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Wipro Ltd. v. Assistant Collector of Customs & Ors.

Civil Appeal · Neutral citation not assigned (Civil Appeal Nos. 9766-9775 of 2003)Decided 16 Apr 2015
Civil Appeal Nos. 9766-9775 of 2003
Justice A.K. Sikri · Justice Rohinton Fali Nariman

Background

Wipro Ltd., a manufacturer of computer systems and peripherals, imported components and software and was assessed customs duty under proviso (II-i) to Rule 9(2) of the Customs Valuation Rules, 1988: a 1990 amendment that let customs authorities add a flat notional 1% of the F.O.B. value of imported goods as "loading, unloading and handling charges," regardless of the actual charges incurred. In Wipro's own case this notional charge (about Rs. 15,214.69) vastly exceeded the actual handling charge actually paid (about Rs. 65.40), inflating the duty payable roughly 230 times over. Wipro's challenge to the validity of this proviso as exceeding the rule-making power under the Customs Act and violating Articles 14 and 19(1)(g) had been rejected by the Madras High Court, leading to these appeals.

Decision Breakdown

The Supreme Court held that delegated rule-making power to "carry out the purposes of the Act" cannot be used to create new substantive rights, obligations, or disabilities that the parent statute itself did not contemplate, and that the Customs Act's valuation provisions (Section 14) intended charges to be added to value based on actual, ascertainable figures wherever possible. Since the impugned proviso imposed a flat notional 1% charge even where the actual loading/unloading/handling charges were known and ascertainable, the Court found it unsustainable and bad in law in its existing form. Rather than striking it down entirely, the Court "read down" the proviso so that the 1% notional charge would apply only when the actual charges were not ascertainable; the High Court's judgment upholding the unqualified proviso was set aside and the appeals allowed, with no order as to costs.

Lesson Learnt

Subordinate rules made under a statute cannot be used to impose obligations harsher than what the parent law actually permits; a rule authorizing a "notional" or presumed charge should be read to apply only where the real, actual figure genuinely cannot be determined, not as a substitute even when the true figure is known.

Official source (sci.gov.in)View Judgment (PDF)

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