Fiscal liability can be deferred for importers

EXPERT EYE

A very interesting point of interpretation of fiscal statutes has been settled by the Supreme Court recently. Now the revenue authorities can no longer deny the importers exemptions under certain conditions.

In the case of Commissioner of Customs (Imports), Mumbai vs.Tullow India Operations Ltd. "� 2005(89) ELT 401 (SC), before the Supreme Court, the issue was whether the revenue authorities could deny an exemption subject to production of an essentiality certificate from a government organisation at the time of import of goods.

The government organisation took a long time to issue the certificate even though it was applied for in time. The revenue authorities not only charged the goods to higher duty at the time of the import but also did not refund the extra duty when the certificate was produced at a later stage when it was obtained.

The authorities interpreted the expression 'at the time of import' to mean that even when the certificate was produced later, the exemption could be denied. This amounts to denial of exemption due to delay on the part of another organisation. The Supreme Court found that the importer had complied with the substantive portion of the condition required to be fulfilled for the exemption to be available.

The revenue authorities took the stand that the fiscal liability could not be deferred. This legalistic stand to deny the exemption was disapproved by the Supreme Court on the ground that "the condition referred to in the exemption as regard time when such certificate is to be produced would mean those which were within the control and power of the importer. If it is not within the power and control of the importer and depends upon the acts of other public functionaries, non-compliance of such condition cannot be held to be a condition precedent, which would disable the importer from obtaining the benefit therefrom for all times to come".

The Supreme Court also rejected the plea of the authorities to quote a precedent from another judgement by the Tribunal in the case of Jindal Drilling and Industries Ltd Vs. Collector- 2001 (138)ELT 1335(T).

The reason is that in the Jindal case, the importer had not even applied for the certificate to the competent authority. So when the importer has applied but has not got it, he cannot be denied the exemption just because the competent authority does not issue the certificate in time.

On the other hand,there is another judgement of the Supreme Court, in the case of Commissioner of Central Excise vs. M.P.V. & Engg. Industries "�2003 (153) ELT 485, wherein the court has although was otherwise entitled to obtain the benefit of an exemption certificate, should not ordinarily be denied because of any administrative delay over which he had no say. This judgement is also in line with the judgement now given by the Supreme Court in the case of Tullow India.

The Supreme Court, in this case, clearly propounded the principle of interpretation of a fiscal statute that there is no universal law that fiscal liability cannot be deferred.

The court also observed that in a fiscal statute, when there is a provision for provisional assessment and provisional clearance subject to compliance of certain conditions, such conditions may be fulfilled at a later stage, namely at the stage of final assessment or clearance.

This interpretation reveals a truly helpful and duly liberal approach in Customs and in other fiscal laws. This would prevent executive aggrandisement of a highly legalistic approach on the part of the revenue authorities.

smukher2000@yahoo.com