Judges: O. Chinnappa Reddy, A.P. Sen and E.S. Venkataramiah, JJ.

Facts:

There was a levy of customs duty on imported paper under the Indian Tariff Act, 1934, subject to certain applicable exemptions.

Challenge in these petitions were made to the validity of the imposition of import duty on newsprint imported from abroad under Section 12 of the Customs Act, 1962 read with Section 2 and Heading No. 48.01/21 Subheading No. (2) in the First Schedule to the Customs Tariff Act, 1975.

Challenge was also made to the levy of auxiliary duty under the Finance Act, 1981 on newsprint as modified by notifications issued under Section 25 of the Customs Act, 1962 with effect from March 1, 1981.

Issues:

(i) Do newspapers have immunity from taxation?

(ii) Are the impugned notifications issued under Section 25 of the Customs Act, 1962 beyond the reach of the Administrative Law?

(iii) Has there been proper exercise of power under Section 25(1) of the Customs Act, 1962?

(iv) Is the classification of newspapers made for the purpose of exemption violative of Article 14?

Laws:

Constitution of India - Article 14 - State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.

Constitution of India - Article 19 (1)(a) - Relates to freedom of speech and expression, subject to certain reasonable restrictions.

Constitution of India - Article 19 (1)(g) - Relates to freedom to practice any profession or to carry on any occupation, trade or business, subject to certain reasonable restrictions.

Customs Acts, 1962 - Section 25 - Power of Executive Government to grant exemptions from the levy of Customs duty.

Contentions:

Petitioners

(i) Levy of the import duty is directly proportional to crippling the freedom of speech and expression as it led to the increase in the price of newspapers, which ultimately affects their circulation.

(ii) It was reasonably expected of every newspaper to register an automatic growth of at least 5% in its circulation per year, owing to growth of population and literacy in the country, which got directly impeded by the increase in the price of newspapers.

(iii) Methodology adopted by the Customs Act, 1962 and the Customs Tariff Act, 1975 for computing the import duty rate exposed the newspaper publishers to Executive interference, as such notification issued under Section 25 of Customs Act is illegal.

(iv) There was no reason to impose customs duty on newsprint which had enjoyed total exemption till March 1, 1981. Classification of the newspapers into small medium and big newspapers for purposes of levying customs duty is violative of Article 14 of the Constitution.

(v) Abrupt increase in the price of newsprint subsequent to March 1, 1981 and the inflationary economic conditions which further contributed to higher cost of production, made it impossible for the industry to bear the duty any longer, which resultantly made the levy violative of Articles 19(1)(a) and 19(1)(g) of the Constitution.

(vi) Power of the Government to levy taxes of any kind on the newspaper establishment directly affects the freedom of press and would be contrary to the spirit of the Constitution.

Respondents

(i) The levy of duty was made in the public interest with an intention to augment the revenue of the Government. The Executive has to satisfy itself that there is some other corresponding public interest justifying any exemption from such levy. Sans these public interest, there is no power to exempt but to implement the mandate fixed by the Customs Tariff Act, 1975.

(ii) Classification of newspapers, into 'big, medium and small' for granting exemption was done in public interest giving importance to relevant considerations, which lacked any malafide. Therefore, levy of customs duty on import of newsprint is not violative of Article 19(1)(a) of Constitution.

(iii) The comfortable position of foreign exchange cannot be a bar to the imposition of import duty.

(iv) The duty imposed is an indirect tax, which would be borne ultimately by the purchaser of newspaper, therefore, petitioner could not feel aggrieved by it.

(v) Notification issued under Section 25 (1) of the Customs Act granting, modifying or withdrawing an exemption from duty being in the nature of a piece of subordinate legislation, its validity cannot be tested by the Court by applying the standards applicable to an administrative action.

(vi) Levy of customs duty on newsprint was not strictly a levy on newsprint as such since though customs duties were levied with reference to goods, the taxable event was the import of goods within the customs barrier and hence there could be no direct effect on the freedom of speech and expression by virtue of the levy of customs duty on newsprint.

Analysis:

Newspapers - Whether enjoys immunity from taxation

I. There is an intimate connection of newsprint with the freedom of the press, which finds its origin from freedom of speech and expression, and which is ultimately relatable to people's right to know.

II. The tests for determining the vires of any law taxing newsprint have to be different from the tests usually adopted for testing the vires of other taxing statutes.

III. In the case of ordinary taxing statutes, the laws may be questioned only if they are either openly confiscatory or a colorable device to confiscate. On the other hand, in the case of a tax on newsprint, it may be sufficient to show a distinct and noticeable burden-someness, clearly and directly attributable to the tax.

IV. It cannot be held that taxes cannot be levied on newspapers industry, however, such levy shall always be subject to judicial review in the light of the provisions of the Constitution.

Notifications issued under Section 25 of Customs Act - Whether beyond the reach of Administrative Law

I. In cases where the power vested in the Government is a power which has got to be exercised in the public interest, as in present case, the Court may require the Government to exercise that power in a reasonable way in accordance with the spirit of the Constitution.

II. The fact that a notification issued under Section 25(1) of the Customs Act is required to be laid before Parliament under Section 159 thereof does not make any substantial difference as regards the jurisdiction of the court to pronounce on its validity.

III. Notifications issued by the executive Government on March 1, 1981 and February' 28, 1982 under Section 25 of the Customs Act granted exemptions from payment of certain duty beyond what is mentioned in them. They were issued in substitution of earlier notifications which had granted total exemption. Such notifications have to be issued by the Government after taking into consideration all relevant factors which bear on the reasonableness of the levy on the newsprint.

IV. Government should strike a just and reasonable balance between the need for ensuring the right of people to freedom of speech and expression on the one hand and the need to impose social control on the business of publication of a newspaper on the other.

V. Any notification issued under a statute also being a 'law' as defined under Article 13(3)(a) of the Constitution, is liable to be struck down if it is contrary to any of the fundamental rights guaranteed under Part III of the Constitution.

Exercise of power under Section 25(1) of the Customs Act - Whether proper

I. While Parliament has imposed duties by enacting the Customs Act, 1962 and the Customs Tariff Act, 1975, the Executive Government is given wide power by Section 25 of the Customs Act to grant exemptions from the levy of Customs duty.

II. Government had not considered vital aspects before withdrawing the total exemption which was being enjoyed by newspaper industry till March 1, 1981 and imposing 15% duty on newsprint vide notifications issued under Section 25 of Customs Act.

III. Petitioners succeeded in showing a fall in circulation, but whether it is a direct consequence of the customs levy and the increase in price has not been duly established.

IV. Except the synchronizing of time there is nothing to indicate that the slight fall in circulation is directly due to the levy of customs duty.

V. On the other hand, the Government also has made no efforts to show the effect of the impact of the levy on the newspaper industry as a whole.

VI. All these years, the very exemption which they granted was an indication that the levy was likely to have a serious impact on the newspaper industry.

VII. Even now the exemption given to the small and medium newspapers shows that there is bound to be an impact.

VIII. It is not possible to come to the conclusion that the effect of the levy is indeed so burdensome as to affect the freedom of the press, at the same it is equally not possible to conclude that it will not be burdensome.

IX. There are factors indicating that the present levy is heavy and is perhaps heavy enough to affect circulation. There is good ground to direct the Central Government to reconsider the matter afresh.

Classification of newspapers for purpose of exemption from custom duty - Whether violative of Article 14 of Constitution

I. The object of exempting small newspapers from the payment of customs duty and levying 5% ad valorem (now Rs. 275/- per MT) on medium newspapers while levying full customs duty on big newspapers is to assist the small and medium newspapers in bringing down their cost of production.

II. Such papers do not command large advertisement revenue. Their area of circulation is limited and majority of them are in Indian languages catering to rural sector.

III. There is no sinister in the object nor can it be said that the classification has no nexus with the object sought to be achieved.

Conclusions:

(i) Government of India shall reconsider the entire question of levy of import duty or auxiliary duty payable on newsprint used for printing newspapers, periodicals etc, with effect from March 1, 1981.

(ii) Until such redetermination, the Government shall recover only Rs. 550 per MT on imported newsprint towards customs duty and auxiliary duty. It shall not insist upon payment of duty in accordance with the impugned notifications. The concessions extended to medium and small newspapers may however remain in force.

(iii) If, after such redetermination, it is found that any of the petitioners is liable to pay any deficit amount by way of duty, such deficit amount shall be paid by such petitioners.

(iv) If, after such redetermination it is found that any of the petitioners is entitled to any refund, such refund shall be made by the Government.

Important Precedents:

(i) Bennett Coleman and Company v. Union of India MANU/SC/0038/1972

(ii) Romesh Thappar v. State of Madras, MANU/SC/0006/1950