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CASE NO.: Appeal (civil)  4151-4157 of 2001

PETITIONER: Commissioner of Customs, Kolkatta        

RESPONDENT: Vs. M/s. Grand Prime Limited and Ors.                

DATE OF JUDGMENT: 07/07/2003

BENCH: M.B. SHAH & ARUN KUMAR  

JUDGMENT:

J U D G M E N T

ARUN KUMAR, J.

       These appeals are directed against the order of the  Customs Excise & Gold (Control) Appellate Tribunal  (hereinafter referred to as the ’Tribunal’) dated 20th  November, 2000.  By the impugned order the Tribunal  allowed re-export of the three consignments of tussah silk  and one consignment of silk fabric having a total value of  Rs.45,85,291/-.  The Tribunal further set aside the penalties  imposed on individuals by the Commissioner of Customs,  Kolkatta.  The individuals had filed appeals before the  Tribunal against the order of the Commissioner of Customs  and the Tribunal allowed the same.  Hence these appeals by  the Department.

       Briefly the facts are that M/s. Olympia Exports of New  Delhi through its proprietor Shri Mahesh Chowhan imported  the goods in question from Hong Kong purportedly against  an advance licence.  The goods in question fall within list of  restricted items import whereof is permitted subject to certain  conditions.  The importer had obtained an advance licence in  July, 1997.  Against the said licence the importer had  imported and cleared five consignments of raw silk through  the Kolkatta port free of duty subject to the condition that the  imported goods after conversion had to be re-exported.   Intelligence was gathered by the officers of the Directorate of  Revenue Intelligence, Kolkatta to the effect that M/s.  Olympia Exports based in New Delhi had imported and  cleared five consignments of raw silk against a fraudulently  obtained advance licence and had sold the said imported silk  in the open market without discharging the export obligation.   Thus they had violated the provisions of the revenue  exemption notification and the export-import policy.  Further  intelligence was gathered to the effect that the same  importer had again imported two consignments of silk fabric  and tussah silk through Kolkatta port and the said  consignments were awaiting clearance.  It appears that while  the investigation by the Directorate of Revenue Intelligence,  Kolkatta was going on, the importer got a wind of it and  therefore it never turned up to get the goods under the  aforesaid two consignments released.  According to the  revenue the advance licence obtained by the importer was  forged.  Summons  under the provisions of the Customs Act,

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1962  were repeatedly issued to M/s. Olympia Exports and  Shri Mahesh Chowhan, proprietor of M/s. Olympia Exports,  New Delhi to appear before the Directorate of Revenue  Intelligence.  The summons could not be served on either  M/s. Olympia Exports or Shri Mahesh Chowhan and they  never appeared in response to the summons.  Summons  were also issued to various other parties involved in the  previous transaction of import of five consignments which  had been cleared through customs.  They appeared in  response to the summons and their statements were  recorded.  Ultimately a demand-cum-show cause notice  under Section 124 of the Customs Act, 1962 read with  Section 28 of the said Act was issued on 14th May, 1999 to  M/s. Olympia Exports, New Delhi, Shri Mahesh Chowhan  and others.  So far as the consignment, subject matter of the  present appeals is concerned, the show cause notice called  upon the noticees’ to show cause why goods subject matter  of the two consignments, should not be confiscated under  Section 111(d) of the Customs Act, 1962 and why penalties  should not be imposed.  The importer did not respond to the  show cause notice.  Instead M/s. Grand Prime Limited  respondent No.1 addressed a communication dated 27th  May, 1999 to the Commissioner of Customs stating that they  had exported the goods subject matter of the two  consignments.  In the letter respondent No.1 stated that it  had failed to locate that exporter.  It was further stated that  efforts were made to find an alternative purchaser for the  goods which it had failed to arrange.  Request was made to  the Commissioner to grant permission to re-ship/re-export  the goods comprising the said consignments.  An advocate  named Shri Om Prakash Chowdhary of Kolkatta sent a  Power of Attorney purported to be executed in his favour by  respondent No.1 to the Commissioner of Customs, Kolkatta  and purported to represent respondent No.1 in the  proceedings by virtue of the said Power of Attorney.  It  appears that in view of the representation made on behalf of  respondent No.1 a supplementary show cause notice was  issued to the said respondent and its Director Shri Rajesh  Kumar Khattar on 11th February, 2000.  Vide order dated 1st  May, 2000, the Commissioner of Customs, Kolkatta  confirmed confiscation of goods, duty and the penalties  proposed in the show cause notice.  The Commissioner  found that the importer was guilty of misrepresentation of  facts and falsification of documents.  The import was  contrary to law and therefore the goods were liable for  confiscation. At this stage, it is noted that respondent No.1 had filed  a Writ Petition in the Kolkatta High Court while the  proceedings were still pending before the Commissioner of  Customs, Kolkatta.  At the initial stage the High Court had  passed an order giving four months’ time to the  Commissioner of Customs to adjudicate upon the show  cause notice.  However, the Writ Petition was disposed of on  5th July, 2000.  By that time the Commissioner of Customs  had already passed an order in the adjudication proceedings  arising out of the show cause notice.  The High Court  noticed that the party had a right of appeal against the said  order.  The Writ Petition was disposed of with the direction : " CEGAT, Eastern Bench will proceed only on  the point as to whether the petitioner is the  owner of the goods and the goods are entitled  to be re-exported.          The appeal will be preferred by the  petitioner within a period of seven days from

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the date of communication of this order and if  it is filed, it will be decided by the CEGAT,  Eastern Bench within a period of one month  from the date of filing of the appeal.          The matter is disposed of accordingly.   No order is passed as to costs."  

The Tribunal vide its order dated 20th November, 2000  allowed the appeals solely basing its judgment so far as the  question of re-export of goods is concerned on Union of  India versus Sampat Raj Dugar and others [ (1992) 2 SCC  66].  Further without assigning any reasons at all the  Tribunal set aside the penalties imposed on the various  parties by the Commissioner of Customs.  These appeals  are directed against the said judgment of the Tribunal.                     The learned Additional Solicitor General â\200\223 Mr. Mukul  Rohtagi appearing for the appellant submitted that the  Tribunal clearly misunderstood the order passed by the  Kolkatta High Court in as much as it considered that it had to  dispose of the appeal in terms of Dugar’s case (supra).  The  High Court while disposing of the Writ Petition filed by   respondent No.1 never directed the Tribunal to decide the  case as per Dugar’s case (supra).  The operative part of the  decision of the High Court has already been reproduced  hereinbefore and in our view it cannot be inferred from the  said decision that there is any direction to pass an order in  terms of Dugar’s case.  The learned Additional Solicitor  General then proceeded to distinguish the present case from  Dugar’s case.  His basic contention is that the present is a  case of fraud while in Dugar’s case it was not so. Secondly,  according to the learned counsel there is no valid import of  goods in the present case.  Rather the import is contrary to  law and Section 111(d) of the Customs Act, 1962 squarely  applies.  In this context, he further submitted that there is no  provision for re-export of goods in the Customs Act and  therefore there was no question of re-export being permitted.   It was pointed out that in Dugar’s case because of the  peculiar facts of the said case re-export was permitted in  equity.  The present case being a case of fraud and  misrepresentation, equity had no place and therefore  Dugar’s case cannot be treated as a precedent.         We have already noticed the facts of the present case.   The goods in question are in the restricted list under the  Import-Export Policy for the relevant period.  The import of  the goods in question is permitted only against a licence.   The licence is granted subject to the condition of re-export of  goods.  The importer had failed to comply with the condition  of re-export of finished or semi-finished goods, qua, the  imports already made under the same licence.  When the  consignments in question were imported, the importer did  not even turn up inspite of notice for fear of action regarding  the previous imports and likelihood of action being taken  regarding the current imports.  No licence was produced and  no bill of entry was filed to complete the process of  importation.  This rendered the import against the prohibition  imposed regarding the import.  As such Section 111(d) of the  Customs Act comes into play.  It clearly empowers  confiscation of the goods.  The action of the Department in  confiscating the goods was clearly in accordance with law.         It is to be found from the facts on record that  respondent No.1 surfaced only after the show cause notice  had been issued.  It put in appearance through an  advocate  purportedly appointed as an Attorney.  The actual party

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never came forward.  This gives rise to a suspicion that the  importer and exporter were same or they were acting in  collusion.  Respondent No.1 prayed for permission to re- export the goods.  In any case, the transaction leaves doubts  in the mind about its genuineness.  It gives an impression  that when the importer found itself to be in troubled waters,  the exporter was set up as a front to retrieve the situation.         It is also true that the Customs Act does not contain any  provision regarding re-export of  goods.  It gives power of  confiscation of goods which are illegally imported and for  various other reasons enumerated in Section 111 of the Act.

       From the facts of the case, we have seen that the  imported goods are in the list of restricted goods.  They  could be imported against valid advance import licence  issued by the authorities.  The licence against which the  import took place in the present case was found to contain  forgery.  This rendered the licence invalid.  As per conditions  of licence the goods were meant for re-export and they could  not be sold in India.  The importer was found to have  violated this condition of the licence in case of an earlier  import.  Fearing action in case of present import, the  importer did not even come forward to clear the goods.  No  body presented a Bill of Entry or took any other step to clear  the goods.  Thus the import was clearly contrary to law being  without a valid licence and in violation of  condition/restrictions imposed under the licence.  Section  3(1) of the Imports and Exports (Control) Act, 1947  empowers the Central Government to provide for prohibition,  restricting or otherwise controlling import and export of  specified goods.  Such an import clearly attracts the  provisions of Section 111 of the Customs Act and the  appellant was within its right to confiscate the goods in  question.

On the power of confiscation of goods imported  contrary to any prohibition or restriction under Section  111(d),  this court had occasion to observe in Sheikh Mohd.  Omer versus Collector of Customs,  Calcutta and  others  [  1970 (2) SCC 728 ] :

       "What clause (d) of Section 111 says  is that any goods which are imported or  attempted to be imported contrary to "any  prohibition imposed by any law for the time  being in force in this country" is liable to be  confiscated.  "Any prohibition" referred to in  that section applies to every type of  "prohibition".  That prohibition may be  complete or partial.  Any restriction on import  or export is to an extent a prohibition.  The  expression "any prohibition" in Section 111(d)  of the Customs Act, 1962 includes restrictions.   Merely because Section 3 of the Imports and  Exports (Control) Act, 1947, uses three  different expressions "prohibiting", " restricting"  or "otherwise controlling", we cannot cut down  the amplitude of the word "any prohibition" in  Section 111(d) of the act.  "Any prohibition"  means every prohibition. In other words all  types of prohibitions.  Restriction is one type of  prohibition."   

       On the question of breach of conditions contained  in the exemption notification by the importer, this court held

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in Sheshank Sea Foods Pvt. Ltd., Karnataka versus  Union of India and others  [(1996) 11 SCC 755 ] that :

"The communication of the Central Board  of Excise and Customs dated 13.5.1969,  refers to the breach of the condition of a  licence and suggests that it may not be  possible to take action under Section 111(o) in  respect thereof.  It is true that the terms of 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  licence, entitling the licensing authority to  investigate.  But the breach is not only of the  terms of licence, 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."

       In this case the goods imported by the appellant  were exempted from customs duty subject to the condition  that they would not be sold, loaned, transferred or disposed  of in any other manner.  The appellants had however  disposed of the goods.  It was observed that the customs  authorities had the power to take action under the provisions  of Section 111(o).

In Dugar’s case (supra) relied upon by the respondents,  this court had permitted re-export of goods in special  circumstances on equitable grounds.  The goods in that case  had been imported under a valid licence but had not been  cleared from customs.  This court was concerned with the  question whether import of the goods was contrary to law  and whether the goods were liable to confiscation under the  Customs Act.  After considering clauses (d) and (o) of  Section 111 of the Customs Act, this court took the view that  the said clauses were not attracted in the facts of the  case  and therefore the power to confiscate goods could not be  exercised.  It was in this background that the court also  considered the question of passing of property in goods in  favour of the importer and ultimately the foreign exporter was  permitted to re-export the goods.

The points of distinction between the present case and  Dugar’s case (supra) are that  the importer did not disappear  in that case. Rather it appeared before the Customs  Authorities and claimed the right to take delivery of goods.   The importer in Dugar’s case participated in adjudication  proceedings before the Customs Authorities and  during the  course of the proceedings the exporter appeared on its own  and pleaded that the goods be not confiscated as title in the  goods had not passed.  In Dugar’s case, there was a valid  import licence while in the present case it is not so.  There is  forgery on the licence which rendered the licence invalid.   Therefore, the import was without a licence.  This was  prohibited.  In Dugar’s case this court had held that none of  the clauses of Section 111 of the Customs Act were  attracted, the import being under a licence.  The import was  legal.  In the present case, the import is without a valid  licence and is clearly in violation of Section 111 (d) and (o) of  the Customs Act.  This is a clear distinction between Dugar’s

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case and the present case. Therefore, in our view Dugar’s  case can be of no help to the respondent No.1.

The learned senior counsel for respondent No.1 â\200\223 Shri  Rajeev Dhawan had argued that the exporter continued to  be the owner of the goods as the property in goods had not  passed.  The importer had not retired the document of title to  goods which were sent through the bank.  Therefore, it was  submitted that the exporter had title to the goods and was  entitled to re-export the goods.  In our view, this argument  has no merit so far as the facts of the present case are  concerned.  The present is a case of illegal import and  provisions of Section 111 (d) and (o) of the Customs Act  clearly apply. The goods are liable to confiscation.  The  considerations which are relevant under the sale of Goods  Act cannot be applied in the context of present facts.  

In support of his argument that the property in goods  had not passed, Mr. Dhawan, learned senior counsel for  respondent No.1, relied on Garden Silk Mills Ltd. versus  Union of India [ 1999 (113)E.L.T. 358 (S.C.) ].  On the basis  of this judgment, it was argued that the importation of  goods   had not been completed. In that case, the goods had not  crossed the customs barrier and had not become part of  mass of goods in India.  Hence, this judgment has no  relevance so far as the present case is concerned.  In the  present case, importation of goods was complete.  Further,  the present is a case where the appellant is invoking its  power to confiscate the goods and we are called upon to  decide whether appellant is entitled to exercise power under  Section 111 of the Customs Act to confiscate the goods.

It has been held by this Court in M.J. Exports Limited  and another versus the CEGAT, Bombay [ 1993 (Suppl.)1  SCC 169 ] that export of goods contrary to any prohibition  imposed under the law  for the time being in force will render  the goods liable to confiscation.  The same principle applies  

to illegal import.  The Import-Export Policy, 1988-91  permitted issuance of Open General Licence for import of life  saving goods.  Life saving equipment was imported from  Germany under the OGL after obtaining customs clearance  without payment of customs duty.  It was re-packed and  sought to be exported to the USSR under a contract.  It was  held that object of permitting import of life saving goods  being that the goods may be available for use in the country,  re-export thereof was prohibited by necessary implication by  or under the OGL.  Such goods being prohibited within the  meaning of Section 2(33), re-export thereof  rendered them  liable to confiscation  under Section 113(d) and penalty  under Section 114 of Customs Act.

       The result of the above discussion is that import of the  consignments in question being contrary to law, the goods  were liable to confiscation under Section 111 of the Customs  Act.  The order of confiscation of goods passed by the  Commissioner of Customs is held to be in accordance with  law.  We are unable to agree with the view taken by the  Tribunal in permitting re-export of the goods.  Further, the  Tribunal in its impugned order has waived the penalties  imposed by the Commissioner on respondents 3 to 7.  This  part of the order of the Tribunal is without any reasons.  The  Tribunal has not considered the evidence against these  persons which lead the Commissioner to impose the  penalties.  Nothing has been said in the order to justify

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waiver of the penalties.  Therefore, that part of the order of  the Tribunal also can not be sustained.  Accordingly, the  impugned order of the Customs Excise and Gold (Control)  Appellate Tribunal dated 20th November, 2000 is set aside  and the order of the Commissioner of Customs, Kolkatta  dated 1st May, 2000  is hereby restored.          The appeals are thus allowed with costs.