Matraco (India) Limited vs Union Of India (Uoi) And Ors.
2003 Latest Caselaw 1077 Bom

JUDGMENT

V.C. Daga, J.

1. The petitioners by the present petition seek to challenge validity and constitutionality of a Public Notice No. 82 (ITC)/PN/88-91 dated 29th November, 1988 and para 5 of Appendix-6 of Import and Export Policy April 1988-March 1991 ("said policy" for short) and the order in original dated 23rd March, 1989 as well as the order of respondent No. 3, the Customs, Excise and Gold (Control) Appellate Tribunal ("CEGAT" for short); whereby the redemption fine in lieu of confiscation was reduced from Rs. 9 lakh to Rs. 4.5 lakh holding that the petitioners were entitled to a benefit of doubt on the facts and circumstances of the case.

FACTS:

2. The brief facts leading to the petition are as under:

The petitioners are a company engaged in the import of several items. In or about September 1988, one Mr. Ashok Gupta, Director of the petitioner company visited Hong Kong for the purpose of business and placed an order with M/s. Easmesco International Corporation, Hong Kong (hereinafter referred to as the "Suppliers" for short) for an aggregate quantity of 91 M.T. i.e. 7 containers of 13 M.T. each of Cassia of Chinese Origin.

3. Out of the total quantity of 91 M.T., the order of 2 containers (26 M.T.) was placed on behalf of M/s. Agro Impex, order of 1 container (13 M.T.) was placed on behalf of M/s. Oriental Containers and order for the balance 4 containers (52 M.T.) was placed on behalf of the petitioners. As regards the 3 containers booked in the name of M/s. Agro Impex and M/s. Oriental Containers, the Suppliers insisted upon the payment by irrevocable letter of credit. However, since the petitioners had imported a consignment of citric acid from the same Suppliers somewhere in January 1988 on payment on document basis i.e. without a letter of credit, the Suppliers agreed to ship cassia without insisting upon the letter of credit being opened by the petitioners. On 29th September, 1988, the Suppliers issued proforma invoice in favour of the petitioners for 4 containers aggregating 52 M.T. of Cassia of Chinese Origin being confirmation of the order placed on behalf of the petitioners.

4. On the basis of the said proforma invoice dated 29th September, 1988, the petitioners made applications to the Plant Protection Advisor to the Government of India and Directorate of Plant Protection Quarantine and Storage, Faridabad, as required under para 104 of the said policy. The requisite permits were issued to the petitioners on 26th October, 1988 and 3rd November, 1988 much prior to the issuance of public notice dated 29th November, 1988.

5. The petitioners state that on 28th November, 1988 the said goods were shipped on vessel "Ocean Strength" as 4 different consignments under respective bills of lading and covered by 4 separate invoices of the suppliers. The said goods arrived at Bombay in January 1989 and the petitioners filed 4 bills of entry for warehousing.

6. The petitioners state that they claimed clearance of the said goods under Open General Licence ("OGL" for short) in terms of description given against Serial No. 62(ii) of Appendix-6, List-8, Part II of the said policy, whereby Cassia could be imported by all persons for stock and sale. The said description at Serial No. 62(ii) continued to exist in the said policy under OGL until the same was deleted by a Public Notice No. 82 (ITC)/PN/88-91 dated 29th November, 1988 issued by respondent No. 4, the Chief Controller of Imports and Exports. By virtue of para 3 of the said public notice, it was notified that, inter alia, import of Cassia by eligible importers would not be permitted under OGL except to the extent of irrevocable letters of credit already opened before the date of impugned public notice, for which the shipments are made within a period of 90 days therefrom. The petitioners state that the impugned public notice was published in the Gazette of the Government of India and was made available for sale to the public on 7th December, 1988.

7. The petitioners further state that nearly for a period of two months the customs authorities did not allow clearance of the said goods without furnishing any reasons. The petitioners were, therefore, compelled to file Writ Petition No. 596 of 1989 in this Court, wherein this Court while rejecting the petition vide order dated 15th March, 1989 directed the customs authorities to issue show cause notice and adjudicate upon the matter by 27th March, 1989. The petitioners state that though the relevant bills of lading were dated 28th November, 1988 and the impugned public notice was dated 29th November, 1988, the customs authorities by show cause notice dated 16th March, 1989 alleged that the actual date of shipment of the said goods was 19th December, 1988 and not 28th November, 1988 as entered on the relevant bills of lading, as such the import of the said goods was not covered by OGL and, therefore, considered the said import as unauthorised. It was also alleged that the petitioners had obtained and presented antedated bills of lading and, thereby, were liable for penal action. In support of the allegations made in the show cause notice, the customs authorities purportedly relied on a letter dated 18th February, 1989 of the steamer agents of the shipping company M/s. Orient Shipping Agency Private Limited, Bombay.

8. On 20th March, 1989, the petitioners by their Advocate's letter replied to the said show cause notice, inter alia, submitting that the letter dated 18th February, 1989 on which the customs authorities were relying upon revealed that the said goods were delivered to the agents of shipping company on 27th November, 1988 and were due for shipment to Bombay on vessel "City of Edinborough", but on account of force majeure circumstances, the same were shipped on 19th December, 1988 by vessel "Ocean Strength".

9. The respondent No. 2, the Additional Collector of Customs vide order-in-original dated 23rd March, 1989 rejected the contention of the petitioners and held that the import of the said goods was unauthorised and not permissible under OGL. He, however, gave an option to the petitioners to redeem the said goods on payment of fine of Rs. 9 lakh and also imposed penalty of Rs. 2 lakh on the petitioners.

10. Being aggrieved and dissatisfied by the above order dated 23rd March 1989, the petitioners preferred an appeal to CEGAT. In the meantime, the petitioners by letter dated 13th April, 1989 addressed to the steamer agents M/s. Oriental Shipping Agency Pvt. Ltd. requested for an explanation/clarification as to how the relevant bills of lading came to be issued. In reply to the above letter, the steamer agents by their letter dated 10th May, 1989 explained that the said goods were to be shipped per vessel "City of Edinborough" from Hong Kong on 27th November, 1988, but the containers were shut out due to non-availability of cargo space and, therefore, the said goods were shipped on 19th December, 1988 on vessel "Ocean Strength". The steamer agents also forwarded a copy of correction advice dated 17th February, 1989 issued by the shipping company M/s. Mitsui O.S.K. Lines Ltd., which also revealed the facts as stated by the steamer agents in their letter dated 10th May, 1989. The petitioners also obtained a certificate dated 26th April, 1989 from M/s. Onward Cargo Service, Hong Kong, certifying that the 4 containers containing the said goods were loaded from Sherzan in China on 27th November, 1988 and delivered to M/s. Mitsui O.S.K. Lines Ltd., Hong Kong on the same date. In spite of the aforesaid facts, submissions and evidence put forth by the petitioners, the CEGAT by an order dated 9th November, 1989 rejected petitioners appeal but reduced the redemption fine to Rs. 4.5 lakh and set aside the penalty of Rs. 2 lakh.

11. Aggrieved by the aforesaid order of the CEGAT, the petitioners invoked writ jurisdiction of this Court under Article 226 of the Constitution of India.

THE SUBMISSIONS:

12. The learned Counsel appearing for the petitioners submitted that a letter of credit is merely a mode of payment. It is an added guarantee/security for the suppliers, but with development of trust and credit-worthiness between the parties to the transaction, letter of credit, can be dispensed with. In the instant case, since the petitioners already had transaction with the suppliers on documents on payment basis, there was no need for the parties to the contract to provide for opening of a letter of credit. He submitted that a contract without letter of credit is as good commitment as a contract with letter of credit. A letter of credit is not a sine qua non for establishing confirmed commitment.

13. Learned Counsel for the petitioners submits that in the instant case the proforma invoice was dated 29th November, 1988. The permits, which were issued by a Department of Government of India, were dated 26th October, 1988 and 3rd November, 1988. These permits were mandatory and condition precedent for import of the said goods. Besides this, there were third party documents in the form of letters of steamer agents, carriers and forwarders and the correction advice of the shipping company to show that the said goods had left China, which is the country of origin, for their destination i.e. Bombay on 27th November, 1988 and were in fact due to be loaded and shipped on the same date per vessel "City of Edinborough", however, on account of force majeure circumstances like shut out of cargo, which is common in international shipping, the same could be loaded only on 19th December, 1988. The learned Counsel, therefore, submits that prior to the issuance of impugned public notice dated 29th November, 1988 and even much prior to the date of availability of the said public notice i.e. 7th December, 1988, the contract between the petitioners and the suppliers had been entered into and in furtherance thereof certain irreversible steps had taken and non-fulfilment of the contract on the part of the petitioners would have entailed civil and penal consequences and damages upon the petitioners.

14. Learned Counsel for the petitioners submits that condition relating to opening of letter of credit has no nexus with the object except protecting the firm commitments. Even without opening letter of credit, it is evident beyond doubt that the entire transaction commencing from the contract until the shipment of the said goods was a genuine and real. Therefore, there is no warrant or justification in law to penalise the petitioners for not opening a letter of credit.

15. Learned Counsel for the petitioners submits that shipment of the said goods has in any event taken place within 90 days from the date of the impugned public notice. There has been no variation in the contract in the import of the said goods and at any time whatsoever. He, therefore, submits that the condition relating to the opening of letter of credit is arbitrary, unreasonable and violative of Article 14 of the Constitution of India. He further submits that there cannot be difference between two importers only on the basis of the difference in terms of payment. In his submission, the impugned public notice seeks to create two classes of importers of Cassia, one who has opened an irrevocable letter of credit and the other who has not done so. This classification is not based on any intelligible differential, in as much as, the fact that the commitments in each case are firm and irrevocable and be established independently, as had been done in the present case by the petitioners.

16. Learned Counsel for the petitioners submits that the consignments of the said M/s. Agro Impex and M/s. Oriental Containers were cleared unconditionally by the customs authorities merely because their imports were against a letter of credit. This was in spite of the fact that both of them had imported the goods under bills of lading dated 18th November, 1988 and on the same vessel "Ocean Strength". He submits that the confiscation of goods and imposition of redemption fine on the said goods in the case of petitioners is discriminatory and hence contrary to the fundamental rights guaranteed under Article 14 of the Constitution. He submits that condition as regards opening of a letter of credit amounts to imposition of unreasonable restriction on the petitioners fundamental rights to carry on trade and business. He submits that as long as the import of the said goods by the petitioners and/or transaction relating thereto is genuine, real and based purely on commercial considerations, the petitioners cannot be compelled to open an irrevocable letter of credit and face penal consequences for failure to do so.

17. Learned Counsel for the petitioners further submits that admittedly the said goods are of Chinese origin. It is also evident that the said goods had left Sherzan in China for the destination to Bombay on 27th November, 1988, as such 27th November, 1988 is the correct date of shipment of the said goods. Therefore, the import of the said goods is prior to the issuance of the impugned public notice and not affected by the amendment made thereunder. In his submission, the import of the said goods is valid, proper and authorised under OGL in terms of Serial No. 62(ii) of Appendix 6, List 8, Part II of the said policy. Learned Counsel for the petitioners submits that the said goods were handed over to the steamer agents/shipping company at Hong Kong on 27th November, 1988, as such the date of issue of bills of lading as 28th November, 1988 is correct. This is also corroborated by the correction advice of the shipping company (Exhibit 'P' to the petition) which only corrects the endorsement of "loaded on board" but the date of issue of bills of lading remains 28th November, 1988. He, therefore, submits that in terms of para-82 of the Hand Book of Import and Export Procedure 1988-1991, 28th November, 1988 is the date of shipment of the said goods.

18. Learned Counsel for the petitioners submits that the CEGAT has misconstrued and/or misinterpreted the provisions of paras 82 and 86 of the said Hand Book and, therefore, the order dated 9th November, 1989 is liable to be set aside. He submits that mere reduction in the redemption fine by the CEGAT from Rs. 9 lakh to Rs. 4.5 lakh is contrary to the law laid down by this Court. The learned Counsel submits that having come to the conclusion that there was no deliberate attempt on the part of the petitioners to present ante-dated bills of lading and having regard to the fact that clearance of the consignments of M/s. Agro Impex and M/s. Oriental Containers imported under similar circumstances, except under a letter of credit, was allowed unconditionally by the customs authorities, there was no justification to the CEGAT in retaining the redemption fine of Rs. 4.5 lakh on the said goods. He, therefore, submits that the impugned order passed by the CEGAT is ex facie, patently erroneous and contrary to the prevailing legal position and, therefore, liable to be set aside.

PER CONTRA:

19. Mr. Rana, learned Counsel appearing for the revenue, in order to support the impugned order of the CEGAT, submitted that the public notice dated 29th November, 1988 is legal and valid. In consequence of the said public notice eligible importers, who had not opened and established their irrevocable letter of credit before the date of the said public notice i.e. 29th November, 1988 and for which shipments were not made within a period of 90 days from the date of the said notice, were not entitled to import, inter alia, Cassia under OGL. He submits that admittedly in the present case the petitioners did not open and establish irrevocable letter of credit on or before 29th November, 1988. He further submits that admittedly the ship carrying the goods of the petitioners sailed from Hong Kong on 19th December, 1988. He pointed out that according to the note available on record M/s. Orient Shipping Agency Pvt. Ltd. by their letter dated 18th February, 1989 informed the Assistant Collector, SIIB, Bombay that the correct date of the "loaded on board bill of lading" should be read as 19th December, 1988 which was the date on which the imported goods were loaded on Board "Tokyo Bay under the Voy No. 90530". In the circumstances, he submitted that the goods imported by the petitioners were shipped on the said date i.e. 19th December, 1988 that is to say after the date of the said public notice dated 29th November, 1988. In this premise, learned Counsel for the revenue submits that the import of Cassia by the petitioners was hit by the public notice dated 29th November, 1988, as such the petitioners were not entitled to import Cassia under OGL. He, therefore, submits that the order of the Additional Collector dated 23rd March, 1989 confiscating the goods imported by the petitioners but allowing them to redeem the said goods for home consumption on payment of redemption fine is proper and valid order. For the same reasons and on the strength of the same submission, he also tried to support the order of the CEGAT dated 9th November, 1989 and strongly refuted the submissions advanced by the learned Counsel for the petitioners and contended that the petitioners deliberately presented ante-dated bills of lading, as such this cannot be said to be a case, wherein the bona fides of the petitioners can be said to have been established.

CONSIDERATION:

20. Having heard the parties at length and perused the record and proceedings, one thing is clear that the Appellate Authority has found that the petitioners are bona fide importers and that there was no deliberate attempt on the part of the petitioners to present antedated bills of lading. Having held that there is no lapse on the part of the petitioners, the goods imported by the petitioners could not be confiscated and, consequently, the redemption fine could not be levied. It is the contention of the petitioners that having accepted that the redemption fine levied is not justified, the CEGAT could not have merely reduced the redemption fine from Rs. 9 lakh to Rs. 4.5 lakh. The petitioners have rightly contended that the order of the CEGAT is self-contradictory and suffers from contradiction which can be seen from the findings recorded in para 15 of the order. Para 15 of the impugned order specifically records the finding, "there is no worthwhile evidence presented by the department to show that there had been a deliberate attempt on the part of the appellants to present an ante-dated B/L". The CEGAT, however, went on recording finding that even the documents on the basis of which adjudication of proceeding has been initiated i.e. the letter from the steamer agents, clearly indicates that the cargo has been received by the Shipping Lines at Hong Kong as early as in the month of November. It is further recorded by the CEGAT that evidence produced by the petitioners shows the date of receipt from the Shipping Lines at Hong Kong is 27th November, 1988 which was not in dispute. In the circumstances, the CEGAT was pleased to hold that it is possible that the date of issue of bill of lading is 28th November, 1988 but the date of loading has been wrongly shown by mistake on the part of the clerk endorsing loading date on the bill of lading. It is thus clear that a mistake on the part of the clerk of the shipper has been accepted by the CEGAT. Thus finding of fact is not a subject-matter of challenge at the instance of revenue. The finding of fact recorded by the CEGAT that there is no presentation of ante-dated bills of lading is also not challenged by the revenue. In the result, the CEGAT was pleased to reduce redemption fine from Rs. 9 lakh to Rs. 4.5 lakh. In this backdrop, if there is a bona fide mistake on the part of the shipper or the clerk of the shipping agency, we fail to understand as to how the petitioners can be penalised for that even by reducing the redemption fine. Secondly, if there was no attempt on the part of the petitioners to present ante-dated bills of lading, and on the facts of the finding of fact recorded by the CEGAT that the goods were received by the shipping lines as early as in the month of November 1988, how one can reach to the conclusion that the entire transaction was undertaken subsequent to the issuance of public notice dated 29th November, 1988. It is no doubt true that irrevocable letter of credit was not established by the petitioners but that by itself cannot be a ground to say that the concluded contract which was entered into by the petitioners was not a genuine contract. The condition relating to the opening of the irrevocable letter of credit put in the public notice was to prevent the importers entering into an import contract subsequent to the public notice but if on the strength of the genuine material available and accepted by the CEGAT if the petitioners have to establish that their transaction to import goods was genuine transaction and was not based on any manipulation then, in that event, the CEGAT was not justified in levying redemption fine, though reduced to the extent of 50%.

21. The petitioners relied upon the judgment of the Apex Court in the case of M/s. B. Vijaykumar & Co. v. Collector of Central Excise and Customs, in Civil Appeal Nos. 4445 and 4446 of 1988 arising out of S.L.P. No. 6666 and 11721 of 1988, wherein the Apex Court ruled that having regard to the findings of the Tribunal that import of goods was bona fide, the Collector of Central Excise and the Tribunal were not justified in either confiscating the goods or imposing redemption fine. The said judgment was followed by this Court in the case of Dimexon v. Union of India, 1989(44) E.L.T. 226; wherein also this Court set aside the confiscation of goods and redemption fine. The learned Counsel for the petitioners, relying upon the aforesaid judgments, submits that the order of the CEGAT is erroneous self-contradictory and contrary to the law laid down by the Apex Court.

22. We do not propose to base our judgment on the basis of M/s. B. Vijaykumar & Co. (cited supra) because that case was decided by the Apex Court on the peculiar facts of that case. However, once the finding of fact is reached that the goods were handed over for export to India to a shipper on 27th November, 1988 i.e. well before the issuance of public notice dated 29th November, 1988 and accepted by the revenue, in that event that is no justification on the part of the CEGAT to impose redemption fine. The CEGAT having accepted the date of issuance of relevant bills of lading as 28th November, 1988 and also the import of the goods being bona fide and the delay in shipment being totally beyond the control of the petitioners, the redemption fine of Rs. 4.5 lakh in lieu confiscation does not meet the ends of justice.

23. In the result, for the reasons recorded hereinabove, the impugned order dated 9th November, 1989 passed by the CEGAT is set aside. Writ Petition No. 315 of 1990 is allowed. Rule is made absolute in terms of this judgment.

24. Since we have set aside the order of the CEGAT, it is not necessary to decide the legality and validity of the public notice dated 29th November, 1988 or the validity of para-5 of Appendix-6 of the said policy, though the petitioners were seriously challenging legality and validity of the said instruments on the touch stone of Article 14 of the Constitution of India.

25. Since we are allowing the petition, it will be necessary to make consequential order. Under interim order of this Court dated 21st February, 1990 the petitioners were directed to pay redemption fine of Rs. 2.25 lakh and furnish security by way of bank guarantee in the sum of Rs. 2.25 lakh of the nationalised bank. The petitioners would be entitled to refund of Rs. 2.25 lakh and shall also be entitled to return of bank guarantee with necessary endorsement for cancellation thereof, so as to enable them to submit it to their bankers. Accordingly, we direct the respondents to refund the amount of Rs. 2.25 lakh and to return bank guarantee to the petitioners with necessary endorsement for cancellation, within six weeks from today. In the event of delay in refund, the same shall carry interest at the rate of 6% per annum after expiry of six weeks till refund in full and final.

W.P. No. 1551/1990 :

26. So far as the second petition filed by the petitioners being Writ Petition No. 1551 of 1990 is concerned, the petitioners are challenging levy of interest on the customs duty payable by the petitioners on four consignments of Cassia imported by them which remained in the bonded warehouse for a period beyond three months. The petitioners submit that the goods remained in bonded warehouse for no fault of the petitioners. The petitioners submitted that on 10th February, 1989, at the time of warehousing, it was noted on each of the aforesaid 4 bills of entry: "ex-bonding not to be allowed pending 'no objection' SIIB regarding ITC angle". According to the petitioners, during the adjudication proceeding the petitioners were prevented from getting the goods released and, subsequently, they were not allowed to get the same released, as such the petitioners were required to obtain necessary interim order pending Writ Petition No. 315 of 1990. Pursuant to the order dated 21st February, 1990 passed by this Court in that writ petition, the petitioners filed bills of entry for ex-bond clearance for home consumption. However, at that stage, the respondents insisted on charging interest on the customs duty payable by the petitioners on the ground that the said goods remained in bonded warehouse beyond the period of three months. As the petitioners were in urgent need of the said goods, it appears that the petitioners paid interest of Rs. 75,056/- in respect of bill of Entry No. 003527.

27. As a matter of fact, in our opinion, the said amount of interest could not have been recovered by the respondents from the petitioners on the face of interim order passed by this Court. If at all the respondents wanted to levy interest, then, they ought to have approached this Court and ought to have got the interim order modified. It was not open for them to read something more in the interim order and insist upon payment of interest, especially, when the matter was sub-judiced. In this view of the matter, the demand for interest was unjustified. Even otherwise, since we have quashed and set aside imposition of redemption find and directed refund of fine paid by the petitioners we also hold that the respondents were not entitled to charge and recover interest in the sum of Rs. 75,056/- in respect of Bill of Entry No. 003527, as such petitioners would be entitled to refund of the same amount of interest. The respondents are, therefore, directed to refund the petitioners the amount of interest paid by them in the sum of Rs. 75, 056-within six weeks from today. In the event of delay in payment of said interest amount, the same shall carry interest at the rate of 6% per annum after expiry of six weeks till payment in full and final.

28. In the result, Writ Petition No. 1551 of 1990 is allowed. Rule is made absolute in terms of the above order.

Accordingly, both the petitions stand disposed of with no order as to costs.