Dinesh Kumar Nevatia vs Collector Of Customs on 27 July, 1988

1. Outcome
The application filed by Dinesh Kumar Nevatia was allowed. The respondents (Collector of Customs) were directed to refund the customs duty of Rs. 1,76,167.40 paid by the petitioner within three weeks. In case of default, interest at 12% per annum would be applicable from the date of judgment until the date of refund. The Customs Authorities were also directed to issue a Wharf rent exemption certificate from the date of arrival of the goods till their release, allowing the petitioner to seek a refund for demurrage charges.

2. Core Issue
The core issue was to determine when the importation of the subject goods (Dun Peas) was complete for the purpose of levying customs duty. This determination decided whether the goods were liable to customs duty under a new notification issued after their arrival in Indian territorial waters.

3. Key Facts
* The petitioner purchased 252 Metric Tons of Dun Peas.
* The goods arrived at the Port of Calcutta on board M.V. Peters on 27th January, 1987.
* The vessel entered the territorial waters of India on 27th January, 1987.
* Discharge of the cargo was completed by 30th January, 1987.
* At the time of the vessel entering territorial waters and discharge, Dun Peas were classified as Open General Licence (OGL) items, and no customs duty was payable.
* A Customs Notification No. 40/87, dated 4th February, 1987, was issued, imposing 25% ad valorem duty on the importation of Dun Peas.
* The petitioner presented the Bill of Entry on 5th February, 1987, at which point the goods were assessed to duty based on the new notification.

4. Arguments
* Taxpayer (Dinesh Kumar Nevatia):
* The importation of goods was complete on 27th January, 1987, when the vessel entered the territorial waters of India, or at the latest by 29th January, 1987, when the goods were unloaded.
* Since no customs duty was payable on these goods before Notification No. 40/87 came into force (4th February, 1987), the goods should not be liable for the newly imposed duty.
* Revenue (Collector of Customs):
* For fixing the rate of duty, the date of importation is not relevant. What is relevant is as provided under Section 15 of the Customs Act, 1962.
* The relevant date for duty is the date when the Bill of Entry is filed for home consumption and assessed.
* Since the petitioner presented the Bill of Entry on 5th February, 1987, after the notification came into effect, they are liable to pay duty as per Notification No. 40/87.

5. Court’s Reasoning
The Calcutta High Court relied heavily on the Full Bench decision of the Bombay High Court in Apar Private Ltd. v. Union of India and Ors., which meticulously addressed the same question. The reasoning can be summarized as follows:

• Definition of 'Import' and 'India': The Customs Act, 1962, defines 'import' in Section 2(2) as "bringing into India from a place outside India". Section 2(27) defines 'India' as including "the territorial waters of India". The expression "imported goods" in Section 2(25) means "any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption."
• Taxable Event: Combining these definitions, the Full Bench held that goods are "imported into India" and become chargeable to customs duty no sooner than they are brought from outside the territorial waters of India into the territorial waters of India. This is the "taxable event."
• Chargeability vs. Quantification/Collection: The court clarified that while the "taxable event" (chargeability) occurs when goods enter territorial waters (Section 12), the valuation (Section 14) and determination of the rate of duty (Section 15) and collection are subsequent steps that may occur at a later point in time. Quantification and collection are postponed, not chargeability itself.
• Effect of Exemption Notifications: A crucial distinction was made between exemption notifications issued under Section 25(1) and Section 25(2) of the Customs Act:
  • Section 25(1) Exemption: If a notification under Section 25(1) wholly exempts goods from the levy of duty, and such notification is in force on the date of importation (i.e., when goods enter territorial waters), then no duty is leviable. The subsequent withdrawal or modification of this notification before clearance for home consumption does not make the goods dutiable. This type of notification exempts the goods themselves from the levy, severing the link between Section 12 and the Customs Tariff Act schedules. There is no concept of "nil" duty in such cases; the goods are simply not chargeable.
  • Section 25(2) Exemption: If an exemption under Section 25(2) is in force, the goods remain chargeable to duty, but the importer is exempted from payment under specific circumstances. If such an exemption is withdrawn before clearance, duty would be payable.
• Redundancy Argument: The court noted that if "importation" were deemed complete only upon clearance for home consumption or landing on the landmass, various provisions of the Customs Act concerning control and regulation of goods within territorial waters (e.g., relating to transshipment, unloading, warehousing) would be rendered redundant.
• Application to the present case: Since the Dun Peas were OGL items (effectively wholly exempt from duty) when the vessel entered Indian territorial waters on 27th January, 1987, they were not liable for duty. The subsequent Notification No. 40/87 issued on 4th February, 1987, could not retroactively impose duty on goods whose importation (taxable event) was already complete under the previous exemption regime.

6. Statutory References
* Customs Act, 1962:
* Section 2(2) - Definition of 'import'
* Section 2(25) - Definition of 'imported goods'
* Section 2(27) - Definition of 'India' (includes territorial waters)
* Section 12 - Charging section for customs duties
* Section 14 - Valuation of goods
* Section 15 - Date for determination of rate of duty and tariff valuation
* Section 21 - Transhipment of certain goods without payment of duty
* Section 23 - Remission of duty on goods lost, destroyed or abandoned
* Section 25 - Power to grant exemption from duty (Sub-sections 1 and 2)
* Section 29 - Arrival of vessels and aircrafts
* Section 30 - Delivery of manifest or import report
* Section 31 - Unloading of goods
* Section 32 - Goods not to be unloaded or loaded except under supervision of customs officer
* Section 33 - Restrictions on unloading and loading of goods
* Section 34 - Power to require goods to be unloaded or loaded at Customs Port or Customs Airport
* Section 37 - Landing of goods
* Section 42 - Restrictions on departure of conveyances
* Section 45 - Restrictions on custody and removal of imported goods
* Section 46(1) - Filing of Bill of Entry
* Section 48 - Procedure in case of goods not cleared, warehoused, or transhipped within thirty days
* Section 49 - Storage of imported goods in warehouse pending clearance
* Section 53 - Transit of goods without payment of duty
* Section 54 - Transhipment of goods without payment of duty
* Customs Tariff Act, 1975
* Indian Tariff Act, 1934 (Section 2A)
* Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zone Act, 1976 (Section 3(2))

7. Precedents Cited
* Apar Private Ltd. v. Union of India and Ors. (Bombay High Court Full Bench) - Heavily relied upon
* Wallace Brothers and Company Ltd. v. Commissioner of Income Tax (16 ITR 240)
* Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth tax (59 ITR 767 (S.C.))
* Chatturam Horilram Ltd. v. Commissioner of Income tax (27 ITR 709)
* Kalwas Devadattam v. Union of India (49 ITR 165)
* In Re Sea Customs Act (AIR 1963 S.C. 1760) - Distinguished
* R.C. Jail v. Union of India (AIR 1962 S.C. 128)
* Shinde Brothers v. Deputy Commissioner, Ralchur
* Union of India v. Bombay Tyre International Ltd.
* Prakash Cotton Mills (P) Ltd. v. B. Sen - Distinguished
* K. Jamal Co. v. Union of India (1981 Excise Law Times 162) - Noted and contrasted with a later decision
* Sundaram Textiles Ltd., Madural v. Assistant Collector of Customs, Madras and Anr. (1983 Excise Law Times 909)
* Jain Shudh Vanaspati Ltd. v. Union of India (1983 E.LT.1688) - Distinguished