1995 (10) TMI 45 - SC - Customs

Export Duty Rate Determination Based on Date of Entry Outwards, Not Initial Vessel

The Supreme Court held that the correct rate of export duty is based on the date of 'entry outwards' for the vessel that actually exports the goods, not ... Whether the rate of customs duty prevalent at the date of entry outwards of the vessel was to be operative? Whether the change in the rate of duty by any notification subsequent to the date of entry outwards of the vessel but before the actual arrival of the vessel in the port was to be operative? Held that:- It is well settled that the relevant rate of customs duty in connection with the export of goods would be the rate which prevailed when the `entry outwards' for the vessel which ultimately exported the goods, was effected and subsequent changes in the rate of duty before the actual arrival of the vessel would be irrelevant. In the present case the situation is slightly different. The earlier `entry outwards' for vessel S.S. Neils Maersk remained inoperative and ineffective. For that vessel Section 39 of the Act never operated. It is only for the second vessel S.S. P'Xilas that an effective `entry outwards' became operative and under Section 39 of the Act as per the said `entry outwards' the goods could be loaded on the ship and could be exported. It is this `entry outwards', therefore, which would be the relevant entry qua which the rate of customs duty for export had to be worked out. Respondent's writ petition was, therefore, liable to be dismissed and was erroneously allowed by the High Court.In the result this appeal succeeds and is allowed. The judgment and order of the High Court are set aside. Issues Involved:1. Validity of additional export duty demand.2. Applicability of the rate of export duty.3. Interpretation of relevant provisions of the Customs Act, 1962.Issue-wise Detailed Analysis:1. Validity of Additional Export Duty Demand:The respondent, engaged in the export of coir yarn, initially presented shipping bills for export through the vessel S.S. Neils Maersk in July 1966. Due to lack of space, the goods were not loaded and subsequently resubmitted for export via S.S. P'Xilas in August 1966. The export duty rate increased from 10% to 25% during this period. The customs authorities demanded an additional amount of Rs. 4,444.96 based on the higher duty rate applicable on the date of the second shipping bill. The respondent paid this amount under protest and later sought a refund, which was denied by the Assistant Collector, the Appellate Collector, and the Commissioner of Revision Applications. The Kerala High Court allowed the respondent's writ petition, directing a refund, which led to the present appeal by the customs authorities.2. Applicability of the Rate of Export Duty:The core issue revolved around the correct rate of export duty applicable when goods are exported through a different vessel after the initial attempt fails. The customs authorities argued that the duty should be based on the date of the 'entry outwards' for the vessel that actually exported the goods (S.S. P'Xilas on 9th August 1966), not the initial vessel (S.S. Neils Maersk). The Supreme Court agreed with this interpretation, noting that the effective export duty rate is determined by the date of the 'entry outwards' for the vessel that ultimately carries the goods out of Indian territorial waters.3. Interpretation of Relevant Provisions of the Customs Act, 1962:The Court examined several provisions of the Customs Act, 1962, including Sections 2(18), 2(15), 12, 16(1), 39, 50, and 51. Section 16(1) stipulates that the rate of duty is based on the date of the shipping bill presentation, with a proviso that if the shipping bill is presented before the 'entry outwards' of the vessel, the relevant date is the date of such entry. Section 39 requires the master of a vessel to permit loading only after an 'entry outwards' order is granted. The Court emphasized that the taxing event occurs when goods are taken out of India, and the effective export duty is based on the 'entry outwards' date of the vessel that actually exports the goods. The earlier 'entry outwards' for S.S. Neils Maersk was deemed ineffective as it did not result in the export of goods.Conclusion:The Supreme Court concluded that the High Court erred in its judgment. The effective rate of export duty was the rate prevalent on the date of the 'entry outwards' for the vessel S.S. P'Xilas (9th August 1966), which was 25% ad valorem. Thus, the respondent was not entitled to a refund of the additional duty paid. The appeal was allowed, the High Court's judgment was set aside, and the respondent's writ petition was dismissed. No order as to costs was made.Separate Judgments:The judgment was delivered by S.B. Majmudar, J., with B.P. Jeevan Reddy, J., concurring.