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PETITIONER: RIB TAPES (INDIA) PVT. LTD. & ANR.

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT02/09/1986

BENCH: OZA, G.L. (J) BENCH: OZA, G.L. (J) NATRAJAN, S. (J)

CITATION:  1986 AIR 2014            1986 SCR  (3) 697  1986 SCC  (4) 189        JT 1986   312  1986 SCALE  (2)367

ACT:      Customs   Act,   1962;-Section   III(m)-Difference   in ’value’- Whether  could be  made basis  of breach  prior  to 1973.      Statutory Interpretation:-  Object and Reasons of Bill- Resort to - for intention of Legislature re-Permissible.

HEADNOTE:      The appellants,  owners of  a hosiery factory, imported 27 knitting  machines in  1972 under the import licence held by them.  According to the Customs authorities the machinery was not  new as the licence permitted to import, but was old reconditioned, and  that the price shown was much lower than the  actual   value.  After   hearing  the  appellants,  the Collector of Customs found that the appellants had committed breach of  s. l l l(d) and also of s. l ll(m) of the Customs Act 1962  and for  both the  counts he  imposed the penalty, which was  maintained by  the Board. On revision the Central Government reduced  the penalty  from Rs.  1,47,000  to  Rs. 1,00,000 which  had been imposed for breach of s. 111 (m). A writ petition  filed by  the appellants was dismissed by the High Court.      In  the   appeal  to  this  Court,  on  behalf  of  the appellants it was contended that a penal provision has to be construed  strictly   and  in   absence  of  specific  words requiring ’value’  to be mentioned, it could not be inferred that any  difference in  value could  be made  the basis  of penalty.      On behalf  of the  respondents it  was  contended  that although the  term ’value’ was not in s. 1 l l(m) before the 1973 amendment  but that  will make  no difference  as  even without  the   term  ’value’   a  mis-description  could  be interpreted to  be a  mis-description on  the basis of value stated and  ultimately the  goods found  to be  of a  higher value. By  the amendment  the Legislature  had only tried to explain or clarify the position. 698      Allowing the Appeals, the Court, ^      HELD: 1.  The impugned  orders are  set aside  and  the penalty imposed  on the appellants under s. Ill(m) read with

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s. 111(d) of the Customs Act 1962 is quashed. [704A-B]      2. Before  the amendment  in 1973,  s. 111(m)  did  not contemplate  any   difference  in  material  particulars  in respect of  value but  it referred  matters other  than  the value. [703B-C]      3. Unamended  s. 111(m)  indicated that  wherever goods actually imported are different in material particulars than the goods  which were  shown in  the  bill  of  entry  or  a declaration as  contemplated in  s. 46  then it  will  be  a breach of s. 11 l(m). The difference in particulars could be in respect of anything but value, as this sub-clause clearly shows that  the difference  in value  could not  be made the basis of  breach of  this sub-clause before the amendment of 1973, when  the term  ’value’ has  been introduced into this sub-clause. [70 1 B-C ]      4. In  order to interpret a particular provision and to infer the  intention of  the Legislature,  the  objects  and Reasons stated  in the  Bill, when  it is  presented to  the Legislature, could be used. [703B ]      5. The  amendment inserting  the  term  ’value’  in  s. 111(m) cannot be said to be explanatory. [703Fl      Union of  India &  ors. v.  M/s. Rai  Bahadur Shree Ram Durga Prasad (P) Ltd. & ors., [1969] 2 SCR 727, relied upon.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal No. 172 of 1979      From the Judgment and order dated 4.4.1978 of the Delhi High Court in Civil Writ No. 261 of 1978.      B.R. Aggarwala for the Appellants.      O.P. Sharma for the Respondents.      The Judgment of the Court was delivered by      OZA, J.  This appeal  on special  leave arises out of a Judgment of 699 the Delhi  High Court  dated 4th  April, 1978.  The leave is granted on  a limited  question as  regards the  question of interpretation of  sub-clause .  (m) of  Section 111  of the Customs Act, 1962 (’Act’ for short). The appellants imported 27 knitting  machines  as  the  appellants  owns  a  hosiery factory in  1972. The  appellants held an import licence for import of knitting machinery.      According to  the Customs authorities the machinery was not new  as the  licence permitted  to import,  but was  old reconditioned. The  Customs authorities  also held  that the price shown  by the  appellant on  the basis  of invoice was much lower than what the price actually should be. The price shown by  the appellant on the basis of invoice was Rs.77441 whereas according. to the Customs authorities the price came to Rs.2,98,359.  On this  basis, a  show  cause  notice  was issued and  after hearing  the appellant,  the Collector  of Customs Bombay  by  order  dated  29.12.73  found  that  the appellants had committed breach of Section 111(d) of the Act and also  Section 111(m)  of the Act and for both the counts the penalty  was imposed  on the  appellants. Under  Section 111(d) the  penalty  imposed  was  Rs.1,12,000  in  lieu  of confiscation of  goods  and  for  breach  Section  111(m)  a penalty of Rs. 1.47,000 was imposed under Section 112 of the Act.      Against this  order passed by the Collector of Customs, an appeal  was filed  by the appellants before the Board and the Board  maintained the  order passed  by the Collector of Customs. On  revision, the  Central Government  reduced  the

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penalty from  Rs.1,47.000 to  Rs. One lac only. Against this the appellant  preferred a  writ petition  before the  Delhi High Court  which was  dismissed by  a Division Bench of the High Court  by  its  judgment  dated  4th  April,  1978  and aggrieved by this the present appeal has been preferred.      So far  as the  penalty under Section 111(d) in lieu of confiscation was  concerned, the  leave has not been granted and it  is not  disputed that the appellants have taken away the goods after paying the duty and in this appeal therefore we are  not concerned  with it. The only challenge before us therefore is  in respect  of penalty  of Rs. One lac imposed under Section 111(m) of the Act.      It is  not disputed  that Section 111(m) of the Act has been amended  in 1973  by  Act  No.  36  of  1973  but  this amendment will  not  be  applicable  to  the  present  case. Section 111(m)  as it  stood before  the amendment  reads as under: 700           "Any dutiable  or prohibited  goods which  do  not           correspond in  any material  particular  with  the           entry made  under this  Act  or  in  the  case  of           baggage with the declaration made under Section 77           in respect thereof." and After  the Amendment  Act 1973  this provision now reads like:           "any goods  which do  not correspond in respect of           value or  in any  other particular  with the entry           made under this Act or in the case of baggage with           the declaration  made under  Section 77 in respect           thereof." It is  therefore clear that the word ’value’ was inserted in this provision.  Before the  insertion of this word ’value’; Section 111(m)  appears to  mean that  if  the  dutiable  or prohibited goods are imported which do not correspond in any material particular  with the entry made under Section 46 of the Act  and in  case of  baggage with  the declaration made under  Section  77,  then  alone  Section  111(m)  could  be attracted:           Section 46 of the Act provides:           "46(1) The importer of any goods, other than goods           in tended  for transit or transhipment, shall make           entry thereof  by presenting to the proper officer           a  bill   of  entry   for  home   consumption   or           warehousing in the prescribed form:                Provided  that  if  the  importer  makes  and           subscribes to  a  declaration  before  the  proper           officer, to  the effect that he is unable for want           of full information to furnish all the particulars           of the  goods required under this sub-section, the           proper officer may, pending the production of such           information, permit  him, previous  to  the  entry           thereof (a)  to examine  the goods in the presence           of an  officer of  customs or  (b) to  deposit the           goods  in   a  public  warehouse  appointed  under           Section 57 without warehousing the same.           XX      XX      XX      XX           XX      XX      XX      XX           XX      XX      XX      XX           (4) The  importer while presenting a bill of entry           shall at  the foot thereof make and subscribe to a           declaration as to                           MANOHAR 701           the truth  of the  contents of  such bill of entry           and shall,  in  A  support  of  such  declaration,

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         produce to the proper officer the invoice, if any,           relating to the imported goods."           XX      XX      XX     XX It is  in respect of this that Section 111(m) indicated that wherever goods  actually imported  are different in material particulars than  the goods  which were shown in the bill of entry or a declaration as contemplated in Section 46 then it will be  a breach  of  Section  111(m).  The  difference  in particulars could  be in  respect of  anything but value, as this sub-clause  clearly show  that the  difference in value could not  be made  the basis  of breach  of this sub-clause before the amendment of 1973, when the term ’value’ has been introduced into this sub-clause.      It  was  contended  by  the  learned  counsel  for  the appellants that  in fact  in the  decision of  this Court in Union of  India &  ors. v.  M/s Rai  Bahadur Shree Ram Durga Prasad (P)  Ltd.  &  ors.,  [1969]  2  SCR  727  this  Court considered the  question of  description  and  came  to  the conclusion that  a  penal  provision  has  to  be  construed strictly and  in absence of specific words requiring ’value’ to  be   mentioned,  it  could  not  be  inferred  that  any difference in  value could  be made  the basis  of  penalty. Whereas  learned   counsel  appearing  for  the  respondents contended that  although the  term ’value’  was not  in Sec. 111(m) of the Act before the amendment but that will make no difference as according to him even without the term ’value’ a  mis-description   could  be  interpreted  to  be  a  mis- description on  the basis of value stated and ultimately the goods found  to be  of a  higher value. By the amendment the Legislature  had  only  tried  to  explain  or  clarify  the position and  he contended  that this  was the view taken by the High Court while considering this question.           In Union of India’s case the Court held:           "If we  are to  hold that  every declaration which           does not state accurately the full export value of           the goods  exported  is  a  contravention  of  the           restrictions imposed  by s. 12(1) then all exports           on consignment  basis must  be held  to contravene           the restrictions  imposed by  s. 12(1). Admittedly           s. 12(1) governs every type of export. Again it is           hard to believe that the legislature intended that           any minor  mistake in giving the full export value           should be  penalised in  the manner provided in s.           23(A). The wording of s. 12(1) does 702           not support  such a  conclusion. Such a conclusion           does not accord with the purpose of s. 12(1).                It is  true that the regulations contained in           the Act  are enacted in the economic and financial           interest of  this country.  The  contravention  of           those  regulations   which  we   were   told   are           widespread are  affecting vital  economic interest           of this country. Therefore the rigour and sanctity           of those  regulations should  be maintained but at           the same  time it  should not be forgotten that s.           12(1)  is  a  penal  section.  The  true  rule  of           construction of  a section like s. 12(1) is, if we           may say  so with respect, as mentioned by Plowman,           J. in  Re H.P.C.  Productions Ltd.-[1962]  Ch. Dn.           466 at 473." It is  therefore clear  that their  Lordships relied  on the rule of  construction holding that penal provision has to be strictly construed  and held that where the provision itself did not  require the  value to  be stated  for any  error in respect of  that,  no  penalty  could  be  imposed.  Learned

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counsel contended  that it was because of this decision that the Amendment  Act 1973 was passed by the Parliament and the term ’value’ was inserted in Sec. 111(m) of the Act. Learned counsel referred  to objects  and Reasons  for the amendment mentioned in the Bill, which resulted in Act No. 36 of 1973. The material  words mentioned in the objects and Reasons for the amendment as stated in the Bill reads as under           "The amendments to these Acts proposed in the Bill           mainly seek  to make  the  punishments  prescribed           thereunder more  severe and  to make certain other           provisions the  rein with  regard to  the rules of           evidence and procedure with a view to removing the           loopholes noticed in the working of these Acts and           making their enforcement more effective.           2. The  notes on  clauses explain  in  detail  the           various provisions of the Bill.           -Clause(2). This clause seeks to amend Section 111           of the Customs Act, 1962, with a view to providing           for the  confiscation of  goods in  cases of  mis-           declaration  of   the  value   or  imported  goods           irrespective of whether or not such goods 703           are dutiable  or prohibited,  in  order  to  cover           cases of over invoiced imports." It is not in dispute that in order to interpret a particular provision and to infer the intention of the Legislature, the objects and Reasons stated in the bill, when it is presented to the  Legislature, could  be used.  In this  view  of  the matter it  appears that  before the  amendment in 1973, Sec. 111(m)  did  not  contemplate  any  difference  in  material particulars in  respect of  value but  it  referred  matters other than the value.      It is  not disputed  that penalty under Sec. 111(m) has been imposed  solely on  the ground  that the price shown by the appellant in the declaration was much less than what was ultimately found  by the  Department  to  be  the  price  of imported goods  and in  respect of this difference of price, it  was   held  that  there  is  a  difference  in  material particulars which  brought the matter within the mischief of Sec. 111(m)  of the  Act. But  in view  of the fact that the term ’value’  was not in Sec. 111(m) before the amendment of 1973 this difference on the basis of value could not be said to be  a  difference  in  material  particulars  within  the meaning of  the language  of Sec. 111(m) and in this view of the matter,  the view  taken by the authorities could not be maintained.      The  High   Court  in   its  judgment   realising  this difficulty observed  that  this  amendment  where  the  term ’value’ has now been inserted is merely explanatory and that was what  was also  contended by  learned  counsel  for  the respondents.      It is  not in  dispute that a penal provision has to be strictly  construed  and  reading  Sec.  111(m)  before  the amendment it  is not  possible to draw an inference that any difference in  material  particulars  may  be  referable  to ’value’. This  argument therefore  can not  be accepted. The scheme of  Sec. 111(m)  as it stood then nowhere referred to the difference  of value as one of the ingredients which may attract this  provision. In such a situation therefore if it was  not   the  specific   intention  of  the  provision,  a difference in  respect of  value therefore could not be said to attract this provision and on that basis no penalty could be imposed. 704      The appeal  is allowed  and the  orders passed  by  the

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Collector, Board,  Central Government and the High Court are hereby set  aside. The  penalty imposed  on  the  appellants under Sec.  111(m) read with Sec. 112 is hereby quashed. The appellant shall  be entitled to get refund of the penalty if already deposited. No order as to costs. A.P.J.                                      Appeals allowed. 705