Holding

Section 3(2) of the Customs Tariff Act, 1975 is a valid legislative provision and not ultra vires; the petition is dismissed.

Summary

The petitioners, Jain Brothers, who import automobile spare parts, challenged Section 3(2) of the Customs Tariff Act, 1975, on the ground that including customs duty in the valuation of imported goods for the purpose of levying an additional duty equal to excise duty was unconstitutional and ultra vires. The Supreme Court examined the language of Section 3, noting that sub‑section (1) prescribes the rate of the additional duty while sub‑section (2) specifies the components of the value on which that duty is calculated, including customs duty. The Court held that sub‑section (2) is a legitimate part of the charging provision and does not exceed legislative authority. Earlier decisions such as Hyderabad Industries Ltd. were distinguished, and the cited cases on similar issues were deemed inapplicable. Consequently, the petition was dismissed with costs.

Issues considered

Whether Section 3(2) of the Customs Tariff Act, 1975, which mandates inclusion of customs duty in the valuation of imported articles for the levy of additional duty, is unconstitutional or ultra vires.

Legislation cited

Customs Act, 1962s. 12, s. 14
Customs Tariff Act, 1975s. 3

Subjects

Customs dutyAdditional dutyExcise dutyConstitutional challengeUltra viresValuation of importsCustoms Tariff ActSection 3Import regulationsAutomobile spare parts

Judgment

)

A JAIN BROTHERS AND ANR.
v.
UNION OF INDIA AND ORS.

JULY 21, 1999

B [B.N. KIRPAL, M. SRINIVASAN ANDS. RAJENDRA BABU, JJ.].

Customs Tarrif Act, 1975:

S.3 (2)-Imported article-Levy of additional duty equal to excise
C duty-Inclusion of Customs duty in calculating the value of imported article
for purposes of levy of additional duty-Held, the provision is not
unconstitutional nor ultra vires-Customs Act, I 962-S. I 2.

Hyderabad Industries Ltd. and Anr, v. Union of India and Ors.,
(1999)(108) ELT 321, distinguished.
D
J.K. Synthetics Ltd. etc v. Commercial Taxes Officer etc., (1994) 94 STC
422 and Union of India and other etc. etc. v. Bombay Tyre International Ltd.
and etc. etc. AIR, (1984) SC 420, not applicable.

CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No. 5308
E of 1983.

Under Article 32 of the Constitution of India.

S.K. Dholakia, Dushyant Dave, C.S. Vaidyanathan, H.A. Raichura, N.D.
Garg, Kailash Vasdev, (Rahul Roy), for P.H. Parekh, Ashok K.Mahajan, Ramesh
F Singh, Siddhartha Goswami, Ms. Vanita Bhargava, Ashok Kumar Gupta Ms.
Bina Gupta, (Vineet kumar) (NP) MusharafChoudhary N.K. Bajpai Dilip Tandon,
K.C. Kaushik, P. Parmeswaran, A. Sobba Rao and Ms. Sushma Suri for the
appearing Parties.

G
The following Order of the Court was delivered :

The challenge in this writ petition is to the provisions of Section 3 of
the Customs Tariff Act, 1975.
'
The petitioners are engaged in the business of import of automobile
H spare parts. They are liable to pay customs duty as levied under Section 12
1026
JAIN BROTHERS v. U.0.1. 1027
of the Customs Act, 1962 which provides that the Customs duty will be levied A
at such rates as may be specified under the Customs Tariff Act, 1975.

The Customs Tariff Act, 1975 (hereinafter referred to as "the Act")
provides for levy of additional duty under Section 3 which Section reads as
follows:
B
"3. levy of additional duty equal to excise duty.-{l) Any article
which is imported into India shall, in addition be liable to a duty
(hereinafter to this section referred to as the additional duty) equal to
the excise duty for the time being leviable on a like article if produced
or manufactured in India and if such excise duty on a like article is C
leviable at any percentage of its value, the additional duty to which
the imported article shall be so liable shall be calculated at that
percentage of the value of the imported article.

Exp/anation.-ln this section, the expression "the excise duty for the
time being leviable on a like article if produced or manufactured in D
India" means the excise duty for the time being in force which would
be leviable on a like article if produced or manufactured in India or,
if a like article is not so produced or manufactured, which would be
leviable on the class or description of articles to which the imported
article belongs and where such duty is leviable at different rates, the
highest duty. E
(2) For the purposes of calculating under this section the additional
duty on any imported article, where such duty is leviable at any
percentage of its value, the value of the imported article shall,
notwithstanding anything contained in Section 14 of the Customs
Act, 1962 (52 of 1962), be the aggregate of- F
(i) the value of the imported article determined under sub-section

- ( 1) of the said Section 14 or the tariff value of such article fixed
under sub-section (2) of that section, as the' case may be; and

(ii) any duty of Customs chargeable on that article under Section 12 G
of the Customs Act, 1962 (52of1962), and any sum chargeable
on that article under any law for the time being in force as an
addition to, and in the same manner as a duty of Customs, but
not including the duty referred to in sub-section (1 ).

(3) If the Central Government is satisfied that it is necessary in the H
1028 SUPREME COURT REPORTS [1999) 3 S.C.R.

A public interest to levy on any imported article (whether on such article
duty is leviable under sub-section (1) or not) such additional duty as
would counter-balance the excise duty leviable on any raw materials,
components and ingredients of the same nature as, or similar to those,
used in the production or manufacture of such article, it may, by
notification in the Official Gazette, direct that such imported article
B shall, in addition be liable to an additional duty representing, such
portion of the excise duty leviable on such raw materials, components
and ingredients as, in either case, may be determined by rules made
by the Central Government in this behalf.

(4) In making any rules for the purposes of sub-section (3), the
c Central Government shall have regard to the average quantum of the
excise duty payable on the raw materials, components or ingredients
used in the production or manufacture of such like article.

(5) The duty chargeable under this section shall be in addition to any
other duty imposed under this Act or under any other law for the time
D being in force.

(6) The provisions of the Customs Act, 1962 (52 of 1962), and the .
rules and regulations made thereunder, including those relating to
drawbacks, refunds and exemption from duties, shall, so far as may be,
apply to the duty chargeable under this section as they apply in
E
relation to the duties leviable under that Act."

The grievance of the petitioners is that in so far as sub-section (2) of
Section 3 provides for inclusion of Customs duty in calculating the value of
the imported article for the purposes of levy under the said Section. is
F concerned, the same is unconstitutional and ultra vires.

Shri Dholakia, learned senior counsel for the petitioners contended that

G
Section 3(1) is the charging section. Section 3(2) is really the machinery
section which has been created for giving effect to the charging section. He
submits that any loading of value to the goods imported is not permissible
and in effect the machinery provision of Section 3(2) travelled beyond the
charging provision and hence Section 3(2) is ultra v_ires Section 3(1). Learned
-
senior counsel relied on the decision of this court in Hyderabad Industries
Ltd. and Anr. v. Union of India and On., ( 1999) 108 ELT 321, in support of
his contention that Section 3(1) is the charging section.

H At the outset, we may mention that in Hyderabad Industries (supra),
j
JAIN BROTHERS v. U.0.1. 1029
this Court was not concerned with the interpretation of Section 3(2). What A
arose for consideration was the interpretation of Sectio1_1 3(1). Nevertheless
in the course of considering the same, the Court took note of notes to clauses
of the Customs Tariff Bill, 1975 and observed that the levy under Section 3
was "with a view to levy additional duty on an imported article so as to
counter-balance the excise duty leviable on the like article indigenously made. B
In other words, Section 3 of the Act has been enacted to provide for a level
playing field to the present or future manufacturers of the like articles in
India."

As we read Section 3, we find that it is one composite Section dealing
with different aspects of the levy of tax. While sub-section (I) of section 3 C
deals with the rate at which the duty is leviable on the value of the imported
article, sub-section (2) provides that in calculating the value of the imported
article what are the ingredients which have to be taken into consideration for
arriving at the said value. Sub-clause (ii) states that any duty of Customs
chargeable on the article under Section 12 of the Customs Act, 1962 and any
sum chargeable on that article under any law for the time being in force as D
an addition to and in the same manner as the duty of Customs, shall be
included in determining the value of the imported article. It is not necessary
to refer to other sub-sections but it is clear from the aforesaid that both the
sub-sections are different limbs of the charging section.
E
We do not see in the present case any impediment in the legislature
providing for the manner in which the value of an article should be calculated
for the purposes of determining the rate of tax which can be imposed. The
Customs duty which is required to be taken into consideration for the purposes
of levying additional duty would normally form part of the value of the
imported article on which the additional duty is to be imposed. In a sense sub- F
section (2) of Section 3 makes clear what is implicit in sub-section (I} of
Section 3, namely, the value of the imported article would include the Customs
duty payable thereon. In commercial parlance, the value of an imported article
may include Customs duty and this is what has been made clear and accepted
in sub-section (2) of Section 3. We, therefore, do not see any conflict between G
the two sub-sections and it is not possible to accept the contention that sub-
section (2) has gone beyond the provisions of sub-section (I}.

Learned senior counsel for the petitioners drew our attention to the
decisions in J.K Synthetics Ltd etc. v. Comm£;rcial Taxes Officer Etc., (1994)
94 STC 422 and Union of India and Oth~rs Etc. Etc. v. Bombay Tyre H
1030 SUPREME COURT REPORTS [1999] 3 S.C.R.

A International Ltd. and Etc. Etc., AIR (1984) SC 420, but in our opinion these
.decisions are of no relevance in the present case.

For the aforesaid reasons, we do not see any merit in this writ petition.
The same is dismissed with costs. .

B RP. Petition dismissed.

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