nd February, 1978, the customs authorities, by a notice of demand dated 13th February, 1978, called upon the petitioner to pay export duty of Rs. 6,25,000 on the 5,000 tonnes of tapioca chips already exported. By letter dated 1st March, 1978, the petitioner-firm requested for two months' time to submit an explanation. The petitioner-firm submitted an explanation on 24th April, 1978. By order dated 2nd June, 1978, the Assistant Collector of Customs, Mangalore, confirmed the demand of Rs. 6,25,000 as export duty. This was on the basis that the goods (tapioca chips) had to be classified as animal feed liable for export duty, under item No. 21 of the Second Schedule to the Customs Tariff Act, 1975. The contention of the petitioner was that by reason of Notification No. 107 dated 18th May, 1978, issued under Section 25(1) of the Customs Act, 1962, the Central Government had included tapioca chips in the table annexed to Notification No. 16, Customs, dated 22nd January, 1977. The said notification exempted animal feed of the description 'tapioca chips' from the levy of export duty under item No. 21 of the Second Schedule to the Customs Tariff Act, 1975. The Assistant Collector was of the view by a process of deduction that the tapioca chips were not exempt, and were liable to duty under Section 28(2) of the Customs Act, 1962,

5. Against this order, the petitioner-firm preferred an appeal to the Appellate Collector of Customs on 2nd August, 1978. By order dated 27th October, 1978, the Appellate Collector of Customs set aside the order of the original authority and directed de novo adjudication. After reconsideration, the Assistant Collector passed an order on 16th March, 1979, confirming the demand of Rs. 6,25,000 as export duty holding that the tapioca chips did not come under the exempted category of animal feed specified in Notification No. 401 dated 2nd August, 1976, and Notification No. 16 dated 22nd January, 1977, and 'tapioca chips' is an exempted animal feed only by Notification No. 107 dated 18th May, 1978, and, therefore, as animal feed, it was liable to export duty. Against this order, an appeal was preferred to the Appellate Collector of Customs, Madras. That appeal was rejected on 31st August, 1979. A revision to the Government of India was also rejected by order dated 2nd June, 1981, upholding the levy. It is at this stage, this writ petition has been preferred for certiorari to quash these orders.

6. The contention of Mr. G. Ramaswami, the learned Counsel for the petitioner, is that there is absolutely no justification for holding that the tapioca chips exported would fall under the definition of 'animal feed' in item No. 21 of the Second Schedule to the Customs Tariff Act, 1975. It is not uncommon that tapioca chips are taken by human beings. Relying upon very many materials produced before me, it is urged that it is human food. More than this, on 4th April, 1977, the Collectorate of Customs and Central Excise, Cochin, had made it very clear to one of the exporters M/s. Peirce Leslie India Ltd., Cochin 3, that no duty was payable on export of tapioca chips, but leviable to cess at 1/2 per cent ad valorem. This undoubtedly would constitute a representation or holding out to the trade, and, therefore, this is a clear case of promissory estoppel. Neither of these points have been considered in a proper perspective by any one of the authorities. Therefore, the order is liable to be quashed.

7. Mr. K.N. Balasubramaniam, the learned Counsel for the respondents, would urge that having regard to the order placed by the exporter, if taken note of in conjunction with the Indian Standards Specification for tapioca as livestock feed, the quality would certainly fall short of those standards. Therefore, the conclusion is inescapable that it will fall under the category of animal feed. Merely because it is taken by human beings as food in some of the Western countries also, it does not lose the character of animal feed. So long as there is no specific exemption, the petitioner cannot claim that it is not liable to pay duty. Further, where two clarifications are possible, and if on a bona fide interpretation, the customs department has taken one view, unless and until it is perverse, courts do not interfere. This is not a case of that character. As regards the promissory estoppel, the contention on behalf of the department is that this is not a representation made to the petitioner, nor is it the petitioner's case that on the strength of the same, it exported tapioca chips.

8. I have given my very careful consideration to the arguments advanced before me. I am of the view that the arguments advanced on behalf of the department cannot be held to be tenable. Under Heading No. 21 of the Second Schedule to the Customs Tariff Act, 1975, it is stated: 'Animal feed Rs. 125 per tonne.' Thereafter, Notification No. 401/F. No. 356/9/76-Cus. I was issued in the following terms:

In exercise of the powers conferred by Sub-Section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts animal feed containing not more than 40 per cent protein contents falling under Heading No. 21 of the Second Schedule of the Customs Tariff Act, 1975 (51 of 1975), when exported out of India, from the whole of the duty of customs leviable thereon under the said Second Schedule.

9. A further notification is 'Notification No. 16/F. No. 370/100/76-Cus. I'. It reads as follows:

G.S.R.--In exercise of the powers conferred by Sub-Section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), and in supersession of the notification of the Government of India, in the Department of Revenue and Banking (Revenue Wing) No. 401-customs dated 2nd August, 1976, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts animal feed, falling under Heading No. 21, of the Second Schedule of the Customs Tariff Act, 1975 (51 of 1975), and annexed when exported out of India, from the whole of the duty of customs leviable thereon under the said Second Schedule.

Table

1. Animal feed of any of the following descriptions:

(a)Cotton seed cakes, whether decorticated or not.

(b)Cotton seed extractions, whether decorticated or not.

(c)Linseed cakes.

(d)Linseed extractions.

(e)Guar meal.

2. Mixed or compounded animal feed, containing one of more of the ingredients mentioned at Sl. No. 1 above, whether or not such animal feed containsany other oil-cakes or substances, provided the protein content of such animal feed is not more than 40 per cent.

10. At this stage itself, I may say that where the Assistant Collector of Customs went wrong is that the exemption under the last of the notifications, viz., Notification No. 16, does not specifically mention tapioca chips and, therefore, by a process of deduction, which I consider as illogical, held that tapioca chips were subject to customs duty. This is not the correct way of interpreting the notification at all. Be that so.

11. On 4th April, 1977, the following letter was written by the Collectorate of Customs and Central Excise, Cochin, to M/s. Peirce Leslie India, Ltd., Cochin-3:

Sir,

Sub: Export of Tapioca Chips.

Ref: Your Letter No. RFI/30 dated 16th March, 1977.

With reference to your letter, this is to inform you that no duty is payable on export of tapioca chips, but leviable to cess at 1/2 per cent ad valorem.

Thanking you.

12. However, on 18th May, 1978, there was a total exemption in the following terms, as per Notification No. 107/F. No. 470/132/77-Cus. I:

G.S.R.--In exercise of the powers conferred by Sub-Section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government being satisfied that it is necessary in the public interest so to do, hereby makes the following amendment in the notification of the Government of India, Department of Revenue and Banking (Revenue Wing) No. 16-Customs dated the 22nd January 1977, namely:--

In the table annexed to the said notification in Sl. No. 1, after item(s), the following shall be inserted, namely :--

(t) Tapioca chips.

13. From the above, it is clear that the policy adopted for the purpose of export or import by the customs department either under the Customs Act or under the Customs Tariff Act does not depend upon the intention of the parties. If that were, so, it will be a case of confusion worse confounded. It is dictated by the economic needs of the country, earning of foreign exchange, financial stability, etc. The volume of materials furnished before me by the petitioner includes an extract of Encyclopaedia Britannica-1960 Volume 4, page 968, which reads as follows:

The plants are probably natives of South America, but the bitter cassava, which is the more important of the two in an economic sense, has been introduced into most tropical regions, and is extensively cultivated in west tropical Africa and the Malay archipelago, from which, as well as from Brazil and other South American States, its starch in the form of tapioca is a staple article of export...The roots are preserved for use by being cleaned, sliced and dried; from such dried slices manioc or cassava meal, used for cassava cakes, etc., is prepared by rasping. The starch also is separated and used for food under the name of Brazilian arrowroot; and this, when agglomerated into pellets on hot plates, forms the tapioca (q.v.) of commerce.

14. It is stated in 'Tropical Crops' by J.L. Pursglone (1974 Edition) at page 172 as follows:

Starch is prepared by grating or grinding washed peeled tubers and washing out the starch by squeezing in repeated changes of water. Tapioca is made by gently heating washed and clean starch on hot iron plates which partly cooks it and causes agglutination into small round pellets. Cassava flour is made by grinding the sun-dried slices or chips. In north-eastern South America a coarse meal, farinha, is prepared by grating washed peeled tubers and squeezing the mass in long, sleeve-like baskets, tipiti, which expresses the juices; the compressed pulp is then toasted over a low fire. The latex and extracted juice may be concentrated by boiling to produce cassureep which is used in sauces and is a constituent of West Indian pepper-pot. In West Africa, garri a meal like farinha, is made, but the pulp is fermented for a rather long period. Cassava starch is used for food and also in the manufacture of adhesives and cosmetics and in-sizing textiles, laundering and paper making. Tapioca is used for puddings, biscuits and confectionery.

15. In 'Travancore State Manual-1940', the following is found about tapioca:

It is the food of the poor but the middle classes also take it in one form or another. There was a growing increase in the area under its cultivation till 11.06.

16. In the same Manual, at pages 327 and 328, the following passage occurs:

Edible roots occupy a prominent place among the garden products. The most important of these root crops are the tapioca or cassava. Elephant foot, yam, chempu, kacchil, sweet potato, thivakkilangu, cheruvallykkilangu, arrowroot, mukkilangu, kananna and taplipot palm are other important root crops. Cassava is a native of North America. Fifty or sixty years ago, the poorer classes of people in Travancore began to eat the root and within a few years its value as a food became widely known. Now it forms the chief food of the poorer classes and is also consumed by the middle and even the higher classes of people, so much so that it may be called the potato of Travancore.

17. In 'Season and Crop Report for Kerala State 1976-77, Bureau of Economics and Statistics, Trivandrum', tapioca is described as follows:

Tapioca.--Tapioca is an important food crop of the State and it is extensively cultivated in all districts. Quilon and Trivandrum Districts occupy about 47 per cent of the total area under the crop. During 1976-77, tapioca is cultivated in an area of 323,278 hectares in the State. The estimate for the previous year was 326,865 hectares.

18. The following passage appears in 'Wealth of India--Raw Materials', Volume VI, L-M published by the Council of Scientific and Industrial Research, New Delhi, at page 292:

Cassava is the staple food of the poorer section of the population in many tropical countries, particularly Central and South America, Central and West Africa, Indonesia and Polynesian Islands. It is consumed, like sweet potato, in the form of tubers, chips, flour and sago. In India, cassava, along with fish, forms the main item of diet of the working classes in Kerala. Young tubers, particularly of sweet varieties, are consumed after roasting or boiling, like potato. As fresh tubers do not keep well for long; they are cut into slices and dried. Dried slices can be stored for several months. They are cooked and eaten or powdered into flour and used in the same manner as rice flour. In Philippines, tubers are grated, juice squeezed out and the residue made into pellets; under the name cassava rice, dried pellets are used as a substitute for rice and maize. The most important commercial use for cassava is the production of starch and sago; they are produced both on cottage and industrial scale in many cassava-producing countries, including India (van Royen 1.99: Rep. Tapioca Enquiry Comm., Travancore-Cochin, 1952, 33-37: Rep. Marketing Tapioca, 1955, 27-28; Holleman & Aten. 16; Burkill, II, 1417-19).

19. Therefore, it is not correct on the part of the customs authorities to classify tapioca as animal feed. Merely because animals take it, it cannot be considered as animal feed. Nor again, as I have observed earlier, the failure under the notification to specifically include tapioca chips in the exempted category would enable the customs authorities to contend that it would fall under the definition 'animal feed'. I am unable to accept the arguments of the learned Counsel for the department that the intention of the exporter was to have the following quality of Indian tapioca chips imported:

Indian Tapioca Chips New Crop:--Starch, min. 70%, moisture max. 13%, fibre max. 4%, sand/silics 2% max. Allowance for deficiency in starch or excess in moisture/fibre and/or sand/silics, if any, on the basis of 1:1, fractions pro rata, max. 2% pieces. Cargo to be fumigated immediately prior to shipment.

20. This no doubt falls short of the Indian Standard Specification for tapioca as livestock feed. But, as I observed above, this is not the way in which any construction should take place with reference to an entry in the Customs Tariff Act. Added to that, it is well-settled principle that an order has to be supported only on the reasons stated therein and not by additional reasons in a writ of certiorari. This is too well-settled as far as this Court is concerned, as is seen from the decision in Vedachala Mudaliar v. Central Road Traffic Board, Madras : AIR1948Mad454 , wherein it has been observed as follows:

It is well-established that it is not a good return to a rule nisi for the issue of a writ of certiorari to state that the order is justified on fact not contained in the order. This Court cannot take notice of any fact which does not appear upon the face of the order: vide Halsbury, (Hailsham Edition), Volume IX, page 889, and The King v. Listun (1793) STR 338 : 101 ER 189.

21. The same principle is also found in Mohinder Singh v. Chief Election Commissioner : [1978]2SCR272 , where it was held following the decision in Commissioner of Police v. Gordhandas Bhanji : [1952]1SCR135 as follows:

When a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out.

22. This ground is not mentioned in the impugned order.

23. Turning to the promissory estoppel, I am unable to see why that principle cannot be made applicable. When the order in question says that the doctrine will not be applicable when a Government Officer acts outside the scope, I am unable to appreciate this view. In this case, there is no question of any authority acting outside the scope. That is very evident from the complete exemption granted by the notification dated 18th May, 1978. These important points have not been dealt with in the manner in which they require to be dealt with. Therefore, I have no hesitation in setting aside these impugned orders. Accordingly, the impugned orders are set aside, and the matter will stand remitted for fresh consideration in the light of the observations made above. Since the matter is an old one, orders will have to be passed at an expeditious level. I make it clear that the matter is remitted to the Tribunal. The writ petition is accordingly allowed. There will be no order as to costs.


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