Patel India (Private) Ltd. Vs. Union of
India & Ors  INSC 57 (28 March 1973)
SHETTY, K.J. (J) SHETTY, K.J. (J)
CITATION: 1973 AIR 1300 1973 SCR (3) 811 1973
SCC (1) 745
Sea Customs Act, 1878-S. 40--Whether refund
of excess import duty comes under the Section.
The appellant Company was the sole
distributing agent in India for the imported products of an American: firm. The
Customs authorities used to levy import duty on the basis of the invoice price
under s. 29 read with s.. 30 of the Sea Customs Act, 1878, as being the real
value of the goods so imported.
During 1954-55, the appellant Company
imported several items set out in Annexure 'D' of the Special Leave Petition.
When items 1 and 2 arrived in Bombay Port,
the Custom authorities, ignoring their hitherto followed practice, refused to
accept the invoice price as the real value and levied excess duty. An appeal to
the Customs Collector failed, whereupon the appellant Company lodged a revision
application before the Government of India.
Pending the disposal of the said revision,
several other items set out in Annexure 'D' arrived in Bombay Port and the
Customs authorities charged the Appellant-Company with excess amounts as import
duty. For fear of demurrage charges, the appellant-Company paid the excess duty
In March, 1957, the Government of India
disposed of the said revision, accepting the appellants' contention, and
directed re-assessment of import duty on the said two items 1 and 2 on the
basis of their invoice price and also ordered refund of the excess duty charged
The appellant-Company, however, did not file
appeals in respect of the other items which had arrived during the pendency of
the said revision, although the Customs had, levied excess duty thereon.
The Customs authorities refunded the excess
duty levied on those items, for which application for refund was made within
the time prescribed under s. 40, but refused refund in respect of the rest of
the items., An appeal to the Collector and a revision before the Government of
India were both rejected. The appellant company, thereafter, filed a writ petition
before the Delhi High Court for appropriate relief, but was without success.
The respondent contended before the Court
that whatever claims were found not in time as required by s. 40 of the Sea
Customs Act have been correctly rejected by the Appraiser of Customs, Bombay,
and therefore, the appellantCompany had no claim. Allowing the appeal,
HELD : (1) After the disposal of the revision
by the Government of India, there was no doubt that the invoice prices were the
real value of the consignments and the Custom authorities had no right in law
to charge extra duty on the rest of the consignments. Indeed, the excess duty
was charged in violation of Sections 29 and 30 and in excess of 8 12
jurisdiction. This position was also accepted by the Custom authorities when
they ordered refund of excess duty charged by them in relation to items 22 to
29 and 33 to 35.
[815H] (ii) Section 40 had no application in
the present case.
Section 40 clearly applies only to cases
where duties have been paid through inadvertence, error or misconstruction, and
where refund application has to be made within 3 months.. The present case is
not one where the excess duty was paid through any of the 3 reasons set out in
The excess duty was demanded on the ground
that the invoice price was not the real value of the imported goods. Since s.
40 did not apply to the facts of the case, the respondents could not retain the
excess duty illegally.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1799 of 1969.
Appeal by special leave from the judgment and
order dated April 5, 1967 of the Delhi High Court at New Delhi in letters
Patent Appeal No. 44 of 1967 and Writ Petition No.
181 of 1967.
Petition under Article 32 of the Constitution
of India for the enforcement of fundamental rights.
N. S. Bindra, S. K. Dholakia and Vineet
Kumar, for The appellant and petitioner.
S. N. Prasad and S. P. Nayar, for the
The Judgment of the Court was delivered by
SHELAT, ACTING C.J.--At all material times,
company acted as the sole distributing agent
in India for the products of M/s. Sawyer's Inc., Portland, U.S.A., and as such
used to import View master stereoscopes, reels etc.
The custom authorities used to levy import
duty on the basis of the invoice price under s. 29 read with s. 30 of the Sea Customs
Act, 1878 as being the real value of the goods so imported.
During the year 1954-55, the
appellant-company imported several items set out in Annexure 'D' to the
appellant's special leave petition, the details of which it is not necessary to
set out here. When items 1 and 2 arrived in Bombay port, the customs
authorities, ignoring their hitherto followed practice,' refused to accept the
invoice price as the real value and levied excess duty in the aggregate sum of
Rs. 1356. An appeal to the Customs Collector failed whereupon the
appellant-company lodged a revision application before the Government of India.
Pending the disposal of the said revision,
several other items set out in the said annexure 'D' arrived in Bombay port, in
respect of which the Customs, refusing to accept their invoice price.
813 charged the appellant-company with excess
amounts as import duty. For fear that demurrage charges would have to be
incurred, the appellant-company paid the excess duty charged as aforesaid, but
On March 20, 1957, the Government of India
disposed of the said revision, accepting the appellant's contention, and
directed reassessment of import duty on the said two items 1 and 2 on the basis
of their invoice price and also ordered refund to the appellant-company of the
excess duty charged on them.
It would seem that since the said revision
was pending before the Government of India, the appellant-company thought that
the Customs would follow the principle which would be laid down in the decision
in the said revision.
The appellant-company therefore, abstained
from filing appeals in respect of the other items, which had arrived pending
the decision of the said revision although the Customs had levied excess duty
thereon. On the said revision being disposed of and the Government having
therein ordered refund, the appellant-company applied for refund of the excess
duty charged in respect of some of the items, items 22 to 29 and 33-35. This
was done under s. 40 of the Act and within the period appointed therein. The
Customs granted refund on the aforesaid items 22 to 29 and 33-35, although
invoice value thereof had not been accepted, and excess duty had been charged.
The customs authorities, however, declined to refund the excess duty in respect
of the rest of the items. The reason given for such refusal was that the
application for refund in respect of those items had not been made within the
time prescribed by s. 40.
An appeal to the Collector and a revision
before the Government of India against the said refusal to grant refund were
both rejected, the refusal by the Customs appraiser being confirmed on the
ground that refund was not applied for in time under sec. 40.
The appellant-company thereupon filed a writ
petition in the High Court of Punjab (at Delhi) under Art. 226 of the
Constitution pleading inter alia that :
(a) Sec. 40 of the Act had no application,
(b) the Union of India was not entitled to appropriate or retain the said
excess duty, (c) the appellant-company had 'a legal right to the return of the
said excess duty, and (d) that there was an error apparent on the record in the
orders refusing return of the excess duty.
The appellant-company on these ^Pleas prayed
that the said orders of refusal should be quashed and an order should be passed
directing return of the excess duty.
8 14 In para 16, sub-paras (i) and (j) of its
return the Union of India averred as follows :
"(i) with reference to clause (1) of
para No.16 of the petition, it is correct that the Government of India cannot
appropriately retain to whatever they are not legally entitled. But I submit
that the importers are also required to put in the claims in time as required
by law. I deny that the petitioner has a legal right to the return of the
excess customs duty levied on all the consignments.
I deny and controvert the allegations made in
clause (J) of para No. 16 of the petition. I say that the Bombay Customs House
allowed some claims of the petitioner which were in time under section 40 of
the Sea Customs Act, out of the list forwarded with their letter dated
3-4-1957." Para 17 of the return was as follows :
"I deny para No. 17 of the petition. I
submit that whatever claims were found not in time.
as required by section 40 of the Sea Customs Act
have been correctly rejected by the Appraiser of Customs, Bombay." It is
clear from the return by the Union of India that (a) refund was granted to the
appellantcompany in respect of the items referred to above without any appeal
having been filed by the company relating to those items, (b) refund was
granted in respect of those items simply on the ground that an application
there for had been made within the time prescribed by sec. 40, and it was
refused in respect of the rest of the items only because such an application
there for was not made within the time prescribed by sec. 40, and (c) there was
no plea that the excess duty was rightly charged on those items.
The learned Single Judge of the High Court
who heard the writ petition held that sec. 40 of the Act did not apply;
that it applied to erroneous payments and not
to erroneous assessments. He, however, held that the proper. remedy for the
appellant-company was to have filed appeals against such erroneous assessments
under s. 188 of the Act, and that that having not been done, no relief could be
granted to the appellant-company. He, however, observed that the Government was
morally bound to grant the 815 refund and made a recommendation that the refund
should be made to the appellant-company. A Letters Patent appeal against the
said judgment was rejected. Hence this appeal by special leave.
The only question which arises in this appeal
is whether the High Court ought to have granted in the circumstances of the
case the relief asked for by the appellant-company in its writ petition.
Sec. 29 of the Act casts a duty on the owner
of imported goods, whether liable to duty or not, to state the real value,
quantity and description of such goods in the bill of entry or the shipping
bill and to subscribe a declaration of the truth of such statement at the foot
of such bill. In case of doubt, the Customs Collector has the power to require
such owner or anyone else in possession of any invoice, broker's note, policy
of insurance or other document, whereby the real value, quantity and
description of any such goods can be ascertained. An invoice thus is one of the
documents from which the real value of imported goods has to be ascertained
where the Customs Collector has any doubt as regards their declared value. Sec.
30 then defines 'real value' to be the wholesale cash price, less trade
discount, for which goods of the like kind and quality. are sold or are capable
of being sold at the time and place of importation. Sec. 31 provides that goods
chargeable with duty upon the value thereof but for which. a specific value is
not fixed by law for the purpose of levying duties thereon, shall, without
unnecessary delay, be examined by the officer of customs. If it appears that
the real value of such goods is correctly stated in the bill of entry or
shipping bill, the goods shall be assessed in accordance therewith.
There is no dispute that the
appellant-company had declared the real value of the articles imported by it
and in support thereof had produced the manufacturers' invoices. The customs
authorities had refused to accept the invoice price as real value and charged
excess duty. But any doubt with regard to the real value of the several
consignments imported by the company was totally eradicated when the Government
of India decided the company's revision and directed that the invoice price
should be accepted and duty should be assessed accordingly. In respect of the
two items to which the revision related, the Government had also directed
refund of the excess duty charged and paid under protest. There was thus no
doubt or dispute left thereafter as regards the invoice prices 'being the real
value of the consignments. The direction given in its decision in the said
revision that the invoice price should be accepted as real value within the
meaning of sec. 30 of the Act H applied to the rest of the consignments. The customs
authorities, therefore, were not right in law in charging excess duty on the
rest of the consignments. Indeed, the excess duty was charged in violation of
ss. 29 and 30 and in excess of Jurisdiction, since, as held 8 16 by the
Government of India, the real value of the goods was their invoice price.
The position, indeed, was accepted by the
customs authorities when they ordered refund of excess duty charged by them in
relation to items 22 to 29 and 33-35. Such refund could only have been ordered
on the footing that the excess duty on those consignments had been charged
without the authority of law and therefore without jurisdiction.
The fact that an application had been made
there for under sec. 40 was irrelevant to the point that. the excess duty was
assessed and recovered without the authority of law.
Sec. 40, on which the Union of India relied
in its return, provides that no customs duties or charges which have been paid,
and of which repayment wholly or in part, is claimed in consequence of the same
having been paid through inadvertence, error or misconstruction, shall be
returned, unless such claim is made within three months from the date of such
payment. The section clearly applies only to cases where duties have been paid
through inadvertence, error or misconstruction, and where refund application
has to be made within three months from the date of such payment.
As rightly observed 'by the High Court, the
present case was not one where the excess duty was paid through any of the
three reasons set out in s. 40. The excess-duty was demanded on the ground that
the invoice price was not the real value of the imported goods and payment
under protest was also made on that footing The ultimate result in the
appellant-company's revision was that charging of excess duty was not warranted
under the Act, and that the value on which duty should have been assessed was
the invoice price and nothing else. That being the position, sec. 40 did not
apply and could not have been relied upon by the customs authorities for
refusing to refund the excess duty unlawfully levied on the appellant-company.
From the fact that the customs authorities
refunded the excess duty' on items 22 to 29 and 33-35, it follows that the
customs authorities had fully realised that the excessduty had been levied
without the authority of law, for otherwise they would not have agreed to
refund it, and further that they could not lawfully retain it. If the customs
authorities were not entitled to levy the excess duty and retain it, they were
bound to return it to the appellant company who had paid it under protest and
only with a view no+, to incur demurrage charges, unless there was some
provision of the Act which debarred the appellantcompany from recovering it.
The only provision relied on by the
customs-authorities was sec. 40 of the Act. Indeed, their refusal to refund the
excess-duty 8 17 both in their return and in the High Court was on the ground
of the omission of the appellant-company to apply for the refund within the
time provided by that section. It is necessary to emphasise that it was not
their case that the invoice price of the items in question was not the real
value or that the excess dirty was lawfully levied or that the
appellant-company was not entitled to the refund thereof for any reason except
the omission to apply,for it within the time prescribed 'by sec. 40. But since
sec. 46 did not apply to the facts of the case, the respondents could not
retain the excess duty except upon the authority of some other provision of law.
No other provision was pointed out by them which would disentitle the
appellant-company to the refund oh the ground of its rights being time-barred
or otherwise. No such provision other than sec. 40 which disentitled the
appellant-company to the refund having been put forward and the customs
authorities not being entitled to retain the excess duty, there was a legal
obligation on the part of the respondents to return the excess duty and a
corresponding legal right in the appellant-company to recover it. Besides,
except s. 40 the Act contains no other provision laying down any limitation
within which an importer has to apply for refund. The refusal to return the
excess duty on the round that the appellant-company had not applied within time
provided by the Act was clearly unsustainable. Since there was not and could
not be any dispute with regard to the invoice price being the real value there
was no point in filing any appeal; nor could the omission to file any such
appeal be a proper or valid ground for refusing relief to the
appellant-company, when there remained no longer any dispute 'between the
parties as to the invoice price being the real value of the imported items.
For the reason aforesaid, we are satisfied
that the High Court was not right in refusing the relief, in spite of its being
satisfied that the excess duty, was charged without any basis in law and also
that the respondents could not lawfully retain the excess duty. In the
circumstances we set aside the judgment of the High Court and allow the appeal.
The respondents will pay to the appellant company its costs both here and in
the High Court. In view of this conclusion no separate order need be passed in
writ petition 181 of 1967. The writ petition accordingly stands disposed of.
S.C. Appeal allowed.