ORDER
H.R. Syiem, Member (T)
1. A consignment of ammonium chloride fertilizer was imported by ship S.S. Green Bay and cleared under Bill of Entry GSI 587 dated 31-1-75 by the Food Corporation of India. Duty was paid, it is said, at 60% basic under I.C.T. Item 28 to expedite clearance. The Food Corporation filed a claim for refund of duty saying the fertilizer was exempted under Notification No. 115/73 but the Assistant Collector, by an order which bears two dates, 2-1-75 and 18-5-76, rejected it saying the notification exempted only diammonium phosphate and ammonium nitro-phosphate and not ammonium chloride. In September ’75, the Government of India gave an ad hoc exemption Order No. 404 dated 29-9 75 for the fertilizer imported by S.S. Green Bay. Armed with this, the Corporation filed an appeal to the Appellate Collector of Customs, Bombay, who, however, rejected it because he said the claim under the ad hoc order No. 404 of 29-9-75 was a new claim, the original claim being under Notification No. 115 and was therefore a shift in ground. The shift in ground constituted a fresh claim which would be time-barred. He felt that he was precluded from considering the appeal and so he rejected it vide his order No. S/49-812/76GS dated 29-1-77 (this order bears an inscription that it was despatched on 18-12-76, that means three weeks before it was written).
2. The Food Corporation has now appealed and we are to consider this appeal against the above order of the Appellate Collector. The main argument in the appeal is that there was no shift in the ground as held by the Appellate Collector because the initial claim was lodged with the Assistant Collector on 15-7-75 and the correct Notification under which this consignment was exempted from duty was intimated to him in their letter dated 21-11-75 which was in continuation of their original claim dated 15-7-75, and that both the dates were prior to rejection by the Assistant Collector. The appeal was heard on 17-1-84 during which the learned counsel for the appellants argued that the claim was genuine and ought to have been accepted. The exemption was an ad hoc exemption meant for that particular consignment which arrived by ship ‘S.S. Green Bay’. The counsel also argued that the time-limit should be taken as one year since this Tribunal had decided in some other cases that the Food Corporation was equivalent to Government, and therefore the Appellate Collector was mistaken in rejecting the claim for refund by holding the fresh claim on the ad hoc exemption No. 404 as time-barred. He also pleaded that the so-called shift of ground with which the Appellate Collector found fault with is not a valid reason for rejecting the claim because the Tribunal had held in a number of decisions that a shift in ground does not invalidate a claim. [At this point, on enquiry from the Bench, the learned counsel for the department said that he conceded that quoting a new notification would not invalidate a refund claim since such has been the decisions of the Tribunal]. So the ad hoc exemption No. 404 quoted at a later stage by the Food Corporation would not invalidate its claim originally made with the Assistant Collector. The learned counsel for the appellants requested that the case be remanded to the Appellate Collector to decide on the basis of the fresh notification as the goods are covered by ad hoc exemption No. 404 of 29-9-75.
3. The learned counsel for the department rose to say that though he conceded in accordance with the decisions of the Tribunal that a new notification quoted at a later stage would not invalidate a refund claim, he would like to show that the claim itself was invalid and cannot be covered by the ad hoc exemption notification.
First of all, the learned counsel said that the goods arrived and were cleared in January, 1975. The notification exempting the goods was issued in September, 1975. It may be true that the exemption specifically referred to the consignment but the fact remains that it was a notification issued long after the importation and therefore sought to cover an importation that had already been completed. Such a notification cannot have the effect that is sought to be given to it, i.e. a retrospective effect. Notifications of this kind must always have effect only from their date of issue and never from a date preceding their issue. It may be permissible for Parliament to make laws retrospectively but it is not permissible for the Government to legislate with such retroactivity. The notification furthermore had a condition that the goods had been used as fertilizers and a certificate was required to be produced within six months or such extended time as might be granted by the Collector of Customs. These conditions could not be fulfilled at the time of the importation because the notification was not in existence then and it is not possible for the conditions to be fulfilled later once the goods have been cleared. He, however, stated that the time-bar would not affect a refund claim that might be made under ad hoc notification 404. The learned counsel submitted that Sub-section 2 of Section 25 of the Customs Act, 1962 was made only for giving exemption and is not meant for remission of duty. The exemption, if extended now, would be a remission of duty and not an exemption of duty. He quoted decision in AIR 1963 S.C. 274 in which it is held that Article 265 was the source and basis for taxation. According to counsel this source of the power to tax does not confer on the Government the power to exempt with retrospective effect. The law framed for the purpose of collection of customs duty, i.e. Customs Act, 1962, makes no provision whereby the exemption granted by the Government can be given with retrospective effect.
The learned counsel quoted the case of Dr. Hari Vishnu Pophale and Ors. v. Union of India and Ors. in Civil Writ 1802/1979 decided on 16-4-80 by the High Court of Delhi. In that case although the Court held that the exemption order given under Section 25(2) of the Customs Act, 1962 was valid, an important fact was that the goods were still under Customs’ custody when the notification was issued. In this case before the Tribunal the goods had been cleared when the exemption was given. The Court had held that the rule making authority cannot make rule with retrospective effect. In 1978 E.L.T. J 375 the Supreme Court held that retrospective effect to any notification would be beyond the powers of the rule making authority. In 1 SCR 1981 627 the Supreme Court observed that a delegate cannot exercise the same power of the delegator unless there is special conferment therefor and that the State Government cannot, under the authority of the delegation, make retrospective rules. In 1978 TLR 2102 the learned counsel for the department said that the Kerala High Court said much the same thing. In AIR 1963 S.C. 274 the Supreme Court pronounced in a dissenting judgment, that the Government had no power under Section 12 of the Forward Contracts’ (Regulation) Act, 1952 to make bye-laws retrospectively. He also quoted AIR 1970 S.C. Vol. I page 385. Here the Supreme Court ruled that the person or authority exercising subordinate legislative functions cannot make a rule, regulation or bye-law which can operate with retrospective effect.
4. The cases quoted by the learned counsel for the department however do not really support his arguments. In AIR 1970 S.C. 385 the court dealt with a case when a notification ‘ under the Income-tax Act, 1961 investing a tehsildar with the power of a tax recovery officer can authorise him to act retrospectively. This was a statutory notification and required the tax recovery officer to act against rights of a citizen with a date prior to the notification conferring such powers. In AIR 1963 S.C. 274 the dissenting judgment which was quoted by the learned counsel for the department in support of his case was in respect of a bye-law framed by the Government under the Forward Contracts’ (Regulation) Act, 1952 assigning functions to the Forward Markets’ Commission. The dissenting judgment ended by saying that the Government had no power under Section 12 of the Act to make a bye-law assigning any function to the Commission. The majority decision however held that the section contemplated the making of a bye-law regulating the performance of contracts and termination of the same and this could obviously refer only to bye-law affecting rights under contracts which are subsisting on the day the action was taken. The Court held that Section 11 authorised the framing of a bye-law which would operate retrospectively in the sense that it affects rights of parties under subsisting contracts. The question decided upon by the Court in that case, therefore, was whether the provisions of the Act viz. the Forward Contracts’ (Regulation) Act, 1952 empowered the framing of a bye-law which would operate retrospectively. In 1 SCR 1981 627 the Supreme Court dealt with a question of whether the State Government, as the delegate could make retrospective rules when the legislature had not empowered it to do so. To make retrospective law the delegate required special conferment spelt out in express words of the delegation or by compelling implication. It ruled that Section 4(2) of the Andhra Pradesh Motor Vehicles (Taxation of Passengers and Goods) Act, 1954 did not make such conferment. It further ruled that even placing the rules on the Table of the legislature would not have the affect of validating the retroactivity. In 1978 E.L.T. (J 375) the Supreme Court decided a question of the definition of the word ‘hank’ made by a Notification of 16-2-63 which sought to amend the meaning of the word, so that the new meaning was deemed to take effect from August, ’62.
It needs to be noted clearly that in all the cases quoted above, the courts were dealing with rules or bye-laws made by the rule making authority or the delegate in such a manner that rights of citizens or the affected persons were adversely acted upon with retrospective effect. All the judgments dealt with legislation known as subordinate legislation i.e., rules, regulations, bye-laws made by a subordinate authority (other than the legislature which alone can make laws). There is not one judgment that says that an order of the kind issued by the Central Government in this case giving an exemption that would have retroactive impact on goods that have been imported and cleared several months before, as being also invalid by reason of its retroactivity. The learnad counsel for the department urged that in the Civil Writ 1802/1979 of the Delhi High Court the order of the Court releasing the goods giving effect to the ad hoc exemption of 17-8-79 issued under Section 25(2) took into account the fact that the goods were still in custody. But we find nothing in the text of the judgment that this factor weighed with the honourable court when it came to its decision. In fact, in that case the court held that the order of the Board in so far as it upheld the order of the Collector, was illegal and so set it aside. The court also observed that the Board was incompetent in law to go beyond the order of the Central Government passed under Section 25(2) and to limit its operation from the date of the order, viz. 17-8-79, prospectively. Another case quoted by the learned counsel for the department is 1978 TLR 2102. This is a case about a claim for refund of duty under Section 27(1). We are not clear of the relevance of this case. Another case quoted by the learned counsel for the department was 1983 E.L.T. 549 in which the Tribunal held that the Central Government had no power to grant exemptions with retrospective effect but this was a case in which there was no question of giving retrospective effect to a notification. It was a case of the appellant asking that an exemption notification No. 118/75-C.E. be given retrospective effect so that he would get its benefit. The Tribunal rejected this request.
5. To understand the discussion we should like to reproduce the Section 25 of the Customs Act, 1962 which reads as under :
“25(1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearence) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon.
(2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from the payment of duty, under circumstances of an exceptional nature to be stated in such order, any goods on which duty is leviable.”
It would be seen that whereas Section 25(1) contemplates notification in the Official Gazette, Sub-section (2) speaks of a “special order in each case” exempting goods from duty. In the Civil Writ . 1802/1979 the Delhi High Court observed “the considerations of retroactivity are not relevent for an order under Section 25(2) and the impugned order is not a retrospective in character”. The decision quoted by the learned counsel for the department all relate to legislation such as rules, regulations, notifications etc. They do not deal with an order which by its very nature appears to be more an executive fiat than a piece of legislation such as a notification under Sub-section (1) of Section 25 is, because of its general application. We cannot understand why an exemption that is so specific to the goods in question, as this one, cannot be given effect to simply because it acts on a past consignment. The exemption giving power knew quite well at the time that it issued the order that the goods had been cleared already. In exempting the ammonium chloride in question from payment of customs duty and auxiliary duty in excess of 5% ad valorem subject to certain conditions there is no doubt that the exemption giving power knew that it would only act retrospectively. It is all very well for the department to say that no retrospective effect should be given to the exemption, but in that case one wonders why the Department of Agriculture wrote this letter of February, 1975 and even more strongly, why the Ministry of Finance, issued the order when it knew the fertilizers had already been cleared. One cannot reconcile the objection of the learned counsel with the fact that the Government had acted and had issued the ad hoc exemption order. Perhaps he wants to suggest that the Government was unaware that it was doing something it did not have the power to do. If it did, then we are compelled to ask what was the object in issuing this exemption order when, as the learned Counsel holds, it cannot be implemented. We can see no satisfactory explanation and, in fact, there cannot be any other than that when the Government gave the ad hoc exemption, it knew that it could do so.
6. The ad hoc exemption in this case specifically identifies the consignment that it was meant to cover. We have seen that it was issued after the goods had been cleared. We think that the obvious and sensible step, therefore, is to… implement it just as it was issued because that evidently was the wish of the exemption giving power.
7. We direct that the exemption should be extended to the consignment in question and whatever duty had been recovered in excess of the exemption should be refunded within three months.