1990 (11) TMI 145 - SC - Customs

Supreme Court: Palm Kernel and Palm Seeds Distinct, Duty Determined on Removal Date

The Supreme Court held that Palm Kernel and Palm seeds are distinct commodities, and the import of Palm Kernel under Open General Licence before 27-7-1987 ... Palm Kernel not included within Palm seed for the purposes of Import Policy - canalisation of imports and import under Open General Licence (OGL) - actual removal from warehouse for determination of rate of duty under Section 15(1)(b) of the Customs Act, 1962 - no deemed or juristic 'deemed removal' where statute requires actual removal - obligation on revenue not to take advantage of its own wrongful act - cancellation of private warehouse licence/handing over of keys treated as actual removalPalm Kernel not included within Palm seed for the purposes of Import Policy - canalisation of imports and import under Open General Licence (OGL) - Whether Palm Kernel was a canalised item falling within the entry 'Palm seeds' and thus could not be imported under OGL prior to 27-7-1987. - HELD THAT: - The Court examined the distinction between 'Palm seed' and 'Palm Kernel' on the basis of trade usage and technical explanation placed on record (Central Plantation Crops Research Institute letter). The policy entry in Appendix 5 referred to 'Palm oil (all types including Palmolein and other fractions)/Palm seeds' and the Government subsequently amended the policy on 27-7-1987 to add 'all other materials from which oil can be extracted', thereby demonstrating that the earlier policy did not include Palm Kernel. The Court agreed with the High Court's conclusion that Palm Kernel and Palm seed are commercially and technically distinct and that prior to 27-7-1987 Palm Kernel was not a canalised item and therefore could be imported under OGL if shipped before canalisation. [Paras 29, 30]Palm Kernel was not included within 'Palm seed' prior to the amendment of 27-7-1987 and consequently imports of Palm Kernel shipped before that amendment could be validly made under OGL.Actual removal from warehouse for determination of rate of duty under Section 15(1)(b) of the Customs Act, 1962 - no deemed or juristic 'deemed removal' where statute requires actual removal - obligation on revenue not to take advantage of its own wrongful act - cancellation of private warehouse licence/handing over of keys treated as actual removal - What is the date for determination of the rate of customs duty for warehoused goods and whether the importer was liable to duty at the higher rates introduced after filing ex-bond bills of entry. - HELD THAT: - The Court held that Section 15(1)(b) prescribes the rate of duty applicable to goods cleared from a warehouse as the rate in force on the date on which the goods are actually removed from the warehouse. 'Actual removal' must be given its ordinary meaning and cannot be replaced by a juristic deeming that would fix an earlier date; the Legislature's intention is clear. Where the Customs authorities prevented release of goods by entertaining an erroneous or illegal demand (here, wrongful insistence on payment of redemption fine and penalty), they cannot take advantage of their own wrong to charge a higher rate of duty. The Court relied on the practice set out in the Customs Manual and the factual finding that in respect of the first lot the warehouse licence was cancelled and keys handed over on 17-12-1987 (treated as actual removal), and that identical procedure ought to have been followed when bills of entry for the balance were presented on 28-1-1988. Because the importer had complied with Section 68 formalities on 28-1-1988 and no duty was leviable that day, the Customs authorities were not entitled to demand duty at the later higher rates. [Paras 32, 36, 38, 39]Rate of duty is to be determined by the date of actual removal from the warehouse; where the importer duly presented bills of entry and the department unlawfully withheld release, the department cannot insist on a later higher duty. The appellant was entitled to deliver the goods on the basis of the rate in force on 28-1-1988.Final Conclusion: Union of India's appeal is dismissed; the appeal of M/s. Priyanka Overseas Pvt. Ltd. is allowed: Palm Kernel imported pursuant to contracts shipped before 27-7-1987 was not canalised and could be imported under OGL, and the importer is entitled to have the balance goods released at the rate of duty in force on 28-1-1988 because the department wrongfully prevented removal. The respondents are directed to refund the deposited redemption fine and penalty sums to the appellant within one month (no interest unless delayed), parties to bear their own costs. Issues Involved:1. Import Policy2. Duty Payable under the Customs Act, 1962Issue-wise Detailed Analysis:1. Import Policy:Facts and Contentions:The case involves the import of Palm Kernel by the appellant under the Open General Licence (OGL). The Government of India's Import Policy for 1985-88 canalised certain items, including Palm seeds, through the State Trading Corporation (STC) or Hindustan Vegetables Oil Corp. The appellant contended that Palm Kernel and Palm seeds are distinct items, as supported by various authorities, including the Central Plantation Crops Research Institute and M/s. Oil Palm India Limited. The Chief Controller of Imports & Exports issued a Public Notice on 27-7-1987 canalising the import of 'any other material from which oil can be extracted,' which included Palm Kernel.Judgment:The Supreme Court agreed with the High Court's view that Palm Kernel and Palm seeds are different commodities. The notification dated 27-7-1987 was an amendment to the earlier policy, indicating that Palm Kernel was not a canalised item before this date. Consequently, the import of Palm Kernel under OGL before 27-7-1987 was lawful. The Customs authorities had no legal justification to confiscate the goods or impose a redemption fine and penalty.2. Duty Payable under the Customs Act, 1962:Facts and Contentions:The appellant argued that the duty should be determined based on the date of actual removal from the warehouse, which, according to them, should be 28-1-1988 when the ex-bond bills of entry were filed. The Customs authorities contended that the duty should be based on the date the goods entered the territorial waters of India, i.e., 2nd/3rd October 1987. The duty rates changed from 105% to nil on 4-12-1987, back to 105% on 29-1-1988, and then to 245% on 1-3-1988.Judgment:The Supreme Court held that the term 'actual removal' in Section 15(1)(b) of the Customs Act means the physical removal of goods from the warehouse. The duty applicable is the rate in force on the date of actual removal. The Customs authorities' wrongful detention of goods and the imposition of redemption fines and penalties were deemed illegal. The appellant was entitled to remove the goods on 28-1-1988 when no duty was payable. The Court directed the Customs authorities to refund the amount of Rs. 50 lacs lying in deposit towards redemption fine and personal penalty within one month, without any interest, but with 15% interest per annum if not refunded within the stipulated time.Conclusion:The Supreme Court dismissed the appeal filed by the Union of India and allowed the appeal filed by the appellant, M/s. Priyanka Overseas Pvt. Ltd., directing the refund of Rs. 50 lacs and holding that no duty was payable on the goods as of 28-1-1988. The parties were directed to bear their own costs.