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Goods Exempted from Customs Duty

 15-Apr-2025

Transasia Bio-Medicals Ltd. v. Union of India 

“The goods imported, even though exempted from basic customs duty, may still be subject to levy of additional duty under the respective enactments and they would be so subject unless and until they are specifically exempted by the competent authority in exercise of the powers vested under those respective enactments from such additional duty.” 

Chief Justice K.R. Shriram and Justice Mohammed Shaffiq 

Source: Madras High Court 

Why in News? 

Recently, the bench of Chief Justice K.R. Shriram and Justice Mohammed Shaffiq held that exemption from basic customs duty does not automatically extend to additional duties unless specifically exempted under the respective enactments. 

  • The Madras High Court held this in the matter of Transasia Bio-Medicals Ltd. v. Union of India (2025). 

What was the Background of Transasia Bio-Medicals Ltd. v. Union of India (2025) Case? 

  • Transasia Bio-Medicals Ltd., represented by Ashok Suthar (General Manager-Taxations & Legal), imported a consignment of Hemato Analyser with standard accessories and filed bills of entry. 
  • The Deputy Commissioner of Customs (Group-5B) assessed the bills of entry and demanded additional duty at 4% in terms of Notification No.19/2005-Cus dated 01.03.2005. 
  • The additional duty was demanded on the grounds that as per Notification No.19/2005-Cus, the goods covered under exemption Notification No.24/2005-Cus are liable to pay additional duty at the rate of 4%. 
  • The goods imported fell under Customs Tariff heading 9027 80, which is listed in the Customs Exemption Notification No.24/2005-Cus, and the tariff rate for this product was designated as "free" under the Customs Tariff Act, 1975. 
  • Notification No.19/2005 was issued under Sub-section (5) of Section 3 of the Customs Tariff Act, 1975, while Notification No.24/2005 was issued under Sub-section (1) of Section 25 of the Customs Act, 1962. 
  • The petitioner challenged the validity of Notification No.24/2005-Cus, contending that when the Customs Tariff designates imported goods as "free" of duty, there is no need for exemption under Section 25 of the Customs Act. 
  • The petitioner further argued that if Notification No.24/2005 is invalid, then the reference to that notification in Notification No.19/2005 would also be ineffective, meaning the imported goods would not be liable for the 4% additional duty. 
  • The petitioner filed writ petitions under Article 226 of the Constitution of India, 1950 (COI) seeking a declaration that Notification No.24/2005-Cus is ultra vires the provisions of Section 25 of the Customs Act, 1962. 
  • The petitioner also sought a writ of Certiorari to quash the assessments made in the bills of entry Nos.896356 dated 21.10.2005 and 940189 dated 05.01.2006 that levied 4% additional duty under Notification No.19/2005-Cus.

What were the Court’s Observations?

  • The Madras High Court observed that both the Customs Act and the Customs Tariff Act are independent of each other, and one duty can be levied without the other, as supported by the decision in Colgate Palmolive (India) Limited v. Commissioner of Customs, Patna. 
  • The Court noted that Section 3(1) of the Customs Tariff Act provides for levy of additional duty, which is in addition to the customs duty leviable under Section 12 of the Customs Act and Section 2 of the Customs Tariff Act. 
  • The Court held that even if the duty leviable under the Customs Act is stated to be "free," additional duty can still be levied under the Customs Tariff Act because the charging section for additional duty is Section 3 of the Customs Tariff Act and not Section 12 of the Customs Act. 
  • The Court emphasized that the notification does not say 4% of the customs duty leviable on the goods imported (in which case 4% of "free" would have been "nil") but rather states that the identified goods when imported shall be liable to an additional duty at 4% ad valorem. 
  • The Court observed that goods imported, even though exempted from basic customs duty, may still be subject to levy of additional duty under respective enactments unless specifically exempted by the competent authority exercising powers under those enactments. 
  • The Court referenced the Century Floor Mills Ltd. v. Union of India case, noting that under Section 25 of the Customs Act, the Government has authority to grant exemption from duty conditionally or in absolute terms, making imports either free of liability or subject to conditions as deemed appropriate. 

What are the Legal Provisions Refereed to? 

Section 12 of the Customs Act, 1962: 

  • Section 12 deals with Dutiable goods. 
  • Section 12(1) states that except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, on goods imported into, or exported from, India. 
  • Section 12(2) provides that the provisions of sub-section (1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government." 

Section 25 of the Customs Act, 1962: 

  • This Section empowers the Central Government to exempt goods from customs duty when satisfied it is necessary in the public interest. 

Mercantile Law

Earlier Application under Section 42 of the Arbitration Act

 15-Apr-2025

Hariram & Ors v. National Highway Authority of India 

“It is apposite to state that a writ petition cannot be construed as an "earlier application" under Section 42 of the Arbitration Act to decide jurisdiction as the very nature of a writ petition is to challenge an administrative action or a legal decision, not to initiate arbitration proceedings.” 

Justice Manoj Kumar Ohri 

Source: Delhi High Court 

Why in News? 

A bench of Justice Manoj Kumar Ohri held that writ petition filed cannot be construed as earlier application under Section 42 of the Arbitration and Conciliation Act, 1996. 

  • The Delhi High Court held this in the case of Hariram & Ors v. National Highway Authority of India (2025). 

What was the Background of Hariram & Ors v. National Highway Authority of India (2025) Case?   

  • The petitioners filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (A & C Act), challenging an award dated 16th October 2020, passed by the District Collector, Division Meerut, District Baghpat, Uttar Pradesh. 
  • The Central Government had issued a notification on July 28, 2006, to acquire land from Baghpat Division to Baghpat District, Uttar Pradesh under Section 3A (1) of the National Highways Act. 
  • Some portions of land were compulsorily acquired, while for other portions, possession was taken without acquisition via a notification dated 8th February 2007. 
  • The petitioners initially approached the Delhi High Court through a Writ Petition, seeking compensation for their acquired land. 
  • The Delhi High Court disposed of the writ petition on 27th November 2018, directing the competent authority to disburse compensation to the petitioners within six months. 
  • The petitioners received the original land compensation as per the market value of 2006 through an order dated 27th May 2019, passed by the District Collector, Bhagpat, U.P. 
  • Unsatisfied with the compensation amount, the petitioners filed suit before the District Collector-Division Meerut under Sections 3G (5) and 3G (7) of the National Highway Act, seeking enhanced compensation. 
  • The suit was dismissed via the impugned judgment dated 16th October 2020. 
  • The respondents raised a preliminary objection regarding the Delhi High Court's territorial jurisdiction to entertain the petition under Section 34 of the Arbitration Act. 
  • The Delhi High Court dismissed the petition for lack of territorial jurisdiction, ruling that the competent court under whose jurisdiction Baghpat falls would have jurisdiction to entertain the petition. 

What were the Court’s Observations? 

  • The Court defined what constitutes a "Court" under the Arbitration and Conciliation Act, 1996, as the principal Civil Court having jurisdiction to decide the subject matter of arbitration if it had been the subject matter of a suit. 
  • The Court determined that territorial jurisdiction in arbitration matters lies with the court within whose jurisdiction the subject matter of the suit is situated, as well as the courts within whose jurisdiction the arbitration is conducted. 
  • The Court established that the designation of an arbitration seat is equivalent to an exclusive jurisdiction clause, following the precedents set in BALCO v. Kaiser Aluminium Technical Services Inc. and other cases. 
  • The Court ruled that a writ petition cannot be construed as an "earlier application" under Section 42 of the Arbitration Act for the purpose of determining jurisdiction. 
  • The Court clarified that Section 42 of the Arbitration Act applies only to applications made under Part I of the Act if they are made to a court as defined in the Act. 
  • The Court confirmed that the subject matter of arbitration should not be equated with the subject matter of a suit, as the former relates to proceedings under Part I of the Arbitration Act. 
  • The Court held that the purpose of Section 2(1)(e) is to identify courts with supervisory control over arbitration proceedings, which refers to the court of the seat of arbitration. 
  • The Court found that the legislature intentionally gave jurisdiction to two courts: the court where the cause of action arose and the court where arbitration takes place. 
  • The Court ruled that since Baghpat was the agreed seat of arbitration, the land in question was located outside Delhi, and the impugned award was passed in Baghpat, UP, the Delhi High Court lacked territorial jurisdiction in this case. 
  • The Court concluded that the competent court under whose jurisdiction Baghpat falls has the jurisdiction to entertain a petition under Section 34 of the Arbitration and Conciliation Act, 1996. 

What is Section 42 of the A & C Act? 

About: 

  • The Section envisions a situation where, if an application under Part I of the A&C Act has already been made to a Court, that same Court is entrusted with the jurisdiction to deal with all subsequent applications arising out of that agreement and arbitral proceedings and other Courts are barred from entertaining such applications. 
  • Section 42 is meant to avoid conflicts in the jurisdiction of courts by placing the supervisory jurisdiction over all arbitral proceedings in connection with the arbitration in one court exclusively.

Constituents:

  • Section 42 of the Arbitration and Conciliation Act, 1996 commences with a non obstante clause ("Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force"), which renders it overriding in effect and gives it primacy over any other conflicting provisions. 
  • The provision establishes exclusive jurisdictional competence in the court where the first application under Part I of the Act has been filed with respect to an arbitration agreement. 
  • Such court of first instance shall retain exclusive jurisdiction over all subsequent applications arising out of the same arbitration agreement and the proceedings thereto. 
  • The provision operates as a complete ouster of jurisdiction of all other courts, once jurisdiction has been properly invoked in accordance with the section. 
  • For the application of Section 42, the initial application must qualify as one made "under this Part" (Part I of the Act) and must be presented before a "Court" as defined under Section 2(1)(e) of the Act.