1991 (7) TMI 85 - HC - Customs

Issues Involved:
1. Applicability and duration of exemption notifications under Section 25(1) of the Customs Act, 1962.
2. Hostile discrimination between private importers and MMTC under Section 25(2) of the Customs Act, 1962.
3. Validity of the special exemption notification under Section 25(2) of the Customs Act, 1962.

Detailed Analysis:

Issue 1: Applicability and Duration of Exemption Notifications under Section 25(1) of the Customs Act, 1962
The appellants used aluminium ingots for manufacturing various aluminium products, which they purchased locally and imported. On 18th April 1980, the Central Government issued a notification under Section 25(1) of the Customs Act, 1962, exempting aluminium ingots from the whole of the basic customs duty and additional duty. This notification was valid until 30th September 1980. Subsequent notifications on 29th August 1980 and 9th September 1980 modified the duty exemptions. The appellants argued that the exemption notification dated 18th April 1980 continued to remain in force until 30th September 1980. However, this plea was given up during the hearing.

Issue 2: Hostile Discrimination Between Private Importers and MMTC under Section 25(2) of the Customs Act, 1962
The appellants contended that the exemption granted to MMTC under Section 25(2) of the Customs Act, 1962, constituted hostile discrimination. They argued that both the appellants and MMTC were similarly situated as importers of aluminium ingots and rods, and any favorable treatment accorded to MMTC was discriminatory, arbitrary, and without legal authority. They claimed that MMTC, which did not pay additional duty, could sell aluminium ingots at lower prices, resulting in hostile discrimination against users who did not purchase from MMTC, violating Article 14 of the Constitution of India.

Issue 3: Validity of the Special Exemption Notification under Section 25(2) of the Customs Act, 1962
The appellants challenged the validity of the special exemption notification issued on 2nd December 1980 under Section 25(2) of the Customs Act, 1962, which exempted 30,639 tonnes of aluminium ingots imported by MMTC from additional duty. They argued that Section 25(2) did not permit the grant of exemption to any particular importer and that the exemption had to pass the test of Article 14 of the Constitution. The appellants submitted that the reasons stated in the notification did not justify the differential treatment between MMTC and private importers. The court noted that the reasons given in the notification suggested a general exemption for aluminium due to a shortage in the country, but no affidavit or material was provided by the respondents to justify the discrimination.

Judgment:
The court, referencing the Supreme Court's affirmation of the Delhi High Court's judgment in M. Jahangir Bhatusha's case, observed that the power conferred on the Central Government under Section 25(2) was to be exercised with subjective satisfaction based on circumstances of an exceptional nature. The court found that the reasons set forth in the exemption notifications in M. Jahangir Bhatusha's case constituted a reasonable basis for the same, emphasizing the need to protect domestic prices and ensure sufficient supplies.

However, the court acknowledged that there appeared to be some substance in the appellants' contention that no good reason had been made out for treating private importers differently from MMTC. Despite this, the court concluded that it could not convert a special exemption notification under Section 25(2) into a general notification under Section 25(1). Furthermore, the court could not strike down the notification as it would adversely affect MMTC, which was not a party to the appeals.

Conclusion:
The appeals were dismissed without any order as to costs. The interim orders restraining the respondents from enforcing bank guarantees furnished by the appellants would remain in operation for four weeks from the date of the judgment.

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