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PETITIONER: UNION OF INDIA & ORS.

       Vs.

RESPONDENT: JAIN SHUDH VANASPATI LTD. & ANR

DATE OF JUDGMENT:       08/08/1996

BENCH: BHARUCHA S.P. (J) BENCH: BHARUCHA S.P. (J) MAJMUDAR S.B. (J)

CITATION:  1996 SCALE  (5)873

ACT:

HEADNOTE:

JUDGMENT:                          O R D E R      The 1st.  respondents imported  RBD palm oil during the period November,  1978, to March, 1979, and cleared the same in the  quantity of 13,500 metric tonnes. Import of the said oil  was  permissible.  On  11th  October,  1979,  the  1st. respondents  were  served  with  show  cause  notices  under Section 28  of the  Customs Act  and, on 21st January, 1980, with show  cause notices under Section 124 thereof. The show cause notices  stated that the said oil had been imported in containers made of stainless steel, which was a banned item, but which  had been painted over to give the impression that they were  made of  mild steel.  Thus, Customs  duty had not been levied  and the  stainless steel containers were liable to be  confiscated. The  respondents were  required to  show cause thereagainst. The respondents filed a writ petition in the Delhi  High Court  on 8th  February, 1980, impugning the issuance of  the Section  28  and  Section  124  show  cause notices. On  22nd August,  1980 the  High Court  allowed the writ petition.      This appeal  is directed against the judgment and order of the  High Court.  When special  leave was  granted on 9th October, 1980,  this Court  ordered that the stainless steel containers which  had been  seized by  the appellants  would continue to  remain under seizure and be kept in the factory premises of  the 1st. respondents under the supervision of a Customs Officer. We are told that they so remain.      For completeness,  it is  necessary to mention that the appeal was  dismissed on  28th November,  1991, but,  on the review petition  of the  appellants, that judgment and order was set  aside and  the appeal  was  directed  to  be  heard afresh, which is how we come to hear it.      The High  Court based its judgment on material produced by the  respondents before  it to show that modern marketing practice required  the  movement  of  refined  oil  only  in stainless steel  or epoxy-coated  tanks. It  found that  the material acceptabIe, particularly because one of the letters

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that the  respondents produced had been written by the State Trading Corporation.  The High Court held that the stainless steel containers  that were  used by the 1st. respondents to import the  said oil  could not  be treated  as separate  or independent items of importation. What had been imported was only the  said oil  and not  the stainless steel containers. The High  Court looked  to the  law and stressed Section 47, whereunder clearance for home consumption had been given. It took the view that no show cause notices under Section 28 or Section 124  could have  been issued  unless and  until  the order under Section 47 had been revised under the provisions of Section 130.           Section 47 reads thus :-      "47 Clearance  of  goods  for  home      consumption.  -  Where  the  proper      officer is satisfied that any goods      entered for  home  consumption  are      not  prohibited   goods   and   the      importer has  paid the import duty,      if any,  assessed thereon  and  any      charges payable  under this  Act in      respect of  the  same,  the  proper      officer   may    make   an    order      permitting clearance  of the  goods      for home consumption."           Section 28 reads thus :-      "S.28.  -  Notice  for  payment  of      duties not  levied, short levied or      erroneously refunded.- (1) When any      duty has  not been  levied  or  has      been short  levied  or  erroneously      refunded, the  proper officer  may,      within six months from the relevant      date, serve  notice on  the  person      chargeable with  the duty which has      not been  levied or  which has been      so short  levied  or  to  whom  the      refund has  erroneously been  made,      requiring him  to show cause why he      should not pay the amount specified      in the notice;           Provided that  where any  duty      has not  been levied  or  has  been      short   levied    or    has    been      erroneously refunded  by reason  of      collusion  or   any  willful   mis-      statement or  suppression of  facts      by the  importer or the exporter or      the  agent   or  employee   of  the      importer    or     exporter,    the      provisions  of   this   sub-section      shall have  effect as  if  for  the      words "six  months" the words "five      years" were substituted.      (2)  The   Assistant  Collector  of      Customs   after   considering   the      representation, if any, made by the      person on  whom  notice  is  served      under   sub-section    (1)    shall      determine the  amount of  duty  due      from  such  person  (not  being  in      excess of  the amount  specified in      the  notice)   and  thereupon  such      person  shall  pay  the  amount  so      determined.

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    (3) For the purposes of sub-section      (1), the expression "relevant date"      means -      (a) in  a case  where duty  is  not      levied.  the   date  on  which  the      proper officer  makes an  order for      the clearance of the goods;      (b)  in   a  case   where  duty  is      provisionally    assessed     under      section 18,  the date of adjustment      of duty  after the final assessment      thereof;      (c) in  a case  where duty has been      erroneously refunded,  the date  of      refund;      (d) in  Any other case, the date of      payment of duty."      It is  patent  that  a  show  cause  notice  under  the provisions of  Section 28  for payment of Customs duties not levied or short-levied or erroneously refunded can be issued only subsequent  to the  clearance under  Section 47  of the concerned goods.  Further, Section  28 provides  time limits for  the  issuance  of  the  show  cause  notice  thereunder commencing from  the "relevant  date";  "relevant  date"  is defined by  subsection (3)  of Section 28 for the purpose of Section 28  to be  the date on which the order for clearance of the goods has been made in a case where duty has not been levied; which  is to  say  that  the  date  upon  which  the permissible period  begins to  run is  the date of the order under Section 47. The High Court was, therefore, in error in coming to  the conclusion  that no  show cause  notice under Section 28 could have been issued until and unless the order under Section 47 had been first revised under Section 130.           Section 124 reads thus :-      "S.124.  -   Issue  of   show-cause      notice   before   confiscation   of      goods, etc. - No order confiscating      any goods  or imposing  penalty  on      any person shall be made under this      Chapter unless  the  owner  of  the      goods or such person -      (a) is  given a  notice in  writing      informing him  of  the  grounds  on      which it  is proposed to confiscate      the goods or to impose a penalty;      (b)  is  given  an  opportunity  of      making a  representation in writing      within such  reasonable time as may      be specified  in the notice against      the  grounds   of  confiscation  or      imposition  of   penalty  mentioned      therein; and      (c)   is    given   a    reasonable      opportunity of  being heard  in the      matter:           Provided   that   the   notice      referred to  in clause  (a) and the      representation   referred   to   in      clause (b)  may, at  the request of      the person concerned be oral."      The case of the appellants in the show cause notices is that the  stainless steel  containers in  which the said oil was  imported   were  banned,   that  the   stainless  steel containers were deliberately camouflaged by painting them to resemble mild  steel containers, and that this was done with

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a view  to enabling their clearance. A clearance order under Section 47 obtained by fraudulent means such as this (if it, in fact,  be so)  cannot debar  the issuance of a show-cause notice for  confiscation of  goods under Section 124. Fraud, if established,  unravels all.  An order  under  Section  47 obtained by  the employment  of fraudulent  methods does not have to  be set  aside by  the exercise of revisional powers under Section 130 before the ill-effects of the fraud can be set right  by initiation  of the  process of confiscation of the fraudulently cleared goods under Section 124.      It is relevant to bear in mind that the issuance of the show-cause notice  under Section  124 contemplates  that the respondents’  response   shall  be   considered   and   only thereafter will  the  matter  be  decided.  The  respondents shall, therefore,  have  full  opportunity  to  satisfy  the authorities that  there was  no importation  of banned goods which makes them liable to confiscation.      The High  Court noticed that the appellants’ allegation was that the stainless steel containers were painted over to suppress their  true nature,  but it  took the view that the respondents were  not required  to disclose  the  nature  or price of  containers. We  do think that the High Court ought to have  taken some  note of the significance of painting of stainless steel.  If the  stainless  steel  containers  were painted,  and   so  painted   as  to   resemble  mild  steel containers, there can be little doubt that the intention was to slip them through the Customs.      Certainly, the  High Court  ought not  to have  entered into the thicket of evidence. Evidence was something for the authorities hearing  the parties under Section 28 and 124 to accept and  weigh. We  do not  approve  of  stultifying,  in exercise of  powers under  Article  226,  an  investigation, still at the show-cause stage, by going into facts.      We are  also of  the view  that the  High Court  in any event, ought  not to  have allowed the writ petition without reserving liberty  to the  appellants to proceed against the respondents under  Section 130  which,  as  the  High  Court looked at it, was the appropriate course of action.      We have  refrained from expressing ourselves, so far as we could,  upon the  merits of  the controversy  between the parties. In  deciding upon  the  show  cause  notices  under Sections 28  and 124,  the authorities  shall not  take into account our  observations or  those of the High Court in the order under appeal.      The appeal  is allowed.  The judgment  and order of the High Court  is set  aside. The  writ petition  filed by  the respondents is  dismissed. Proceedings  pursuant to the show cause notices  under Sections 28 and 124 shall continue. The respondents shall have the opportunity therein to place such evidence as they may deem appropriate.      Pending  the   adjudications,   the   stainless   steel containers shall  remain under  seizure, but in the premises of the  1st. respondents  under the supervision of a Customs Officer.      There shall be no order as to costs.