# [1973] 3 S.C.R. 811

- **Citation:** [1973] 3 S.C.R. 811
- **Court:** Supreme Court of India
- **Decided:** 1973-03-28
- **Case number:** Civil Appeal No. 1799 of 1969
- **Bench:** J. M. Sl:IELAT ACTING C.J, Y. V. Cl:IANDRACl:IUD
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1973-3-s-c-r-811-5953
- **Pages:** 7

## Headnote

Sea Customs Act, 1878-S. 40-Whether refund of excess ilnport duty
comes under the Section.
The appellant Company was the so1e distributing agent in India for
the imported products of an American firm.
The Customs authorities used
to ]evy i1'tport duty on the basi.s of the invoice price under s. 29 read
with s. 30 of the Sea Customs Act, 1878, as being the real value of the
goods so imported.
·
During 1954~55, the appellant Company imported several items set out
in. Annexure 'D' o'f the Special Leave Petition.
\Vhen items 1 and 2
arfived in Bombay Port, the Custom authorities, ignoring their hitherto·
followed practice, refused to accept the invoice price as the real value and
Jcvie<l excess duty.
An appeal to the Customs Collector failed, whereupon the appellant Company lodged a revision
application
before the
Government of India.
Pending the disposal of the said revision, several other items set out
in Annexure 'D' arrived in Bombay Port and the Customs authorHies
charged the Appellant-Company with excess· amounts as
import duty.
For fear of demurrage charges, the appellant-Company paid the excess
duty under protest.
In March, 1957, the Government of India disposed of the said revision, accepting the appellants' contention, and directed re~assessment of
import duty on the said two items 1 and 2 on the basis of their invoice
price and also ordered refund of the excess duty charged on them.
The .appellaht-Company, however, did not file appeals in respect of
the other items which had arrived during the pendency of the said revision, although the Customs had levied excess duty thereon.
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The Customs authorities
refunded the excess duty levied on those
items, for which applicatiort for refund was made within the time prescribed under s. 40, 'but refused refund in respect of the rest of the items.,
An appeal to the Collector and a revision before the Government of
India were both rejected. The appellant c9mpany, thereafter, filed a writ
petition before the Delhi High Court for appropriate relief, but was without success.
The respondent contended' before .the Court that whatever claims were
found not in time as required by s. 40 of'the Sea Customs Act have been
correctly rejected by the Appraiser df Customs, Bombay, and therefore,
the appellant-Company had nd claim.
Allowing the appeal,
HELD : (I) After the disposal of the revision by the Government of
India, there was no doubt that the invoice prices were the real value of
the consi&nments and the Custom authorities bad no right in law
to
charge extra duty on the rest of the consignments.
Indeed the excess
duty was charged in violation of Sections 29 and 30 and ln excess of
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SUPREME COURT REPORTS
[1973] 3 s.c.R.
jurisdiction. This position was also accepted by the Custom authorities
when they ordered refund of excess duty charged by them in relation to
items 22 to 29 and 33 to 35. [815HJ
(ii) Section 40 had no application in the present case. Section 40
clearly applies only to cases where duties have been paid through inadvertence, error or misc~truction, and where refund application has to be
made within 3 months. The present case is not one where the excess duty
was paid through any of the 3 reasons set out in S'.P.ction -40. The excess
duty was demanded on the ground that the invoice price was not the real
value of the imported goods.
Since s. 40 did not apply to the facts of
the case, the respondents could not retain the excess duty illegally. [816 DJ

## Text

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PATEL INDIA (PRIVATE) LTD.
V,
UNION OF INDIA & OTHER~
(with connected petition)
March 28, 1973
[J. M. Sl:IELAT ACTING C.J. AND Y. V. Cl:IANDRACl:IUD, J.]
Sea Customs Act, 1878-S. 40-Whether refund of excess ilnport duty
comes under the Section.
The appellant Company was the so1e distributing agent in India for
the imported products of an American firm.
The Customs authorities used
to ]evy i1'tport duty on the basi.s of the invoice price under s. 29 read
with s. 30 of the Sea Customs Act, 1878, as being the real value of the
goods so imported.
·
During 1954~55, the appellant Company imported several items set out
in. Annexure 'D' o'f the Special Leave Petition.
\Vhen items 1 and 2
arfived in Bombay Port, the Custom authorities, ignoring their hitherto·
followed practice, refused to accept the invoice price as the real value and
Jcvie<l excess duty.
An appeal to the Customs Collector failed, whereupon the appellant Company lodged a revision
application
before the
Government of India.
Pending the disposal of the said revision, several other items set out
in Annexure 'D' arrived in Bombay Port and the Customs authorHies
charged the Appellant-Company with excess· amounts as
import duty.
For fear of demurrage charges, the appellant-Company paid the excess
duty under protest.
In March, 1957, the Government of India disposed of the said revision, accepting the appellants' contention, and directed re~assessment of
import duty on the said two items 1 and 2 on the basis of their invoice
price and also ordered refund of the excess duty charged on them.
The .appellaht-Company, however, did not file appeals in respect of
the other items which had arrived during the pendency of the said revision, although the Customs had levied excess duty thereon.
, /
The Customs authorities
refunded the excess duty levied on those
items, for which applicatiort for refund was made within the time prescribed under s. 40, 'but refused refund in respect of the rest of the items.,
An appeal to the Collector and a revision before the Government of
India were both rejected. The appellant c9mpany, thereafter, filed a writ
petition before the Delhi High Court for appropriate relief, but was without success.
The respondent contended' before .the Court that whatever claims were
found not in time as required by s. 40 of'the Sea Customs Act have been
correctly rejected by the Appraiser df Customs, Bombay, and therefore,
the appellant-Company had nd claim.
Allowing the appeal,
HELD : (I) After the disposal of the revision by the Government of
India, there was no doubt that the invoice prices were the real value of
the consi&nments and the Custom authorities bad no right in law
to
charge extra duty on the rest of the consignments.
Indeed the excess
duty was charged in violation of Sections 29 and 30 and ln excess of
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SUPREME COURT REPORTS
[1973] 3 s.c.R.
jurisdiction. This position was also accepted by the Custom authorities
when they ordered refund of excess duty charged by them in relation to
items 22 to 29 and 33 to 35. [815HJ
(ii) Section 40 had no application in the present case. Section 40
clearly applies only to cases where duties have been paid through inadvertence, error or misc~truction, and where refund application has to be
made within 3 months. The present case is not one where the excess duty
was paid through any of the 3 reasons set out in S'.P.ction -40. The excess
duty was demanded on the ground that the invoice price was not the real
value of the imported goods.
Since s. 40 did not apply to the facts of
the case, the respondents could not retain the excess duty illegally. [816 DJ
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1799 of
1969.
Appeal btY special leave from the judgment and order dated
April 5, 1967 of the Delhi High Court at New Delhi in letters
Patent Appeal No. 44 of 1967 and Writ Petition No. 181 of 1967.
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Petition under Article 32 of the Constitution of India for the
enforcement of fundamental rights.
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N. S. Bindra, S. K. Dholakia and Vineet Kl!.mar, for the appellant and petitioner.
S. N. Prasad and S. P. Nayar, for the respondents.
The Judgment of the Court was delivered by
SHELAT, ACTING C.J.-At all material times, the appellantcompany acted as the sole distributing agent in India for the products of Mis. Sawyer's Inc., Portland, U.S.A., and as such used
to import Viewmaster stereoscopes, reels etc. The custom authorities used to levy import duty on the basis of the invoice price
under s. 29 read with s. 30 -of the Sea Customs Act, 1878 as
being the real value of the goods so imported.
During the year 19,54-55, the appellant-company
imported
several items set out in Anne1<.ure 'D' to the appellant's special
leave petition, the details of which it is not necessary to set out
here. When items I and 2 arrived in Bombay p()rt, the customs
authorities, ignoring their hitherto followed pract.ice, refused
to
accept the invoice price as the real value and levied excess duty
in the aggregate sum of Rs. 1356.
An appeal _to the Customs
Collector failed whereupon the appellant-company lodged a revision application before the Government of India.
Pending the disposal of the said revision, several other items
set out in the said annexure 'D' arrived in Bombay port, in respect
of •vhich the CuS'toms, refusing to accept their
invoice price,
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PATEL IN!)IA PVT. LTD. v. UNION (She/at, Acting C.J.)
813
charged the appellant-company with excess amounts as import
duty. For fear that demurrage charges would have to be incurred,
the appellant-company paid the excess duty charged as aforesaid,
but under protest.
On March 20, 1957, the Government of India disposed of
the said revision, accepting the appellant's contention, and directed
reassessment of import duty on the said two items 1 and 2 on the
basis of their invoice pric.e and also ordered refund to the appellant-company of the excess duty charged on them.
It would seem that since the said revision was pendin.11: before
the Government of. India, the appellant-qompany thought that
the Customs would follow the principle which would be laid down
in the decision in the said revision.
The appellant-company,
therefore, abstained from filing appeals in respect of the other
items, which had arrived pending the decision of the said revision
although the Customs had levied excess duty thereon. On the
said revision being disposed of and the Government having
therein ordered refund, the appellant-company applied for refund
of the excess duty charged in respect of some of the items, viz.,
items 22 to 29 and 33-35. This was done under s. 40 of the Act
and within the period appointed therein.
The Customs granted
refund on the aforesaid items
22 to 29 and 33-35, although
invoice value thereof had not been accepted, and excess duty
had been charged.
The customs authorities, however, declined
to refund the excess duty in respect of the rest of the items. The
reason given for such refusal was that the application for refund
in respect of those items had not bj-.en made within the time prescribed by s. 40. An appeal to the Collector and a revision before
the Government of India against the said refusal to grant refund
were both rejected, the refusal by the Customs appraiser being confirmed on the groimd that refund was not applied for in time
under sec. 40.
The appellant-company thereupon filed a writ petition in the
High Court of Punjab (at Delhi) under Art. 226 of the Constitution pleading inter alia that :
(a) Sec. 40 of the Act had no application,
(b) the Union of India was not entitled to appropriate or retain the said excess duty,
( c) the appellant-company had a legal right to the
return of the said excess duty, and
( d) that there was an error apparent on the record
in the orders refusing return of the excess duty.
The appellant-company on these pleas prayed that the said orders
of refusal should be quashed and an order should be passed directing return of the excess duty.
SUPREME COURT REPORTS
[1973] 3 s.c.R.
In para 16, sub-paras (i) and (j) of its return the Union of
India averred as follows :
"(i) with reference to clause (1) of para No. 16 of
the petition, H is correct that the Government of
India cannot appropriately retain to whatever
they are not legally entitled.
But I submit that
the importers are also
required to put in the
claims in time as required lJy law. I deny that
!he petitioner has a legal right to the return of
the excess ci'::: ''"' duty levied on all the consignments.
( j) I deny and controvert the allegations made in
clause (J) of para No. 16 of the petition. I say
that !he Bombay Cus'IOms House allowed some
claims of the petitioner which were in time under
section 40 of the Sea Customs Act, out of the
list forwarded with weir letter dated 3-4-1957."
P":·a 17 of the return was as follows :
"I deny para No. 17 of the petition. I submit that
whatever claims were found not in time as required by
section 40 of the Sea Customs Act have been correctly
rejected by the Appraiser of Customs, Bombay."
It is clear from the return by 'the Union of India that :
(a) refund was granted to the appellant-company in
respect of the items referred to above without any
appeal having been filed by the company relating
to those items,
( b) refund was
granted in respect of those Hems
simply on the ground that an application therefor had been made whhin the time prescribed by
sec. 40, and it was refused in respect of the rest
of the items only because such an application
therefor was not made within the time prescribed
by sec. 40, and
( c) there was no
plea that !he exce5'
duty was
rightly charged on those iteins.
The learned Single Judge of the High Court who heard the
'' :·'t petition held !hat sec. 40 of the Act did not apply; that it
arplied to erroneous payments and not to erroneous assessments.
He, however, held that the proper remedy for the appellant-compJny was to have filed appeals against such erroneous assessments
un.:ler s. 188 of the Act. and that that having not been done, no
relief could be j!ranted to the appellant-company.
He, however,
olo-ervecl that the Government was morally bound to !!rant the
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PATEL INDIA PVT. LTD. v. UNION (She/at, Acting C.J.)
8,15
refund and made a recommendation that the refund should be
made .to .the appellant-c~mpany; A Letters Patent appeal against
1he said 1ulgment was reiected. Hence this appeal by special leave.
. The only qu.estion which arises in this appeal is whether the
High Court ought to have granted in the circumstances of the case
1he relief asked for by the appellant-company in its writ petition.
Sec. 2~ of the Act casts a duty on the owner of imported goods,
whet~er. hable to duty or not, to state the real val11e, quantity and
descnphon of such goods in the bill of en1ry or the shipping bill
and to subscribe a declaration of the truth of such statement at
the foot of such bill. In case of doubt, tht Customs Collector has
the power to require such owner or any one else in possession of
my invoice, broker's note, policy of insurance or other document,
.vhereby the real value, quantity and description of any such goods
can be ascertained.
An invoice thus is one of the documents from
which the real value of imported goods has to be ascertained where
1he Customs Collector has any doubt as regards their declared
Yalue. Sec. 30 then defines 'real value' to be the wholesale cash price,
less trade discount, for which goods of the like kind and quality
are sold or are capable of being sold at the time and place of
importation. Sec. 31 provides that goods chargeable with duty upon
the value thereof but for which a specific value is not fixed by law
for the purpose of levying duties thereon, shall, without unnecessary
delay, be examined by the officer of customs. If it appears that the
real value of such goods is correctly stated in the bill of entry or
shipping bill, the goods shall be assessed in accordance therewith.
There is no dispute that the appellant-company had declared
the real value of the articles imported ~ it and in support thereof
'lad produced the manufacturers' invoices. The customs authorities
'1ad refused to accept the invoice price as real value and charged
excess duty. But any doubt with regard to the real value of the
several consignments imported by the company w.as totally eradicated when the Government of India decided the company's revision and directed that the invoice price should be accepted and
duty should be assessed accordingly. In respect of th~ two items to
which the revision related, the Government had al!;o .directed refund
of the excess duty charged and paid under protest. 'f!lere. was t!ius
no doubt or dispute left thereafter as regards the mvo1ce pnces
being the real value of the consignments. The direction given in
its decision in the said revision that the invoice price should be
~ccepted as real value within the meaning of sec. 30 of the. ~ct
applied to the rest of the consignments. The customs authonl!es,
therefore, were not right in law in charging excess duty on t~e r7st
of the consignments. Indeed, the excess .du.ty .w~s ch~rged m vmJation of ss. 29 and 30 and in excess of 1unsd1c1Ion, smce, as held
816
SUPREME COURT REPORTS
[1973] 3 s.c.R.
by the Government of India, the real value of the goods was their
invoice price.
The position, indeed, was accepted by the customs authorities
when they ordered refund of excess duty charged by them in
relation to items 22 to 29 and 33-35. Such relund could only
have been ordered on the footing that the excess duty on those
consignments had been charged without the authority ot law and
therefore without jurisdiction. The fact that an application had
been made therefor under sec. 40 was irrelevant to the point that
the excess duty was assessed and recovered without the authority
of Jaw.
Sec. 40, on which the Union of India relied in its return,
provides that no customs duties 9r charges which have been paid,
and of which repayment ,wholly or in part, is claimed in consequence of the same having bieen paid through inadvertence, error
or misconstruction, shall be returned, unless such claim is made
within three months from the date of such payment. The section
clearly applies only to cases where duties have been paid through
inadvertence, error or misconstruction, and where relund application has to be made within three months from the date of such
payment.
As rightly observed by the High Court, the present case was
not one where the excess duty was paid through any of the three
reasons set out in s. 40. The excess-duty was demanded on the
ground that the invoice price was not the real value of the imported goods and payment under protest was also made on that footing.
The ultimate result in the appellant-company's ·re\lision was that
charging of excess duty was not warranted under the Act, and
that the value on which duty should have been assessed was the
invoice price and nothing else.
That being the position, sec.· 40
did not apply and could not have been relied upon by the customs
authorities for refusing to refund the excess d.utY unlawfully
levied on the appellant-company.
From the fact that the customs authorities refunded the excess
duty on items 22 to 29 and 33-35, it follows that the customs
authorities had fully realised that the excess-duty had been levied
without the authority of Jaw, for otherwise they would not have
agreed to refund it, and further that they could not lawfully retain
it. If the customs authorities were not· entitled to levy the excess
duty and retain it, they were bound to return if to the appellantcompiuly who had paid it under prote8t and only with a view not
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to incur demurrage Charges, unless there was some provision of
the Act which debarred the appellant'COinpailyJi:om recovering it. · H
The only provision relied on blv the· customs-authorities was
sec. 40 of the Act. Indeed, their relusa! to refund the excess-duty
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PATEL INDIA PVT. LTD. v. UNION (She/at, Acting C.J.)
s 17
both in their return and in the High Court was on the grounc! of
the omission of the appellant-company to apply for the refund
wi•thin the time provided by that section. It is necessary to emphasise that it was not their case that !he invoice price of the
items in question was not the real value or that the excess duty
was lawfully levied or that the appellant-company was not entitled
to the refund ~hereof for any reason except the omission to apply
for it within.the time prescribed by sec. 40.
But since sec. 40
did not apply to the facts of the case, the respondents could not
retain the excess duty except upon the authority of some o:her
provision of Jaw.
No ather provision was pointed out by them
which would disentitle !he appellant-company to the refunc •Jn
the ground of its rights being time-barred or otherwise. No ;uch.
provision other than sec. 40 which disentitled the appellant-company lo the refund having been put forward and the
cuswms
authorities not being entitled to retain the excess duty, there was
a legal obligation on the part of the respondents to
retun~ ·the
excess duty and a corresponding legal right in the appellant-ompany to recover it.
Besides, except s. 40 the Acl contains no
O'ther provision laying down any limitation within which an importer has to apply for refund.
The re.fusal to return the excess
duty on the ground that the appellant-company had not applied
within time provided by the Act was clearly unsustainable. Since
there was not and could not [<, any dispute with regard to the
invoice price being the real value there was no point in filing any
appeal; nor could the omission to file any such appeal be a proper
or valid ground for refusing relief ·to the appellant-company, when
there remained no longer any dispute between the parties as to
the invoice price being the real value of the imported items.
For the reason aforesaid, we are satisfied !hat the High Court
was not right in refusing the relief, in spite of its being satisfied
that the excess duty was charged without any basis in law and
also that the respondents could not lawfully retain the excess duty.
In the circumstances we set aside the judgment of the High Court
and allow the appeal. The respondents will pay to the appellantcompany its costs both here and in the High Court. In view of this
conclusion no separate order need be passed in writ petition 181
of 1967. The writ petition accordingly stands disposed of.
s.c.
Appeal allowed.