1984 (12) TMI 65 - SC - Customs

Levy of customs duty on newsprint Whether it is open to the Government to levy any tax on any of the aspects of the press industry? whether the tax has been shown to be so burdensome as to warrant its being struck down? Held that - In view of the intimate connection of newsprint with the freedom of the press, the tests for determining the vires of a statute taxing newsprint have, therefore, to be different from the tests usually adopted for testing the vires of other taxing statutes. In the case of ordinary taxing statutes, the laws may be questioned only if they are either openly confiscatory or a colourable device to confiscate. On the other hand, in the case of a tax on newsprint, it may be sufficient to show a distinct and noticeable burdensomeness, clearly and directly attributable to the tax.While we, therefore, cannot agree with the contention that no tax can be levied on newspaper industry, we hold that any such levy is subject to review by courts in the light of the provisions of the Constitution. On the material now available to us, while it is not possible to come to the conclusion that the effect of the levy is indeed so burdensome as to affect the freedom of the press, we are also not able to come to the conclusion that it will not be burdensome. This is a matter which touches the freedom of the press which is, as we said, the very soul of democracy. This is certainly not a question which should be decided on the mere question of burden of proof. There are factors indicating that the present levy is heavy and is perhaps heavy enough to affect circulation. On such a vital issue, we cannot merely say that the petitioners have not placed sufficient material to establish that the drop in circulation is directly linked to the increase of the levy when, on the side of the Government, the entire exercise is thought to be irrelevant. Hence, there appears to be a good ground to direct the Central Government to reconsider the matter afresh in the light of what has been said here. We do not, however, see much substance in the contention of some of the petitioners that the classification of the newspapers into small, medium and big newspapers for purposes of levying customs duty is violative of article 14 of the Constitution. If on such reconsideration, the Government decides that there should be any modification in the levy of customs duty or auxiliary duty with effect from March 1, 1981, it shall take necessary steps to implement its decision. Until such redetermination of the liability of the petitioners and others is made, the Government shall recover only ₹ 550 per MT on imported newsprint towards customs duty and auxiliary duty and shall not insist upon payment of duty in accordance with the impugned notifications. The concessions extended to medium and small newspapers may, however, remain in force. If it is found that any of the petitioners is liable to pay any deficit amount by way of duty, such deficit amount shall be paid by such petitioner within four months from the date on which a notice of demand is served on such petitioner by the concerned authority. Any bank guarantee or security given by the petitioners shall be available for recovery of such deficit amounts and it is found that any of the petitioners is entitled to any refund, such refund shall be made by the Government within four months from the date of such redetermination.

Issues Involved:
1. Validity of the imposition of import duty on newsprint under the Customs Act, 1962, and the Customs Tariff Act, 1975.
2. Impact of the import duty on the freedom of speech and expression under Article 19(1)(a) and Article 19(1)(g) of the Constitution.
3. Classification of newspapers for the purposes of levy of import duty and its compliance with Article 14 of the Constitution.
4. Judicial review of notifications issued under Section 25 of the Customs Act, 1962.
5. Relief to be provided to the petitioners.

Issue-wise Detailed Analysis:

1. Validity of the Imposition of Import Duty on Newsprint:
The petitioners, comprising companies, shareholders, and employees engaged in publishing newspapers, challenged the imposition of import duty on newsprint under Section 12 of the Customs Act, 1962, read with Section 2 and Heading No. 48.01/21 of the First Schedule to the Customs Tariff Act, 1975, and the levy of auxiliary duty under the Finance Act, 1981. The imposition of customs duty and auxiliary duty was claimed to be in the public interest to augment government revenue. The government argued that the classification of newspapers for granting exemption was done in the public interest and was not mala fide. The court examined the historical context of the levy of customs duty on newsprint in India, noting that newsprint had enjoyed total exemption from customs duty from 1966 until March 1, 1981, based on recommendations from various committees and financial considerations.

2. Impact on Freedom of Speech and Expression:
The petitioners argued that the imposition of import duty on newsprint directly affected the freedom of speech and expression guaranteed by the Constitution, leading to an increase in newspaper prices and a reduction in circulation. They contended that the levy was a method of executive interference and that the classification of newspapers for duty purposes was irrational. The court emphasized the importance of freedom of the press in a democratic society, noting that it is included in Article 19(1)(a) of the Constitution. The court cited various international documents and judicial pronouncements supporting the freedom of the press and highlighted the role of the press in advancing public interest and democratic participation.

3. Classification of Newspapers and Article 14:
The petitioners contended that the classification of newspapers into small, medium, and big for the purposes of levying import duty was violative of Article 14 of the Constitution. The government defended the classification, stating that it was done in the public interest to support smaller newspapers with limited circulation and revenue. The court found that the classification had a rational basis and was intended to assist smaller newspapers in reducing production costs. The court rejected the contention that the classification was violative of Article 14.

4. Judicial Review of Notifications under Section 25 of the Customs Act:
The court addressed the argument that notifications issued under Section 25 of the Customs Act, 1962, were beyond judicial review. The court held that even if the power to grant exemption under Section 25 was considered a legislative power, the notifications could still be questioned on the grounds of unreasonableness and arbitrariness. The court emphasized that subordinate legislation must conform to the statute under which it is made and should not be manifestly arbitrary. The court cited various judicial precedents supporting the view that subordinate legislation is subject to judicial review.

5. Relief to Petitioners:
The court acknowledged the peculiar difficulty arising from the pattern of legislation and the impact of quashing the impugned notifications. The court directed the government to reconsider the entire question of levy of import duty on newsprint with effect from March 1, 1981, within six months. The court specified that until such reconsideration, the government should recover only Rs. 550 per MT on imported newsprint towards customs duty and auxiliary duty. The court also directed that any deficit amount or refund determined after reconsideration should be settled within four months.

Conclusion:
The court allowed the petitions, directing the government to reconsider the levy of import duty on newsprint and to take necessary steps based on the reconsideration. The court emphasized the importance of balancing the need for revenue with the protection of the freedom of the press, ensuring that any levy on newsprint does not unduly burden the newspaper industry.

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