Research › Search › Judgment

Rajasthan High Court · body

2006 DIGILAW 56 (RAJ)

Modern Threads (India) Ltd. v. Union of India

2006-01-04

GOVIND MATHUR

body2006
Honble MATHUR, J.–The petitioner purchased two consignments of old unripped completely premutilated and fumigated original C.A.W. Woollen hosiery rage from M/s. Auckland Rag Co. Ltd., Kagans, Newzealand and one consignment of same goods from M/s. Compagnie Verdier-Dufor, Paris, France. The goods aforesaid were dispatched from respective foreign ports before 29.2.1992 and the payment too was made to foreign suppliers by State Bank of Bikaner and Jaipur through its foreign counter parts on or before 29.2.1992 in accordance with the procedure applicable. (2). The facts as averred in petition for writ, the petitioner, a company registered under Indian Companies Act purchased the consignment of woollen hosiery rags during currency of export and import policy of Government of India (hereinafter referred to as ``Exim policy), which remained in force from 1.4.1990 to 31.3.1993, according to which the ``official rate of foreign exchange conversion (hereinafter referred to as ``forex conversion) was available to all the persons importing goods under open general license as well as actual users. At the time when the petitioner placed order for consignment concerned there was only one rate of forex conversion viz. the official rate. The petitioner understood that the import of all the woollen rags would be governed by official rate of forex conversion. The Government of India after presentation of union budget for the year 1992-93 created two different rates of forex conversion, known as official rate and market rate. The grievance of the petitioner is that the Collector of Customs, Mumbai assessed the value of the goods for purpose of levying the custom duty at the market rate of forex conversion which is quite higher than the official rates of forex conversion. (3). While giving challenge to the assessment of value of goods for the purpose of levying the custom duty at the market rate, the contention of counsel for the petitioner is that respondent Collector of Customs should be estopped from assessing the value of goods for levying custom duty as the entire transaction with regard to purchase of woollen rags by foreign suppliers was under the Exim policy of Government of India existing from 1.4.1990 to 31.3.1993 and in the said policy only official rates of forex conversion was available. The petitioner acted upon the representation made by Government of India under the Exim policy then existing with a belief that the assessment of value of goods shall be made on official rate for determining custom duty, therefore, respondent Collector of Customs by virtue of principles of promissory estoppel is required to be estopped to assess value of goods on market rate of forex conversion. It is also contended by counsel for the petitioner that entire transaction completed on or before 29.2.1992, therefore, the market rate of forex conversion which came in force on 1.4.1993 could not be applied while determining the value of goods for the purpose of charging custom duty. According to counsel for the petitioner the market rate came in force after presentation of union budget for the year 1992-93 i.e. w.e.f. 1.4.1993. The counsel has supported his contention by placing reliance on the decision of Honble Supreme Court in the case of Indian Acrylics vs. Union of India & Anr. reported in (2000) 2 SCC 678 , wherein the Apex Court reversed decision of Division Bench of Punjab & Haryana High Court [Indian Acrylics Ltd. vs. Union of India, 1993 (68) E.L.T. 772 (P&H)]. Learned Division Bench of Punjab & Haryana High Court held that the value of importing goods for the purpose of charging custom duty is to be determined under the provisions of Customs Act, 1962 and the Exim policy of Central Government is nothing to do in such determination. (4). A reply to the writ petition is filed on behalf of Union of India and respondent Collector of Customs. The stand of the respondents is that Exim policy of Government of India is nothing to do with determination of custom duty which is required to be assessed according to the provisions of Customs Act, 1962. It is emphasised by the respondents that the provisions of Section 14 of the Customs Act, 1962 prescribes for valuation of goods for purpose of assessment. It is emphasised by the respondents that the provisions of Section 14 of the Customs Act, 1962 prescribes for valuation of goods for purpose of assessment. According to it a duty of custom is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and the place of importation or exportation, as the case may be, in the course of international trade where the seller and the buyers have no interest in the business of each other and the price is the sole consideration for sale or offer for sale. It further provides that the price of the goods shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under Section 46 or a shipping bill or bill of export, as case may be, presented under Section 50. The rate of exchange as prescribed under Section 14 of the Act of 1962 means the rate of exchange determined by Central Government or ascertained in such manner as the Central Government may direct for the conversion of Indian Currency into foreign currency or foreign currency into an Indian currency. According to counsel for the respondents the Collector of Customs made assessment of the value of goods imported by the petitioner on basis of forex conversion rate prescribed by the Central Government in accordance with SEction 14 of the Act of 1962 as it was existing on the day a bill of entry was presented under Section 46 of the Act of 1962. (5). Heard counsel for the parties. (6). The contention of counsel for the petitioner is that the petitioner entered into the transaction for import or woollen rags with foreign suppliers in view of export and import policy existing from 1.4.1990 to 31.3.1993 according to which only one official rate of forex conversion was required to be applied for determining value of goods for the purpose of charging custom duty. On basis of Exim policy referred above counsel for the petitioner pressed for application of principles of promissory estoppel to estop respondent Collector of Customs, Mumbi from assessing value of imported goods by applying market rate of forex conversion. On basis of Exim policy referred above counsel for the petitioner pressed for application of principles of promissory estoppel to estop respondent Collector of Customs, Mumbi from assessing value of imported goods by applying market rate of forex conversion. The determination of custom duty is required to be made in accordance with the provisions of Customs Act, 1962. Section 14 of the Act of 1962 pertains to valuation of goods for the purpose of assessment. Sub-sections (1) and (3) of Section 14 of the Act of 1962 which are relevant for adjudication of present controversy read as under:– ``14. Valuation of goods for purposes of assessment.–(1) for the purposes of the [Customs Tariff Act, 1975], or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be - the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale: [provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill or bill of export, as the case may be, is presented under section 50.]. (3) For the purposes of this section– (a) ``rate of exchange means the rate of exchange– (i) determined by the Central Government, or (ii) ascertained in such manner as the Central Government may direct, for the conversion of Indian currency into foreign currency or foreign currency into Indian currency; (b) ``foreign currency and ``Indian currency have the meanings respectively assigned to them in the Foreign Exchange Regulation Act, 1973.] (7). The valuation of goods for the purpose of determination of the duty of custom on any goods is required to be assessed under the Act of 1962 in accordance with the provisions of Section 14 and Exim policy is nothing to do in this regard. The valuation of goods for the purpose of determination of the duty of custom on any goods is required to be assessed under the Act of 1962 in accordance with the provisions of Section 14 and Exim policy is nothing to do in this regard. The valuation of such goods are required to be assessed on basis of forex conversion rate as in force on the date on which a bill of entry is presented before the Custom Commissioner in accordance with the provisions of Section 46 o the Act of 1962. The Central Government is having absolute powers to determine such forex rate. (8). In present case the Collector of Customs determined custom duty chargeable on the goods imported for the petitioner by applying the forex rate in force on the date bill of entry was presented under Section 46 of the Act of 1962. No error, therefore, was at all committed by the respondents in assessing the value of goods for the purpose of determination of custom duty chargeable from the petitioner. The application of export and import policy in present set of facts is misconceived, therefore, the contention of counsel for the petitioner with regard to application of promissory estoppel is also having no worth. The export and import policy is having no role to play while assessing value of goods imported and which is chargeable for duty of customs. (9). The second contention of counsel for the petitioner that the market value as adopted by the Collector of Customs came into force on 1.4.1990 to 31.3.1993 whereas the entire transaction completed on 29.2.1992 i.e. prior to coming into force the market rate of forex conversion and as such the same could not be made applicable in present controversy, is also not having any force in view of the fact that value of imported goods was assessed in accordance with the provisions of Section 14 of the Act of 1962 and not on basis of export and import policy. The day relevant for such calculation is the day on which bill of entry is presented under Section 46 of the Act of 9161. (10). The reliance placed by counsel for the petitioner on decision of Honble Supreme Court in the case of Indian Acrylics (supra) is also of no consequence as the same is having no application in present controversy. (10). The reliance placed by counsel for the petitioner on decision of Honble Supreme Court in the case of Indian Acrylics (supra) is also of no consequence as the same is having no application in present controversy. It is true that Honble Supreme Court in the case of Indian Acrylics (supra) reversed Division Bench judgment of Honble Punjab & Haryana High Court wherein learned Punjab & Haryana High Court held that value of imported goods for the purpose of charging custom duty is to be determined under the provisions of Customs Act, 1962 and the export and import policy of the Central Government have nothing to do with regard to valuation of imported goods for the purpose of determination of custom duty. Before the Division Bench of Honble Punjab & Haryana High Court a contention was also made by counsel for Indian Acrylics Ltd. that the rate of foreign exchange fixed by the Central Government under Section 14(3)(i) is arbitrary as the same is different from the rate of exchange fixed by the Reserve Bank of India. (11). The Division Bench of Punjab & Haryana High Court while negativating the aforesaid contention held that by ascertaining the value it cannot be said that determination of forex conversion rate by Central Government under Section 14(3)(i) perse would be arbitrary as the Central Government has to fix the rate of exchange under the provisions of Custom Act not for one person or for particular item. Such forex conversion rate is to be applied to all and different articles imported. The Division Bench of Punjab & Haryana High Court held that in absence of any other material brought on record it cannot be held that determination of rate of exchange by Central Government under Section 14(3)(i) is arbitrary. Honble Supreme Court in the case of Indian Acrylics (supra) reversed Division Bench decision of Punjab & Haryana High Court only on the count that the Central Government had no good reason for prescribing higher forex conversion rates. The relevant portion of the judgment of Honble Supreme Court in the case of Indian Acrylics (supra) reads as under:– ``5. The counter filed by the respondent before the High Court, as also before this Court, does not indicate why the rate was fixed at Rs. 31.44. The affidavits do not indicate that the prevalent Reserve Bank of India rate had been taken into consideration. The counter filed by the respondent before the High Court, as also before this Court, does not indicate why the rate was fixed at Rs. 31.44. The affidavits do not indicate that the prevalent Reserve Bank of India rate had been taken into consideration. Strangely, the High Court, adverting to this contention, stated that adverting to this contention, stated that ``...In the absence of any other material brought on record, it cannot be held that the rate of exchange by the Central Government under Section 14(3)(i) is arbitrary and it said this after nothing the contention on behalf of the appellant that the Central Government rate was arbitrary being different from that fixed by Reserve Bank of India. 6. The exchange rate fixed by Reserve Bank of India is the accepted and determinative rate of exchange for foreign exchange transactions. if it is to be deviated from to the extent that the notification dated 27.3.1992 does, it must be shown that the Central Government had good reasons for doing so. Reserve Bank of Indias rate, as we have pointed out, we Rs. 25.95, the rate fixed by the notification dated 27.3.1992 was Rs. 31.44, so that there was a difference of as much as Rs. 5.51. In the absence of any material placed on record by the respondents and in the absence of so much as a reason stated on affidavit in this behalf, the rate fixed by the notification dated 27.3.1992 must be held to be arbitrary. 7. Having regard to the lapse of time and the complications which might result, we refrain from striking down the said notification, but direct that so far as the appellants are concerned, the value of their consignment shall be calculated at the exchange rate of one US dollar equal to Rs. 25.95. This is what, in fact, has been paid. (12). Honble Supreme Court in the case of Indian Acrylics (supra) not at all dealt with the issue with regard to assessment of value of imported goods for determination of the custom duty chargeable. In the instant writ petition no challenge is given by the petitioner to forex conversion rates fixed by the Government of India while exercising powers under Section 14(3)(i) of the Act of 1962. (13). In view of whatever discussed above. In the instant writ petition no challenge is given by the petitioner to forex conversion rates fixed by the Government of India while exercising powers under Section 14(3)(i) of the Act of 1962. (13). In view of whatever discussed above. I am of the considered opinion that respondent Collector of Customs, Mumbai rightly assessed the value of goods for determination of custom duty chargeable. The writ petition, therefore, is having no merit and therefore, the same is dismissed.