TaxTMI 
TaxTMI 
1985 (10) TMI 273
X X X X Extracts X X X X
X X X X Extracts X X X X
....artially exempt from such duty ? 4. Whether the countervailing or additional duty payable under Section 2A of the Indian Tariff Act, 1934, or under Section 3 of the Customs Tariff Act, 1975, was Customs duty referred to in the charging section, namely, Section 12 of the Customs Act, 1962 ? 2. The facts leading to the filing of these two writ petitions are stated in the order of reference and we think it unnecessary to repeat the same. Suffice to note that on the dates when the goods in question entered the "territorial waters of India" from the foreign country as also on the day they were stored in the bonded warehouse, they were wholly exempt from payment of basic Customs duty under a notification issued by the Central Government (hereinafter referred to as "Exemption Notification") in exercise of its powers under Section 25(1) of the Customs Act, 1962 (hereinafter referred to as "the Customs Act"). But, by the time these goods were sought to be removed from the bonded warehouse, the Exemption Notification was rescinded and the exemption granted thereunder was withdrawn. A Division Bench of this Court in Shawhney v. Sylvania & Laxman (hereinafter referred to as "Sylvani....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thorities and the Customs Authorities issued an order granting entry inwards for the said vessel. A bill of entry for the clearance of these goods was presented by the Respondents on 27th April 1967. The goods were actually cleared on 6th June, 1967. Accepting the contention of the Respondents that the goods were imported before 31st March 1967 upto which date the exemption granted under the said notification was operative, the Customs Authorities cleared the goods without levying any duty of customs. Later, on 23rd September, 1967 the Assistant Collector of Customs issued a notice to the Respondents to show cause why customs duty amounting to Rs. 1,40,558.75 due from them should not be levied. This demand was made on the footing that on the day when the bill of entry was presented and the goods were cleared, the exemption notification was no longer in force and the goods were chargeable to duties of customs. The Court held that as the taxable event occurs when the goods are imported into the territorial waters of India the chargeability of the goods to customs duty ha to be determined with reference to that date. As that event took place much prior to 31st March 1967 when the exem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ented is that in order to work out the rate of duty on any particular date, the basic requirement is that the goods are dutiable in the first instance. In other words, there must be chargeability to duty on the date of importation. Section 12 is the only charging section, which says that subject to the provisions of this Act, viz., the Customs Act, the rates of duty will be those mentioned in the Indian Tariff Act, 1934. Since the Tariff Act is subject to the provisions of the Customs Act, one has to read the Notification under Section 25(1) as on the date of actual importation, viz., 29th March, 1967. On that date there was total exemption, which means that the glass tubes in question were not dutiable goods at all on March 29, 1967, when actually imported. If that is so, can we apply the subsequent rate which is now prevalent after the 1st April, 1967, to these goods. The learned Judges pointed out that this cannot be done. The goods which were not liable to pay duty at all when imported cannot be subjected to the duty by the procedure to be adopted under Section 15 for clearance." (Emphasis supplied by us). On the basis of the judgment in Sylvania Laxman's case when it was ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....argues that the two Division Benches have not expressed divergent views and therefore reference to the Full Bench is not called for. We agree with Mr. Cooper that the Division Bench in Synthetics' case did not disagree with the principle laid down in Sylvania Laxman's case. In fact, in arriving at the conclusion that although importation into India is complete on the date when the goods enter territorial waters, if they are not totally exempt from duty at that point of time and some customs duty is chargeable, those goods would be liable to the levy of customs duty at the rates in force on the dates mentioned in Section 15 of the Customs Act. In the later case the principle enunciated in Sylvania Laxman's case that the chargeability to customs duty under Section 12 (1) is to be determined with reference to the date on which the goods enter territorial waters of India was accepted. On that footing the Division Bench found that on the date when the goods were imported into territorial waters, were not wholly exempt from duty Customs duty but were chargeable to duty and therefore customs duty payable was to be computed and quantified at the rate prevalent on the dates mentioned in Sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a Laxman's case) would require reconsideration." (Emphasis supplied) That they were not in entire agreement with the view expressed in Sylvania Laxman's case and that they were of the view that it required reconsideration, in the light of the Supreme Court decisions in Empress Mills v. Municipal Committee, Wardha (AIR 1958 SC 341). In Re: Sea Customs Act (AIR 1963 SC 1760); Prabhal Cotton and Silk Mills v. Union of India (1982 E.L.T. 203); Shri Ramlinga Mills v. Assistant Collector of Customs (1983 E.L.T. 65) and Union of India & Ors. v. Khalil (1970 Cr. L.J. 417) is further clear from what is stated in paragraph 20 of the order of reference extracted below : ".........the decision in Sylvania's case (77 Bom. L.R. 380) followed by this Court in Synthetics case (1981 E.L.T. 414) is primarily based on the view that the event of importation takes place when the goods cross territorial waters and not when they come on the land and are either cleared from the warehouse or the bill of entry presented as required under Section 15(1) of the Customs Act, 1962" Inasmuch as the Bench in referring the case has observed that the view taken in Sylvania Laxman's case has to be reconsi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s leviable." Once goods are exempted from levy of duty under sub-section (I) of section 25, question of payment of duty does not arise and no special order granting exemption from payment is necessary. Only where goods are not exempt under sub-section (1) of section 25 and the Central Government having regard to special circumstances deems it necessary exempt from payment of duty on goods on which duty is leviable would it be necessary to make a special order under sub-section (2) of section 25. Once exemption is granted under section 25(1) it would mean that as envisaged by section 12 of Customs Act, the exemption notification "provides otherwise" and the goods are not chargeable to duty under section 12. Thus section 25(1) of the Customs Act empowers the Central Government to exempt goods from levy of duty generally and under section 25(2) from payment of duty by a special order. If as provided under section 25(1) exemption is granted from the whole of the duty leviable on certain goods, customs duty itself is not leviable on such imported goods, no question of calculating the customs duty leviable at any particular rate specified either under the Customs Tariff Act or any other ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on clause' enacting that certain words when found in the Act are to be understood as regards that Act in a certain sense, or are to include certain things which, but for the interpretation clause, they would not include ................... *            *            *            * An interpretation clause which extends the meaning of a word does not take away its ordinary meaning........................... An interpretation clause of this kind is not meant to prevent the word receiving its ordinary, popular and natural sense whenever that would be properly applicable, but to enable the word as used in the Act when there is nothing in the context or the subject-matter to the contrary, to be applied to some things to which it would not ordinarily be applicable.** **" 10. It is true that in ascertaining the intention of the legislature in using a particular word, how the word is commonly understood must undoubtedly be given weight. If the word is used with reference to or in the context of a particular trade o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nition by using the expression "unless the subject or context otherwise requires" or some such qualifying words. As laid down in Meux v. Jacobs (1875) LR 7 HL 481 at page 493, the interpretation clause should not be understood as requiring extended meaning in all circumstances, for the definition clause itself says "unless the context otherwise require". However, even where such an expression is employed it is only where the contrary intention appears from the context that the definition clause may be given a go by and the word understood as is understood in common parlance. But then, as stated above, when the definition clause employs the word "includes" and enjoins that "unless the context requires otherwise, it shall include" as stated therein, the Court cannot, unless there are compelling circumstances and reasons having regard to the context in which the word defined is used, the interpretation clause cannot give a go by to the definition. The effort of the Court should be to give effect to the meaning intended by the Parliament as made clear by defining the words employed by it in the enactment "unless the context otherwise requires". 12. Mr. Talyarkhan, learned Couns....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovisions of the Act to any intending insurer or quondam insurer." In this decision their Lordships were concerned with a case where the opening words of the definition clause declared "unless there is anything repugnant in the subject or context". Even there it was laid down that the meaning to be given to a word is that given in the definition clause itself, unless there is anything repugnant in the subject or context. 13. Reliance was also placed on the judgment of the Supreme Court in Commissioner of Gift Tax, Madras v. Getty Chettiar (AIR 1971 SC 2410 at page 2413) in which the Supreme Court took a view similar to the one taken in Vanguard Fire and General Insurance Company's case (AIR 1960 SC 972). Thus as discussed above, ordinarily, the special meaning given to the interpretation clause should be given effect to. Where a word is defined in a Statute to mean a certain thing, wherever that word is used in that statute, it shall mean what is stated in the definition unless the context otherwise requires. 14. In our view having regard to the definition of the word "India" under the Customs Act with which we are presently concerned which is an inclusive defini....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lause is preceded by the words 'unless the context otherwise requires', normally the definition given in the section should be applied and given effect to but this normal rule may, however, be departed from it there be something in the context to show that definition should not be applied............ it would thus appear that ordinarily one has to adhere to the definition and if it is an expansive definition the same should be adhered to............"(Emphasis supplied). In our view where the definition itself says that a particular word shall mean or a particular word shall include certain things and such a clause is preceded by the expression "unless the context otherwise requires", it shall mean or include those things or situations, it is not open to the Court to give any other meaning to those words except when the context requires otherwise. The expression "unless the context otherwise requires" excludes all situations except those for compelling reasons the intended definition has to be abandoned. Section 2 directs that in this Act, "unless the context otherwise requires", the words occurring in the Act shall be understood as defined therein. In other words, "India" common....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the land mass of India. In other words, could it be said that there is no "impact" of goods into India when they enter the territorial waters but these would be import only after they are unloaded on the land mass of India. 15. Mr. Dalal, learned Counsel appearing for the Customs authorities, contends that not only definitions of the words, India and Import into India but also the various connotations of the word "levied" occurring in section 12 must be kept in view in deciding when the "import into India" occurs. According to him, the word "levied" in Section 12 of the Customs Act which declares that duties of customs shall be levied, in the context means not merely chargeability but also quantification of the duty, that is the valuation of goods for the purpose of levy of duty, the rate at which the duty should be levied and also recovery of such duty. According to him, the expression "imported into India" occurring in Section 12 must therefore be interpreted not only keeping in view when the goods became chargeable to duty but also the dates with reference to which the goods are to be valued and the event with reference to which the rate at which duty is to be levied ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that Section 14 by itself does not lay down when or what goods are chargeable to customs duty. It only deals with valuation of the goods imported which are chargeable to customs duty. If they are chargeable to customs duty and are chargeable by reference to their value, then the value has to be determined as laid down in Section 14. It does not lay down at what point of time the goods became imported goods. Whether they are chargeable at all to duty and if so, when they become chargeable must be determined with reference to the other provisions of the Customs Act. That other provisions is only Section 12. 18. So too section 15 only lays down the date for determination of rate of duty and tariff valuation of imported goods. The expression "the rate of duty and tariff valuation, if any, applicable" occurring in section 15 is significant. Section 15 itself envisages that in respect of certain goods, no rate of duty or tariff valuation may be applicable. The customs duty would be payable only if they are chargeable to duty. What is enjoined by Section 15 would become relevant only if goods are chargeable to duty. Only then for the purpose of determining the amount of duty paya....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essment during that year would have arisen in that case." 21. In Kalwas Devadattam v. Union of India [49 ITR 165 at page 171 (SC)] Shah, J., speaking for the Court held (page 784) : "Under the Indian Income-tax Act liability to pay income-tax arises on the accrual of the income, and not from the computation made by the taxing authorities in the course of assessment proceedings ; it arises at a point of time not later than the close of the year of account." In this behalf reference is made to the discussion in the Supreme Court in Re Sea Customs Act (AIR 1963 SC 1760) regarding duties of Excise and Customs wherein it was declared : ".........subject always to the legislative competence of the taxing authority, the said tax can be levied at a convenient stage so long as the character of the impost (that is, it is a duty on the manufacture or production) is not lost. The method of collection does not affect the essence of the duty, but only relates, to the machinery of collection for administrative convenience." That decision further laid down (at page 1775) : "Similarly in the case of duties of customs including export duties though they are levied with referen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the scheme of the Act, as to when the taxable event occurs. 22. Strong reliance is placed by Mr. Dalal, learned counsel for Customs, on the decision of the Supreme Court in Re Sea Customs Act (AIR 1963 SC 1760) to contend that the taxable event occurs in the case of import of goods into India only when the stage for paying the import duty is reached and without paying which the goods cannot be allowed to cross the customs barrier: "in the case of duties of customs including export duties though they are levied with reference to goods, the taxable event is either the import of goods within the customs barriers or their export outside the customs barriers............... Now, what is the true matter of an import or export duty ? Truly speaking, the imposition of an import duty, by and large, results in a condition which must be fulfilled before the goods can be brought inside the customs barriers, i.e., before they form part of the mass of goods within the country. Such a condition is imposed by way of exercise of the power of the Union to regulate the manner and terms on which the goods may be brought into the country from a foreign land. Similarly an export duty is a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t in order to be an excise duty (a) the levy must be upon 'goods', and (b) the taxable event must be the manufacture or production of goods. Further the levy need not be. imposed at the stage of production or manufacture but may be imposed later." 25. The same principle is reiterated in Union of India v. Bombay Tyre International Ltd. [AIR 1984 SC 420 = 1983 E.L.T. 1896 (S.C.)]. Dealing with the question, whether certain heads of post-manufacturing expenses are also included in the assessment of duty under the statute the Supreme Court declared "the stage of collection need not in point of time synchronize with the completion of the manufacturing process.........the point of time of collection is to be located where the statute declares it. Collection of duty and levy of duty are two different things." The Supreme Court further observed : ".........while the nature of an excise is indicated by the fact that it is imposed in respect of the manufacture or production of an article, the point at which it is collected is not determined by the point of time when its manufacture is completed but will rest on consideration of administrative convenience, and that generally it ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it is not limited to importation for commerce only but includes importation for transit across the country......... interpretation far from being inconsistent with any principle of International Law, is entirely in accord with International Conventions and the Treaties between India and Nepal." Keeping this in view we may examine the several theories that were propounded as to when goods brought from a foreign country become imported goods. One such theory is the theory of original package. The Supreme Court in State of Bombay v. F.H. Balsara (AIR 151 SC 318), observed that according to the doctrine of original package evolved in America which doctrine was applied not only to commodities imported from foreign countries but also to commodities which were the subject of inter-state commerce, importation was not complete so long as the goods were in the original package and hence the State had no power to tax imports until the original package was broken or there was one sale while the goods were still in the original package. The Supreme Court declared that having regard to scheme of legislation that has been outlined in the Government of India Act and in the present Constitution,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nbsp; the Supreme Court merely declared that imposition of an import duty "results in a condition which must be fulfilled before the goods can be brought inside the customs barriers". It did not lay down that import itself occurred at that point of time or that they become imported goods only when they were sought to be removed for home consumption or formed part of the goods on the land mass of the country. The Supreme Court merely declared that payment of duty is a condition precedent for bringing the goods inside the custom barrier. It did not determine at what point of time or at what point of time prior to the goods reaching the customs barriers or prior to the goods being cleared for home consumption after crossing the customs barriers, became imported goods. 31. Another contention raised is that unless the goods are brought to port there is no import. Very strong reliance was placed by Mr. Dalal learned Counsel for this contention upon the decision of the High Court of Australia in Wllson v. Chambers & Co. Pvt. Ltd. (38 C.L.R. 131). That was a case in which a certain quantity of paint was shipped from England to a consignee in Melbourne, Sydney, Australia. The paint ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ars as duty payable by the appellants on raw sugar imported by them from Hamburg into Canada in the s.s. Cynthiana in which their Lordships were required to consider two related questions and they were :- (a) Was the sugar "imported into Canada within the meaning of the Customs Tariff Act before May 3, 1895, on which day the statute 58 and 59 Vict. C. 23, imposing the said duty, came into force ? (b) Does the fact that an entry of the said sugar was, under the circumstances detailed, made at the Customs on May 2, 1895, as if the said sugar were free from duty, in the circumstances of this case prevent the Crown from subsequently claiming the duty ? The undisputed fact in that case was that when the entry of sugar was made on May 2, 1895, it was wholly exempt from duty, but the very next day, before the sugar was cleared, it was subject to duty. The question with which we are now concerned squarely arose for decision in that case and the question was, what is the date of importation of the sugar. The Court observed : "The real question............is whether the sugar was 'imported' within the meaning of Section 4 of the Tariff Act, 1894, before or after May 3, because it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....heir Lordships have just indicated, and the words appear to them to mean when the goods arc landed and delivered to the importer or to his order, or when they are taken out of warehouse, if instead of being delivered they have been placed in bond. (4) The result is that, in the opinion of their Lordships, the words 'imported into Canada' must, in order to give any rational sense to the clause, mean imported at the port of discharge, and cannot be used in the sense attributed to the word 'imported' by the appellants, in accordance with the construction placed by them on the definition in Section 150 of the Customs Act. (5) If the goods were 'imported', within the meaning of the Tariff Act, on or after May 3, (in other words) if the duty became payable after that date, the Crown was entitled to it. But their Lordships do not find it necessary to adopt the appellants' constructions of Section 150. Every clause of a statute should be construed with reference to the context and the other clauses of the Act, so as, so far as possible, to make a consistent enactment of the whole statute or series of statutes relating to the subject-matter." Dismissing the appeal the Court held (Page....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me consumption, how do they become imported goods ? After all the goods sought to be removed for home consumption would have by then not only entered the territorial waters of India but would have been unloaded on to the land mass of India. But then, even according to the learned Counsel for the Customs when the goods are brought to the land mass they do become imported goods. It is common knowledge, goods unloaded on the land mass are not immediately cleared for home consumption. The Customs Act itself gives two options to an Importer. The importer may clear the goods forthwith or lodge them in a warehouse for clearance from time to time. In the latter event when do they become imported goods ? Is it only when they are cleared from the warehouse for home consumption. The goods lodged in the warehouse need not be cleared in one lot; they could be cleared in instalments. Even in respect of goods unloaded on the land mass on the same day or even at the same time, Section 15 of the Customs Act clearly envisages different rates of duties with reference to the date of clearance. Then there will be different dates of importation for the goods unloaded on the land mass on the same day but....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cleared for home consumption. In fact, the moment they are cleared for home consumption and they become part of the goods on the land mass, they cease to be imported goods for the purpose of levy of customs duty ; of course, they are cleared for home consumption only on payment of duty. Even on a reading of Section 12 in the context of the scheme of the Customs Act and in particular in conjunction with Sections 14 and 15, we find nothing which requires a different meaning to be given to the expression "imported into India". We, therefore, hold that goods from outside India, no sooner than they enter the "territorial waters of India" become "goods imported into India" and acquire the character of imported goods. 36. That they become imported goods no sooner than they enter the territorial waters of India would be further clear from the several provisions of the Customs Act, to which we will presently refer. 37. As rightly contended, the provisions of an Act have to be construed in the light of the scheme of the Act more especially if a particular provision is susceptible of several interpretations. In fact, both the learned Counsel far from disputing this position r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e imported goods on their entering the territorial waters of India. There is nothing to indicate that the goods did not become imported goods even after entering the territorial waters until the ship called at the port of unloading. 39. Section 21 makes provision for goods derelict, wreck etc. It reads as follows : "21. Goods derelict, wreck, etc. - All goods, derelict, jetsam, flotsam and wreck brought or coming into India, shall be dealt with as if they were imported into India, unless it be shown to the satisfaction of the proper officer that they are entitled to be admitted duty-free under this Act." When the legislature declared that such goods are liable to duty, it could be only on the footing that they become imported goods no sooner than they entered the territorial waters and before they are brought on to the land mass and cleared for home consumption. So too, Section 22, which makes provision for abatement of duty on damaged or deteriorated goods, could have been enacted only on the basis that the goods become imported goods and such goods were damaged or deteriorated during or after unloading but before clearance. Such a provision would not have been neces....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vision for transit of goods in the same vessel or aircraft in the following terms: "53. Transit of goods in same vessel or aircraft. - Subject to the provisions of Sec. 11, any goods imported in a vessel or aircraft and mentioned in the import manifest as for transit in the same vessel or aircraft to any port or airport outside India or any customs port or customs airport may be allowed to be so transited without payment of duty." If on catering the territorial waters of India the goods did not become imported goods and would not so become until unloaded on the land mass and were not subject to levy of customs duty under Section 12, such a provision would have been wholly unnecessary. The legislature obviously intended, that primarily goods brought from outside the country, no sooner than they entered the territorial waters of India were to be regarded as "imported goods" and duty was leviable thereon, but thought it advisable to exempt goods which are not intended to be unloaded on the land mass and are merely in transit for being unloaded elsewhere and accordingly made provisions exempting them from payment of duty. It is thus manifest that under the Act goods on entering t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of imported goods they become liable to duty no sooner than they are imported. While in the case of import the duty is attracted if the goods become imported goods, in the case of goods sought to be exported, duty has to be paid when they are still "export" goods and not after they are exported. This distinction has been made and maintained throughout the Customs Act. An examination of these provisions further fortifies our conclusion that the goods become imported goods no sooner than they are brought from outside the country into the territorial waters of India and the taxable event is not postponed till a bill of entry is filed or till they are sought to be cleared for home consumption. 42. What follows from the above discussion is that when goods from a place outside India are brought to India as defined under Section 2 (27) of the Customs Act, that is, into the territorial waters of India, they become "imported goods". They continue to be imported goods until cleared for home consumption. The taxable event occurs upon the goods entering the territorial waters of India. If at that point of time, the imported goods are chargeable to duty, then the duty has to be asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at is, when the goods enter territorial waters of India, as those goods continue to be chargeable to duty and the importer is only exempted from paying it, if any the time they are removed for home consumption that notification is withdrawn, duty would be payable at the time of removal of goods as laid down in Sections 14 and 15 read with Section 12. If the goods are not chargeable to customs duty in view of any of the provisions of the Customs Act or the provisions of any other law, then neither their valuation under Section 14 nor calculation of the duty payable at the rates as mentioned in Section 15 of the Customs Act would be required. Same would be the position when a notification wholly exempting the goods from levy of customs duty is issued under sub-section (1) of Section 25 of the Act. The observation in the order of reference that chargeability of the goods to customs duty arises on account of the goods being listed in the Schedule ignores the opening words "Except as otherwise provided in this Act or any other law for the time being in force" occurring in Section 12. We are unable to agree with that observation. If on account of exemption granted under Section 25 (1) th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... duty. What is levied under Section 12 is wholly exempted in exercise of the power under Section 25. The fact that the goods are still shown in the Schedule as chargeable under the Customs Tariff Act does not render the goods subject to levy of duty. Only if the goods are chargeable to duty under the Customs Act, the duty will be at the rates specified in the Schedule to the Customs Tariff Act. But, inasmuch as where the notification under Section 25(1) exempts imported goods covered by the notification from the levy of whole of the duty leviable thereon it cannot be said that "nil" duty is chargeable on these goods. The Schedule to the Customs Tariff Act ceases to apply to the Customs Act, no sooner than the notification under Section 25(1) is issued. The link between the Customs Act and the Customs Tariff Act established by Section 12 is severed by the notification under Section 25(1) and the Schedule to the Customs Tariff Act ceases to apply and no notion of "nil" duty can be imported where the goods are wholly exempt from duty under the notification. The metaphysical concept of "nil duty" cannot be invoked so as to subject to duty goods wholly exempt from levy when the taxable ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of India (1982 E.L.T. 203); Shri Ramlinga Mills Private Ltd. and others v. Assistant Collector of Customs and another (1983 E.L.T. 65) (Kerala) and Union of India v. K. Kecherim (1970 Cri. L.J. 417). We, therefore, proceed to consider if these and some other decisions relied upon for the respondents, in any way militate against the view we have taken. 48. The first Supreme Court case, Express Mills v. Municipal Committee, Wardha (AIR 1958 S.C. 341) dealt with terminal tax on goods imported into and exported from the Municipal limits of Wardha imposed under the C.P. and Berar Municipalities Act. The question that arose for consideration was whether the goods in transit that were neither loaded or unloaded within the Municipal Limits attracted terminal tax under Section 66(l)(o). In that context, the Court held : "By giving to the words 'imported into or exported from' their derivative meaning without any reference to the ordinary connotation of these words as used in the commercial sense, the decided cases in India have ascribed too general a meaning to these words which it appears from the setting, context and history of the clause was not intended. The effect of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 'import' were defined in a particular statute the general meaning of the words 'import' or 'importation' drawn by the Supreme Court, in the absence of such a definition would not apply. Referring to the cases of Nek Mohammad v. Emperor [AIR 1936 All. 83(G)] and Hardwarimal Harnath DAS v. Municipal Board, Dehradun (AIR 1939 All. 736(H), both of which related to goods in transit, the Supreme Court itself observed : "The word 'import' was there given the meaning 'carried into'. But the decision was based on the definitions given in the Statutory Rules to the word 'import' which was 'bringing into the terminal tax limits from outside those limits'. In none of these cases was the argument as to the qualification stemming from the use of the words 'terminal tax' considered nor was the signification of the word 'terminal' as a prefix to the word tax discussed." This makes it abundantly clear that where the words 'import' and 'importation' are defined, they have to be given full effect. When the word 'India' is also defined under the Customs Act, in deciding when the goods could be deemed to have been imported into India, we cannot ignore this definition and apply the general notio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the expression 'imported into' which forms a part of the expression 'imported into or exported from India' cannot carry any other meaning; the expression 'India' must mean land mass of India whether it is in the context of 'exportation from India' or importation into India of goods within the meaning of dutiable goods in the context of Section 12 (1) of the Act." The Division Bench further observed (Page 210) ; ".........To construe the expression 'goods exported from India' to mean goods exported from land mass of India on the one hand and to interpret the expression following on its heels the 'goods imported into India' to mean goods imported into territorial waters of India and not the land mass of India would introduce an anachronism and so incongruity." In our view, this reasoning ignores the distinction made by the Customs Act itself between the "Imported goods" and "export" goods. Under the Customs Act, while "import" goods do not attract duty until they are "imported goods", goods sought to be exported attract duty when they are "export" goods and are sought to be taken across the customs barrier. There is nothing inconsistent in so reading the two expressions whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of the goods has to be so made, we do not see how it necessarily leads to the conclusion that the goods do not become goods "imported" into India when they enter the territorial waters of India and would become imported goods only when they are placed on the land mass. We are unable to see what difficulty there is in accepting that chargeability should be with reference to the entry into the territorial waters and the valuation of goods should be made with reference to the point of time when they are so placed that they can form a part of the mass of the goods in the country. Referring to Sections 12, 14 and 15, which we have discussed above, the Division Bench observed (Page 212) : "If the argument of the counsel for the petitioners were right, customs duty would be payable even if the ship were to stray into the territorial waters of India for it would amount to importation of goods into India. So also customs duty would be payable even when the ship which enters the territorial waters changes its course, turns back and leave the territorial waters before landing the goods on the land mass. Such a construction leading to absurdity should be avoided as observed in Mercy Do....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... behalf as directed under Section 14(1)(b) would be the assessable value of the imported goods for the purpose of determining the customs duty payable. There is yet a third mode of ascertaining the value of the goods and that is under Section 14 (2) under which the Government is vested with the power to fix by notification, tariff values for any class of imported goods or export goods having regard to the' trend of value of such or like goods. Thus the valuation of goods for the purpose of assessment of duty is the price at which such goods or the like are ordinarily sold, or offered for sale, for delivery at the time and place of importation in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale. That is only for the purpose of valuation of goods and not for determining the chargeability of goods to duty. Since valuation has to be made under Section 14 full effect has to be given to what is contained in that section. If in international trade the price has to be ascertained with reference to the time and place when the goods are so placed as to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... at which they were chargeable was in question. Are they to be charged at the rate prevalent on the date they were imported or at the rate in force when they were sought to be removed from the warehouse? As discussed above, on the day the goods were imported, that is, when they ent- ered the territorial waters of India, the taxable event occurred and if on that day the goods were wholly exempt from duty, the question of calculating the rate does not arise at all and, therefore, the further question whether the rate prevalent on the date of importation, i.e. when they entered the territorial waters or when they are sought to be removed from the warehouse for home consumption also does not arise. There is nothing in this decision which warrants a different conclusion than the one we have reached in respect of goods which were totally exempt from duty on the date they were imported into India. 52. In K. Jamel Co. v. union of India (1981 Excise Law Times 162) a learned Single Judge of the Madras High Court, in a very short judgment in which there is not much of discussion, was of the view that the definition of "import" as contained in Section 2(23) of the Customs Act stating :....
X X X X Extracts X X X X
X X X X Extracts X X X X
....preme Court in M/s. Prakash Cotton Mills (P) Ltd. v. B. Sen (AIR 1979 S.C. 675) all of which we have discussed above. In this case too, the meaning of the expression "import into India" has not been considered in the light of the definitions contained in Section 2(23), 2(25) and 2(27) of the Customs Act. It was observed : "............to give the words their literal meaning would lead to an absurdity because a person may bring goods into India by a ship and may not clear the goods in India and may re-export it. In that case, would Customs duty be chargeable as soon as the vessel arrives in India ? Take another case of an Aircraft landing in any Air Port in this country in course of transit. Would Customs Duty be chargeable for any goods being carried in the Aircraft although no Customs clearance is sought for ?" In so observing, we must respectfully note that the provisions contained in Chapter VIII relating to goods in transit were wholly lost sight of. Specific provision is made in respect of such goods and they are declared not liable for customs duty and in our opinion that was necessitated only because under Section 12 all goods brought from foreign countries on entering....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... felt that it was otherwise provided by Sections 14 and 15 of the Customs Act. With great respect, we are unable to share this view. Sachar, J. further observed (Page 1697): "............it would be wrong to read that Section 15 covers only the quantification but the date with reference to which quantification is to be done could relate back to the earlier period of time when the ship had entered the territorial waters. Statute is clear that irrespective of the date when ship enters territorial waters, calculation for the purpose of rate of duty must be done with reference to the date mentioned in Section 15 in various circumstances." These observations, in our view, assume that chargeability to duty and quantification of duty payable under the Customs Act should be with reference to the same date. For this assumption there is no justification when Section 15 itself gives an indication that even in regard to goods imported on the same day (whether importation means, importation into the territorial waters or on to the land mass) the rate of duty will have to be determined under section 15 with reference to different dates on which they are cleared for home consumption whet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of octroi duty and the opinion of the Supreme Court In Re: Sea Customs Act's case (AIR 1963 S.C. 1760) as explained by the Supreme Court, was applicable as regards chargeability of goods to the customs duty also and that import would be complete only when there is "incorporating and mixing up the goods imported with the mass of property in the local area." It may be recalled that the Sea Customs Act, 1878 did not define the words "import" or "India" occurring in Section 20 of that Act with which the Supreme Court was mainly concerned and with reference to which the opinion was expressed in. In Re: Sea Customs Act. It was concerned with the goods imported or exported by sea into or from any "customs port" from or to any foreign port. The expression "foreign port" was defined in Section 3(e) of the Sea Customs Act as meaning any place not within the territory of India. Section 20 of the Sea Customs Act was recast and amended by Act XLV of 1951 and the Supreme Court observed that sub-section (2) thereof has borrowed most of its words from the provisions of clause (2) of Art. 259. In the absence of any special definition of the word "import" and in the face of Section 20 which dealt wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rated goods. We are unable to comprehend how the learned Judge could hold that it supports the contention of the Customs authorities. It is precisely because such goods constitute imported goods, they became liable to duty even though damaged and not cleared for home consumption, the legislature thought it inequitable to impose duty on such goods and provided for abatement of duty. If the goods were not liable to payment of duty until they are cleared, provision for abatement of duty would not have been necessary. Such a provision was made in Section 22 only on the footing that even before they are cleared for home consumption these goods became liable to duty. Section 22, as discussed above, is a provision clearly disclosing the legislative intent that the goods which have entered the territorial waters become imported goods and though not cleared for home consumption would be liable to duty. We are, therefore, unable to agree with the view taken by Sachar, J. that import is when the goods are unloaded from the ship and so placed as to form part of the mass of goods in the country for consumption. The compelling reason for reaching that conclusion according to the learned Judge is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at 'Nil Rate' and when that notification is withdrawn or modified and a certain rate is fixed it would be chargeable to duty at that rate. We are unable to agree with either of these propositions. These observations overlook the distinction pointed out by us earlier between an exemption under sub-section (1) of Section 25 which exempts goods from the levy of duty itself, and the exemption under sub-section (2) which only exempts from payment of duty. In the former case goods cease to be dutiable goods under Section 12 and in the latter case while the goods remain dutiable under Section 12, they are only exempt from payment of duty. As discussed above, the effect of exemption notification under sub-section (1) of Section 25 is that the goods are not chargeable at all to any duty. In Union of India v. A. Kechirim (1970 Cr. L.J. 417) a Division Bench of the Delhi High Court held (page 420): ".......... there is no import within the meaning of the Customs Act in a case where the goods are entrusted under Section 80 and are not carried by the passenger beyond the customs barrier." The case turned upon the construction of the term "baggage" as used in Sections 77 and 80 of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g the decisions in Sylvania Laxman's case (77 Bom. L.R. 380) and Sundaram Textiles v. Assistant Collector (1983 E.L.T. 909) differed with the view taken in Sylvania Laxman's case. Dealing with a case of total exemption from duty on the date when the ship entered the territorial waters the learned Judge observed (page 188) : "As there is no decision of this Court or of the Supreme Court to bind me, I would venture to suggest that a different approach is possible in the case of total exemption also." The learned Judge proceeded to hold on an examination of Section 2 read with Sections 12, 14, 15, 17, 25, 30, 32, 33, 34, 37 and 45 to 49 and the relevant definitions as under (page 188) : ".......The charge under Section 12 is on 'imported goods'. Though the Section uses the expression 'goods imported into India' Sections 13, 15, 17 and many other relevant provisions show that the legislative intention is to impose customs duty on 'imported goods', as defined in Section 2(25). Under the definition clause, the goods retain the character of imported goods till they are cleared for home consumption under Section 46 or 68. The provisions of Section 12 would, therefore, continue to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....time at which chargeability under Section 12 could attach to the goods; at the most, the definition specifies only the earliest point of time from which the goods could be treated as dutiable. It does not preclude a charge being imposed at any subsequent point of time, so long as the goods continue to be "imported goods" for the purpose of Section 12." We do not see any contradiction in fixing chargeability of goods to duty with reference to the time when the goods acquired the character of imported goods, that is, when the taxable event occurred and the rate of duty with reference to date of clearance. In so construing, the question of taxability is neither being viewed in isolation nor in the abstract without reference to goods or the importer who has to pay the charge. Even while keeping those factors in view, we are only giving effect to the principle that tax or duty is attached when the taxable even occurs. May be, the legislature has power to fix different dates of taxable events; but when the Customs Act does not do so fix, chargeability has to be determined with reference to the point of time at which the goods become imported goods and that as discussed above occurs wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o duty even if the exemption notification is withdrawn or modified before the bill of entry is presented or the goods are cleared for home consumption, as the case may be. But, if the goods, when they enter the territorial waters of India are subject to levy of some customs duty by virtue of partial exemption from duty granted under Section 25(1) of the Customs Act, the goods being chargeable to customs duty, it will be charged at the rates in force on the date when the bill of entry was presented or on the date when the goods are sought to be cleared for home consumption, as the case may be. Having considered the matter in the light of the several decisions referred to above, we are of the opinion that the opinion expressed in Sylvania Laxman's case (77 Bom. L.R. 380) still holds goods. In view of the foregoing discussion our answers to question Nos. 1 and 2 are as follows. 59. Question No. 1 : Under the Customs Act the event of importation occurs when the goods from a place outside India enter the territorial waters of India. 60. Question No. 2 : The rate at which imported goods are chargeable to customs duty has to be determined under Section 15 of the Customs Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Whether the charging section for the levy of countervailing duty and additional duty is Sections 2A and 3 respectively of the Tariff Act and the Customs Tariff Act or Section 12 of the Customs Act, it is only under Section 25(1) of the Customs Act that the Central Government may exempt goods from the whole or any part of the duty leviable thereon. As basic customs duty is distinct from countervailing duty and additional duty, a notification under Section 25(1) of the Customs Act may exempt goods of any description from the whole or any part of basic customs duty and likewise from the whole or any part of countervailing duty or additional duty. A notification under sub-section (1) of Section 25 may exempt the imported goods from the whole or any part of the duty of customs leviable thereon or by a special order under sub-section (2) of Section 25 from the payment of such duty. Under sub-section (5) of Section 2A of the Tariff Act the provisions of the Customs Act, 1962 and the rules and regulations made thereunder including those relating to refunds and exemptions from duties are made applicable to duties chargeable under Section 2A of the Tariff Act. So is the position with resp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d until they are specifically exempted by the Competent Authority in exercise of the powers vested under those respective enactment's from such additional duty. In fact, a reference to the notifications issued from time to time show that the Central Government in exercise of this power of exemption under Section 25(1) of the Customs Act in some cases exempted the goods only from levy of basic customs duty, wholly or partially, and in some cases only from the levy of additional duty, wholly or partially. Some notifications may have even exempted the goods wholly or partially from the levy of both basic customs duty and additional duty. Our answer to the third question, therefore, is If the goods were wholly exempt from basic customs duty leviable under the Customs Act, when they entered the territorial waters of India, no basic duty of customs would be leviable thereon even if such exemption were withdrawn under Section 25(1) of the Customs Act before the goods are released for home consumption. Even if such goods were not exempt from the levy of countervailing duty under Section 2A of the Tariff Act or additional duty under Section 2 of the Customs Tariff Act, they would s....