Case Note & Summary
The Supreme Court heard an appeal by special leave filed by the Principal Appraiser (Exports), Collectorate of Customs & Central Excise, Cochin, the Appellate Collector of Customs, Madras, and Union of India against a judgment of a Division Bench of the Kerala High Court. The respondent, an exporter of coir yarn and ropes at Calicut, had presented shipping bills in July 1966 for export of three lots of coir yarn to Basrah on board S.S. Neils Maersk. Export duty at the then prevailing rate of 10% ad valorem was assessed and paid, an entry outwards was granted under Section 39, and an order permitting clearance and loading was made under Section 51. However, due to lack of space in that vessel, the goods were shut out. The respondent then secured space on another vessel, S.S. P'Xilas, and submitted fresh shipping bills on 9 August 1966; the earlier shipping bills were amended to permit export on the second vessel. In the meantime, export duty on coir yarn was enhanced from 10% to 25% ad valorem. The customs authorities demanded an additional amount of Rs.4,444.96, which the respondent paid under protest. The respondent later applied for refund under Section 27 of the Customs Act, 1962, but the Assistant Collector rejected the application on 13 June 1968, holding that the total duty paid did not exceed the duty leviable at the relevant date of entry outwards for S.S. P'Xilas. The Appellate Collector of Customs dismissed the appeal on 16 September 1969, and the revisional applications under Section 131 were rejected. The Kerala High Court, in a writ petition, directed refund of the additional amount by order dated 30 July 1975. The core legal issue was the relevant date for determining the rate of export duty when goods are shut out from the first vessel and later exported by a different vessel. The appellants contended that under Sections 16(1) with its proviso, 17(1) and 50 of the Customs Act, the applicable rate is the rate prevailing on the date of entry outwards of the vessel through which the goods are actually exported, i.e., 9 August 1966 for S.S. P'Xilas, when the rate was 25% ad valorem. They argued that the earlier entry outwards for S.S. Neils Maersk was redundant and of no legal effect. The respondent did not appear. The Supreme Court analyzed Sections 2(15), 2(18), 12, 16(1), 39, 50, and 51 of the Customs Act, 1962. It held that customs duty by way of export duty is levied when goods are exported or taken out of India, and the taxing event under Section 12 occurs only upon actual export. Section 16(1) provides that for goods entered for export under Section 50, the rate is the rate in force on the date of presentation of the shipping bill; the proviso deems the shipping bill to be presented on the date of entry outwards of the vessel by which the goods are to be exported. The court noted that entry outwards is vessel-specific and a prerequisite under Section 39 for loading export goods. Since the goods never left India on the first vessel, the earlier attempt was an incomplete and inchoate exercise. The effective export took place only on the second vessel after fresh compliance with Sections 50, 51 and 39 and a new entry outwards on 9 August 1966. Therefore, the rate of duty applicable was 25% ad valorem, and the earlier assessment created no binding obligation. There was no question of reassessment. The court held that the High Court erred in treating the earlier assessment as final and that the respondent was not entitled to refund of the additional duty. The appeal was allowed and the High Court's order was set aside.
Headnote
A) Customs Law - Export Duty - Taxing Event and Rate of Duty - Customs Act, 1962, Sections 12, 16(1) proviso, 39, 50, 51 - Export duty leviable on goods when they are actually exported i.e., taken out of India to a place outside India; rate determined by date of presentation of shipping bill, which by proviso to Section 16(1) is deemed to be date of entry outwards of vessel by which goods are to be exported. Where goods were shut out from first vessel and later exported by second vessel after fresh shipping bills and new entry outwards, relevant date is date of entry outwards for second vessel, not first, and prevailing higher duty rate applied. Held that earlier assessment and entry outwards were ineffective and created no binding obligation, so no refund was due (Paras Not mentioned). B) Customs Law - Entry Outwards and Effective Export - Mandatory Compliance with Sections 39 and 50 - Customs Act, 1962, Sections 39, 50, 51 - Entry outwards is vessel-specific and a prerequisite for loading export goods; exporter must present shipping bill and obtain permission for clearance. When first vessel had no space, goods were not exported, and exporter had to comply afresh with Sections 50, 51 and 39 for second vessel; effective export occurred only on second vessel's entry outwards, making earlier attempt an inchoate exercise of no legal effect. Held that no reassessment was involved; only effective assessment of export duty was for second vessel (Paras Not mentioned). C) Customs Law - Refund of Duty - Sections 27 and 131 Customs Act, 1962 - A claim for refund of duty paid under protest will fail where duty paid did not exceed duty leviable at correct rate applicable. When export duty rate increased from 10% to 25% ad valorem before effective entry outwards, exporter was liable to pay higher amount, and additional payment of Rs.4,444.96 was correctly demanded. Held that respondent was not entitled to refund of additional duty, and High Court's direction to refund was erroneous (Paras Not mentioned).
Issue of Consideration
What is the relevant date for determining the rate of export duty under Section 16(1) of the Customs Act, 1962 when goods initially entered for export on one vessel are shut out and later exported on a different vessel?
Final Decision
Appeal allowed; the order of the Kerala High Court was set aside; respondent is not entitled to refund of the additional export duty of Rs.4,444.96. The applicable rate was 25% ad valorem as on 9 August 1966.
Law Points
- Export duty leviable under Section 12 of Customs Act
- 1962 when goods are taken out of India
- rate of duty for goods entered for export under Section 50 is determined by date of presentation of shipping bill
- proviso to Section 16(1) deems shipping bill presented on date of entry outwards of vessel by which goods are to be exported
- entry outwards is vessel-specific and prerequisite for loading export goods under Section 39
- earlier entry outwards and assessment for vessel that did not carry goods are ineffective
- no question of reassessment
- effective export requires compliance with Sections 39
- 50
- 51 afresh for actual exporting vessel.
