1986 (3) TMI 79 - HC - Customs

Summary

Issues Involved:
1. Validity of Section 15 of the Customs Act.
2. Validity of Section 3 of the Customs Tariff Act.
3. Inclusion of customs duty in additional duty under Section 3(2) of the Tariff Act.
4. Inclusion of landing charges in the assessable value of imported goods.
5. Exemption on packages and containers under notifications issued by the government.

Detailed Analysis:

1. Validity of Section 15 of the Customs Act:
The petitioners attacked Section 15 of the Customs Act as beyond the legislative competence of the Union Parliament and violative of Articles 14, 246, 265, 300A, and 301 of the Constitution. However, the petitioners did not pursue this challenge during the hearing. The Court held that Section 15 of the Customs Act was enacted by Parliament under Article 246(1) read with Entry 83 of List-I (Union List) of the 7th Schedule to the Constitution and is within its legislative competence. The Court found no merit in the challenge and rejected it.

2. Validity of Section 3 of the Customs Tariff Act:
The petitioners challenged Section 3 of the Tariff Act on the grounds of it being beyond the legislative competence of the Union Parliament and violative of Article 14 of the Constitution. The Court held that the Customs Act and the Tariff Act form a composite legislation, with the Tariff Act being integral to the Customs Act. The Court cited the Supreme Court's affirmation in Khandelwal Metal and Engineering v. Union of India, concluding that the Tariff Act, including Section 3, was within the legislative competence of the Union Parliament. The Court rejected the petitioners' contention.

3. Inclusion of Customs Duty in Additional Duty under Section 3(2) of the Tariff Act:
The petitioners contended that Section 3(2) of the Tariff Act, which includes customs duty in the calculation of additional duty, was discriminatory and violated Article 14 of the Constitution. The Court examined the true scope and ambit of Article 14, referencing several Supreme Court rulings. The Court determined that Section 3(2) of the Tariff Act does not violate Article 14, as it constitutes a valid classification and passes the twin tests of valid classification. The Court rejected this challenge.

4. Inclusion of Landing Charges in the Assessable Value of Imported Goods:
The petitioners argued that the assessable value should exclude landing charges, claiming that import is completed when the ship crosses the territorial waters of India. The Court held that the value for customs duty must be determined at the time and place of importation, which is the sea port where goods are delivered. The Court concluded that landing charges are part of the assessable value as per Section 14 of the Customs Act and the Customs Valuation Rules of 1963. The Court rejected the petitioners' contention.

5. Exemption on Packages and Containers under Notifications Issued by the Government:
The petitioners claimed exemptions on packages and containers based on government notifications under Section 25 of the Customs Act. The Court directed the Assistant Collector to examine the petitioners' claims for exemption from import duty on packages and containers in accordance with the notifications issued by the government. The Court emphasized that the authority must first examine and decide on the petitioners' claims.

Conclusion:
- Section 15 of the Customs Act, Section 3(2) of the Customs Tariff Act, and the Bill of Entry (Forms) Regulations, 1976 are valid.
- Customs duty paid on High Density Polythelene Moulding Powder is includible in determining additional duty under Section 3(2) of the Customs Tariff Act.
- Landing charges are includible in the levy of customs duty.
- The claim for exemption on packages and containers requires examination by the authority under the Act.

Orders and Directions:
1. The Assistant Collector is directed to examine the petitioners' claims for exemption from import duty on packages and containers in terms of the government notifications and make appropriate orders in accordance with the law.
2. The writ petitions are dismissed in all other respects. The respondents are entitled to recover the additional duty and customs duty on landing charges from the bank guarantees furnished by the petitioners. For bank guarantees representing packing material, the determination must be made by the Assistant Collector.

Disposition:
- Writ petitions are disposed of in the above terms, with parties bearing their own costs.
- The order is to be communicated to the respondents within 10 days.