Case: Union of India Vs. Mackinnon Mackenzie and Company Limited

no distinction between the export of the goods and acquisition of character of export goods. The submission is not correct because the expression export goods merely means that the goods are ready for being taken outside India. As long as the goods are not actually taken out of India, it cannot be even suggested that the export is completed. The Assistant Collector, therefore, was perfectly justified in holding that the export had not taken place in respect of damaged sugar bags. Mr. Bulchandani submitted that even though the export has not taken place, once the shipping company filed bills of entry for home consumption, it must be assumed that the cargo which was sought to be cleared from custom barrier was imported goods. The learned Counsel fairly stated that the expression imported goods as defined in section 2 (25) of the Act, means goods brought into India from a place outside India. Mr. Bulchandani could not submit that the damaged sugar bags were brought from outside India but urged that as the damaged sugar bags had acquired characteristic of export goods, when such goods are brought for home consumption by filing a bill of entry, it must be concluded that such goods had acquired the character of goods imported from outside India. It is not permissible to make violence to the clear language of the statute and accept the contention of the department that the damaged sugar bags were imported goods. ( 13 ) MR. Bulchandani submitted that unless the damaged sugar bags were treated as imported goods, the customs authorities cannot recover countervailing duty. The countervailing duty is payable so as to offset the advantage which the imported goods may earn over the manufacture of local goods due to non-payment of excise duty. Mr. Bulchandani submitted that the sugar bags were permitted to be cleared from factory gate without payment of excise duty in view of the fact that the bags were to be exported outside India. It was urged that as the bags were not exported, the cargo had escaped payment of excise duty and in case the damaged sugar bags are not treated as imported goods, then the liability to pay countervailing duty will not arise. The apprehension of the learned Counsel that the manufacturer of sugar will escape payment of excise duty is ill founded because the liability to pay excise duty on the manufacture of sugar had accrued when the sugar was cleared from the factory gate by Indian Sugar Industry Export Corporation Limited. Mr. Bulchandani had to concede that the corporation had executed the requisite bond in favour of Collector of Excise and had undertaken to pay the excise duty in case the goods are not exported. It is, therefore, obvious that the Collector of Excise can enforce the bond and recover the excise duty and the claim of Mr. Bulchandani that the sugar had escaped duty because of failure to export is not correct. Mr. Bulchandani then submitted that the shipping company had acted as the agent of Indian Sugar Industry Export Corporation Limited and, as such, was liable to pay the amount of duty. Reliance was placed on letter dated June 2, 1980 addressed by the Corporation to the shipping company. The letter, inter alia, mentions that after shipment was effected, the Corporation had submitted proof of export to Maritime Collector of Central Excise, Bombay, and necessary credit in the bond account has been given. Relying on this averment in the letter, it was claimed that the Corporation had secured the advantage of non-payment of excise duty and, consequently, the shipping company must pay the said duty. The submission is devoid of any merit for more than one reason. In the first instance, Mr. Bulchandani could not explain why the Collector of Central Excise, Bombay, had given credit to the Corporation when the sugar was, in fact, not exported. Secondly, Mr. Bulchandani could not vouchsafe about the correctness of the averment made in the letter by the Corporation. The customs authorities had not bothered to ascertain from the Collector of Excise as to whether any credit was in fact given to the Corporation. Next, even assuming that the Collector of Excise had given erroneous credit to the Corporation, that would not transfer the liability to pay the excise duty from the Corporation to the shipping company. Mr. Bulchandani had to concede that the liability to pay the excise duty is solely of the manufacturer, but made a faint attempt to urge that the shipping company had stepped into the shoes of the Corporation. It was contended that the shipping company had taken lien in securing the report from the surveyors and had taken active interest in disposing of the damaged sugar bags. The submission that the shipping company was acting at the behest of the Corporation or as the agent of the Corporation is without any substance. The shipping company was required to take steps to mitigate the damages which the shipping company was required to pay to the Corporation for the damage caused to the sugar bags entrusted to the shipping company for export. The steps taken by the shipping company for mitigating the losses cannot lead to the conclusion that the shipping company was acting as the agent of the Corporation whose duty was to pay the excise duty. In our judgment, the recovery of countervailing duty from the shipping company was not justified as the assumption of the customs department that the cargo cleared for home consumption under bills of entry filed by the shipping company was imported goods was not correct. The customs authorities could not have recovered the excise duty from the shipping company as it was the sole liability of the manufacturers to pay the same. In our judgment, the action of the customs authorities in recovery of duty was without any authority of law and the order of the learned Single Judge directing the refund of the entire duty does not suffer from any infirmity.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The submission proceeds on the assumption that the sugar bags which were cleared by the shipping company for home consumption were imported goods. The assumption of the department that the sugar bags were imported goods is entirely incorrect and contrary to the statutoryis not in dispute that the requisite entry of goods contained in sugar bags was made for exportation under section 50 of the Act. It is equally not in dispute that while clearing the sugar bags from the factory gate, excise duty which is normally payable was not recoverable in view of the fact that the sugar was to be exported. It hardly requires to be stated that the liability to pay excise duty in respect of manufacture of sugar arises as soon as the goods are cleared from the factory gate and the liability stands differed when the goods are to be exported. The manufacturer, who is liable to pay excise duty, is required to execute a bond assuring that in case the goods are not exported for one reason or other, then the manufacturer will pay the requisite excise duty. It is not in dispute that Indian Sugar Industries Export Corporation Limited had executed such bond in respect of the goods which were to be exported. The officer had permitted clearance and loading of the goods for exportation in accordance with section 51 of the Act.It is impossible to accede to the submission. The expression export defined under the Act clearly means taking the goods out of India to a place outside India. It is not in dispute that the territorial water of India extends to limits of 12 nautical miles from Bombaysubmission is not correct because the expression export goods merely means that the goods are ready for being taken outside India. As long as the goods are not actually taken out of India, it cannot be even suggested that the export is completed. The Assistant Collector, therefore, was perfectly justified in holding that the export had not taken place in respect of damaged sugaris not permissible to make violence to the clear language of the statute and accept the contention of the department that the damaged sugar bags were importedis, therefore, obvious that the Collector of Excise can enforce the bond and recover the excise duty and the claim of Mr. Bulchandani that the sugar had escaped duty because of failure to export is notsubmission is devoid of any merit for more than one reason. In the first instance, Mr. Bulchandani could not explain why the Collector of Central Excise, Bombay, had given credit to the Corporation when the sugar was, in fact, not exported. Secondly, Mr. Bulchandani could not vouchsafe about the correctness of the averment made in the letter by the Corporation. The customs authorities had not bothered to ascertain from the Collector of Excise as to whether any credit was in fact given to the Corporation. Next, even assuming that the Collector of Excise had given erroneous credit to the Corporation, that would not transfer the liability to pay the excise duty from the Corporation to the shippingsubmission that the shipping company was acting at the behest of the Corporation or as the agent of the Corporation is without any substance. The shipping company was required to take steps to mitigate the damages which the shipping company was required to pay to the Corporation for the damage caused to the sugar bags entrusted to the shipping company for export. The steps taken by the shipping company for mitigating the losses cannot lead to the conclusion that the shipping company was acting as the agent of the Corporation whose duty was to pay the excise duty. In our judgment, the recovery of countervailing duty from the shipping company was not justified as the assumption of the customs department that the cargo cleared for home consumption under bills of entry filed by the shipping company was imported goods was not correct. The customs authorities could not have recovered the excise duty from the shipping company as it was the sole liability of the manufacturers to pay the same. In our judgment, the action of the customs authorities in recovery of duty was without any authority of law and the order of the learned Single Judge directing the refund of the entire duty does not suffer from any infirmity.