1999 (7) TMI 70 - SC - Customs

Whether Section 3(1) of the Customs Tariff Act 1975 is the charging section? Held that - We do not see in the present case any impediment in the legislature providing for the manner in which the value of an article should be calculated for the purposes of determining the rate of tax which can be imposed. The customs duty which is required to be taken into consideration for the purposes of levying additional duty would normally form part of the value of the imported article on which the additional duty is to be imposed. In a sense sub-section (9) of Section 3 makes clear what is implicit in sub-section (1) of Section 3 namely the value of the imported article would include the Customs duty payable thereon. In commercial parlance the value of an imported article may include customs duty and this is what has been made clear and accepted in sub-section (2) of Section 3. We therefore do not see any conflict between the two sub-sections and it is not possible to accept the contention that sub-section (2) has gone beyond the provisions of sub-section (1). Appeal dismissed.

Summary

Issues:
Challenge to the provisions of Section 3 of the Customs Tariff Act, 1975 regarding the calculation of additional duty on imported articles.

Analysis:
The petitioners, engaged in the import of automobile spare parts, challenged the provisions of Section 3 of the Customs Tariff Act, 1975, which deal with the levy of additional duty equal to excise duty on imported articles. The petitioners argued that including customs duty in calculating the value of imported articles for levy purposes was unconstitutional and ultra vires.

The petitioners contended that Section 3(1) is the charging section, while Section 3(2) acts as a machinery provision to give effect to the charging section. They argued that any loading of value to imported goods was impermissible, and Section 3(2) exceeded the charging provision, making it ultra vires Section 3(1). The petitioners relied on a previous court decision to support their argument.

The court noted that the previous court decision was focused on interpreting Section 3(1) and not Section 3(2). The court observed that Section 3 aimed to provide a level playing field for manufacturers in India by levying additional duty on imported articles to counter-balance excise duty on locally made similar articles.

Upon analyzing Section 3, the court found it to be a composite section addressing various aspects of tax levy. While sub-section (1) dealt with the duty rate on the imported article's value, sub-section (2) outlined the factors to consider when calculating the value of imported articles. The court concluded that both sub-sections were integral parts of the charging section and did not conflict.

The court rejected the petitioners' argument that Section 3(2) exceeded its mandate by including customs duty in the value calculation. It clarified that customs duty was typically part of an imported article's value for levying additional duty. The court found no conflict between the sub-sections and dismissed the petition, citing that the legislature had the authority to determine how an article's value should be calculated for tax imposition purposes.

The court deemed previous decisions cited by the petitioners irrelevant to the present case and dismissed the writ petition with costs, finding no merit in the challenge to the provisions of Section 3 of the Customs Tariff Act, 1975.