1981 (8) TMI 80 - HC - Customs

Customs Duty on Imported Woollen Rags Invalidated; Petitioners Liable for Demurrage Charges Under Item No. 92

MADHU WOOL SPINNING MILLS Versus UNION OF INDIA AND OTHERS

The court invalidated the customs duty imposed on the petitioners for imported woollen rags, as the exemption notification did not specify a minimum wool ... Woollen waste and rags - Trade advice - Validity - Samples - Demurrage charges - Goods exempted from duty Issues Involved:1. Validity of Customs Duty Imposition2. Reliance on Trade Advice for Duty Assessment3. Methodology and Validity of Testing Wool Content4. Liability for Demurrage Charges5. Appropriate Scale of Rates for Demurrage ChargesIssue-wise Detailed Analysis:1. Validity of Customs Duty Imposition:The petitioners argued that the exemption notification dated April 20, 1966, exempted woollen wastes and woollen rags from customs duty without stipulating a minimum wool content. The Court agreed, stating, 'The Exemption Notification does not restrict the advantage only to those woollen wastes and woollen rags containing wool of more than 50 per cent.' Therefore, the Customs authorities could not levy duty on the basis that the wool content was less than 50%.2. Reliance on Trade Advice for Duty Assessment:The petitioners contended that the Customs authorities improperly relied on trade advice to impose duty. The Court held, 'It is now well settled that the trade advice issued by the Government of India has no statutory force,' and thus, it was impermissible for the authorities to base their quasi-judicial function on such advice. The Court referenced a similar case, M/s. Nagesh Hosiery Mills v. M.R. Ramchandran, to support this view.3. Methodology and Validity of Testing Wool Content:The Customs authorities conducted three tests to determine wool content, with conflicting results. The Court found the reliance on the third core-drilling test, which showed a wool content of 26%, to be unjustified. 'Merely because the different analysis show different conclusions it is not permissible to select that conclusion which suits the authorities to levy the duty,' the Court stated. The first two tests showed wool content above 50%, and the authorities provided no valid reason to discard these results.4. Liability for Demurrage Charges:The petitioners argued they should not be liable for demurrage charges as the goods were detained due to the Customs authorities' insistence on duty payment. The Court referred to the Supreme Court decision in The Board of Trustees of the Port of Bombay v. Indian Goods Supplying Co., which held that demurrage charges are due even if the delay in clearing goods is not the importer's fault. The Court concluded that the petitioners must pay demurrage charges after May 1975 but could seek reimbursement from the Customs authorities through appropriate proceedings.5. Appropriate Scale of Rates for Demurrage Charges:The petitioners contended that demurrage charges should be computed under Item No. 85 (textiles) rather than Item No. 92 (residuary). The Court disagreed, stating, 'In my judgment, it would not be possible to hold so. What was contemplated by Item No. 85 was textile or fabrics in its pure form and not the woolen rags.' The Court cited the Mysore High Court decision in H. Anjanappa & Son v. Commissioner of Commercial Taxes, which supported the view that woollen rags do not fall under the category of textiles.Conclusion:The Court quashed the orders of the Deputy Collector and the Appellate Authority, stating that the petitioners are not liable to pay Customs duty on the imported woollen rags. However, the petitioners are liable to pay demurrage charges from June 1, 1975, onwards, as per the rates provided by Item No. 92 of the Scale of Rates. The Port Trust authorities were instructed not to dispose of the goods for four months to allow the petitioners to clear them after payment of demurrage charges.