of Customs, Kolkatta Vs. M/S. Grand Prime Limited & Ors  Insc 281 (7 July 2003)
Shah & Arun Kumar Arun Kumar, J.
appeals are directed against the order of the Customs Excise & Gold
(Control) Appellate Tribunal (hereinafter referred to as the 'Tribunal') dated 20th November, 2000. By the impugned order the Tribunal
allowed re-export of the three consignments of tussah silk and one consignment
of silk fabric having a total value of Rs.45,85,291/-. The Tribunal further set
aside the penalties imposed on individuals by the Commissioner of Customs, Kolkatta.
The individuals had filed appeals before the Tribunal against the order of the
Commissioner of Customs and the Tribunal allowed the same. Hence these appeals
by the Department.
the facts are that M/s. Olympia Exports of New Delhi through its proprietor Shri
Mahesh Chowhan imported the goods in question from Hong Kong purportedly against an advance licence.
The goods in question fall within list of restricted items import whereof is
permitted subject to certain conditions. The importer had obtained an advance licence
in July, 1997. Against the said licence the importer had imported and cleared
five consignments of raw silk through the Kolkatta port free of duty subject to
the condition that the imported goods after conversion had to be re-exported.
was gathered by the officers of the Directorate of Revenue Intelligence, Kolkatta
to the effect that M/s.
Exports based in New
Delhi had imported
and cleared five consignments of raw silk against a fraudulently obtained
advance licence and had sold the said imported silk in the open market without
discharging the export obligation.
they had violated the provisions of the revenue exemption notification and the
export-import policy. Further intelligence was gathered to the effect that the
same importer had again imported two consignments of silk fabric and tussah
silk through Kolkatta port and the said consignments were awaiting clearance.
It appears that while the investigation by the Directorate of Revenue
Intelligence, Kolkatta was going on, the importer got a wind of it and
therefore it never turned up to get the goods under the aforesaid two
consignments released. According to the revenue the advance licence obtained by
the importer was forged. Summons under the provisions of the Customs Act, 1962
were repeatedly issued to M/s. Olympia Exports and Shri Mahesh Chowhan,
proprietor of M/s. Olympia Exports, New Delhi to appear before the Directorate
of Revenue Intelligence. The summons could not be served on either M/s. Olympia
Exports or Shri Mahesh Chowhan and they never appeared in response to the
summons. Summons were also issued to various other parties involved in the
previous transaction of import of five consignments which had been cleared
through customs. They appeared in response to the summons and their statements
were recorded. Ultimately a demand-cum-show cause notice under Section 124 of
the Customs Act, 1962 read with Section 28 of the said Act was issued on 14th May, 1999 to M/s. Olympia Exports, New Delhi, Shri Mahesh Chowhan and others. So
far as the consignment, subject matter of the present appeals is concerned, the
show cause notice called upon the noticees' to show cause why goods subject
matter of the two consignments, should not be confiscated under Section 111(d)
of the Customs Act, 1962 and why penalties should not be imposed. The importer
did not respond to the show cause notice. Instead M/s. Grand Prime Limited
respondent No.1 addressed a communication dated 27th May, 1999 to the Commissioner of Customs stating that they had
exported the goods subject matter of the two consignments. In the letter
respondent No.1 stated that it had failed to locate that exporter. It was
further stated that efforts were made to find an alternative purchaser for the
goods which it had failed to arrange. Request was made to the Commissioner to
grant permission to re-ship/re-export the goods comprising the said
consignments. An advocate named Shri Om Prakash Chowdhary of Kolkatta sent a
Power of Attorney purported to be executed in his favour by respondent No.1 to
the Commissioner of Customs, Kolkatta and purported to represent respondent
No.1 in the proceedings by virtue of the said Power of Attorney. It appears
that in view of the representation made on behalf of respondent No.1 a
supplementary show cause notice was issued to the said respondent and its
Director Shri Rajesh Kumar Khattar on 11th February, 2000. Vide order dated 1st May, 2000,
the Commissioner of Customs, Kolkatta confirmed confiscation of goods, duty and
the penalties proposed in the show cause notice. The Commissioner found that
the importer was guilty of misrepresentation of facts and falsification of
documents. The import was contrary to law and therefore the goods were liable
this stage, it is noted that respondent No.1 had filed a Writ Petition in the Kolkatta
High Court while the proceedings were still pending before the Commissioner of
Customs, Kolkatta. At the initial stage the High Court had passed an order
giving four months' time to the Commissioner of Customs to adjudicate upon the
show cause notice. However, the Writ Petition was disposed of on 5th July, 2000. By that time the Commissioner of
Customs had already passed an order in the adjudication proceedings arising out
of the show cause notice. The High Court noticed that the party had a right of
appeal against the said order. The Writ Petition was disposed of with the direction
CEGAT, Eastern Bench will proceed only on the point as to whether the
petitioner is the owner of the goods and the goods are entitled to be
appeal will be preferred by the petitioner within a period of seven days from
the date of communication of this order and if it is filed, it will be decided
by the CEGAT, Eastern Bench within a period of one month from the date of
filing of the appeal.
matter is disposed of accordingly.
order is passed as to costs." The Tribunal vide its order dated 20th
November, 2000 allowed the appeals solely basing its judgment so far as the
question of re-export of goods is concerned on Union of India versus Sampat Raj
Dugar and others [ (1992) 2 SCC 66]. Further without assigning any reasons at
all the Tribunal set aside the penalties imposed on the various parties by the
Commissioner of Customs. These appeals are directed against the said judgment
of the Tribunal.
learned Additional Solicitor General – Mr. Mukul Rohtagi appearing for the
appellant submitted that the Tribunal clearly misunderstood the order passed by
the Kolkatta High Court in as much as it considered that it had to dispose of
the appeal in terms of Dugar's case (supra). The High Court while disposing of
the Writ Petition filed by respondent No.1 never directed the Tribunal to
decide the case as per Dugar's case (supra). The operative part of the decision
of the High Court has already been reproduced hereinbefore and in our view it
cannot be inferred from the said decision that there is any direction to pass
an order in terms of Dugar's case. The learned Additional Solicitor General
then proceeded to distinguish the present case from Dugar's case. His basic
contention is that the present is a case of fraud while in Dugar's case it was
not so. Secondly, according to the learned counsel there is no valid import of
goods in the present case. Rather the import is contrary to law and Section
111(d) of the Customs Act, 1962 squarely applies. In this context, he further
submitted that there is no provision for re-export of goods in the Customs Act
and therefore there was no question of re-export being permitted.
pointed out that in Dugar's case because of the peculiar facts of the said case
re-export was permitted in equity. The present case being a case of fraud and
misrepresentation, equity had no place and therefore Dugar's case cannot be
treated as a precedent.
have already noticed the facts of the present case.
goods in question are in the restricted list under the Import-Export Policy for
the relevant period. The import of the goods in question is permitted only
against a licence.
is granted subject to the condition of re-export of goods. The importer had
failed to comply with the condition of re-export of finished or semi-finished
goods, qua, the imports already made under the same licence. When the
consignments in question were imported, the importer did not even turn up inspite
of notice for fear of action regarding the previous imports and likelihood of
action being taken regarding the current imports. No licence was produced and
no bill of entry was filed to complete the process of importation. This
rendered the import against the prohibition imposed regarding the import. As
such Section 111(d) of the Customs Act comes into play. It clearly empowers
confiscation of the goods. The action of the Department in confiscating the
goods was clearly in accordance with law.
to be found from the facts on record that respondent No.1 surfaced only after
the show cause notice had been issued. It put in appearance through an advocate
purportedly appointed as an Attorney. The actual party never came forward. This
gives rise to a suspicion that the importer and exporter were same or they were
acting in collusion. Respondent No.1 prayed for permission to re- export the
goods. In any case, the transaction leaves doubts in the mind about its
genuineness. It gives an impression that when the importer found itself to be
in troubled waters, the exporter was set up as a front to retrieve the situation.
also true that the Customs Act does not contain any provision regarding
re-export of goods. It gives power of confiscation of goods which are illegally
imported and for various other reasons enumerated in Section 111 of the Act.
the facts of the case, we have seen that the imported goods are in the list of
restricted goods. They could be imported against valid advance import licence
issued by the authorities. The licence against which the import took place in
the present case was found to contain forgery. This rendered the licence
invalid. As per conditions of licence the goods were meant for re-export and
they could not be sold in India. The
importer was found to have violated this condition of the licence in case of an
earlier import. Fearing action in case of present import, the importer did not
even come forward to clear the goods. No body presented a Bill of Entry or took
any other step to clear the goods. Thus the import was clearly contrary to law
being without a valid licence and in violation of condition/restrictions
imposed under the licence. Section 3(1) of the Imports and Exports (Control)
Act, 1947 empowers the Central Government to provide for prohibition,
restricting or otherwise controlling import and export of specified goods. Such
an import clearly attracts the provisions of Section 111 of the Customs Act and
the appellant was within its right to confiscate the goods in question.
power of confiscation of goods imported contrary to any prohibition or
restriction under Section 111(d), this court had occasion to observe in Sheikh Mohd.
Omer versus Collector of Customs, Calcutta and others [1970 (2) SCC 728 ] :
clause (d) of Section 111 says is that any goods which are imported or
attempted to be imported contrary to "any prohibition imposed by any law
for the time being in force in this country" is liable to be confiscated.
"Any prohibition" referred to in that section applies to every type
of "prohibition". That prohibition may be complete or partial. Any
restriction on import or export is to an extent a prohibition. The expression
"any prohibition" in Section 111(d) of the Customs Act, 1962 includes
because Section 3 of the Imports and Exports (Control) Act, 1947, uses three
different expressions "prohibiting", " restricting" or
"otherwise controlling", we cannot cut down the amplitude of the word
"any prohibition" in Section 111(d) of the act. "Any
prohibition" means every prohibition. In other words all types of
prohibitions. Restriction is one type of prohibition." On the question of
breach of conditions contained in the exemption notification by the importer,
this court held in Sheshank Sea Foods Pvt. Ltd., Karnataka versus Union of
India and others [(1996) 11 SCC 755 ] that :
communication of the Central Board of Excise and Customs dated 13.5.1969,
refers to the breach of the condition of a licence and suggests that it may not
be possible to take action under Section 111(o) in respect thereof. It is true
that the terms of the said exemption notification were made part of the
appellants' licences and, in that sense, a breach of the terms of the said
exemption notification is also a breach of the terms of the licence, entitling
the licensing authority to investigate. But the breach is not only of the terms
of licence, it is also a breach of the condition in the exemption notification
upon which the appellants obtained exemption from payment of customs duty and,
therefore, the terms of Section 111(o) enable the Customs authorities to
investigate." In this case the goods imported by the appellant were
exempted from customs duty subject to the condition that they would not be
sold, loaned, transferred or disposed of in any other manner. The appellants
had however disposed of the goods. It was observed that the customs authorities
had the power to take action under the provisions of Section 111(o).
case (supra) relied upon by the respondents, this court had permitted re-export
of goods in special circumstances on equitable grounds. The goods in that case
had been imported under a valid licence but had not been cleared from customs.
This court was concerned with the question whether import of the goods was
contrary to law and whether the goods were liable to confiscation under the
Customs Act. After considering clauses (d) and (o) of Section 111 of the
Customs Act, this court took the view that the said clauses were not attracted
in the facts of the case and therefore the power to confiscate goods could not
be exercised. It was in this background that the court also considered the
question of passing of property in goods in favour of the importer and
ultimately the foreign exporter was permitted to re-export the goods.
points of distinction between the present case and Dugar's case (supra) are
that the importer did not disappear in that case. Rather it appeared before the
Customs Authorities and claimed the right to take delivery of goods.
importer in Dugar's case participated in adjudication proceedings before the
Customs Authorities and during the course of the proceedings the exporter
appeared on its own and pleaded that the goods be not confiscated as title in
the goods had not passed. In Dugar's case, there was a valid import licence
while in the present case it is not so. There is forgery on the licence which
rendered the licence invalid.
the import was without a licence. This was prohibited. In Dugar's case this
court had held that none of the clauses of Section 111 of the Customs Act were
attracted, the import being under a licence. The import was legal. In the
present case, the import is without a valid licence and is clearly in violation
of Section 111 (d) and (o) of the Customs Act. This is a clear distinction
between Dugar's case and the present case. Therefore, in our view Dugar's case
can be of no help to the respondent No.1.
learned senior counsel for respondent No.1 – Shri Rajeev Dhawan had argued that
the exporter continued to be the owner of the goods as the property in goods
had not passed. The importer had not retired the document of title to goods
which were sent through the bank. Therefore, it was submitted that the exporter
had title to the goods and was entitled to re-export the goods. In our view,
this argument has no merit so far as the facts of the present case are
concerned. The present is a case of illegal import and provisions of Section
111 (d) and (o) of the Customs Act clearly apply. The goods are liable to
confiscation. The considerations which are relevant under the sale of Goods Act
cannot be applied in the context of present facts.
support of his argument that the property in goods had not passed, Mr. Dhawan,
learned senior counsel for respondent No.1, relied on Garden Silk Mills Ltd.
versus Union of India [ 1999 (113)E.L.T. 358 (S.C.) ]. On the basis of this
judgment, it was argued that the importation of goods had not been completed.
In that case, the goods had not crossed the customs barrier and had not become
part of mass of goods in India. Hence, this judgment has no
relevance so far as the present case is concerned. In the present case,
importation of goods was complete. Further, the present is a case where the
appellant is invoking its power to confiscate the goods and we are called upon
to decide whether appellant is entitled to exercise power under Section 111 of
the Customs Act to confiscate the goods.
been held by this Court in M.J. Exports Limited and another versus the CEGAT,
Bombay [ 1993 (Suppl.)1 SCC 169 ] that export of goods contrary to any
prohibition imposed under the law for the time being in force will render the
goods liable to confiscation. The same principle applies to illegal import. The
Import-Export Policy, 1988-91 permitted issuance of Open General Licence for
import of life saving goods. Life saving equipment was imported from Germany under the OGL after obtaining
customs clearance without payment of customs duty. It was re-packed and sought
to be exported to the USSR under a contract. It was held that
object of permitting import of life saving goods being that the goods may be
available for use in the country, re-export thereof was prohibited by necessary
implication by or under the OGL. Such goods being prohibited within the meaning
of Section 2(33), re-export thereof rendered them liable to confiscation under
Section 113(d) and penalty under Section 114 of Customs Act.
result of the above discussion is that import of the consignments in question
being contrary to law, the goods were liable to confiscation under Section 111
of the Customs Act. The order of confiscation of goods passed by the
Commissioner of Customs is held to be in accordance with law. We are unable to
agree with the view taken by the Tribunal in permitting re-export of the goods.
Further, the Tribunal in its impugned order has waived the penalties imposed by
the Commissioner on respondents 3 to 7. This part of the order of the Tribunal
is without any reasons. The Tribunal has not considered the evidence against
these persons which lead the Commissioner to impose the penalties. Nothing has
been said in the order to justify waiver of the penalties. Therefore, that part
of the order of the Tribunal also can not be sustained. Accordingly, the
impugned order of the Customs Excise and Gold (Control) Appellate Tribunal
dated 20th November,
2000 is set aside and
the order of the Commissioner of Customs, Kolkatta dated 1st May, 2000 is hereby restored.
appeals are thus allowed with costs.