Delhi High Court

Srs Engineering Industries vs Secretary To Government Of India, ... on 20 November, 2008

Author: Badar Durrez Ahmed

*            THE HIGH COURT OF DELHI AT NEW DELHI

%                                Judgment delivered on: 20.11.2008

+                          WP(C) 2321/1993

SRS ENGINERRING INDUSTRIES                              ......Petitioner

                                  -versus-

SECRETARY TO GOVT OF INDIA                                ..... Respondent

MINISTRY OF FINANCE

Advocates who appeared in this case:

For the Appellant          :     Mr G Umapathy
For the Respondent         :     Ms Maneesha Dhir with Mr R S Bhatnagar &
                                 Ms Preeti Dalal

CORAM :-

HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE RAJIV SHAKDHER

1. Whether the Reporters of local papers may be allowed to see the judgment ? Yes

2. To be referred to Reporters or not ? Yes

3. Whether the judgment should be reported in the Digest ? Yes

BADAR DURREZ AHMED, J (ORAL)

1. The petitioner is aggrieved by the fact that the goods imported

by it are being subjected to a higher rate of duty for no fault on its

part. The facts are that the petitioner imported inner and outer rings

of ball bearings. The goods arrived at the territorial waters of India

for berthing at the Madras port on 20.2.1989. The relevant bill of

entry under Section 46 of the Customs Act, 1962 was filed on

27.2.1989. It so happened that the vessel which brought the goods

into the territorial waters of India could not get a berthing at the

Madras port because of a strike by the port labour/employees. It is

on account of this strike that the entry inward certificate could not be

issued by the customs authorities immediately after the entry of the

vessel into the territorial waters. The entry inward certificate was

ultimately issued on 2.3.1989.

2. The difficulty that has arisen in the present case is that the

finance budget of the Central Government was introduced on

28.2.1989 and the tax proposals took effect from 1.3.1989. In the

pre-budget scenario, the petitioner was liable to pay duty to the

extent of Rs 15.73 lacs on the said goods. However, after the

introduction of the budget, w.e.f, 1.3.1989, the same goods became

exigible to duty to the extent of Rs 1.96 crores. Subsequently, the

petitioner, by virtue of Court orders, was permitted to clear the

goods on the admitted duty of Rs.15.73 lacs; which was done. The

grievance of the petitioner is that it is being foisted with the huge

liability for no fault on its part.

3. The petitioner had challenged the provisions of Sections 15

and 32 of the Customs Act, 1962 before the Supreme Court by way

of a petition under Article 32 of the Constitution of India. During

the pendency of the said writ petition, the Supreme Court had passed

an order on 11.8.1992 which inter alia reads as under:-

"Without going into the merits of the issues raised before us, it appears to us, prima facie, having regard to the peculiar circumstances of the case, the fact that the delay in berthing was not due to the fault of the petitioner or the vessel, the enormous magnitude of the increase in the rate of duty, the fact that in pursuance of the orders of this Court the goods had not been allowed to be cleared but were kept in a warehouse under the supervision of the customs authorities till recently, and also the fact that the rates of duty have been again slashed so that the petitioners would have to pay a considerably smaller amount of duty if the goods were to be cleared now, that the Government should consider the facts sympathetically and, if possible scale down the duty to a figure bearing a reasonable correlation to the value of the goods imported. A representation in this behalf may be filed by the petitioner within two weeks from today. The Government should dispose of the representation within four weeks thereafter, at any rate, not later than 30.9.1992."

Thereafter, the petitioner made a representation on 20.8.1992. The

said representation inter alia sought the issuance of an ad-hoc

exemption order under Section 25(2) of the Customs Act, 1962. It

was rejected by a reasoned order dated 28.9.1992 by the Central

Government.

4. Thereafter, another representation dated 8.10.1992 was

submitted by the petitioner with regard to the contents of Paragraphs

2 to 4 of the letter dated 28.9.1992 whereby the earlier representation

was rejected. This representation was also dealt with and a letter

dated 17.11.1992 was issued by the Department of Revenue,

Ministry of Finance, Government of India stating that the

petitioner's claim remains unsubstantiated and that there was no

merit in its representation dated 8.10.1992 necessitating re-

consideration of the decision communicated by the letter dated

28.9.1992.

5. Subsequently, the writ petition pending before the Supreme

Court being CWP No 392/1989 came to be heard and was disposed

of by a judgment dated 9.12.1992. The Supreme Court concluded

that the relevant date for fixing the rate of customs duty was

2.3.1989 and that the prevailing rate on that date would be the one

applicable for purposes of calculating the duty payable by the

petitioner. The Supreme Court also held, with regard to the

contention of the petitioner that Section 15(1) of the Customs Act,

1962 was ultra vires, that the issue was no longer a subject matter of

debate, in as much as, a Constitution Bench of the Supreme Court in

the case of R Changir Shatusha etc. v Union of India & Ors: 1989

3 SCR 356 had upheld the validity of Section 15(1). While

concluding the Court directed as under:-

"This court, as seen, by order dated August 11, 1992 directed that the respondent may consider the case sympathetically. It is open to the government to consider the same and pass and appropriate order. Subject to the above observations the writ petitions are dismissed out, however, without costs."

6. From the above extract it appears that the Supreme Court had

not been apprised of the fact that the representation filed by the

petitioner pursuant to the order dated 11.8.1992 had already been

disposed of as indicated above. However, since the Supreme Court

had directed that the respondent may consider the case

sympathetically and that it was open to the Government to consider

the same and pass appropriate order, the petitioner filed another

representation before the Central Government on 29.12.1992. In

Paragraphs 6 to 8 of this representation, for the first time, the

petitioner represented that it was not the intention of the Central

Government, as discernible from the Finance Minister's speech, that

the amendment sought to be introduced would have any revenue

significance. The petitioner's contention was that the entire exercise

of bringing in the amendments, particularly, with regard to ball

bearings falling under Chapter 84 of the Customs Tariff Act, 1975

was merely to restructure the customs duty scheme and was not

intended to bring about any new levy or higher rate of duty. It was

also contended that in this context the application of the Provisional

Collection of Taxes Act, 1931 would not have immediate effect from

the midnight of 1.3.1989. Rejection of this representation was also

communicated to the petitioner by a letter dated 13.4.1993 in the

following words:-

"The undersigned is directed to refer to your representation dt. 29.12.92, on the above subject, addressed to the Minister of State (R&E), and to say that it has not been found possible to accede to your request."

7. It is this communication that is impugned in the present writ

petition. This writ petition has been pending since 1993. In so far as

the legal position is concerned, with regard to the applicability and

interpretation of Section 15(1) of the Customs Act, 1962, the issue

stands settled by the Supreme Court judgment dated 9.12.1992. It is

only the question of sympathetic consideration by the Government

that remained to be considered in as much as the Supreme Court was

not aware of the fact that the petitioner's representation had already

been rejected. The petitioner had, as mentioned above, filed another

representation in which the said additional point was taken.

8. The learned counsel for the respondent drew our attention to

the counter affidavit filed on behalf of the respondent with regard to

the point made by the petitioner pertaining to the Provisional

Collection of Taxes Act, 1931. The relevant parts of the said

affidavit reads as under:-

"The Provisional Collection of Taxes Act 1931 provides that where a Bill to be introduced on behalf of the government provides for the increase of a duty of custom or excise, the Central Government may cause to be inserted in the Bill a declaration that it is expedient in the public interest that any provision of the Bill relating to such imposition or increase shall have immediate effect under this Act. Section 4 of the said Act enacts that a declared provision shall have the force of law immediately on the expiry of the day on which the Bill containing it is introduced. In the present case the Finance Bill of 1989 contains a declaration to the following effect : "It is hereby declared that it is expedient in the public interest that the provisions of clause 34 (except sub-Clause

(b) thereof) and clauses 35, 36, 37, 38 and 39 of this Bill

shall have immediate effect under the Provisional Collection of Taxes Act, 1931".

Therefore as the Provisional Collection of Taxes Act provides for giving immediate effect to clause 34 (a) which applies to the second schedule therefore the increase in the duty comes into effect immediately i.e. from the date of introduction of the Finance Bill, that is 28th February, 1989.

7. Further in exercise of the power conferred under sub section (1) of section 25 of the Customs Act the Central Government issued a notification No. 70/89 Customs dated 1.3.89 which amended notification No. 146/86 Customs dated 26.2.86 providing the effective rates of duty on ball bearing and roller ball bearings and parts thereof. Therefore on the basis of the abovementioned changes introduced by the Finance Bill and the notification dated 1.3.89 the Customs assessed the Bill of entry and the duty levied has rightly been levied. Further the notification is perfectly valid as the increase in duty came into effect from 28th Feb 1989 and the taxable event occurred on 2.3.89.

9. The learned counsel for the respondent, after reading the said

portion of the counter affidavit, submitted, and in our view rightly,

that the Supreme Court by virtue of its judgment dated 9.12.1992

had already fixed 2.3.1989 as the effective date on which the

applicable rate of duty was to be ascertained. That being the

position, any other submissions contrary thereto made by the

petitioner cannot be entertained or at least could not have been

entertained by the Government while considering the matter

sympathetically.

10. Consequently, this writ petition cannot be allowed in view of

the decision on merits already taken by the Supreme Court on

9.12.1992. In so far as the question of sympathetic consideration is