28 September 2020

Rate of duty when notification issued on same date when bills of entry presented

Observing that the self-assessment was carried out based on the rate of duty which prevailed at the time of the presentation of the bill of entry, the Supreme Court has upheld the High Court’s Orders setting aside re-assessments, by the Customs department, due to a notification issued later on the date of presenting of bill of entry, enhancing the rate of duty.

The rate of duty on goods from Pakistan was raised by the government to 200% by the notification in question (Notification No. 5/2019-Cus., dated February 16, 2019) issued under Section 8A of the Customs Tariff Act, 1975. The notification was issued on the same date (but later during the day) on which the bills of entries were filed and goods were self-assessed.

The Apex Court in its judgement dated September 23, 2020 rejected the department’s contentions that two different rates of duty cannot be applicable on the same day, and that by use of the phrase ‘on the date’ (under Section 46 of Customs Act, 1962) without making a reference to time, the legislature has by a legal fiction enacted that the rate of duty will be the rate that is prevalent on the date of the presentation of the bill of entry for home consumption. The contention that the notification issued at 20:46:58 hours on February 16, 2019 took effect commencing from 0000 hours on that day, was thus rejected.

Dismissing the appeal by the department, the Court observed that notification operates only prospectively and cannot displace the rate of duty applicable when the bill of entry was presented. It also noted that a notification issued under Section 8A(1) of the Customs Tariff Act, 1975 does not fall under definition of ‘Central Acts’ and ‘Regulations’ under the General Clauses Act, 1897, and hence the Section 5(3) of the latter would not be applicable.

It also noted that Parliament did not either expressly or by necessary implication indicated that a notification once issued under Section 8A will have force and effect anterior in time, and hence the notification will not be effective retrospectively.

Further, relying on Information Technology Act 2000, Information Technology (Electronic Service Delivery) Rules 2011 and  Digital Signature (End entity) Rules 2015, the Court in the case Union of India v. G S Chatha Rice Mills held that the provisions in the Customs Act for the electronic presentation of the bill of entry for home consumption and for self-assessment have to be read in the context of Section 13 of the Information Technology Act which recognizes ‘the dispatch of an electronic record’ and ‘the time of receipt of an electronic record’.

The Apex Court finally was of the view that the power of reassessment under Section 17(4) of the Customs Act, 1962 could not have been exercised since this is not a case where there was an incorrect self-assessment of duty. Holding that the duty was correctly assessed at the time of self-assessment in terms of the duty which was in force on that date and at the time, it held that the subsequent publication of the notification was not a valid basis for re-assessment.

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