New Delhi: It is indeed a rare instance of the Supreme Court, which has been facing severe criticism in recent times for uncritically accepting the Centre’s claims in the cases before it, having ruled decisively against the Centre. But the Centre’s legal setback in the apex court, it would appear, is on a very trivial issue: whether a notification could be said to take effect from the fraction of the day when it is precisely uploaded or from the beginning of the day.
The terrorist attack at Pulwama, Jammu and Kashmir, on February 14 last year, led to the then Narendra Modi government adopting ostensibly strong measures against Pakistan, to demonstrate its determination to strike back against India’s perceived adversary. While the dramatic Balakot airstrike helped the then Modi government recover from its falling electoral fortunes ahead of the 2019 Lok Sabha elections and return to power with a thumping majority in the Lok Sabha, a lesser-known fact was its notification under Section 8A of the Customs Tariff Act, 1975 on February 16, 2019.
The notification introduced a tariff entry by which all goods originating in or exported from Pakistan were subjected to an enhanced customs duty of 200% irrespective of the fact that some of the products had hitherto been exempt from customs duty. The precise time at which the notification was uploaded on the e-Gazette was 20:46:58 hours.
Before this notification, India and Pakistan, both being SAARC countries, had agreed that duty was to be levied on the imports from Pakistan at concessional rates, in those cases where imports were exigible to any duty at all.
Customs authorities at the land customs station at the Attari border sought to enforce the enhanced rate of duty on importers who had already presented bills of entry for home consumption before the enhanced rate was notified in the e-Gazette. The customs authorities refused to release the goods which were assessed earlier and reassessed them by levying revised duty at 200% and IGST at 28%, enhancing the duty from Rs 73,342 to Rs 8,10,952 in one case.
Their action led to a challenge before the Punjab and Haryana high court. The consignments of import covered a diverse range of goods, ranging from dry dates to cement.
On August 26 last year, a division bench of the high court allowed a batch of writ petitions. The high court held that since the importers, who had imported goods from Pakistan, had presented their bills of entry and completed the process of “self-assessment” before the notification enhancing the rate of duty to 200% was issued and uploaded, the enhanced rate of duty was not attracted.
The high court rejected the Centre’s contention that the relevant date for determining the rate of duty was the date of the presentation of the bill of entry. As the amended rate of duty came into force on February 16, 2019, the importers were liable to pay duty on the basis of the amended rate, the Centre had submitted.
The high court found that the bills of entry were presented on February 16, 2019, before the issuance of notification 5/2019. The filling of the bill of entry and the entry of the vehicle were fulfilled before the publication of notification 5/2019. The absence of customs’ clearance had no bearing on the rate applicable; the notification 5/2019 having been released after working hours, it would apply from the next day as held in the decision of the Supreme Court in Union of India v Param Industries Limited, decided in 2016. More important, the high court held that a notification under Section 8A of the Customs Tariff Act, 1975 cannot apply retrospectively.
The high court ordered the Union of India to release goods within seven days on the payment of duty ‘as declared and assessed’ without applying the notification enhancing the rate of duty on goods originating in Pakistan.
The Centre appealed against the high court’s decision in the Supreme Court.
A three-judge bench of the Supreme Court, on Wednesday, agreed with the high court, and dismissed the Centre’s appeal. While Justices D.Y. Chandrachud and Indu Malhotra delivered a joint judgment, Justice K.M. Joseph authored a separate but concurring judgment.
With the change in the manner of publishing gazette notifications from analog to digital, the precise time when the gazette is published in the electronic mode assumes significance. Such notifications, akin to the exercise of delegated legislative power, cannot operate retrospectively, unless authorised by statute, the judgment authored by Justice Chandrachud held.
In the era of the electronic publication of gazette notifications and electronic filing of bills of entry, the revised rate of import duty under the Notification 5/2019 applies to bills of entry presented for home consumption after the notification was uploaded in the e-Gazette at 20:46:58 hours on February 16, 2019, Justice Chandrachud added.
A notification issued by the government pursuant to the conferment of statutory power is distinct from an act of the legislature; administrative notifications, even when they are issued in pursuance of an enabling statutory framework, are subject to the statute, he reasoned.
In empowering the Central government to exercise power under Section 8A of the Customs Tariff Act, parliament has not either expressly or by necessary implication indicated that a notification once issued will have force and effect anterior in time. A notification enhancing the rate of duty under Section 8A has prospective effect, the bench ruled.
A rule framed by the delegate of the legislature does not have retrospective effect unless the statutory provision under which it is framed allows retrospectively either by the use of specific words to that effect or by necessary implication, the bench suggested.
The bench relied on the following precedents to support its conclusion:
In Regional Transport Officer, Chittoor v Associated Transport Madras (P), Justice V.R. Krishna Iyer held that the fact that the rules had been framed in pursuance of a resolution passed by the legislature or that they have to be placed on the table of the legislative body would not lead to an inference that the legislature had authorised the framing of subordinate legislation with retrospective effect.
In Federation of Indian Minerals Industries v Union of India, Justice Madan B. Lokur observed that the power to frame subordinate legislation is not retrospective unless it is authorised expressly or by necessary implication by the parent statute.
The Centre contended before the Supreme Court that the e-Gazette notification would have effect from the expiry of the previous day. Thus though it was issued late in the evening on February 16, 2019, since the previous day, February 15, 2019 expired at midnight, the notification must be treated as born and alive from the first tick of time past the midnight of February 15, 2019, the Centre argued.
The Centre relied on Section 15 of the Customs Act, which it claimed does not allude to the time of the day, but only refers to the day. Therefore, the Centre argued that the rate in force within the meaning of Section 15 from the midnight of February 15, 2019 was the rate fixed under the notification in respect of the goods governed by the same.
Justice Joseph, in his separate judgment, rejected this contention after an elaborate survey of the case law on the subject. He noted that after the notification was issued late in the evening, the system did not accept further electronic declaration of Bills of Entry as it was contemplated that such Bills of Entry would attract the higher duty.
The notification, Justice Joseph notes, came late in the evening as a bolt from the blue. He disagreed with the Centre’s view that by virtue of Section 5(3) of the General Clauses Act, the notification must be treated as effective from the point of time immediately after mid night on February 15/16 February, 2019. Justice Joseph’s answer is that the notification is neither a Central law, nor a regulation, as mentioned in Section 5(3).
According to Justice Joseph, the principle which has evolved over a period of time is that the law frowns upon determining a day with reference to its fractions. The counsel for the respondents, P.S. Narasimha had submitted that the notification would come into operation with reference to the point of time of the day when it was issued.
Distinguishing a law made by parliament and a notification, Justice Joseph reasoned that the former is taken as known to the public and mere assent of the president would suffice. Publication in the case of delegated legislation before it becomes effective, he suggested, is based on a rationale. Therefore, he held that the notification – a case of delegated legislation – must be treated as having come into force not before its publication. The interpretation based on time of publication is in harmony with a view that accords respect for vested rights, he reasoned. Completed self-assessments, therefore, cannot be reopened by virtue of the notification, he ruled.
But the question whether the notification could be said to have taken effect from the time it was uploaded, that is, 20:46:58 on February 16, 2019 or if fractions of the day are to be excluded, from February 17, 2019 when it began, remains unclear. Justice Joseph, while agreeing with the view that fractions of the day should be excluded, also seemed to support the view of the other two judges that the notification came into force after its publication, that is, uploading. But all the three agree on the point that it could not have applied before 20:46:58 on February 16, 2019, and therefore, the Centre’s appeal must fail.