N. Pandia Nadar And Sons vs Union Of India (Uoi) And Anr. on 22 November, 1991

Outcome
* Writ Petitions 3057, 12127, and 12281 of 1988 were ALLOWED.
* All other writ petitions were DISMISSED**.
* For the allowed petitions, any difference in duty paid under interim orders is to be refunded to the petitioners, and any bank guarantees given are discharged. For the dismissed petitions, the department is at liberty to pursue further action to realise the duty due.

2. Core Issue
The core issues revolved around the effective date of customs duty notifications and the relevant date for determining the rate of duty for imported goods:
* Whether a customs duty notification (under Section 25(1) of the Customs Act) becomes effective from the date of its publication in the Official Gazette, or from the date when copies of the Gazette are made available for sale to the public.
* What is the determinative date for the rate of duty and tariff valuation of imported goods under Section 15(1) of the Customs Act, 1962.
* Whether the diversion of a vessel to a foreign port after initial entry into Indian territorial waters affects the determination of the duty rate.

3. Key Facts
* The petitioners were importers of pulses, which were initially exempt from customs duty under Notification No. 129/76.
* Subsequently, customs duty was imposed/revised through Notification No. 40/87 (25% ad valorem) and Notification No. 286/88 (35% ad valorem).
* The Union of India claimed that Notification No. 40/87 was published on 16.2.1987 and copies released on 18.2.1987.
* Notification No. 286/88 was claimed to be published on 6.10.1988, with copies released for sale at New Delhi on the same date, and its contents publicised through news media earlier (4.10.1988/5.10.1988).
* W.P. No. 3057 of 1988 specifically concerned Notification No. 40/87, with the bill of entry filed on 5.2.1987. All other petitions related primarily to Notification No. 286/88.
* Some petitioners had filed bills of entry on the very day the relevant notification was published/released for sale.
* A contention was raised that some ships carrying the goods had entered Indian territorial waters earlier, but were diverted to Pakistan before returning to discharge goods in India.

4. Arguments

• Taxpayer (Petitioners):

  • The effective date of a customs notification is not merely its publication date, but when it is "made known to the public" by making copies of the Official Gazette available for sale. They cited Union of India v. Asia Tobacco Co. Ltd.
  • The Supreme Court in Bharat Surfactants did not conclusively settle the effective date issue, merely distinguishing earlier Bombay High Court judgments.
  • Notification No. 286/88 should not apply to bills of entry filed on 6.10.1988, even if published/released on that date.
  • The rate of duty should be determined based on the date the ship first entered Indian territorial waters, even if subsequently diverted.
  • Gazette copies being available only in New Delhi (and not Madras) meant the notification was not effectively made known in Madras.

• Revenue (Union of India):

  • The rate of customs duty and tariff valuation for imported goods is determined by Section 15(1)(a) of the Customs Act, which specifies the date the bill of entry is presented under Section 46. (Relied on Shah Devchand and Co. v. Union of India and Bharat Surfactants (Pvt) Ltd. v. Union of India).
  • The effective date of a notification, as mandated by Section 25(1) of the Customs Act, is the date of its publication in the Official Gazette. (Relied on Government of India v. Amnachala Nadar). Availability of copies at the place of publication (e.g., New Delhi) is sufficient.
  • Notification No. 286/88 would apply even to bills of entry filed on 6.10.1988, as it became enforceable on that date.
  • The diversion of a ship to a foreign port after initially entering Indian waters is irrelevant for determining the duty rate given the Supreme Court's clear position on Section 15.

5. Court’s Reasoning

• Rate of Duty and Tariff Valuation: The Court held that the issue is not res integra (not unsettled). It relied on the categorical pronouncements of the Supreme Court in Bharat Surfactants (Pvt) Ltd. (a Constitution Bench decision) and Shah Devchand & Co. These cases establish that the relevant date for determining the rate of duty and tariff valuation is the date the bill of entry is presented under Section 46 of the Customs Act (or the deemed date of entry inwards if the bill of entry is presented earlier). The Court clarified that the Supreme Court merely distinguishing certain Bombay High Court decisions did not leave the point open for debate; the Supreme Court's ratio on Section 15 is binding.
• Effective Date of Notification:
  • While acknowledging a conflicting Division Bench decision of the Madras High Court (Union of India v. Asia Tobacco Co. Ltd.), the Court preferred its own earlier Division Bench decision in Government of India v. Amnachala Nadar (to which the presiding judge was a party). This precedent held that Section 25(1) of the Customs Act mandates publication in the Official Gazette as the decisive date for a notification to come into force.
  • Even considering the petitioners' argument that the notification should be effective only when copies are available for sale, for Notification No. 286/88, copies were released for sale at New Delhi on 6.10.1988. The Court found this sufficient, stating that it is not a condition precedent for copies to be available at all places in the country for the notification to be enforceable. Thus, Notification No. 286/88 became enforceable from 6.10.1988.
  • For W.P. No. 3057 of 1988, the bill of entry was filed on 5.2.1987, which was before the publication (16.2.1987) and release for sale (18.2.1987) of Notification No. 40/87. Therefore, Notification No. 40/87 could not be enforced against the petitioner in this specific case, leading to it being allowed.
  • The argument that bills of entry filed on 6.10.1988 (the date of publication/release for sale) should not be subject to Notification No. 286/88 was rejected, as the notification became legally enforceable on that date.
• Ship Diversion: The Court found the argument regarding the ship's initial entry into Indian waters, subsequent diversion, and later return to be irrelevant. It reiterated that the Supreme Court's interpretation of Section 15 focuses solely on the date of the bill of entry, irrespective of such operational details.

6. Statutory References
* Customs Act, 1962:
* Section 15(1)
* Section 15(1)(a)
* Section 25(1)
* Section 46

7. Precedents Cited
* Bharat Surfactants (Pvt) Ltd. v. Union of India: Followed (Supreme Court, Constitution Bench).
* Shah Devchand and Co. v. Union of India: Followed (Supreme Court).
* Apar Private Ltd. and Ors. v. Union of India and Ors.: Distinguished by the Supreme Court, not followed by this court.
* Jain Shudh Vanaspathi Ltd. v. S.R. Patankar, Assistant Collector of Customs, Bombay and Ors.: Distinguished by the Supreme Court, not followed by this court.
* Union of India v. Asia Tobacco Co. Ltd.: Not followed (Division Bench of Madras High Court).
* The Government of India Rep. by the Secretary to Government, Ministry of Revenue, New Delhi v. Amnachala Nadar (Writ Appeal, No. 1577 of 1987 dated 16.10.1990): Followed (Division Bench of Madras High Court, to which Justice Raju was a party).