Holding

Customs duty is payable based on the date of removal of goods from the bonded warehouse (or presentation of the bill of entry), not the date of entry into Indian territorial waters.

Summary

The respondents imported goods that were exempt from basic customs duty under a notification issued under Section 25(1) of the Customs Act when the goods entered Indian territorial waters and were stored in a bonded warehouse. When the goods were later removed from the warehouse, the exemption was withdrawn and the respondents argued that duty should not be payable because the taxable event occurred on the entry date when duty was nil. The Bombay High Court held in their favour, but the Supreme Court examined earlier decisions (Bharat Surfactants and Dhiraj Lal) and held that the relevant date for levying duty under Section 15 is the date of presentation of the bill of entry or, for warehoused goods, the date of actual removal from the warehouse. Consequently, duty must be paid based on the rate applicable on that later date, not the entry date. The Supreme Court set aside the High Court judgment and allowed the appeals.

Issues considered

What is the relevant date for determining the rate of customs duty under Section 15 of the Customs Act when goods are stored in a bonded warehouse and the exemption is later withdrawn?
Does an exemption in force at the time of entry into Indian territorial waters shield the goods from duty liability at a later date of removal from the warehouse?

Legislation cited

Customs Act, 1962s. 12, s. 15, s. 25(1), s. 31(1), s. 46(1)

Subjects

Customs dutyExemption notificationBonded warehouseSection 15Date of liabilityCustoms Act 1962Supreme Court reversalImport duty

Judgment

A UNION OF INDIA AND ORS.
v.
APAR PRIVATE LTD. AND ORS.

JULY 22, 1999

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

Customs Act, 1962 :

Ss. 12 and 15-Date for determination ofrate ofduty and tariffvaluation
C of imported goods.:_On the date the goods entered territorial waters of India
as also on the day they were stored in bonded warehouse, the goods were
exempt from basic Customs duty under a notification u/s. 25(1)-When goods
were sought_ to be removed from bonded warehouse, exemption notification
had been rescinded and exemption granted was withdrawn-Held, duty has
D to be paid with reference to the relevant date as per s. 15.

Apar Private Ltd. & Ors., v. Union ofIndia and Others, (1985), 22 ELT
644, reversed.

MS. Shawhney v. Mis. Silvania and Laxman Ltd., (1975) 77 Born. L.R.
380, overruled.
E
Mis. Bharat Surfactants (Private) Ltd. and Another v. Union of India
and Another, [1989) 4 SCC 21 and Dhiraj Lal H. Vohra and Others v. Union
of India and Others, [1993) Suppl. 3 SCC 453, relied on.

CIVIL APPELLATE Jurisdiction : Civil Appeal Nos. 1257-1258
F of 1987.

From the Judgment and Order dated 17.10.85 of the Bombay High Court
in W.P. No. 774 and 1215of1979.

C.S. Vaidyanathan, Additional Solicitor General, Joseph Vellapally, N.K.
G Bajpai Dalip Tandon, K.C.Kaushik, P. Parmeswaran, A. Subba Rao, Ms. Sushma
Suri, Sunil Dogra, Ms. Monica Sharma, Rajesh Kumar, U.A. Rana Ms. Arshi
suhail, (Dinesh Kumar Garg, Ms. Radha Rangaswamy, R.K. Agnihotra, Pramod
Swarup, Ramesh Chandra Mishra, Ms. Lata Krishnamurthi, S.N. Bhat, Satish
Vig, Sanjeev Sachdeva) (NP), Raj iv K. Garg, N.D. Garg, K.J. John, A.V. Rangam
H and A. Rangandhan for the appearing parties.
1056
U.0.1. v. APARPRIVATELTD. 1057
A
.
The following Order of the Court was delivered :
.
The judgment of the Full Bench of the Bombay High Court reported in
1985 (22) ELT 644 is called in question in these appeals by special leave before
us. The question which arose for consideration before the Bombay High
Court related to the levy of Customs duty under the provisions of the Sea
Customs Act. B
The brief facts on which the Bombay High Court proceeded were that
when the goods of the respondents 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 in exercise of its C
powers under Section 25(1) of the Customs Act, 1962. When these goods
were sought to be removed from the bonded warehouse, the exemption
notification had been rescinded and the exemption granted thereunder was
withdrawn.
D
The case of the respondents was that on the day when the goods
entered the territorial waters, that is the point of time when the taxable event
under Section 12 occurred; and as the duty was nil on that day, therefore the
question of paying any duty with reference to a subsequent point of time,
namely, when the goods were removed from the warehouse did not arise.
E
The Bombay High Court following its earlier decision in Shawhney v.
Sylvania & Laxman, 77 Born. LR 380, decided in favour of the respondents
and held that as the goods were exempt from payment of tax on the day when
they entered the territorial waters no Customs duty was payable.

. .In our o~inion, this *iistion is no longer res integra. At least two F
dec1s1ons of this Court, namely, Mis. Bharat Surfactants (Private) Ltd. and
Another v. Union of India and Another, [1989] 4 SCC 21 and Dhiraj Lal H.
Vohra and Others v. Unidn of India and Others, [1993] Supp. 3 SCC 453, were
directly concerned with similar contention that had been raised. Dealing with
the same, this Court has in clear terms come to the conclusion that what is G
relevant is the day on which the bill of entry in respect of goods in 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. It is no doubt true that in Bharat Surfactants (supra), this Court
did observe that it did not express any opinion with regard to the soundness
of the view taken by the Bombay High Court in Sylvania & Laxman's Case H
1058 SUPREME COURT REPORTS [1999] 3 S.C.R.

A (77 Born. L.R. 380) and in the judgment under appeal but, nevertheless, as we
read the said judgment, the conclusion of this Court in Bharat Surfactants
was contrary to the view expressed by the Bombay High Court. We do not
find .that the said decision in Bharat Surfactants can in ariy way be
distinguished from the facts of the present case~ Siplilarly in Dhiraj Lal
B (supra), the contention raised that the ship had entered the territorial waters
on 20th February, 1989 and that was the relevant date for determining the
taxability of the imported goods, was rejected. In this connection, it was
observed as follows :

"It is clear from a bare reading of these relevant provisions that the
c due pate to calculate the rate of duty applicable· to any imported
goods shall be the rate and valuation in force, in the case of the
goods entered for home1consumption under Section 46, is the date on
w!tich 'the bill of entry in respect of such goods is presented under
that section and iri the case of goods cleared from a warehouse under
Sectfon'68, the date on which the goods are actua!ly removed from
D th~ warehouse. By operation of the proviso if a bill of entry has been
· ~ ·presented before the date of entry inwards the bill of entry shall be
· deemed ,to h/ave been presented "on the date of such entry inwards"
. but would-be subject to the operation of Sections 46 and 31 ( 1) of the
Act. Section 46( l) provides that the importer of any goods, other than
goods intended for transit or transhipment, shall make entry thereof
E
by presenting to the proper officer a bill of entry for home consumption
or warehousing in the prescribed form and it may be presented under
sub-section (3) thereof at any time after delivery of the import manifest.
Section 31(1) provides that the master of the vessel shall not permit
the unloading of any imported goods until an order has been given
F by the proper officer "granting entry inwards" to such vessel and no
order under sub-section ( 1) shall be given until an import manifest has
been delivered or the proper officer is satisfied that there was sufficient
cause for not delivering it. Granting entry inwards on delivery of
import manifest and the date of arrival of the vessel into port admittedly
are on March 2, 1989 and the Master of the vessel made a declaration
G in this behalf that they would discharge the cargo on March 2, 1989
therefore, the relevant date under Section 15(l)(a) is the date on which
entry inwards after delivery of import manifest was granted to discharge
the cargo for the purpose of the levy of the Customs duty and rate
of tariff. The contention, therefore, that the ship entered Indian territorial
H waters on February 20, 1989 and was ready to discharge the cargo is
'
U.O.l. v. APARPRIVATELTD. 1059
not relevant for the purpose of Section 15(1) read with Sections 46 A
and 31 of the Act. The prior entries regarding presentation of the bill
of entry for clearance of the goods on February 27, 1989 and their
receipt in the appraising section on February 28, 1989 also are
irrelevant. The relevant date to fix the rate of Customs duty, therefore,
is March 2, 1989. The rate which prevailed as on that date would be B
the duty to which the goods imported are liable to the impost and the
goods would be cleared on its payment in accordance with the rate
of levy of Customs prevailing as on March 2, 11989."

Following the aforesaid two decisions of this court, we are of the
opinion that the judgment under appeal does not lay .down the law correctly. C
Duty has to be paid with reference to the relevant date as per Section 15 of
the Customs Act. We, accordingly, aliow these appeals and set aside the
judgment of the Bombay High Court, the result of which woul~ be that the
writ petitions filed by the respondents in the Bombay High Court would stand
dismissed.
\ D
No order as to costs.

RP. Appeals allowed.