SC: Enhancement of rate of duty u/s 8A Customs Tariff Act is prospective

The Hon’ble Supreme Court, on 23rd September 2020, in the matter of Union of India & Ors. v. M/s G S Chatha Rice Mills & Anr. pronounced that the entrustment of the power to issue a notification enhancing the rate of duty under Section 8A of the Customs Tariff Act, 1975, is not accompanied by a statutory entrustment of authority to the Central government to exercise it with retrospective effect. An enhancement of the rate of duty pursuant to the exercise of power under Section 8A can only be prospective.

The Hon’ble Supreme Court observed that:

In interpreting the statute, the court is guided by the terms of its provisions, the purpose underlying their adoption and the scheme which emerges from interrelated provisions and the nature of the provision. (Para 34)

The provision which falls for construction is Section 15(1) of Customs Act, 1962 of which both clauses (a) and (b) use the expression “on the date”. In clause (a), the rate of duty and valuation is the rate and valuation in force on the date on which a bill of entry is presented under Section 46 where goods are entered for home consumption. Under Clause (b), where goods are cleared from a warehouse under Section 68 it is the date on which a bill of entry for home consumption is presented under that Section which is determinative of the rate and valuation. (Para 34)

The legislature does not always say everything on the subject. When it enacts a law, every conceivable eventuality which may arise in the future may not be present to the mind of the lawmaker. Legislative silences create spaces for creativity. Between interstices of legislative spaces and silences, the law is shaped by the robust application of common sense. (Para 35)

The interpretation of the court must aid in establishing a system which ensures certainty for citizens, ease of application and efficiency of administration. (Para 35)

A notification under Section 8A(1) of the Customs Tariff Act, 1975, even though it has the effect of amending the First Schedule, takes effect prospectively. Section 8A does not confer upon the notification an operation anterior to its making. In the language of the law, its operation is prospective. (Para 36)

A notification which is issued in terms of the provisions of Sub-section (1) of Section 8A of the Customs Tariff Act, 1975,  is akin to the exercise of a delegated legislative power. The Central government is empowered to issue a notification enhancing the rate of duty where it is satisfied that immediate action is necessary to increase the rate of customs duty on an article specified in the First schedule. The effect of the notification is to amend the First schedule to the Customs Tariff Act in respect of the import duty leviable on an article under Section 12 of the Customs Act. In issuing a notification under Sub-section (1) of Section 8A, the Central government exercises power as a delegate of the legislature. (Para 39)

Section 5(3) of the General Clauses Act 1897 applies to a “Central Act” or “Regulation”. Hence, the above provision makes it abundantly clear that it is only a ‘Central Act’ or ‘Regulation’ which comes into operation immediately on the expiration of the day preceding its commencement. (Para 40)

A notification issued by the Central government under sub-section (1) of Section 8A of the Customs Tariff Act, 1975 does not fulfill the description of a Regulation under Section 3(50) of the General Clauses Act. The expression is confined to specific species of Regulations. The definition does not extend to all subordinate legislation or to notifications issued by a delegate of the legislature acting in pursuance of a statutory authority. (Para 41)

The expression “Central Act” is defined in Section 3(7) of the General Clauses Act, 1897. The expression “Central Act” is defined by using the expressions “shall mean” and “shall include”. The use of these expressions indicates that the definition is exhaustive. (Paras 40 and 42)

A notification which has been issued under Sub-section (1) of Section 8A of the Customs Tariff Act is not an Act of Parliament. The notification has the effect of amending the First schedule. The Central government as a delegate of the legislature has been entrusted with the authority to issue such a notification. That does not make the notification an Act of Parliament. (Para 42)

The mere fact that a piece of delegated legislation has been issued in exercise of a legislatively conferred power does not bring the delegated legislation within the ambit of the phrase “Central Act” as defined in Section 3(7) of the General Clauses Act. (Para 43)

The rate of customs duty is determined on the date on which the bill of entry for home consumption is presented (Section 15 of Customs Act, 1962). The presentation of the bill of entry has to be made electronically (Section 46 read with the 2018 Regulations). The presentation is required to be made on the customs automated system. The provisions in the Customs Act for the electronic presentation of the bill of entry for home consumption and for self-assessment have to be read in the context of Section 13 of the Information Technology Act which recognizes “the dispatch of an electronic record” and “the time of receipt of an electronic record”. The legal regime envisaging the electronic presentation of records, such as the presentation of a bill of entry, has been imparted precision as a result of the enabling framework of the Information Technology Act under which these records are maintained. The presentation of the bill of entry under Section 46 is made electronically and is captured with time stamps in terms of the requirements of the Information Technology Act read with Rule 5(1) of the Information Technology (Electronic Service Delivery) Rules 2011. (Para 50)

A notification issued by the Ministry of Finance in the Department of Revenue, in exercise of powers conferred by sub-section (1) of Section 8A of the Customs Tariff Act 1975, which was uploaded in the e-gazette at a specific time and date cannot apply to bills of entry which were presented on the customs automated EDI system prior to it, attracting the legal fiction set out in Regulation 4(2) of the Bill of Entry (Electronic Integrated Declaration and Paperless Processing) Regulations 2018. (This inference has been drawn on the basis of Para 61)

Section 8A of the Customs Tariff Act 1975, does not contain language indicative of a legislative intent to authorize the Central government to relate back the exercise of the power to a period prior to its exercise. The exercise of the power under Section 8A (2) is governed by the prescriptions contained in sub-sections (3) and (4) of Section 7. The conferment of the power has not been made retrospective either expressly or by necessary implication. (Para 62)

The entrustment of the power to issue a notification enhancing the rate of duty under Section 8A of the Customs Tariff Act, 1975, is not accompanied by a statutory entrustment of authority to the Central government to exercise it with retrospective effect. An enhancement of the rate of duty pursuant to the exercise of power under Section 8A can only be prospective. (Para 63)

Parliament and the state legislatures are entrusted with the power to enact legislation under Articles 245 and 246 of the Constitution. Parliament and the state legislatures possess the plenary power to enact legislation, with prospective and retrospective effect, subject to due observance of constitutional requirements. (Para 64)

A notification issued by the government pursuant to the conferment of statutory power is distinct from an act of the legislature. Administrative notifications, even when they are issued in pursuance of an enabling statutory framework, are subject to the statute. Delegated legislation does not lose its character even when it has the same force and effect as if it is contained in the statute. (Para 64)

Plainly, a notification enhancing the rate of duty under Section 8A of the Customs Tariff Act, 1975 has prospective effect. (Para 64)

A rule framed by the delegate of the legislature does not have retrospective effect unless the statutory provision under which it is framed allows retrospectivity either by the use of specific words to that effect or by necessary implication. (Para 64)

Copy of notification: Judgement_23-Sep-2020

-Adv. Tushar Kaushik

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