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CASE NO.: Appeal (civil) 767-768  of  1995

PETITIONER: UNION OF INDIA & ORS.

       Vs.

RESPONDENT: V.

DATE OF JUDGMENT:       06/11/2001

BENCH: S.P.Bharucha, Y.K.Sabharwal, Brijesh Kumar

JUDGMENT:

Y.K. Sabharwal, J.

       In Civil Appeal Nos.767-768 of 1995, the challenge of Union of India is to the judgm ent and order of the High Court whereby allowing the writ petition, the Collector of Customs  has been directed to release the imported goods of the writ petitioner (respondent No.1 her ein) lying with the Central Warehousing Corporation Limited (for short ’the Corporation’). I t has been further directed that the first respondent will pay demurrage, container charges  and ground rent to the Corporation from the date of storage of the goods till January, 15, 1 991 whereas the Collector of Customs will pay the said charges on account of storage of thes e goods from January 16, 1991 till the date of release of the goods.         In Special Leave Petition (C) No.1663 of 2000, the challenge of the Government is to  the order of the Customs, Excise and Gold (Control) Appellate Tribunal which upheld the ord er of Collector of Custom dated 22nd October, 1993.  By the said order, the Collector of Cus toms directed the discharge of show cause notice dated 18th February, 1991 and had directed  that the proceedings be dropped.  We grant leave in the special leave petition.         Civil Appeal No.7931 of 1995 has been filed by the original writ petitioner. The lim ited challenge therein is to the direction for payment of demurrage, container charges and g round rent by the said petitioner till January 15, 1991.  The contention urged in this appea l is that the said charges are payable by the appellant only upto 21st September, 1990 and n ot thereafter. This judgment will dispose of all four appeals.         We have heard learned Attorney General and also learned counsel for the Corporation.   None, however, appeared for the importer who is respondent in Civil Appeal Nos.767-768 of  1995 and Civil Appeal arising out of SLP (C) No.1663 of 2000 and appellant in Civil Appeal N o.7931 of 1995.         The importer filed Bill of Entry dated 16th August, 1990 for clearance of consignmen t declared as 100% Polyester Fabric.  On 3rd September, 1990, Custom Authorities conducted e xamination of 10% of the goods and found some discrepancies with regard to the declared leng th and weight of the fabric.  The importer by its letter dated 4th September, 1990 agreed wi th that examination and findings and requested the custom authorities not to go in for 100%  examination of the goods.  The Customs Authorities examined another 10% of the goods; on the  basis whereof, it calculated average excess in length and weight.  It found that total of 8 43.85 mts. (weight = 206.30 kg.) fabric was excess in length.  The CIF value of the excess f abric was found to be Rs.17,003/- (Assessable value Rs.17,173/-).  The importer requested th e Assistant Collector of Customs for waiver of show cause notice and personal hearing.  On 2 1st September, 1990, the Assistant Collector passed an order on note-sheet whereby the impor ter was allowed the release of the excess goods after payment of fine of Rs.25,000/- and per sonal penalty of Rs.5,000/- .  The amounts were deposited on 22nd September, 1990 as also cu stoms duty amounting to Rs.43,657/- on the excess goods.  On that day itself, i.e., 22nd Sep

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tember, 1990, DRI Officers visited the CFS Patparganj and detained the consignment on the ba sis of information available with them.  On November 15, 1990, the DRI seized the detained g oods.         A writ petition was filed in the Delhi High Court by the importer seeking directions  against the custom authorities for release of consignment of Polyester Fabric imported by i t against duty free advance import licence urging that the consignment had been illegally an d unauthorisedly detained by the custom authorities.  The import was effected by the importe r under Duty Exemption Entitlement Certificate (DEEC) and duty free advance import licence.   Under that licence, the importer was allowed to import 80,000 mts. of 100% polyester fabric  of CIF value of Rs.16,16,000/-.  One of the condition of import was that the importer would  export 1,60,000 pieces of shorts made out of the imported 100% polyester fabric of the desi red denier of value of Rs.24,48,000/-.  In accordance with the DEEC policy,  all imports und er export obligation were duty free.  The importer claimed that it had exported the required  quantity of 1,60,000/- pieces of shorts of the required fabric and the buyer had remitted r equisite foreign exchange and, thus, it had fulfilled the export obligation.  The importer f urther claimed that the order imposing penalty and redemption fine as aforesaid was made on  21st September, 1990 which amount along with the customs duty were deposited on the very nex t date and since the goods were not released despite the said deposits, the writ petition wa s being filed. The formal order on the lines on which the order was made on the note-sheet on 21st Septembe r, 1990 was passed by the Assistant Collector on 15th January, 1991.         In the counter affidavit filed in the writ petition, the Assistant Collector, Direct orate of Revenue (Intelligence) averred that the importer had violated the import control or der and evaded duty amounting to over Rs.16 lakhs.  On receipt of information by the DRI tha t the export effected was fraudulent and no test report regarding the goods was filed, the s tatement of the ’Director of the’ writ petitioner-company was recorded under Section 108 of  the Customs Act.  The statements of some other persons were also recorded under Section 108.   The case of the Directorate of Revenue was that the exports were fraudulent.  When the wri t petition came up before the Division Bench of the High Court on 11th February, 1991, a req uest was made on behalf of the department that time be granted to it to further investigate  the matter.      The High Court allowed the investigation to be completed within one week an d also permitted the department to issue a show cause notice to the writ petitioner/importer  who was given time to file its reply within 48 hours on receipt of the show cause notice.   The adjudication, if any, was required to be completed and concluded within one week after t he completion of investigation. On 18th February, 1991, a show cause notice was issued to the importer to explain as to why  the goods be not confiscated and the company and its Directors be not proceeded with for pen al action under Section 112 of the Customs Act, 1962.  By order dated 25th February, 1991, t he Additional Collector Custom ordered confiscation of the goods but allowed the goods to be  redeemed on payment of redemption fine of Rs.4,00,000/- and appropriate duty amounting to o ver Rs.16,00,000/-      Besides it, penalty of Rs.10,00,000/- each was imposed on the Direct ors and Rs.5,00,000/- on the company. The order dated 25th February, 1991 was set aside by the High Court as it was found that the  principles of natural justice had not been complied with before passing the said order supp osedly on account of time limit for decision fixed by the High Court and without waiting for  reply of the importer, the order was passed by the Collector on 25th February, 1991.  The H igh Court while setting aside that order directed the matter to be decided afresh after deal ing with the points raised by the petitioner in the written submissions including the point  of jurisdiction in view of the order dated 10/15th January, 1991.  On remand the matter was  dealt with by the Collector of Custom before whom two, submissions were made, namely, (1) In  view of the order dated 10/15th January, 1991, another order of adjudication could not be m ade in respect of the same consignment and (2) On merits, confiscation of goods was not just ified.  Accepting the first contention, the Collector of Custom in terms of his order dated  22nd October, 193 discharged the show cause notice dated 18th January, 1991 and dropped the  proceedings.  He was of the opinion that in view of the order of adjudication dated 10/15th  January, 1991, there could not be another adjudication order in respect of the same consignm ent.  In this view, the Collector refrained from going into the second contention which conc erned the merits of the case.  The order dated 22nd October, 1993 was upheld in appeal by th e Tribunal and the appeal was dismissed on 13th September, 1999.  That order is the subject  matter of appeal arising out of SLP (C) No.1663 of 2000.  By the impugned judgment and order  that High Court allowed the writ petition and directed release of the goods and issued dire ctions for payment of demurrage etc. as noticed hereinbefore.         The Tribunal has dismissed the appeal against the order dated 22nd October, 1993 fil ed by the Government upholding the order of the Collector principally on the ground that the  Collector had no jurisdiction to pass a fresh order of adjudication in view of earlier orde

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r dated 10/15th  January, 1991 covering the consignment in question and also for the reason  that the High Court while deciding the writ petition upheld the finding that the Collector h ad no jurisdiction to pass a fresh adjudication order in view of the earlier order dated 10/ 15th  January, 1991.  Accordingly the Tribunal declined to interfere with the order of the C ollector and, thus, the appeal was dismissed.  It deserves to be noticed that the Collector  was of the view that the principles of constructive res judicata will fairly apply as the te st report dated 26th November, 1990/4th December, 1990 which was the sole basis of the impug ned show cause notice was available with the department during the adjudication proceedings  by the Assistant Collector who passed the order on 15th January, 1991 and, therefore, the te st report is deemed to have been taken into account by the Assistant Collector before conclu ding the adjudication proceedings leading to the order dated 10/15th January, 1991.         Learned Attorney General contends that the Collector of Customs committed serio us illegality in coming to the conclusion that the principles of res judicata or  constructive res judicata have any applicability to the facts and circumstances  of the present case.  Further, the Tribunal erroneously dismissed the appeal, c ontends Attorney General, by holding that the matter stood concluded by the judg ment of the High Court directing release of the goods.  The test report in respe ct of which the Collector states in his order dated 22nd October, 1993 that on a pplication of principles of constructive res judicata, it is deemed to have been  considered by the Assistant Collector when he passed the order on 15th January,  1991, Mr.Sorabjee submits that the conclusion is a result of manifest erroneous  approach for the reason that the order dated 10/15th January, 1991 was only a f ormal order and in fact as a result of concession of the importer, an order on n ote-sheet had already been passed  on 21st September, 1990 pursuant to which, as  per the own case of the importer, it had deposited the redemption fine, persona l fine and the customs duty on 22nd September, 1990 and even the writ petition h ad been filed seeking release of the goods on 7th November, 1990.  On these admi tted facts, contends learned Attorney General that the question of deemed consid eration of report dated 26th November/4th December, 1990 can never arise.  The c ontention, therefore, is that the show cause notice could not be discharged on t he ground that the test report dated 26th November/4th December, 1990 could not be taken int o consideration as the same is deemed to have been taken into consideration while making the  order dated 10/15th January, 1991.  We agree.  There is substance in the contention of the  learned Attorney General.  It is evident from the above facts that the test report was not a nd could not be taken into consideration by the Assistant Collector when the order was passe d on 21st September, 1990 followed by a formal order dated 10/15th January, 1991.  On the ba sis of the order for release passed on 21st September, 1990, the importer was claiming relea se of the goods for which purpose it had even filed the writ petition even prior to 15th Jan uary, 1991.  The principles of res judicata or constructive res judicata have no application  whatsoever.  Further, it is evident that by order dated 11th February, 1991 the High Court  had allowed the investigation.  In its view, the case had to be examined on merits to find o ut whether it was a case of fraud or not, as contended by the department.  The merits of the  case were not gone into because the Collector accepted the first submission regarding the a pplicability of principles of constructive res judicata.  Further, the High Court in the imp ugned judgment and order has observed that the order of the Collector dated 22nd October, 19 93 was not the subject matter of challenge before it.  It was in this light that the observa tions of the High Court that the Collector was right in holding that he had no jurisdiction  to pass afresh order of adjudication in view of the earlier order dated 10/15th January, 199 1 covering the consignment in question had to be seen.  Those were only prima facie observat ions as at that stage the appeal against the order of the Collector dated 22nd October, 1993  was pending before the Tribunal.  Under these circumstances, the investigation permitted by  the High Court could not be brushed aside and the matter had to be taken to its logical con clusion.         For the aforesaid reasons, it is not possible to uphold the impugned order of the Tr ibunal as also the order of the Collector dated 22nd October, 1993.      For the same reason s, the impugned judgment and order of the High Court directing the release of the goods cann ot be sustained till it is finally decided as to whether there is any substance or not in th e allegations made against the importer in the show cause notice dated 18th February, 1991 o n examination of the merits of the case.  As already noticed, the merits were not examined b y the Collector in view of his conclusion that the second order of adjudication could not be  made. Therefore, setting aside the impugned judgment and order of the High Court, the order dated  22nd October, 1993 of the Collector and order dated 13th September, 1999 of the Tribunal, we  remand the matter to the Collector for fresh decision on the show cause notice after afford ing to the importer a reasonable opportunity to put forth its view point.  While granting th

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e leave, this Court had directed maintenance of status quo.  The order of status quo will co ntinue till the matter is examined afresh by the Collector in terms of this judgment. The High Court has directed that the Custom Department would pay the demurrage, container ch arges and ground rent to the Corporation from 16th January, 1991.  The said direction is con trary to the decision of this Court in International Airport Authority of India & Ors. v. Gr and Slam International & Ors. [(1995) 3 SCC 151].       The Corporation is entitled to recov er its charges from the importer.  Therefore, the direction in the impugned judgment and ord er that the custom authorities shall pay those charges is set aside.  Thus, the appeal filed  by the importer (CA No.7931/95) deserves to be dismissed.      In any event, no one has app eared in support of that appeal. For the foregoing reasons, Civil Appeal Nos.767-768 of 1995 and civil appeal arising out of  SLP (C) No.1663 of 2000 are allowed.    The case, as aforestated, is remanded back to the Co llector for fresh decision.   Civil Appeal No.7931 of 1995 is dismissed.  No order as to cos ts.