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PETITIONER: THE PRINCIPAL APPRAISER (EXPORTS)COLLECTORATE OF CUSTOMS & C

       Vs.

RESPONDENT: ESAJEE TAYABALLY KAPASI, CALICUT

DATE OF JUDGMENT11/10/1995

BENCH: MAJMUDAR S.B. (J) BENCH: MAJMUDAR S.B. (J) JEEVAN REDDY, B.P. (J)

CITATION:  1995 SCC  (6) 536        JT 1995 (7)   260  1995 SCALE  (5)683

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T S.B. Majmudar. J.      The  Principal  Appraiser  (Exports),  Collectorate  of Customs &  Central  Excise,  Customs  House,  Cochin-3,  the Appellate Collector  of Customs,  Customs &  Central  Excise House, Madras  and the  Union of  India represented  by  the Joint Secretary,  Ministry of Finance, Department of Revenue and Insurance,  New Delhi  have  preferred  this  appeal  by special leave  against the  judgment and order of a Division Bench of the Kerala High Court allowing writ petition of the respondent on  24th November  1972. A  few relevant facts to highlight the grievance of the appellants are required to be mentioned at the outset.      Respondent at the relevant time carried on the business of export  of coir yarn and ropes at Calicut in the State of Kerala. In  July 1966  the respondent  presented before  the customs authorities  at the  port of  Cochin, shipping bills for three  lots of  coir yarn  booked to be shipped on board the S.S.  Neils Maersk.  The said  shipping bills  were  for getting entry  outwards for  the said  ship destined for the port of  Basrah. The  duty payable on the export of the said goods at  the then  prevailing  rate  was  assessed  by  the customs authorities.  The same  was paid  by the respondent. The "entry  outwards" as  envisaged under  Section 39 of the Customs Act,  1962 (hereinafter referred to as the Act’) was issued and  an order permitting the clearance of the loading of the  goods for  exports as  envisaged under Section 51 of the Act was made.      For want  of space  in the  said vessel  the goods were "shut out". The respondent, however, secured necessary space for exporting  these goods  by  another  vessel  named  S.S. p.Xilas. Respondent   accordingly  submitted fresh  shipping bills on  9th August  1966 for  ‘entry  outwards’  for  S.S. P’Xilas. On  the basis  of a  petition made on behalf of the respondent the  earlier shipping  bills were  allowed to  be

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amended enabling  the respondent  to ship the goods on board the said vessel S.S. P’Xilas.      In the  meanwhile and before the necessary amendment of the shipping  bills the export duty payable on coir yarn was enhanced from  10% to  25%. The  first appellant accordingly demanded  from   the  respondent  an  additional  amount  of Rs.4,444.96. The respondent paid the same under protest.      Thereafter the  respondent by his letter dated 21st May 1968/6th July  1968 applied  for  refund  of  the  aforesaid amount as  per Section  27 of the Act. On 13th June 1968 the Assistant   Collector   (Customs),   Cochin   rejected   the application of  the respondent  on the ground that the total amount of  export duty paid by respondent did not exceed the duty leviable  on the  goods to  be exported at the relevant date of  issuing the  ‘entry outwards’  for  the  ship  S.S. P’Xilas. Respondent  unsuccessfully carried  the  matter  in appeal before the Appellate Collector of Customs, Madras who dismissed the  appeal on 16th September 1969. Thereafter the respondent moved  the Commissioner  of Revision Applications to the  Government of  India, Ministry of Finance, New Delhi under Section  131 of  the Act by filing three applications. The Commissioner rejected all the three applications.      Under these circumstances the respondent moved the High Court of Kerala at Ernakulam in the aforesaid writ petition. A Division Bench of the High Court allowed the writ petition by its order dated 30th July 1975 and directed the appellant no.1 to  refund the amount of Rs.4,444.96 to the respondent. It is  this order  of the  High Court which is challenged by the appellants in this appeal.      Learned counsel for the appellants vehemently submitted that on  a conjoint  reading  of  Sections  16(1)  with  the proviso, 17(1)  and 50 of the Act it has to be held that the proper export  duty chargeable  on any  goods sought  to  be exported would  be duty  payable on  the  date  when  ‘entry outwards’ for  the concerned  vessel through which the goods are exported  was issued. That in the present case the goods in question  got exported  through vessel  S.S. P’Xilas  and ‘entry outwards’  for the said vessel was issued only on 9th August 1966.  That the  export duty  payable on that day was 25% ad valorem and consequently the earlier ‘entry outwards’ for the vessel the S.S. Neils Maersk which never resulted in the export  of the  goods was  totally redundant  and of  no legal effect.  That the  High Court  had patently  erred  in taking the  view that  once the duty was assessed and ‘entry outwards’ was  issued for  the vessel  S.S. Neils Maersk the authorities could  not demand  any further  duty on the same goods even  though they  got actually exported by the second vessel S.S.  P’Xilas. No one has appeared for the respondent to contest these proceedings.      Having  given   our  anxious   consideration   to   the contentions  canvassed   by  the  learned  counsel  for  the appellants we  have reached  the conclusion  that the  order under appeal cannot be sustained.      A few relevant provisions of the Act are required to be noted for  appreciating the  contentions canvassed on behalf of the appellants. Section 2(18) of the Act defines ‘export’ to mean,  ‘taking out  of India  to a  place outside India’. Section 2(15)  defines ‘duty’  to  mean,  ‘duty  of  customs leviable under  this Act’.  Section 12 which is the charging Section lays  down by  sub-section (1)  thereof that  except otherwise provided  in this  Act, or  any other  law for the time being  in force,  duties of  customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51  of 1975),  or any  other law for the time being in force, on goods imported into, or exported from India.

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    It becomes, therefore, clear that under the Act customs duty will  have to  be paid  by way  of export duty on goods which are  exported from  India and  the taxing  event  will occur  when  the  goods  are  taken  out  of  India  to  the destination of  a place  outside  India.  Section  16(1)  as applicable at the relevant time read as under:      "16(1).   The rate  of duty  and  tariff      valuation,  if  any  applicable  to  any      export goods,  shall  be  the  rate  and      valuation in force,      (a)  in the  case of  goods entered  for      export under  section 50, on the date on      which a  shipping  bill  or  a  bill  of      export  in  respect  of  such  goods  is      presented under that section:      (b)  in the  case of any other goods, on      the date of payment of duty:           Provided that  if the shipping bill      has been  presented before  the date  of      entry outwards  of the  vessel by  which      the  goods   are  to  be  exported,  the      shipping bill  shall be  deemed to  have      been presented on the date of such entry      outwards." Section 50  deals with  entry of  goods for  exportation. It reads as under :      "50. Entry of goods for exportation.-      (1) The exporter of any goods shall make      entry  thereof   by  presenting  to  the      proper officer  in the  case of goods to      be exported  in a  vessel or aircraft, a      shipping bill,  and in the case of goods      to be exported by land, a bill of export      in the prescribed form.      (2)  The exporter  of any  goods,  while      presenting a  shipping bill  or bill  of      export, shall  at the  foot thereof make      and subscribe  to a  declaration to  the      truth of its contents." Once the  proper officer is satisfied that any goods entered for export  are not  prohibited goods  and the  exporter has paid the  duty, if  any, assessed  thereon and  any  charges payable under  this Act  in respect  of the same, the proper officer may  make an  order permitting clearance and loading of the goods for exportation. Section 39 of the Act provides that the  master of  the vessel shall not permit the loading of any export goods, other than baggage and mail bags, until an order  has been  given by  the  proper  officer  granting entry-outwards  to  such  vessel.  The  aforesaid  statutory provisions clearly  indicate that  various steps  have to be taken by  an exporter before his goods actually get exported meaning thereby they go out of Indian territorial waters. In the facts  of the present case it is not in dispute that the respondent had  entered his  goods for  exportation  as  per Section 50,  assessment was  also made by the proper officer under Section 51 and the officer had permitted clearance and loading of  the goods in vessel S.S. Neils Maersk. But these goods could not be exported as there was no room in the said vessel with  the result  that they  were brought back to the warehouse and  had to  await the  arrival of the next vessel which could  carry them.  That event  happened on 9th August 1966 when  another vessel  S.S. P’Xilas  was  available  and amended  shipping   bills  were   again  presented   by  the respondent under Section 50 read with Section 51 and Section 39 of the Act. The ‘entry outwards’ for the said vessel S.S.

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P’Xilas, therefore,  became effective on and from 9th August 1966. Once  that happened  Section 16 got squarely attracted to the  facts of  the case. The rate of export duty on these goods had to be the rate in force as prevalent on the day on which the  amended shipping  bill or  a bill  on  export  in respect of such goods was presented under Section 50. As the earlier  shipping  bills  were  rectified  and  amended  for permitting the  export of  the goods in the second ship S.S. P’Xilas only  on 9th  August 1966  the rate of duty would be the one  that prevailed  on 9th  August 1966. The proviso to Section 16(1) makes the position clear. It lays down that if the shipping  bill has  been presented  before the  date  of entry outwards  of the  vessel by  which the goods are to be exported, the  shipping bill  shall be  deemed to  have been presented on  the date of such entry outwards. Thus the date of  ‘entry   outwards’  would  be  the  relevant  date  with reference to  which the rate of customs duty on the exported good is  to be  worked out. ‘Entry outwards’ for vessel S.S. P’Xilas was  of 9th  August 1966.  On that  day the  rate of export duty  prevalent was  25% and  valorem and not 10% and valorem which  prevailed earlier.  It is obvious that ‘entry outwards’ has  to be  effected in  connection with  a  given vessel and  unless that is done the master of the ship would not permit loading of such goods for export in his vessel as laid down  by Section 39. Even the High Court has noted this position but  according to  the High  Court once  there  was already an  ‘entry outwards’  granted with  reference to the vessel S.S.  Neils Maersk  and duty  was  assessed,  in  the absence of  there being any provision of reassessment of the duty under  the Act  the assessed duty could not change. The said reasoning  is not  well sustained. On the scheme of the Act the  customs duty  by way  of export duty is leyied when the goods are exported or taken out of India. In the present case the goods never left the territorial limits of India on any day  prior to 9th August 1966. Earlier was an incomplete or inchoate  attempt on  the part  of respondent  to  export these goods  through vessel  S.S.  Neils  Maersk.  For  that vessel even  though ‘entry  outwards’ was  obtained it could not result  into any  export as per Section 39 of the Act as that ship had no room to carry these goods. Consequently the goods remained unexported through that vessel. The effective export of  these goods  took place  only by  the next vessel S.S. P’Xilas.  For that purpose the shipping bills were duly amended, procedure  of Section  50 read with Section 51 was, therefore, followed afresh by the respondent and when he got ‘entry outwards’ for vessel S.S. P’Xilas which permitted him to get  these goods  loaded in  that ship as per Section 39, the prevalent  rate of duty which the respondent had to bear on the  exported  goods  would  be  the  duty  at  the  rate prevalent when  ‘entry outwards’  for ship  S.S. P’Xilas was obtained by the respondent. That is, the clear effect of the combined  operation  of  Section  16(1)  proviso  read  with Sections 39,  50 and  51 of the Act. There is no question of any re-assessment  of the export duty as erroneously assumed by the  High Court.  The assessment of effective export duty was only  done once  the goods  got  cleared  for  effective export  via   vessel  S.S.  P’Xilas.  The  earlier  inchoate exercise of  an attempt  to export  them through vessel S.S. Neils Maersk  remained an exercise in futility. Consequently the earlier assessment of duty being an ineffective exercise created no  binding obligation  either on  the part  of  the assessing authorities  or on  the part  of  the  respondent- exporter. Learned counsel for the appellants was, therefore, right when  he contended  that the  High Court  had erred in taking the view that the export duty payable on the goods in

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question was as per the rate that prevailed at the time when first  ‘entry  outwards’  was  obtained  in  July  1966  for exporting the goods through vessel S.S. Neils Maersk and not the ‘entry  outwards’ as  per the amended shipping bills for vessel S.S.  P’Xilas in  August 1966.  It is  not in dispute between the  parties that  if the  effective rate  of export duty was as prevalent on 9th August 1966 the respondent will not be  entitled to  claim any refund of the additional duty of customs paid by him for exporting these goods through the second vessel S.S. P’Xilas.      It may  also be  noticed at  this stage  that when  the Customs Act  1962 came  into force  no regulations under the Act were  framed at the relevant time. But these regulations came to be framed only in 1976 being Shipping Bill & Bill of Export (Form)  Regulations, 1976. However, in the absence of any such regulations prior to 1976 it could be presumed that the earlier  forms prescribed  for exporting goods under the Sea Customs Act, 1878 which came to be repealed and replaced by the  Customs Act, 1962 with effect from 1st February 1963 continued to  remain in force. The position of law under the Sea Customs Act, 1878 was that under Section 137 thereof the Chief Customs  Officer was  authorised to prescribe the form of the  shipping bill. 1934 edition of the Bombay Supplement to the  Indian Sea  Customs Manual compiled by the erstwhile Central Board  of Revenue  under  Section  204  of  the  Sea Customs Act  contains the  proforma of a shipping bill. Form No.34 which prescribes the format of a shipping bill clearly indicates that  the name  of the  vessel through  which  the goods are  to be exported is one of the essential requisites of such  a shipping  bill. It  becomes thus  clear that  the shipping bill  as well  as the ultimate ‘entry outwards’ for the  concerned   goods  sought  to  be  exported  must  have reference to  the vessel  through which such goods are to be exported. Therefore,  before any  goods are  exported out of Indian territorial waters which vessel is to be utilised for exporting  them,   becomes  a  relevant  consideration.  The concerned shipping bill has to be lodged with reference to a given vessel which is to carry these goods out of the Indian territorial waters  and in connection with such a vessel the ‘entry outwards’  has to be obtained and only thereafter the master of  the vessel  should allow the loading of the goods for being exported out of India. The rate of duty payable on such exported  goods would,  therefore, be  the rate of duty that was prevalent at the time when ‘entry outwards’ through a given  vessel is  obtained.  There  cannot  be  an  ‘entry outwards’  in  connection  with  a  vessel  which  does  not actually carry  such goods for the purpose of export. In the facts  of   the  present   case,  therefore,  conclusion  is inevitable that earlier ‘entry outwards’ for the vessel S.S. Neils Maersk  was an  ineffective ‘entry  outwards’ for  the purpose of  computing the  rate of customs duty of export on the goods  in question. Only the subsequent ‘entry outwards’ for vessel  S.S. P’Xilas  which actually carried these goods out of  Indian territorial waters and effected the export of these goods  was the  only  relevant  and  operative  ‘entry outwards’ and  the rate of duty prevalent on the date of the said ‘entry  outwards’ for  vessel S.S. P’Xilas was the only effective rate of duty payable on the export of these goods. Consequently it  must be  held that  the respondent has made out no  case for  refund of  Rs.4,444.96 for which he lodged the claim.      Before parting  with this  discussion we may refer to a decision of  a Constitution Bench of this Court in Gangadhar Narsinghdas Agarwal v. P.S. Thrivikraman & Anr. (AIR 1973 SC 350) wherein  proviso to  Section 16  of the  Act  fell  for

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consideration of  the Bench.  The question  before the Bench was whether  the rate  of customs duty prevalent at the date of entry  outwards of  the vessel  was to  be  operative  or whether the  change in  the rate of duty by any notification subsequent to  the date  of entry outwards of the vessel but before the  actual arrival  of the vessel in the port was to be operative. The Constitution Bench held that the operative rate of  duty would  be the  duty that was chargeable on the date of  ‘entry outwards’ of the vessel and if there was any change in  the duty  before the actual arrival of the vessel such change  was of  no legal  consequence. For  arriving at this conclusion Ray, J., speaking for the Constitution Bench made the  following pertinent  observations in paragraphs 15 to 17 of the Report:      "15. Entry outwards of a vessel is dealt      with in  Section 39  of the Act. Section      39 is as follows:-      39.  The master  of a  vessel shall  not      permit the  loading of any export goods,      other than  baggage and mail bags, until      an order  has been  given by  the proper      officer granting  entry outwards to such      vessel’.  Proper  officer  mentioned  in      Section 39  of the  Act  is  defined  in      Section 2(34)  of the Act in relation to      any functions to be performed under this      Act to  mean the  officer of Customs who      is assigned those functions by the Board      or the  Collector of Customs. Section 39      contemplates  an  order  by  the  proper      officer granting  entry outwards to such      vessel. In  the present case, the agents      of the  ship made  an application  on 30      July, 1966  for entry  outwards  of  the      vessel.  The   Assistant  Collector   of      Customs, Marmagoa  granted permission on      30 July, 1966 to ship cargo on board the      vessel. Under  Section  39  of  the  Act      loading  of  goods  is  not  permissible      until an  order is  made granting  entry      outwards to  the vessel.  In the present      case,  the  Customs  Authorities  on  30      July, 1966  made an order granting entry      outwards to the vessel.      16.  Under Section  16 of  the  Act  the      date of  presentation of a shipping bill      is the  relevant date  for determination      of rate  of duty  and  tariff  valuation      applicable to  export goods.  Under  the      proviso to Section 16 of the Act however      there   is    a   fictional   date   for      determination of  such duty. The fiction      is introduced  by providing for the date      of entry  outwards of  the vessel  to be      relevant date in case where the shipping      bill has  been presented before the date      of entry  outwards of  the  vessel.  The      date of  entry outwards of the vessel is      the order  made under  Section 39 of the      Act.      17.  Section 38  of the  Sea Customs Act      1878 was  the counter-part of Sec. 16 of      the Customs Act, 1962. Section 61 of the      Sea Customs  Act, 1878  was the counter-      part of  Section 39  of the Customs Act,

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    1962. Under  Section 38  of the 1878 Act      the rate  of duty  was the rate in force      when the  shipping  bill  was  delivered      under  Section  137  of  the  1878  Act.      Section 137 of the 1878 Act provided for      clearance  of   goods  for  shipment  by      delivery of  shipping bill,  payment  of      duties and  the passing  of the shipping      bill by the Customs Authorities. Section      38 of  the 1878  Act had  two  provisos.      Under the  first  proviso  to  that  old      section where the shipment was permitted      without   a   shipping   bill,   or   in      anticipation  of   the  delivery   of  a      shipping bill,  the rate  of duty was to      be the  rate in  force at  the time when      the shipment  of goods  commenced. Under      the second  proviso to Section 38 of the      1878 Act  where the shipping bill was in      anticipation  of   the  arrival  of  any      vessel or  before an order was given for      entry  outwards   of  the   vessel   the      shipping bill  must be  deemed  to  have      been delivered on the date on which that      vessel arrived  or  entry  outwards  was      given whichever  was  later.  Under  the      provisions of Section 38 of the 1878 Act      the Customs  Authorities  had  power  to      apply the  rate in  force on the date of      the arrival of the vessel. Under Section      16 of the 1962 Act it is not permissible      to do  so. The  statue does  not contain      such a provision. Section 16 of the 1962      Act speaks of the fictional date only in      relation to  the order  of date of entry      outwards of  the vessel.  In the present      case, the order of entry outwards of the      vessel was made prior to 2 August, 1966.      Therefore, the  Customs  Authorities  in      the   impugned   order   acted   without      jurisdiction in  imposing  duty  on  the      export by holding that the date of entry      outwards of  the  vessel  was  the  date      "when the vessel arrived"." It is,  therefore, well  settled that  the relevant  rate of customs duty in connection with the export of goods would be the rate  which prevailed  when the ‘entry outwards’ for the vessel which ultimately exported the goods, was effected and subsequent changes  in the  rate of  duty before  the actual arrival of  the vessel  would be  irrelevant. In the present case the situation is slightly different. The earlier ‘entry outwards’ for  vessel S.S. Neils Maersk remained inoperative and ineffective. For that vessel Section 39 of the Act never operated. It is only for the second vessel S.S. P’Xilas that an effective  ‘entry outwards’  became operative  and  under Section 39  of the  Act as per the said ‘entry outwards’ the goods could  be loaded on the ship and could be exported. It is this  ‘entry outwards’,  therefore, which  would  be  the relevant entry qua which the rate of customs duty for export had to be worked out.      Respondent’s writ petition was, therefore, liable to be dismissed and was erroneously allowed by the High Court.      In the  result this appeal succeeds and is allowed. The judgment and order of the High Court are set aside. The writ petition filed  by  the  respondent  will  stand  dismissed.

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However, in  the circumstances of the case there shall be no order as to costs all throughout.