Sundaram Textiles Ltd., Madurai vs Assistant Collector Of Customs, Madras ... on 7 July, 1981

1. Outcome
The writ petitions are allowed. The assessment orders passed by the Assistant Collector of Customs are quashed, and the first respondent is directed to release the goods without payment of the disputed basic, auxiliary, or additional duties.

2. Core Issue
The core issue is the relevant date for determining the applicability of customs duty and exemptions on imported goods:
* Is it the date the vessel enters India's territorial waters (when a total exemption was in force)?
* Or is it the date of presentation of the Bill of Entry for home consumption, or actual removal of goods from the port (when the exemption had expired or new duties were levied)?
This involves interpreting the interplay between Section 12 (charging section) and Section 15 (rate determination) of the Customs Act, 1962, particularly in the context of a total exemption.

3. Key Facts
* Petitioner: Sundaram Textiles Ltd., a Public Limited Company manufacturing cotton/viscose blended yarn, imported viscose staple fibre from the UK.
* Goods Imported: 142 bales (29999.8 kgs) and 48 bales (9903.70 kgs) of viscose staple fibre.
* Vessel Details: Steamer 'Clan Macnair' entered Indian territorial waters on December 7, 1978.
* Exemption Status (Dec 1978): Notification No. 388 dated August 2, 1976 (extended by No. 66 dated March 18, 1978) fully exempted viscose staple fibre from basic customs duty, auxiliary duty, and additional duty. This exemption was valid up to and including December 31, 1978.
* Bill of Entry: Prepared on December 8, 1978, and received by Customs on December 13, 1978. The Bill of Entry was endorsed "free" and "duty foregone" by Customs officials on December 16/18, 1978, as the exemption was in force.
* Unloading/Berthing Delay: Due to operational risks and non-availability of berth, the vessel was actually berthed and goods could only be unloaded on January 4, 1979.
* New Notifications (Jan 1979): On January 5, 1979, new notifications (No. 6 & 7) were issued re-exempting basic and auxiliary duty, but Notification No. 8 levied an additional duty of Rs. 1.32 per kg.
* Assessment: Customs authorities subsequently refused to release the goods duty-free, refusing the petitioner's request to warehouse under Section 49, and assessed basic duty (100%), auxiliary duty (20%), and additional duty (Rs. 1.50/kg) on January 20/31, 1979, based on the rates applicable after December 31, 1978.

4. Arguments
* Taxpayer (Sundaram Textiles Ltd.):
* The import was complete when the vessel entered India's territorial waters on December 7, 1978.
* On December 7, 1978, the goods were totally exempt from all customs duties under Notification No. 66, which was valid until December 31, 1978.
* Section 12 of the Customs Act is the charging section, creating the liability to duty upon import into India (including territorial waters).
* Section 15, which specifies the date for determining the rate of duty, only applies when a duty is leviable or a charge arises. If there is a total exemption at the point of chargeability (import into territorial waters), Section 15 is inapplicable.
* The refusal to permit warehousing under Section 49 was without jurisdiction.
* Revenue (Assistant Collector of Customs):
* The concept of "exemption" is not equivalent to "free of duty"; a charge always arises on import.
* Section 15(1)(a) mandates that the rate of duty applicable is that in force on the date the Bill of Entry for home consumption is presented.
* Alternatively, for goods cleared from a warehouse (S. 15(1)(b)), it's the date of actual removal.
* On the relevant date of presentation/actual clearance (January 1979), the prior exemption had expired, and duties were leviable under the new notifications.
* "Bringing into India" (Section 2(23)) implies clearance of goods.

5. Court’s Reasoning
* Distinction between Chargeability and Rate: The Court emphasized the "well-settled" distinction between the chargeability of customs duty and the quantification or determination of its rate.
* Section 12 (Chargeability): This is the only charging section. Duty is leviable "on goods imported into... India." Section 2(27) defines "India" to include territorial waters. Therefore, the liability to duty attaches the moment the goods cross India's customs frontier (i.e., enter territorial waters).
* Section 15 (Rate Determination): This section specifies the date for determining "the rate of duty and tariff valuation, if any, applicable to any imported goods." The crucial phrase "if any" and "applicable" is key.
* Impact of Total Exemption: If, at the time of chargeability (when goods enter territorial waters), there is a total exemption in force, it means there is no rate of duty applicable under Section 12. In such a scenario, Section 15, which deals with rates, simply does not come into play because there is no duty to be rated.
* Distinguishing Precedents:
* The Court strongly relied on Shawney v. Sylvania and Laxman (Bombay HC), which held that chargeability arises on entry into territorial waters, and if goods are totally exempt at that point, Section 15 (for rate determination) is irrelevant. This view was consistently followed by other Bombay High Court decisions (Synthetics and Chemicals Ltd., New Chemi Industries).
* The Supreme Court decision in Prakash Cotton Mills (P) Ltd. v. B. Sen was distinguished, as it dealt with warehoused goods that were already chargeable to duty, and the question was only about the rate (or exchange rate) applicable at the time of removal, not about initial chargeability or total exemption.
* The judge explicitly overruled his own earlier view in K. Jamal Co. v. Union of India, acknowledging that the relevant precedents making the distinction between chargeability and rate determination in the context of total exemption were not brought to his attention previously.
* Conclusion: Since the goods were totally exempt from all duties when the ship entered India's territorial waters on December 7, 1978, no duty was leviable. The subsequent expiry of the exemption or issuance of new notifications cannot retrospectively create a duty liability where none existed at the moment of import/chargeability.

6. Statutory References
* Customs Act, 1962:
* Section 2(11) (Customs Area)
* Section 2(16) (Entry)
* Section 2(23) (Import)
* Section 2(27) (India includes territorial waters)
* Section 12(1) (Charging Section for duties of customs)
* Section 15(1) (Date for determination of rate of duty and tariff valuation)
* Section 17 (Assessment)
* Section 46 (Entry of goods for home consumption)
* Section 49 (Storage of imported goods in warehouse pending clearance)
* Section 68 (Clearance of warehoused goods for home consumption)
* Section 25(1) (Power to grant exemption from duty)
* Customs Tariff Act, 1975:
* Section 2 (Rates of duty)
* First Schedule, Chapter 56 (for Viscose fibres)
* Finance Act, 1976:
* Section 32(1) (Auxiliary duty)

7. Precedents Cited
* Shawney v. Sylvania and Laxman, LXXVII Bom. L.R. 380 (Bombay High Court) - Relied Upon
* Synthetics and Chemicals Ltd. v. B. C. Coutinho and others, 1981 E.L.T. 414 (Bombay High Court) - Relied Upon
* New Chemi Industries Pte Ltd. and another v. Union of India and others, 1981 E.L.T. 920 (Bombay High Court) - Relied Upon
* Collector of Customs v. H. S. Mehra (Madras High Court, Division Bench) - Relied Upon (for meaning of "import")
* Prakash Cotton Mills (P) Ltd. v. B. Sen (Supreme Court) - Distinguished
* K. Jamal Co. v. Union of India, 1981 E.L.T. 162 (Madras High Court, Single Judge) - Overruled by the present judgment
* Wallace Brothers and Co. Ltd. v. Commissioner of Income-tax, 16 I.T.R. 240 (Privy Council) - Cited for distinction between chargeability and quantification.
* Kesoram Industries and Cotton Mills Ltd. v. C.W.T., 59 I.T.R. 767 (Supreme Court) - Approved Wallace Brothers.
* Halsbury's Laws of England, Third Edition, Volume 33, page 138 - Referenced for time of import.
* W.A. No. 537 of 1969 (Madras High Court) - Distinguished.