2017 (4) TMI 142 - HC - Customs

Effective date of amending notification - import of Areca Nuts/Betel Nuts - Whether the amendment notification dated 27.01.2017 is prospective in operation or could have any retrospective operation? Held that - The notification dated 27.01.2017 is specifically that of an amendment of Appendix-I to the principal notification dated 13.08.2008 and thereby, the entry at serial number 14 has been substituted. There is not a whisper or even a remotest suggestion in any manner in the said notification that the same would be applicable from any date anterior to the date of issuance i.e., 27.01.2017. As per Sub-section (2A) of Section 25 ibid., if any explanation was to be inserted in the notification for the purpose of clarifying the scope and applicability, the same was required to be issued within one year of the date of issuance of the principal notification. Obviously, the notification as issued on 27.01.2017 is not the one issued under Sub-section (2A) of Section 25 of the Act of 1962. Moreover, the notification itself clearly states that the same has been issued in exercise of the powers conferred by Sub-Section (1) of Section 25 of the Act of 1962 for the purpose of amendment of the principal notification dated 13.08.2008. In the notification dated 27.01.2017, nothing has otherwise been provided as regards the date of its enforcement. Therefore, it remains beyond the pale of doubt that its operation would be governed by Clause (a) of Sub-section (4) of Section 25; and, accordingly, it has come into force on the date of issuance and not before. Petition allowed - decided in favor of petitioner.

Issues Involved:
1. Legality of the direction to furnish a 40% Bank Guarantee for duty on Areca Nuts/Betel Nuts.
2. Prospective or retrospective operation of the amendment notification dated 27.01.2017.

Issue-wise Detailed Analysis:

1. Legality of the direction to furnish a 40% Bank Guarantee for duty on Areca Nuts/Betel Nuts:

The petitioner, an association of persons engaged in export and import trade with Myanmar through Moreh Land Custom Station, filed a writ petition challenging the direction issued by the Commissioner of Custom (Preventive), North Eastern Region, Shillong, requiring members to furnish a Bank Guarantee of 40% of the duty allegedly leviable on the import of Areca Nuts/Betel Nuts. The petitioner argued that the import of Areca Nuts under HS Code No. 08028010 and 08028020 attracted a Nil rate of Basic Customs Duty (BCD) under Notification No. 96/2008-Customs, dated 13.08.2008 (as amended), without any condition.

Initially, the respondents allowed import at Nil BCD but later directed the furnishing of a 40% Bank Guarantee, claiming that Betel Nuts attract 40% BCD per entry at Sl. No. 14 of Notification No. 96/2008-Cus dated 13.08.08 (as amended). The respondents justified this by stating that the Central Board of Excise and Customs (CBEC) re-examined the issue and found that Betel Nuts were eligible for a 60% tariff concession, thus requiring a 40% duty. However, the petitioner contended that there was no change in facts or law to warrant such a direction and that the previous interpretation allowing Nil BCD was correct.

2. Prospective or retrospective operation of the amendment notification dated 27.01.2017:

During the pendency of the writ petition, the Government issued a notification on 27.01.2017, substituting Entry No. 14 in Appendix-I to the notification dated 13.08.2008. The core issue for determination was whether this notification would apply prospectively or retrospectively.

The petitioner argued that the notification dated 27.01.2017 was prospective in operation, as it was an amendment under Sub-section (1) of Section 25 of the Customs Act, 1962, and not retrospective or clarificatory in nature. The petitioner relied on several Supreme Court decisions, asserting that in the absence of any stipulation to the contrary, the notification could not apply to imports made before its issuance date.

Conversely, the respondents argued that the notification was essentially explanatory and clarificatory, thus applicable retrospectively. They referenced the Supreme Court decision in CIT v. Gold Coin Health Food (P) Ltd., which dealt with an amendment to an explanation in the Income Tax Act, 1961, deemed clarificatory and retrospective.

The court, after thorough consideration, rejected the respondents' argument. It held that the notification dated 27.01.2017 was a substantive amendment specifying the rate of exemption of duty and was not issued under Sub-section (2A) of Section 25 of the Customs Act, 1962, which would allow for retrospective explanations. The court emphasized that the notification clearly stated it was issued under Sub-section (1) of Section 25 for amending the principal notification and, per Clause (a) of Sub-section (4) of Section 25, it came into force on the date of issuance, i.e., 27.01.2017, and not before.

Conclusion:

The court concluded that the notification dated 27.01.2017 is prospective in operation and does not apply to imports made before its issuance. Consequently, the impugned communication dated 06.10.2016 and the order dated 05.10.2016 were rendered redundant and ineffective. The court directed the respondents to clear the goods in question without further delay and in accordance with the law. The writ petition was allowed, and no costs were awarded.

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