2020 (7) TMI 429 - HC - Customs

Court rules notification cannot be applied retroactively, declares Customs Act section arbitrary. Petitioner to be refunded excess amount.

The Court held that the notification dated 1.3.2018 could not be applied retrospectively to transactions conducted before its publication on 6.3.2018. It ... Validity of electronic publication of Gazette notifications - Commencement of a notification: date of issue/upload versus date of electronic Gazette publication - Interpretation of Section 25(4) of the Customs Act vis-a -vis Section 25(1) and (2A) - Operation of Section 8 of the Information Technology Act in relation to e-Gazette publication - Obligation to refund customs duty and IGST collected prior to official e-Gazette publicationValidity of electronic publication of Gazette notifications - Commencement of a notification: date of issue/upload versus date of electronic Gazette publication - Operation of Section 8 of the Information Technology Act in relation to e-Gazette publication - The date on which a notification issued under Section 25 becomes enforceable is the date and time when it is electronically published/printed in the Official (electronic) Gazette, and mere uploading on a Departmental website does not constitute publication for the purpose of enforceability. - HELD THAT: - The Court accepted and followed the reasoning of the Division Bench of the Delhi High Court in M.D. Overseas Ltd., which explained that Section 8 of the Information Technology Act and the government Office Memorandum adopting exclusive e-publishing establish that publication occurs when the Gazette is first published in electronic form. The Madras High Court found no basis to distinguish or displace that conclusion. The Court further agreed with the Andhra Pradesh Division Bench that an endorsement showing the time of electronic signing/printing of the Gazette is decisive for determining when the notification came into force. Consequently, the administrative act of uploading notifications on a Ministry/Department website without their being electronically printed in the e-Gazette does not make the notification enforceable from the upload date. [Paras 16, 17, 18]Notification is enforceable only from the date and time it is electronically published in the Official Gazette; uploading on a website does not suffice.Interpretation of Section 25(4) of the Customs Act vis-a -vis Section 25(1) and (2A) - Obligation to refund customs duty and IGST collected prior to official e-Gazette publication - Amendment effecting commencement from date of issue (Section 25(4)) is inconsistent with Sections 25(1) and (2A) and, as applied, rendered collection of enhanced duty prior to e-Gazette publication arbitrary; the petitioner is entitled to refund of excess duty and IGST collected before electronic publication. - HELD THAT: - Relying on the Andhra Pradesh Division Bench decision in Ruchi Soya Industries Ltd., the Court concluded that reading Section 25(4) to make a notification enforceable from its date of issue creates a conflict with the manifest requirement of publication in Sections 25(1) and (2A), producing absurdity and uncertainty. The Court found that such operation is arbitrary insofar as it permits the executive to withhold publication yet treat the notification as effective from an earlier date, thereby prejudicing importers who could not have knowledge of the change. Applying that reasoning to the facts, the High Court held the collection of enhanced customs duty and IGST prior to the e-Gazette publication was unlawful and directed refund of the excess amount deposited under protest. The Court adopted the Andhra Pradesh Division Bench's view that the statutory and constitutional objections to the amended operation of Section 25(4) warranted relief by way of refund. [Paras 18, 20]Section 25(4) as applied to make notifications effective from date of issue conflicts with Sections 25(1) and (2A); respondents directed to refund excess customs duty and IGST collected prior to e-Gazette publication.Final Conclusion: The writ petition is allowed: the Court adopts the precedents holding that a notification under Section 25 is enforceable only upon electronic publication in the Official Gazette and, applying that principle, directs the respondents to refund the excess customs duty and IGST collected before such e-Gazette publication within two months. Issues Involved:1. Validity of the Notification issued under Section 25 of the Customs Act, 1962.2. Date of enforcement of the notification.3. Payment of customs duty and Integrated Goods and Service Tax (IGST).4. Applicability of the notification to transactions prior to its publication.5. Constitutionality of Section 25(4) of the Customs Act, 1962.6. Refund of excess customs duty and IGST paid under protest.Detailed Analysis:1. Validity of the Notification issued under Section 25 of the Customs Act, 1962:The petitioner, a public limited company, challenged the Notification issued by the respondent Customs Department dated 1.3.2018 under Section 25 of the Customs Act, 1962. The petitioner argued that the notification was updated on 2.3.2018 and published in the Official Gazette on 6.3.2018. Therefore, the enhanced customs duty and IGST collected based on this notification were unlawful as the petitioner had already paid the applicable duty and IGST on 1.3.2018 and 5.3.2018, respectively.2. Date of enforcement of the notification:The petitioner contended that since the notification was published on 6.3.2018, it could not be applied to transactions carried out before this date. The respondents reassessed the customs duty and raised an additional demand, which the petitioner deposited under protest. The petitioner sought a declaration that the notification dated 1.3.2018 could not be applied retrospectively to their transactions.3. Payment of customs duty and Integrated Goods and Service Tax (IGST):The dispute centered on the payment of customs duty and IGST for the clearance of imported Crude Vegetable Oils. The petitioner argued that the enhanced duty of 54% as against the earlier 40% could not be imposed on them for transactions conducted before the publication of the notification.4. Applicability of the notification to transactions prior to its publication:The petitioner relied on the Division Bench judgment of the Delhi High Court in M.D. Overseas Ltd. v. Union of India, which held that a notification would come into effect from the date and time when it was electronically printed in the gazette, not merely from the date of its issuance. The Andhra Pradesh High Court in Ruchi Soya Industries Ltd. v. Union of India also supported this view, stating that the notification's enforceability is dependent on its publication in the Official Gazette.5. Constitutionality of Section 25(4) of the Customs Act, 1962:The petitioner challenged the vires of Sub-Section (4) of Section 25 of the Customs Act, 1962, arguing that it was inconsistent with Section 25(1) and arbitrary. Section 25(1) requires the issuance of a notification in the Official Gazette for granting or withdrawing exemptions in public interest. However, Section 25(4) states that the notification shall come into force on the date of its issue by the Central Government for publication in the Official Gazette. The petitioner argued that this provision allows the Central Government to enforce a notification without publishing it, violating Article 14 and Article 19(1)(g) of the Constitution of India.6. Refund of excess customs duty and IGST paid under protest:The Court considered the judgments of the Delhi High Court and the Andhra Pradesh High Court, which had already settled the issue in favor of the petitioner. The Court directed the respondents to refund the excess amount paid by the petitioner as enhanced duty under protest, including the IGST amount, within two months.Conclusion:The Court found no reason to differ from the reasoning given by the Delhi and Andhra Pradesh High Courts. It held that the notification dated 1.3.2018 could not be applied retrospectively to transactions conducted before its publication on 6.3.2018. The Court declared Section 25(4) of the Customs Act, 1962, as arbitrary and inconsistent with Section 25(1) and (2-A). The writ petition was allowed, and the respondents were directed to refund the excess amount collected from the petitioner.