The Supreme Court of India, in a significant judgement, has held that the court cannot interfere with the union executive’s power to amend/withdraw notifications under Section 25 of the Customs Act, 1962 since it was in line with the provisions of the Customs Act.
The Union Government challenged the Order of the Calcutta High Court which held the withdrawal of a customs notification invalid. ABP Pvt Ltd, the assessee/respondent imported one set of high-speed cold set (Universal 70) Web Offset printing machines along with the necessary parts and accessories and claimed exemption from payment of the duty relying upon the notification dated May 28, 2003 (First Notification).
The First Notification provided for the levy of custom duty on the import of High-Speed Cold-Set Web Offset Rotary Printing Machines with a minimum speed of 70,000 copies per hour (“Imported Machine”) at a concessional rate of 5 %. Relying upon the first notification, the assessee caused an irrevocable letter of credit to be issued, for the purchase of the Imported Machine.
The First Notification was subsequently amended by the Central Government through a fresh notification dated November 11, 2003 (Amended Notification). The Amended Notification shifted the benefit of the concessional rate from “High-Speed Cold-Set Web Offset Rotary Printing Machine with minimum speed of 70,000 copies per hour” to “High-Speed Coldset Web Offset Rotary Double Width Four Plate Wide Printing Machine with a minimum speed of 70,000 copies per hour”.
The assessee filed a Bill of Entry claiming the benefit of a 5% concession (under the First Notification). However, owing to the Amended Notification, the assessee was ineligible for the benefit of the previously enjoyed concession, under the First Notification, and was liable to pay customs duty at 39.2% on the value of the Imported Machine amounting to ₹1,92,54,318.
The Assessee filed a writ before the High Court for declaring the Amended Notification ultra vires Section 25(1) of the Customs Act 1962 and sought, a declaration for withdrawal of the Amended Notification. On 18.03.2004, a single judge made an interim order directing the release of the imported machinery provisionally on payment of a concessional rate of duty against the bank guarantee for the differential amount of Rs. 1,67,98,410 and set aside the amended notification on the ground that no intelligible differentia existed for granting concession on one type of machinery and withdrawing concession to other types of machinery.
The Union Government preferred an appeal to the Division Bench of the High Court. The High Court upheld the judgment and order of the single-judge bench. The High Court observed that the imported machine was neither manufactured in any part of the country at the relevant point of time nor any copy of representation received from domestic manufacturers questioning the exemption granted to the imported machine shown by the revenue.
It was submitted by the assessee that the Union could not withdraw or amend the First Notification issued under Section 25(1) of the Customs Act without any justification. Further submitted that the power of the Central Government under Section 25(1) of the Customs Act to grant or amend an exemption is not unrestricted and the government is duty-bound to examine the issue in light of public interest.
It was evident that the sole ground which persuaded the High Court, to set aside the Amended Notification is that withdrawal of the concession could not be said to facilitate indigenous manufacturers. The High Court held that the “Indigenous angle, therefore, was not germane to the withdrawal of exemption” and therefore, “public interest which must govern in the case of grant or withdrawal of the grant is lost.”
It was observed that once it was recognized that it was the executive’s exclusive domain, in fiscal and economic matters to determine the nature of classification, the extent of levy to be imposed, and the factors relevant for either granting, refusing or amending exemptions, the role of the court is confined to decide if its decision is backed by reasons, germane, and not irrelevant to the matter.
A single judge bench comprising Ravindra Bhat held that “the High Court, by the impugned judgment, erred in judging the merits of the reasons which led the executive government to issue the Amended Notification. No mala fides or oblique considerations were pleaded or urged; the exercise of power was in line with the provisions of the Act. The indigenous angle, i.e. availability of equipment, cannot be characterized as an irrelevant factor or consideration, since the grant of exemption to a class of goods, which are similar to those manufactured within the country, and its likely adverse impact on such manufacturers or producers, is germane and relevant.“
The court set aside the Impugned judgement and allowed the appeal.
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