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PETITIONER: PATEL INDIA (PRIVATE) LTD.

       Vs.

RESPONDENT: UNION OF INDIA & OTHERS(with connected petition)

DATE OF JUDGMENT28/03/1973

BENCH: SHETTY, K.J. (J) BENCH: SHETTY, K.J. (J) CHANDRACHUD, Y.V.

CITATION:  1973 AIR 1300            1973 SCR  (3) 811  1973 SCC  (1) 745

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

HEADNOTE: The  appellant  Company was the sole distributing  agent  in India  for the imported products of an American :firm.   The Customs authorities 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 1954-55, the appellant Company imported  several items set out in Annexure ’D’ of the Special Leave Petition. When  items  1  and 2 arrived in  Bombay  Port,  the  Custom authorities,  ignoring  their  hitherto  followed  practice, refused  to accept the invoice price as the real  value  and levied  excess  duty.  An appeal to  the  Customs  Collector failed,  whereupon the appellant Company lodged  a  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  authorities  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 revision, 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  appellant-Company,  however, did not  file  appeals  in respect  of  the other items which had  arrived  during  the pendency  of  the said revision, although the  Customs  had, levied excess duty thereon.     The Customs authorities refunded the excess duty  levied on  those items, for which application for refund  was  made within  the time prescribed under s. 40, but refused  refund in respect of the rest of the items., An  appeal  to  the  Collector and  a  revision  before  the Government  of  India  were both  rejected.   The  appellant company, thereafter, filed a writ petition before the  Delhi High Court for appropriate relief, but was without success.

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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 of Customs, Bombay, and therefore, the  appellant- Company had no claim.  Allowing the appeal, HELD  :  (1)  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  consignments  and  the Custom authorities had 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 in excess of 8 12    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. [815H] (ii) Section  40  had no application in  the  present  case. Section  40 clearly applies only to cases where duties  have been  paid through inadvertence, error  or  misconstruction, 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 Section 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. [816D]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1799  of 1969. Appeal  by 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 Kumar, for The appellant 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  products of M/s.  Sawyer’s Inc., Portland, U.S.A.,  and as such used to import View master stereoscopes, reels etc. The custom authorities 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 1954-55,  the  appellant-company  imported several  items  set out in Annexure ’D’ to  the  appellant’s special  leave  petition,  the details of which  it  is  not necessary  to set out here.  When items 1 and 2  arrived  in Bombay   port,  the  customs  authorities,  ignoring   their hitherto  followed practice,’ 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  a revision 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 which the Customs, refusing  to  accept

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their invoice price. 813 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 price and also  ordered refund  to the appellant-company of the excess duty  charged on them. It  would  seem  that since the said  revision  was  pending before  the  Government  of  India,  the   appellant-company 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, 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 been made within the time prescribed by s. 40. An  appeal  to  the  Collector and  a  revision  before  the Government of India against the said refusal to grant refund were  both  rejected, the refusal by the  Customs  appraiser being  confirmed on the ground that refund was  not  applied for in time under sec. 40. The appellant-company thereupon filed a writ petition in the High  Court  of  Punjab (at Delhi) under  Art.  226  of  the Constitution pleading inter alia that :               (a)   Sec. 40 of the Act had no application,               (b)   the  Union of India was not entitled  to               appropriate or retain the said excess duty,               (c)   the appellant-company had ’a 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 directing return of the excess duty. 8 14 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, it 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  by law.  I deny that the  petitioner               has a legal right to the return of the  excess               customs duty levied on all the consignments.               I deny and controvert the allegations made  in               clause (J) of para No. 16 of the petition.   I

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             say that the Bombay Customs 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 their letter  dated               3-4-1957."               Para 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               items simply on the ground that an application               therefor   had  been  made  within  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 the excess  duty               was rightly charged on those items. The  learned  Single Judge of the High Court who  heard  the writ  petition held that sec. 40 of the Act did  not  apply; that  it applied to erroneous payments and not to  erroneous assessments.  He, however, held that the proper. remedy  for the appellant-company was to have filed appeals against such erroneous assessments under s. 188 of the Act, and that that having  not  been done, no relief could be  granted  to  the appellant-company.    He,   however,   observed   that   the Government was morally bound to grant the  815 refund  and made a recommendation that the refund should  be made  to  the appellant-company.  A  Letters  Patent  appeal against  the said judgment was rejected.  Hence this  appeal by special leave. The only question which arises in this appeal is whether the High Court ought to have granted in the circumstances of the case  the relief asked for by the appellant-company  in  its writ petition. Sec.  29  of the Act casts a duty on the owner  of  imported goods,  whether  liable to duty or not, to  state  the  real value, quantity and description of such goods in the bill of entry or the shipping bill and to subscribe a declaration of the  truth of such statement at the foot of such  bill.   In case  of  doubt,  the Customs Collector  has  the  power  to require  such  owner or any one else in  possession  of  any invoice,  broker’s  note,  policy  of  insurance  or   other document,  whereby 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 the Customs Collector  has any  doubt  as regards their declared value.  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. a 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

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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 by it and in support thereof  had  produced  the  manufacturers’  invoices.   The customs authorities had 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 was totally  eradicated  when  the Government  of  India  decided the  company’s  revision  and directed that the invoice price should be accepted and  duty should be assessed accordingly.  In respect of the two items to  which  the  revision related, the  Government  had  also directed  refund of the excess duty charged and  paid  under protest.  There was thus no doubt or dispute left thereafter as  regards the invoice prices ’being the real value of  the consignments.   The direction given in its decision  in  the said  revision that the invoice price should be accepted  as real  value  within  the meaning of sec. 30  of  the  Act  H applied  to  the  rest of  the  consignments.   The  customs authorities,therefore,  were  not right in law  in  charging excess  duty on the rest of the consignments.   Indeed,  the excess duty was charged in violation of ss. 29 and 30 and in excess of Jurisdiction, since, as held 8 16 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  re- fund  could only have been ordered on the footing  that  the excess  duty on those consignments had been charged  without the  authority  of 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 law. Sec.  40, on which the Union of India relied in its  return, provides  that no customs duties or charges which have  been paid,  and of which repayment wholly or in part, is  claimed in  consequence  of  the  same  having  been  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 refund application 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 imported goods and payment under  protest was  also  made on that footing The ultimate result  in  the appellant-company’s  revision  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   duty 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  law,  for otherwise  they  would  not have agreed to  refund  it,  and

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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  it  to  the appellant  company  who had paid it under protest  and  only with  a view no+, to incur demurrage charges,  unless  there was some provision of the Act which debarred the  appellant- company from recovering it. The only provision relied on by the customs-authorities  was sec.  40  of the Act.  Indeed, their refusal to  refund  the excess-duty 8 17 both in their return and in the High Court was on the ground of  the omission of the appellant-company to apply  for  the refund  within  the time provided by that  section.   It  is necessary  to emphasise that it was not their case that  the invoice  price  of the items in question was  not  the  real value  or that the excess dirty was lawfully levied or  that the appellant-company was not entitled to the refund thereof for  any reason except the omission to apply ,for it  within the time prescribed ’by sec. 40.  But since sec. 46 did  not apply  to the facts of the case, the respondents  could  not retain  the  excess duty except upon the authority  of  some other provision of law.  No other provision was pointed  out by them which would disentitle the appellant-company to  the refund  oh  the ground of its rights  being  time-barred  or otherwise.   No  such  provision other than  sec.  40  which disentitled the appellant-company to the refund having  been put  forward and the customs authorities not being  entitled to  retain the excess duty, there was a legal obligation  on the part of the respondents to return the excess duty and a corresponding  legal  right  in  the  appellant-company   to recover it.  Besides, except s. 40 the Act contains no other provision  laying  down any limitation within which  an  im- porter  has to apply for refund.  The refusal to return  the excess duty on the round that the appellant-company had not applied  within  time  provided  by  the  Act  was   clearly unsustainable.   Since  there was not and could not  be  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 a 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  th‘e  imported items. For  the  reason aforesaid, we are satisfied that  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. S.C.                                    Appeal allowed. 818