Apar Private Ltd. And Others vs Union Of India And Others on 17 October, 1985

Here's a summary of the judgment "Apar Private Ltd. And Others vs Union Of India And Others on 17 October, 1985," structured as requested:

1. Outcome

The Full Bench answered the referred questions as follows:
* Question 1: Under the Customs Act, 1962, the event of importation occurs when goods from a place outside India enter the territorial waters of India.
* Question 2: The rate of customs duty is determined under Section 15 of the Customs Act (i.e., date of presentation of Bill of Entry or removal from warehouse), provided the goods were not wholly exempt from customs duty when they entered the territorial waters of India. If they were wholly exempt at that point, no customs duty is leviable, even if the exemption is later withdrawn before clearance.
* Question 3: If goods were wholly exempt from basic customs duty on entry into territorial waters, no basic duty is leviable, regardless of whether countervailing/additional duties were leviable or their exemptions were withdrawn. Only if goods were chargeable to some basic customs duty (e.g., partially exempt) on entry, would the rates at clearance apply for basic duty. The same principle applies independently to additional duties.
* Question 4: Deemed unnecessary to answer in light of the answers to the preceding questions.

2. Core Issue

The core issues before the Full Bench were to clarify:
* The precise point in time when "importation into India" of goods is deemed to occur under the Customs Act, 1962.
* The relevant date for determining the rate of customs duty applicable to imported goods.
* The impact of total versus partial exemption from duty at the time of importation versus at the time of clearance from a warehouse or for home consumption.
* Whether countervailing or additional duties are considered "customs duty" under the charging Section 12 of the Customs Act, 1962.

3. Key Facts

The dispute arose from two writ petitions where:
* Goods were brought into India (entering its territorial waters) and subsequently stored in bonded warehouses.
* At the time the goods entered India and were warehoused, they were wholly exempt from basic customs duty under a notification issued by the Central Government under Section 25(1) of the Customs Act, 1962.
* Subsequently, this exemption notification was rescinded before the goods were sought to be removed from the bonded warehouses for home consumption.
* The Customs authorities then sought to levy basic customs duty on these goods, arguing that the relevant date for duty determination was the date of clearance, by which time the exemption was no longer in force.
* The petitioners (importers) contended that no duty was leviable as the goods were wholly exempt on the date of importation.
* The matter was referred to a Full Bench due to perceived divergent views among Division Benches of the Bombay High Court and calls for reconsideration of earlier precedents.

4. Arguments (Taxpayer vs Revenue)

• Taxpayer (Petitioners):

  • Importation: Argued that importation is complete when goods enter the "territorial waters of India," based on the definitions of "import" [Section 2(23)] and "India" [Section 2(27)] in the Customs Act, 1962.
  • Chargeability: The liability to customs duty ("chargeability") arises at this point of importation.
  • Exemption: If goods are wholly exempt from duty on the date of importation (entry into territorial waters), then no duty is leviable at all, even if the exemption is withdrawn before the actual clearance of goods for home consumption. They contended that "nil duty" is not a concept under Section 25(1) exemptions; rather, the levy itself is removed.
  • Statutory Interpretation: Maintained that Section 12 is the charging section, while Sections 14 (valuation) and 15 (rate) deal with the quantification and collection mechanisms, which are distinct from chargeability.
  • Precedent: Supported the view taken in Shawhney v. Sylvania & Laxman (Sylvania Laxman's case) and subsequent Bombay High Court judgments concurring with it.

• Revenue (Customs Authorities):

  • Importation: Contended that "importation into India" and the taxable event occur not when goods enter territorial waters, but when they are cleared for home consumption, or at least when they form part of the "land mass" of India, ready to mix with the country's general goods.
  • Levy & Quantification: Argued that the word "levied" in Section 12 encompasses chargeability, valuation, rate determination, and recovery, implying that all these aspects crystallize at the point of clearance.
  • Exemption (Nil Duty): Maintained that even if goods are wholly exempt under Section 25(1), they are still chargeable to a "nil rate" of duty. Therefore, if the exemption is withdrawn before clearance, the full duty becomes payable at the rates then in force, as Section 15 (determination of rate) would apply.
  • Absurdity: Suggested that interpreting "import" as entry into territorial waters would lead to absurdities, such as levying duty on goods merely transiting India.
  • Precedent: Sought reconsideration of Sylvania Laxman's case, citing Supreme Court decisions (e.g., Express Mills, Re Sea Customs Act) and other High Court judgments (e.g., Gujarat HC in Prabhat Cotton Mills, Delhi HC in Jain Shudh Vanaspati) that allegedly supported their interpretation.

5. Court’s Reasoning

The Full Bench meticulously analyzed the statutory provisions and precedents, distinguishing between chargeability and quantification of duty:

• Meaning of "Import into India" and Taxable Event:

  • The court emphasized the statutory definitions in the Customs Act: Section 2(23) defines "import" as "bringing into India from a place outside India," and Section 2(27) states "India" includes "the territorial waters of India." Section 2(25) defines "imported goods" as those brought into India, not yet cleared for home consumption.
  • The phrase "unless the context otherwise requires" in Section 2 does not mandate discarding these explicit definitions unless there are compelling reasons, which the court found lacking in the context of Section 12.
  • The court concluded that the act of "importation" is complete, and thus the "taxable event" occurs, the moment goods enter the territorial waters of India.
  • This interpretation is strongly supported by various other sections:
    • Section 13 (Pilfered Goods): Provides for non-liability of duty on pilfered "imported goods" after unloading but before clearance, implying duty liability arose earlier (before unloading).
    • Sections 21 (Derelict goods), 22 (Damaged goods), 23 (Lost/destroyed goods): These provisions for duty on, abatement of, or remission from duty on such goods, occurring before clearance, presuppose that duty liability has already attached at an earlier stage.
    • Chapter VII and VIII (Sections 37, 45, 53, 54): Sections allowing customs officers to board vessels carrying "imported goods" while afloat (Section 37), or exempting goods "in transit" (Sections 53, 54) from duty, confirm that goods are considered "imported" (and potentially dutiable) even before reaching land or being cleared. Such exemptions would be superfluous if duty only attached at clearance.
  • The court rejected the Revenue's "land mass" argument, stating it would render numerous provisions redundant and create absurdities (e.g., smuggled goods not being "imported").
  • It distinguished Express Mills (terminal tax, different statutory context) and Re Sea Customs Act (which focused on the nature of the tax, not the precise timing of "import" into the defined "India").

• Distinction: Chargeability vs. Quantification/Rate:

  • The court stressed that while chargeability (taxable event) occurs when goods enter territorial waters (under Section 12), the valuation of goods (Section 14) and the rate of duty (Section 15) are determined at later stages (date of Bill of Entry or removal from warehouse). These are distinct steps in the levy process.

• Effect of Total vs. Partial Exemption (Section 25):

  • Section 25(1) Exemption (Whole Duty): This provision exempts goods "from the whole... of duty of customs leviable thereon." If such a notification is in force when goods enter territorial waters, the goods are not leviable to duty at all under Section 12. The concept of "nil duty" for such goods was rejected; the charge itself is removed. Therefore, subsequent withdrawal of the exemption before clearance does not make them dutiable.
  • Partial Exemption or Section 25(2) Exemption: If the goods are only partially exempt, or if the exemption is one from payment (under Section 25(2)), they remain chargeable to duty. In such cases, the rate of duty will be applied as per Section 15 (i.e., the rate in force on the date of Bill of Entry or removal from warehouse).
  • The court reaffirmed the correctness of Sylvania Laxman's case based on this distinction.

• Countervailing and Additional Duties:

  • These duties, though collected under the Customs Act machinery, are levied in addition to basic customs duty under separate enactments (Indian Tariff Act/Customs Tariff Act).
  • An exemption under Section 25(1) for basic customs duty does not automatically extend to these additional duties, or vice versa.
  • The principles of chargeability (on entry into territorial waters) and quantification (at clearance) apply independently to each type of duty. If goods are wholly exempt from basic customs duty, they remain so, irrespective of their status regarding additional duties.

6. Statutory References

• Customs Act, 1962: Sections 2(23), 2(25), 2(27), 2(28), 12, 13, 14, 15, 17, 21, 22, 23, 25(1), 25(2), 29, 30, 31, 32, 33, 34, 37, 38, 42, 45, 46, 48, 49, 52, 53, 54, 55, 56, 68, 69, 77, 79, 80, 110(1), 111(d).
• Customs Tariff Act, 1975: Section 3, Section 3(6), First Schedule.
• Indian Tariff Act, 1934: Section 2A, Section 2A(5), First Schedule.
• Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976: Sections 3(2), 5.
• Other Acts (Contextual references/distinctions): Companies Act, 1956 [Section 2(29)], Insurance Act, Income-tax Act, Gift Tax Act, Estate Duty Act, C.P. and Berar Municipalities Act [Section 66(1)(o)], Sea Customs Act, 1878, Canadian Customs Act, 1886, Canadian Customs Tariff Act, 1894.

7. Precedents Cited

• Followed/Approved:

  • Shawhney v. Sylvania & Laxman (77 Bom. L.R. 380)
  • Synthetics and Chemicals v. S.C. Coutinho (1981 E.L.T. 414)
  • New Chemi Industries Pvt. Ltd. and another v. Union of India and others (1981 Excise Law Times 920)
  • Sundaram Textiles Ltd., Madurai v. Assistant Collector of Customs, Madras and another (1983 E.L.T. 909)
  • Wallace Brothers and Company Ltd. v. Commissioner of Income-tax (16 ITR 240, Privy Council)
  • Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax [59 ITR 767 (SC)]
  • Chatturam Horilram Ltd. v. Commissioner of Income-tax (27 ITR 709)
  • Kalwas Devadattam v. Union of India [49 ITR 165 (SC)]
  • In Re : Sea Customs Act (AIR 1963 SC 1760) (interpreted as consistent)
  • R. C. Jall v. Union of India (SC)
  • Shinde Brothers v. Deputy Commissioner, Raichur (SC)
  • Union of India v. Bombay Tyre International Ltd. (SC)
  • Vanguard Fire and General Insurance Company v. M/s. Fraser and Roass (AIR 1960 SC 972)
  • Commissioner of Gift Tax, Madras v. Getty Chettiar (SC)
  • S. K. Gupta v. K. P. Jain (SC)
  • Gramophone Co. of India v. Birendra Bahadur Pandey (SC)
  • State of Bombay v. F. H. Balsara (AIR 151 SC 318)

• Distinguished/Disagreed with:

  • Express Mills v. Municipal Committee, Wardha (AIR 1963 SC 1760)
  • Prabhat Cotton and Silk Mills Ltd. v. Union of India (1982 E.L.T. 203) (Gujarat HC)
  • K. Jamel Co. v. Union of India (1981 Excise Law Times 162) (Madras HC Single Judge, later reversed by same judge)
  • Shewbuxrai Onkarmall v. Assistant Collector of Customs & Others [1981 (8) Excise Law Times 298] (Calcutta HC Single Judge)
  • Jain Shudh Vanaspati Ltd. v. Union of India (1983 E.L.T. 1688) (Delhi HC)
  • Union of India v. K. Kechirim (1970 Cr. L.J. 417) (Delhi HC)
  • Aluminium Industries Ltd. v. Union of India [1984 (16) E.L.T. 183] (Kerala HC Single Judge)
  • Canada Sugar Refinery Company v. The Queen (1898 A.C. 735, Privy Council)
  • N. B. Sanjana v. E.S. & W. Mills (SC) (distinguished on "nil duty" concept)