1. Import of whole grain oats without licence — Dispute over classification as fodder under open general licence or grain requiring licence — Proceedings under Sea Customs Act. (Para 2 , 3 )
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1962 Supreme(SC) 178
SUPREME COURT OF INDIA
19th April, 1962
B.P. SINHA, C.J.I., P.B. GAJENDRAGADKAR, K.N. WANCHOO, N. RAJAGOPALA AYYANGAR AND T.L. VENKATARAMA AYYAR, JJ.
Collector of Customs, Madras, Appellant
Versus
K Ganga Setty, Respondent.
Civil Appeal No. 588 of 1960.
Advocated appeared
Mr. H. N. Sanyal, Additional Solicitor General of India, (Dr. V. D. Mahajan and Mr. P.D. Menon. Advocates, with him), for Appellant; M/s. R. Ganapathy Iyer, M. S. K. Sastri and M. S. Narasimhan, Advocates, for Respondent.
Advocates:
H.N.SANYAL, M.S.K.Shastri, M.S.NARASIMHAN, P.P.Menon, R.Ganapathy Iyer, V.D.Mahajan
H.N.SANYAL, M.S.K.Shastri, M.S.NARASIMHAN, P.P.Menon, R.Ganapathy Iyer, V.D.Mahajan
Courts cannot interfere with the Customs Authorities' classification of goods unless the interpretation is perverse. If the authority's construction is rationally supportable, the court will not substitute its own view, even if an alternative interpretation appears more favorable to the subject.
Headnote:(A) Sea Customs Act - Sections 19 and 167(8) - Import and Export Control Act, 1947 - Section 3(2) - Specific Relief Act - Section 45 - Classification of imported goods - Jurisdiction of Court to interfere with the order of Customs Authorities - It is primarily for the Import Control authorities to determine the entry under which a commodity falls; the Court is competent to interfere only if the construction adopted is perverse, meaning no reasonable person could adopt it - If two constructions are reasonably possible and the one in favor of Revenue is adopted, the Court has no jurisdiction to interfere merely because the other interpretation appeals to the Court as the better one. (Para 7)
(B) Interpretation of Tariff Entries - Whether a commodity capable of being used as animal feed can be classified as "grain" - A particular species of grain cannot be excluded from the category of "grain" merely because it is capable of being used as cattle or horse feed - The fact that a grain can serve as animal feed does not make it "fodder" to the exclusion of its classification as grain. (Para 8)
Facts of the case:
An importer brought in whole grain oats without an import license. The authorities classified the goods as "grain" under the relevant item of the Import Trade Circular, which required a license, resulting in the confiscation of goods and the imposition of a fine. The importer contended that the oats were intended for horse feed and should therefore be classified as "fodder," which was covered by an open general license. The High Court had previously set aside the order of the authorities, holding that the goods were fodder.
Findings of Court:
The decision of the authorities to classify uncrushed oats as grain was rationally supportable and could not be characterized as perverse or mala fide. The specific entry in the circular also explicitly listed oats under the category of grain.
Issues: Whether the High Court had the jurisdiction to substitute its own interpretation of a tariff entry for that of the Customs Authorities and whether whole grain oats used as animal feed constitute "grain" or "fodder."
Ratio Decidendi: The court held that judicial review of tariff classification is limited to cases of perversity; if the authorities' interpretation is rationally supportable, the court cannot interfere. Furthermore, the inherent nature of a commodity as "grain" is not altered by its potential use as animal feed, and thus it remains classifiable as grain.
Result: Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Whether whole grain oats used as animal feed constitute fodder under open general licence or grain requiring a specific import licence. (Para 4 , 5 , 6 )
3. Classification by customs authorities is rationally supportable if not perverse; whole grain oats are inherently grain regardless of use as animal feed. (Para 1 , 7 , 8 , 9 , 10 )
4. Courts shall not interfere with customs classification unless the construction adopted is perverse, meaning no reasonable person could have adopted such an interpretation. (Para 7 )
5. Appeal allowed — Order of the Division Bench set aside — Application under Section 45 of the Specific Relief Act dismissed. (Para 11 )
6. When can a court interfere with the classification of goods by customs or import control authorities?
A court may interfere only if the authorities adopted a construction that no reasonable person could adopt, rendering the decision perverse. If two reasonable interpretations exist, the court cannot interfere even if the interpretation favoring the subject appears better. (Para 7 )
7. Does the fact that a grain is used as animal feed automatically classify it as fodder?
No. A grain is not excluded from the category of grain merely because it is capable of being used as cattle or horse feed, especially if it is also suitable for human consumption. (Para 8 )
8. How does a specific mention of a commodity in a tariff entry affect its classification?
A specific reference to a commodity (such as oats) within a general category (such as grain) in a tariff entry clarifies its classification, overriding general arguments about its use as fodder. (Para 9 )
Judgment
AYYANGAR, J. : The point involved in this appeal which comes before us on a certificate of fitness under Art. 133 (1) (c) granted by the High Court of Madras is a very short one and relates to the nature and extent of the jurisdiction possessed by the High Court in considering the validity of an order of the Customs Authorities interpreting the provisions of the entries in the Tariff Schedule as regards the imposition of duties.
2. The respondent imported from Australia a quantity of oats which was described in the indent, contract and shipping documents as "standard feed-oats". The commodity imported consisted of oats in whole grain. The question raised related to the proper classification of the goods imported under the Import Trade Control Schedules current during the period July to December 1952, when the consignment reached India. The controversy centered round the point whether the "feed-oats" fell within item 42 or within item 32 of the Circular. Item 42 ran :
"Fodder, bran and pollards - O.G.L. - Soft" i.e., this item was covered by an open general licence and so no special import licence was necessary for the import of these goods from a soft currency area, while as regards item 32 the entry ran:
"Grain, not otherwise specified, including broken grain but excluding flour-
(a) oats
(b) others -Ports -Nil-A.U." which meant that a licence was necessary for the importation of the goods specified in it which would be granted by the Joint Chief Controller of Imports or Exports at Calcutta and Bombay, if they were the ports of entry, and by the Deputy Chief Controller of Imports and Exports, Madras, if they were to be imported through Madras; "nil" that no quotas were specified limiting the quantity to be imported and that actual users (A.U.) could apply for the licence.
3. The respondent who carried on business in fodder under the name and style of Balakrishna Flour Mills placed an order with an Australian firm for the supply of whole grain "feed-oats", without obtaining any licence for the import. The goods arrived in Madras on August 1, 1952, and when the respondent attempted to clear the goods, the Customs Authorities insisted no the production of a licence before he would be permitted to do so. The Assistant Collector held that the goods imported fell within item 32 and as admittedly the respondent held no licence from the Deputy Chief Controller of Imports and Exports, Madras, covering the import, there had been a contravention of s. 19 of the SEA CUSTOMS ACT read with S. 3 (2) of the Import and Export Control Act 1947, and so proceeded to deal with the violation under S. 167 (8) of the SEA CUSTOMS ACT . He directed the confiscation of the goods and imposed as fine of Rs.5,000/- in lieu of confiscation, if the respondent desired to clear the goods. An appeal filed to the Collector of Customs was rejected and thereafter the respondent moved the High Court for the issue of a writ of mandamus under S. 45 of the Specific Relief Act.
4. In his affidavit in support of the application the respondent besides contending that oats in full-grain fell within the head fodder under item 42, set out earlier, because (1) he had imported them for being made available solely for feeding race-horses at Bangalore, (2) that in South India oats was not used as human food but only as feed for horses and (3) that in any event, he had been misled by an answer that he received from the Deputy Chief Controller of Imports, Madras, of whom he had made an enquiry as to whether feedoats could be imported under an open general licence under Serial No. 42 and had received an affirmative answer. The learned Single Judge who heard the application dismissed it on the ground that the order of the Customs Authorities classifying uncrushed feed-oats as grain and not as fodder could not be said to be either perverse or mala fide and that consequently the Court could not interfere with the decision of the authorities. An appeal was preferred there-from
