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Report No. 115

Chapter IV

Import-Export Cases

4.1. The Minister of Law and Justice by his letter dated May 5, 1986 forwarded to the Commission a letter received by him from Shri Ramu S. Deora, Chairman. Western Region of the Federation of Indian Export Organisations set up by Ministry of Commerce and Supply, Government of India requesting the Commission to examine the feasibility of setting up of a Special Court to clear Import/Export cases. While forwarding the letter, the Minister of Law and Justice requested the Commission to take into consideration the suggestions put forth in the letter while making recommendations on Tax Court. The Commission by its reply dated May 14, 1986 agreed to examine the suggestions in the letter aforementioned while dealing with the feasibility aspect of setting up a Central Tax Court for direct and indirect taxes. Hence this part.

4.2. The Imports and Exports (Control) Act, 1947 was enacted to confer power on the Central Government to prohibit, restrict or otherwise control imports and exports and to deal with matters connected therewith. Section 3 of the Act confers power on the Central Government by order published in the Gazette to make provision for prohibiting, restricting or otherwise controlling in all cases or in specified classes of cases, and subject to such exceptions, if any, as may be made by or under the order:-

(a) the import, export, carriage coastwise or shipment as ships, stores or goods of any specified description;

(b) the bringing into any port or place in India of goods of any specified description intended to be taken out of India without being removed from the ship or conveyance in which they are being carried.

The Act replaced rule 84 of the Defence of India Rules under which control over imports and exports was imposed and subsequently extended under the Emergency Provisions (Continuance) Ordinance, 1946 which expired on 24th March, 1947. The power to regulate import/export sought to avoid any disturbance to the economy of the country during the transition from war time to peace time conditions. That apart, even during peace time, control over export and import has to be exercised for development of economy in a planned manner. Section 4B confers power to enter and inspect any premises in which imported goods or materials which are liable to confiscation under the Act are suspected to have been kept or concealed section 4C confers power to conduct search and section 4D confers power to seize imported goods or materials under circumstances mentioned therein.

Section 4G confers power to confiscate any imported goods or materials in respect of which any condition of the licence or letter of authority, under which they were imported, relating to the utilisation or distribution of such goods or materials et al has been or is being contravened. Section 4-I provides for levy of penalty. Section 4K provides for adjudication for confiscation or levy of penalty. Section 4M provides a forum of appeal against the decision of the Chief Controller or Additional Chief Controller to the Central Government and in any case to the Chief Controller or where he so directs to the Additional Chief Controller. Section 4N confers power of revision on the Chief Controller. This is the brief outline of the Act.

4.3. Since the escalation of the process of industrialisation of the country, exports and imports have multiplied manifold, both as in quantum and variety of goods. Numerous orders have been issued for control of export and import of various denomination of goods. A number of disputes have arisen and are likely to arise between the exporter and/or the importer on one hand and the authorities under the Act on the other with regard to the nature of goods, the degree of control et el. To illustrate, when total ban was imposed on the export of silver, ban order was challenged as violative of the fundamental right guaranteed by Article 19(1)(g) of the Constitution. A question was also raised whether the administrative policy behind the ban is justiciable at all.1 Gloves were imported and the question arose whether they were prohibited goods and whether they were dutiable also.2 Such illustrations can be multiplied manifold.

1. Union of India v. Damani & Co., AIR 1980 SC 1149.

2. Ram Kirpal Bhagat v. State of Bihar, AIR 1970 SC 951.

4.4. Whenever there is a dispute between the importer or exporter on one hand and the authorities under the Act on the other, it has to be adjudicated after giving opportunity to the owner of the goods to be heard before either confiscation is ordered or penalty is levied. (See sections 4K and 4L of the Act). Any person aggrieved by the decision of the adjudicating authority may prefer an appeal as provided in section 4N. Thereafter, the aggrieved person may either invoke the jurisdiction of the High Court under Article 226 or an appeal to the Supreme Court under Article 136 of the Constitution. This is the present set up for adjudication and relief by recourse to judicial authorities after the matter has been dealt with by quasi-judicial authorities.

4.5. The Imports and Exports (Control) Act, 1947 is a statute cognate to the Customs Act, 1962 and various other statutes which deal with export or import such as Antiquities (Export) Control Act, 1947. There are numerous other cognate provisions which need not be enumerated here.

4.6. It would appear at a glance that as exports and imports proliferated, the area and quantum of disputes between the authority under the Act on the one hand and the exporter/importer on the other get wider. The power to confiscate goods or to levy penalty for contravention of the law is of a drastic nature. But it is equally useful to curb the tendency to recklessly import unnecessary goods as would disturb the economy or export essential goods and create shortages again disturbing the economy. Further till the dispute is resolved, goods may not be released. If the goods consist of essential raw material, the delay in its delivery pending the procedure would affect production of finished products.

The federation on whose letter the Law Commission was invited to examine the question of setting up of a Special court, has stated that there occurs divergence of opinion in the matter of imports/exports policies by different authorities such as Import Trade Control Organisation, Customs, Judiciary, Reserve Bank of India and Importers/Exporters. This causes delay in imports/exports clearance considerably affecting imports/exports and resulting into litigation. The author of the letter refers to the controversy about the import of Mutton Tallow and the consequent Debarment Orders issued by Chief Controller of Imports and Exports. Disputes also arise, according to him, in the case of certain canalised items.

Such disputes arose in the case of diamonds, almonds et el. He points out that because of the disputes, the consignments are held up for 5/6 months at a stretch and the Supreme Court takes 4/5 months just to clarify the scope of the licences it itself and earlier ordered to be issued. During the period, according to him, the importers had to suffer double demurrage of BPT and container detention. He further pointed out that if the commodity is a perishable one, it gets damaged in quality inevitably resulting in national loss. These are certainly weighty considerations.

4.7. Now if the Import and Export Act, 1947 would operate in close collaboration with the Customs Act, 1962, the expertise in dealing with the provisions of the Customs Act would assist in dealing with the questions arising under the Imports and Export (Control) Act, 1947. Therefore, the Commission is of the view that the Central Tax Court for indirect taxes as envisaged in Chapter III of this report must also deal with the decision of the Chief Controller or the Additional Chief Controller, as the case may be, and the appeal to the Central Government under section 4N must be abolished.

The Commission is therefore, of the view that the jurisdiction of the Central Tax Court for indirect taxes must be enlarged to include appeal against the decision of the Chief Controller or the Additional Chief Controller, rendered in appeal or as an adjudicating authority, as the case may be, must lie to that court and shall be dealt with in the same manner as it deals with appeals under the Customs Act or the Central Excises and Salt Act. This will provide a unified machinery for dealing with identical issues and reduce the time spent in the disposal of disputes arising under the Imports and Exports (Control) Act, 1947.

D.A. Desai, Chairman.

Mrs. V.S. Rama Devi, Member-Secretary.

Dated: 28th August, 1986.

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