Supreme Court: The 3-judge bench of Dr. DY Chandrachud, Indu Malhotra and KM Joseph, JJ has held that with the change in the manner of publishing gazette notifications from analog to digital, the precise time when the gazette is published in the electronic mode assumes significance and hence, in the scheme of the Customs Act, 1962, the Customs Tariff Act 1975 and the Bill of Entry (Electronic Integrated Declaration and Paperless Processing) Regulations 2018, the time at which the notification under Section 8A is published would indeed have relevance.
BACKGROUND
After the Pulwama terrorist attack on 14 February 2019, the Union Government, on 16 February 2019, issued a notification under Section 8A of the Customs Tariff Act 1975 introducing a tariff entry by which all goods originating in or exported from the Islamic Republic of Pakistan were subjected to an enhanced customs duty of 200%. The precise time at which the notification (Notification 5/2019) was uploaded on the e-Gazette was 20:46:58 hours.
The First respondent, a partnership firm based in Amritsar, engaged in the import of cement, imported a consignment of fourteen hundred bags of cement from Pakistan under an invoice dated 1 February 2019. Here’s the sequence of events that followed:
- A truck crossed the ‘zero line’ on Saturday, 16 February 2019 with a Pakistan Custom’s Cargo Manifest bearing the time of 4:31 pm.
- the goods entered Indian territory through the Attari border at Amritsar before 18:00 hours on 16 February 2019;
- the importers had filed bills of entry under Section 46 of the Customs Act, before the close of working hours, seeking clearance of the goods for home consumption;
- the value and description of the goods were declared;
- the importers had self-assessed the goods in terms of the prevailing notifications and had filed the bills of entry in the EDI system;
- the declarations were subject to verification by the customs department which did not dispute them and generated duty payment TR-6 challans;
- since 16 February 2019 was a Saturday, the customs’ office was closed after 18:00 hours and was to open on Monday,18 February 2019;
- some of the importers paid the duty online through TR-6 challans on 16 February 2019 while in the case of others, the payment of duty was in progress;
- Notification 5/2019 was issued at 20:46:58 hours on 16 February 2019 following the Pulwama terrorist attack as a result of which the rate of duty on goods originating in Pakistan was enhanced to 200 per cent irrespective of the fact that some of the products had hitherto been exempt from customs duty; and
- the customs authorities refused to release the goods on the basis of the bills of entry which were self-assessed at the pre-existing rate and proceeded to recall them and re-assess the goods to the enhanced rate of duty applicable under notification 5/2019.
SCHEME OF THE CUSTOMS ACT 1962 AND DETERMINATION OF THE RATE UNDER SECTION 15
- Section 12 specifies that the rates of duty on goods imported and exported are those which are provided in the Customs Tariff Act or in any other law. Section 12 does not indicate when the duties under those enactments will come into being or force. Section 15 specifies the date with reference to which the rate of duty and tariff valuation of imported goods is determined. Clauses (a), (b) and (c) of sub-section (1) of section 15 contain distinct provisions which apply to:
- goods entered for home consumption under Section 46;
- goods cleared from a warehouse under Section 68; and
- other goods.
- In terms of the provisions of Section 15(1)(a), in the case of goods which are entered for home consumption under Section 46, the date of presentation of the bill of entry determines the rate of duty and tariff valuation.
- Under Section 47(2)(a), the importer is obliged to pay the import duty on the date of the presentation of the bill of entry in the case of self-assessment. Regulation 4(2) of the Regulations of 2018 categorically stipulates when the presentation of the bill of entry is complete.
- Once the bill of entry is deemed to have been presented in terms of Regulation 4(2) the rate and valuation in force stand crystalized under Section 15(1)(a).
- Section 17(4) confers a power of re-assessment on the proper officer where it is found on verification, examination or testing of the goods or otherwise- that the self-assessment has not been done correctly.
- The provisions of Section 15(1)(a) have to be read in conjunction with the provisions of Section 46 which are referred to in the former provision. Section 46 has incorporated a regime which encompasses the submission of the bill of entry for home consumption or warehousing in an electronic format, on the customs automated system in the manner which is prescribed.
- The Bill of Entry (Electronic Integrated Declaration and Paperless Processing) Regulations 2018 stipulate the manner in which the bill of entry has to be presented. The deeming fiction in Regulation 4(2) of specifies when presentation of the bill of entry and ‘self-assessment’ are complete. The rate of duty stands crystallized under Section 15(1)(a) once the deeming fiction under Regulation 4(2) comes into existence.
Hence,
“the regulations have to be read together with the statutory provisions contained in Section 15(1)(a) and Section 46, while determining the rate of duty.”
‘DAY’ AND ‘DATE’ – INTERPRETATION OF
ASG K M Natraj submitted before the Court that because notification 5/2019 was issued on 16 February 2019, the court must regardless of the time at which it was uploaded on the e-Gazette treat it as being in existence with effect from midnight or 0000 hours on 16 February 2019.
The Court, however, refused to accept this submission and said.
“The consequence of this interpretation would be to do violence to the language of Section 8A(1) of the Customs Tariff Act, and to disregard the meaning, intent and purpose underlying the adoption of provisions in the Customs Act in regard to the electronic filing of the bill of entry and the completion of self-assessment.”
Noticing that the Regulation 4(2) of the 2018 Regulations provides for a deeming fiction in regard to the filing of the bill of entry and the completion of self-assessment, the Court said that it would do violence to the overall scheme of the statute to interpret the language of Section 15(1)(a) in the manner in which it is sought to be interpreted by the ASG.
EFFECT OF NOTIFICATIONS ISSUED IN E-GAZETTES
With the change in the manner of publishing gazette notifications from analog to digital, the precise time when the gazette is published in the electronic mode assumes significance. Notification 5/2019, which is akin to the exercise of delegated legislative power, under the emergency power to notify and revise tariff duty under Section 8A of the Customs Tariff Act, 1975, cannot operate retrospectively, unless authorized by statute.
It was, hence, held
“In the era of the electronic publication of gazette notifications and electronic filing of bills of entry, the revised rate of import duty under the Notification 5/2019 applies to bills of entry presented for home consumption after the notification was uploaded in the e-Gazette at 20:46:58 hours on 16 February 2019.”
Since, Notification 5/2019 was uploaded in the e-gazette at a specific time and date, it cannot apply to bills of entry which were presented on the customs automated EDI system prior to it, attracting the legal fiction set out in Regulation 4(2) of the 2018 Regulations.
RETROSPECTIVITY
The Court referred to a consistent line of precedents to carve out the distinction between the plenary power which is entrusted to Parliament and the state legislatures to enact legislation with both prospective and retrospective effect, and the power entrusted to a delegate of the legislature to frame subordinate legislation.
In Regional Transport Officer, Chittoor vs. Associated Transport Madras (P), (1980) 4 SCC 597, it was held that the fact that the rules had been framed in pursuance of a resolution passed by the legislature or that they have to be placed on the table of the legislative body would not lead to an inference that the legislature had authorized the framing of subordinate legislation with retrospective effect.
Hence, it was noticed
“This precisely is the principle which applies in construing whether the power which is conferred by Section 8A of the Customs Tariff Act is retrospective. The provisions of sub-sections (3) and (4) of Section 7, which are made applicable by sub-section (2) of Section 8A, are to ensure Parliamentary oversight. But that does not enable the Central Government to exercise the power under section 8A with retrospective effect.”
CONCLUSION
Dr. DY Chandrachud, J for himself and Indu Malhotra, J conclude:
In the present case the twin conditions of Section 15 stood determined prior to the issuance of Notification 5/2019 on 16 February 2019 at 20:46:58 hours. The rate of duty was determined by the presentation of the bills of entry for home consumption in the electronic form under Section 46. Self-assessment was on the basis of rate of duty which was in force on the date and at the time of presentation of the bills of entry for home consumption. This could not have been altered in the purported exercise of the power of re-assessment under Section 17 or at the time of the clearance of the goods for home consumption under Section 47. The subsequent publication of the notification bearing 5/2019 did not furnish a valid basis for re-assessment.
K.M. Joseph, J writing a separate but concurring opinion said
“It is one thing to say that the legislature may have the power to make a law with retrospective effect subject to limitations imposed by the Constitution and quite another to contend that delegated legislation would carry retrospective effect irrespective of power to make such a law conferred by the parent enactment on the delegate. More importantly the scheme of the Customs Act and the Tariff Act and the Regulation 4(2) of the 2018 Regulations rule out the tenability of applying the notification in the manner sought by the appellants.”
Hence, in the scheme of the Customs Act, the Tariff Act and the 2018 Regulations, the time at which the notification under Section 8A is published would indeed have relevance.
[Union of India v. G S Chatha Rice Mills, 2020 SCC OnLine SC 770, decided on 23.09.2020]