Gulabdas and Company and Anr vs Assistant Collector Of Customs and Ors

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Writ Petition (civil) 234-245 of 1956

Decision Date: 25 April 1957

Coram: S.R. DAS, S.J. Imam, S.K. Das, P.G. Menon, A.K. Sarkar

On 25 April 1957 the Supreme Court of India delivered a judgment in the matter titled Gulabdas & Company & Anr versus Assistant Collector of Customs & Ors. The opinion was authored by Justice S.K. Das and the bench was composed of Justices S.J. Imam, S.K. Das, P.G. Menon and A.K. Sarkar. The case was recorded as Writ Petition (civil) numbers 234 to 245 of 1956, with the petitioner identified as Gulabdas & Company & Anr and the respondents as the Assistant Collector of Customs and others. The decision appeared in the 1957 law reports at AIR 733. The judgment began by noting that the proceeding comprised twelve separate writ petitions filed under Article 32 of the Constitution, each seeking protection of fundamental rights. Among these, three petitions—numbers 235, 236 and 240—were filed by a partnership known as Messrs. Kanji Shavji Parekh. The remaining nine petitions were presented by nine distinct firms. All of the petitioners, including Messrs. Kanji Shavji Parekh, were described as established importers who possessed quota rights for importing stationary articles and whose business operations were based in Calcutta. Because the twelve petitions raised identical legal questions, the Court elected to hear them together and to consider the arguments collectively. Counsel N.C. Chatterji, who appeared on behalf of all the petitioners, was invited to address the Court in detail concerning the facts of petition number 235 of 1956, and he explained that the factual circumstances underlying the other petitions were essentially the same, differing only in minor particulars such as dates, names and other non‑essential details that did not affect the core issues under consideration. Consequently, the Court decided to set out the facts of petition 235 in full, thereby dispensing with the need to repeat the factual matrix of the remaining petitions.

The factual background presented related to Messrs. Kanji Shavji Parekh, a registered partnership firm whose principal place of business was situated in Calcutta, and whose partners were all Indian citizens. The firm was an established importer of stationary articles and held quota rights for the importation of such items, including a category described in the Import Trade Control Policy Book as “Artists’ Materials,” which were listed in Appendix 10 on pages 376 and 377 of the policy for the licensing period covering July to December 1954. On 4 August 1954 the Joint Chief Controller of Imports and Exports granted to the firm a licence authorising the import of goods identified as “Artists’ Material,” which fell under serial number 168 (C) of Part IV of the Policy Statement for the same July‑December 1954 period. Item 168 of the statement referred to “articles made of paper and papier‑maché, stationery including drawing and copy books etc.,” and sub‑item (c) covered “other articles” within that category. A more detailed description of the “Artists’ Materials” was provided in Appendix XX, where item 11 was identified as “Crayons.” The licence specified an approximate value of the goods of Rs 2,088 and gave the firm a twelve‑month period of validity from the date of issuance. Prior to the licence being issued, however, in the middle of June 1954 the petitioners had arranged, through Messrs. Crystal Company—agents and representatives of Messrs. Lyra Lead Pencil Company of Nuremberg, West Germany—to purchase crayons of the brand “Lyra.” The petitioners indicated that the crayons were coloured, supplied in sets of twelve assorted colours per box, with twelve boxes packed to a carton. On 14 June 1954 the petitioners wrote to the Assistant Collector of Customs for Appraisement, Calcutta, enclosing a carton of “Lyra” brand crayons and requesting clarification of the proper customs classification for those crayons. The Assistant Collector responded on 3 July 1954, stating that the “Lyra” crayons should be classifiable under item 45 (a) of the Indian Customs Tariff, while also noting in a footnote that the classification was provisional and might be revised after a physical examination of the goods at the time of importation.

In the months preceding the issuance of the licence, the petitioners, in June 1954, entered into arrangements with Messrs. Crystal Company, the local agents of Messrs. Lyra Lead Pencil Company of Nuremberg, West Germany, for the purchase of crayons marketed under the Lyra brand. The petitioners described these crayons as coloured crayons supplied in twelve assorted colours, packaged twelve crayons per box and twelve boxes per carton. On 14 June 1954, they wrote to the Assistant Collector of Customs for Appraisement in Calcutta, enclosing a carton of Lyra crayons and requesting clarification of the appropriate customs classification for the goods. The Assistant Collector responded on 3 July 1954, indicating that the Lyra crayons would be classified under item No. 45 (a) of the Indian Customs Tariff, but added a footnote that the classification was provisional and could be revised after examination of the goods at the time of importation. After receiving the licence on 4 August 1954, the petitioners placed an order through Messrs. Crystal Company for the importation of 486 dozen boxes of Lyra coloured crayons, a order that was confirmed in September 1954. They opened an irrevocable letter of credit in favour of the manufacturers through a bank, and the consignment arrived from Hamburg, West Germany, at the port of Calcutta on or about 10 January 1955. The petitioners then filed a Bill of Entry through their clearing agents under the Sea Customs Act (Act VIII of 1878). On that Bill of Entry the Assistant Collector made an endorsement that read: “Collector’s order in File S. 6‑140/55A. Goods assessable under item 45 (4) ICT and accept the licence produced. Declare number of pieces and length of the pencil both in words and figures.” This endorsement showed that, contrary to the earlier provisional view, duty was being assessed under item 45 (4) of the Indian Customs Tariff rather than item 45 (a). The petitioners objected to this assessment because the duty rate under item 45 (a) was 39 3/8 percent ad valorem, whereas under item 45 (4) the duty was “2 annas for every length of 7 ½ inches or part thereof, or 66 2/3 percent ad valorem, whichever is higher.” Seeking redress, the petitioners presented their case to two successive Collectors of Customs. On 26 April 1955, the Assistant Collector wrote to the petitioners, stating that the decision on the merits of the assessment had been taken by the Collector’s predecessor and communicated through an endorsement on the reverse of the Bills of Entry, and that the current Collector saw no basis to interfere with that decision. The letter further advised that, if the petitioners remained dissatisfied, they should pursue the appeal procedure prescribed under section 188 of the Sea Customs Act.

In the communication issued by the Assistant Collector of Customs, it was stated that if the petitioners were dissatisfied with the decision, they should pursue the appeal process laid down in section 188 of the Sea Customs Act. Accordingly, the petitioners filed an appeal with the Central Board of Revenue through a letter dated 14‑17 May 1955. The Board examined the appeal and on 12 October 1955 issued an order declaring that the goods had been correctly classified for duty under item 45 (4) of the Indian Customs Tariff and that there was no reason for the Board to interfere with the assessment made by the Collector of Customs at Calcutta. Following that dismissal, the petitioners instituted the present writ proceeding, challenging the legality of the orders issued by the Assistant Collector of Customs, the Collector of Customs, and the Central Board of Revenue. In their writ petition they sought appropriate writs to set aside those orders and requested that the Customs authorities be directed to release the goods upon payment of duty calculated under item 45 (a) of the Indian Customs Tariff. The respondents, comprising the Customs authorities concerned and the Union of India, contested the writs. Their principal arguments were that the writ petitions could not be maintained under article 32 of the Constitution because no fundamental right guaranteed by Part III had been infringed, and that the orders had been validly made by competent authorities after the petitioners had been given a full hearing. The petitioners, through counsel, advanced four principal grounds of challenge. The first ground alleged that the Assistant Collector’s order on the bill of entry was based on a prior order of the Collector recorded in File No. S. 6‑140/55A, and that both the Assistant Collector and the Collector had passed their respective orders without hearing the petitioners, thereby breaching principles of natural justice. The second ground referred to an affidavit filed by the respondents in which they described the ‘Lyra’ brand crayons as coloured pencils rather than crayons. Counsel argued that this characterization was plainly erroneous; if the items were indeed pencils, then the licence issued on 4 August 1954 for importing crayons would not have been a valid licence for the goods in question. Nevertheless, the Customs authorities had accepted the licence as valid and proceeded on the mistaken premise that the ‘Lyra’ items were not crayons, an error described as manifestly erroneous. The third ground, which will be addressed subsequently, further elaborates the petitioners’ objections.

The petitioners asserted that the orders issued by the Customs authorities infringed their constitutional guarantees under clause (f) and clause (g) of article 19(1), which protect the right to hold property and the right to engage in trade. In addition, counsel for the petitioners highlighted that, in other cases, Customs had levied duty on comparable articles by classifying them under item 45(a) of the Indian Customs Tariff, thereby alleging that the petitioners had been subjected to disparate treatment. At first glance, these two submissions appear to raise issues of enforcement of fundamental rights, and the petitioners would accordingly be entitled, under article 32 of the Constitution, to approach the Supreme Court for redress. However, a detailed examination reveals that none of the twelve petitions truly invoke the enforcement of a fundamental right. The petitioners do not contest any provision of the Indian Tariff Act of 1934 or any provision of the Sea Customs Act of 1878. Their grievance is limited to the assessment made by the Customs authorities pursuant to those statutes. The statutory framework authorises the customs officers to determine the duty payable on imported goods, and the authorities exercised that power, whether correctly or incorrectly. The petitioners' statutory remedy was to appeal the assessment to the Central Board of Revenue, which dismissed the appeal. Unless the petitioners challenge the constitutionality of the duty‑imposing provisions or contend that the orders exceed the statutory jurisdiction of the Customs officials, the question of a breach of article 19(1) does not arise. When the legal provision under which a decision is made is valid and the decision is within the authority’s jurisdiction, an error of fact or merit does not constitute a violation of a fundamental right. In such circumstances, the appropriate recourse is an appeal, and where the appeal to the Board fails, a further remedy of revision before the Central Government remains available. The petitioners neither pursued the revision remedy nor disputed the validity of the statutory provisions, nor did they allege jurisdictional excess. Their sole contention is that the orders are erroneous on the merits, a position that does not give rise to a breach of article 19(f) or (g).

Regarding the petitioners’ claim of unequal treatment, the Court noted that the affidavit submitted by the respondents contains a specific paragraph that addresses this issue. The affidavit explains that the assessment of duty on the coloured pencils, which the petitioners described as crayons, had in some instances been made mistakenly, but that the error was corrected in later imports by applying the correct tariff item. It further states that other firms importing similar goods have been assessed under the same tariff provision. Consequently, the Court found that the affidavit’s explanation suffices to dispose of the argument that the petitioners were subjected to disparate treatment.

The affidavit of the respondents contains a paragraph that reads: “I say that the contention of the petitioner is untenable inasmuch as the levy of customs duly on the coloured pencils as crayons was done in some cases merely through oversight, and when that was found out, the mistake was corrected inasmuch as in subsequent imports the duty was levied under item 45 (4) of the Customs Tariff, and this has been regularly followed in cases of merchants who have imported these kinds of goods … I say that there are many other firms who have imported the coloured pencils and they have been assessed under item 45 (4) of the Customs Tariff, and therefore the petitioners are not entitled to make any grievance on that account.” In the Court’s view, this statement fully resolves the allegation of unequal treatment raised by the petitioners. It may be noted that before 1 March 1951, coloured and copying pencils were classified under the heading “stationery not otherwise specified” within item 45 (4) of the Indian Customs Tariff. The Indian Tariff (Amendment) Act, 1951 (Act XIII of 1951) introduced a new head, item 45 (a), which specifically dealt with “coloured and copying pencils”. At that time a protective ad valorem duty of 37 ⅓ per cent was imposed. The Indian Finance Act XIV of 1953 later raised that duty to 66 ⅔ per cent ad valorem. Subsequently, in October 1954, the Indian Tariff (Second Amendment) Act, 1954 altered the duty applicable under item 45 (4) for “coloured and copying pencils” to a revenue duty of “two annas for every length of 7 ½ inches or part thereof or 66 ⅔ per cent ad valorem, whichever is higher.” From the amendment of 1951 onward, when items 45 (4) were inserted into the First Schedule of the Indian Tariff Act, 1934 (XXXII of 1934), any difficulty that might have existed earlier in assessing duty on coloured pencils was effectively removed. The petitioners also relied on a letter dated 3 July 1954 in which the Assistant Collector of Customs indicated that “Lyra” brand crayons were classifiable under item 45 (a). That letter, however, expressly described the classification as provisional and subject to revision after examination of the goods at the time of importation. Moreover, a tentative classification made by an Assistant Collector does not bind the Collector, and therefore the petitioners cannot base a claim of estoppel upon it. In fairness to the counsel for the petitioners, it should be added that no such estoppel claim was actually raised before the Court. The petitioners’ counsel further referred to observations in Chapter 1 of the 1952 handbook “Import Trade Control”, which explained that the import policy is announced with reference to serial numbers in the Import Trade Control Schedule and that importers must determine the appropriate part and serial number for the goods they intend to import. Those observations relate to licensing policy and the determination of the correct authority for import licences, and, in the present dispute, they have no bearing on the question of duty assessment.

The handbook quoted by the petitioners explains that an importer must first determine under which part and serial number of the Import Trade Control (I.T.C.) Schedule the intended article falls. To assist importers, Appendix ‘X’ provides an alphabetical list of articles so that the I.T.C. classification of any specific item can be readily ascertained. The handbook further observes that, except in Part VI, each serial number in the I.T.C. Schedule is followed by the corresponding Customs classification taken from the First Schedule to the Indian Tariff Act, 1934. This cross‑reference is intended to help importers resolve doubtful cases by referring to a Customs classification with which they are already familiar through past import transactions. The commentary stresses that it is important for the importer to know the correct I.T.C. classification because only then can the importer identify the proper authority to which an application for an import licence should be addressed and can the importer evaluate, for himself, whether a licence is likely to be granted. The Court held that these observations relate solely to licensing policy and therefore have no bearing on the specific question before the Court, namely whether the “Lyra” brand crayons should be assessed under item 45(a) as stationery not otherwise specified or under item 45(4) as coloured pencils. The Court further found that the petitioners had not established any violation of their fundamental right under Article 19 or any unequal treatment by the Customs authorities. Consequently, on that short ground the petitioners’ applications were dismissed. Regarding the first two grounds raised by the petitioners, the Court observed that the petitioners had enjoyed a full hearing before two successive Collectors of Customs at Calcutta, and thus their claim of a breach of natural‑justice principles was without merit. According to the affidavit filed on behalf of the respondents, the petitioners became aware, between 19 January 1955 and 16 February 1955, that the Collector, through Customs officers, had assessed the goods under item 45(4). On 16 February 1955 the petitioners submitted a representation challenging the distinction between “crayons” and “coloured pencils.” The Collector considered this representation and granted the petitioners a personal hearing on 26 February 1955, after which the assessment order was confirmed. On 6 April 1953 the petitioners requested an interview with the successor to the previous Collector; they were again heard on 12 April 1955. Subsequently, on 26 April 1955 the petitioners were informed that the assessment order could not be revised and that their proper remedy lay in filing an appeal before the Central Board of Revenue. The petitioners pursued that appeal, which was also dismissed. In view of this full procedural history, the Court concluded that there was no violation of the principles of natural justice.

In this case the Court observed that, taking into account the facts and circumstances, it was groundless to assert that the principles of natural justice had been violated. The Court further explained that the allegation that the impugned orders were manifestly erroneous because crayons had been treated as coloured pencils could not be entertained on an application filed under Article 32 of the Constitution. This allegation did not pertain to the enforcement of any fundamental right, and it could not be resolved without first establishing the precise distinction between a coloured pencil and a crayon – a distinction that would require an inquiry into disputed facts and material evidence. Such an inquiry was identified as a matter for the constitutional authorities, and the Court remarked that it was not within its powers on a Section 32 application to embark on that investigation. Accordingly the Court concluded that none of the twelve applications presented any merit. All twelve applications were therefore dismissed with costs awarded to the respondents. Because the applications were heard together, a single hearing fee in favour of the respondents was ordered, to be paid proportionately by the petitioners in each case.