By TIOL News Service

NEW DELHI, JULY 31, 2018: THE petitioner had obtained special licences from the DGFT to import 5000 mt of garlic.

Prior to the Customs Notification No. 11/2003-Cus issued on 15.01.2003 the pre-existing rate of customs duty was 30%, however, by this Notification of 15.01.2003 the customs duty was increased to 100%.

The petitioner had imported and cleared 3000 mt of the consignments which it had contracted for and the special licences to that extent were exhausted.

As on 15.01.2003, it appeared that the balance goods i.e. 2000 mt, had arrived at the port but the Bill of Entry could not be filed on account of certain documentary formalities. Consequently, when the question of clearance of the goods arose, the Customs authorities insisted upon payment of 100% duty.

The Writ petition filed against the directions of the Customs authorities was disposed of on 17.02.2004 on the ground that since the dispute primarily concerned government bodies, the Committee of Disputes headed by the Cabinet Secretary ought to examine it. Subsequently, the Customs Authorities turned down the petitioner's request and omitted to grant relief to the petitioner with respect to its request for an order under Section 25(2) of the Customs Act, 1962.

In these circumstances, the petitioners' grievance that the differential rate of duty i.e. balance 70% ought to be paid, has been highlighted in these proceedings.

The Counsel for the petitioner urges that the power under Section 25(2) of the Act is a stand-alone one and that in special or exceptional circumstances the Central Government may pass, on good and various grounds, such orders exempting a particular consignment from such rate of customs duty as may be appropriate.

Learned Senior Counsel relied upon the judgment of a learned Single Judge of the Madras High Court in Kodali Sathyanarayana Vs. Union of India, 1994 (70) ELT 194 .

The petitioner further states that the Nodal Ministries concerned, i.e. the Department of Agriculture, Department of Consumer Affairs as well as the Ministry of Commerce, had unanimously recommended to the Ministry of Finance that the old rates of customs duty of 30% ought to apply to the concerned consignment of imported garlic. It was emphasized that these Ministries highlighted that it would be unfair and unjust to subject the petitioner to a higher rate of duty, given that it imported the products for distribution to the general public.

The Central Government urged that the question as to what ought to be the rate of customs duty or for that matter for any other tax is one of policy and that even as to whether a particular case falls within the exceptional category under Section 25(2) of the Act is a matter to be gone into exclusively by the appropriate authority, which is the Central Government, having regard to not merely one or two but several circumstances. [Manglam Organics Ltd. vs. Union of India, (2017) 7 SCC 221, Union of India and Ors. vs. Apar Private Ltd. and Ors. - 2002-TIOL-366-SC-CUS-LB and Garden Silk Mills vs. Union of India - 2002-TIOL-19-SC-CUS-LB is relied upon]

The High Court extracted Section 25(1) & (2) of the Customs Act and inter alia observed thus -

+ It is quite apparent that when the Central Government exercises a power under Section 25 of the Act it does so as a delegate of Parliament; the rate and the conditions applicable have the effect of altering the customs duty prescribed in the Customs Tariff Act, 1975. Therefore, there is certain amount of deliberation and exclusive consideration based upon the economic factors variant.

+ The placement of Section 25(2) of the Act leaves one in no doubt that this power is an extension and amplification of general power under Section 25(1) of the Act.

+ The fact that the Nodal Ministries recommended to the Finance Ministry to consider the issue of exemption of the differential duty in this case only means that there was some view within the Government that the exercise of power under Section 25(2) of the Act had to be considered as reasonable. That however cannot be elevated to a right entitling the Court to issue a mandamus or any direction of that nature requiring the Central Government to pass an order under Section 25(2) of the Act.

+ The Central Government has stated on record that the increased customs duty rate was necessary because after D.G.F.T. issued special import licences; indicating an annual cap on the import of the garlic, the licences were traded and the beneficiaries were not importing the allotted quantities.

+ In the light of the explanation given by the Central Government, it is apparent that the purpose for which the restricted or special licences were issued, was defeated for two reasons – firstly, that the price in the retail market continued to remain high despite the authorisation to import; the authorization to import was based upon the assessment of shortage of the item in the market at that stage; secondly, the import licences were sold and traded at unjustified premium. Both these had the consequences of driving up the garlic prices. As a result, the D.G.F.T. removed the item from restricted category and placed it in OGL category. The Finance Ministry also responded by increasing the rate of duty to 100%.

+ Given all these considerations – which this Court had no reason to doubt – we are of the opinion that it would not be appropriate to direct the Central Government, at this stage, and after this lapse of time to consider the petitioner"s case on the ground of special or exceptional circumstances. It is not disputed that the petitioner also trades in garlic and presumably had its own retail outlet chains.

Concluding that the petitioners case does not constitute and fall in the "exceptional circumstances"category and, therefore, the law prevailing i.e. the rate of duty as on the date of import (S. 15 of the Act) covers petitioner"s case, the Writ Petition was dismissed.

The Interim order was vacated.

(See 2018-TIOL-1487-HC-DEL-CUS)