Principal Appraiser (Exports) Collectorate of Customs & Vs. Esajee Tayabally
Kapasi, Calicut  INSC 550 (11 October 1995)
S.B. (J) Majmudar S.B. (J) Jeevan Reddy, B.P. (J) S.B. Majmudar. J.
1995 SCC (6) 536 JT 1995 (7) 260 1995 SCALE (5)683
Principal Appraiser (Exports), Collectorate of Customs & Central Excise,
Customs House, Cochin-3, the Appellate Collector of Customs, Customs &
Central Excise House, Madras and the Union of India represented by the Joint
Secretary, Ministry of Finance, Department of Revenue and Insurance, New Delhi
have preferred this appeal by special leave against the judgment and order of a
Division Bench of the Kerala High Court allowing writ petition of the
respondent on 24th November 1972. A few relevant facts to highlight the
grievance of the appellants are required to be mentioned at the outset.
at the relevant time carried on the business of export of coir yarn and ropes
at Calicut in the State of Kerala. In July 1966 the respondent
presented before the customs authorities at the port of Cochin, shipping bills for three lots of
coir yarn booked to be shipped on board the S.S. Neils Maersk. The said
shipping bills were for getting entry outwards for the said ship destined for
the port of Basrah. The duty payable on the export of the said goods at the
then prevailing rate was assessed by the customs authorities. The same was paid
by the respondent.
"entry outwards" as envisaged under Section 39 of the Customs Act, 1962
(hereinafter referred to as the Act') was issued and an order permitting the
clearance of the loading of the goods for exports as envisaged under Section 51
of the Act was made.
want of space in the said vessel the goods were "shut out". The respondent,
however, secured necessary space for exporting these goods by another vessel
named S.S. p.Xilas. Respondent accordingly submitted fresh shipping bills on 9th August 1966 for `entry outwards' for S.S. P'Xilas.
On the basis of a petition made on behalf of the respondent the earlier
shipping bills were allowed to be amended enabling the respondent to ship the
goods on board the said vessel S.S. P'Xilas.
meanwhile and before the necessary amendment of the shipping bills the export
duty payable on coir yarn was enhanced from 10% to 25%. The first appellant
accordingly demanded from the respondent an additional amount of Rs.4,444.96.
The respondent paid the same under protest.
the respondent by his letter dated 21st May 1968/6th July 1968 applied for refund of the
aforesaid amount as per Section 27 of the Act. On 13th June 1968 the Assistant
Collector (Customs), Cochin rejected the application of the respondent on the
ground that the total amount of export duty paid by respondent did not exceed
the duty leviable on the goods to be exported at the relevant date of issuing
the `entry outwards' for the ship S.S. P'Xilas. Respondent unsuccessfully
carried the matter in appeal before the Appellate Collector of Customs, Madras who dismissed the appeal on 16th September 1969. Thereafter the respondent moved
the Commissioner of Revision Applications to the Government of India, Ministry
of Finance, New Delhi under Section 131 of the Act by
filing three applications.
Commissioner rejected all the three applications.
these circumstances the respondent moved the High Court of Kerala at Ernakulam
in the aforesaid writ petition.
Division Bench of the High Court allowed the writ petition by its order dated 30th July 1975 and directed the appellant no.1 to
refund the amount of Rs.4,444.96 to the respondent.
this order of the High Court which is challenged by the appellants in this
counsel for the appellants vehemently submitted that on a conjoint reading of
Sections 16(1) with the proviso, 17(1) and 50 of the Act it has to be held that
the proper export duty chargeable on any goods sought to be exported would be
duty payable on the date when `entry outwards' for the concerned vessel through
which the goods are exported was issued. That in the present case the goods in
question got exported through vessel S.S. P'Xilas and `entry outwards' for the
said vessel was issued only on 9th August 1966.
That the export duty payable on that day was 25% ad valorem and consequently
the earlier `entry outwards' for the vessel the S.S. Neils Maersk which never
resulted in the export of the goods was totally redundant and of no legal
effect. That the High Court had patently erred in taking the view that once the
duty was assessed and `entry outwards' was issued for the vessel S.S. Neils Maersk
the authorities could not demand any further duty on the same goods even though
they got actually exported by the second vessel S.S. P'Xilas. No one has
appeared for the respondent to contest these proceedings.
given our anxious consideration to the contentions canvassed by the learned
counsel for the appellants we have reached the conclusion that the order under
appeal cannot be sustained.
relevant provisions of the Act are required to be noted for appreciating the
contentions canvassed on behalf of the appellants. Section 2(18) of the Act
defines `export' to mean, `taking out of India to a place outside India'.
2(15) defines `duty' to mean, `duty of customs leviable under this Act'.
Section 12 which is the charging Section lays down by sub-section (1) thereof
that except otherwise provided in this Act, or any other law for the time being
in force, duties of customs shall be levied at such rates as may be specified
under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time
being in force, on goods imported into, or exported from India.
becomes, therefore, clear that under the Act customs duty will have to be paid
by way of export duty on goods which are exported from India and the taxing event will occur
when the goods are taken out of India to the destination of a place outside India. Section 16(1) as applicable at the relevant time read as
The rate of duty and tariff valuation, if any applicable to any export goods,
shall be the rate and valuation in force, (a) in the case of goods entered for
export under section 50, on the date on which a shipping bill or a bill of
export in respect of such goods is presented under that section:
the case of any other goods, on the date of payment of duty:
that if the shipping bill has been presented before the date of entry outwards
of the vessel by which the goods are to be exported, the shipping bill shall be
deemed to have been presented on the date of such entry outwards." Section
50 deals with entry of goods for exportation. It reads as under :
Entry of goods for exportation.-
The exporter of any goods shall make entry thereof by presenting to the proper
officer in the case of goods to be exported in a vessel or aircraft, a shipping
bill, and in the case of goods to be exported by land, a bill of export in the
The exporter of any goods, while presenting a shipping bill or bill of export,
shall at the foot thereof make and subscribe to a declaration to the truth of
its contents." Once the proper officer is satisfied that any goods entered
for export are not prohibited goods and the exporter has paid the duty, if any,
assessed thereon and any charges payable under this Act in respect of the same,
the proper officer may make an order permitting clearance and loading of the
goods for exportation. Section 39 of the Act provides that the master of the
vessel shall not permit the loading of any export goods, other than baggage and
mail bags, until an order has been given by the proper officer granting
entry-outwards to such vessel. The aforesaid statutory provisions clearly
indicate that various steps have to be taken by an exporter before his goods
actually get exported meaning thereby they go out of Indian territorial waters.
In the facts of the present case it is not in dispute that the respondent had
entered his goods for exportation as per Section 50, assessment was also made
by the proper officer under Section 51 and the officer had permitted clearance
and loading of the goods in vessel S.S. Neils Maersk. But these goods could not
be exported as there was no room in the said vessel with the result that they
were brought back to the warehouse and had to await the arrival of the next
vessel which could carry them. That event happened on 9th August 1966 when another vessel S.S. P'Xilas
was available and amended shipping bills were again presented by the respondent
under Section 50 read with Section 51 and Section 39 of the Act. The `entry
outwards' for the said vessel S.S. P'Xilas, therefore, became effective on and
from 9th August 1966. Once that happened Section 16 got
squarely attracted to the facts of the case. The rate of export duty on these
goods had to be the rate in force as prevalent on the day on which the amended
shipping bill or a bill on export in respect of such goods was presented under
Section 50. As the earlier shipping bills were rectified and amended for
permitting the export of the goods in the second ship S.S. P'Xilas only on 9th August 1966 the rate of duty would be the one
that prevailed on 9th
August 1966. The
proviso to Section 16(1) makes the position clear. It lays down that if the
shipping bill has been presented before the date of entry outwards of the
vessel by which the goods are to be exported, the shipping bill shall be deemed
to have been presented on the date of such entry outwards. Thus the date of
`entry outwards' would be the relevant date with reference to which the rate of
customs duty on the exported good is to be worked out. `
outwards' for vessel S.S. P'Xilas was of 9th August 1966. On that day the rate of export
duty prevalent was 25% and valorem and not 10% and valorem which prevailed
earlier. It is obvious that `entry outwards' has to be effected in connection
with a given vessel and unless that is done the master of the ship would not
permit loading of such goods for export in his vessel as laid down by Section
39. Even the High Court has noted this position but according to the High Court
once there was already an `entry outwards' granted with reference to the vessel
S.S. Neils Maersk and duty was assessed, in the absence of there being any
provision of reassessment of the duty under the Act the assessed duty could not
change. The said reasoning is not well sustained. On the scheme of the Act the
customs duty by way of export duty is leyied when the goods are exported or
taken out of India. In the present case the goods
never left the territorial limits of India on any day prior to 9th August 1966.
Earlier was an incomplete or inchoate attempt on the part of respondent to
export these goods through vessel S.S. Neils Maersk. For that vessel even
though `entry outwards' was obtained it could not result into any export as per
Section 39 of the Act as that ship had no room to carry these goods.
Consequently the goods remained unexported through that vessel. The effective
export of these goods took place only by the next vessel S.S. P'Xilas. For that
purpose the shipping bills were duly amended, procedure of Section 50 read with
Section 51 was, therefore, followed afresh by the respondent and when he got
`entry outwards' for vessel S.S. P'Xilas which permitted him to get these goods
loaded in that ship as per Section 39, the prevalent rate of duty which the
respondent had to bear on the exported goods would be the duty at the rate
prevalent when `entry outwards' for ship S.S. P'Xilas was obtained by the
respondent. That is, the clear effect of the combined operation of Section
16(1) proviso read with Sections 39, 50 and 51 of the Act. There is no question
of any re-assessment of the export duty as erroneously assumed by the High
Court. The assessment of effective export duty was only done once the goods got
cleared for effective export via vessel S.S. P'Xilas. The earlier inchoate
exercise of an attempt to export them through vessel S.S. Neils Maersk remained
an exercise in futility. Consequently the earlier assessment of duty being an
ineffective exercise created no binding obligation either on the part of the
assessing authorities or on the part of the respondent- exporter. Learned
counsel for the appellants was, therefore, right when he contended that the
High Court had erred in taking the view that the export duty payable on the
goods in question was as per the rate that prevailed at the time when first
`entry outwards' was obtained in July 1966 for exporting the goods through
vessel S.S. Neils Maersk and not the `entry outwards' as per the amended
shipping bills for vessel S.S. P'Xilas in August 1966. It is not in dispute
between the parties that if the effective rate of export duty was as prevalent
on 9th August 1966 the respondent will not be entitled
to claim any refund of the additional duty of customs paid by him for exporting
these goods through the second vessel S.S. P'Xilas.
also be noticed at this stage that when the Customs Act 1962 came into force no
regulations under the Act were framed at the relevant time. But these
regulations came to be framed only in 1976 being Shipping Bill & Bill of
Export (Form) Regulations, 1976. However, in the absence of any such
regulations prior to 1976 it could be presumed that the earlier forms
prescribed for exporting goods under the Sea Customs Act, 1878 which came to be
repealed and replaced by the Customs Act, 1962 with effect from 1st February
1963 continued to remain in force. The position of law under the Sea Customs
Act, 1878 was that under Section 137 thereof the Chief Customs Officer was authorised
to prescribe the form of the shipping bill. 1934 edition of the Bombay
Supplement to the Indian Sea Customs Manual compiled by the erstwhile Central
Board of Revenue under Section 204 of the Sea Customs Act contains the proforma
of a shipping bill. Form No.34 which prescribes the format of a shipping bill
clearly indicates that the name of the vessel through which the goods are to be
exported is one of the essential requisites of such a shipping bill. It becomes
thus clear that the shipping bill as well as the ultimate `entry outwards' for
the concerned goods sought to be exported must have reference to the vessel
through which such goods are to be exported. Therefore, before any goods are
exported out of Indian territorial waters which vessel is to be utilised for
exporting them, becomes a relevant consideration. The concerned shipping bill
has to be lodged with reference to a given vessel which is to carry these goods
out of the Indian territorial waters and in connection with such a vessel the
`entry outwards' has to be obtained and only thereafter the master of the
vessel should allow the loading of the goods for being exported out of India.
The rate of duty payable on such exported goods would, therefore, be the rate
of duty that was prevalent at the time when `entry outwards' through a given
vessel is obtained. There cannot be an `entry outwards' in connection with a
vessel which does not actually carry such goods for the purpose of export. In
the facts of the present case, therefore, conclusion is inevitable that earlier
`entry outwards' for the vessel S.S. Neils Maersk was an ineffective `entry
outwards' for the purpose of computing the rate of customs duty of export on
the goods in question. Only the subsequent `entry outwards' for vessel S.S. P'Xilas
which actually carried these goods out of Indian territorial waters and
effected the export of these goods was the only relevant and operative `entry
outwards' and the rate of duty prevalent on the date of the said `entry
outwards' for vessel S.S. P'Xilas was the only effective rate of duty payable
on the export of these goods.
it must be held that the respondent has made out no case for refund of Rs.4,444.96
for which he lodged the claim.
parting with this discussion we may refer to a decision of a Constitution Bench
of this Court in Gangadhar Narsinghdas Agarwal v. P.S. Thrivikraman & Anr. (AIR
1973 SC 350) wherein proviso to Section 16 of the Act fell for consideration of
the Bench. The question before the Bench was whether the rate of customs duty
prevalent at the date of entry outwards of the vessel was to be operative or
whether the change in the rate of duty by any notification subsequent to the
date of entry outwards of the vessel but before the actual arrival of the
vessel in the port was to be operative. The Constitution Bench held that the
operative rate of duty would be the duty that was chargeable on the date of
`entry outwards' of the vessel and if there was any change in the duty before
the actual arrival of the vessel such change was of no legal consequence. For
arriving at this conclusion Ray, J., speaking for the Constitution Bench made
the following pertinent observations in paragraphs 15 to 17 of the Report:
Entry outwards of a vessel is dealt with in Section 39 of the Act. Section 39
is as follows:-
The master of a vessel shall not permit the loading of any export goods, other
than baggage and mail bags, until an order has been given by the proper officer
granting entry outwards to such vessel'. Proper officer mentioned in Section 39
of the Act is defined in Section 2(34) of the Act in relation to any functions
to be performed under this Act to mean the officer of Customs who is assigned
those functions by the Board or the Collector of Customs. Section 39
contemplates an order by the proper officer granting entry outwards to such
vessel. In the present case, the agents of the ship made an application on 30 July, 1966 for entry outwards of the vessel.
The Assistant Collector of Customs, Marmagoa granted permission on 30 July, 1966 to ship cargo on board the vessel.
Under Section 39 of the Act loading of goods is not permissible until an order
is made granting entry outwards to the vessel. In the present case, the Customs
Authorities on 30 July, 1966 made an order granting entry outwards to the
Under Section 16 of the Act the date of presentation of a shipping bill is the
relevant date for determination of rate of duty and tariff valuation applicable
to export goods. Under the proviso to Section 16 of the Act however there is a
fictional date for determination of such duty. The fiction is introduced by
providing for the date of entry outwards of the vessel to be relevant date in
case where the shipping bill has been presented before the date of entry
outwards of the vessel. The date of entry outwards of the vessel is the order
made under Section 39 of the Act.
Section 38 of the Sea Customs Act 1878 was the counter-part of Sec. 16 of the
Customs Act, 1962. Section 61 of the Sea Customs Act, 1878 was the counter-
part of Section 39 of the Customs Act, 1962. Under Section 38 of the 1878 Act
the rate of duty was the rate in force when the shipping bill was delivered
under Section 137 of the 1878 Act.
137 of the 1878 Act provided for clearance of goods for shipment by delivery of
shipping bill, payment of duties and the passing of the shipping bill by the
Customs Authorities. Section 38 of the 1878 Act had two provisos.
the first proviso to that old section where the shipment was permitted without
a shipping bill, or in anticipation of the delivery of a shipping bill, the
rate of duty was to be the rate in force at the time when the shipment of goods
commenced. Under the second proviso to Section 38 of the 1878 Act where the
shipping bill was in anticipation of the arrival of any vessel or before an
order was given for entry outwards of the vessel the shipping bill must be
deemed to have been delivered on the date on which that vessel arrived or entry
outwards was given whichever was later. Under the provisions of Section 38 of
the 1878 Act the Customs Authorities had power to apply the rate in force on
the date of the arrival of the vessel. Under Section 16 of the 1962 Act it is
not permissible to do so. The statue does not contain such a provision. Section
16 of the 1962 Act speaks of the fictional date only in relation to the order
of date of entry outwards of the vessel. In the present case, the order of
entry outwards of the vessel was made prior to 2 August, 1966.
the Customs Authorities in the impugned order acted without jurisdiction in
imposing duty on the export by holding that the date of entry outwards of the
vessel was the date "when the vessel arrived"." It is,
therefore, well settled that the relevant rate of customs duty in connection
with the export of goods would be the rate which prevailed when the `entry
outwards' for the vessel which ultimately exported the goods, was effected and
subsequent changes in the rate of duty before the actual arrival of the vessel
would be irrelevant. In the present case the situation is slightly different.
The earlier `entry outwards' for vessel S.S. Neils Maersk remained inoperative
and ineffective. For that vessel Section 39 of the Act never operated. It is
only for the second vessel S.S. P'Xilas that an effective `entry outwards'
became operative and under Section 39 of the Act as per the said `entry
outwards' the goods could be loaded on the ship and could be exported. It is
this `entry outwards', therefore, which would be the relevant entry qua which the
rate of customs duty for export had to be worked out.
writ petition was, therefore, liable to be dismissed and was erroneously
allowed by the High Court.
result this appeal succeeds and is allowed. The judgment and order of the High
Court are set aside. The writ petition filed by the respondent will stand
in the circumstances of the case there shall be no order as to costs all