Sheshank
Sea Foods Pvt. Ltd. Vs. Union of India & Ors [1996] INSC 1454
(19 November 1996)
S.P.
Bharucha, K.S. Paripoornan Bharucha, J.
ACT:
HEAD NOTE:
The
principal judgment was delivered by a Division Bench of the High Court of
Karnataka in the case of M/s. Kamath Packaging Limited (Civil Appeal No.
1153/92). In the other matters the High Court followed the aforesaid judgment.
A writ
petition was filed by M/s. Kamath Packaging Ltd. before the High Court seeking
a writ or prohibition restraining the Customs authorities from proceeding with
search and seizure operations in their premises. The writ petition was
dismissed by a learned single Judge and the appeal therefrom by the Division
Bench. The writ petition was filed upon the basis that the Customs authorities
had no right or authority nor did the Customs Act, 1962, empower them to go
into questions relating to the utilization of the raw materials that had been
imported by the appellants under advance incences granted to them under the
Duty Exemption Scheme. It was the case of the Customs authorities that the raw
materials had been imported by the appellants without payment of duty by
availing of the benefit of an Exemption Notification dated 30th April, 1988 (No. 116/1988). The terms and
conditions thereof had been violated by the appellants. Search and seizure
operations in this behalf were, therefore, within their powers.
The
said Exemption Notification was issued in exercise of powers conferred by
Section 25(1) of the Customs Act and one of the conditions thereof was that the
materials exempted thereunder would not "be sold, loaned, transferred or
disposed of in any other manner".
Learned
counsel for the appellant submitted that the investigation by the Customs
authorities was in respect of alleged violations of the terms of the
appellants' advance licences which incorporated the terms of the said Exemption
Notification. Only the licensing authority had the jurisdiction to investigate
the alleged violations. The Duty Exemption Scheme under which the licences had
been issued was a code by itself and exceeded any investigation by the Customs
authorities. The bond that had been furnished by the appellants pursuant to the
licences also provided for action by the licensing authority.
Our
Attention was drawn by learned counsel for the appellant in support of his aforestated
submissions to the Import and Export Policy, 1988-91, wherein Chapter XIX dealt
with the Duty Exemption Scheme. Paragraph 291 stated that the licence holder
should, before ciearance of the first consignment of import, execute a bond
with the requisite value of bank guarantee or legal undertaking, as the case
may be, with the concerned licensing authority in the prescribed form,
Paragraph graph 243 read thus:
"If
licences holder fails to discharge the prescribed export obligation within the
permitted time, the licensing authority shall initiate action against the licence-holder
on the lines indicated in Chapter XIX of the Hand Book of Procedures, 1988-91.
This
shall, however, be without prejudice to any other action that may be initiated
by the Customs authorities for recovery of Customs duty or other duties and
interest thereon under Section 142 of the Customs Act, 1962." Learned
counsel drew attention to the Hand Book of Procedures, April 1988 - March 1991,
issued by the Ministry of Commerce, Government of India, Chapter XIX whereof
also dealt with the Duty Exemption Scheme. Paragraph 374 dealt with the
consequences of a licence holder failing to discharge the prescribed export
obligation either in full or in part. If this happened in such circumstance
that "the licensing authority is satisfied that the exempt material has
not been sold or misutilised for domestic production" the action that
could be taken was set out. In learned counsels submission, these provisions of
the Import & Export Policy and the Hand Book of Procedures showed that is
was only the licensing authority which could investigate alleged cases of
domestic sale of exempt material and the jurisdiction of the Customs authorities
to do so was ousted.
Learned
counsel placed reliance upon a communication to all Collectors of Central
Excise issued by the central Board of Excise & Customs on 13th May, 1969,
or the subject of whether, in the event of the contravention of a post- importation
condition of an import licence, it was open to the Customs authorities the
confiscate imported goods under Section 111 (O) of the Customs Act. The said
communication stated that before Section 111 (o) could be attracted there had
"to be an exemption, subject to a condition, from a prohibition. Where a
valid licence has been issued, it is not a case of an exemption from the
prohibition. Therefore, if a post importation condition of a licence is
contravened, it cannot be said that any condition of exemption is contravened.
For
the reasons stated above, the Ministry of Law have advised that it may not be
possible to take action under Section 111 (o) with respect to the conditions of
the licence relating to the use of goods after they are cleared from the
Customs charge." Section 111 (o) is the sheet-anchor of the respondents'
case. It reads thus:
"111.
Confiscation of improperly imported goods. etc. - The following goods brought
from a place outside India shall be liable to confiscation - XXX XXX XXX (o)
any goods exempted, subject to any condition, from duty or any prohibition in
respect of the import thereof under this Act or any other law for the time
being in force, in respect of which the condition is not observed unless the
non-observance of the condition was sanctioned by the proper officer."
Section 111 (o) states that when goods are exempted from Customs duty subject
to a condition and the condition is not observed, the goods are liable to
confiscation. The case of the respondents is that the goods imported by the
appellants, which availed of the said exemption subject to the condition that
they would not be sold, loaned, transferred or disposed of in any other manner,
had been disposed of by the appellants. The Customs authorities, therefore,
clearly had the power to take action under the provisions of Section 111 (o).
We do
not find in the provisions of the Import and Export Policy or the Hand Book of
Procedures issued by the Ministry of Commerce, Government of India, anything
that even remotely suggests that the aforesaid power of the Customs authorities
had been taken away or abridged or that an investigation into such alleged
breach could be conducted only by the licensing authority. That the licensing
authority is empowered conduct such an investigation does not by itself
preclude the Customs authorities from doing so.
The
communication of the Central Board of Excise and Customs dated 13th May, 1969, refers to the breach of the
condition of a license and suggests that it may not be possible to take action
under Section 111 (o) in respect thereof. It is true that the terms or 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 license, entitling the licensing authority to investigate.
But the breach is not only of the terms of the license; 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.
For
these reasons, we find no merit in the appeals and dismiss them with costs.
Back
Pages: 1 2