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PETITIONER: JAIN EXPORTS (P) LTD. & ANR.

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT05/05/1988

BENCH: MISRA RANGNATH BENCH: MISRA RANGNATH PATHAK, R.S. (CJ)

CITATION:  1988 SCR  (3) 952        1988 SCC  (3) 579  JT 1988 (2)   602        1988 SCALE  (1)1123

ACT:      Customs Act  1962: Sections  111 and  112 &  Import and Export Policy 1980-81 Appendix 9 Para 5 Entry 1-Coconut oil- ’Edible’ and  ’non edible’  i.e. commercial  or  industrial- Classification of-Canalised  goods-Determination  of-Whether Customs Collector  entitled to take view contrary to that of Board and Central Government.      Administrative  Law:   Quasi  judicial  tribunals-Lower authorities bound by decisions of higher authorities.      Natural justice-Extent  of opportunity of hearing to be given-Not  referable   to  the  quantum  of  the  stake  but relatable to the demands of the situation.

HEADNOTE:      The appellants are a Company and its Managing Director. The Company  imported two consignments of refined industrial Coconut oil.  The ships carrying the aforesaid cargo arrived at the  port of destination on 10th September, 1982 and 22nd September, 1982.  The appellant  No. 1  filed the  bills  of entry for  release of  the said  cargo in  the office of the Assistant Collector  of Customs.  Instead of  release of the cargo, notices  to show cause were received by the appellant on the  allegation that the import of industrial coconut oil was not  legal as it was a canalised item. The appellant No. I was  also called  upon to  show cause  as to why the cargo should not  be  confiscated  under  section  111(d)  of  the Customs Act  and also  as to  why he should be not penalised under Section 112 thereof.      The appellant  showed cause  and took  the  stand  that import of  industrial coconut  oil was  not banned under the import policy  of the  Government for  the relevant  period. When personal  hearing was afforded, it was also pointed out that the notices issued by Respondent No. 3 were the outcome of bias,  and that the Joint Chief Controller of Imports and Exports had taken undue interest in the matter.      By the  adjudication orders  dated 17th  December, 1982 and 20th  December, 1982,  the respondent  No. 3 came to the conclusion that 953 "coconut oil",  whether edible  or not, were canalised items and fell  within the  ambit of  Appendix 9  Para 5(1) of the Import Policy  of 1980-81,  and that it was also not an item

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under the  o.G.L. of  1980-81 Policy.  It was  held that the items that were imported were liable to be confiscated under section 111(d)  of the  Customs Act, but an option was given to redeem  the goods  on payment  of Rs.3  crores  and  Rs.2 crores respectively as redemption fines.      The appellants filed two Writ Petitions challenging the action of  the Collector. The Writ Petitions were heard by a Full Bench  of the High Court. Two Judges held that the writ petitions were liable to be dismissed, while the third Judge took the  view that  the action of the Collector was totally untenable and  that the writ petitions should be allowed and the order of the Collector should be set aside. The majority of the  Judges were  also of  the view  that the  quantum of redemption  fine   should  be   considered  by  the  Customs Appellate Tribunal.      In the appeals to this Court it was contended on behalf of the appellants: (1) The import policy of which year would be applicable-the  period during  which  the  licences  were issued or  the time  when import  actually took  place.  (2) Whether "coconut  oil" appearing  in para 5 of Appendix 9 of the Import  Policy of  1980-81 was  confined to  the  edible variety or  covered the  industrial variety.  (3) Whether in the face of the decision of the Board and Central Government as the  statutory appellate  and revisional  authorities, it was open  to the Collector functioning in lower tier to take a contrary  view of the matter in exercise of quasi judicial jurisdiction, and  (4) Whether  the orders  of the Collector were vitiated  for breach  of rules  of natural justice, and collateral considerations in the making of the order.      Dismissing the Appeals, ^      HELD: 1.  The  High  Court  has  come  to  the  correct conclusion that  the terms  of the  Import Policy of 1980-81 would apply to the facts of these cases. [957F]      In the  instant case,  the licences were either of 1980 or 1981  and were  revalidated from  time to time subject to the condition  that items  which do not appear in Appendices 26, 5  and 7  of the  Import Policy  of 1982-83  will not be imported.[957D]      2(a) Whatever  may have  been the reason for specifying ’edible  and   non-edible’  classification  in  1981-82,  if ’coconut oil’ takes within its 954 fold all  varieties, it  must follow  that in  1980-81,  all varieties of  coconut oil  were included  in paragraph  5 of Appendix 9. [958H;959A]      (b) If  ’coconut oil’  of the  industrial  variety  was covered by  paragraph 5 of Appendix 9 then it would not have been included  in Appendix 10 and, therefore, could not have been imported under OGL. [958C]      (c) In  Appendix 9, no classification of coconut oil is given and, therefore, all varieties of coconut oil should be taken as covered by the term. [958D]      (d) When  a customer  goes to  the market  and asks for coconut oil  to buy,  he is  not  necessarily  supplied  the edible variety.  Coconut oil  is put  to less  of edible use than non-edible. [958E]      (e) The  S.T.C. was  not competent  to bind the customs authorities in  respect of  their statutory functioning, and if on  actual interpretation it turns out that ’coconut oil’ covered  what   the  appellants   have  imported,  the  fact situation cannot  take a  different turn  on account  of the letter of the S.T.C. At the most, it may have some relevancy when the  quantum of  redemption fine  is considered  by the Tribunal. [959C-D]

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    3. In  a tier  system, undoubtedly  decisions of higher authorities are  binding on  lower  authorities  and  quasi- judicial  Tribunals  are  also  bound  by  this  discipline. However, what  the  Court  is  now  concerned  with  is  not disciplining the  Collector in  his quasi-judicial  conduct, but to ascertain what the correct position in the matter is. [959H;960A-B]      4. The  observance of  Rules of  Natural Justice is not referable to  the fatness  of the  stake but  is essentially related to  the demands  of a  given situation. The position here is  covered by  statutory provisions  and  it  is  well settled that  Rules of  Natural Justice  do not supplant but supplement the law. [960D-E]      Broome v. Cassell & Co., [1972] 1 AER 801 referred to.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal Nos. 2705 & 5383 of 1985.      From the  Judgment and  Order dated  20.12.1984 of  the Delhi High Court in Writ Petition No 4037 and 4038 of 1982.      L.M. Singhvi,  Kailash Vasdev,  G.L. Rawal, Ms. Neerja, Sandeep Narain,  R. Narsimha.  Abhishek Manu  Singhvi and C. Mukhopadhya for the Appellants. 955      T.S.K.M. Iyer,  R.P. Srivastava  and C.V.S. Rao for the Respondents.      The Judgment of the Court was delivered by      RANGANATH MISRA,  J. These  appeals by  certificate are directed against  the common judgment of a full Bench of the Delhi High  Court dated  December  20,  1984,  in  two  writ petitions  under   Article  226  of  the  Constitution.  The appellants are  respectively  a  Company  and  its  Managing Director. The  Company was the holder of Letter of Authority in respect  of three  licences for  import of coconut oil in one case  and of two licences in the other and was appointed Letter of  Authority Holder in respect of the said licences. It imported  two consignments  of 5342.369 Mts. and 3002.557 Mts. of  refined industrial  coconut oil  from Sri Lanka and the delivery  port was Kandla. The respective ships carrying the aforesaid  cargo arrived  at the  port of destination on 22nd  September,   1982,  and   10th  September,  1982,  and appellant No.  1 filed the bills of entry for release of the said cargo  in the  office of  the  Assistant  Collector  of Customs at  Kandla. Instead  of release  of the cargo on the basis of  steps taken  by appellant  No. 1,  notices to show cause were  received by  appellant No.  1 on  the allegation that import  of industrial  coconut oil  was not legal as it was a canalised item. The appellant No. 1 was called upon to show cause  as to why the cargo may not be confiscated under section 111(d) of the Customs Act as also why the appellants may  not   be  penalised  under  section  112  thereof.  The appellants showed  cause and  took the  stand that import of industrial coconut  oil was  not  banned  under  the  Import Policy of  the Government  for the  relevant period  and the premises upon  which the authorities had proceeded to direct issue of  show cause  was factually untenable. When personal hearing was  afforded, on  behalf of  the appellant No. 1 it was pointed  out that  the notices  by respondent No. 3 were the outcome of bias and the said statutory authority had not applied his  own mind  to the  matter in controversy. It was also  pointed   out  that   Shri  Takhat  Ram,  Joint  Chief Controller of  Imports and  Exports had taken undue interest in the  matter to  the prejudice  of the  appellants and had

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brought to bear upon the statutory authority pressure to act against the interests of the appellants. By the adjudication orders dated  17th December,  1982 and  20th December, 1982, the respondent  No. 3  came to  the conclusion that "coconut oil, whether  edible or  not, were  canalised items and fell within the  ambit of  Appendix 9  para 5(1)  of  the  Import Policy of  1980-81. It  was not  an item under the O.G.L. of 1980-81 Policy".  Respondent No.  3 further held that either of the consignments was covered by the import 956 licences produced  by the  appellants  and  was,  therefore, liable to be confiscated under section 111(d) of the Act but gave an  option to  appellant No.  1 to  redeem the goods on payment of  Rs.3 crores  and  Rs.2  crores  respectively  as redemption fines.  On 27.12.1982  two  writ  petitions  were filed in  the High  Court of Delhi challenging the action of the Collector.  The said  writ petitions were finally placed before a  Bench of  three-Judges of  the High  Court; two of them being  Sachar and  Khanna, JJ.,  came to  hold that the writ petitions  were liable  to be dismissed while the other Judge being  Wad, J.  took the  view that  the action of the Collector was  totally untenable  and that the writ petition should be  allowed and  the order of the Collector should be set aside.  The majority  of the  learned Judges were of the further view  that the  quantum of redemption fine should be considered by  the Appellate  Tribunal. Sachar, J. with whom Khanna J. concurred, directed:           "I would  in the circumstances remit the matter to           the Appellate Tribunal but only on the question of           consideration  of   the  question  of  quantum  of           redemption fine. The Appellate Tribunal could hear           and dispose of this matter as if it was hearing an           appeal filed  by the  petitioners but, only on the           question of quantum of redemption fine." In the  absence of  any challenge, this part of the order of the  High   Court  has  become  final  and  has  to  operate irrespective of the fate of the two appeals.      The following  common contentions have been advanced by learned counsel for the appellants:                (1) The  import policy of which year would be           applicable to  the facts  of the  present case-the           period during  which the  licences were  issued or           the time when import actually took place.                (2) Whether "coconut oil" appearing in para 5           of Appendix  9 of the Import Policy of 1980-81 was           confined to  the edible  variety  or  covered  the           individual variety.                (3) Whether  in the  face of  the decision of           the Board  and Central Government as the statutory           appellate and  revisional authorities, it was open           to the Collector functioning in lower ties to take           a contrary view of the matter in exercise of quasi           judicial jurisdiction; and 957                (4) Whether  the order  of the  Collector was           vitiated for  breach of  rules of natural justice,           and collateral considerations in the making of the           orders. It is  not in  dispute that the relevant import policy to be referred to  is of the year 1980-81 as all the licences were issued during  that period. The Collector found and the High Court has  not recorded  a different  finding that  when the licence   was   first   revalidated   on   18.1.1982,   such revalidation was  subject to  paragraph 215  of  the  Import Policy of  1981-82. Again  while revalidating  some  of  the

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licences on  25.9.1982, it  was stipulated  that during  the extended period, items which do not appear in Appendix 5 and 7 of  Import Policy  of 1982-83  could not  be allowed to be imported and items which appear in Appendix 26 of the Import Policy of  1982-83 will  also not be allowed to be imported. The Collector turned down the plea that the licences allowed the import of items appearing in Appendix 5 and 7 of 1979-80 policy and 1982-83 policy in addition to the items appearing in the  OGL and Industrial coconut oil. In the instant case, the licences  were of  either  of  1980  or  1981  and  were revalidated from  time to time. For convenience we may refer to  a   sample  order   of  revalidation   dated  28.6.1982. Revalidation was subject to the following conditions:           "This licence  is revalidated for a further period           of six  months from  the date of revalidation with           the condition  that during  the extended period of           validity the items which do not appear in Appendix           5 and  7 of  the Import Policy of 1982-83 will not           be imported.  This licence  will also not be valid           for the  import of  items appearing in Appendix 26           of  the   Import  Policy  of  1982-83  during  the           extended period of validity."      The High  Court has come to the correct conclusion that the terms of the import policy of 1980-81 would apply to the facts of these cases.      The basic  question is  whether at  the relevant  time, import of coconut oil had become canalised through the State Trading Corporation (’STC’ for short). Rule 3 of the Imports (Control) Order,  1955 made  under the  Imports and  Exports (Control) Act, 1947 provides:           "3(1) Save as otherwise provided in this order, no           person shall  import in  case of  the descriptions           specified  in  Schedule  I  except  under  and  in           accordance with the licence 958           or a  custom’s clearance  permitting grant  by the           Central Government  or by any officer specified in           Schedule II." Para 5 of Appendix 9 ran thus:           "In  the  case  of  the  various  items  mentioned           therein, import  will be  made only  by the  State           Trading Corporation  of  India  on  the  basis  of           foreign exchange released by the Government in its           favour. The items mentioned therein are."      It  is   thus  clear  that  if  ’coconut  oil’  of  the industrial variety was covered by paragraph 5 of Appendix 9, then it  would not  have been  included in  Appendix 10 and, therefore, could not have been imported under OGL.      In Appendix  9, no  classification of  coconut  oil  is given and; therefore, all varieties of coconut oil should be taken as  covered by  the term.  There is no warrant for the assumptions that item 1 of paragraph 5 of Appendix 9 covered only the  edible variety when ’coconut oil’ as such has been mentioned. It  is not  disputed that  ’coconut oil’  without anything more  could cover  both the edible as also the non- edible (commercial or industrial) varieties. When a customer goes to  the market  and asks  for coconut oil to buy, he is not necessarily  supplied the edible variety. Coconut oil is put to less of edible use than non-edible. Reliance has been placed on the entry in the Import Policy of 1981-82 where in paragraph 5 of Appendix 9 it has been said thus:           "In the  case  of  the  following  items,  whether           edible of  non-edible, import will be made only by           the S.T.C. ...........                (1) Coconut oil............................."

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         "All other  oils/seeds,  whether  edible  or  non-           edible,  not   specifically  mentioned   above  or           elsewhere in  this policy,  will also  be imported           only by S.T.C. under these provisions."      In our  view no  support can  be had for the contention advanced by  appellants’ learned  counsel from the change in the language  of paragraph  5 in  the Import  Policy of  the subsequent year.  Whatever may  have  been  the  reason  for specifying ’edible  and non-edible’  classification in 1981- 82, if  ’coconut oil’ takes within its fold all varieties of it, it must follow that in 1980-81, all varieties of coconut oil were 959 included in  paragraph 5  of  Appendix  9.  It  is,  in  our opinion, unnecessary  to refer to authorities and precedents to support such an obvious conclusion.      Similarly   no    support   is   available   from   the communication by  way of  reply received  by the  appellants from the  S.T.C. to the effect that import of edible coconut oil alone was canalised through it. When the question before us is as to what exactly was the ambit of the entry No. 1 in paragraph 5  of appendix  9, the letter of the S.T.C. has no light to  throw and  the matter  has to  be  ressolved  with reference  to   broader  aspects  than  the  letter  of  the Corporation. Nor  can  that  letter  or  the  representation contained therein  be used  to build  up a plea of estoppel. The S.T.C. was not competent to bind the customs authorities in respect  of their  statutory functioning and if on actual interpretation it  turns out that ’coconut oil’ covered what the appellants have imported, the fact situation cannot take a different  turn on  account of the letter of the S.T.C. At the most,  it may  have some  relevant when  the quantum  of redemption fine  is considered  by the  Tribunal in terms of the direction of the High Court.      Massive arguments  were built up by learned counsel for the appellants on the basis that the decision of the Central Board and the Central Government rendered in similar matters were binding on the collector and he could not have acted to the contrary.  Several precedents have been cited during the hearing. In  a tier  system, undoubtedly decisions of higher authorities are  binding on  lower  authorities  and  quasi- judicial Tribunals are also bound by this discipline.      In Broome  v. Cassell  and Co.,  [1972] 1  AER 801, the Lord  Chancellor   delivering  the   opinion  of  the  House observed:           "I hope it will never be necessary to say so again           that in  the herichical  system  of  courts  which           exists in  this country,  it is necessary for each           lower tier,  including the  Court  of  Appeal,  to           accept loyally the decisions of the higher tiers." This Court  in Kaushalya  Devi  Bogra  v.  Land  Acquisition officer,  [1984]   2  SCC  324  has  clearly  approved  this position. There  is  aubundance  of  authority  that  quasi- judicial tribunals too are bound by this rule.      That, however,  does not  assist the appellants at all. It may  be that  the Collector  of Customs  should have felt bound by the decision of 960 the Board  or the  Central Government  but  the  matter  has passed that  stage. What  we are  now concerned  with is not disciplining the Collector in his quasi-judicial conduct but to ascertain  what the  correct position  in the  matter is. Very appropriately,  appellants’  learned  counsel  has  not found fault with the High Court for not following the quasi- judicial opinion  of the Board or the Central Government nor

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has he  pleaded for acceptance of that by us as a precedent. Once on  analysis we reach the conclusion that ’coconut oil’ of every  description was covered in paragraph 5 of appendix 9, the  quasi-judicial decision  ceases to  be relevant.  We propose to say no more on this aspect of the submission.      What  survives   for  consideration   is  the  argument relating to  the vice  of breach  of natrual justice and the vice of collateral pressure of the Import Authorities in the making of  the order. We must frankly state that this aspect of the argument has not at all impressed us. It has not been disputed that  show cause  notices were  issued,  cause  was shown and considered by the statutory authorities. It may be that more  of opportunities  than extended  were expected by the appellants in view of the fact that large stakes were in issue. The observance of the Rules of Natural Justice is not referable to  the fatness  of the  stake but  is essentially related to  the demands  of a  given situation. The position here is  covered by  statutory provisions  and  it  is  well settled that  Rules of  Natural Justice  do not supplant but supplement the law.      We have  not been  able  to  find  any  breach  in  the compliance of  the statutory  procedure. We are not inclined to agree  that the role played by Sri Takht Ram vitiated the order of the Collector.      All  the   contentions  fail  and  these  appeals  are, therefore, dismissed.  The respondents are entitled to their costs throughout. S.L.                                 Appeals dismissed. 961