1983 (4) TMI 55 - HC - Central Excise

Summary

Issues Involved:

1. Classification of Tapioca Chips as Animal Feed
2. Applicability of Promissory Estoppel
3. Validity of Customs Authorities' Interpretation and Notifications

Issue-wise Detailed Analysis:

1. Classification of Tapioca Chips as Animal Feed:

The primary issue in this case revolves around whether tapioca chips should be classified as "animal feed" under Item No. 21 of the Second Schedule to the Customs Tariff Act, 1975, which would make them liable for export duty. The petitioner firm argued that tapioca chips are consumed by humans and should not be classified as animal feed. They cited various materials, including the "Travancore State Manual-1940" and "Wealth of India-Raw Materials," to support their claim that tapioca chips are a staple food for humans, especially in Kerala. The Customs authorities, however, classified tapioca chips as animal feed based on the Indian Standards Specification for tapioca as livestock feed, asserting that the quality of the exported chips fell short of these standards. The Court found that the Customs authorities' classification was incorrect and that the failure to include tapioca chips in the exempted category under Notification No. 16 was not a valid reason to subject them to customs duty.

2. Applicability of Promissory Estoppel:

The petitioner firm invoked the doctrine of promissory estoppel, arguing that the Customs authorities had previously represented that no duty was payable on the export of tapioca chips, citing a letter dated 4-4-1977 from the Collectorate of Customs and Central Excise, Cochin. The Court agreed with the petitioner, stating that the principle of promissory estoppel should apply. The Court dismissed the respondents' argument that the doctrine was inapplicable because the representation was not made directly to the petitioner. The Court emphasized that the complete exemption granted by the notification dated 18th May 1978 supported the petitioner's claim.

3. Validity of Customs Authorities' Interpretation and Notifications:

The Court scrutinized the Customs authorities' interpretation of various notifications and found it flawed. The Assistant Collector of Customs had relied on Notification No. 401/F. No. 356/9/76-Cus. I and Notification No. 16/F. No. 370/100/76-Cus. I, which exempted certain animal feeds but did not specifically mention tapioca chips. The Court held that the Assistant Collector's process of deduction was illogical and that tapioca chips should have been considered exempt under the notification dated 18th May 1978, which explicitly included tapioca chips. The Court also highlighted that an order must be supported by the reasons stated therein and cannot be justified by additional reasons provided later, citing precedents such as "Vedachala Mudaliar v. Central Road Traffic Board, Madras" and "Mohinder Singh v. Chief Election Commissioner."

Conclusion:

The Court quashed the impugned orders and remitted the matter for fresh consideration, emphasizing that the Customs authorities had not dealt with the issues properly. The Court directed that the matter be reconsidered expeditiously and clarified that it was remitted to the Tribunal. The Writ Petition was allowed, with no order as to costs.