http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8

PETITIONER:

THE PRINCIPAL APPRAISER (EXPORTS)COLLECTORATE OF CUSTOMS & C

Vs.

RESPONDENT:

ESAJEE TAYABALLY KAPASI, CALICUT

DATE OF JUDGMENT11/10/1995

BENCH:

MAJMUDAR S.B. (J)

BENCH:

MAJMUDAR S.B. (J)

JEEVAN REDDY, B.P. (J)

CITATION:

1995 SCC (6) 536 JT 1995 (7) 260

1995 SCALE (5)683

ACT:

HEADNOTE:

JUDGMENT:

J U D G M E N T

S.B. Majmudar. J.

The 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.

Respondent 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.

The "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.

For 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8

amended enabling the respondent to ship the goods on board

the said vessel S.S. P'Xilas.

In the 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.

Thereafter 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.

The Commissioner rejected all the three applications.

Under these circumstances the respondent moved the High

Court of Kerala at Ernakulam in the aforesaid writ petition.

A 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.

It is this order of the High Court which is challenged by

the appellants in this appeal.

Learned 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.

Having 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.

A few 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'.

Section 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.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8

It 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 under:

"16(1). 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:

(b) in the case of any other goods, on

the date of payment of duty:

Provided 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 :

"50. Entry of goods for exportation.-

(1) 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 prescribed form.

(2) 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.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8

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. `Entry 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8

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.

It may 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.

Consequently 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.

Before 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8

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:

"15. Entry outwards of a vessel is dealt

with in Section 39 of the Act. Section

39 is as follows:-

39. 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 vessel.

16. 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.

17. 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,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8

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.

Section 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.

Under 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.

Therefore, 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.

Respondent's writ petition was, therefore, liable to be

dismissed and was erroneously allowed by the High Court.

In the 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 dismissed.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8

However, in the circumstances of the case there shall be no

order as to costs all throughout.