Imported Item Cant Be Assessed In Parts

THE Supreme Court has allowed the appeal of the Collector of Customs, Madras, against the challenge raised by Indian Organic Chemicals Ltd on the question of imposing additional duty on the import of a diesel engine set. The company had argued that the imported goods comprised a diesel engine and an alternator. It claimed that the additional duty under the Customs Tariff Act should have been charged separately on each of the two components of the set and the benefit of exemption notifications in this regard should have been given to it. It wanted refund of the duty which was paid based on this calculation.

 

However, the customs department assessed the set as a whole for additional duty and exemptions under Item 68 of the Tariff Act. The company appealed to the Collector of Customs without success.

However, on further appeal, the customs tribunal accepted its contention. It applied Section 19 of the Customs Act and came to the conclusion that the two main components of the diesel set _ the diesel engine and the generator _ should have been separately assessed to additional duty and the benefit of the applicable exemption notifications be given. The customs department appealed against this judgment of the tribunal to the Supreme Court.

The division bench consisting of Justice S P Bharucha and Justice Shivaraj Patil struck down this ruling as laying down the wrong principle. In the first place, said the Supreme Court judges, Section 19 of the Customs Act was inapplicable to the assessment of additional duty under the Customs Tariff Act. Section 19 applies to "duty" that is, "duty under the Customs Act", as is clear from Section 2(15) of the Customs Act. The method of determination of customs duty under that, where goods consist of articles liable to different rates of customs duty is not applicable for the purposes of assessment of additional duty under the Customs Tariff Act, the judgment emphasised.

What the company imported was the set, the judgment explained. That was what the invoice referred to and it gave the price for it.

"That the set comprised of a diesel engine and an alternator was of no consequence for the purposes of assessment of additional duty. There is no dispute that for the purposes of such assessment, tariff item 68 was applicable," the court concluded.