Case BriefsSupreme Court

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]

Case BriefsCOVID 19High Courts

Delhi High Court: A Division Bench of D.N. Patel, CJ and Prateek Jalan, J., while addressing a Public Interest Litigation, held that,

“fixing of the fare is a complex phenomenon and a decision to be taken by the Government. It is a policy decision and this Court is not inclined to interfere in this policy decision.”

Present Public Interest Litigation was preferred challenging the minimum fares which are fixed by Ministry of Civil Aviation vide its 21st May, 2020 Order.

Petitioners Counsel submitted that the difference in fare prices will lead to fixation of prices by the cartel of the airlines.

Bench while disagreeing with petitioners contention stated that, in the present circumstances when various restrictions have been placed on the airline operations, and maximum limit for air fare is given by the Government, the minimum fare is also prescribed so as to strike a balance between the passengers as well as the airlines agency

Exercise of tariff fixation, and economic matters in general, are issues on which the writ court would generally refrain from exercising jurisdiction, unless found to be totally arbitrary or unreasonable.

Further the Court observed that it ought to be kept in mind that this fixation of minimum and maximum fares is for the journey to be performed only for essential purposes. 

Section 8B(1) of the Aircraft Act, 1934 specifically clothes the Central Government with the power to take necessary measures to minimise the possible danger to public health in the event of outbreak of any dangerous epidemic.

Thus, in view of the COVID19 pandemic, power exercised by respondents cannot be said to be arbitrary or unreasonable.

Ministry of Civil Aviation’s order as mentioned above is only a stop gap arrangement for which present PIL is not tenable.

Lastly the Court concluded it’s  Order by stating that, “problem being faced by everyone during this pandemic situation is such a unique phenomenon that requires experimental solutions. There cannot be any mathematical solution for a problem like this.”

In view of the above observations, petition was disposed of. [Veer Vikrant Chauhan v. UOI, 2020 SCC OnLine Del 627, decided on 04-06-2020]

Case BriefsHigh Courts

Calcutta High Court: Shekhar B. Saraf, J., while allowing the present petition held that,

“Lawyer using a domestic space as his chamber for his livelihood cannot be placed in the commercial category.”

The present writ petition was filed to resolve the issue as to whether a lawyer using a domestic space as his chambers is liable to be charged with a tariff on a commercial basis.

Petitioner who is a practicing lawyer was having a chamber on the ground floor of the multi-storied building where he resided on the third floor. He had made an application for a new electric connection on the ground floor under the category domestic (urban).

CESC Limited had sent the petitioner a quotation for payment of service charges and security deposit on the basis of commercial connection. Later on, receiving the same, the petitioner raised an objection to the said quotation and sought a fresh quotation on the basis of domestic connection.

Aggrieved with the above, the petitioner filed the present petition.

Counsel for the petitioner, Subir Sanyal, submitted that the profession of a lawyer cannot be equated as a commercial activity. Neither the Electricity Act nor any Rules or Regulations framed thereunder define the term “commercial”.

In reference to the above, counsel cited the case — V. Sasidharan v. Peter and Karunakar, (1984) 4 SCC 230, wherein the following was held:

“…under the Shops and Establishment Act, the establishment of a legal practitioner/ firm of lawyers was held not to be a commercial establishment.”

Advocate Rajiv Lall, appearing on behalf of CESC Limited, relied on the Supreme Court decision in,

M.P. Electricity Board v. Shiv Narayan, (2005) 7 SCC 283, to indicate that the activity of a lawyer running an office falls under the category of non-domestic use.

Analysis

High Court on perusal of the Supreme Court decision in M.P. Electricity Board v. Shiv Narayan, (2005) 7 SCC 283, stated that it is evident that the tariff entries in the case before the Supreme Court were of two categories, that is, (a) “domestic purposes” and (b) “commercial and non-domestic purposes”. The Supreme Court after examining held that as the use was not domestic it would fall in the category of “commercial and non-domestic” and further held that running an office is clearly a “non-domestic” use.

“There is a fundamental distinction between a professional activity and an activity of a commercial character, and therefore, it is crystal clear that the legal profession would not fall under the category of ‘Commercial (Urban)’.”

Further, the Court noted that the categorization in the tariff of CESC Ltd. only contains two categories of relevance to the present case:

  • Domestic (Urban)
  • Commercial (Urban)

Thus the Court added that upon reading of the Supreme Court’s decision in M.P. Electricity Board v. Shiv Narayan, (2005) 7 SCC 283,

…it is crystal clear that the legal profession would fall under the category of “non-domestic”

Decision

Hence, the High Court in view of the present case stated that,

 “…space on the ground floor has been taken by the petitioner as an extension of his residence for the use of the space as his legal chamber. The above factual matrix is clearly distinguishable from law firms and proprietorship firms that are having offices in commercial spaces dealing with litigation and non-litigation work.”

Thus, chambers of a litigation lawyer are clearly used for his livelihood, and accordingly, the benefit of doubt is required to be given to such a petitioner placing him in the category of the “Domestic (Urban)”

In view of the above, the writ petition was allowed. [Arup Sarkar v. C.E.S.C. Ltd., 2020 SCC OnLine Cal 295, decided on 11-02-2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for Electricity (APTEL): A Division Bench of Manjula Chellur, J. (Member) and S.D. Dubey, (Technical Member) passed an order for implementation of the Tribunal’s order for the payment of the sum of money due with interest.

An application for the implementation of the order was made by the appellant when after a reasonable time the respondent didn’t pay any heed towards the order against them.

Aman Anand, Aman Dixit, counsels for the appellant submitted that the order was received for the payment after increasing the recovery of interim transfer of lignite to 85 percent in place of 70 percent. It was submitted by the appellant that no appeal was pending against the said order. Hence, this application.

R.K. Mehta, Himanshi Andley, P.N. Bhandari, counsels for the respondents, submitted that the matter related to the increase in the tariff was pending in the Commission and that the appellant had rushed to the tribunal prematurely in order to prejudice the pending decision of the Commission.

The Tribunal after submission by the parties held that although the matter is pending in the Commission the payment due is for the previous year and thus the same is to be made by the respondent as per the order of the Tribunal. It was further reiterated that, the said order was passed by this Tribunal at the premise of financial hardship to the generator which was being allowed considerably at less transfer price than they actually claimed. The Court concluded that, the maintenance of judicial discipline is a part of our judicial process. Thus, the order was made for the implementation of the order of the Tribunal in its true spirit.[Barmer Lignite Mining Co. Ltd. v. Rajasthan Electricity Regulatory Commission, 2019 SCC OnLine APTEL 27, decided on 17-05-2019]