2020 (6) TMI 500 - HC - Customs

Exemption for Customs duty - import of three textile machines - inclusion of new items in the exemption - Amendment is retrospective or prospective - Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 - HELD THAT - The question whether the relevant customs notification was retrospective in nature becomes academic. However, since the Director General of Foreign Trade had declined to grant relief to the company holding that the said notification had no retrospective effect and the learned Single Judge, on the other hand, allowed the writ petition taking a contrary view, the said issue is also addressed - aforesaid notification dated November 04, 1999, was introduced for further amending the notification No. 29/97-cus dated the 1st April, 1997 and giving a retrospective effect would mean that the same would relate back to 1st April, 1997. The amended EXIM Policy was made effective from 1st April, 1999. Such interpretation, therefore, leads to an absurdity where the customs notification would be made operative even before the EXIM Policy came into being. If the law maker, by way of amendment, introduces anything which was left out or omitted by mistake in the original provision, then such amendment may operate retrospectively with effect from the date of the original provision - The relevant amendment in the customs notification has not been made for rectification of any such mistake. Two additional import items were introduced to give effect to the amendment of the EXIM Policy. The inclusion of the import items namely, textile and chemical sectors , if construed to be operative retrospectively, then the same would entail refund of all customs duties already levied under the ten per cent customs duty regime. Such a consequence was never the intendment of the amendment. Appeal allowed.

Summary

Issues:
1. Interpretation of EXIM Policy 1997-2002 and corresponding customs notification.
2. Entitlement to zero customs duty under amended EXIM Policy.
3. Relevance of date of filing bill of entry for customs duty determination.
4. Retrospective effect of customs notification.
5. Applicability of precedents in customs duty cases.

Analysis:
1. The judgment dealt with the interpretation of the Export and Import (EXIM) Policy 1997-2002 and the corresponding customs notification. The company applied for a customs duty license to import textile machines, later seeking a refund under the amended policy. The Ministry of Commerce amended the policy to allow zero customs duty for textile machinery imports subject to export obligations, effective from April 1, 1999. However, the Ministry of Finance issued the corresponding exemption notification on November 4, 1999, leading to a dispute over the retrospective application of the notification.

2. The court analyzed whether the company was entitled to zero customs duty under the amended EXIM Policy. The Director General of Foreign Trade initially rejected the claim, citing the lack of retrospective effect in the customs notification. The company argued that the date of filing the bill of entry should determine the customs tariff, relying on legal precedents. The court held that since the goods arrived in February 1999 and the amended policy was effective from April 1, 1999, the company was not entitled to the benefit of zero customs duty.

3. The relevance of the date of filing the bill of entry for customs duty determination was also examined. The court clarified that the date of filing the bill of entry is crucial only for exemption notifications under the Customs Act, not under the Foreign Trade (Development and Regulation) Act. The court emphasized that in this case, the delay in issuing the customs notification was inconsequential as it did not apply to the relevant import.

4. The retrospective effect of the customs notification was a key issue in the judgment. The court analyzed the wording of the notification and compared it to precedents to determine if it should be construed as retrospective. Ultimately, the court found that the notification was not intended to rectify any mistake and applying it retrospectively would lead to unintended consequences, such as refunding all customs duties previously levied.

5. The judgment also discussed the applicability of precedents in customs duty cases. While the company relied on certain judgments to support its arguments, the court distinguished those cases based on the specific circumstances and intent behind the amendments. The court ultimately set aside the order of the Single Judge and dismissed the writ petition, allowing the appeals filed by the Director General of Foreign Trade and customs authorities.