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Time of Publication of E-Gazette Is Relevant for Determining Enforceability of Notifications-SC

Union of India and Ors. v. Chatha Mills Ltd. and Ors.,

Civil Appeal No 3249 of 2020 (Arising out of SLP(C) No 3860 of 2020, September 23, 2020.

Counsel for Writ Petitioners/ Respondents: Mr PS Narasimha, learned Senior Counsel.

Counsel for Appellants: K.M. Nataraj, learned Additional Solicitor General

The Hon’ble Supreme Court Comprising of Justice D.Y.Chandrachud, Justice Indu Malhotra and Justice K.M.Joseph held in this case that the Notification issued by the Central Government following the aftermath of the Pulwama attack enhancing the Customs Duty by 200% will not apply retrospectively.

The present case is an appeal by the Union of India against the order passed by the Hon’ble Punjab and Haryana High Court.

Following the attack in Pulwama on 14 February 2019, the Union Government issued a notification under Section 8A of the Customs Tariff Act 1975 by which all goods originating in or exported from the Islamic Republic of Pakistan were subjected to an enhanced customs duty of 200%. The precise time at which the notification was uploaded on the e-Gazette was 20:46:58 hours. Customs authorities at the land customs station at Attari sought to enforce the enhanced rate of duty on importers who had already presented bills of entry for home consumption before the enhanced rate was notified in the e-Gazette. . Their arbitrary action based on the notification made the Writ Petitioners to challenge the notification before the High Court of Punjab and Haryana. Following the High Court verdict in favour of the petitioners, the Union of India approached the Supreme Court.

The questions of law formed and decided by the Apex Court;

1. What is the nature of the Notification? Is it a species of subordinate legislation?

2. If it is subordinate legislation, when did it commence? What is the scheme of the Customs Act as regards the rate of duty on imports and the power of assessment? Was the Notification in force on 16.02.2019 so that it would cover all the transactions countenanced by the Bills of Entry which were duly presented during the office hours on 16.02.2019? What constitutes a day under Section 15 of the Customs Act?

3. Whether the Notification is covered by Section 5(3) of the General Clauses Act?

4. Whether the appellants were justified in resorting to re-assessment in these cases?

Contentions from both sides

The appellants in the present appeal contended that, (i)Section 15 should be interpreted in light of the rule of literal construction and it is the simple intent of Parliament to consciously make the date on which the Notification is issued as the date for determination of the rate of duty (as applicable), which this court must uphold. (ii)The schedule is a part of the Act, and hence an amendment to it is an amendment to the Act (iii) in view of (ii) it is an amendment to a Central Act within the meaning of 3(7) and hence according to Section 5(3) which states that “a Central Act or Regulation, unless the contrary is expressed, comes into force immediately on the expiration of the day preceding its commencement” would apply.

The respondents contended that (i) Subordinate legislation is not retrospective unless the statute under which it has been framed, expressly or by necessary implication, imports retrospectively. (ii) In terms of the provisions of Section 15(1)(a), where goods entered for home consumption under Section 46, the rate of duty is the rate in force on the date on which a bill of entry, in respect of such goods, is presented under Section 46. Regulation 4(2) of the Information Technology Regulations 2018 has been made pursuant to Section 46 and contains a deeming fiction which prescribes when the presentation of the bill of entry and self-assessment is complete. (iii) in view of the above contention, once the bills of entry were filed and self-assessment was complete, the subsequent issuance of notification 5/2019 at 20:46:58 hours would have no application to the present batch of cases.

Justice D.Y.Chandrachud authored the judgment on behalf of himself and Justice Indu Malhotra. Justice K.M.Joseph concurred with the view taken by Justice Chandrachud in his judgment.

The court, while determining the rate under Section 15 of the Customs Act 1962, explained how section 15(1) of the Customs Act, section 40 of the Customs Act and Regulation 4(2) of the Bill of Entry Regulations 2018 are intertwined in the following words:

“The provisions of Section 15(1)(a) have to be read in conjunction with the provisions of Section 46 which are referred to in the former provision. Section 46 has incorporated a regime which encompasses the submission of the bill of entry for home consumption or warehousing in an electronic format, on the customs automated system in the manner which is prescribed. The Regulations of 2018 stipulate the manner in which the bill of entry has to be presented. The deeming fiction in Regulation 4(2) specifies when presentation of the bill of entry and ‘self assessment’ are complete. The rate of duty stands crystallized under Section 15(1)(a) once the deeming fiction under Regulation 4(2) comes into existence. The regulations have to be read together with the statutory provisions contained in Section 15(1)(a) and Section 46, while determining the rate of duty”.

The Supreme Court while making reference to its judgments in Bharat Surfactants (Private) Limited vs. Union of India, Priyanka Overseas Pvt. Ltd. vs. Union of India, DhirajLal H Vohravs. Union of India and D.C.M. vs. Union of India explained as to on what basis the duty charged must be determined in the following words:

“The presentation of a bill of entry for home consumption under Section 46 is hence the definitive event with reference to which the customs duty payable for import is determined. The duty in force on the day when the bill of entry for home consumption is presented is the duty which is applicable under Section 15(1)(a). It is in view of this principle that the entry of the vessel into territorial waters, before the presentation of the bill of entry, has been held not to fix the rate of duty where the rate of duty has undergone a change”.

A notification which is issued in terms of the provisions of Sub-section (1) of Section 8A is akin to the exercise of a delegated legislative power. The Central Government is empowered to issue a notification enhancing the rate of duty where it is satisfied that immediate action is necessary to increase the rate of customs duty on an article specified in the First schedule. In issuing a notification under Sub-section (1) of Section 8A, the Central Government exercises power as a delegate of the legislature. The issue now to be considered is whether the notification that was issued by the Central government under Section 8A(1) of Customs Act at 20:46:58 hours on 16 February 2019 took effect commencing from 00:00 hours on that day.

In view of the above, the court while making reference to its judgments in Kolhapur Canesugar Works Ltd. v. Union of India (UOI) and Securities and Exchange Board of India v. Magnum Equity Services Ltd referred to section 5(3), section 3(7), section 3(13) and section 3(50) of the General Clauses Act and observed how the present Notification is a delegated legislation in the words below:

Notification 05/2019 was issued by the Central Government under the delegated authority to increase emergency tariff duties under Section 8A of the Customs Tariff Act, 1975. The notification has been issued in pursuance of a statutory power. The notification has the effect of enhancing the rate of duty prescribed in the First Schedule to the Customs Tariff Act. That does not, transform the notification which has been issued in pursuance of a statutory authority into a ‘Central Act’.

The court by noting how the power of reassessment under section 17 is not applicable in the present case and in view of all that was discussed above concluded that the notification enhancing the tariff duty cannot be applied retrospectively. The court further noted,

In the present case the twin conditions of Section 15 stood determined prior to the issuance of Notification 5/2019 on 16 February 2019 at 20:46:58 hours. The rate of duty was determined by the presentation of the bills of entry for home consumption in the electronic form under Section 46. Self-assessment was on the basis of rate of duty which was in force on the date and at the time of presentation of the bills of entry for home consumption. This could not have been altered in the purported exercise of the power of re-assessment under Section 17 or at the time of the clearance of the goods for home consumption under Section 47. The rate of duty which was applicable was crystallized at the time and on the date of the presentation of the bills of entry in terms of the provisions of Section 15 read with Regulation 4(2) of the Regulations of 2018. The power of reassessment under Section 17(4) could not have been exercised since this is not a case where there was an incorrect self-assessment of duty. The duty was correctly assessed at the time of self-assessment in terms of the duty which was in force on that date and at the time. The subsequent publication of the notification bearing 5/2019 did not furnish a valid basis for re-assessment.

Justice K.M.Joseph, while concurring with the above view, observed :“There is no merit in the contention of the Union of India that by virtue of section 5(3) of the General Clauses Act, the notification must be treated as effective from the point of time immediately after mid night on 15/16 February, 2019.”

There was no order as to costs and the appeal was appropriately dismissed.

Kalidharun K M View/Download the Judgment: Union of India and Ors. v. Chatha Mills Ltd. and Ors.



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