2001 (7) TMI 1321 - HC - Indian Laws

Summary

Issues Involved:
1. Validity of Import Duty on excisable articles.
2. Authority of the State legislature to levy Import Duty.
3. Nature of Import Duty as a tax or fee.
4. Compliance with Articles 19(1)(g), 301, and 304 of the Constitution of India.
5. Refund of Import Duty paid by the petitioner.

Detailed Analysis:

1. Validity of Import Duty on excisable articles:
The petitioner, a company registered under the Indian Companies Act, 1996, challenged the notifications dated 9th December 1996, 31st March 1997, and 9th July 1998, which levied Import Duty on excisable articles imported into Rajasthan. The petitioner argued that these notifications were ultravires Article 265 of the Constitution of India and Entry 51 of List II of the Seventh Schedule, as well as Section 28 of the Excise Act. The court held that no tax in the nature of Import Duty can be levied by the State legislature under the scheme of the Constitution and the provisions of the Excise Act.

2. Authority of the State legislature to levy Import Duty:
The petitioner contended that under Article 246 read with Entry 51 of List II in the Seventh Schedule, the State legislature has no authority to levy Import Duty on alcoholic liquors for human consumption. The court examined the legislative field of taxing alcoholic liquors under Entry 51, which confines the power of the State legislature to impose tax on the manufacture or production of alcoholic liquor for human consumption and to levy Countervailing Duties on similar goods manufactured or produced elsewhere in India. The court concluded that the State legislature does not have the authority to levy Import Duty on excisable articles imported into the State.

3. Nature of Import Duty as a tax or fee:
The petitioner argued that the Import Duty levied under the impugned notifications cannot be upheld as fees under Entry 66, as there is no quid pro quo. The court noted that the State cannot levy Import Duty as a tax under Entry 51 and also cannot justify it as a fee under Entry 66 without the essential element of quid pro quo. The court further stated that the Import Duty imposed under the notifications cannot be considered as a fee for parting with the privilege of importing excisable articles, as it was charged as a tax without any authority under the Constitution or the Excise Act.

4. Compliance with Articles 19(1)(g), 301, and 304 of the Constitution of India:
The petitioner contended that the imposition of Import Duty contravenes Articles 301 and 304 of the Constitution, as it results in a barrier on free trade, commerce, and intercourse throughout the territory of India. The court held that since there is no fundamental right to trade in intoxicants under Article 19(1)(g), the charging of fees does not impinge on the freedom to carry on any trade or commerce. The court also noted that the levy of Import Duty as a tax is not authorized by law and cannot be sustained under Article 304.

5. Refund of Import Duty paid by the petitioner:
The petitioner sought a refund of the Import Duty paid under the impugned notifications with interest. The court observed that the petitioner must have passed on the burden of the Import Duty to the consumers and, therefore, allowing a refund would result in unjust enrichment. The court held that the petitioner is not entitled to claim a refund for the period prior to the interim order passed by the court, as the burden of the duty must have been transferred to the buyers. However, the petitioner shall be absolved from paying the Import Duty since the date of the interim order.

Conclusion:
The court quashed the levy of Import Duty under the notifications dated 9th July 1998, as it was not authorized by the Constitution or the Excise Act. The court also held that the petitioner is not entitled to a refund of the Import Duty paid prior to the interim order, but no Import Duty shall be payable from the date of the interim order. The petition was allowed in the terms stated above, with no costs.