KARUPPIAH AND OTHERS v. THE DIRECTOR-GENERAL OF CUSTOMS

030-SLLR-SLLR-1998-V-2-KARUPPIAH-AND-OTHERS-v.-THE-DIRECTOR-GENERAL-OF-CUSTOMS.pdf


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KARUPPIAH AND OTHERS
v.
THE DIRECTOR-GENERAL OF CUSTOMS
SUPREME COURTFERNANDO, J.,
WADUGODAPITIYA, J. ANDBANDARANAYAKE, J.
SC APPEALS NOS. 108/96AND 109/96
CA APPLICATIONS NOS. 387/92«
AND 403/92 oJULY 15, 1998.
Writ of Mandamus – Customs Ordinance – Surcharge on customs duty – Orderunder s. 10A of the Ordinance – Applicability of the surcharge to goods comingwithin the preview of the surcharge in consequence of a waiver of customs duty.
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Karuppiah and Others v. The Director-General
of Customs (Fernando, J.)
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The appellants imported two consignments of yeast in June and December, 1990,respectively. The rate of customs duty for yeast was 35% of which 30% had beenwaived by the respondent, the Director-General of Customs in 1988. Consequently,both consignments were cleared on payment of 5% duty. In March, 1989, theMinister of Finance acting under s. 10A of the Customs Ordinance made an Order(A4) levying a surcharge of 5% “on all imported goods (other than five specifieditems) on which the rate of customs duty is five per centum" with effect from15.3.89 for a period of two years. Long after the consignments in question hadbeen released the respondent decided that the surcharge was payable on themas well and demanded payment. S. 10A reads:
“In addition to any duties leviable under this Ordinance, the Minister may,with the approval of the Cabinet of Ministers, by Order published in the Gazette,levy a surcharge on the customs duty payable on such imported goods asare specified in such order, if he deems it expedient in the interest of thenational economy to do so“.
It was argued for the respondent that the Order A4 should be read asif it read “goods on which the rate of customs duty payable is five per centum".
Held :
The Order A4 referred to the goods on which the rate of duty (duly prescribedby statute or subordinate legislation) was 5%. The language used in the Orderdoes not suggest that it was the Minister's intention to recover the surcharge onlyin respect of goods on which the duty actually paid was 5%.
Per Fernando, J.
“While 'payable' would, in certain contexts have a different meaning to'leviable', in s. 10A 'payable' does not mean anything more, or less, than‘leviable'. . . The customs duties which are 'leviable' (or 'levied') by the Stateare thus identicle – in rate and amount – to what is ‘payable* (or 'paid') bythe importer".
APPEAL from the judgment of the Court of Appeal.
S. Sivarasa PC with C. Vivekananthan for the appellants in both appeals.
K. Sripavan DSG for the respondent in both appeals.
Cur. adv. vult.
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September 25, 1998
>
FERNANDO, J. I
I have had the advantage of reading the draft judgment ofBandaranayake, J. in which the relevant facts, statutory provisions,
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and submissions have been set out. While agreeing with herconclusion and order, I wish to state my reasons more fully on thequestion of interpretation which arises.
The facts are not in dispute. The first appeal relates to twoconsignments of yeast imported in July and August, 1990, and thesecond to two consignments imported in June and December, 1990.The rate of customs duty on yeast according to the Sri Lanka CustomsImport Tariff Guide in 1987 was 35%, and that was the same rateset out in Gazette No. 56417 of 30.6.89. By letter dated 25.5.88 theDirector of Fiscal Policy (of the Ministry of Finance) authorized therespondent, the Director-General of Customs, to grant a partial waiverof duty (of between 5% and 30%) on yeast. That was what bothcounsel termed an "administrative arrangement”; it was not sanctionedeither by section 19 of the Customs Ordinance, or by any otherstatutory provision which was brought to our notice; and the appealswere argued on the assumption that such waiver was lawful. Accord-ingly, the respondent granted a 30% waiver, and duty was recoveredat 5% on the consignments imported by the appellants.
Section 10A of the Customs Ordinance provides;
"In addition to any duties leviable under this Ordinance, theMinister may, with the approval of the Cabinet of Ministers, byOrder published in the Gazette, levy a surcharge on the customsduty payable on such imported goods as are specified in suchOrder, at such rates and for such periods as are specified in suchOrder, if he deems it expedient in the interest of the nationaleconomy to do so."
In March, 1989, acting under that provision, the Minister of Financehad made an Order (A4) levying a surcharge of 5% "on all importedgoods (other than five specified items) on which the rate of customsduty is five per centum", with effect from 15.3.89 for a period of twoyears. Long after the consignments in question had been cleared,the respondent decided that the surcharge wa§ payable on them aswell, and demanded payment – threatening that, otherwise, he wouldrefuse to pass future consignments of other goods imported by theappellants.
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The question is whether yeast fell within the category of "importedgoods on which the rate of customs duty is five per centum", withinthe meaning of the Order A4.
There are several reasons why I cannot accept Mr. Sripavan'sinterpretation of the Order A4.
First, section 10A required the Minister to specify the importedgoods on which he wished to impose the surcharge. He could havespecified them individually, laboriously describing each and every itemwhich he had in mind, together with its Customs Tariff number. Instead,he described the entire class of goods collectively, ie goods (subjectto five exceptions) "on which the rate of customs duty is five percentum".That, in my view, referred to the goods on which the rate of duty(duly prescribed by statute or subordinate legislation) was 5%. Thelanguage used in the Order does not suggest that it was the Minister’sintention to recover the surcharge only in respect of goods on whichthe duty actually paid was 5%. Perhaps he could have done so, butin that event he should have said so plainly. At all material times,the rate of customs duty on yeast was 35%.
Second, Mr. Sripavan tried to get over that difficulty, by arguingthat "payable" in section 10A of the Customs Ordinance meanssomething different to “leviable". He argued that whatever may be thestatutory rate of duty "leviable" on imported goods, what was "payable"by the importer could be different; in the present case, it was thereduced rate of 5% applicable after the waiver. Therefore, he con-tended, since section 10A authorised the Minister to impose a sur-charge on the customs duty "payable", his order must be interpretedwith the word "payable" interpolated; as if it read "goods on whichthe rate of customs duty payable is five percentum".
While “payable" would, in some contexts, have a different meaningto "leviable", in section 10A "payable" does not mean anything more,or less, than “leviable". Those two expressions refer to one and thesame concept, but frorg two different points of view: that of the stateand that of the importer. Correlative to the State's pqwer to imposeor levy customs duties is the importer's liability to pay those duties.The customs duties which are "leviable" (or “levied") by the state arethus identical – in rate and amount – to what is "payable" (or "paid")by the importer. Indeed, that is implicit in section 10, which refers
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to the “several duties of customs", set forth in the schedule, which“shall be levied and paid “ upon all goods imported into or exportedfrom Sri Lanka; the schedule refers to a preferential rate and a generalrate, and draws no distinction between rates to be “levied" and ratesto be “paid". What is levied, and what has to be paid, are thereforeone and the same.
Finally, to allow such a distinction to be made would permit anunacceptable degree of uncertainty, and even speculation, as to therates and amounts “payable". While in this case we are concernedwith low rates (5%) of duty and surcharge, the same principles mustgovern a surcharge of, say, 50% on goods for which the rate of dutywas, say, 35%. Looking at the relevant statutes and the publishedsubordinate legislation, how would a prospective importer know whathe would be required to pay upon importation? And even if he knewof the "administrative arrangement", how would he know whether ornot the Director-General of Customs would choose to exercise hisdiscretion? If that officer did not, it would be 35% duty and 50%surcharge; and if he did, it would be 5% duty and no surcharge. Fromthe point of view of the state, section 10A empowers the Ministerto make an order for the purpose of increasing revenue, "in the interestof the national economy". He can do so only with the approval ofthe Cabinet, and his order has also to be placed before Parliament.On the day the order A4 came into force, if the question had beenasked, "Does it apply to yeast?”, the answer would have been in thenegative – because the rate of duty on yeast was then 35%. If thesubsequent waiver of duty by the respondent made the order applicableto yeast, that was a result which the order did not contemplate. Inthe absence of express provision authorising such a result, I do notthink that the applicability of the order A4 – despite Cabinet andParliamentary approval – can be made to depend on the decision(not sanctioned by any statutory provision) of the Director-Generalof customs to grant or to refuse a waiver. I
I therefore agree that in each case the judgment of the Court ofAppeal be set aside, and that Mandamus do issue to the respondentdirecting him tp accept and pass bills of entry correctly framed bythe appellants under section 47 of the Customs Ordinance in respectof goods imported by the appellants without requiring them firstto frame and pass additional bills of entry, and/or to pay a surchargeof 5%, in respect of the aforesaid consignments of yeast imported
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by them (in July and August, 1990, and in June and December, 1990,respectively). In each case, the respondent will pay the appellantsa sum of Rs. 20,000 as costs in both courts.
WADUGODAPITIYA, J. – I agree.
BANDARANAYAKE, J.
When SC (Appeal) No. 108/96 was taken up for hearing the counselfor petitioners and respondent in SC (Appeal) No. 109/96 informedus that the subject matter in both the cases are similar and thatthey have no objection to both matters being taken up for hearingtogether. Accordingly both appeals were so heard.
The 1st and 2nd petitioners are husband and wife and carry onbusiness in partnership dealing with the import of foodstuffs and rawmaterials for the hotel and bakery trade under the name, style andfirm of S. P. Shahul Hameed and Brothers. They are importers ofyeast, which, for the purpose of customs duty, was classified as naturalyeast (active or inactive) in the customs tariff. The general rate ofduty payable for natural yeast was 35% per kg (A1). In or about Marchor April, 1988, a waiver of duty between 5% and 35% per kg. onyeast was granted by the Director of Policy Planning and Revenueof the Ministry of Finance and Planning. According to the petitioners,all the importers of yeast, claimed this concession and submitted theirentries to the office of the Director, Fiscal Policy and Revenue settingout the rate of duty at 35%, whereupon, the Director, Fiscal Policyand Revenue in a letter addressed to the respondent, authorised thewaiver of 30% of the duty payable. The customs authorities accord-ingly noted the waiver of 30% in the Bill of Entry and duly collectedthe balance 5% duty on yeast (A2).
Thereafter by letter dated 25.05.1988, the Director, Fiscal Policyand Revenue of the Ministry of Finance and Planning authorised thePrincipal Collector of Customs himself to grant a partial waiver of dutybetween 5% and 35% per kg of yeast until further notice (A3).
By order made under section 10A of the Customs Ordinance andpublished in the Government Gazette Extraordinary No. 549/13 of15.03.1989, the Minister of Finance, imposed a levy on all importedgoods (other than certain exempted goods) on which the rate of
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customs duty was 5%, a surcharge of percentage points on such ratesof duty with effect from midnight of 15/16th March, 1989, for a periodof 2 years (A4). Thereupon, the Director-General of Customs issuedto all officers of the Customs a circular dated 15.03.1989 incorporatingthe above order (A5).
According to the petitioners after the publication of the order markedA4 and the issue of the circular marked A5:
natural yeast (active or inactive) was again classified in Govern-ment Gazette No. 564/7 of 30.06.1989 under Tariff item No. 21.02with the same general import rate of duty of 35% per kg (A6).
upon framing the Bills of Entry at 35% by the petitioners andother importers of yeast such being the rate of duty leviableaccording to the said classification, the customs recovered fromthe petitioners and others 5% duty being the balance duty payableafter granting a waiver and the petitioners and other importersof natural yeast were not required to pay the surcharge of 5%.
However, from February, 1991, one month prior to the expirationof the period of validity of the order marked A4, the customs authoritiesdemanded that a surcharge of 5% should be paid on future importsof natural yeast. The petitioners submitted that notwithstanding theprotests made by the petitioners and other importers of yeast, theywere required to pay the surcharge of 5% on the yeast imported bythem.
In October, 1991, the Deputy Collector of Customs, by his letterdated 21.10.1991 stating that the petitioners had failed to pay theadditional 5% surcharge on Red Star Dry Yeast imported on 16.08.1990,called upon the petitioners to pass an additional entry for the surcharge(the duty short paid) within two weeks of that date (A7). Also by hisletter dated 21.10.1991, the Deputy Collector of Customs, stating thatthe petitioners have failed to pay the surcharge 5% duty on Red StarBakery Dry Yeast imported on 30.07.1990 called upon the petitionersto pass an additional entry for the duty short paid within two weeksof that date (A7A). Thereafter by his letters dated 31.10.1991 (A7B),12.11.1991 (A7C), 14.01.1992 (A7D), 21.02.1992 (A7E) and 21.02.1992(A7F), the Deputy Collector of Customs required the petitioners to paythe said surcharge of 5% duty on yeast imported and cleared from
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the customs warehouses by the petitioners before February, 1991 andstated that in the event of failure to pay the same, action would betaken under the provisions of the Customs Ordinance.
The petitioners, by their letter dated 30.11.1991 to the respondentprotested against the said additional surcharge (A8).
Consequent to this letter, the respondent sent a letter dated05.02.1992 (A9) addressed to the petitioners stating that the Treasuryhas directed that the surcharge of 5% would apply when the dutyrate is reduced to 5% through a partial waiver of duty. The petitionerssubmit that this letter is in general terms and no specific mention ismade to the case of import of yeast. The petitioners and otherimporters of the yeast on which the surcharge of 5% was demandedsent several letters to the authorities concerned and the respondentthereupon forwarded two letters, both dated 30.04.1992, to thepetitioners stating that they were final reminders and that if anadditional entry is not passed for duty short period within 2 weeksfrom date of those letters, he would be compelled to refuse to passgoods consigned to the petitioners (A10 and A11) under section 18(3) of the Customs Ordinance. The petitioners invoked the jurisdictionof the Court of Appeal by way of an application for a Writ ofMandamus on the respondent to accept and pass Bills of Entrycorrectly framed by the petitioners without stipulating and enforcingthat additional entries should be framed and passed and the surchargeon goods referred to in the letters marked A10 and A11 should bepaid. The Court of Appeal refused to grant the Writ of Mandamuson the respondents. The petitioners appealed to the Supreme Court.Special leave to appeal was allowed on the following question:
Did the surcharge imposed by A4 apply to importation of yeastin respect of which the customs rate of duty was 35%?
Learned President's Counsel, for the petitioners submitted that thesurcharge is applicable only to goods carrying, an import duty of 5%.His position was that> the surcharge of 5% is not applicable to thecommodity of yeast as the correct duty applicable ^cording to BTMNo. 21.06(1) (A1) is 35% with a partial and special waiver of 30%which the respondent was authorized to grant (A3). The petitionerswere granted this special waiver for each consignment when papersfor each such consignment were submitted to the respondent, for that
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purpose. The position of learned President's Counsel for the peti-tioners was that the duty levied for yeast is 35% and not 5% in sofar as the interpretation of the circular A5 was concerned. He furtersubmitted that even after the publication of the order A4 and the issueof the circular A5, natural yeast (active or inactive) was again classifiedin Government Gazette No. 564/7 of 30.06.1989 (A6) under tariff itemNo. 21.02 with the same general import rate duty of 35% per kg.
The position of learned Deputy Solicitor-General for respondentwas that Part II of the Customs Ordinance, deals with ‘levying ofcustoms duties' and section 10 of the Customs Ordinance contem-plates the manner in which duties shall be levied and paid upon allgoods, wares and merchandise imported into and exported from SriLanka. Learned DSG submitted that section 10A empowered theMinister to levy a surcharge on the customs duty payable on suchimported goods as are specified in such order and since A4 was madeunder section 10A, the Minister imposed a surcharge of 5% on goodswhere the customs duty payable is 5 percentum.
Learned DSG further submitted that the Customs Ordinance dealswith 2 types of situations. One is categorised as duties 'leviable ongoods' and other is the duty actually payable on 'imported goods'.His position is that the order made under the Revenue ProtectionAct, No. 19 of 1962 (A6) levies customs duty at the rate of 35%on natural yeast and therefore the duty leviable on yeast is 35%;the duty actually payable on the said yeast after the waiver is 5%thereby attracting a surcharge of 5% as evidenced by A4.
I am unable to agree with the submission of the learned DeputySolicitor-General for the following reasons. The Government notifica-tion dated 15.03.1989 (A4) stated as follows:
The Customs Ordinance (Chapter 235)
Order under section 10A
By virtue of the powers vested in me und®r section 10A of theCustoms Ordinance (Chapter 235) as amended by Act No. 83 of 1988,I, Dingiri Banda Wijetunga, Minister of Finance, with the approval ofthe Cabinet of Ministers, do by this order levy on all imported goodsother than –
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Unground Rock Phosphate
Ground Rock Phosphate
Cement Clinker
Pharmaceuticals Products
Fertilisers
Tariff Heading No. 25 10A (i)
Tariff Heading No. 25 10B (i)
Tariff Heading No. 25 23 (ii)
Tariff Heading Nos. 30.01,30.02and 30.03
Tariff Heading Nos. 31.01,31.0231.03, 31.04 and 31.05
on which the rate of customs duty is five percentum, a surchargeof five percentage points on such rates of duty with effect from midnightof 15th/16th March, 1989, for a period of two years.
According to the Government notification dated 30.06.1989 (A6),the import duty on yeast (active or inactive) at the relevant timewas 35%.
The Director, Fiscal Policy and Revenue of the Ministry of Financeand Planning by his letter dated 25.05.1988 (A3) had authorised thePrincipal Collector of Customs to grant a partial waiver of duty onimport of yeast until further orders. Based on this authorisation, a 30%duty waiver was granted and 5% duty was collected from thepetitioners on the importation of yeast.
The circular on ’levy of a surcharge on import duty' dated 15thMarch, 1989 (A5) states that the Minister of Finance has issued anorder to levy a surcharge of five percentage points on all importedgoods having an import duty rate of five percent other than thefollowing:
unground rock phosphate;
ground rock phosphate;
cement clinker;
pharmaceutical products;
fertilisers.
According to the Sff Lanka Customs Import Tariff Guide, 1987 (A1)(subsequently amended as HS Code 21.02 (10) (A2)?the rate of dutyfor natural yeasts (active or inactive) was 35%. By the letter dated25.05.1988 (A3), the Director/Fiscal Policy and Revenue authorisedthe Principal Collector of Customs to grant a partial waiver of dutyto yeast importers until further orders were given. This special waiver
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was granted to the importers for each consignment when papers foreach such consignment were submitted to the respondent for thatpurpose. The Gazette notification (A4) and the issue of the circular(A5) on levy of a surcharge on import duty were dated 15.03.1989.Three months later on 30.06.1989, natural yeast (active or inactive)was again classified in Government Gazette No. 564/7 (A6) undertariff item No. 21.02 with the same general rate of duty of 35%per kg.
On a plain reading, it is clear that the intention of the Gazettenotification A4 and the circular A5 was to levy a surcharge of'5 percentage points on all imported goods having an import duty rateof five percent'. In construing the meaning of ambiguous words orwords which are capable of giving two interpretations, N. S. Bindraon Interpretation of Statutes, made the following observation:
An authority to impose a tax or to levy fees cannot be deducedfrom provisions of doubtful import and when the words used ina statute are capable of two interpretations, one in favour of thetaxing authority and the other in favour of the subject, the latterinterpretation must hold the field. The reason for these rules isthat it is opposed to the well-recognised conceptions governing aprogressive state of society to permit statutory bodies to assumeby inference from the words of an enactment the authority to imposetaxes or to levy fees, as nothing is more liable to abuse than suchsupposed authority (Mewa Ram v. Mattra Municipal Board, LR 1939All 770 : AIR 1939 All 466, 471 (FB) (taxes on stands for motorcars, lorries and hackney carriages); Central India, etc., Co., Ltd.v. Municipal Committee, Wardha AIR 1958 SC 341, 344). Hence,if there be any doubt or if there be two alternative interpretationspossible, taxing statute must be interpreted in favour of theassessee and against the revenue authority (p. 792).
Accordingly in my view, the 5% surcharge that should be leviedon imported goods under the notification A4 will not be applicableto the importation of yeast.*
4>
For the aforesaid reasons, in each case the judgment of the Courtof Appeal is set aside and I direct that Mandamus be issued to therespondent directing him to accept and pass Bills of Entry correctlyframed by the petitioners under section 47 of the Customs Ordinance
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Puttalam and Others
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in respect of goods imported by the petitioner, without stipulating andenforcing that additional entries should first be framed and passedand the surcharge on goods referred to in A13 and A14 should bepaid.
I make order that in each case the respondent will pay theappellants a sum of Rs. 20,000 as costs in both Courts.
Appeals allowed.
Order made directing Writs of Mandamus to issue.