JUDGMENT

K.A. Nayar, J.

1. The facts of the case are simple and the law appears to be complicated by the conflicting decisions of this Court as well as other High Courts. Since conflicting views were expressed by two Division Benches of the Court in the decisions in Ramakrishna Mills (CBE) ltd Vs. The Asst.Collector of Customs 1987 KLJ 248 and Aluminium Industries Ltd Vs Union of India (1987) 1 KLT 653, the case is referred to the Full Bench.

 

2. The question which arises for consideration is that when goods are exempted by a notification issued under Section 25 of the Customs Act from the whole of customs duty on the date on which the ship carrying the goods from a place outside India entered the territorial waters, whether cancellation or modification of the exemption notification before the date of presentation of the bill of entry in the case of goods entered for home consumption under Section 46 will fasten liability on the importer to pay duty prevalent on the date on which entry inwards is given to the vessel.

 

3. The petitioner, a leading Malayalam daily in the State had been allotted 1035 tonnes of newsprint for the year 1980, which had to be imported through the State Trading Corporation. Pursuant to the request of the petitioner, the State Trading Corporation took steps for import of the goods and informed the petitioner that a consignment of newsprint was shipped by M/s. Ontario, Canada in M.V. Ratnakirti from Basic Comeau, Canada. The import manifest of the vessel M.V. Ratnakirti was duly filed with the Customs, Cochin on 16.2.1981. The petitioner presented the bill of entry in the prescribed form on 24.2.1981 before the vessel was berthed at Q4 Cochin Harbour at about 9.30 p.m. on 28.2.1981. The proper officer granted entry inwards on 1.3.1981. The agent of the vessel by letter dated 16.2.1981 informed the Assistant Collector of Customs that M.V. Ratnakirti is expected to arrive Cochin on 28.2.1981 with 2004.142 tonnes of newsprint. The details of the cargo from Basic Comeau, Canada for discharging at Cochin were presented along with the letter though the same was not a complete import manifest. In that letter they had undertaken to produce all documents and finalise the manifest within 24 hours of arrival of the vessel at Cochin. The fact that the petitioner filed bill of entry Nos. 271 and 282 in the prescribed form on 24/2/1981 for clearance of the newsprint seems to be admitted. But according to the respondent the forms were not complete. The vessel M.V. Ratnakirti, even though entered Indian territorial waters earlier, arrived Cochin harbour in the late hours of 28.2.1981 and entry inwards was granted on 1.3.1981 at 10 a.m. According to the department, the import manifest in complete form was presented in the import department only on 2.3.1981. Ordinarily entry inwards will not be given until the import manifest has been delivered. Therefore, when the steamer agents approached the Preventive Officer, on 28.2.1981 at 10 p.m., entry inwards was refused as import manifest in complete form was not presented. But the very next day on 1.3.1981 under the special order of the Assistant Collector of Customs (Preventive), entry inwards was given. Customs duty will have to be paid on goods imported, at the rate specified under the Customs Tariff Act, 1975 unless exempted. Chapter 48.01/21 item 2 of the Indian Customs Tariff Act mentions the rate of duty as 40% ad valorem. The relevant entry in Schedule I to the Customs Tariff Act reads as under:

Heading Sub-heading No. and description of Standard rate of Central Excise

No. article duty Tariff ite m

 

01/21

1)

2) Newsprint containing mechanical

wood pulp amounting to not less than

70 per cent of the fibre content

(excluding chrome, marble, flint,

poster, stereo and art paper) 40%

Under Section 25, power is given to the Central Government to exempt any goods from whole or any part of the customs duly leviable thereon. In exercise of the power under Section 25(1) a notification No. 148 Cus. dated 15.7.1977 modified by Notification No. 2 Cus. dated 7.1.1978 was issued by the Central Government exempting newsprint from the entire duty payable as follows:

 

Newsprint for printing of newspapers, books and periodicals falling under sub-heading No. (1) of Heading No. 48.01/21 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), is exempt from the whole of the portion of the duty of Customs leviable thereon, which is specified in the said First Schedule.

 

But as per the budget introduced in 1981, which was presented in the Parliament on 28.2.1981, newsprint was liable to duty at 15% ad valorem with effect from 1.3.1981. The relevant portion of the said notification issued under Section 25 limiting basic duty at 10% is produced hereunder:

 

The effective rate of basic import duty on newsprint for printing of newspaper, books and periodicals is 10% ad valorem. 24/81-Cus. dt. 1.3.1981. 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 Ministry of Finance, Department of Revenue, No. 148-Customs, dated the 15th July, 1977, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts newsprint, falling under sub-heading No. (2) of heading No. 48.01/21 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1974), when imported into India, for printing of newspapers, books and periodicals, from so much of that portion of the duty of customs leviable thereon which is specified in the said First Schedule as is in excess of 10 per cent ad valorem.

 

4. As the petitioner was given entry inwards only on 1.3.1981, the department required the petitioner to pay duty prevalent as on 1.3.1981, viz. 15% ad valorem, i.e., 10% Basic + 5% auxiliary. The petitioner contended that the taxable event under the Customs Act was the import of goods to India. The goods entered India which term was defined to include territorial waters of India as well, on 25.2.1981 awaiting a berth and the vessel was berthed at 21.30 hours on 28.21981. Hence, it was contended that the importation was completed well before 1.3.1981 and that was during the time when the imported goods were wholly exempted from the customs duty leviable under the 1st Schedule of the Customs Tariff Act, 1975. The department took the view that the entry inwards was given on 1.3.1981 and, therefore, the question of duty has to be considered only with respect to that date. The law applicable for the purpose of levy of duty is the law as on 1.3.1981. Tariff valuation applicable to the imported goods in the case of goods cleared for home consumption under Section 46 will be the rate and valuation applicable on the date on which a bill of entry is presented. Section 15 of the Customs Act (for short "the Act") reads as under:

 

15. Date for determination of rate of duty and tariff valuation of imported goods. (1) The rate of duty and tariff valuation, if any, applicable to any imported goods, shall be the rate and valuation in force--

(a) in the case of goods entered for home consumption under Section 46, on the date on which a bill of entry in respect of such goods is presented under that section;

(b) in the case of goods cleared from a warehouse under Section 68, on the date on which the goods are actually removed from the warehouse;

(c) in the case of any other goods, on the date of payment of duty;

 

Provided that if a bill of entry has been presented before the date of entry inwards of the vessel by which the goods are imported, the bill of entry shall be deemed to have been presented on the date of such entry inwards.

 

The bills of entry Nos. 271, 282 in the case was presented on 24.2.1981. If the bill of entry is presented before the date of entry inwards of the vessel by which the goods are imported, the bill of entry shall be deemed to have been presented on the date of such entry inwards. Entry inwards admittedly was given on 1.3.1981 and the duly and tariff valuation applicable according to Section 15 in respect of the imported goods will be the one available on the date on which the entry inwards was given. The requirement of bill of entry and formality to be complied for obtaining the same is mentioned in Section 46. The importer will have to file a bill of entry before the proper officer namely the Officer of Customs who have been assigned those functions. This bill of entry is required to be presented in respect of goods for home consumption or for warehousing. The form in this regard is contained in the Bill of Entry (Forms) Regulations, 1976. If the importer makes a declaration before the proper officer stating that he is unable for want of full information to furnish all the particulars of the goods, there was power for the proper officer, pending the production of the information, to permit the importer previous to the entry to examine the goods or deposit the same in a public warehouse. The bill of entry should include all the goods mentioned in the bill of lading or other receipts given by the carrier to the consignor. The bill of entry can be presented at any time after delivery of the import manifest or import report. The Collector of Customs has power under special circumstances to permit a bill of entry to be presented even before delivery of import report. There is also provision for presenting the bill of entry even before the delivery of import manifest under certain circumstances. The importer, while presenting the bill of entry will have to make declaration regarding the truth of the contents in respect of bill of entry and will have to produce supporting documents relating to the imported goods. Thereafter, if the proper officer is satisfied that the goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and also any charges payable under the Act, the proper officer may make an order permitting the clearance of the goods under Section 47 of the Act. According to Section 14, the value of such goods shall be deemed to be the price at which such goods are ordinarily sold or offered for sale, for delivery at the time and place of importation or exportation, as the case may be. Therefore, the time and place of import and export will also become relevant. The proviso to Section 14 also says that the price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented. It will be seen that the time of import, place of import etc. are relevant in imposing duty and that has to be fixed under the law with respect to the date on which entry inwards is given which will be a definite date. Hence, the petitioner was directed to pay the duty as assessed, viz. 15% ad valorem which came to Rs.6,94,630.30. Since the petitioner was not willing to pay the duty in clearing the goods, it approached this Court and this Court passed an interim order on 6.3.1981 permitting the petitioner to clear the newsprint, on the petitioner providing bank guarantee for the customs duty demanded and executing a bond in favour of the respondent to be liable for interest at 12% thereon in the event of the petitioner failing in the original petition. The bank guarantee will cover not only the customs duty but also the interest. There is no case before us that the petitioner has not cleared the goods pursuant to the interim order.

 

5. It would appear that the petitioner, along with other newsprint importers, challenged the constitutional validity of the notifications aforementioned dated 1.3.1981 issued by the Government of India imposing Customs and Auxiliary duty on Newsprint imported as violative of Article 19(1)(a) of the Constitution of India. Writ Petition No. 3632/81 and connected cases were filed by the petitioner and others under Article 32 of the Constitution of India. The Supreme Court originally granted stay of the operation of the notification. During the pendency of the writ petitions before the Supreme Court by the budget proposal announced on 27.2.1982, the Finance Minister modified the notification of 1981 and fixed a flat rate of duty of Rs.550/- per tonne of newsprint. Notification No. 31-Cus. issued on 28.2.1982 reads as follows:

 

Exemption to newsprint--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 Ministry of Finance (Department of Revenue) No. 24-Customs, dated the 1st March, 1981, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts newsprint, falling under sub-heading No. (2) of Heading No. 48.01/21 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), and specified in column (2) of the Table hereto annexed, when imported into India, from so much of that portion of the duty of customs leviable thereon which is specified in the said First Schedule as is in excess of the rate of duty specified in the corresponding entry in column (3) of the said Table. TABLE

 

Sl.No. Description of goods Rate of duty U

 

1 2 3 ___________________________________________________________________________ _

1 Newsprint for printing of newspapers, books Rs.550 per tonne and periodicals

2 Newsprint for other purposes Rs.40 per cent ad valorem ________________________________________________________________________________ _

The modification was also challenged by way of an amendment before the Supreme Court. The subject matter of the writ petitions before the Supreme Court was the competency of the Central Government for imposing duty. But the petitioner's contention in this original petition related only to the validity of the demand of duty on goods imported. According to the petitioner, the goods entered India well before the notification was issued, though it was cleared for home consumption only after the notification. Hence, the petitioner wanted an adjudication of the questions raised in the original petition irrespective of the result of the writ petitions before the Supreme Court. The writ petitions filed under Article 32 of the Constitution of India before the Supreme Court were allowed on 6.12.1984 in I.E. Newspapers (Bombay) P. Ltd. v. Union of India with the following directions (Page 165 of ECC)

 

(1) The Government of India shall reconsider within six months the entire question of levy of import duty or auxiliary duty payable by the petitioners and others on newsprint used for printing newspapers, periodicals etc., with effect from March 1, 1981. The petitioners and others who are engaged in newspaper business shall make available to the Government all information necessary to decide the question.

 

(2) If on such reconsideration the Government decides that there should be any modification in the levy of customs duty or auxiliary duty with effect from March 1, 1981 it shall take necessary steps to implement its decision.

 

(3) Until such redetermination of the liability of the petitioners and others is made, the Government shall recover only Rs. 550 per MT on imported newsprint towards customs duty and auxiliary duty and shall not insist upon payment of duty in accordance with the impugned notifications. The concessions extended to medium and small newspapers may however remain in force.

 

(4) If, after such redetermination, it is found that any of the petitioners is liable to pay any deficit amount by way of duty, such deficit amount shall be paid by such petitioners within four months from the date on which a notice of demand is served on such petitioners by the concerned authority. Any bank guarantee or security given by the petitioners shall be available for recovery of such deficit amounts.

 

(5) If, after such redetermination it is found that any of the petitioners is entitled to any refund, such refund shall be made by the Government within four months from the date of such redetermination.

 

6. The challenge in those petitions related to the validity of the imposition of import duty on newsprint imported from abroad under Section 12 of the Customs Act, 1962 read with Section 2 and heading No. 48.01/21 sub-heading No. 2 in the First Schedule of the Customs Tariff Act, 1975 and the levy of auxiliary duty under the Finance Act, 1981 to newsprint as modified by notification issued under Section 25 of the Customs Act, 1962 with effect from 1.3.1981. The Supreme Court rejected the contention of the petitioners therein that no tax can be levied on newsprint industry. The Supreme Court, thereafter, considered whether there had been proper exercise of power under Section 25(1) by the Government of India. Since no material has been placed before the court to come to a definite conclusion that import duty at 15% imposed on newsprint was burdensome so as to warrant striking down the notification, the Supreme Court felt that it will be in the interest of substantial justice to direct the Central Government to reconsider the matter afresh in the light of the observation made in the judgment. Thus it will be seen that the Supreme Court decision related to the validity of the notification issued on 1.3.1981 imposing a duty of 15% ad valorem inclusive of auxiliary duty instead of nil duty. It was not proved before the Supreme Court that the effect of levy was so burdensome so as to affect the freedom of press, at the same time, the Supreme Court was not able to come to the conclusion that it will not be burdensome. It is in that view of the matter, the Supreme Court gave the directions aforementioned.

 

7. The question with which we are concerned here related to the liability of the petitioner in respect of the import of newsprint which entered the territorial waters of India when there was complete exemption but there was a duty imposed with effect from 1.3.1981 at 15% ad valorem as above on the day on which the imported goods were cleared for home consumption.

 

8. The petitioner wants a declaration to the effect that it is not liable to pay any customs duty on newsprint imported as per Exts. P1 to P5. Entry inward to the vessel was admittedly given on 1.3.1981. Under Section 12 of the Customs Act except as otherwise provided in the Act or any other law for the time being in force, duties of customs shall be levied at such rate as specified under the Customs Tariff Act, 1975 on goods imported into or exported from India. We are concerned here only with goods imported into India and not the goods exported from India. Section 2 of the Customs Tariff Act, 1975 says that the rates at which duties of customs shall be levied under the Customs Act, 1962 will be as specified in the First and Second Schedules and the First Schedule in Chapter 48, viz., 48.01/21, sub-heading (2) mentions the standard rate of duty on newsprint imported at 40%. Section 15 says that the rate of duty and tariff valuation to any imported goods shall be the rate and valuation in force in the case of goods entered for home consumption under Section 46, on the date on which a bill of entry in respect of such goods is presented under that section. The proviso thereunder clearly mentions that if the bill of entry has been presented, as in this case, before the date of entry inwards of the vessel by which the goods are imported, the bill of entry shall be deemed to have been presented on the date of such entry inwards. The bill of entry in this case has been presented on 24.2.1981 even before the vessel arrived at Cochin Harbour. Therefore, the bill of entry should be deemed to have been presented on the date of entry inwards of the vessel which was on 1.3.1981. Hence, in terms of Section 15 rate of duty payable on imported newsprint will be the rate applicable on 1.3.1981. Section 15 has not been challenged in this writ petition. Hence, the rate of duty applicable to the newsprint imported as on 1.3.1981 will have to be paid by the petitioner for removal for home consumption.

 

9.  SC 490, there was 105% customs duty in respect of import of palm kernels up to 3.12.1987. It was modified with effect from 4.12.1987 by notification under Section 25 completely exempting the goods from duty. This position lasted till 28.1.1988 and on 29.1.1988 exemption was cancelled. Therefore, from 29.1.1988 palm kernels became liable for duty at 105% ad valorem which was increased to 245% from 1.3.1988. The goods entered the territorial waters in October 1987 when the duty was at 105% ad valorem. The goods were cleared from warehouse on two occasions. The first on 17.12.1987 when there was nil duty and the second on 17.6.1988 when there was 245% duty. For the removal on 17.6.1988, the Customs department wanted duty to be paid as the exemption notification has been cancelled as aforementioned. The importer contended that he has filed bill of entry on 28.1.1988 before exemption notification was cancelled. The actual removal was delayed only because of the default of the department. The Supreme Court held that the contention of the importer was correct and the duty has to be ascertained on the date of presentation of the bill of entry in terms of Section 15. The Supreme Court observed: [1991] 32 ECC 189 at 203, para 36

 

  case (supra) relied by the learned Solicitor General was a case of Section 15(1) (a) of the Customs Act. Under the above provision the criteria for determining the rate of duty and tariff valuation is the rate in force in the case of goods entered for home consumption under Section 46, on the date on which a bill of entry in respect of such goods is presented. The Section provides that if a bill of entry has been presented before the date of entry inwards of the vessel by which the goods are imported, the bill of entry shall be deemed to have been presented on the date of such entry inwards. While interpreting the words 'date of entry inwards of the vessel' it was held that it would be the date of entry recorded in Customs register. Where vessel arrived and bill of entry was presented at a prior date to the date of berth given by Port authorities and entry inwards registered by the Customs Authorities at a later date then it was held that the rate of import duty and tariff valuation would be that in force on the later date.

 

The contention that the rate applicable on the date on which the goods arrived the territorial waters of India as being the deemed date of delivery urged on behalf of the department has not been accepted by the Supreme Court. This position is seen from the contention on behalf of the petitioner as under:

 

23. [Para 22 of [1991] 32 ECC 189 at 198] It was contended that the learned Single Judge had taken a correct view that the crucial date for levy of duty would be 28.1.1988 and the Division Bench of the High Court committed a clear error in holding that the actual date of delivery for the entire lot of goods should be considered as 2/3rd October, 1987 when the goods actually arrived in the territorial waters of India.

 

Referring to the above contention the Supreme Court held: [1991] 32 ECC 189 at pp 204-205, para 39

The appellant submitted the bills of entry on 28.1.88 and admittedly no duty was payable on that date. Moreover where goods imported are kept in a warehouse under a bond, the date of arrival of such goods in India is not relevant for determining the duty, therefore the High Court committed error in holding the appellant was liable to pay duty as in force on the date of arrival of goods.

 

The same view was taken by the Supreme Court in Northern Corporation v. Union of India , wherein the duty assessed on the

goods imported was enhanced at the time when it was sought to be removed from warehouse. It was contended that the delay in removing the goods was on account of the prohibitory order of the Income-tax department. But the Supreme Court held that the importer has to pay duty at the enhanced rate as the delay cannot be attributed to the Customs department. The contention of the importer and the decision thereto is contained in para 10 [1990] 30 ECC 21 at 25, para 9 which reads as under:

 

10. (Para 9 in ECC) Mr. Garg, appearing for the petitioner, on the other hand contended before us that his client was willing indeed to pay the duty when the goods crossed the customs barrier and were in the process of being cleared, but could not be cleared because of the prohibitory orders of the Income tax Department Under Section 102 of the Customs Act. In that light, it was not possible, Mr. Garg contended, for the Income-tax Department to claim enhanced duty due to facts which were not for the fault of the petitioner. In view of the language used in Section 15(1)(b) of the Act, it is difficult to accept this contention specially in the light of the expression used 'actually removed'. It must be accepted that the prohibitory orders, arbitrary or not, would postpone the date of clearance and as such would postpone the determination of the duty. Therefore, it is difficult to accept Mr. Garg's contention.

 

These decisions will indicate Section 15 will apply where exemption is for whole or any part of the duty. Entering the territorial water is not a criterion, but presentation of bill of entry under Section 15 is the criterion. The Supreme Court further held: ([1990] 30 ECC 21 at 25, Para 10)

In a particular situation whether customs duty is payable at the rate prevalent on a particular date or not has to be determined under the four corners of the Customs Act, 1962.

 

10. Notwithstanding this clear provision in the section, and pronouncement thereon counsel for the petitioner contended that Section 12 is the charging section and that section alone provides for levy. The charging section begins with the word "except as otherwise provided" and there is a power for exemption under Section 25. Section 25(1) provides for exemption of any part of duty of customs leviable thereon. Insofar as there was a complete exemption given until 1.3.1981, charge under Section 12 on the import of newsprint cannot have any effect on goods which had already entered the territorial waters. According to the petitioner, the chargeable event is the import and that import is completed when the vessel enters territorial waters. That is admittedly well before the new notification came into force with effect from 1.3.1981. According to the petitioner, the exemption notifications under Sections 25(1) and 25(2) cover different fields. Notification under Section 25(1) gives an exemption from charge itself and notification under Section 25(2) only exempts from payment of duty. Petitioner referred to a large number of cases.

 

 

12. Duty of customs is a tax on the act of importation coming under entry 83 of List I of the 7th Schedule of the Constitution. Under Section 12 of the Customs Act, duties of customs are levied on goods imported. It cannot be stated that newsprint ceased to be imported goods as soon as the goods enter the territorial waters. If that be so as observed by the Delhi High Court in the decision reported in Jain Shudh Vanaspati and Anr v Vs Union of India and others as the territorial waters extend upto 12 nautical miles from the base line, the question as to when, at what particular time a ship entered the territorial waters can always become subject matter of debate and dispute between the importer and Customs authorities. Under definition [Section] 2(25) of the Customs Act "imported goods" means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption. Until the goods are cleared for home consumption, the import duty in any case can be validly imposed, that is why Section 12 provides that duties of customs shall be levied on goods imported into India. The ship may enter into the territorial waters and at that point of time it cannot be stated that all the goods in the ship are imported goods. What goods have to be levied duty and at what rate and at what point of time, etc., are mentioned in Sections 12 & 15 read with Customs Tariff Act, 1975. Since the importation is a continuing process for the purpose of fastening the liability under the Customs Act, duty will have to be ascertained at a particular point of time. Therefore, Section 15 says that in the case of goods entered for home consumption, the date for determination of the rate of duty and tariff valuation shall be the date on which a bill of entry in respect of such goods is presented and if a bill of entry is presented even before the entry inwards of the vessel, it will be deemed to be presented on the date of such inwards entry given by the proper officer. The law in England in this regard is summarised in Halsbury's Laws of England, Fourth Edition page 180, para 684 as under:

 

684. Duty on imported goods. The general rule is that imported goods may not be delivered or removed on importation until the importer has paid to the proper officer any duty chargeable on them, except where such delivery or removal is permitted by or under the customs enactments. In the case of goods of which entry is made, duty must be paid on making the entry, and the duties of customs and the rate of duty chargeable are those in force with respect to such goods at the time of the delivery of the entry, If no entry is made of the goods the duties and rates chargeable are those in force with respect to such goods at the time of their importation.

 

13. There are a large number of cases which took the view that the duty payable in respect of the import will be the duty that can be imposed on the date on which the vessel enters the territorial waters and if on that date, viz. the date on which the ship enters on territorial waters, there is an exemption from the whole or the portion of the duty of customs leviable thereon as specified in the first schedule of the Customs Tariff Act, 1975, the importer is entitled to the benefit of exemption, even if the exemption is withdrawn before entry inwards. (See Synthetics and Chemicals v. S.C. Coutinho , New Chemi Industries Pvt. Ltd. and Anr. v. Union of India and Ors. , Sundaram Textiles Ltd., Madurai v. Assistant

 

Collector of Customs, Madras , Apar Private Ltd. v. Union of India 22 ELT 644 (Bom), Everett (I) Pvt. Ltd. v. Assistant Collector of Customs 24 ELT 469 (Cal), Indian Rayon Corporation v. Collector , Assistant Collector v. Sylvania & Laxman Ltd. , Sri Ramakrishna Mills Vs The Asst.Collector of customs 1987 KLJ 248. In Apar Private Ltd. v. Union of India when the goods entered the territorial waters of India from the foreign country, as also on the date on which they were stored in the bonded warehouse, the goods were wholly exempted from payment of basic customs duty under notification issued in exercise of power under Section 25(1) of the Act. The exemption notification was withdrawn by the time when the goods were sought to be removed. Under Section 15(1)(b) the rate of duty payable in the case of goods cleared from a warehouse shall be the rate actually in force when they are removed from the warehouse. The Customs authorities demanded customs duty applicable on the date of removal on the basis of the above section. The demand was illegal going by two Division Bench rulings of the same High Court, viz., Assistant Collector v. Sylvania & Laxman Ltd. and Synthetics and Chemicals v. S.C.

Coutinho . The Division Bench of the Bombay High Court hearing the case expressed doubt regarding the correctness of the earlier Division Bench rulings and referred the matter to the Full Bench. According to the referring order, the chargeability of any goods would arise on their being put in the Schedule and merely because they are wholly exempted from payment of Customs duty, it cannot be considered to have ceased to be chargeable to Customs duty. Effect of total exemption from customs duty according to the reference order was only that during the existence of the notification, the goods were chargeable for nil customs duly. The Division Bench, therefore, took the view that Synthetic case and Sylvania Laxman's case would require reconsideration. But the Full Bench, after detailed consideration, took the view that the chargeability is different from the determination of the rate. The chargeability had to be determined on the date of importation. The Full Bench held that in the context of Section 12, import into India, which includes its territorial waters, must mean that for the purpose of chargeability under Section 12, taxable event occurs when the goods enter the territorial waters. The theory propounded that only upon the goods forming part of the land mass they become imported goods, was rejected. The court ultimately held that under the Customs Act the event of importation occurs when goods from a place outside India enter the territorial waters of India and the rate at which the imported goods are chargeable to customs duty will have to be determined under Section 15 of the Customs Act, provided such goods are not wholly exempt from customs duty when they entered the territorial waters of India. The customs duty has to be charged on imported goods, if they are being cleared immediately, at the rate in force on the date of presentation of the bill of entry and, if warehoused, at the rate in force on the date when the goods were sought to be cleared for home consumption. But if the goods were wholly exempt from customs duty by virtue of notification under Section 25(1) of the Customs Act on the date when the goods entered the territorial waters of India, no customs duty will be levied even if exemption were withdrawn before the goods are cleared for home consumption. If the goods are only partially exempt from levy of basic customs duty, then the entire customs duty will be chargeable under Section 14 and 15 of the Customs Act at the value and the rates prevalent on the date of clearance. Hence, the Full Bench of the Bombay High Court took the view that if the goods are wholly exempt from basic customs duty, irrespective of whether they are exempt from the levy of additional duty wholly or partially, even if the exemption notification were withdrawn before the clearance of the goods, the crucial date for determining whether basic customs duty was leviable is the date on which the goods were imported, viz., when they entered the territorial waters of India. This view has been followed by all the other decisions mentioned above. In the decisions reported in Ramakrishna Mills Vs The Asst.Collector of Customs 1987 KLJ 248, the Division Bench of this Court also held, following the full bench decision of the Bombay High Court and other decisions, that the taxable event occurs when the vessel carrying the goods enters the territorial waters of India and if, at that point of time, the goods are wholly exempt from duty by virtue of a notification issued under Sub-section (1) of Section 25 of the Act, no duty can be levied at a subsequent stage on the expiry or withdrawal of the notification. In that case also, when the ship carrying the goods entered the territorial waters of India, there was a complete exemption for the goods. But there was no such exemption when the goods crossed the custom barriers or when the vessel reached the Port of discharge, viz., Cochin Port. The vessel reached the Cochin Port on 4.1.1979 and the goods were discharged at Cochin on the same day. The exemption notification was there only till 31.12.978 which was brought into force again on 5.1.1979. Therefore, on the date on which the vessel reached the Cochin Port and discharged the goods, there was no exemption. The Division Bench also took the view that the taxable event is the import of goods into India and that event takes place when the vessel enters the territorial waters.

 

14. But as against the above, the view taken by some of the other High Courts including another Division Bench of this Court, is, customs duties are charged on goods imported and the levy is on goods brought into a proper Port of entry with an "intent" to unload them. The act of importation implies bringing goods into Indian Port for the purpose of discharge. The act of import for the purpose of levy will not materialise until the goods have been brought into the Port of discharge and the vessel is granted entry inwards. The levy of duty has to be made with reference to that particular point of time and the rates then in force. The decisions which took this view are K. J canal Co. v. Union of India , Shewbuxari Onkarmall v. Asst. Collector of Customs and Ors. , e through Assistant Collector, Customs & Central Excise, Jullundur v. Tilak Raj Kapur, Son of Shri Amar Nath Kapur, of M/s: Kapur Trading Co., Phagwara Gate, Jullundur , M. Jamal Co. v. U.O.I.

 

, Lucas TVS, Madras v. Asst. Collector of Customs,

Madras and Ors. , Ballarpur Industries Ltd. v.

Collector , Chetankumar & Co. and Ors. v. Collector of Customs, Madurai and Ors. , Prabhat Silk & Cotton

Mills Co. Ltd. v. Union of India, New Delhi and Ors. 1992 (38) ECR 16 KLT 653 aluminium ingots consigned to the petitioner reached Cochin Port on 25.3.1981 and the bill of entry for clearance of the goods was presented on 28.3.1981. But with effect from 27.3.1981 in respect of aluminium ingots additional duty was raised from 12.5% to 40% plus 10% special excise duty and auxiliary duty became payable at 5% from 27.3.1981. It was contended that duties of customs were attracted as soon as the goods were imported, i.e. as soon as the vessel carrying the goods enters the territorial waters of this country and as the goods were admittedly brought into India prior to 27.3.1981, it was contended that the enhanced rate will not be applicable. It was also submitted that chargeability in respect of levy of customs duty will arise from the import of goods. After referring to the Supreme Court decision in In re Sea Customs Act (AIR 1963 SC 1760) the Division Bench held ([1985] 4 ECC 1 at 7, para 8):

 

It may be that in a general sense the course of import commences at the time the vessel carrying goods intended to be discharged at an Indian port enters the territorial waters for the purpose of' proceeding to the port, but the act of import for the purpose of levy does not materialise until the goods have been brought into the port of discharge and the vessel is granted 'entry inwards' and the bill of entry has been presented. The levy of duty is made with reference to that particular point of time, and the rates applicable are those then in force.

 

The Division Bench further held that in respect of goods entered for home consumption under Section 46, the rate applicable are those in force on the date on which the bill of entry is presented, or deemed to be presented. The Division Bench held that the importer is liable to pay duty at the rate in force as specified in Section 15 and "Section 15 fills up the lacuna of Section 12 which, without the aid of the former, cannot operate and they must therefore be read together." The Court further observed that the levy of duty in respect of goods imported is postulated only with reference to the time and space specified under the relevant provisions. There is no levy until the necessary documents such as import manifest, the invoice and the bill of entry are presented to the officer concerned and the vessel is granted entry inwards at the place of unloading within the port. The Division Bench stated that it is at that stage the goods are charged with duty at the rate then in force and only such goods as are legally brought into the country for the purpose of import by presenting the bill of entry on payment of proper duties, penalties, rent, interest, etc. for clearance for home consumption or by keeping them in a bonded warehouse. The importation of the goods, therefore, materialise or its process becomes complete and the goods become qualified to be cleared to merge with the mass of goods in the country only at the time and place of presentation of the bill of entry and payment of duty and other charges. The goods imported for the purpose of Sections 12 and 15 are the goods which are still not released from the stream of import but have completed the course and are awaiting release by clearance to become part of the mass of goods within the country. Chargeability and the computation of charges are both centred at that point of time and space as provided in Sections 12 and 15. According to their Lordships, any other provision to separate chargeability from computation by relating chargeability to the time of entry into the territorial waters and computing the duties with reference to the rate then in force is contrary to the legislative intent. The provision contained in Section 15 is indented to specify the time and place for chargeability. Their Lordships also referred to the Supreme Court decisions reported in Collector of Customs, Calcutta v. Dass & Co. and

 

Assistant Collector, Customs v. Dutex Clock Co. where the Supreme Court, considering the provisions of Sea Customs Act 1878, held that duty payable is as per the rate in force of the actual or deemed date of presentation of the bill of entry. Similar construction has been given by the Supreme Court i . Therefore, the court held that the duty

 

payable was the duty in force on the date of filing the bill of entry for clearance of the goods, i.e., the duty prevalent on 28.3.1981.

 

15. In the unreported decision referred to above, the question for determination was the date and hour of entry inwards for the purpose of levy of customs duty under Section 15. After referring to the ship practice and Sections 30 and 31 of the Act, the Division Bench of the Madras High Court held:

 

Now it will be perfectly in accordance with the shipping practice to understand the date of entry as the date when the entry is made by the customs officer. Though without reference to any practice, the words 'date of entry inwards of the vessel by which the goods are imported' would relate to the arrival of the vessel, having regard to the technical sense in which the words 'entry inwards' have been used, the proviso will have to be understood as referring to the entry made by the customs department.

 

It was an admitted fact in that case that the ship arrived at the outer anchorage on 22.12.1966, entered the harbour and was berthed there on 23.12.1966 and the entry inwards was made on 24.12.1966 at 12.50 P.M. Therefore, the Division Bench held that higher duty came into effect with effect from 23.12.1966 and the importer has to pay the excess duty.

 

16. The above decision of the Madras High Court has been approved by the Supreme Court in the decision reported in M/s. Bharat Surfactants (Pvt.) Ltd. , where the vessel was given "prior entry" on 4.7.1981 and the vessel arrived in the Port of Bombay on 11.7.1981. The Customs Authorities imposed customs duty on the import at the rate of 150% on the footing that the import was made on 31st July 1981, the date of entry inwards. The case of the petitioner was that the rate of duty leviable on the import should be the one ruling on 11 July 1981, viz. the date of arrival of the vessel. The validity of Section 15 of the Customs Act, 1962 was also challenged. The Supreme Court examined the requirement of Section 15 and observed that the rate of duty and tariff valuation applicable to the imported goods is governed by Section 15(1)(a). The petitioners contended that the rate of customs duty chargeable on the import of goods in India is the rate in force on the date when the vessel carrying the goods enters the territorial waters of India. The petitioners specifically pointed out that Section 12(1) declares that customs duty will be levied at the rates in force on goods imported into India and the expression 'India' is defined by Section 2(27) to include the territorial waters of India. The Supreme Court held that the rate of duty and tariff valuation had to be determined in accordance with Section 15(1) of the Customs Act. Hence, the rate and valuation had to be at the rate in force when the date of bill of entry was presented under Section 15(1)(a). In accordance with the proviso, if the bill of entry has been presented before the entry inwards of the vessel by which the goods are imported, the Bill of Entry shall be deemed to have been presented on the date of such entry inwards. The contention that the import had taken place on 11.7.1981 when the ship arrived in Bombay Port was not found favour with. The Court held that: ([1989] 23 ECC 393 at 399, para 14)

 

Accordingly, the rate of import duty and the tariff valuation shall be that in force on 31 July, 1981. The contention of the petitioners that the rate of import duty and tariff valuation will be that ruling on 11 July, 1981 cannot be sustained and is rejected.

 

It will be seen that the contention that rate of customs duty chargeable on imported goods in India is the rate in force, on the date when the vessel carrying the goods entered the territorial waters of India as defined in Section 2(27) has been rejected by Supreme Court. The Court also approved the decision of the Madras High Court in Omega Insulated Cable Co. (India) Limited v. The Collector of Customs, Madras (W.A. No. 537 of 1969) aforementioned. From the sections of the Act, we find that the customs duty is imposed on goods imported. The duty is on the goods and the dutiable event is the import. The question whether import will take place when the ship enters territorial waters of India or only when the imported goods join the land mass or when they get incorporated and mixed up with land mass or on their reaching within the limits of Port of discharge or when the goods cross the custom barriers, or when they irrevocably move into the free circulation, etc. will not be very material in deciding the question as to the imposition, levy, assessment and collection of customs duty. For the purpose of levying duty, time and place had to be fixed and that is what has been done by Sections 12 & 15 read with Customs Tariff Act. There is charge under Section 12 read with Schedule I of the Customs Tariff Act. Item 2 of Chapter 48.01/21 refers to the Newsprint. When the question of duty on newsprint arises one has necessary to go to Chapter 48.01/21 of the 1st Schedule. If there is no exemption or concession, duty as laid down thereon will have to be imposed. On expiration of the exemption or cancellation of the notification of exemption, there is no, re-introduction of the charging provision. The charging Sections are there at all times and so continue to operate. There cannot be a levy or duty without a rate which has to be determined with respect to the time and place. Hence Sections12 and 15 are complimentary to each other and they together form the charging section. So long the character of the levy as an import duty is not destroyed, there cannot be any objection in imposing the duty at any convenient stage. Parliament has chosen the stage by Section 15. In the case of goods entered for home consumption under Section 46, the rate of duty and tariff valuation has to be determined with reference to rate prevalent on the date or deemed date of the presentation of the bill of entry, in the case of goods cleared from the warehouse, the rate prevalent on the date on which goods are actually removed from warehouse and in the case of any other goods the rate prevalent on the date of payment. The charge so fixed will be certain with respect to the time and place. In made it clear that the rate of

duty, rate of exchange and tariff valuation applicable to any imported goods will be the rate and valuation in force on the date on which warehoused goods are actually removed from the warehouse.

 

17. The effect of exemption given under Section 25 is only to suspend or reduce the burden of duty imposed under Section 12 of the Act and Schedule I of the Customs Tariff Act. When there is an absolute exemption, it will be a case of nil rate. All imported goods are chargeable under Section 12 and the charge will be at nil rate when there is complete exemption. Exemption can be cancelled or rate can be enhanced at any lime before entry inwards is given in the case of goods cleared for home consumption or before removal from warehouse in the case of goods cleared from bounded warehouse. The effect of exemption has been explained in the decision in   STC 561. The court, examined the distinction between the provision contained in the statute in regard to exemption of tax and in regard to non-liability. The court held that:--

 

There is a broad distinction between the provisions contained in the statute in regard to the exemptions of tax or refund or rebate of tax on the one hand and in regard to the non-liability to tax or non-imposition of tax on the other. In the former case, but for the provisions as regards the exemptions or refund or rebate of tax, the sales or purchases would have to be included in the gross turnover of the dealer because they are prima facie liable to tax and the only thing which the dealer is entitled to in respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on which the tax can be imposed. In the latter case, the sales or purchases are exempted from taxation altogether. The Legislature cannot enact a law imposing or authorising the imposition of a tax thereupon and they are not liable to any such imposition of tax. If they are thus not liable to tax, no tax can be levied or imposed on them and they do not come within the purview of the Act at all. The very fact of their non-liability to tax is sufficient to exclude them from the calculation of the gross turnover as well as the net turnover on which sales tax can be levied or imposed.

 

The exemption notification therefore will not affect the chargeability. In quantifying the liability, the duty on exempted goods will not be taken into account so long as the exemption continues.

18. The liability in any taxable statute will arise by virtue of the charging section. The principle is well established by a series of decisions. In Chattutram Horilram Ltd. v. Commr. of Income-tax , the Supreme Court, examining the charging section, in Income Tax Act and observed:

 

The Income-tax Act is a standing piece of legislation which provides the entire machinery for the levy of income-tax. The Finance Act of each year imposes the obligation for the payment of a determinate sum for each such year calculated with reference to that machinery. As has been pointed out by the Federal Court in Chattitram v. Commissioner of Income-tax, Bihar [1947] 15 ITR 302 (quoting from the judgment of Lord Duned in Whitney v. Commissioners of Inland Revenue 1926 AC 37) there are three stages in the imposition of a tax: There is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay. The same idea has been expressed in slightly different language by Lord Romer in the judgment of the Privy Council reported in   [1938] 6 ITR 414. Chapter III of the Income-tax Act headed 'Taxable Income' contains the various provisions with reference to which taxable income is determined. The tax is leviable under Section 3 and is in respect of the total income of an assessee in the previous year.

 

Later on, the Supreme Court held that under scheme of the Income-tax Act, the Income of the assessee attracts the quality of taxability with reference to the standing provisions of the Act. But the payability and the quantification of the tax depend on the passing and the application of the annual Finance Act. Thus, income is chargeable to tax independent of the passing of the Finance Act. But until the Finance Act is passed no tax can be levied. The same principle was reiterated by the Supreme Court in Kesoram Industries & Cotton Mills Ltd. v. C.W.T. and Kalwa Devadattam v. Union of India

 

. In re. Sea Customs Act, Section 20, AIR 1963 SC 1760 (para 24), Asstt. Collector C.E. v. N.T. Co. of India Ltd. and Asstt. Collector, Calcutta v. National Tobacco

Co. of India Ltd. 1978 ELT 416 at 424. In the Customs Act the charging section is Section 12 and instead of annual Finance Act, the rate is mentioned in the Schedules of the Customs Tariff Act. Section 15 is complementary to the charging section, providing the definite date with respect to which the rate for the assessment under Section 17 has to be made. Duty had to be assessed according to the levy under Sections 12 and 15 together in the case of imported goods. Counsel for the petitioner relied on the reported case in   , to show incorporating and mixing up of property imported with mass of goods with mass of property in the case are not necessary to constitute import. The Supreme Court held in that case that the same word may mean different things in different enactments and indifferent contexts and held: ([1984] 2 ECC 142 at 159)

 

32. We have, therefore, no hesitation in coming to the conclusion that the word 'import' in Sections 51 and 53 of the Copyright Act means 'bringing into India from outside India', that it is not limited to importation for commerce only, but includes importation for transit across the country. Our interpretation, far from being inconsistent with any principle of international law, is entirely in accord with International Conventions and the Treaties between India and Nepal. And, that we think is as it should be.

 

19. All the decisions referred to in para.13 taking the view that the taxable event is the entry of the ship in the territorial waters agree that whenever there is a partial exemption, the rate applicable is the rate as on the date of removal. In other words Section 15 of the Act will apply in cases when there is only a partial exemption. The reasoning is, when exemption is given under Section 25(1) from whole of the duty, the goods are not chargeable at all. It is stated that the chargeable event is the act of importation and that means when the goods enter the territorial waters, if there is complete exemption, there is no chargeability. This reasoning did not appeal to the Supreme Court in the decision reported in  . In that case goods were unconditionally exempted from central excise duty on the date of manufacture, but were dutiable on the date of their removal. The question was whether Central Excise duty had to be paid. The Supreme Court held that excisable goods do not become non-excisable goods merely by reason of the exemption given under the notification. The Court further held that even though taxable event is the manufacture or production of excisable article, the duty can be levied and collected at a later date for administrative convenience.

 

20.  Authorities are competent to apply the rate prevalent on the date of removal of the goods, even though the production or manufacture may have been completed at a point of time when the goods were exempt from tax.

 

21. Sections 12 and 15 will have to be read together and it provides for levy of customs duty on imported goods. The rate and valuation is mentioned in Section 15. When complete exemption is given under Section 25, the rate will be nil, but that will not make Section 15 inapplicable or make the goods non-dutiable. The customs formalities will have to be gone through in respect of all goods. If the goods fall in any of the Chapters in the Customs Tariff Schedule, duty will be imposed at the rate mentioned therein unless by notified order exemptions are given from whole of the duty leviable or in part. Therefore, there cannot be any distinction based on the exemption being whole or in part.

 

22. It is argued that exemption under Section 25(1) is exemption from the charge itself, whereas exemption under Sub-section (2) mentions exemption from payment of duty. But on a closer look it can be seen that Section 25(1) empowers the Government to exempt by issue of notification the whole or any part of the customs duty leviable On any goods imported. Whether the exemption is whole or in part, the notification is under Section 25(1) of the Act. The words "leviable thereon" refers to the levy and collection at the rate mentioned in the Customs Tariff Act or any other law for the time being in force. Apart from customs duty, there can be additional duty under the Customs Tariff Act and auxiliary duty under the Finance Act. Further, Section 25 also mentions that the notification can be subject to conditions to be fulfilled before or after clearance as may be specified in the notification. This also will indicate that the exemption is not from the charge, but only from assessment and collection. The notification under Section 25(1) giving complete exemption in our opinion will not stand on a different footing and Section 15 will govern both the situations whether the notification is giving exemption from whole of duty or in part.

 

23. Section 12 mentions that duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975) or any other law for the time being in force on goods imported. "Dutiable goods" is defined in Section 2(14) to mean any goods which are chargeable to duty and on which duly has not been paid. "Imported goods" is defined in Section 2(25) as goods brought into India from a place outside India excluding goods which have been cleared for home consumption. "Importer" has been defined under Section 2(26) to mean, in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer. "India" includes the territorial waters of India. Goods brought to Indian territorial waters from a place outside India will be imported goods and duty can be levied under Section 15 on such goods, provided the goods are imported goods for the purpose of levy and collection of duty. The Customs Act makes elaborate provision for levy, assessment and collection. The valuation of goods for the purpose of assessment is mentioned in Section 14. The date for determination of the rate of duty and tariff valuation is contained in Section 15. Assessment is under Section 17. Power to grant exemption is given under Section 25. The procedure and formalities to be complied with by a person carrying the goods by vessel is dealt with in Chapter VI. Section 29 prohibits the person in charge of a vessel from permitting to call or land the vessel on any place other than a customs port or a customs airport. "Customs port" has been defined to mean any port appointed under Clause (a) of Section 7 to be customs port, for unloading imported goods or loading export goods. The person in charge of a conveyance carrying imported goods will have to give within 24 hours of arrival thereof at a customs station, an import manifest in the prescribed form to the proper officer. This is provided under Section 30. The proper officer has been defined to mean an officer of Customs who has been assigned those functions by the Board or the Collector of Customs. The person delivering the import manifest or import report as the case may be will have to make a declaration as to the truth of its contents. There is a specific prohibition under Section 31 to the master of the vessel from permitting unloading of any imported goods until an order has been given by the proper officer granting entry inwards to such vessel. No entry inwards shall be given until an import manifest has been delivered or the proper officer is satisfied that there was sufficient cause for not delivering it. It is so provided in Section 31 of the Act. Only such imported goods as specified in the import manifest or report can be unloaded in the particular customs station. The unloading and loading of goods can only be at the approved places. Section 8 gives power to the Collector of Customs to approve landing places and specify limits of customs area. "Customs area" has been defined in Section 2(11) to mean the area of a customs station including any area in which imported goods or exported goods are ordinarily kept before clearance by Customs Authorities. "Customs station" means any customs port, customs airport or land customs station. The imported goods shall not be allowed to be unloaded except under supervision of the proper officer. Thus, the Act itself makes elaborate provision for import and similar provisions are there for export also in Chapter VI.

 

24. Provisions for clearance of imported goods are mentioned in Chapter

 

7. The imported goods unloaded in a customs area shall remain in the custody of such person as approved by the Collector of Customs until they are cleared for home consumption or are warehoused or are transhipped in accordance with the provisions of Chapter VIII. The importer of the goods other than goods intended for transit or transhipment will have to make entry thereof by presenting to the proper officer a bill of entry for home consumption or warehousing in the prescribed form. Ordinarily, the bill of entry shall include all the goods mentioned in the bill of lading. Such a bill of entry can be presented at any time after delivery of the import manifest or import report. The Collector of Customs may, in special circumstances, permit a bill of entry to be presented before delivery of the import manifest or report. The bill of entry also may be presented even before the delivery of such manifest if the vessel by which the goods have been shipped for importation into India is expected to arrive within a week from the date of such presentation. The importer, while presenting the bill of entry, will have to subscribe at the foot a declaration of the truth of its contents and also will have to produce an invoice relating to the imported goods. If the proper officer is satisfied that the goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any assessed, and the charges payable under the Act in respect of the same, the proper officer will pass an order permitting clearance of the goods for home consumption. Thus, it will be seen that the act of importation is linked with the goods as well as the person. Section 49 provides for storage of imported goods in warehouse pending clearance. Similar provisions are there for export of goods. Chapters VIII and IX being for goods in transit, makes provision for warehousing.

 

25. On a reading of the entire provisions relating to import, of goods, it will be seen that the act fixes time and place for levy, assessment and collection of duty. The duty is on imported goods and the time and place are when and from where the goods are removed for home consumption.

 

26. In the decision reported in In re Sea Customs Act, Section 20(2) AIR 1963 SC 1760 the Supreme Court examined the nature of custom duty and held:

 

(26) Similarly in the case of duties of customs including export duties, though they, are levied with reference to goods, the taxable event is either the import of goods within the customs barriers or their export outside the customs barriers. They are also indirect taxes like excise and cannot, in our opinion, be equated with direct taxes on goods themselves. Now, what is the true nature of an import or export duty? Truly speaking, the imposition of an import duty, by and large, results in a condition which must be fulfilled before the goods can be brought inside the customs barriers, i.e., before they form part of the mass of goods within the country. Such a condition is imposed by way of the exercise of the power of the Union to regulate the manner and the terms on which the goods may be brought into the country from a foreign land.

 

The Supreme Court laid down that the imposition of import duty results in a condition to be fulfilled before the goods can be brought inside the custom barrier, i.e., before they form part of the mass of goods within the country, in short, before they are cleared for home consumption, i.e., the date on which the goods are "irrevocably moved into free circulation," or incorporated or mixed up with the other goods. The Supreme Court also held in Empress Mills v. Union of India that:

 

'import' is not' merely the bringing into but comprises something more i.e., 'incorporating and mixing up of the goods imported with the mass of the property' in the local area.

 

The Supreme Court, in the decision reported in In re Sea Customs Act (1878) Section 20(2) AIR 1963 SC 1760 held, while considering the nature of excise duty that:

 

Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country. It is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, that is, ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence of the taxing authority, the said tax can be levied at a convenient stage so long as the character of the impost, that is, it is a duty on the manufacture or production, is not lost. The method of collection does not affect the essence of the duty, but only relates to the machinery of collection for administrative convenience.

 

The same principle will apply to customs duty, as well. Duty is levied in respect of the import and dutiable goods are brought lo tax. When the goods enter the territorial water, the goods are only being imported. It will cease to be imported goods when its character of imported goods ceases. Therefore, for the purpose of assessment, a time will have to be fixed and the legislature fixed the time under Section

15. The levy, assessment and quantification of duty have to be completed on the basis of that date. That is what Sections 12 and 15 purport to do.

 

 

the rate of duty applicable to the imported goods had to be determined according to the law which was prevalent on the date they were actually removed from the warehouse, namely, the amended Sections 14 and 15 of the Act.

 

That was a case where goods were warehoused and part of the goods were removed. But before the entire lots of goods were cleared, the currency was devalued and Sections 14 and 15 of the Customs Act were amended. Thereafter, the importer was allowed to clear the goods only on payment of enhanced duty according to the amended provisions. The controversy related to the question whether the customs authorities were justified in applying the rate prevalent on the date of removal of the goods from the warehouse. After referring to Section 15, the Supreme Court held:

 

It is thus the clear requirement of Clause (b) of Sub-section (1) of Section 15 of the Act that the rate of duty, rate of exchange and tariff valuation applicable to any imported goods shall be the rate and valuation in force on the date on which the warehoused goods are actually removed from the warehouse.

 

The above principle has been followed by the Supreme Court in the latter decisions referred to in para 9 above.

 

27. It is contended that Section 12 is the only charging section and chargeability in respect of customs duty has to be determined with reference to the date on which the vessel enters the territorial waters. The date of bill of entry will be relevant only for ascertainment and quantification of the rate. But the duty is for bringing into India, i.e., for clearance of goods which is to be ascertained with reference to the date of presentation of the bill of entry. As the process of importation continues, till the goods are cleared for home consumption, the provision of Section 12 continues to apply. Chargeability has to be determined with reference to the importer and the imported goods and that has to be done on a reading of Sections 12 and 15, as otherwise, if chargeability has to be determined with respect to the date on which the goods enter the territorial waters, the goods which are not discharged in the port of discharge will become chargeable to duty. Customs duty or imposition of import duty, as held by the Supreme Court, results only in a condition which must be fulfilled before the goods are brought inside the customs barrier, that is before they form part of the mass of goods within the country. If that be so, the imposition under Section 12 can only be on the date on which entry inwards was given.

 

28. Hence, we hold that duty leviable under the Customs Act is the rate prevalent when entry inwards is given. Notification under Section 25(1) even if grants complete exemption, will not affect the chargeability. The charge on the goods are still there, but the liability to pay duty is temporarily suspended in whole or in part. The duty has to be assessed reading Sections 12 and 15 together. Therefore, chargeability will have to be determined with respect to the import, at the rate applicable on the date on which entry inwards is given even in the case where complete exemption from customs duly was available under Section 25(1).

 

29. This Court on 6.3.1981 passed an order on C.M.P. No. 4201/81 permitting the petitioner to clear the newsprint covered by Exts.P1 to P5 and bills of entry No. 271 arid 282 dated 24.2.1981 on the petitioner providing bank guarantee for the customs duty demanded and executing a bond in favour of the respondents to be liable for interest thereon in the event of the petitioner failing in the original petition. It was made clear that the Bank guarantee would cover not only the customs duty, but also interest stipulated in that order. Counsel for the petitioner submitted that the Supreme Court, in writ petition No. 3632 of 1981, on 20.7.1981 granted a stay of operation of the notification dated 1st March, 1991 and 12th May, 1981 on the petitioners giving an unqualified and categorical Bank Guarantee for the amount of 15% import duty payable under the impugned notification on each consignment of newsprint cleared to the Collector of Customs concerned. If the petitioner complied with the order of the Supreme Court dated 20.7.1981, needless to say the duty and the interest payable on the duly element in terms of the order on C.M.P. 4201/81 will be only upto 20.7.1981. This is so clarified.

 

30. Subject to the above, this writ petition is dismissed and we hold that the decisions referred to in para. 13 above holding that the customs duty will be the one prevalent on the date the ship enters the territorial waters are not laying down the correct law.  14 above laying down that the duly and the rate available on the date of filing of the bill of entry will be the rate applicable. 

 

On the pronouncement of the judgment, an oral application has been made by counsel for the petitioner under Article 134-A of the Constitution of India for leave to appeal to the Supreme Court. We are unable to certify under Article 134-A that the case involves any substantial question of law of general importance, which, in our opinion, needs to be decided by the Supreme Court. The oral application is accordingly dismissed.

 

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