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Judgment
Srinivasan, J.—In these writ petitions common questions are raised challenging the orders passed by customs authorities on the basis that
tariff heading 98.01 does not apply to the photographic machinery imported by the petitioners in view of the definition of ""industrial plant"" in the
Project Imports Regulations, 1986 which came into force on April 3,1986. In three of the writ petitions which were filed in 1986 long before the
other petitions were filed, some additional contentions are advanced resting on an interpretation of the said Regulations and the doctrine of
promissory estoppel.
The three writ petitions filed in 1986, are at the instance of the same person with reference to the same import. The petitioner is a partnership
firm carrying on manufacture of colour film processing and printing and enlargement of the same as a Small Scale Industry. It placed an order for
import of two mini colour laboratories from Japan, one for their factory in Madras and the other for their branch in Madurai at a total cost of
Rs.15,62,000/- (ci.f. value) in October 1985. The Letters of Credit were opened on 23.1.1986 and the dates of shipment were 31.3.1986 and
2.4.1986. The goods arrived at Madras Port in the third week of April, 1986. The petitioner applied to the Director of Industries who was the
Sponsoring Authority for recommendation on 22.3.1986. The same was granted on 24.4.1986. But on 3.4.1986, the new Project Imports
Regulations, 1986 were issued under Customs Notification No. 230/86 dated 3.4.1986 and they came into force on that day. They defined the
expression ""industrial plant"" so as to exclude from its scope photographic studios, photographic film processing laboratories, photocopying studios
and certain other establishments. Applying that definition to the word ""Industrial plant"" occurring in tariff Heading No. 98.01 in the First Schedule
to The Customs Tariff Act, 1975, The Customs authorities refused to assess the duty under the heading and held that duty should be paid under
tariff heading No. 90.10. The aggrieved petitioner has filed three writ petitions. In W.P. 6477 of 1986, the prayer is for issue of a Certiorarified
Mandamus to quash the order of the Assistant Collector of Customs dated 24.4.1986 in S49/132/86 Group and direct him to register the contract
in respect of photographic film printing and processing Machine Model No. FUJI Mini Lab 27 and extend the benefit of concessional duty of
55%. In W.P. 6478 of 1986 the prayer is for a declaration that Clause 3(a)(i) of the Project Import Regulations, 1986 contained in Customs
Notification No.230/86 is ultra vires the Constitution of India. The prayer in W.P. 6479 of 1986 is the same as in W.P. 6477 of 1986 with respect
to the photographic printing and enlarging Machine Model No.QSS 603.
Apart from challenging the validity of the definition of ""industrial plant"" in the Project Import Regulations, 1986 as has been done by all the other
writ petitioners, the petitioner in the above three writ petitions contends that the said Regulations contain a saving provision as they except ""things
done or omitted to be done"" under the old Regulations which were superseded by the present Regulations. According to him, he had done all that
he should do under the old Regulations and the new definition introduced by the new Regulations for the first time on 3.4.1986 will not apply to the
two machines imported by him. He has also raised a contention that the principle of promissory estoppel will apply to his case and the authorities
are barred by the same from applying the new definition as he had acted already on the basis of the old Regulations.
It is not necessary to set out the facts in the other writ petitions as they are all similar. It is sufficient to note that in all those cases, the contracts
as well as the imports are years after the coming into force of the Project Import Regulations, 1986 on 3.4.1986.
In order to appreciate the contentions advanced and come to a correct conclusion, it is necessary to set out the history of the legislation briefly.
The Customs Act, 1962 (Act 52 of 1962) was enacted to consolidate and amend the law relating to Customs. Before that the law was governed
by the Sea Customs Act 8/1878, the Inland Bonded Warehouses Act 8/1896, the Land Customs Act 19/1924 and the Aircraft Act 22/1934. All
the four Acts were repealed by the Customs Act. Section 12 of the Customs Act provided that duties of customs shall be levied at such rates as
may be specified under the Indian Tariff Act, 1934 except as otherwise provided in that Act or any other law for the time being in force. Indian
Tariff Act XXXII of 1934 was enacted to consolidate the law relating to customs duties on goods imported into or exported from British India by
sea and by land. Section 2 thereof prescribed for levy and collection of the duties specified in the First and Second Schedules to the Act. The
Tariff was mainly based on the Draft League of Nations Nomenclature of 1931. Section 160 of the Customs Act repealed Section 2 of the Indian
Tariff Act and substituted it with a new appropriate Section 2.
The substantive provisions and the Schedules of the Indian Tariff Act were amended from time to time. The progress made in industrial growth
and economic development besides the substantial changes in the composition and pattern of the country''s external trade made it necessary to
revise the entire nomenclature of the tariff so as to bring in line with the contemporary conditions. The Indian Tariff (Amendment) Act, 1949 was
enacted for the purpose of giving effect to the tariff concessions agreed to by India under the General Agreement on Tariffs and Trade (GATT).
That was a temporary Act, some provisions of which were extended from year to year. Practical difficulties were experienced and it was found
more convenient to give effect to the GATT Concessions through notifications under the Customs Act rather than amending the statutory tariff. The
Tariff Revision Committee set up by the Government suggested that the tariff schedule should be revised and based broadly on the Brussels Tariff
Nomenclature making such modifications as necessary to suit the needs of the country. That resulted in the enactment of The Customs Tariff Act,
1975 (51 of 1975) which came into force on the 2nd August, 1976 containing a new Customs Tariff Nomenclature based on the Customs Co-
operation Council Nomenclature known as CCCN. The Act was however not a complete adoption of the CCCN but only an adaptation through
suitable contraction and expansion as specified in the Headings to the First Schedule to the Act to suit the requirements of this country. Section 2
provides that the rates at which duties of customs shall be levied under the Customs Act are specified in the First and Second:; Schedules. The Act
repealed Indian Tariff Act, 1934 and the Amendment Act of 1949. The Act also made consequential amendments in the Customs Act, 1962 by
substituting the words and figures ""Customs Tariff Act, 1975"" in the ""place of Indian Tariff Act, 1934"". Thus, Section 12 of the Customs Act
makes a reference to the Customs Tariff Act, 1975.
Necessarily the provisions of the Customs Act and the Customs Tariff Act have to be read together in order to consider the matter in the proper
perspective. I have already referred to Section 12 of the Customs Act. Section 15 of the Customs Act prescribes that the rate of duty and tariff
valuation applicable to the imported goods shall be the rate and valuation in force in the case of goods entered for home consumption u/s 46 on the
date on which a bill of entry in respect of such goods is presented under that Section. As per the proviso, if a bill of entry is presented before the
date of entry inwards of the ship, the bill of entry shall be deemed to have been presented on the date of such entry inwards. It is not necessary to
refer to the remaining parts of the section in this case. Section 25 of the Customs Act enables the Central Government to grant exemptions from
payment of duty if it considers necessary in the public interest to do so. Section 157 of the Customs Act empowers the Central Board of Excise
and Customs constituted under the Central Boards of Revenue Act, 1963 to make Regulations consistent with the Act and the Rules and generally
to carry out the purposes of the Act without prejudice to any power contained elsewhere in the Act.
Turning to the Customs Tariff Act, 1975, it was realised that the adaptation of CCCN in the manner done was not quite satisfactory and the
Customs Co-operation Council recommended certain measures to be taken with effect from 1978. Hence Amendment Act 26 of 1978 was
enacted. There-were some more amendments and ultimately Act of 1986 was passed which came into force on 28.2.1986. The entire First
Schedule has been replaced. It is based on a system of classification derived from international convention of ""Harmonised Commodity
Description"" and ""Coding System"" which was approved by the Customs Co-operation Council on 14th June, 1983 with suitable modifications.
The Harmonised Commodity Description and Coding System in known as Harmonised System. Under the System, goods have been classified
basically using a four digit system, with two more digits added for further sub-classification. In view of various advantages of the system, India has
acceded to the International Convention in terms of which the contracting parties had to adopt the same in their customs tariff as well statistical
nomenclature. Hence, the main features of the new first schedule are as follows:
(i) The Harmonized System of nomenclature comprising 97 Chapters along with its general interpretative rules, Section Notes, Chapter Notes and
sub-heading Notes has been totally adopted;
(ii) The rates of duty have been transposed into the new Schedule maintaining the existing levels of duty on individual items as far as possible.
Wherever it has not been found practicable to transpose the existing duty rates, due to a change in the nomenclature or merger of existing
subheadings into a single heading or sub-heading in the Harmonized System, the higher rate of duty among the existing sub-headings has been
provided. However, suitable exemption notifications u/s 25 of the Customs Act, 1962 to maintain the same effective levels of duty in such cases
will be considered at the time of implementation of the new tariff.
(iii) Chapter 98 of the Harmonized System (which is for special use) has been made use of for our special needs like project imports, laboratory
chemicals, passengers'' baggage, imports by post or air and ship stores:
(iv) Chapter 99, which is another Chapter lit the Harmonized System for special use, has been utilised to specify in the Schedule itself certain
imports which are currently exempted from customs duty by virtue of notifications u/s 25 of the Customs Act, 1962.
The first schedule contains rules for interpretation. As per Rule 1, the titles of Sections and Chapters are provided for ease of reference only and
for legal purposes, classification shall be determined according to the terms of the Headings and relative Section or Chapter Notes and if such
Headings or Notes do not otherwise require, according to the rules of interpretation. It is not necessary to refer to those rules. Each Chapter
contains Notes and some of them contain definitions to be applied to the expressions used therein. The entire first schedule forms part of the statute
and naturally the Notes found in each chapter are equally so. The provisions contained in the Notes are as much binding as the other parts of the
Act and they cannot be ignored unless held unconstitutional.
Prior to the introduction of the present First Schedule, that is before 28.2.1986, the goods to which these petitions relate were covered by
Heading No. 84.66. Before the passing of the Customs Tariff Act, 1975, they were covered by Heading N0. 72-A under the Tariff Act of 1934,
Under the present Schedule, they will fall under Heading No. 90.10 and the prescribed rate of duty is 100%. The description of the article is
Apparatus and equipment for photographic (including cinematographic) laboratories (including apparatus for the projection of circuit patterns on
sensitized semi-conductor materials) and (sic not?) specified or included elsewhere in this Chapter; negotoscopes; projection screens."" But [it] is
the contention of the petitioners that the goods fall under Heading No. 98.01 and by virtue of Note 1, the applicability of Heading No. 90.10 gets
excluded.
Chapter 98 deals with ""Project imports, Laboratory chemicals, etc., Note 1 reads:
This Chapter is to be taken to apply to all goods which satisfy the conditions prescribed therein, even though they may be covered by a more
specific heading elsewhere in this schedule.
Head No. 98.01 is as follows:
---------------------------------------------------------------------------------------
Sub, Rate of duty * +
Heading -------------------------
No Heading Description of article
No. Standard prefer
ential areas
-----------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
-----------------------------------------------------------------------------------------
All items of machinery including prime
98.01 9801.00 movers, instruments,apparatus and 60%
appliances, control gear and transmission
equipment, auxiliary equipment (including
those required for research and development
purposes, testing and quality control), as well
as all components (whether finished or not)
or raw materials for the manufacture of the
aforesaid items and their components,
required for the initial setting up of a unit,
or the substantial expansion of an existing
unit, of a specified:
(1) industrial plant,
(2) irrigation project
(3) power project
(4) mining project,
(5) project for the exploration for oil or
other minerals, and
(6) such other projects as the Central
Government may, having regard to, the
economic development of the country
notify in the Official Gazette in this
behalf;
and spare parts, other raw materials
(including semifinished material) or
consumable stores not exceeding 10% of the
value of the goods specified above provided
that such spare parts, raw materials or
consumable stores are essential for the
maintenance of the plant or project
mentioned in 1 to 6 above.
------------------------------------------------------------------------------------
* For Additional Duty see also Annexure I.
+ For Auxiliary Duty Rates/Exemptions see Annexure II.
It is the contention of the petitioners that the language used in the description of article is of very wide amplitude and it will apply to the
machinery imported by them. On the other hand, the respondents rely on Note 2 in the Chapter which is in the following terms:
Heading No. 98.01 is to be taken to apply to all goods which are imported in accordance with the regulations made u/s 157 of the Customs
Act, 1962 (52 of 1962) and expressions used in this heading shall have the meaning assigned to them in the said regulations.
As seen already, u/s 157 of the Customs Act, it is the Board of Central Excise and Customs which is empowered to make regulations and in
exercise of the said power, the Board issued Customs Notification No. 230/86-Cus. dated 3.4.1986 framing regulations called the Project Import
Regulations, 1986. It superseded the earlier regulations known as Project Imports (Registration of Contract) Regulation, 1965. Clause 2 of the
Regulations of 1986 declares that the regulations shall apply for assessment and clearance of the goods falling under Heading No. 98.01 of the
First Schedule to the Customs Tariff Act, 1975. Clause 3(a) defines ""Industrial plants"" as follows:
(a) ''Industrial Plants'' means an industrial system designed to be employed directly in the performance of any process or series of processes
necessary for manufacture, production or extraction of a commodity, but does not include
(i) establishments designed to offer services of any description such as hotels, hospitals, photographic studios, Photographic film processing
laboratories, photocopying studios, laundries, garages and workshops, or
(ii) a single machine or a composite machine, within the meaning assigned to it, in Notes 3 and 4 to Section XVI of the said First Schedule.
As photographic studios, photographic film processing laboratories and photocopying studios are excluded from the definition of industrial plant
referred to in Heading No. 98.01, the petitioners are disentitled to claim the benefit of the lesser rate of duty prescribed therein and they are
obliged to pay the higher duty prescribed under Heading No. 90.10.
It is already seen that Chapters 1 to 97 of the first schedule describe the goods and prescribe the rates of duty. Chapter 98 is only for special
use which is more or less an exception or proviso to Chapters 1 to 97. While chapters 1 to 97 prescribe the maximum and usual rates to be
charged on the goods themselves, Chapter 98 provides for certain concession on the basis of the user of such goods and the special needs of the
country. Hence, the conditions set out in Chapter 98 must be satisfied before the benefit thereof is claimed. It is also seen that power of exemption
is entrusted to the Central Government and the power to make regulations is with the Board. Note 2 in Chapter 98 is also a provision conferring
the power and it requires the Board to exercise the power u/s 157 of the Customs Act. While the Parliament has taken the trouble of defining
certain expressions in Chapters 1 to 97, it has chosen to entrust the function to the Board in chapter 98. Obviously, it has thought fit to do so as the
making of regulations by the Board may be easier than making an amendment to the statute whenever changes are called for. When in its wisdom
the Legislature has entrusted the function of defining the expressions used in Chapter 98 to the Board and the latter has also carried out the said
function, it is not possible to ignore the definition contained in the regulations and contend that the expressions used in the Schedule are of wider
amplitude or that they should be understood in the sense in which they are used in common parlance. Chapter 98 does not contain a definition of
the terms used in the heading and there is no merit in the contention that the Board has cut down the scope of such terms by the definition
contained in the Regulations of 1986. In order to understand the entry under Heading No. 98.01, one has to apply the definition contained in the
Regulations and if that is done, the machinery imported by the petitioners fall outside the Chapter and they will be governed by the Heading No.
90.10.
The language used in the Heading No. 98.01 is also significant. It does not merely refer to all items of machinery of all industrial plants. The
entry has to be divided into four parts as follows:
(i) All items of machinery including prime movers, instruments, apparatus and appliances, control gear and transmission, equipment, auxiliary
equipment (including those required for research and development purposes, testing and quality control), as well as all components (whether
finished or not) or raw materials for the manufacture of the aforesaid items and their components;
(ii) required for the initial setting up of a unit or the substantial expansion of an existing unit;
(iii) of a specified (1) industrial plant, (2) irrigation project, (3) power project, (4) mining project and (5) such other projects as the Central
Government may notify in the Official Gazette;
(iv) Spare parts etc.
The word ""Specified"" occurring in the third part above is very significant. The Legislature has not made the entry applicable to all industrial plants
and projects automatically but the entry can be invoked only if the machinery etc, is for a specified industrial plant, specified irrigation project,
specified power project or specified project for the exploration for oil or other minerals. Reading the expression ""specified"" along with Note 2, it is
clear that the Board is conferred with the power of so specifying by defining the expressions. Instead of specifying the industrial plants by separate
orders, the Board has defined the expression in the Regulations. Before 28.2.1986, Heading No. 84.66 was the corresponding entry. While the
wording thereof was almost similar, there was a proviso which read as follows:
Provided these are imported (whether in one or more than one consignment) against one or more specific contracts, which have been registered
with the appropriate Customs House in the manner prescribed by Regulations which the Central Board of Excise and Customs may make u/s 157
of the Customs Act, 1962 (52 of 1962) and such contract or contracts has or have been so registered before any order is made by the proper
officer of Customs permitting the clearance for home consumption, or deposit in a warehouse of items, components or raw materials.
The power of the Board was to prescribe the manner of registration of specific contracts. The Board framed the Project Imports (Registration of
Contract) Regulations, 1965. Those regulations did not contain any definition of the expressions in the Heading. The nomenclature of the
regulations is now suitably changed and the brackets and the words within are omitted. It is only because there was no express specification of the
industrial plants, the question of admissibility of the project import facility on automatic colour film processing laboratory had to be referred to the
Central Government and they passed on order in F.No. 526/52/83-CUS (T.U.) dated 4.11.1983 granting the same subject to certain conditions.
Now that the regulations contain a definition which excludes named industries, there is no question of Registration of Contracts for import of
machinery for such industries.
In order to get over this situation, the petitioners contend that the regulation defining ""industrial plant"" and excluding therefrom certain
establishments is not valid for various reasons. At first it is argued that as the language used in Heading No. 98.01 is so wide as to include all
machinery, it is not open to the Board to exclude any machinery therefrom. Reference is made to the judgment of the Privy council in Dilworth and
others v. The Commission of Stamps 1899 AC 99, wherein the word ""include"" occurring in a definition clause is considered and it is held that the
said word is generally used in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used those
words or phrases must he construed as comprehending, not only such things as they signify according to their natural import but also those things
which the interpretation clause declares that they shall include. The proposition has no applicability to the present case.
Similarly, the ruling in The State of Bombay and Others Vs. The Hospital Mazdoor Sabha and Others, dealing with the definition of ""industry
in the Industrial Disputes Act has no relevance. I have already dealt with at length the fallacy in the contention that the scope of Heading No. 98.01
is reduced by the definition contained in the Project Import Regulations. The word ""including"" used in the Heading is only with reference to the
items of machinery and not the industrial plant or the projects mentioned therein.
It is next contended that the Legislature cannot be understood to have exceeded its power of delegation and conferred a power on the Board
to alter the scope of the legislation itself. In this connection reliance is place on the propositions laid down by the Supreme court in In re Article
Constitution of India, etc. AIR 1951 SC 332. In paragraph 74, the court has held that the Legislature cannot abdicate its legislative functions
and, therefore, while entrusting power to an outside agency, it must see that such agency acts as a subordinate authority and does not become a
parallel legislature. Reliance is placed on certain passages found in Legislation and Interpretation by Jagdish Swarup to the similar effect. It is hardly
necessary to refer to those passages, as they have no applicability here.
Learned Counsel for the petitioners cited the following rulings in support of his contention that a delegatee cannot by exercise of the power
conferred by the Legislature in the delegation act against the main provisions in the Statute or vary or abrogate the same;
1) Commissioner of Income Tax, Madras Vs. S. Chenniappa Mudaliar, ,
2) Second Income Tax Officer and Others Vs. M.C.T. Trust and Others, ,
3) Madras Industrial Linings Ltd. Vs. Income Tax Officer and Others, ,
4) Atmanatha Swami Devasthanam v. Tlie Commissioner Hindu Religious and Charitable Endowments Board, Madras - 34 and Anr. 1980 (I)
MLJ 375 and
5) Collector of Central Excise, Bombay-I and Another Vs. Parle Exports (P) Ltd., .
None of the rulings has any bearing on the question before me and I do not consider it necessary to refer to them in detail. As stated earlier, the
Legislature has entrusted the function of specifying or denying the particular industrial plants or projects to the Board and the same has been
carried out. There is no question of whittling down the scope of the entry in the Heading by applying the definition contained in the Regulations. It
would be a case of putting the cart before the horse if the expressions used in the Heading are to be given a meaning other than that contained in
the Regulations and then considering whether the Regulations have cut down the scope of the entry in the Heading. Hence, the judgment in
Onkarlal Nandlal Vs. State of Rajasthan and Another, cited for the proposition that the interpretation of the definition of the expression must be in
the Rules and by-laws as found in the statute, will have no application in this case.
It is next contended that the Central Government had by its order dated 4.11.1983 in F.No. 526/52/83-CUS (T.R.U.) referred to already,
decided to extend the facility to the machinery in question and the Board, which is a subordinate authority, cannot act contrary to it and give a
definition which will deprive the said machinery of the project import facility. There is no merit in this contention. It is unnecessary to consider
whether the Board is subordinate to the Central Government or not. Even if it is so, the Parliament has entrusted the function of defining the
expressions to the Board with effect from 28.2.1986. It any other authority had given a different meaning to the expressions contained in the
Heading earlier, that will become ineffective on the framing of the Regulations by the Board on 3.4.1986. The notification of the Central
Government dated 4.11.1983 will automatically cease to be effective after the introduction of the Regulations. No reliance can be placed thereon
by the petitioners. Learned counsel referred to a judgment of this Court in Benzex Labs Limited Vs. Collector of Customs, in support of his
proposition that a subordinate authority cannot act in contravention of the order passed by a superior authority. The proposition, though well-
settled, has no application in this case.
It is next contended that the Customs Tariff Act is a fiscal enactment and it should be strictly construed. It is argued that no equitable
considerations would arise in construing such statutes and it is not open to the Court to interpret such provisions on the basis of any presumption or
intendment of the Legislature. Reliance is placed on a passage in Principles of Statutory Interpretation by justice G.P. Singh, 5th Edn., at pages
455 and 456, which reads as follows:
Strict construction of taxing statutes
(a) General principles of strict construction:
A taxing statute is to be strictly construed. The well-established rule in the familiar words of Lord Wensleydale, reaffirmed by Lord Halsbury and
Lord Simonds, means: ''The subject is not to be taxed without clear words for that purpose; and also that every act of Parliament must be read
according to the natural construction of its words''. [Re Micklethwait, (1885) II Ex 452 referred to in Tenant v. Smith, (1892) AC 150 (Lord
Halsbury); St. Aubyn .A.G. (1951) 2 All ER 473 (Lord Simonds); Member-secretary, Andhra Pradesh State Board for Prevention and Control
of Water Pollution Vs. Andhra Pradesh Rayons Ltd. and Others, . In a classic passage Lord Cairns stated the principle thus: ''If the person sought
to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other
hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within
the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable,
construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute"".
[Partington v. A.G. (1869) LR 4 HL 100, referred to in IRC v. Duke of Westminister (1936) AC 1; AIR 1940 183 (Privy Council) Potts''
Executor v. IRC (1951) I All ER 76 A.V. Fernandez Vs. The State of Kerala, ; CIT v. M & G Stores AIR 1968 SC 200, P.205;J.K Steel Ltd.
v. Union of India AIR 1970 SC 1182; Ransom (Inspector of Taxes) v. Higgs (1974) 3 All ER 949. Viscount Simon quoted with approval a
passage from Rowlatt. J. expressing the principle in the following words: ''In a taxing Act one has to look merely at what is clearly said. There is no
room for an intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in nothing is to be implied. One
can only look fairly at the language used. [Cape Brandy Syndicate v. IRC (1921) I KB 64 (Rowlatt, J.) referred to in Canadian Eagle Oil Co. Ltd.
v. R. (1945) 2 All ER 499; Gumahai v. CIT AIR 1963 SC 106; Banarsidas v. ITO AIR 1064 SC 1742, See further Commissioner of Income
Tax, Madras Vs. V. Mr. P. Firm, Muar, ; Commissioner of Income Tax, Patiala and Others Vs. Shahzada Nand and Sons and Others, ,
Janapada Sabha Chhindwara Vs. The Central Provinces Syndicate Ltd. and Another, ; Owen Thomas Managin v. IRC (1971) 2 WLR 39 (PC)
P.42; Controller of Estate Duty v. Kantilal Trikamlal ; Shrimati Tarulata Shyam and Others Vs. Commissioner of Income Tax, West Bengal, ,
Member-secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution Vs. Andhra Pradesh Rayons Ltd. and Others, ,
Aphali Pharmaceuticals Ltd.'' v. State of Maharashtra : 1989(44)ELT613(SC) Goodyear India Ltd., Gedore (India) Pvt. Ltd., Kelvinator of India
Ltd. and the Food Corporation of India and Another Vs. State of Haryana and Another, ; Sutlej Cotton Mills Ltd. Vs. Commissioner of Income
Tax, West Bengal III, Calcutta, . Relying upon this passage Lord Upjohn said: theory of taxation, (sic) [Commr. of Customs v. Top Ten
Promotions (1969 3 All ER 39.
In fiscal legislation a transaction cannot be taxed on any doctrine of ""the substance of the matter"" as distinguished from its legal signification, ''for a
subject is not liable to tax on supposed spirit of the law'' or by inference or by analogy"". [IRC v. Duke of Westminister (1936) AC 1 AIR 1940
183 (Privy Council) ; Potts Executive v. IRC (1951) 1 All ER 76 ; A.V. Fernandez Vs. The State of Kerala, ; Commissioner of Income Tax,
Gujarat Vs. Keshavlal Lallubhai Patel, ; M.G. Agarwal Vs. State of Maharashtra, ; The Joint Commercial Tax Officer, Harbour Division, II-
Madras Vs. The Young Men''s Indian Association (Regd.), Madras and Others, ; Europea Oil (NZ) Ltd. v. Inland Revenue Commissioner 1976
1 All ER 503 (Legal rights arising from a transaction and not its economic results are materials); State of Rajasthan Vs. Pabudan Singh and
Lachhman Singh, . Member-secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution Vs. Andhra Pradesh Rayons
Ltd. and Others, ]. In refuting the doctrine of ''the substance of the matter'' Lord Tomlin observed; it is said that in revenue cases there is a doctrine
that the court may ignore the legal position and regard what is called the substance of the matter.'' This supposed doctrine seems to rest for its
support upon a misunderstanding of language used in some earlier cases. The sooner this misunderstanding is dispelled, and the supposed doctrine
given its quietus, the better it will be for all concerned, for the doctrine seems to involve substituting ''the uncertain and crooked cord of discretion''
for the golden and straight metwand of the law.'' [IRC v. Duke of Westminister, Supra, referred to in Pott''s Executors v. IRC, Supra p.80 (Lord
Normand); Commissioner of Income Tax, Gujarat Vs. B.M. Kharwar, IK, Steel Ltd. v. Union of India, Supra p.2292; The Commissioner of
Income Tax, Calcutta Vs. Gillanders Arbuthnot and Co., Comma, of Customs v. Top Ten Promotions (1969) 3 All ER 39 Ransom (Inspector of
Taxes v. Higgs (1974) 3 All ER 949. Learned Counsel also drew my attention to certain passages found in the rulings of the Supreme Court
referred to in the foot-notes. I do not find any necessity to refer to them in detail, as the above passage in the text-book as well as the passages in
the judgments cited have no application in this case.
It is next argued that Note 2 in Chapter 98 does not contain any guidelines to the Board and it will tantamount to excessive delegation. It is
also contended that there is no need for the petitioners to challenge the validity of Note 2 as such, as the very conditions precedent for such
delegation as contained in Note 2 have not been fulfilled in the present case. Reference is made to the decisions of the Supreme Court in Devi Das
Gopal Krishnan and Others Vs. State of Punjab and Others, , Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. Vs. The Asstt. Commissioner of Sales
Tax and Others, , Govind Saran Ganga Saran Vs. Commissioner of Sales Tax and Others, , A.N. Parasuraman Etc. Vs. State of Tamil Nadu, ,
Delhi Transport Corporation Vs. D.T.C. Mazdoor Congress and Others, . The rulings will not apply, as this is not a case of empowering the
Board to levy any tax, but only authorising the Board to define the industrial plants or other projects which Will be entitled to the concessional rate
prescribed in Chapter 98 having regard to the conditions prevailing in the trade.
It is also contended that Note 2 should be interpreted in such a manner that the Legislature expected the Board to frame Regulations in
accordance with the subsisting law( and the Board was not expected to brush aside that which is contained in the main statute. It is also argued that
the expression ""industrial plant"" is a well known concept and particularly it has been understood in a specific mariner for over 52 years. It is
submitted that item 72-A in the Schedule to the Indian Tariff Act of 1934 was similar in language and it held the field till the Act of 1975 was
passed and in the later Act Heading No. 84.66 was understood in the same manner for about 11 years till the New Regulations were framed by
the Board. It is not open to the Board to ignore the position that the expression has been understood for such a long time in a particular manner
and introduce a new definition so as to cut down the scope of it. Reference is made to a judgment of the Supreme court in The Commissioner of
Gift Tax, Madras Vs. N.S. Getty Chettiar, . The Court had to interpret the word ""transaction"" occurring in the Gift Tax Act. It was held that
partition in a Hindu family did not effect any transfer as generally understood in law. The argument is unsustainable for the reasons already given
and the ruling has no relevance in the present case.
Reliance is also placed on the judgment of the Supreme Court in Hukam Chand etc. Vs. Union of India (UOI) and Others, , in which it was
held that the rule-making authority has to act within the limits of power delegated to it. The judgment does not in any way apply to the facts of this
case.
It is next argued that the Board is empowered by Section 157 of the Customs Act only to make Regulations generally to carry out the
purposes of that Act. It is submitted that the Customs Act is penal in nature and it is enacted with the object of providing a machinery for collection
of duty and prevention of smuggling and it is contended that the Board can make only Regulations for carrying out the objects of the Customs Act
and has no power to make Regulations for other purposes. There is no merit whatever in this contention. When Note 2 in Chapter 98 expressly
confers the power to make Regulations for project imports and also assign meanings to the expressions found in the Headings, it is futile to contend
that the Board can make only such regulations as would fall strictly within the scope the Customs Act. Apart from that, the relevant provisions of
the Customs Act have already been referred to and it has been pointed out that the two Acts viz., Customs Act and Customs Tariff Act should be
read together and the provisions are complementary to each other. Reliance placed by learned Counsel on the judgment of the Supreme Court in
Amba Lai v. Union of India and Ors AIR 1961 SC 264 and that of the High Court of Australia in Shanahan v. Scotto 96 C.L.R 245 as well as
that of the Privy Council in Utah Construction & Engineering Pty., Ltd., and Anr. v. Pataky (1965) 3 All ER 650 is of no relevance in this case.
It is next argued that there is no nexus between the object of the Regulations and the definition of the expression ""industrial plant"". Counsel has
not been able to substantiate this contention in any manner.
It is next contended that the imported machinery is a new technical development, which is very much required for the advancement of the trade
in this country and if the concession available in Chapter 98 is not made applicable, it will cause a set-back to the development of the industry. It is
not for this Court to decide the validity of the provision on such considerations of hardship.
It is contended that the Central Government has given exemption u/s 25 in Notification No. 182/85 dt. 19.4.1985 and by applying the
definition contained in the present Project Import Regulations, such exemption will be taken away. The Board has no power to do so. The
question does not arise in this case as it is a matter for interpretation of the said Notification in appropriate cases where it may arise. The said
Notification, even if understood as contended by learned Counsel for the petitioners, does not nullify or invalidate the definition of ""industrial plant
contained in the Project Import Regulations of 1986.
Senior Counsel appearing in W.P. Nos .6477 of 6479 of 1986 raised some additional contentions. According to him, the Customs Tariff Act
being a plenary legislation, cannot be amended by, a subordinate legislation viz., the Project Import Regulations of 1986. There is no merit in this
contention. There is no case of amending the statute by a subordinate legislation. The statute has not dealt with the matter and left it to be decided
by the Board. While the statute has used certain expressions in the Chapter, the function of assigning meanings to the same has been entrusted with
the Board. Once the Board assigns certain meanings, they alone will apply to the expressions and they cannot be understood in a different manner.
The next contention is that Note 2 in Chapter 98 refers only to the Regulations of 1965 which were then in force and not to any subsequent
Regulations. Learned Counsel submits that the Note does not use the expression ""Regulations from time to time"". He relies on the Judgment of the
Supreme Court in Hukam Chand etc. Vs. Union of India (UOI) and Others, . The question considered in that case was whether the Central
Government had been vested by the statute with powers to make rules with retrospective effect. Section 40 of the Displaced Persons
(Compensation and Rehabilitation) Act, 1954, was considered by the court and it was held that the said Section did not confer any such power on
the Government. The ruling has no bearing in this case. Moreover, it should be remembered that the Project Import Regulations of 1965 did not
contain any definition and did not assign any meaning to the expressions found in the Heading 84.66, which corresponded to the present Heading
98.01. The Legislature was undoubtedly aware of the said position when it introduced Note 2 in Chapter 98. Hence, Note 2 refers only to the
Regulations to be framed by the Board thereafter; Consequently, the regulations referred in Note 2 are the Project Import Regulations of 1986.
It is next argued that the Regulations except from its purview things done or omitted to be done before the supersession of the old Regulations
of 1965. It is submitted by learned Counsel that his client had entered into a contract for import of the machinery and also opened the Letter of
Credit on 23.1.1986. The petitioner in those three writ petitions applied for a recommendation to the sponsoring authority on 223.1986 and the
same was granted to him only on 24.4.1986. It is contended that the petitioner had done what all he could do and the delay was caused only by
the concerned authorities for which he cannot suffer. There is no substance in this contention, though it is attractive. As rightly pointed out by
learned Counsel for the respondents, the Regulations refer to things done or omitted to be done under the old regulations and not anything done
outside the Regulations. There was no application for registration of contract under the old Regulations by the petitioner. He had only applied for a
recommendation from the sponsoring authority viz., the Director of Industries. Even that was done only on 22.8.1986 arid-the new Regulations
came into force on 3.4.1986. It cannot be contended that there was considerable delay on the part of the Director of Industries in considering the
application for recommendation made by the petitioner. In any event, the words ""things done or omitted to be done"" cannot cover the application
for recommendation by the sponsoring authority. Hence, reliance, placed by learned Counsel on the judgment of the 1993 (45) ECR 1 20 is of no
use.
Learned Counsel for the petitioner has relied on the following judgments to contend that the expression ""things done"" should be given a liberal
interpretation and the application for recommendation made to the sponsoring authority would also fall within the scope of the expression:
(1) Universal Imports Agency and Another Vs. The Chief Controller of Imports and Exports and Others, .
(2) Shri Ram Prasad (Deceased) by his Legal Representative Vs. The State of Punjab, ,
(3) Hasan Nurani Malak Vs. Assistant Charity Commissioner, Nagpur and Others, , and
(4) The Gujarat Electricity Board Vs. Shantilal R. Desai, .
The above rulings have no relevance in this case as the expression used in the Regulations does not admit of any doubt that it refers only to ""things
done"" or steps taken under the superseded regulation.
Learned Counsel submits that the certificate of the Sponsoring Authority is a sine quo non for an application for registration of the contract.
That does not in any way help the petitioner as be ought to have taken steps therefore much earlier. When according to him the Letter of Credit
was opened in January 1986, he has to blame himself for applying to the Sponsoring Authority for recommendation only towards the end of March
1986. In this connection reliance is placed on Dhampur Sugar Mills Ltd. Vs. Union of India and Others, . In that case, a notification was issued by
the Government u/s 29-B of the Industries (Development and Regulation) Act (65 of 1951) exempting sugar industry from certain provisions of the
Act and the Rules framed thereunder. The exemption was applicable for setting up a new industry and the scheme envisaged that the undertaking
should merely register itself with the Government without requirement of a licence. The petitioner in that case had made such an application for
registration when the Scheme was in force, but the Government delayed the consideration of the same and later withdrew the exemption. The court
held that the undertaking was entitled to registration and exemption under the Scheme and the rejection of the application was arbitrary. The ruling
has no bearing in the present case, as there is no application by the petitioner for registration of the contract under the old Regulations.
Reliance is placed on the judgment of the Supreme court in Union of India and others Vs. Kanunga Industries, to contend that if there is any
doubt in a taxing statute, benefit should be given to the assessee. The judgment has no application to this case.
The definition clause in the'' Regulations excluding certain industries from the scope of the expression ""industrial plant"" is, according to learned
Counsel, manifestly arbitrary and violates Article 14 of the Constitution of India. It, is submitted that establishments excluded are hotels,, hospitals,
photographic studios, photographic film processing laboratories, photocopying studios, laundries, garages and workshops. They dp not belong to
any class and there is no connection between one and the other. There is no reasonable classification in the provision. There is no justification for
excluding those establishments from the general expression ""industrial plant"", which has a settled meaning in the common parlance. Reliance is
placed on the judgments in Glass Chatons Importers and Users'' Association Vs. Union of India (UOI), ; Bhor Industries Ltd., Bombay Vs.
Collector of Central Excise, Bombay, . There is no merit in this contention. I have already pointed out that the expression ""industrial Plant
occurring in Heading No. 98.01 can have only such meaning as assigned to it by the Board in the Regulations of 1986. Hence, there is no question
of any discrimination or violation of principles of Article 14 of the Constitution of India. It is not also possible to accept the contention that the
exclusion of certain establishments from the definition is manifestly arbitrary.
It is next argued that printing industry has been treated as an industrial establishment and there is an unreasonable discrimination. Learned
counsel for the respondents clarified the position and produced before me the Tariff Circular No. 21/86 and F.No. 528/17/86-CUS (TRU) dated
18.6.86. Perusal of the same shows that there is no discrimination in favour (sic) of the printing industry as contended by the petitioner.
It is then argued that the principle of equitable estoppel would apply and consequently, the new Regulations would not apply to the contracts
entered into by the petitioner in October 1985, particularly after he had opened a Letter of Credit in January 1986. Reliance is placed upon the
judgment of the Supreme Court in Union of India (UOI) and Others Vs. Godfrey Philips India Ltd., , in which it is held that the principle of
promissory estoppel is available against subordinate legislation. Reliance is also placed on a recent judgment of mine in W.P.No. 10044 of 1992
(reported as Rizwan International v. The Union of India and Anr. in page 191 supra). It is rightly pointed out by learned Counsel for the
respondents that the doctrine of promissory estoppel or the principle of equitable estoppel will not apply to this case. It is not the legality of the
import that is questioned by the authorities. The validity of the import is accepted. The only question relates to the quantum of duty payable by the
petitioner. Section 15 of the Customs Act, to which reference has already been made, has specified the relevant date for determination of rate of
duty and tariff valuation on imported goods. In view of the clear provisions of Section 15 of the Customs Act, the principle of estoppel cannot be
invoked. Whatever is the prevalent rate on the relevant date has to be applied by the authorities. That provision is contained in the plenary
legislation viz., the Customs Act and it is not part of the subordinate legislation viz., the regulations.
In Bharat Surfactants (Private) Ltd. and Another Vs. Union of India (UOI) and Another, the Apex Court considered the provisions of Section
15 of the Customs Act and upheld the Constitutional validity of the same. In that case, the petitioner entered into a contract with foreign sellers for
the supply of edible oils and the vessel carrying the consignment approached Bombay and made its prior entry on 4th July, 1981. Actually it
arrived and registered in the Port of Bombay on 11th July, 1981. As the port authorities were not able to allot a berth to the vessel, it left the port
for Karachi for unloading other cargo intended for that port. Thereafter, it returned to Bombay and arrived on 23rd July, 1981 and waited for a
berth. On 4th August, 1981, a berth was allotted and the Customs Authorities made the final entry on that date. The petitioners presented the bill
of entry to the Customs Authorities on 19th July, 1981. An order was passed by the Customs Officer on 18th July, 1981 directing examination of
the consignment. Duty was assessed on the footing that the import was made on 31st July, 1981, the date of ""inward entry"". It was contended that
the rate of duty leviable was that ruling on 11th July, 1981 and not the later date. The contention was rejected by the Court in view of the express
provisions of Section 15 of the Customs Act. The ratio of the decision would apply to the present case also and the principle of estoppel is
excluded.
The next argument of learned Counsel that the petitioner cannot be made to suffer because the prescribed formalities could not be completed
for no fault of him. It is rightly pointed out by learned Counsel for the respondents that there is no equity about a tax and the provisions of a fiscal
enactment have to be interpreted strictly and that if such interpretation is not to the benefit of the subject, the latter cannot escape the same.
Reliance is placed on the following passage in Maxwell on the Interpretation of Statutes, 12th Edition at page 256:
''In a taxing Act'' said Rowlatt J., ''one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a
tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. But this
strictness of interpretation may not always enure to the subject''s benefit, for if the person sought to '' be taxed comes within the letter of the law he
must be taxed, however great the hardship may appear to the judicial mind to be.
Learned Counsel for the respondents has drawn my attention to the judgment of the Supreme Court in Babu Ram Jagdish Kumar and Others
Vs. State of Punjab and Others, , and contended that the delegation of power to the Board under Note 2 is constitutionally valid and as a fact, the
petitioners have not challenged the same in these writ petitions. The following passage in the judgment is relevant and instruct ive:
A review of the decisions of this Court to some of which we will presently refer shows that the delegation of power by the legislature to a local
authority for to the Executive Government to vary or modify an existing law would not be unconstitutional so long as such delegation does not
involve the abdication of essential legislative power by the legislature. Such delegations of legislative power have been upheld by this Court on
several varied and diverse grounds such as the scheme and policy of the statute under which the power is delegated, the presence of guidelines in
the statute regarding the exercise of delegated power, the lack of time for the Legislature to make provision with regard to all the details involved in
the administration of the law, the incapacity of the Legislature to foresee all future events, the nature of the subject-matter of legislation and the
nature of the donee of power etc. Even in matters relating to taxation laws, it has been consistently held that the Legislature can delegate the power
to fix rates of tax provided there are necessary guidelines regarding such fixation on the ground that in a modern society, taxation is one of the
methods by which economic and social goal of the State can be achieved and the power to tax, therefore, should be a flexible power and capable
of being easily altered to meet the exigencies of circumstances. Such delegation has been held to be not amounting to delegation of essential
legislative function.
The question whether the photographic machineries imported by the petitioners fall under Heading No. 98.01 has been considered by a
Division Bench of the Bombay High Court in W.P.No. 27 of 1990 (Subhash Photographies v. Union of India and Ors.). By Judgment dated 2nd
April, 1992; the contentions raised by the petitioners herein have been fully considered and negatived by the Division Bench. With respect, I
concur with the reasoning of the Division Bench in that judgment.
Yet another judgment of the same court by the same Division Bench is reported in Lazor Colour Prints Pvt. Ltd. v. Union of India 1992 (62)
ELT 7Q3. The Division Bench rejected the contention that the doctrine of promissory estoppel would apply and also held that the Project Import
Regulations are not in any way impaired or affected by the power of exemption granted u/s 25 of the Customs Act to the Government.
Both the rulings of the Bombay High Court are clearly against the contentions of the petitioners herein and I agree with the reasoning of the
Division Bench in the two rulings.
In the result, the writ petitions have to fail and they are dismissed. On the facts and circumstances of the case, there will be no order as to
costs.