By TIOL News Service

CHENNAI, NOV 20, 2013: VIDE Notification No 127/99 Cus dated 01.12.1999, issued under Section 8A(1) of the Customs Tariff Act, 1975, Government had imposed 50% duty on goods falling under sub-heading Nos. 1001.10 and 1001.90 in view of the slow off take of wheat from the Central Pool. Section 8A( 1) empowers the Government to increase the import duties by amending the First Schedule if the circumstances exist which render it necessary to take immediate action.

It is the contention of the Petitioner that that the Notification is ultra- vires Section 8A of the Customs Tariff Act, 1975. It is further contended that Section 12 of the Customs Act, 1962 is the charging section, wherein it is stated that duties of the customs shall be levied at such rates as may be specified under the Customs Tariff Act on the goods imported into or exported from India and wheat has been classified under Sub Heading 1001.90 provided for duty free clearance and in Column No.4 of the Tariff Table, no rate of duty or Nil rate of duty is specified, but only the word 'free' is mentioned. Unless the rate of duty is mentioned in the Customs Tariff Act, imposition of fresh levy by way of Notification cannot be issued under Section 8-A of the Customs Tariff Act to increase the rate of duties. Therefore, it is contended that the imposition of 50% of the Customs Duty on the imported wheat is ultra- vires of Section 12 of the Customs Act and Section 8A of the Customs Tariff Act.

After hearing both sides, the High Court held:

It is relevant to point out that the charging mechanism is Section 12 of the Customs Act. Section 12 of the Customs Act mandates that duties of customs shall be levied on goods imported into or exported from India and the measure or the rate of duty is as per the Tariff Schedule. Therefore, the levy is being controlled under Section 12 of the Customs Act. The rate of duty cannot operate as a bar to the charging Section. The rate of duty mentioned in the Tariff Schedule prior to the amendment is 'Free'. It is to be noted that entry "free" occurs in the column "rate of duty". Therefore, 'Free' is also rate of duty and in the event the Central Government is satisfied such duty should be increased, nothing precludes the Central Government from issuing notification under Section 8A of the Customs Tariff Act. Therefore, merely because, the term 'Free' has been used in the Tariff Schedule, does not mean that the power under Section 8A of the Customs Tariff Act cannot be invoked. The correct interpretation would be it is 'Nil' rate or 'Zero' rate of duty, which is varied by virtue of a notification issued under Section 8A of the Customs Tariff Act.

The main test that should be satisfied for issuing a notification under Section 8A of the Customs Tariff Act is that the article should be included in the First Schedule of the Act. Section 8 of the Customs Tariff Act is concerned about increasing the import duty in respect of article found in the First Schedule. So the emphasis is on the article and not on the rate.

Given the fact that the variation could be brought to the rate as warranted by public interest, it is totally immaterial whether the duty prescribed therein should be a matter of concern for this Court to advert its attention on the arguments raised by the petitioner.

Even though learned counsel for the assessee submitted that the increase of the rate of duty leviable under Section 12 of the Customs Act is payable only when there is "Nil" rate of duty or any other rate of duty not in the case of 'Free', the said aspect has already been dealt with by the Kerala High Court in W.A.No.2651/2000 etc batch by order dated 10.04.2001, with which we respectfully agree. We do not agree with the submissions of the learned counsel for the assessee that the increased rate of duty is payable when only there is a "Nil" rate and not when there is 'Free' rate of duty.

(See 2013-TIOL-913-HC-MAD-CUS)