INSURANCE COMPANY OF THE USSR (INGOSSTRAKH) LTD. VS. U. O. I.

( 1 ) THE petitioners are an insurance company incorporated under U. S. S. R. laws. The petitioners had insured the transaction in petition, namely, the export by the National Agricultural co-operative Marketing Federation of India Ltd. (NAFED) to VIO Export Khleb, an organisation of the U. S. S. R. Government, of HPS Kernels in bags. Between 1st and 21st March 1980 a part of the consignment was loaded at Bedibunder on the vessel n. v. "rorein rolland", 1754 metric tonnes being loaded in to Hatch No. 3. On 22nd March, 1980 the vessel sailed to Porbunder enroute to Odesa-a and the balance of the consignment was loaded there. On the same day a fire broke out in Hatch No. 3 and it was brought under control after some days by the use of carbon dioxide gas and sea water. The part of the consignment that was loaded in Hatch No. 3 was damaged. On 28th March 1980 permission was sought from the customs authorities to unload the damaged cargo because it was swelling and rotting within the vessel. Permission was granted and 1459 bags out of the consignment were unloaded. Dock labourers at Porbunder having gone on strike, the vessel was taken, with permission to bedibunder for further unloading, which was completed on 6th April, 1980. The petitioners, as insurers, paid over U. S. Dollars 21,07,520 to the buyers in the U. S. S. R. and received from them a letter of subrogation dated 23rd May 1980. On 9th May, 1980 an agreement was arrived at between the petitioners and the 4th respondents whereby, with permission, the 4th respondents agreed to purchase the damaged consignment for the sum of Rs. 44,50,000/ -. There was also a further agreement between the petitioners and the 4th respondents whereby it was agreed that the export duty thereon that would be refunded would be shared between them in the proportion of 60 to 40.

( 2 ) ON 1st November 1980 the petitioners filed with the Customs authorities, who are the respondents, an application for refund of such Customs duty in the sum of Rs. 26,62,187. 50. The petitioners were required by a notice dated 22nd May, 1981 to show cause why the claim for refund should not be rejected for the reasons that it was time-barred and that export had taken place. The petitioners replied and were given the opportunity of a personnal hearing. On 6th june, 1981 the 3rd respondent rejected the application on the grounds mentioned in the show cause notice. The petitioners preferred an appeal. The appeal was rejected on 26th April, 1982 only on the ground that the application for refund was barred by the provisions of Section 27 of the Customs Act since it was received after 6 months from the date of the payment of Customs duty.

( 3 ) THIS petition seeks the quashing of the appellate order and the refund of the sum of Rs. 26,62,187. 50 Ps.

( 4 ) THE first question is : when does an export take place, and it is settled by the judgment of a division Bench of this court sitting at Panaji, V. M. Salgaocar and Brothers v. Union of India, 1987 (30) E. L. T. 251. Having considered the provisions of the Customs Act, the Division Bench held that there was a vast difference between the concept of chargeability of Customs duty under section 12 and that of its assessment or quantification under Section 16. Section 12 was the charging section and thereunder Customs duty on exported goods was leviable only when the export was complete. An export was complete when the export goods i. e. the goods intended for export, left the territorial waters of India.

( 5 ) IT has been held that where a duty has been recovered which, in law, is not leviable, the recovery is without the authority of law. [see Shri Vallabh Glass Works Ltd. v. Union of India, 1984 (16) E. L. T. 171 (S. C.) = A. I. R. 1984 S. C. 971; Atul Products Ltd. v. Union of India, 1985 (22) E. L. T. 714 and International Electronics Mfg. Co. v. Union of India, 1986 (25) E. L. T. 631].

( 6 ) NOW, Customs duty upon the export of goods is leviable when the goods are exported, that is to say, when they leave Indian territorial waters. The machinery of the statute requires that it be collected before this point of time. It is paid and collected upon the assumption that the goods will be exported, i. e. , they will leave Indian territorial waters. If they do not, as here, Customs duty does not become leviable. The Customs duty that has paid and collected earlier is then held by the Customs authorities without authority of law. The principle of the judgments aforementioned, therefore, operates and this court, in exercise of the powers under Article 226, may order the refund of such Customs duty.

( 7 ) IT is urged that the courts power to order a refund in ancillary to the striking down of some order and that in the instant case the appellate order cannot be struck down because, so far as the customs authorities were concerned, they were bound by the provisions of Section 27 of the customs Act. The best answer to that is, I think, that Section 27 applies only where Customs duty has been collected and held with the authority of law, i. e. the Customs Act. Where as here, it is not, the provisions of Section 27 do not apply and the court may strike down the appellate order.

( 8 ) ACCORDINGLY, the petition is made absolute it terms of prayer (b), with these modifications : that the respondents shall be entitled to verify the amount of the Customs duty to be refunded and that they shall pay interest only at the rate of 12% per annum and only from 12th April 1983, when this petition was admitted, till payment or realisation.

( 9 ) NO order as to the costs.