TaxTMI 
TaxTMI 
2022 (2) TMI 24
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....in this batch of Writ Appeals filed by the revenue. The members of the respondent association/mills and the other individual mills are engaged in the manufacture of yarn both cotton as well as synthetic. Their main raw material is cotton and the major component in their input cost is the price of cotton, which works out to about 40% to 50% of their production cost. 3. The respondent mills use different varieties of cotton for manufacture of different counts of yarn. Cotton being a seasonal product, the mills are forced to procure the required quantity of cotton in advance, as and when it is available on the basis of the orders placed on the mills and also on the basis of the prospective orders and market requirements, which include both local and international. The respondent mills import cotton in view of the fact that adequate quantity of cotton may not be available within the country. Importantly, it is submitted by the respondent association/mills that the duty element is taken into account, while deciding the import and also offering quotation to its customers. The orders on the foreign exporters are normally placed 5 to 6 months in advance and the prices are fixed on the b....
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....ating to passing of the impugned notification, instead a counter affidavit was filed, wherein reference was made to starred question in Parliament by some members and response of the concerned Ministry in relation to the impugned notification. Therefore, the learned Judge was of the view that no effective counter affidavit has been filed by the Ministry of Finance, Department of Revenue. d) In any event, the counter affidavit which has been subsequently filed explaining that the impugned notification was issued with a view to restrict undesired cotton imports thereby protecting the interest of domestic cotton, is unacceptable, in view of the law laid down in Mohinder Singh Gill and another v. the Chief Election Commissioner, New Delhi and others (AIR 1978 SC 851 ) that the case of the Central Government cannot be improved on the basis of counter affidavit. 6.2 It was thus, concluded by the learned Judge that the impugned Notification No.2/2002-Customs dated 08.01.2002 does not satisfy the requirements of Section 8A(1) of the Customs Tariff Act, 1975, and is hence, set aside. SUBMISSIONS OF THE PARTIES: 7.1 The learned senior standing counsel appearing for the appe....
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...., the learned senior standing counsel appearing for the appellants sought to allow these writ appeals by setting aside the order of the learned Judge. 8.1 Mr.R.Thiagarajan, learned senior counsel appearing for the respondents contended that by the Notification No.2/2002 dated 08.01.2002, an unilateral increase of import duty on the import of cotton to India was sought to be enforced from the then existed rate of 5% to 10% without the stakeholders being put on notice in any manner. When the same was put to challenge in the batch of writ petitions by the respondents, by contending that the ingredients of section 8A(1) of the Customs Tariff Act, 1975 are not satisfied warranting the increase in import duty from 5% to 10% and the notification was issued arbitrarily and in exercise of power capriciously, the learned Judge, after providing sufficient opportunities to the appellants, has ultimately concluded that the said notification does not satisfy the requirements of section 8A (1) of the Customs Tariff Act, 1975 and accordingly, set aside the same and thereby allowed the writ petitions. 8.2 Pointing out that the increase of import duty was introduced with immediate effect by No....
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....is the relevance and sanctity which ought to be attached to a recital in a notification stating that the pre-requisites for issuance of notification exist? 10.1.1 In this context, it may be relevant to refer to Section 8A of the Customs Tariff Act, 1975 which reads as under: "8A. Emergency power of Central Government to increase import duties (1) Where in respect of any article included in the First Schedule, the Central Government is satisfied that the import duty leviable thereon under section 12 of the Customs Act, 1962 should be increased and that circumstances exist which render it necessary to take immediate action, it may, by notification in the Official Gazette direct an amendment of that Schedule to be made so as to provide for an increase in the import duty leviable on such article to such extent as it thinks necessary: Provided that the Central Government shall not issue any notification under this sub- section for substituting. the rate of, import duty in respect of any article as specified by an earlier notification issued under this sub- section be that Government before such earlier notification has been approved with. or with. out modifications ....
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....l Government under Section 8A(1) of the Customs Tariff Act, 1975. 10.1.3 The learned Judge has proceeded with the subject matter on the premise that the notification does not disclose the reasons which warranted exercise of power by the Central Government nor was the file pertaining to the impugned notification submitted despite repeated directions of this Court. Further, the proceedings in the form of response to starred questions by some members, placed before the Parliament, was not relevant. In any event, the materials produced, in the view of the learned Judge, were not sufficient. For better understanding, the observation of the learned Judge is extracted below: "15. ....In the case on hand, when a specific challenge has been made, the first respondent is unable to satisfy the Court that there was sufficient material before the Central Government to satisfy itself that import duty leviable under Section 12 of the Customs Act, 1962 should be increased and circumstances did exist rendering it necessary for immediate action. Since the Ministry of Finance, Department of Revenue had failed to satisfy this Court that such a contingency did exist, the Court is inclined t....
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....ready remarked, it is most desirable that it should be so, for in that case the presumption that the conditions were satisfied would immediately arise and burden would be thrown on the person challenging the fact of satisfaction to show that what is recited is not correct. But even where the recital is not there on the face of the order, the order will not become illegal ab initio and only a further burden is thrown on the authority passing the order to satisfy the court by other means that the conditions precedent were complied with. In the present case this has been done by the filing of an affidavit before us." 10.1.6 The above view of the Hon'ble supreme court was reiterated in Narayan Govind Gavate v. State of Maharashtra (1977) 1 SCC 133 wherein, with regard to presumption that is raised by a recital in the notification, it was held as under: "28. The High Court opined that the presumption of regularity, attached to an order containing a technically correct recital, did not operate in cases in which Section 106 Evidence Act was applicable as it was to the cases before us. We do not think that we can lay down such a broad general proposition. An order ....
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....n as to the correctness thereof and also casting a burden on the respondents challenging the correctness of the said recital. 10.1.8 In the light of the view expressed by the Federal Court in Sibnath Banerjee AIR 1943 FC 75 : 1944 FCR 1, 42 which view has been affirmed by the Supreme Court in Swadeshi Cotton AIR 1961 SC 1381 and which in turn has been reiterated in Narayan Govind Gavate (1977) 1 SCC 133 and Prafulla Churan Law (2011) 4 SCC 537 with regard to the relevance and sanctity to be attached to a recital in the subordinate legislation, we are of the view that the notification cannot be said to be invalid, on the premise that the notification itself does not elaborate the circumstances/reasons for issuance of the same. Accordingly, the first issue is answered. Issue No.2: Whether the order of the learned Judge setting aside the notification on the premise that the Central Government is unable to satisfy the Court that there was "sufficient material", before the Central Government to satisfy itself that import duty leviable under Section 12 of the Customs Act, 1962 should be increased and circumstances exist rendering it necessary for immediate action under Sec....
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....ort of cotton during the last four years (October- September) is given in the following table: (in lakh bales of 170 kgs.) 1997-98 1998-99 1999-2000 2000-2001 4.13 7.87 22.01 22.00 10.2.4 To understand the sanctity of the above information, it may be relevant to note that in the official website of the Rajya Sabha, in the booklet, which is part of the Rajya Sabha Practice and Procedure Series, while dealing with the relevance of the "Question Hour" and the sanctity attached to the response given by the Ministry, it is stated as under: "DISCUSSION IN RAJYA SABHA: The 'Question Hour' is an important part of the parliamentary proceedings which gives the institution of Parliament the great significance it possesses. This Hour has assumed greater importance because the members can elicit information through questions on matters affecting the day-today life of the citizens for which Ministers are collectively and severally answerable to the legislature. This parliamentary device, in fact, is primarily meant for exercising a kind of legislative control over executive actions. Besides, the Members also find an opportunity through this d....
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....ication in exercise of its powers under Section 8A(1) of the Customs Tariff Act, 1975 "to restrain undesired import of cotton" and "protect the interest of farmers". It is thus, evident that the reasoning of the learned Judge that the appellants failed to demonstrate the existence of circumstances warranting the exercise of power under Section 8A(1) of the Customs Tariff Act, 1975, is contrary to the material on record in the form of "recital in the notification", the Minister's answers during "Question Hour", and the counter affidavit filed by the appellants relating to the circumstances warranting the issuance of the impugned notification. 10.2.5 Further, the reasoning of the learned Judge that the Central Government failed to satisfy the Court with "sufficient material" that the twin requirements for issuance of the impugned notification under Section 8A(1) of the Customs Tariff Act, 1975 existed, is contrary to the law laid down by the Hon'ble Supreme Court and contrary to the facts on record as discussed supra. 10.2.6 In any event, the aforesaid reasoning of the learned Judge viz., failure to satisfy the court that there was "sufficient material" with the Central....
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....vernment to consider." (Emphasis supplied) c. Maharashtra State Board of Secondary and Higher Secondary Education v . Paritosh Bhupeshkumar Sheth (1984) 4 SCC 27 : "14....... It would be wholly wrong for the Court to substitute its own opinion for that of the legislature or its delegate as to what principle or policy would best serve the objects and purposes of the Act and to sit in judgment over the wisdom and effectiveness or otherwise of the policy laid down by the regulation-making body and declare a regulation to be ultra vires merely on the ground that, in the view of the Court, the impugned provisions will not help to serve the object and purpose of the Act.... the Court should not concern itself with the wisdom or efficaciousness of such rules or regulations. It is exclusively within the province of the legislature and its delegate to determine, as a matter of policy, ........It is not for the Court to examine the merits or demerits of such a policy " "16. In our opinion, the aforesaid approach made by the High Court is wholly incorrect and fallacious. The Court cannot sit in judgment over the wisdom of the policy evolved by the legislatu....
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....e power of judicial review of the subordinate legislation and also the presumption as to its Constitutionality would show that the order of the learned Judge insofar as it examined the validity of the notification on the basis of the sufficiency of reasons/material available with the Central Government warranting exercise of its power in issuing such notification, is erroneous and unsustainable and the second issue is decided accordingly. Issue No.3 Whether the order of the learned Judge insofar as it placed reliance on the judgment of the Hon'ble Supreme Court in M.Jhangir Bhatusha v. Union of India 1989 Supp (2) SCC 201 to conclude that the notification itself must set out elaborately the circumstances/reasons which warranted exercise of power under Section 8A(1) of the Customs Tariff Act, 1975, is legal? 10.3.1 The order of the learned Judge insofar as it placed reliance on the judgment of the Hon'ble Supreme Court in M.Jhangir Bhatusha ibid and interpreted Section 25(2) of the Customs Act, 1962, is misplaced. It may be relevant to note the difference in the language employed in Section 8A of the Customs Tariff Act, 1975 and Section 25(2) of the Customs Ac....
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....provides for that requirement. In this regard, it may be relevant to refer to the following judgments: a. Ramesh Chandra Kachardas Porwal v. State of Maharashtra (1981) 2 SCC 722 at page 740 "17. ........ We are here not concerned with the exercise of a judicial or quasi-judicial function where the very nature of the function involves the application of the rules of natural justice, or of an administrative function affecting the rights of persons, wherefore, a duty to act fairly. We are concerned with legislative activity; we are concerned with the making of a legislative instrument, the declaration by notification of the government that a certain place shall be a principal market yard for a market area, upon which declaration certain statutory provisions at once spring into action and certain consequences prescribed by statute follow forthwith. The making of the declaration, in the context, is certainly an act legislative in character and does not oblige the observance of the rules of natural justice. In Bates v. Lord Halsham [(1972) 1 WLR 1973] , Megarry,J., pointed out that the rules of natural justice do not run in the sphere of legislation, primary or delegat....
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.... untenable. This issue is decided accordingly. Issue No.5 "Whether the judgment of the Hon'ble Supreme Court in Mohinder Singh Gill AIR 1978 SC 851 insofar as it holds that a counter cannot be used to improve an order is applicable while deciding the vires/validity of a notification?" 10.5 The decision of the Hon'ble Supreme Court in Mohinder Singh Gill AIR 1978 SC 851 holding that an order cannot be improved upon through a counter, may not be relevant, while examining the validity of a notification. The above principle may have relevance only in relation to an administrative or a quasijudicial order, but not to a notification, which is legislative in character. Thus, the reliance on the decision of the Hon'ble Supreme Court in Mohinder Singh Gill ibid case, while deciding the validity of a notification, which is a piece of a subordinate legislation is wholly misplaced and erroneous. This would also be clear that while examining the validity of a notification, there is a presumption as to its Constitutionality and to sustain the Constitutionality it is permissible to take into consideration matters of common knowledge, matters of common report, the histor....
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....nted. Thus, if the bill of entry is presented for home consumption under Section 46 of the Customs Act, 1962 after the issuance of the impugned notification, the imports would be governed by the amended rate prevailing then. In other words, on the date when the bill of entry was presented under Section 46 of the Customs Act, 1962, the rate that was prevailing was 10%. It has been repeatedly held by the Hon'ble Supreme Court that irrespective of the circumstances/contingency the rate of duty that is applicable would be the date in force on the date on which the bill of entry is presented for home consumption under Section 46 of the Customs Act, 1962 (or) in the case of goods cleared from a warehouse under Section 68 of the Customs Act, 1962, the date on which the goods are actually removed from the warehouses (or) on the date of payment of duty. 11.3 The above position would be clear from the following decisions of the supreme court: 1.Bharat Surfactants (P) Ltd. v. Union of India (1989) 4 SCC 21 In that case, the ship arrived in Bombay Port on 09.07.1981 and the rate of customs duty prevailing on that date was 12.5% however, as the vessel was unable to secu....
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....the Income Tax Act, 1961. Thus, the levy of enhanced duty on account of the delay which is not attributable to the importer thus, cannot result in exposing the importer to a higher rate of duty. Rejecting the said contention, it was held thus: "10. .......It must be accepted that the prohibitory orders, arbitrary or not, would postpone the date of clearance and as such would postpone the determination of the duty..." 3.Dhiraj Lal R. Vohra And Ors. vs Union Of India (Uoi) And Ors. 1993 Supp (3) SCC 453 This was a case where the ship had entered into Indian waters on February 20, 1989 ready to discharge the cargo and awaiting clearance into the port. However, due to reasons beyond the control of the ship or the importer, the goods could not be cleared until March 2, 1989 by which time the rate of duty had materially changed. It was submitted that the cargo was ready for discharge in the Indian waters since February 20, 1989 and the importer has presented the bill of entry for home consumption on February 28, 1989 which was received by the appraising section on February 28, 1989 and thus, the duty which is leviable, should be one of the above dates and not M....
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....ed in the bonded warehouse, during which period it was exempt the subsequent increase or withdrawal of the exemption notification is inapplicable. The said contention was rejected by the Hon'ble Supreme Court and it was held as under: "5. In our opinion, this question is no longer res integra. At least two decisions of this Court, namely, Bharat Surfactants (P) Ltd. v. Union of India [(1989) 4 SCC 21] and Dhiraj Lal H. Vohra v. Union of India [1993 Supp (3) SCC 453] were directly concerned with a similar contention that had been raised. Dealing with the same, this Court has in clear terms come to the conclusion that what is relevant is the day on which the bill of entry in respect of the goods is presented under Section 46 and in the case of goods which are warehoused the relevant date would be the date on which the goods are actually removed from the warehouse...." 5. Kiran Spg. Mills (2000) 10 SCC 228 : When the goods were imported into India, the Ordinance providing for Special Additional Duty had not been promulgated. However, the goods which were imported were cleared from the bonded warehouse on subsequent dates by which time the Ordinance provi....
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....orm principle is adopted by the Act, as explained above, the Hon'ble Supreme court sees no room for any legitimate grievance of discrimination. There is also no presumption that rate of duty always goes up. It may also go down, in which case, the importer stands to gain." 7. Union of India vs. G.S. Chatha Rice Mills (2021) 2 SCC 209 : In this recent judgment, the Supreme Court has considered the question, as to whether a notification issued under Section 8A of the Customs Tariff Act, 1975 would be effective from a particular time in the day when the notification was uploaded in the E-Gazette or from the first moment of the day in which the notification was issued. The said question arose in view of the peculiar facts wherein a notification under Section 8A(1) of the Customs Tariff Act, 1975 was issued at 20:46:58 hrs on 16.02.2019 resulting in enhancement of rate of duty from nil to 200%. The imports in question had entered the Indian Territory before 18.00 hrs on 16.02.2019. The bill of entry was self-assessed at 18.08 hrs on 16.02.2019 under the provisions of the Customs Act, 1962. Question arose as to whether the enhanced rate imposed vide notificatio....