Goods Exempted from Customs Duty May be Subject to Levy of Additional Duty: Madras HC [Read Order]

The Madras High Court in its recent ruling concluded that imported products that are exempt from basic customs tax may be subject to additional duty levied in accordance with applicable laws.

The division bench comprising of Chief Justice K.R. Shriram and Justice Mohammed Shaffiq observed that even though imported goods are exempt from basic customs duties, they may still be subject to additional duties under the relevant laws unless and until the relevant authority, acting under the authority granted by those laws, specifically exempts them from the additional duties.

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Transasia Bio-Medicals Ltd., the petitioner/assessee, imported and stored a single shipment of a hemato analyzer together with its usual accessories and submitted bills of entry. After evaluating the bills of entry, the Commissioner of Customs (Respondent No. 2) requested an additional 4% duty in accordance with Notification No.19/2005-Cus dated 01.03.2005.

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The goods covered by the exemption Notification No.24/2005-Cus dated 01.03.2005 are subject to extra duty at the rate of 4%, per Notification No.19/2005-Cus dated 01.03.2005. The Customs Tariff (9027 80) on the assessee's imported products is listed in Customs Exemption Notification No.24/2005-Cus. According to the Customs Tariff Act of 1975, the aforementioned goods has a free tariff rate.

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The assessee claims that the issue of exemption under Section 25 of the Customs Act does not come up when the Customs Tariff and imported goods state that the rate of tax is free. As a result, Notification No. 24/2005 is illegal. Accordingly, the assessee argued, the mention of that announcement in announcement No. 19/2005 would likewise be included. As a result, the imported items will not be subject to the 4% extra duty.

According to the bench, Notification No. 19/2005 was published using the authority granted by Subsection (5) of Section 3 of the Customs Tariff Act, 1975, and the table only lists the items that will be subject to an additional 4% ad valorem charge. Section 25 of the Customs Act is unrelated to that.

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The court ruled that the Government of India is not unable to exempt goods from the full amount of customs duty imposed on them under the First Schedule in cases when they are permitted to be imported duty-free under Section 25 of the Customs Act, 1962.

The bench referred to Century Floor Mills Ltd. v. Union of India where it was held that under Section 25 of the Customs Act, the Government has authority to grant exemption from duty only conditionally or in absolute terms and in which event, the power under Section 25 of the Customs Act will only go for exempting generally and in absolute terms, thus making import free of any liability under the Act or permit import subject to other conditions as it may deem fit in the given circumstances.

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While dismisisng the petition, the bench held that the Customs Tariff Act of 1975 stipulates that products imported into or exported from India must pay customs charges at the rates prescribed by the Customs Act. Consequently, the Customs Tariff Act establishes the rate at which customs charges will be assessed.

To Read the full text of the Order CLICK HERE

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