2002 (2) TMI 129 - HC - Customs

Circular No.40/2001-Cus. and related order set aside; reassessment under Entry No.29 and Sec.151A; bonds quashed, bank guarantees released

HC held Circular No. 40/2001-Cus. and the impugned departmental order ultra vires Notification No. 17/2001-Cus., set aside them as unsustainable and ... Constitutionality and legality of Circular No. 40 of 2001-Cus. - Departmental clarification - Validity of provisional assessment and the role of Sec. 151A - Interpretation of statute - Violation of Arts. 14, 19(1)(g) and provisions of Sec. 151A of the Customs Act, 1962 - Import of Crude Palm Oil and Crude Palm Olein of non-edible grade - human consumption Or not - power to grant exemption from duty - HELD THAT:- There is no dispute between the parties as regards classification of goods. The question that falls for determination is, once the goods are classified and the taxable event has occurred, the rate of duty is fixed statutorily and some benefit of exemption is granted by way of notification by exercising powers under Sec. 25(1) of the Act, is it possible to (i) postpone the taxable event, and/or (ii) to modify the levy by issuing circular in exercise of power under Sec. 151A of the Act. As can be seen from comparison of Entry No. 29 and Entry No. 34, though there are various types of oils mentioned in Entry No. 29 only crude palm oil of edible grade is brought under Entry No. 34 and the circular is only in relation to the said item viz. crude palm oil. Thus, in effect all goods (other than edible oils) falling under different headings except 15.11 can be imported without any such condition of end-use being imposed upon an importer. Only in relation to heading No. 15.11 relating to palm oil, the condition is being imposed upon an importer to establish the end-use for claiming benefit of concessional rate of duty under the Notification No. 17. There is no logic, no rationale, much less any basis for such a treatment to only one category of oil which otherwise falls under the same classification under the Tariff Act. Once the competent authority who is technically qualified to tender opinion in relation to the technical standards prescribed under the provisions of Food Adulteration Act and Rules thereunder has tendered his opinion it would not be open to any one to take a contrary stand, unless and until such technical opinion is displaced by specific and cogent evidence in the form of another technical opinion. Merely by approaching the matter by stating that the goods could be converted into palm oil of edible grade by carrying out certain processes, the respondent No. 3 who is an officer of the department cannot displace the report of technical expert, nor can he insist that inspite of such report the importer must establish that end-use of the product shall not be other than one as regards entry in which the goods admittedly fall at the time of import. The impugned Circular No. 40 of 2001 in Paragraph 6(c) requires that the end-use certificate shall have to be produced by the importer from the Assistant/Deputy Commissioner of Central Excise having jurisdiction over the factories of soap manufacturers (or other industrial application for which the vegetable oil is claimed to have been used) and such certificate is produced before the customs authority within a period of three months or a period as may be extended by the Commissioner of Customs on being requested by the importer. It is beyond our comprehension as to how can a trader be expected to follow the goods which he has already sold off and which might change hands in series of transactions. To expect such an importer-trader to produce a certificate of end-use from an officer of Central Excise, having jurisdiction over the purchaser who is the last in the chain of transaction is casting a burden which if not impossible is impracticable to say the least. At least, such a requirement/condition cannot be read in Notification No. 17 by virtue of the impugned Circular No. 40 of 2001. It is well established in law that the circulars issued by the Board may bind the officers of the department yet the position would be different with regard to an assessee who is always entitled to contest the validity or legality of such instructions. We, therefore, hold that the impugned Circular No. 40 of 2001-Cus., dated 13-7-2001, Exhibit 'A' is contrary to Notification No. 17 of 2001-Cus., dated 1-3-2001 and cannot override the said notification. As a consequence the impugned Circular No. 40 of 2001-Cus., dated 13-7-2001, Exhibit 'A' as well as impugned order dated 20-7-2001, Exhibit 'R' are quashed and set aside. The respondents are directed to forthwith assess the goods covered by bill of entry dated 28-3-2000, Exhibit 'C' and goods covered by consignments listed in Exhibit 'H' in terms of Entry No. 29 of Table annexed to the Notification No. 17 of 2001, dated 1-3-2001 and further cancel the bonds executed by the petitioners and release the bank guarantees furnished by the petitioners at the time of provisional release of the said goods. Petition is allowed. Issues Involved1. Constitutionality and legality of Circular No. 40 of 2001-Cus.2. Applicability of concessional rate of duty under Notification No. 17 of 2001-Cus.3. Requirement of end-use certification for concessional duty benefits.4. Validity of provisional assessment and the role of Sec. 151A of the Customs Act.SummaryConstitutionality and Legality of Circular No. 40 of 2001-Cus.The petitioners challenged Circular No. 40 of 2001-Cus., dated 13-7-2001, as unconstitutional, illegal, and ultra vires Arts. 14, 19(1)(g) and the provisions of Sec. 151A of the Customs Act, 1962, and Notification No. 17 of 2001-Cus., dated 1-3-2001. The court held that the circular cannot override the notification issued u/s 25(1) of the Customs Act, which has the force of statutory levy. The circular was found to be contrary to the notification and thus quashed.Applicability of Concessional Rate of Duty under Notification No. 17 of 2001-Cus.The petitioners sought assessment of imported goods at a concessional rate of 35% duty as per Entry No. 29 of Notification No. 17 of 2001-Cus. The court noted that the notification did not prescribe any condition for the said entry, and thus, the circular imposing such conditions was invalid. The goods were directed to be assessed at the concessional rate as per the notification.Requirement of End-Use Certification for Concessional Duty BenefitsThe circular required importers to produce an end-use certificate for claiming concessional duty benefits. The court held that such a requirement could not be imposed by a circular if not specified in the notification. The imposition of end-use conditions by the circular was deemed to be an overreach of administrative authority and hence invalid.Validity of Provisional Assessment and Role of Sec. 151A of the Customs ActThe court examined whether the provisional assessment pending end-use verification was permissible. It concluded that once the taxable event of importation occurs, the charge is fastened, and assessment cannot depend on future contingencies. The court also clarified that Sec. 151A allows for instructions for uniformity in classification and levy but does not permit modifying statutory notifications.ConclusionThe court quashed Circular No. 40 of 2001-Cus. and the consequential order dated 20-7-2001, directing the respondents to assess the goods as per Entry No. 29 of Notification No. 17 of 2001-Cus., and to cancel the bonds and release the bank guarantees furnished by the petitioners. The petition was allowed, and the rule was made absolute with no order as to costs. A stay on the operation of the judgment was denied.