Holding

The Court held that unless the import contract is registered with the appropriate customs house before the clearance order, the conditions of Entry 84.66 are not satisfied and the appellants are not entitled to the concessional duty.

Summary

Mihir Textiles Ltd. and another importer sought refund of customs duty on the basis that they were eligible for the 40% concessional rate under Entry 84.66 of the Customs Tariff Act, 1975. Both had cleared their goods after paying full duty and later applied for registration of the import contract as a "project import" but the registration was obtained only after the clearance order. The Court examined the proviso to Entry 84.66, which requires (i) import against a contract registered with the customs house, (ii) registration in the manner prescribed, and (iii) registration before any clearance order is issued. It held that the appellants failed to satisfy the third condition, and a letter to the Ministry of Industry could not be treated as a valid application for registration. The Court further ruled that the conditions are mandatory, not merely directory, and therefore the appellants were not entitled to the concessional relief. Consequently, the appeals were dismissed.

Issues considered

Whether the appellants are entitled to concessional customs duty under Entry 84.66 when the contract registration was not obtained before the clearance order.
Whether the conditions in the proviso to Entry 84.66 are mandatory or directory.
Whether a letter to the Ministry of Industry constitutes a valid application for registration of the import contract.
Whether delay in applying for registration defeats the claim for concessional duty.

Legislation cited

Subjects

customs dutyconcessional reliefEntry 84.66contract registrationimport clearanceCustoms Tariff Actrefund claimmandatory conditions

Judgment

A MIHIR TEXTILES LTD. ETC.
v.
COLLECTOR OF CUSTOMS, BOMBAY ETC.

APRIL 29, 1997

B [SUHAS C. SEN AND K.T. THOMAS, JJ.)

Customs Tariff Act, 1975-Entry No. 84.66--Entitlement to conces-
sional relief in payment of customs duty-Non-compliance of conditions
necessary for such entitlement-Contract not registered before passing of the
C order permitting clearance of the goods from the port-Held, appellants not
entitled to concessional relief

The appellant in one case, had imported 12 Air Jet Looms along with
their accessories and goods. He got them cleared on payment of full duty.
After that he applied to the Collector of Customs for granting registration
D of his contract with the buyer as envisaged in Entry No. 84.66 of Customs
Tariff Act, 1975. Then he filed· a refund application on the premise that he
is liable to pay customs duty only at the concessional rate. The claim for
refund was rejected by the Assistant Collector. On appeal, the Collector
held in favour of the appellant. However, the Customs, Excise and Gold
E (Control) Appellate Tribunal (CEGAT) restored the Assistant Collector's
order.

In the other case, the appellant got imported licence for importing
"Sandzimar Planatory Mill". After that, he contractor with a foreign seller
at Sweden to despatch the foresaid Mills. He wrote a letter to the Govern-
F ment requesting that the licence might be endorsed for "Project Import".
He got cleared the imported goods on payment of full duty. He got the
required endorsement and then made an application for refund of the duty
on the premise that he was liable to pay custonis duty only at the conces-
sional rate. Assistant Collector of Customs, Collector of Customs and
G CEGAT rejected the claim. Hence these appeals.
Both the appellants claimed that they had done their part in obtain-
ing the registration of the import contract as a project import and it was
quite improper to have denied the benefit of the concessional relief
prescribed in Entry No. 84.66 to the importers. They added that non-com-
H pliance of the conditions was only due to the lapses on the part of the
1088
MIHIR TEXTILES LTD. v. COLLECTOR OF CUSTOMS 1089

authorities concerned. A
Dismissing the appeal, this Court

HELD : 1. The proviso to Entry No. 84.66 of Customs Tariff Act,
1975 prescribes, principally, three conditions to be satisfied for entitlement
of concession and they are (1) goods should have been imported against a B
specified contract registered with the appropriate Customs House; (2)
such registration should have been made in the manner prescribed by the
regulations; (3) registration of the contract should have been obtained
before passing of the order granting permission for clearance of the goods.
In the instant cases, the contracts were not registered at all before the C
order of clearance was passed. [1092-B-C]

2. In one case, no application was made for registration of the con-
tract before the goods were cleared. In the other case the appellant did send
a letter to the Ministry of Industry. Even if the letter is treated as applica-
tion, there are two circumstances which go against the appellant. First, D
though he got the licence he did not make the application for almost six
months thereafter. Second, the letter which is claimed to be an application
was sent only a month before clearance of the goods and during the remain-
ing period he could not expect the Central Government to rush through all
the formalities necessary for granting registration. [1092-E-H; 1093-A-B).
E
SB International Ltd. & Ors. v. Assistant Director General of Foreign
Trade and Others, [1996) 2 SCC 439, referred to.

3. There is no legal foundation for both the appellants to secure the
relief prescribed in Entry No. 84.66. [1095-B)
F
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 756 of
1987 Etc.

From the Judgment and Order dated 31.7.86 of the Customs Excise,
Gold (Control) Appellate Tribunal, New Delhi in CD (SB) A.No. 458 of G
1985-B-2.

(Bhaskar Raj Pradhan) for Mrs. M. Karanjawala, S. Ganesh, Amit
Bansal,_N.K. Bajpai and V.K. Verma for the appearing parties.

The Judgment of the Court was delivered by H
1090 SUPREME COURT REPORTS [1997] 3 S.C.R.

A THOMAS, J. In both these appeals the question involved is regarding
the relief entitlement of the claimants to customs duty payable at the time
of clearance of the imported commodities. Under Entry No. 84.66 of the
Customs tariff .all items of machinery, including industrial plant, can get
clearance on payment of a concessional rate of 40%, if the goods are
B imported under certain conditions against specified contract registered
with the Customs House. The grievance of the appellants herein is that
such relief was not granted to them.

Appellant in one of these appeals had imported 12 Air Jet Looms
along with their accessories and the goods arrived at the Bombay Port on
C 18.3.1983. Appellant got them cleared from the port on 31.3.1983 on
payment of full duty which was a little above 52 lacs of rupees. On 13.4.1983
he applied to the Collector of Customs for granting registration of his
contract with the buyer as envisaged in Entry No. 84.66 of the Customs
Tariff and he got the registration on 22.4.1983. Then he filed a refund
D application on the premise that he is liable to pay customs duty at the
concessional rate shown in the aforesaid entry. But the claim for refund
was rejected by the Assistant Collector and then he filed an appeal before
the Collector of Customs (Appeal) and got order of the Assistant Collector
set aside holding that appellant is entitled to refund. However, the depart-
ment filed a further appeal before Customs, Excise & Gold (Control)
E Appellate Tribunal (CEGAT) and as per the order impugned before us
CEGAT restored the Assistant Collector's order.

The main contention in the aforesaid appeal is that application for
registration could not be made to the Collector of Customs before he got
F clearance of the goods from the port since he could get the recommenda-
tion from the Textile Commissioner only by 7.4.1983. Thus, for no fault on
his part he could not avail himself of the concessional duty at the time of
clearance.

The position in the other appeal is slightly different and the facts are,
G in brief, these. Appellant therein got import licence on 22.10.1980 for
importing "Sandzimar Planatory Mill". On the strength of the said import
licence he contracted with a foreign seller at Sweeden to despatch the
aforesaid Mill. On 20.3.1981 he addressed a letter to the Government
requesting that the licence might be endorsed for "Project Import" When
H the imported goods arrived at Bombay Port in April 1981 he got them
~..

MIHIR TEXTILES LTD. v. COLLECTOR OF CUSTOMS [THOMAS, J .] 1091

cleared by payment of full duty (which is a little less than 20.5 lacs rupees). A
Appellant got the required endorsement on 14.8.1981 and then he made
an application for refund of the duty paid by him. The application was
made on the premise that he was liable to pay customs duty only at the
concessional rate prescribed under Entry No. 84.66 of the Customs Tariff.
Assistant Collector of Customs rejected his refund claim on the main
ground that he had not obtained registration of the import contract as "a
B
Project Import". Appellant filed an appeal before Collector of Customs
(Appeal) and when that was rejected he went before CEGAT in further
appeal and that too was dismissed by the impugned order.

The contention adopted by both the appellants is identical, that as
they had done their part in obtaining the registration of the import contract
c
as a project import it was quite improper to have denied the benefit of the
concessional relief prescribed in Entry No. 84.66 to importers.

' For appreciating the said contention it is necessary to extract the
aforesaid Entry 84.66 herein (only material portion). D

"84.66 (I) All items of :

(a) Machinery, including prime movers,

(b) Instruments, apparatus and appliances, E
(c) Control gear and transmission equipment,

(d) Auxiliary equipment, as well as all components. (whether
finished or not) or raw materials for the manufacture of the
aforesaid items and their components, required for the initial F
setting up of a unit, or the substantial expansion of an existing unit,
of a specified :

(1) industrial pant, ......... .

Provided these are imported (where in one or in more than G
one consignment) against one or more specific contracts which
have been registered with the appropriate Customs House in the
manner prescribed by Regulations which the Central Board of
excise and Customs may make under section 157 of the Customs
Act, 1962 (52 of 1962) and such contract or contracts has or have H
1092 SUPREME COURT REPORTS (1997) 3 S.C.R.

A been so registered before any order is made by the proper officer
of Customs permitting the clearance for home consumption, or
deposit in the warehouse of items, components of raw materials."

The proviso prescribes, principally, three conditions to be satisfied
for entitlement of the concessional rate shown in the aforesaid entry. They
B are - (1) Goods should have been imported against a specified contract
registered with the appropriate Customs House; (2) Such registration
should have been made in the manner prescribed by the regulations; (3)
Registration of the contract should have been obtained before the order
(granting permission for clearance of the goods) was passed. Unless all the
C three conditions are satisfied, no importer can claim, as a matter of right,
the concessional relief provided in the entry. In these cases the contracts
were not registered at all before the order of clearance was passed. That
fact is not disputed before us and as the appellants were aware of position
they chose to pay full customs duty for making the clearance.

D Learned counsel contended that the importer is not to be blamed for
non-compliance with the conditions prescribed in the entry because all
what should have been done on their part had been done by them and what
remained to be done was only that part which the authorities had to do in
the matter. Obviously the aforesaid contention has no legs to stand at least
E in one case wherein no application was made at all for registration of the
contract before goods were cleared.

In the other appeal it was submitted on behalf of the appellant that
as a matter of fact the appellant had made the application before the goods
arrived at the port. Counsel for the appellant invited our attention to a
F letter which appellant has addressed to "Ministry of Industry, U dyog
Bhawan, Maulana Azad Raod, New Delhi" as proof of such application
Learned Additional Solicitor General contended that the said letter could
not be treated as the application contemplated in the proviso to Entry
84.66, as the ministry of Industry is not the prescribed authority for granting
G registration.

Even assuming that the said letter should have been treated as the
application contemplated in the proviso can the appellant legally claim the
relief of concessional duty? Two circumstances have been highlighted
against his claim. First is that though the appellant got the import licence
H on 22.10.1980 he did not make any application for registration for almost
MIHIR TEXTILES LTD. v. COLLECTOR OF CUSfOMS ffHOMAS, J .] 1093

six months thereafter. Second is that even the letter which he claims to be A
the prescribed application was sent only a month before clearance of the
goods from the port and during the remaining period he could not expect
the Central Government to rush through all the formalities necessary for
granting registration. If any hasty steps were adopted on the application
the resultant order would have been vulnerable to be assailed as an act
done with undue haste. In this context learned Additional Solicitor General
B
referred us to the following observations made by Jeevan Reddy, J. in S.B.
International Ltd. & Others v. Assistant Director General of Foreign. Trade
& Others, (1996] 2 SCC 439 :

"On receipt of the application, the authorities have to satisfy C
themselves about the correctness of the contents of the application.
They also have to satisfy themselves that the application satisfies
all the requirements of the scheme and the other applicable
provisions of law, if any. In a country like ours, where abuse of
such facilities is rampant, reasonable time has to be afforded to D
the authorities to process the application. What is a reasonable
time, of course, depends on the facts of each case. No hard and
fast limit can be prescribed."

Learned counsel for the appellant raised an alternative contention
that the deficiency in the contract for obtaining the concessions should not E
have been taken so seriously and the Customs Authorities should have
granted the reliefs as the appellants had performed their part in complying
with the conditions. Non- compliance of the conditions, according to the
counsel, was only due to the lapses on the part of the authorities concerned.
This contention was expatiated to the extent that the conditions prescribed p
in the proviso to entry No. 84.66 are merely director and not mandatory.
According to the counsel, the conditions prescribed, if interpreted strictly,
would result in the denial of concessional reliefs which statute has con-
ferred on the citizen.

In support of that contention, counsel invited our attention to the G
decision of a Constitution Bench of this Court in State of U.P. v. Manbod-
han Lal Srivastava, (1958] SCR 533, wherein their Lordship were consider-
ing the implication of non- compliance with the conditions provided in
Article 320(3) of the Constitution on an order imposing punishment to a
Government servant without reference to the Public Service Commission. H
1094 SUPREME COURT REPORTS [1997) 3 S.C.R.

A While considering that question learned Judges made a reference to the
Privy Council decision in Montreal Street Railway Company v. Normandin,
AIR (1917) PC 142 and the Federal Court decision in Biswanath Khemka
v. Emperor.· AIR 1015 FC 67. The Constitution Bench held that the
provisions of Article 320(3) are not mandatory and non-compliance of
those provision does not afford any cause of action in a court of law. Privy
B Council in the above quoted decision has observed that the question
whether provisions in a statute are directory of imperative depends upon
the object of the statute and on general rule can be laid down. "When the
provisions of the statute relate to the performance of a public duty and the
case is such that to hold null and void acts done in neglect of this duty
C would work serious general inconvenience or injustice to persons who have
no control over those entrusted with the duty and at the same time would
not promote the main object of the legislature, it has been the practice to
hold such provisions to be directory." This is not a case where a certain
provision is mandatory or directory. Herc the question is whether con~es-
D sional relief of duty which is made dependent on the satisfaction of certain
conditions can be granted without compliance of such conditions. No
matter even if the conditions are only directory.

In Fom1ica India Division v. Collector of Central Excise, (1955) 77
ELT 511, non-compliance with Rule 56A of the Central Excise Rule, 1944
E was held to be insufficient to deny the benefit of a notification to the
assessce. But the said ben6fit was afforded on the special circumstances of
. a case as could be seen from the following words :

"The circumstances in which the appellants did not pay the duty
on the intermediary product before putting the same to the captive
F
consumption for producing that stage, the appeilants contested the
correctness of the classification and had, therefore, not paid the
duty on the intermediary product. When it was found that they
were liable to pay duty on the intermediary product and had not
paid the same, but had paid the duty on the end product, they
G could not ordinarily have complied with the requirements of Rule
56A."

Nor can we find support from the ratio in B.O.J. Finance Ltd. v. The
Custodian & Others, JT (1997) 4 15, that "infringements of the instructions
H issued by the Reserve Bank of India under the Banking Regulations Act
· ..
MIHIR TEXTILES LTD. 1•. COLLECTOR OF CUSfOMS [THOMAS, J .] 1095

Prohibiting the banks from entering into buy-back arrangements do not A
invalidate such contracts entered into between the banks and it's cus-
tomers", as it involved a question of invalidation of the contract. Here
neither the contract not the import is invalid or illegal and the question is
only whether the importer is entitled to the concessional duty.

There is no legal foundation for both the appellants to secure the B
reliefs prescribed in Entry No. 84.66 of the Customs Tariff. Accordingly
we dismiss these appeal.

J.N.S. Appeals dismissed.