1998 (3) TMI 155 - HC - Customs

Summary

Issues Involved:
1. Validity of notice issued under Section 28(1) of the Customs Act, 1962.
2. Constitutionality of Rule 9(2)(b) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, as amended in 1990.
3. Jurisdiction of respondents to realize duties in excess of actuals.
4. Interpretation of Section 14 of the Customs Act, 1962.
5. Compliance with Article 265 and Article 14 of the Constitution of India.
6. Delegated legislation and its limits.

Detailed Analysis:

1. Validity of Notice Issued Under Section 28(1) of the Customs Act, 1962:
The petitioner challenged the notice issued under Section 28(1) of the Customs Act, 1962, dated 21-12-1990, regarding the collection of duty on loading, unloading, and handling charges. The court examined whether the notice was valid under the provisions of the Customs Act and the rules framed thereunder.

2. Constitutionality of Rule 9(2)(b) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, as Amended in 1990:
The petitioner argued that the amended Rule 9(2)(b) was violative of Article 265 of the Constitution of India, which states that no tax shall be levied or collected except by the authority of law. The court analyzed the rule, which fixed handling charges at 1% of the free on board (FOB) value of the goods, irrespective of the actual charges incurred. The petitioner contended that this notional computation was beyond the competence of Section 14 of the Customs Act and was discriminatory and arbitrary.

3. Jurisdiction of Respondents to Realize Duties in Excess of Actuals:
The petitioner contended that the respondents had no jurisdiction to realize duties in excess of the actual handling charges. The court examined the legislative intent behind the Customs Valuation Rules and the amendments made in 1990. It considered whether the rule-making authority had overstepped its jurisdiction by prescribing a fixed percentage for handling charges instead of actuals.

4. Interpretation of Section 14 of the Customs Act, 1962:
The court delved into the interpretation of Section 14 of the Customs Act, which deals with the valuation of goods for the purposes of assessment. It analyzed whether the provisions of Section 14(1A) were subject to Section 14(1) and whether the delegated authority had the power to create further fiction in the matter of determining the value of imported goods. The court noted that Section 14(1) created a fiction for determining the value of goods, and the rules framed under Section 14(1A) should not go beyond this scope.

5. Compliance with Article 265 and Article 14 of the Constitution of India:
The petitioner argued that the amended Rule 9(2)(b) was violative of Article 14 (equality before the law) and Article 265 (no tax shall be levied or collected except by authority of law) of the Constitution. The court examined whether the rule was arbitrary and discriminatory, considering that it imposed a flat rate for handling charges irrespective of the actual costs incurred. The court also considered whether the rule was in line with the principles laid down under the General Agreement on Tariffs and Trade (GATT).

6. Delegated Legislation and Its Limits:
The court discussed the principles of delegated legislation, emphasizing that the rule-making authority must work within the scope of its delegated powers and cannot create rules that go beyond the legislative intent. It referred to various judgments to highlight that while the legislature can delegate the power to make subsidiary rules, it cannot delegate essential legislative functions. The court concluded that Rule 9(2)(b) was within the competence of the delegated authority and did not suffer from any vice of discrimination or arbitrariness.

Conclusion:
The court dismissed the writ petition, holding that Rule 9(2)(b) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, as amended in 1990, was a valid piece of legislation. It found that the rule did not violate Articles 14 or 265 of the Constitution and was within the jurisdiction of the rule-making authority. The court emphasized that the rule was framed based on the experience and data collected by the respondents and aimed at achieving certainty in the valuation of imported goods for customs duty purposes.