Union of India & Ors, Vs. Security
and Finance (P) Ltd.  INSC 245 (6 October 1975)
CITATION: 1975 AIR 2288 1976 SCR (2) 87 1976
SCC (1) 166
Import controls-Power to determine the head
or Entry under which any particular commodity falls under sections 3(2) and 4
of the Import and Export (Control) Act (1947) read with section 167 (entry 8)
of the Sea Customs Act (Act VIII) 1878.
Sea Customs Act (Act VIII) -Sections 20, 167,
183 & 184-whether an appropriate order under section 183 precludes the
authorities from levying duty under section 20- Interpretation of two penal
provisions of the import laws and powers of the authorities
The respondent company imported auto cycle
parts under the guise of motor vehicle parts, for which only he had a valid
license under the Import laws. In respect of certain consignments of imports
from U.K the customs authorities by a single order dt. 14-11-1955 passed the
(i) acting under section 167(8) of the
Customs Act it gave an option to the respondent to pay fine in lieu of
confiscation of the goods under section 182 and (ii) acting under sections 183
and 20 of the Customs Act to pay the differential duty between auto parts and
the motor parts.
The respondent challenged this order before
the High Court on the ground that once the power under section 183 has been
exercised the authorities had no further-power to levy the differential duty.
The High Court while quashing the order imposing penalty in lieu of
confiscation directed payment of the import duty ordinarily livable for the
auto cycle pedals imported. Against this view of the limitation on the powers
of the Collector, the Union came by way of special leave, while allowing the
appeal the Court,
HELD: (1) It is primarily for the Import
Control Authority to determine the head or entry under which any particular
commodity falls. Of course if a construction adopted by the authority regarding
the concerned entry were per verse, or grossly irrational, then the Court could
or would undoubtedly interfere. [88 D].
"Ganga Setty's case, A.I.R. 1963 S.C.
(ii) The scheme of the Sea Customs Act
reveals that Import/export duty is an obligation/cast by section 20 of the Act.
It is a tax, not a penalty; it is an innocent levy once the eligible event
occurs: it is not a punitive import for a contravention of the law.
Confiscation, penalty and fine provided for under ss. 167 (Item 8) and 183 are
of the species of punishment for violation of the scheme of prohibition and
control [89 G].
(iii) Two legal consequences followed the
importation of pedals, uncovered by any license viz. (1) the importation
attracted duty which any importer licit or illicit had to pay the moment
customs barrier was crossed and (ii) the commission of the offence of importing
pedals without a licence trapping the respondent in the coils of S. 167, entry
8 inviting the jurisdiction of the authorities to exercise their powers under
ss. 182 or 183. [89 H, 90 A].
(iv) The order dual in character, although
clubbed together in a single document is valid and it does not preclude the
authorities levying duty under section 20, since obligation under section 20 is
independent of the liability u/s 183. Non-felicitous and inept expressions used
in the order are perhaps apt to mislaid, but the intendment is clear that what
was done, was not confiscation, but giving an option to pay a quantified fine
in a places of confiscation The order was a composite one, and is quite legal.
[90 D, 91 B-D].
7-L 1276SCI/75 88 Collector of customs v. H.
S. Mehra A.I.R. 1964 Mad.
504: Shewpujanrai Indrasanrai Ltd. v. The
Collector of Customs,  S.C.R. 821 referred to
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 897 of 1968.
Appeal by Special Leave from the Judgment
& order dated the 24th July, 1967 of the Delhi High Court in L.P.A. No. 54
G. L. Sanghi and Girish Chandra for the
S. S. Javali (Amicas Cariae) for the
The Judgment of the Court was delivered by KRISHNA
IYER, J. The respondent imported Auto Cycle Pedals under the guise of motor
vehicle parts for which he had secured the relevant licence. These two articles
are different from the point of view or the law controlling imports. As laid
down in Ganga Setty's case(1) by the Court, it is primarily for the Import
Control Authority to determine the head or entry under which any particular
commodity falls. Or course, if a construction adopted by the authority
regarding the concerned entry were perverse, or grossly irrational, then the
court could and would undoubtedly interfere. In the present case the High Court
has held that the view of the Customs officials could not be considered
perverse and has declined to set aside the impugned order on that score.
Even at this stage it is appropriate to quote
the order under challenge which runs:
"M/s. The Security and Finance Ltd.,
Delhi imported from U.K. the above-mentioned goods for which they did not
possess a valid Import licence issued under Serial No. 301/Pt.IV of Import
Trade Control Schedule. The importation was therefore considered as
unauthorised. The importers were therefore in this Custom Memo No. S24C
1276/55A dated 30-9-55 called upon to show cause why the goods should not be
confiscated and penal action take under s. 167(8) Sea Customs Act read with
Section 3(2) of the Import & Exports (Control) Act. In reply to the said
show cause Memo, the Clearing Agents of the importers produced a licence for
Motor Vehicles parts, and claimed release of the goods against the said
licence. They further stated that similar consignment has been released in the
past against similar licence. Furthermore, no public Notice has been issued to
the effect that Auto Cycle Pedals will not be allowed clearance against Motor
Vehicle Parts licence. The arguments so advanced are not accept able. The
importers did no, avail of the personal hearing offered to them in the said
show cause memo.
ORDER The importation of the above goods
without proper licence is prohibited under sections 3(2) and 4 of the Import
& Export (Control) Act of 1947 and Notification issued thereunder. I
accordingly confiscate the goods (1) A.I.R. 1863 S.C. 1319 89 under section
167(8) Sea Customs Act. In lieu of confiscation I gave an option under section
183 ibid to the importers to clear the goods on payment of a fine of Rs. 22,600/-
(rupees twenty two thousand six hundred only).
Customs duty and other charges as leviable on
the goods will have to be paid in addition before these could be cleared out of
... Dated 14-11-55. Sd/ Dy. Collector of
Customs" Even so, the Court quashed the latter limit of the order under
challenge which had imposed penalty in lieu of confiscation and, on top or it,
directed payment of the import duty ordinarily leviable for the auto cycle
The only ground which led to this fatal
consequence was that the authorities, acting under s 183 of the Sea Customs
Act, 1878 (Act VIII of 1878) (for short, the Act), had no further power to
direct the importer-petitioner i.e., the respondent, to pay excess duty which
represents the difference between what is leviable for motor vehicles spares
and auto cycle pedals Aggrieved by this view of the limitation on the powers of
the Collector of Customs the appellant i.e, the Union of India, has come up
this Court, after securing special leave to appeal. The respondent was not
represented by counsel and since the point involved was one of law and the
amount involved not inconsiderable, we requested Shri Javali, Advocate, to serve
as amicus curiae.
He has argued the case with ability and we
record our appreciation of his services to the Court. Indeed, but for his close
scrutiny of the order of the Deputy Collector of Customs we would not have
perceived the mix-up and other defects he highlighted in his submissions.
We have already stated that a fine, in lieu
of confiscation, had been imposed by the Collector of Customs.
This he did, under s. 183 of the Act, but not
content with that imposition he also directed the payment of the full duty on
the goods imported as condition precedent to the clearing of the goods out of
the 'customs control'.
Does the order under s. 183 preclude him from
levying duty under s. 20? This is the short issue before us. A close study of
the scheme of the relevant provisions, powers and levies discloses a clear
dichotomy which has escaped the attention of the High Court. Import/export duty
is an obligation cast by s. 20 of the Act. It is a tax, not a penalty; it is an
innocent levy once the exigible event occurs. it is not a punitive impost for a
contravention of the law. Confiscation. penalty and fine provided for under ss.
167 (item 8) and 183 are of the species of punishment for violation of the
scheme of prohibition and control. Once this distinction and duality are
remembered, the interpretative process simplifies itself.
Admittedly, the respondent imported pedals
uncovered by any licence. Two legal consequences followed. The importation
attracted duty which any importer, licit or illicit, had to pay the moment 90
customs barrier was crossed. Secondly, the commission of the offence of
importing pedals without a licence caught the offender in the coils of s. 167,
entry 8, inviting the jurisdiction of the authority prescribed under s. 182 to
confiscate the goods or, alternatively, to impose a fine in lieu of
confiscation, under s. 183, of course, if confiscation is resorted to, the
title vests in the State, as provided in s. 184.
Import duty has to be paid inevitably in
these cases, by the importer. Confiscation or fine in lieu thereof is an
infliction on the offender or circle of offenders falling within s. 167, Entry
8. Sometimes, the burden in both the cases, falls on the same person. At other
times, they may fall on different persons. In some cases the importer as well
as the confiscate may be identified and so the duty and the penalty may be
imposed validly. In other cases it may be difficult to get at the actual person
who imported or was concerned in the offence of importation contrary to the prohibition
or restriction clamped down by the law. In that event, only confiscation and,
alternatively, fine, may be imposed.
Viewed in this perspective, the answer to the
question that arises for decision is simple. In the present case, as held by
the High Court, the respondent did import auto cycle pedals outside the permit
or licence. He is therefore liable to pay import duty normally leviable from
He his admittedly transgressed the provisions
of Entry 8 of s. 167 by importing goods not covered by the licence and
therefore comes within the penal complex set out in ss. 182, 183 ; and 184. In
the present case, the Deputy Collector, the competent authority, has chosen to
give the owner of the goods, the respondent, option to pay, in lieu of
confiscation, a fine. He has not confiscated the goods and, therefore, s. 184
is not operational in this context. In short, the obligation under s. 20 is
independent of the liability under s. 183. The order, dual in character,
although clubbed together in a single document, is therefore valid in entirety.
Even so, the confusion has been caused by the Deputy Collector failing to keep
distinct the two powers and the two liabilities and thereby leading to
Shri Javali rightly exposed the order
impugned to the actinic light of criticism by pointing out that this rolled up
order suffers from several infirmities, apart from its unspeaking brevity. The
Deputy Collector does not state that he is levying duty on the importer qua
importer under s. 20.
He does grievously err in the first breath
confiscating the goods (in which case the title vests in Government under s. 184)
and in the very next directing payment of fine in lieu of confiscation. Both
cannot co-exist. Moreover, he forgets that s. 167, entry 8, empowers, apart
from confiscation of the offending goods, a penalty also which is independent
of the fine in s. 183, in lieu of confiscation. This confused and laconic order
only highlights the need for some orientation course in law for officers who
are called upon to exercise judicial powers and write reasoned orders.
91 However, we are prepared to gather from
the order under attack two levies imposed in exercise of two distinct powers,
as earlier explained. The import duty has been made a condition for the
clearance of the goods. This is right and it is impossible to say that the said
payment is not justified by s. 20. Likewise, the authority, when it imposed a
fine, was exercising its power under s. 183. We can readily see that he did not
mean to confiscate the goods. He only proposed to confiscate and proceeded to
fix a fine in lieu thereof. Non-felicitous and inept expressions used in the
order are perhaps apt to mislead, but the intendment is clear that what was
done was not confiscation but giving an option to pay a quantified fine in
place of confiscation.
The order was a composite one, when read in
the sense we have explained, and is quite legal. Therefore we reach the
conclusion that the appellant is entitled to win and the High Court was in
The line of reasoning which has appealed to
us is echoed in a decision of the Madras High Court reported as Collector of
Customs v. S. Mehra(1). Ramachandra Iyer, C.J., speaking for the Bench, has
explained the legal position clearly and we agree with it. Two decisions of
this Court were referred to before the High Court and, indeed, the decision of
the High Court proceeded on the footing that those two decisions concluded the
matter. The Madras decision distinguishes-and for right reasons, if we may say
so with respect-those two rulings of this Court. They do not apply to the facts
of the situation before us. On the other hand, both those cases deal with
quantities of gold seized from persons as smuggled goods. How they were
imported, who were involved in the import, and who could, therefore, be made
liable for import duty, were left blank in those two cases. Therefore, the
conditions imposed by the customs authorities for payment of import duty could
not be supported. We will go into a little more detail to explain those two
decisions and their non-applicability to the point we are discussing. We may
state that neither of them decides that once a find in lieu of confiscation is
imposed, the power to levy duty under s. 20 is deprived if. It is not as if the
authorities could not exercise both`the powers, where the facts attracted both
s. 20 and ss. 182 to 184.
In Shewpujanrai Indrasanrai Ltd. v. The
Collector of Customs(2) this Court had to consider an order passed by the
Collector under the Sea Customs Act in respect of smuggled gold. An option to
pay a fine of Rs. 10,00,000/- was ordered but the Collector tied it up with `
two conditions for the release of the 'confiscated gold'. One was the
production of a permit from the Reserve Bank of India in respect of the gold
and the other was the payment of proper customs duties in respect of the gold.
Both the conditions were held to be illegal by this Court. It was conceded-in that
case by the learned Solicitor General that there was no provision in the
Foreign Exchange Regulation Act or the Sea Customs Act under which the Reserve
Bank could give permission in respect of smuggled gold with retrospective
effect. What (1) A.I.R. 1964 Mad, 504.
(2)  S.C.R. 821.
92 is more, if it could, there would be no
offence under s. 167, entry 8, and the order of confiscation itself would be
bad. As to the second condition of payment of customs duty, there was no
finding by what. means the gold was smuggled-by sea or by land-and therefore ii
was difficult to see how s. 88 which was sought to be pressed into service
could be of any help. Indeed, the decision of the Bombay High Court in Hormasji
Elavia v. The Union of India(1) had been brought to the notice of the learned
Judges, where customs duty was held payable under s. 88 of the Sea Customs Act,
but it was distinguished on the score that in that case the goods had been
tracked down as smuggled through the port of Kantiajal without payment of any
duty and, in those circumstances, it was held that s. 88 applied. the manner of
import, once identified the power to levy duty could be exercised under the
appropriate Act. Therefore, Shewpujanrai (supra) is no authority for the
proposition that import duty cannot be levied once fine in lieu of confiscation
The later decision in Amba Lal v. Union of
India(1) also is of no. assistance. That also related to smuggled gold. The
Collector of Customs imposed conditions for the release, in that case, of the
confiscated gold. Though the order was struck down on a concession by the
learned Additional Solicitor General, on the facts as disclosed in that case,
the contraband goods. were recovered by search from the appellant's house, but
the authorities could not establish by any evidence that the seized articles
were imported into India after the customs barrier was put up for the first
time between India and Pakistan. It is obvious, therefore, that import duty
could not be levied from tale person from whom the seizure was effected.
The case before us stands clearly on a
different footing and the order imposing fine in lieu of confiscation and also
levying import duly is good. We allow the appeal but. in the circumstances of
the case. there will be no order as to costs S.R. Appeal allowed.
(1) Cr. Appl. 1296 of 1953 decided on
(2)  1 S. C. R. 933.