Allowed

Hero Cycles Limited v. the Union of India through the Secretary Ministry of Finance and Ors.

Bombay HC16 Jun 2009WP/2838/2009

Case brief

AI extract

What is this about?

This High Court allowed a writ petition by Hero Cycles Limited, holding that the Assessing Officer failed in his duty to consider exemption notifications. The Court exercised extraordinary jurisdiction to set aside the erroneous assessment of additional duty levied due to the importer's inadvertent omission, directing the rectification of bills of entry but staying the refund claim.

What did the court decide?

Petition allowed; Respondent No. 3 directed to modify bills of entry; refund claim to be decided after modification.

Hero Cycles Limited Vs the Union of India through… — Writ and Judicial Review | Bombay HC (2009)

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hvn

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IN THE HIGHCOURT OF JUDICATURE AT BOMBAY

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CIVILAPPELLATE JURISDICTION

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WRIT PETITON NO. 2838 OF 2009

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Hero Cycles Limited,

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a company incorporated under the Companies Act, 1956 having their office at Hero Nagar, G.T. Road, Ludhiana and a Regional Office at 503, Tulsiani Chambers,

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Nariman Point, Mumbai 400 021. ... Petitioner Versus 1. The Union of India through the Secretary Ministry of Finance Department of Revenue, North Block New Delhi 110 001 2. The Commissioner of Customs (Imports) Mumbai II, JNPT Customs House, Nhava Sheva, Post Uran, Raigad 400 707.

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The Deputy Commissioner of Customs, CRC-I/Mumbai-II, Customs House, Nhava Sheva, Post Uran,

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Raigad 400 707 ... Respondents

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Mr. V. Sridharan i/by M/s. P.D.S. Legal for the Petitioner.

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Mr. Rajinder Kumar for the Respondent.

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CORAM : FERDINO I. REBELLO & J.H. BHATIA, JJ. DATED : JUNE 16, 2009

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ORAL JUDGMENT :(Per Ferdino I. Rebello,J.):

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Rule. Heard forthwith.

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The Petitioners imported goods classifiable under Chapter Heading 87149990 of the Central Excise Tariff Act, 1985. In terms of Sr. No. 25 of the Notification No. 10/2003-CE dated 01.02.2003 as amended by Notification No. 43/2006-CE dated 30.12.2006, the goods imported by the Petitioners are fully exempt from payment of Central Excise duty and consequently no additional duty of customs under Section 3 of the Customs Tariff Act, 1975 is payable on the goods. The Petitioners however, contended that inadvertently and under a bona fide mistake they did not claim exemption under the aforesaid notifications in respect of some Bills of entry. The Respondent No. 3 assessed all the Bills of Entry without extending the benefit of the above Notifications. The petitioners cleared the goods imported by them on payment of additional duty at the rate of 14% under Section 3 of the Customs Tariff Act, 1975.

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According to Petitioners, the bills of entries were assessed without affording the Petitioner an opportunity of being heard and without assigning any reasons for not extending the benefits. The Petitioners have imported similar goods prior to and subsequent to the aforesaid consignments. The benefit of the said notifications has always been extended to the Petitioners by the Respondents. The Petitioners have relied upon several Bills of Entry.

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The Petitioners realizing their mistake, that no additional duty is payable on the import of bicycle parts covered under Chapter Heading 87149990 of the Central Excise Tariff Act and the notifications, filed five refund claims before Respondent No. 3 and 8. The Petitioners did not take the credit of the said additional duty of customs paid on the imported goods. According to Petitioners the incidence of duty of which the refund claimed by the Petitioner is not passed on to any other person and is borne by the Petitioners.

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Pursuant to the correspondence which ensued, Petitioners were given a personal hearing on 22.10.2008. At the hearing the Petitioners also filed certificate from their C.A., to the effect that the Petitioners have not passed on to the extra CVD payable on the said 5 bills of entry to their client. The respondent No. 3 by order in Original No. 57/08-AM(I) dated 31^st December, 2008 and issued on 6^th January, 2009, rejected the Petitioners’ refund claim for the aggregate amount of Rs. 4,45,744/-. The Respondent No. 3 held that the refund claim does not merit sanction since, the importer has not challenged the final assessment order. Being aggrieved by

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that order the Petitioners preferred the appeal. The appeal was dismissed by order dated 14.1.2009 by holding that the Petitioners did not challenge the assessment orders in appeal within the time prescribed and instead the Petitioners had prayed for refund.

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By the present petition, what the Petitioners have prayed is to set aside the assessment made on the said Bills of entry being as under :

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(1) No. 777506 dated 07.04.2008\

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(2) 777486 dated 07.04.2008

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(3) 782375 dated 09.04.2008

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(4) 782358 dated 09.04.2008

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(5) 843130 dated 26.05.2008 to the extent it seeks to charge additional duty

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under Section 3 of the Customs Tariff Act.

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The Petitioners have also sought relief by way of a mandamus to direct the respondents to rectify the assessment made on the said bills to the extent it purports to make assessment on the imported goods to additional duty under Section 3 of the Customs Tariff Act and sanction and grant to the Petitioners refund claims with applicable interest.

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The respondents have filed their reply. At the outset it may be pointed out that the respondents have not controverted the claims by the Petitioners that under the notification, the goods were exempt from the payment of Central Excise duty and

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consequently no additional duty of customs under section 3 of the Customs Tariff Act, 1975 was payable. Similarly the respondents have not denied the averments in the Petition that the Petitioners had imported the goods of the same nature prior to and subsequent to the aforesaid consignments and the benefit of the said notification was extended to the Petitioners by the Respondents. The principle objection on behalf of the Respondent has been that as the Petitioners did not challenge the order of assessment the application for refund was not maintainable. Reliance for that purpose has been placed on the judgment of the Supreme Court in Priya Blue Industries Ltd. Vs. Commissioner of Customs (Preventive) 2004 (172) E.LO.T. 145 (S.C.). Collector of Central Excise Vs. Flock (India) Pvt. Ltd. 2000 (12) E.L.T. 9S. and the judgment of the Delhi High Court in Steel City Beverages Pvt. Ltd. Versus Union of India, 2003(159) E.L.T. 14 (Del). It is also pointed out that as the Petitioners did not claim benefit of the notification, section 154 of the Customs Act, 1962, would not be attracted.

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The first question that we are called upon to consider is, whether in the absence of impugning the original order of assessment by preferring a statutory appeal which was available, should this court, ought to exercise its the extra ordinary jurisdiction. From the averments in the Petition, it is clear that the Petitioners have not challenged in thier petition the orders rejecting the applications for refund. The Petitioners though had statutory remedy of an appeal against the order of assessment, did not invoke that remedy, but instead directly filed the applications for refund. The law is well settled that mere statutory remedy even of an appeal by itself, will be no bar to the exercise of the extra ordinary jurisdiction of this court. This court if it

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finds that there has been a breach of the fundamental principles of justice, would certainly not hesitate to issue a writ of certiorari and the fact that the alternative remedy is available would be no answer. See State of U.P. Vs. Mohammad Nooh, AIR 1958 SC 86. The law has since then been reiterated. In Champalal Binani Versus Commissioner of Income Tax, West Bengal and Others, 76 ITR 692 (SC) though the statutory remedy was available, the assessee chose not to avail of that remedy. While dismissing the Petition, the court noted that where the party feels aggrieved by an order of the authority and has adequate alternative remedy which it may resort to and if it does not avail of that remedy, the High Court will require a strong case to be made for entertaining the petition in its writ jurisdiction. The High Court in such cases would be slow to entertain the petition challenging the oder of the taxing authorities which is ex facie within jurisdiction. Having so said the court then observed as under :

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“A Petition for a writ of certiorari may lie to the High Court, where the order is on the face of it erroneous or raises the question of jurisdiction or of infringement of fundamental rights of the Petitioner..”

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This court in WASP Pump Private Limited Vs. Union of India, 2008 (230) E.L.T. 405 (Bom) in a case where the Petitioner did not avail of the alternative remedy, but had alleged violation of the principles of natural justice and fair play, entertained the writ petition inspite of alternative remedy being available. This court also noted that once there be notifications, even if attention of the respondents had

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not been drawn by the Petitioners to those notifications, a duty was cast on the Assessing Officer to consider the said notification considering that he is the authority to assess if they were relevant for the purpose of assessment. The view on alternative remedy was reiterated in an unreported judgment in Khandelwal Laboratories Ltd. Vs. The Union of India and Others, being Writ Petition No. 6134 of 2008 decided on 8^th October, 2008. Our attention was also invited to another judgment of this court in Nandlal Vithaldas Vs. Commissioner of Income Tax, (1989) 180 ITR 609 (Bom). There also the court was examining the issue of alternative remedy. This court observed that this court if on merits, finds that the orders passed by the judicial or quasi judicial Tribunals are patently wrong, this court would not be justified in refusing to exercise its extra ordinary jurisdiction if justice demands. The law therefore as settled is that mere existence of the alternative remedy by itself is no bar for this court exercising its extra ordinary jurisdiction. It will depend on the circumstances of the case.

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The question therefore, is whether on the facts of this case, this would be a fit case for this court to exercise its extra ordinary jurisdiction. This is not a case of violation of principles of natural justice or fair play and or violation of any fundamental rights. All that the petitioner seeks is refund of money on the ground that the additional duty was not chargeable in view of the exemption notification. Nonetheless the record shows that a statutory notification was in existence and which ordinarily the Assessing Officer ought to have noted. The Supreme Court has held that a Statutory notification issued under Section 5A of the Central Excise Act has statutory force, as if it were contained in the Act itself. We may gainfully refer to

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the following observations of the Supreme Court in Parle Exports (Private) Limited reported 1988 (38) ELT 741.

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“12. How then should the courts proceed? The expressions in the Schedule and in the notification for exemption should be understood by the language employed therein bearing in mind the context in which the expressions occur. The words used in the provision, imposing taxes or granting exemption should be understood in the same way in which these are understood in ordinary parlance in the area in which the law is in force or by the people who ordinarily deal with them. It is, however, necessary to bear in mind certain principles. The notification in this case was issued under Rule 8 of the Central Excise Riles and should be read along with the Act. The notification must be read as a whole in the context of the other relevant provisions. When a notification is issued in accordance with power conferred by the statute, it has statutory force and validity and, therefore, the exemption under the notification is, as if it were contained in the Act itself. See in this connection the observations of this Court in Orient Weaving Mills (P) Ltd. Vs. The Union of India 1978 (2) ELT (J311)(S.C.) (1962 Supp. 3 SCR 481). See also Kailash Nath v. State of U.P. (AIR 1957 SC 790). The principle is well settled that when two views of a notification

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are possible, it should be construed in favour of the subject as notification is part of a fiscal enactment. But in this connection, it is well to remember the observations of the Judicial Committee in Coroline M. Armytage & Ors. v. Frederick Wilkinson (1878 (3JA.C.355 at 370) that it is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction arises.

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The Judicial Committee reiterated in the said decision at page 369 of the report that in a taxing Act provisions establishing an exception to the general rule of taxation are to be construed strictly against those who invoke its benefit. While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed. It must, however, be borne in mind that absurd results of construction should be avoided.”

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In the instant case, the Petitioners admittedly, based on the said notification were being granted benefit of the notification previous to the imports in issue and also subsequent to the imports in question. In other words, both the parties were aware of the said notifications. If the Petitioner on account of an inadvertent error chose not to apply for the benefit, would that result in denial of the

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benefit. In our opinion that by itself would not be answer as a duty is cast on the authority to assess the goods and impose duty according to law which includes a statutory notification, if duty cannot be demanded if otherwise not payable. Once there be a power to assess there is a corresponding duty to assess according to law. The fact that the Petitioner has paid the duty under mistake of law and or in the instant case by oversight, cannot result in being assessed to duty which was otherwise not payable. In our opinion, this will be a case of manifest injustice and on the face of it erroneous.

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The facts of this case being so obvious, this would be a fit case for us to exercise our extra ordinary jurisdiction.

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Once we exercise our extra ordinary jurisdiction, we will have to issue directions to the respondents to amend the original order of assessment. In so far as the claim for refund is concerned, that would only arise after the order is amended. The relief of refund claimed is not maintainable before the order of assessment is amended or modified as held by the Supreme Court in Priya Blue Industries (supra). The Petitioner no doubt has contended that he has not passed on the duties and as such the question of unjust enrichment wold not arise in the matter. That is not for us to answer today. That would only be on an appropriate application being filed for relief after original orders of assessment which have been quoted in our judgment are modified.

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We therefore, allow the Petition in terms of prayer Clauses (a), (b)(i) and (b)(ii). Prayer Clause (b) (iii) is refused at this stage. On the Respondent No.3 modifying the bills of entries, it will be open to the Petitioner to file an application for refund which will be decided according to law.

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Rule made absolute accordingly. No orders as to costs.

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(J.H.BHATIA,J.)

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(FERDINO .I.REBELLO,J.)

Hero Cycles Limited v. the Union of India through the Secretary Ministry of Finance and Ors.

Case brief

What is this about?

What did the court decide?

Hero Cycles Limited v. the Union of India through the Secretary Ministry of Finance and Ors.

Case brief

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What did the court decide?

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