PATEL INDIA (PRIVATE) LTD. versus UNION OF INDIA & OTHER

PATEL INDIA (PRIVATE) LTD.

UNION OF INDIA & OTHER~ (with connected petition) March 28, 1973

[J. M. Sl:IELAT ACTING C.J. AND Y. V. Cl:IANDRACl:IUD, J.]

Sea Customs Act, 1878-S. 40-Whether refund of excess ilnport duty comes under the Section.

The appellant Company was the so1e distributing agent in India for the imported products of an American firm. The Customs authorities used to ]evy i1'tport duty on the basi.s of the invoice price under s. 29 read with s. 30 of the Sea Customs Act, 1878, as being the real value of the goods so imported. ·

During 1954~55, the appellant Company imported several items set out in. Annexure 'D' o'f the Special Leave Petition. \Vhen items 1 and 2 arfived in Bombay Port, the Custom authorities, ignoring their hitherto· followed practice, refused to accept the invoice price as the real value and Jcvie<l excess duty. An appeal to the Customs Collector failed, where-D upon the appellant Company lodged revision application before the Government of India.

Pending the disposal of the said revision, several other items set out in Annexure 'D' arrived in Bombay Port and the Customs authorHies charged the Appellant-Company with excess· amounts as import duty. For fear of demurrage charges, the appellant-Company paid the excess duty under protest.

In March, 1957, the Government of India disposed of the said revi-sion, accepting the appellants' contention, and directed re~assessment of import duty on the said two items 1 and 2 on the basis of their invoice price and also ordered refund of the excess duty charged on them.

The .appellaht-Company, however, did not file appeals in respect of the other items which had arrived during the pendency of the said revi-sion, although the Customs had levied excess duty thereon.

, / The Customs authorities refunded the excess duty levied on those items, for which applicatiort for refund was made within the time pres-cribed under s. 40, 'but refused refund in respect of the rest of the items., An appeal to the Collector and revision before the Government of India were both rejected. The appellant c9mpany, thereafter, filed writ petition before the Delhi High Court for appropriate relief, but was with-out success.

The respondent contended' before .the Court that whatever claims were found not in time as required by s. 40 of'the Sea Customs Act have been correctly rejected by the Appraiser df Customs, Bombay, and therefore, the appellant-Company had nd claim. Allowing the appeal,

HELD : (I) After the disposal of the revision by the Government of India, there was no doubt that the invoice prices were the real value of the consi&nments and the Custom authorities bad no right in law to charge extra duty on the rest of the consignments. Indeed the excess duty was charged in violation of Sections 29 and 30 and ln excess of 811

jurisdiction. This position was also accepted by the Custom authorities when they ordered refund of excess duty charged by them in relation to items 22 to 29 and 33 to 35. [815HJ

(ii) Section 40 had no application in the present case. Section 40 clearly applies only to cases where duties have been paid through inadver-tence, error or misc~truction, and where refund application has to be made within 3 months. The present case is not one where the excess duty was paid through any of the 3 reasons set out in S'.P.ction -40. The excess duty was demanded on the ground that the invoice price was not the real value of the imported goods. Since s. 40 did not apply to the facts of the case, the respondents could not retain the excess duty illegally. [816 DJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1799 of 1969.

Appeal btY special leave from the judgment and order dated April 5, 1967 of the Delhi High Court at New Delhi in letters Patent Appeal No. 44 of 1967 and Writ Petition No. 181 of 1967.

Petition under Article 32 of the Constitution of India for the enforcement of fundamental rights.

N. S. Bindra, S. K. Dholakia and Vineet Kl!.mar, for the appel-lant and petitioner.

S. N. Prasad and S. P. Nayar, for the respondents.

The Judgment of the Court was delivered by

SHELAT, ACTING C.J.-At all material times, the appellant-company acted as the sole distributing agent in India for the pro-ducts of Mis. Sawyer's Inc., Portland, U.S.A., and as such used to import Viewmaster stereoscopes, reels etc. The custom authori-ties used to levy import duty on the basis of the invoice price under s. 29 read with s. 30 -of the Sea Customs Act, 1878 as being the real value of the goods so imported.

During the year 19,54-55, the appellant-company imported several items set out in Anne1<.ure 'D' to the appellant's special leave petition, the details of which it is not necessary to set out here. When items I and 2 arrived in Bombay p()rt, the customs authorities, ignoring their hitherto followed pract.ice, refused to accept the invoice price as the real value and levied excess duty in the aggregate sum of Rs. 1356. An appeal _to the Customs Collector failed whereupon the appellant-company lodged re-vision application before the Government of India.

Pending the disposal of the said revision, several other items set out in the said annexure 'D' arrived in Bombay port, in respect of •vhich the CuS'toms, refusing to accept their invoice price,

charged the appellant-company with excess amounts as import duty. For fear that demurrage charges would have to be incurred, the appellant-company paid the excess duty charged as aforesaid, but under protest.

On March 20, 1957, the Government of India disposed of the said revision, accepting the appellant's contention, and directed reassessment of import duty on the said two items 1 and 2 on the basis of their invoice pric.e and also ordered refund to the appel-lant-company of the excess duty charged on them.

It would seem that since the said revision was pendin.11: before the Government of. India, the appellant-qompany thought that the Customs would follow the principle which would be laid down in the decision in the said revision. The appellant-company, therefore, abstained from filing appeals in respect of the other items, which had arrived pending the decision of the said revision although the Customs had levied excess duty thereon. On the said revision being disposed of and the Government having therein ordered refund, the appellant-company applied for refund of the excess duty charged in respect of some of the items, viz., items 22 to 29 and 33-35. This was done under s. 40 of the Act and within the period appointed therein. The Customs granted refund on the aforesaid items 22 to 29 and 33-35, although invoice value thereof had not been accepted, and excess duty had been charged. The customs authorities, however, declined to refund the excess duty in respect of the rest of the items. The reason given for such refusal was that the application for refund in respect of those items had not bj-.en made within the time pres-cribed by s. 40. An appeal to the Collector and revision before the Government of India against the said refusal to grant refund were both rejected, the refusal by the Customs appraiser being con-F firmed on the groimd that refund was not applied for in time under sec. 40.

The appellant-company thereupon filed writ petition in the High Court of Punjab (at Delhi) under Art. 226 of the Constitu-tion pleading inter alia that :

(a) Sec. 40 of the Act had no application,

(b) the Union of India was not entitled to appro-priate or retain the said excess duty,

( c) the appellant-company had legal right to the return of the said excess duty, and

( d) that there was an error apparent on the record in the orders refusing return of the excess duty.

The appellant-company on these pleas prayed that the said orders of refusal should be quashed and an order should be passed direct-ing return of the excess duty.

[1973] 3 s.c.R.

In para 16, sub-paras (i) and (j) of its return the Union of India averred as follows :

"(i) with reference to clause (1) of para No. 16 of the petition, is correct that the Government of India cannot appropriately retain to whatever they are not legally entitled. But I submit that the importers are also required to put in the claims in time as required lJy law. I deny that !he petitioner has legal right to the return of the excess ci'::: ''"' duty levied on all the con-signments.

( j) I deny and controvert the allegations made in clause (J) of para No. 16 of the petition. I say that !he Bombay Cus'IOms House allowed some claims of the petitioner which were in time under section 40 of the Sea Customs Act, out of the list forwarded with weir letter dated 3-4-1957."

P":·a 17 of the return was as follows :

"I deny para No. 17 of the petition. I submit that whatever claims were found not in time as required by section 40 of the Sea Customs Act have been correctly rejected by the Appraiser of Customs, Bombay."

It is clear from the return by 'the Union of India that :

(a) refund was granted to the appellant-company in respect of the items referred to above without any appeal having been filed by the company relating to those items,

( b) refund was granted in respect of those Hems simply on the ground that an application there-for had been made whhin the time prescribed by sec. 40, and it was refused in respect of the rest of the items only because such an application therefor was not made within the time prescribed by sec. 40, and

( c) there was no plea that !he exce5' duty was rightly charged on those iteins.

The learned Single Judge of the High Court who heard the '' :·'t petition held !hat sec. 40 of the Act did not apply; that it arplied to erroneous payments and not to erroneous assessments. He, however, held that the proper remedy for the appellant-com-pJny was to have filed appeals against such erroneous assessments un.:ler s. 188 of the Act. and that that having not been done, no relief could be j!ranted to the appellant-company. He, however, olo-ervecl that the Government was morally bound to !!rant the

refund and made recommendation that the refund should be made .to .the appellant-c~mpany; Letters Patent appeal against 1he said 1ulgment was reiected. Hence this appeal by special leave.

. The only qu.estion which arises in this appeal is whether the High Court ought to have granted in the circumstances of the case 1he relief asked for by the appellant-company in its writ petition.

Sec. 2~ of the Act casts duty on the owner of imported goods, whet~er. hable to duty or not, to state the real val11e, quantity and descnphon of such goods in the bill of en1ry or the shipping bill and to subscribe declaration of the truth of such statement at the foot of such bill. In case of doubt, tht Customs Collector has the power to require such owner or any one else in possession of my invoice, broker's note, policy of insurance or other document, .vhereby the real value, quantity and description of any such goods can be ascertained. An invoice thus is one of the documents from which the real value of imported goods has to be ascertained where 1he Customs Collector has any doubt as regards their declared Yalue. Sec. 30 then defines 'real value' to be the wholesale cash price, less trade discount, for which goods of the like kind and quality are sold or are capable of being sold at the time and place of importation. Sec. 31 provides that goods chargeable with duty upon the value thereof but for which specific value is not fixed by law for the purpose of levying duties thereon, shall, without unnecessary delay, be examined by the officer of customs. If it appears that the real value of such goods is correctly stated in the bill of entry or shipping bill, the goods shall be assessed in accordance therewith.

There is no dispute that the appellant-company had declared the real value of the articles imported ~ it and in support thereof 'lad produced the manufacturers' invoices. The customs authorities '1ad refused to accept the invoice price as real value and charged excess duty. But any doubt with regard to the real value of the several consignments imported by the company w.as totally eradi-cated when the Government of India decided the company's re-vision and directed that the invoice price should be accepted and duty should be assessed accordingly. In respect of th~ two items to which the revision related, the Government had al!;o .directed refund of the excess duty charged and paid under protest. 'f!lere. was t!ius no doubt or dispute left thereafter as regards the mvo1ce pnces being the real value of the consignments. The direction given in its decision in the said revision that the invoice price should be ~ccepted as real value within the meaning of sec. 30 of the. ~ct applied to the rest of the consignments. The customs authonl!es, therefore, were not right in law in charging excess duty on t~e r7st of the consignments. Indeed, the excess .du.ty .w~s ch~rged m vm-Jation of ss. 29 and 30 and in excess of 1unsd1c1Ion, smce, as held

by the Government of India, the real value of the goods was their invoice price.

The position, indeed, was accepted by the customs authorities when they ordered refund of excess duty charged by them in relation to items 22 to 29 and 33-35. Such relund could only have been ordered on the footing that the excess duty on those consignments had been charged without the authority ot law and therefore without jurisdiction. The fact that an application had been made therefor under sec. 40 was irrelevant to the point that the excess duty was assessed and recovered without the authority of Jaw.

Sec. 40, on which the Union of India relied in its return, provides that no customs duties 9r charges which have been paid, and of which repayment ,wholly or in part, is claimed in conse-quence of the same having bieen paid through inadvertence, error or misconstruction, shall be returned, unless such claim is made within three months from the date of such payment. The section clearly applies only to cases where duties have been paid through inadvertence, error or misconstruction, and where relund appli-cation has to be made within three months from the date of such payment.

As rightly observed by the High Court, the present case was not one where the excess duty was paid through any of the three reasons set out in s. 40. The excess-duty was demanded on the ground that the invoice price was not the real value of the import-ed goods and payment under protest was also made on that footing. The ultimate result in the appellant-company's ·re\lision was that charging of excess duty was not warranted under the Act, and that the value on which duty should have been assessed was the invoice price and nothing else. That being the position, sec.· 40 did not apply and could not have been relied upon by the customs authorities for refusing to refund the excess d.utY unlawfully levied on the appellant-company.

From the fact that the customs authorities refunded the excess duty on items 22 to 29 and 33-35, it follows that the customs authorities had fully realised that the excess-duty had been levied without the authority of Jaw, for otherwise they would not have agreed to refund it, and further that they could not lawfully retain it. If the customs authorities were not· entitled to levy the excess duty and retain it, they were bound to return if to the appellant-compiuly who had paid it under prote8t and only with view not to incur demurrage Charges, unless there was some provision of the Act which debarred the appellant'COinpailyJi:om recovering it. ·

The only provision relied on blv the· customs-authorities was sec. 40 of the Act. Indeed, their relusa! to refund the excess-duty

both in their return and in the High Court was on the grounc! of the omission of the appellant-company to apply for the refund wi•thin the time provided by that section. It is necessary to em-phasise that it was not their case that !he invoice price of the items in question was not the real value or that the excess duty was lawfully levied or that the appellant-company was not entitled to the refund ~hereof for any reason except the omission to apply for it within.the time prescribed by sec. 40. But since sec. 40 did not apply to the facts of the case, the respondents could not retain the excess duty except upon the authority of some o:her provision of Jaw. No ather provision was pointed out by them which would disentitle !he appellant-company to the refunc •Jn the ground of its rights being time-barred or otherwise. No ;uch. provision other than sec. 40 which disentitled the appellant-com-pany lo the refund having been put forward and the cuswms authorities not being entitled to retain the excess duty, there was legal obligation on the part of the respondents to retun~ ·the excess duty and corresponding legal right in the appellant-om-pany to recover it. Besides, except s. 40 the Acl contains no O'ther provision laying down any limitation within which an im-porter has to apply for refund. The re.fusal to return the excess duty on the ground that the appellant-company had not applied within time provided by the Act was clearly unsustainable. Since there was not and could not [<, any dispute with regard to the invoice price being the real value there was no point in filing any appeal; nor could the omission to file any such appeal be proper or valid ground for refusing relief ·to the appellant-company, when there remained no longer any dispute between the parties as to the invoice price being the real value of the imported items.For the reason aforesaid, we are satisfied !hat the High Court was not right in refusing the relief, in spite of its being satisfied that the excess duty was charged without any basis in law and also that the respondents could not lawfully retain the excess duty. In the circumstances we set aside the judgment of the High Court and allow the appeal. The respondents will pay to the appellant-company its costs both here and in the High Court. In view of this conclusion no separate order need be passed in writ petition 181 of 1967. The writ petition accordingly stands disposed of.