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PETITIONER: UNION OF INDIA & ORS,

       Vs.

RESPONDENT: SECURITY AND FINANCE (P) LTD.

DATE OF JUDGMENT06/10/1975

BENCH: KRISHNAIYER, V.R. BENCH: KRISHNAIYER, V.R. GUPTA, A.C.

CITATION:  1975 AIR 2288            1976 SCR  (2)  87  1976 SCC  (1) 166

ACT:      Import controls-Power  to determine  the head  or Entry under which  any particular  commodity falls  under sections 3(2) and  4 of  the Import  and Export  (Control) Act (1947) read with  section 167 (entry 8) of the Sea Customs Act (Act VIII) 1878.      Sea Customs  Act (Act  VIII) -Sections  20, 167,  183 & 184-whether an appropriate order under section 183 precludes the  authorities   from  levying   duty  under  section  20- Interpretation of  two penal  provisions of  the import laws and powers of the authorities

HEADNOTE:      The respondent  company imported auto cycle parts under the guise  of motor  vehicle parts,  for which only he had a valid license  under the  Import laws. In respect of certain consignments of  imports from U.K the customs authorities by a single order dt. 14-11-1955 passed the following:      (i) acting  under section  167(8) of the Customs Act it gave an  option to  the respondent  to pay  fine in  lieu of confiscation of  the goods under section 182 and (ii) acting under sections  183 and  20 of  the Customs  Act to  pay the differential duty between auto parts and the motor parts.      The respondent  challenged this  order before  the High Court on  the ground  that once  the power under section 183 has been  exercised the  authorities had no further-power to levy the  differential duty.  The High  Court while quashing the order  imposing penalty in lieu of confiscation directed payment of  the import  duty ordinarily livable for the auto cycle pedals  imported. Against  this view of the limitation on the  powers of  the Collector,  the Union  came by way of special leave, while allowing the appeal the Court, ^      HELD: (1)  It  is  primarily  for  the  Import  Control Authority to  determine the  head or  entry under  which any particular commodity  falls. Of  course  if  a  construction adopted by  the authority regarding the concerned entry were per verse,  or grossly  irrational, then  the Court could or would undoubtedly interfere. [88 D].      "Ganga Setty’s case, A.I.R. 1963 S.C. 1319. followed".      (ii) The  scheme of  the Sea  Customs Act  reveals that Import/export duty  is an  obligation/cast by  section 20 of

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the Act.  It is a tax, not a penalty; it is an innocent levy once the  eligible event occurs: it is not a punitive import for a  contravention of  the law.  Confiscation, penalty and fine provided  for under ss. 167 (Item 8) and 183 are of the species  of  punishment  for  violation  of  the  scheme  of prohibition and control [89 G].      (iii) Two  legal consequences  followed the importation of pedals, uncovered by any license viz. (1) the importation attracted duty  which any  importer licit  or illicit had to pay the  moment customs  barrier was  crossed and  (ii)  the commission of  the offence  of importing  pedals  without  a licence trapping  the respondent  in the  coils of  S.  167, entry 8  inviting the  jurisdiction of  the  authorities  to exercise their powers under ss. 182 or 183. [89 H, 90 A].      (iv) The  order dual  in  character,  although  clubbed together in  a single  document is  valid and  it  does  not preclude the  authorities levying  duty  under  section  20, since obligation  under section  20 is  independent  of  the liability u/s 183. Non-felicitous and inept expressions used in the  order are perhaps apt to mislaid, but the intendment is clear  that what  was done,  was  not  confiscation,  but giving an  option to  pay a  quantified fine  in a places of confiscation The  order was  a composite  one, and  is quite legal. [90 D, 91 B-D]. 7-L 1276SCI/75 88      Collector of  customs v.  H. S.  Mehra A.I.R. 1964 Mad. 504: Shewpujanrai  Indrasanrai  Ltd.  v.  The  Collector  of Customs, [1959] S.C.R. 821 referred to

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal No. 897 of 1968.      Appeal by Special Leave from the Judgment & order dated the 24th July, 1967 of the Delhi High Court in L.P.A. No. 54 of 1967.      G. L. Sanghi and Girish Chandra for the Appellants.      S. S. Javali (Amicas Cariae) for the Respondent.      The Judgment of the Court was delivered by      KRISHNA IYER,  J. The  respondent imported  Auto  Cycle Pedals under  the guise  of motor vehicle parts for which he had secured  the relevant  licence. These  two articles  are different from  the point  of view  or the  law  controlling imports. As laid down in Ganga Setty’s case(1) by the Court, it  is   primarily  for  the  Import  Control  Authority  to determine the  head or  entry  under  which  any  particular commodity falls. Or course, if a construction adopted by the authority regarding  the concerned  entry were  perverse, or grossly  irrational,   then  the   court  could   and  would undoubtedly interfere.  In the  present case  the High Court has held that the view of the Customs officials could not be considered perverse  and  has  declined  to  set  aside  the impugned order on that score.      Even at this stage it is appropriate to quote the order under challenge which runs:           "M/s.  The   Security  and   Finance  Ltd.,  Delhi      imported from  U.K. the above-mentioned goods for which      they did  not possess  a valid  Import  licence  issued      under Serial  No. 301/Pt.IV  of  Import  Trade  Control      Schedule. The  importation was  therefore considered as      unauthorised. The  importers  were  therefore  in  this      Custom Memo No. S24C 1276/55A dated 30-9-55 called upon      to show  cause why  the goods should not be confiscated

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    and penal  action take  under s. 167(8) Sea Customs Act      read  with   Section  3(2)  of  the  Import  &  Exports      (Control) Act.  In reply  to the  said show cause Memo,      the Clearing Agents of the importers produced a licence      for Motor  Vehicles parts,  and claimed  release of the      goods against  the said  licence. They  further  stated      that similar  consignment has been released in the past      against similar  licence. Furthermore, no public Notice      has been  issued to  the effect  that Auto Cycle Pedals      will not  be allowed  clearance against  Motor  Vehicle      Parts licence. The arguments so advanced are not accept      able. The  importers did  no,  avail  of  the  personal      hearing offered to them in the said show cause memo.                            ORDER           The importation  of the above goods without proper      licence is  prohibited under sections 3(2) and 4 of the      Import &  Export (Control) Act of 1947 and Notification      issued thereunder. I accordingly confiscate the goods (1) A.I.R. 1863 S.C. 1319 89      under section  167(8)  Sea  Customs  Act.  In  lieu  of confiscation I  gave an option under section 183 ibid to the importers to  clear the  goods on  payment of  a fine of Rs. 22,600/- (rupees  twenty two  thousand  six  hundred  only). Customs duty and other charges as leviable on the goods will have to  be paid  in addition  before these could be cleared out of customs control. ... Dated 14-11-55.                                      Sd/                                    Dy. Collector of Customs" Even so,  the Court  quashed the  latter limit  of the order under  challenge  which  had  imposed  penalty  in  lieu  of confiscation and,  on top  or it,  directed payment  of  the import duty  ordinarily leviable  for the  auto cycle pedals imported.      The only ground which led to this fatal consequence was that the  authorities, acting under s 183 of the Sea Customs Act, 1878  (Act VIII  of 1878)  (for short, the Act), had no further power  to direct  the importer-petitioner  i.e., the respondent,  to   pay  excess   duty  which  represents  the difference between  what  is  leviable  for  motor  vehicles spares and  auto cycle  pedals Aggrieved by this view of the limitation on  the powers  of the  Collector of  Customs the appellant i.e,  the Union  of India, has come up this Court, after securing  special leave  to appeal. The respondent was not represented  by counsel and since the point involved was one of  law and  the amount  involved not inconsiderable, we requested Shri  Javali, Advocate, to serve as amicus curiae. He has  argued the  case with  ability  and  we  record  our appreciation of  his services  to the Court. Indeed, but for his close  scrutiny of  the order of the Deputy Collector of Customs we  would not  have perceived  the mix-up  and other defects he highlighted in his submissions.      We  have  already  stated  that  a  fine,  in  lieu  of confiscation, had  been imposed by the Collector of Customs. This he  did, under  s. 183 of the Act, but not content with that imposition  he also  directed the  payment of  the full duty on  the goods  imported as  condition precedent  to the clearing of the goods out of the ’customs control’.      Does the  order under  s. 183 preclude him from levying duty under s. 20? This is the short issue before us. A close study of  the scheme  of the relevant provisions, powers and levies discloses  a clear  dichotomy which  has escaped  the attention of  the  High  Court.  Import/export  duty  is  an obligation cast  by s.  20 of  the Act.  It is  a tax, not a penalty; it  is an  innocent levy  once the  exigible  event

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occurs. it  is not  a punitive impost for a contravention of the law.  Confiscation. penalty  and fine provided for under ss. 167  (item 8)  and 183  are of the species of punishment for violation of the scheme of prohibition and control. Once this   distinction   and   duality   are   remembered,   the interpretative process simplifies itself.      Admittedly, the respondent imported pedals uncovered by any  licence.   Two   legal   consequences   followed.   The importation attracted  duty which  any  importer,  licit  or illicit, had to pay the moment 90 customs barrier was crossed. Secondly, the commission of the offence of  importing pedals  without a  licence caught  the offender in  the coils  of s.  167, entry  8,  inviting  the jurisdiction of  the authority  prescribed under  s. 182  to confiscate the  goods or, alternatively, to impose a fine in lieu  of   confiscation,  under   s.  183,   of  course,  if confiscation is  resorted to,  the title vests in the State, as provided in s. 184.      Import duty  has to  be paid inevitably in these cases, by the  importer. Confiscation or fine in lieu thereof is an infliction on  the offender  or circle  of offenders falling within s.  167, Entry  8. Some times, the burden in both the cases, falls  on the  same person.  At other times, they may fall on  different persons.  In some  cases the  importer as well as the confiscate may be identified and so the duty and the penalty may be imposed validly. In other cases it may be difficult to  get at  the actual  person who imported or was concerned in  the offence  of importation  contrary  to  the prohibition or  restriction clamped down by the law. In that event, only  confiscation and,  alternatively, fine,  may be imposed.      Viewed in  this perspective, the answer to the question that arises  for decision is simple. In the present case, as held by the High Court, the respondent did import auto cycle pedals outside the permit or licence. He is therefore liable to pay  import duty  normally leviable from pedal importers. He his  admittedly transgressed the provisions of Entry 8 of s. 167  by importing  goods not  covered by  the licence and therefore comes within the penal complex set out in ss. 182, 183 ;  and 184.  In the  present case, the Deputy Collector, the competent authority, has chosen to give the owner of the goods,  the   respondent,  option   to  pay,   in  lieu   of confiscation, a  fine. He has not confiscated the goods and, therefore, s.  184 is  not operational  in this  context. In short, the  obligation under  s. 20  is independent  of  the liability under  s.  183.  The  order,  dual  in  character, although clubbed together in a single document, is therefore valid in entirety. Even so, the confusion has been caused by the Deputy Collector failing to keep distinct the two powers and the  two liabilities  and thereby  leading to  avoidable jumbling.      Shri Javali  rightly exposed  the order impugned to the actinic light  of criticism by pointing out that this rolled up order  suffers from  several infirmities,  apart from its unspeaking brevity. The Deputy Collector does not state that he is levying duty on the importer qua importer under s. 20. He does  grievously err in the first breath confiscating the goods (in  which case the title vests in Government under s. 184) and  in the very next directing payment of fine in lieu of confiscation.  Both cannot co-exist. Moreover, he forgets that s.  167, entry  8, empowers, apart from confiscation of the offending  goods, a penalty also which is independent of the fine  in s.  183, in lieu of confiscation. This confused and  laconic   order  only  highlights  the  need  for  some

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orientation course  in law  for officers who are called upon to exercise judicial powers and write reasoned orders. 91      However, we are prepared to gather from the order under attack   two levies  imposed in  exercise  of  two  distinct powers, as  earlier explained. The import duty has been made a condition  for the  clearance of  the goods. This is right and it  is impossible  to say  that the  said payment is not justified by s. 20. Likewise, the authority, when it imposed a fine,  was exercising  its power  under  s.  183.  We  can readily see that he did not mean to confiscate the goods. He only proposed  to confiscate  and proceeded to fix a fine in lieu thereof.  Non-felicitous and  inept expressions used in the order  are perhaps apt lo mislead, but the intendment is clear that  what was done was not confiscation but giving an option to  pay a  quantified fine  in place of confiscation. The order  was a  composite one,  when read  in the sense we have explained,  and is  quite legal. Therefore we reach the conclusion that  the appellant  is entitled  to win  and the High Court was in error.      The line  of reasoning  which has  appealed  to  us  is echoed in  a decision  of the  Madras High Court reported as Collector of Customs v. S. Mehra(1). Ramachandra Iyer, C.J., speaking for  the Bench,  has explained  the legal  position clearly and  we agree  with it.  Two decisions of this Court were referred  to before  the High  Court and,  indeed,  the decision of  the High  Court proceeded  on the  footing that those  two   decisions  concluded  the  matter.  The  Madras decision distinguishes-and  for right reasons, if we may say so with respect-those two rulings of this Court. They do not apply to  the facts of the situation before us. On the other hand, both  those cases  deal with quantities of gold seized from persons  as smuggled goods. How they were imported, who were involved  in the  import, and  who could, therefore, be made liable  for import  duty, were  left blank in those two cases. Therefore,  the conditions  imposed  by  the  customs authorities  for   payment  of  import  duty  could  not  be supported. We  will go  into a little more detail to explain those two decisions and their non-applicability to the point we are discussing. We may state that neither of them decides that once  a find  in lieu  of confiscation  is imposed, the power to  levy duty under s. 20 is deprived if. It is not as if the authorities could not exercise both‘the powers, where the facts attracted both s. 20 and ss. 182 to 184.      In Shewpujanrai  Indrasanrai Ltd.  v. The  Collector of Customs(2) this Court had to consider an order passed by the Collector under  the Sea  Customs Act in respect of smuggled gold. An option to pay a fine of Rs. 10,00,000/- was ordered but the  Collector tied  it up with ‘ two conditions for the release of the ’confiscated gold’. One was the production of a permit  from the  Reserve Bank  of India in respect of the gold and  the other was the payment of proper customs duties in respect  of the gold. Both the conditions were held to be illegal by  this Court.  It was conceded-in that case by the learned Solicitor General that there was no provision in the Foreign Exchange Regulation Act or the Sea Customs Act under which the  Reserve Bank  could give permission in respect of smuggled gold with retrospective effect. What (1) A.I.R. 1964 Mad, 504. (2) [1959] S.C.R. 821. 92 is more,  if it  could, there  would be  no offence under s. 167, entry  8, and the order of confiscation itself would be bad. As  to the second condition of payment of customs duty, there was no finding by what. means the gold was smuggled-by

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sea or  by land-and therefore ii was difficult to see how s. 88 which  was sought  to be pressed into service could be of any help.  Indeed, the  decision of the Bombay High Court in Hormasji Elavia v. The Union of India(1) had been brought to the notice  of the  learned Judges,  where customs  duty was held payable  under s. 88 of the Sea Customs Act, but it was distinguished on  the score  that in that case the goods had been tracked  down as smuggled through the port of Kantiajal without payment  of any duty and, in those circumstances, it was held  that s.  88 applied.  the manner  of import,  once identified the  power to  levy duty could be exercised under the appropriate  Act. Therefore,  Shewpujanrai (supra) is no authority for  the proposition  that import  duty cannot  be levied once fine in lieu of confiscation is imposed.      The later  decision in  Amba Lal  v. Union  of India(1) also is  of no.  assistance. That  also related  to smuggled gold. The  Collector of  Customs imposed  conditions for the release, in  that case,  of the confiscated gold. Though the order was  struck  down  on  a  concession  by  the  learned Additional Solicitor  General, on  the facts as disclosed in that case,  the contraband  goods. were  recovered by search from the  appellant’s house,  but the  authorities could not establish by  any evidence  that the  seized  articles  were imported into India after the customs barrier was put up for the first  time between  India and  Pakistan. It is obvious, therefore, that  import duty  could not  be levied from tale person from whom the seizure was effected.      The case  before  us  stands  clearly  on  a  different footing and  the order imposing fine in lieu of confiscation and also  levying import  duly is  good. We allow the appeal but. in  the circumstances  of the  case. there  will be  no order as to costs S.R.                                         Appeal allowed. (1) Cr. Appl. 1296 of 1953 decided on 18-8-1953. (2) [1961] 1 S. C. R. 933. 93