2019 (9) TMI 1374 - HC - Customs

Customs Act Section 25(4) Unconstitutional, Invalid Notification No.29/2018-Cus, Petitioner Entitled to Refund

The court declared Section 25(4) of the Customs Act unconstitutional due to inconsistencies with other subsections. It also invalidated Notification ... Validity of Section 25(4) of the Customs Act, 1962 (as amended) - Publication requirement of notification in the Official Gazette - Deeming provision for commencement of notifications - Section 15(1)(b) - date for determination of rate of duty for goods cleared from a warehouse - Refund of excess customs duty paid - Interpretation of taxing statutes - strict construction of charging/exemption provisions - Power of court to strike down legislative provision as arbitrary/ultra viresValidity of Section 25(4) of the Customs Act, 1962 (as amended) - Deeming provision for commencement of notifications - Interpretation of taxing statutes - strict construction of charging/exemption provisions - Power of court to strike down legislative provision as arbitrary/ultra vires - Amended sub-section (4) of Section 25 of the Customs Act is arbitrary and contrary to sub sections (1) and (2A) and is liable to be struck down. - HELD THAT: - The court examined the text and purpose of Section 25(1) and (2A), which mandate notification in the Official Gazette to bring exemptions or clarifications into effect, and contrasted them with the amended sub section (4) that deems notifications to come into force on the date of their issue for publication. Applying principles for interpretation of taxing statutes (requiring strict construction of charging/exemption provisions) and authorities addressing promulgation and attribution of knowledge, the court found the amendment created a clear inconsistency and practical absurdity - it rendered the statutory publication requirement otiose, produced uncertainty about the applicable rate of duty and frustrated the object of informing the public. Where an amendment produces such friction, confusion and arbitrariness in the working of the statute, it can be declared invalid. For these reasons the amended provision was held arbitrary and struck down.Section 25(4) (post-amendment) declared arbitrary and contrary to Section 25(1) and (2A); the amended deeming provision struck down.Publication requirement of notification in the Official Gazette - Section 15(1)(b) - date for determination of rate of duty for goods cleared from a warehouse - Deeming provision for commencement of notifications - Refund of excess customs duty paid - Notification No.29/2018-Cus (dated 01.03.2018) could not be given effect prior to its publication and signing on 06.03.2018; duty collected at the enhanced rate before publication is recoverable by the importer. - HELD THAT: - The court applied Section 15(1)(b) to identify the relevant date for determination of duty for goods cleared from a warehouse - the date of presentation of the bill of entry - and observed that the impugned notification was not published or signed and made available to the public on that date. Because the amended sub section (4) (which would deem the notification effective on issue) was held invalid, the lawful date for the notification to take effect is its publication/signing and availability. Consequently, demands and collections made at the enhanced rate prior to publication could not be sustained. The court therefore held that the petitioner, having paid duty at the enhanced rate before the notification was legally effective, was entitled to repayment of the excess amount paid over the rate applicable on the bills' presentation date.Notification held not effective for the petitioner's Bills of Entry presented on 01.03.2018 and 02.03.2018; excess customs duty collected is repayable and the petitioner entitled to refund with interest.Power of court to strike down legislative provision as arbitrary/ultra vires - Remedial exclusivity - availability of alternative statutory appeal - Availability of appellate remedies under the Customs Act does not preclude the High Court from entertaining writ jurisdiction to challenge the vires of a statutory provision. - HELD THAT: - Respondents relied on the existence of appellate remedies (Sections 128 and 129A) to argue that writ relief was premature or barred. The court observed that appellate forums cannot adjudicate on the vires of a legislative provision; therefore, the existence of an alternative statutory remedy did not oust the High Court's jurisdiction under Article 226 to strike down the arbitrary provision. Consequently the writ petitions were maintainable for constitutional challenge to the amended sub section (4).Writ petitions entertained notwithstanding alternative appellate remedies; challenge to vires of statutory provision maintainable.Final Conclusion: Writ petitions allowed: the amended sub section (4) of Section 25 of the Customs Act, 1962 was declared arbitrary and contrary to sub sections (1) and (2A); Notification No.29/2018-Cus could not be given effect for the petitioner's Bills of Entry presented on 01.03.2018 and 02.03.2018, and the excess customs duty collected from the petitioner is to be refunded with interest. Issues Involved:1. Constitutionality of Section 25(4) of the Customs Act, 1962 as amended by the Finance Act, 2016.2. Validity of Notification No.29/2018-Cus dated 01.03.2018.3. Entitlement to a refund of customs duty paid under protest.Issue-wise Detailed Analysis:1. Constitutionality of Section 25(4) of the Customs Act, 1962:The petitioner challenged the constitutionality of Section 25(4) of the Customs Act, 1962, as amended by the Finance Act, 2016, arguing it was arbitrary, illegal, and unconstitutional. The court examined whether the amended sub-section (4) of Section 25 created any confusion or contradiction with sub-sections (1) and (2A) of the same section. The court noted that sub-section (1) mandates that any notification for exemption must be published in the Official Gazette to inform the public. However, sub-section (4), as amended, stated that notifications would come into force on the date of issue for publication, which could lead to situations where the public is unaware of changes in duty rates. The court found this amendment created absurdity, confusion, and friction, making it difficult to reconcile with sub-sections (1) and (2A). Therefore, the court declared Section 25(4) as arbitrary and inconsistent with sub-sections (1) and (2A), rendering it unconstitutional.2. Validity of Notification No.29/2018-Cus dated 01.03.2018:The petitioner contended that Notification No.29/2018-Cus, which increased the customs duty on crude palm oil from 30% to 44%, was not valid as it was published in the Official Gazette only on 06.03.2018. The court examined the requirement for publication in the Official Gazette, noting that the purpose of such publication is to inform the public and ensure predictability and transparency in the law. The court referenced several judgments emphasizing the necessity of publication in the Official Gazette for a notification to take effect. The court concluded that since the notification was signed and published electronically only on 06.03.2018, it could not be deemed to have come into force on 01.03.2018. Therefore, the court held that the notification was not validly in force on the dates when the petitioner filed the Bills of Entry for clearance of the goods.3. Entitlement to a Refund of Customs Duty Paid Under Protest:The petitioner sought a refund of Rs. 2,88,16,200/- paid under protest at the enhanced rate of 44%. The court noted that the relevant date for determining the rate of duty is the date of presentation of the Bills of Entry. Since the notification increasing the duty to 44% was not validly in force on the dates of the Bills of Entry, the petitioner was liable to pay only the original rate of 30%. The court found that the respondents had collected customs duty at the enhanced rate without legal basis and directed them to refund the excess amount collected, along with interest from the date of deposit till the date of payment.Conclusion:The court allowed the writ petitions, declaring Section 25(4) of the Customs Act as unconstitutional and invalidating Notification No.29/2018-Cus dated 01.03.2018. The respondents were directed to refund the excess customs duty collected from the petitioner.