Customs must keep pace with technology

EXPERT EYE

It has sometimes happened that, with the advancement of technology, certain goods have been imported which have countenanced a rigid interpretation of import regulation and Customs tariff to block its entry or to deny it the due rate of duty.

The Supreme Court had to come down heavily to give a definitive ruling that technological progress cannot be stifled by an over-rigid interpretation of the import policy or the Customs tariff.

This was the case when miniaturised switches were imported for use in electronic hearing aids rather than conventional wafer switches.

The stand taken by the Customs was that the words "switches, miniaturised" as component parts of hearing aids should be understood to mean only those type of switches that were generally used at the time of publication of the policy for the relevant year, namely 1977.

The imported switches were not exactly known at the time the policy was published, but they were meant for making hearing aids.

The Supreme Court observed that the Customs had overlooked that industry was not static and that there was continuous technological progress therein. It was unreasonable on the part of Customs to give a static interpretation of the import policy or tariff schedules ignoring the rapid march of technology.

The Supreme Court, therefore, gave a ruling in this case of Collector of Customs vs Lekhraj Jessumal, 1996 (82) ELT 162 SC, in favour of technological progress and observed that import policy and Customs tariff must be interpreted keeping the technological progress in view.

The lessons, however, have not been learned by Customs. Even in recent times, the same over-rigid attitude was taken in respect of seamless flexible pipes, which connected the designated areas in high sea.

The designated areas that are used for drilling oil are notified as Indian territory for the purpose of Customs. Duty is payable on any good brought there.

However, if a continuous pipe connects two designated areas for the purpose of transporting drilled oil, nearly two-thirds of it remain in the non-designated area. The portion, which remains in the non-designated area remains out side India and, therefore, is not dutiable.

Earlier, the imports used to be of segments that would be joined at the border of non-designated area and designated area. Due to technological advance long-length, seamless pipes are manufactured and imported and there is no need of joining them at the high sea.

The Customs have now decided to treat the whole pipe as being in the designated area, since the pipe joined two designated areas. This view ignored the fact that the technological advance made it possible to have a long enough pipe to connect designated areas. It could not be said that one continuous pipe means that it is all within the designated area.

This point of view was appreciated by the tribunal and it has upheld the importer's contention that technological advance cannot be stifled by an over-rigid interpretation of Customs tariff. This was the judgment in the case of L&T vs Commissioner of Customs, 2004 (175) ELT 805.

So once again, it has been the triumph of technology. It would, however, have not been necessary to approach the tribunal, if the Customs had obeyed the dictum laid down by the Supreme Court as early as in1996.

smukher2000@yahoo.com