C.D. Mining & Export Company (P) ... vs Union Of India
1992 Latest Caselaw 350 Del

JUDGMENT

D.P. Wadhwa, J.

(1) The petitioner is in appeal. Its petition filed under Article 226 of the Constitution was dismissed though partly by a learned Single Judge of this Court by judgment dated 9 August 1978. The petitioner had sought quashing of the order dated 18 May 1972 of the Government of India in the Ministry of Finance, Department of Revenue and Insurance, passed in revision under the provisions of the Customs Act, 1962 (for short 'the Act').

(2) We will come to the sequence of the events a little later and would note the substantive part of the order of the Collector of which revision was filed before the Government of India. The Collector held that: (1) goods imported were classifiable as stainless steel sheets under Item 63(20A) ICT; (2) the import licenses originally produced for the clearance of the goods were thus not valid; (3) M/s. Satyanarayana Khaitan Pvt. Ltd. (original name of the appellant) deliberately misdeclared the goods to evade the duty and to pass the goods under the licenses which were not valid. The goods were, thus, held liable to confiscation under Section 111(d) and also under Section 111(m) of the. Act, and further that the importers were liable to penalty under Section 112 of the Act for improper importation f the goods. Consequently, the Collector set aside the order of clearance made earlier by the customs authorities under Section 47 of the Act when the goods were assessed under Item 63(2) Ict as stainless-steel angles as per bill of entry, and consequently the Collector ordered the confiscation of the goods(which had been seized after clearance) under Section 111(d)of the Act read with Section 3(2) of the Imports and Exports Control Act, 1947 and the Import (Control) Order, 1955 as also under Section 111(m) of the Act. Option was, however, given to the owners under Section 125 of the Act to pay a fine of Rs. 21 lakhs in lieu of confiscation. Personal penalty of Rs. 4 lakhs was also imposed. The Collector also raised a demand of Rs. 6,13,741.59 being the duty of customs short levied on the goods when they were classified under Item 63(20A) and not under Item 63(2) ICT.

(3) By its order the Government of India held that the goods which had been imported were liable to duty as 'strips' under Entry 63(14) Ict read with Notification No. 118 of 1962, but at the same time it was observed that differential duty could not be allowed to appellant as there was no claim made by it within the time limit of six months, and redemption fine of Rs. 10 lakhs was also levied on the appellant. The Government of India also remitted in full the personal penalty imposed by the Collector. In fact the revision had been partly allowed by the Government of India. The petitioner had claimed that the goods imported were stainless steel 'angles' classifiable under Item 63(2) ICT. Collector of Customs held the goods to be classifiable as stainless steel 'sheets' under Item 63(20A) ICT. This order by the Collector is dated 7 February 1971 and was made under Section 130 of the Act. It was against this order that a revision was filed under Section 131 of the Act on which impugned order dated 18 May 1972 was passed by the Government of India.

(4) The learned Single Judge directed refund of the difference in duty which had been collected as per order of the clearance at the rate of 27-1/2% ad valorem and that held by the Government of India at the rate of 10 % ad valorem. The redemption fine of Rs. 10 lakhs was quashed with liberty, however, to reimpose that fine in the light of the observations made in the judgment inasmuch as it was noticed that under the proviso to Section 125 of the Act such fine could not exceed the market rate of the goods on confiscation. The learned Single Judge did not agree with the appellant that there was no jurisdiction for confiscation when personal penalty had been remitted. He said that two provisions, Sections 111(d) and 112, were independent of each other and that the order of confiscation of improperly imported goods was not dependent on the personal penalty under Section 122 but it was otherwise. Section 122 deals with adjudication of confiscation and penalties.

(5) When this appeal was admitted an interim order was made on 15 January 1979 as under : "C.M.872178. Counsel for the petitioner say that on page 28 of the judgment under appeal and page 185 of the paper book, the learned Single Judge has observed that, according to the counsel, the value of the goods imported was Rs. 8,25,335.00 and in which the petitioners/ appellants were entitled according to the rules, 7-1/2% profit and thus, the market value of the goods would not be more than Rs. 8,87,870.00 . The learned Counsel for the appellant submits that refund ofRs.l,45,155.00 was due to the appellant as per the orders of the Central Government as passed in consequence of the judgment under appeal, will not be withdrawn by the appellant and that this should be treated as an undertaking by the appellant. Deducting this amount from Rs. 8,87,870.00 , the net bank guarantee by the appellant, therefore, to be furnished by the appellant is Rs. 7,42,715.00 . The appellant give bank guarantee for the above amount and shall keep it alive till the disposal of the appeal. The amount of Rs. 10 lakhs be refunded to the appellant on his undertaking to continue the bank guarantee till the disposal of the appeal. Bank guarantee will be in favor of the Collector of Customs, Bombay, who is dealing with this case. On his furnishing the bank guarantee, the refund will be made by the Government within 2 weeks to the appellant. Appellant seems to have filed certain documents which were not a part of the writ petition. He may file an application for the admission of the additional documents. Collector of Customs, dealing with this case will proceed to determine the market value of the goods in question on the relevant date. We (He ?) will not proceed to pass the final orders."

(6) We may note at the outset that we are considering the provisions of the Act as it stood at the relevant time.

(7) Two import licenses were issued in favor of M/s. Mineral and Metals Trading Corporation of India Ltd. Among various items which could be imported, one of the items was stainless steel angles. The Mineral and Metals Trading Corporation of India Ltd. "authorized to permit" the petitioner to import the goods covered under these two licenses. The petitioners as importers imported what it described as stainless steel angles from Japan. The goods arrived at Bombay and the petitioner submitted a bill of entry for clearance of the goods. Description of the goods in the bill of entry was given asunder : Stainless Steel Angle. 63(2) 6" x6" X 10' 6"" X 6i" X 10' 7" + 7"" x 10'

(8) The lables attached to the cases in which the goods were imported, however, showed the following dimensions of the goods : Swg 26 ... 12" x 10' Swg 26 ... 13" x 10' Swg 26 ... 15" X 10'

(9) After submission of the bill of entry, process of clearance of the goods started. The Dock Appraiser, the Scrutinising Appraiser and the Principal Appraiser accepted the description of the goods as given in the bill of entry. The Assistant Collector of Customs also considered the matter and was of the opinion that the article imported was stainless steel angles. The goods were assessed to customs duty under Section 63(1) ICT and an order of clearance was made on 17 March 1969. The import duty was paid on the following day and the goods were also cleared under Section 47 of the Act at the same time from the customs and stored in a private godown in Bombay. A part of the goods thereafter had also been dispatched to Delhi. The Scrutinising Appraiser had also obtained the opinion of three experts when he had shown them cut samples of the goods imported and it is stated that these experts were told that the total length of the imported item was ten feet.

(10) Two days after the clearance of the goods the Assistant Collector of Customs issued a short levied notice to the petitioner claiming difference in duty that paid under Item 63(2) Ict (27"%) and that payable under Item 63 (29) Ict (50%). The difference of duty amounted to Rs. 1,86,628.72. The petitioner disputed and said the goods had been rightly classified under Item 63(2) and no extra duty as claimed was payable.

(11) On 3 April 1969 the Assistant Collector seized the goods from the godown where these had been stored. The goods which had been sent to Delhi were also detained there. Petitioner says that after the seizure of the goods the customs authorities again obtained opinion of those three very experts from whom opinion had been obtained earlier. This was done without the knowledge and at the back of the petitioner.

(12) On 17 July 1969 Collector of Customs, Bombay, Issued a notice under Section 130 of the Act proposing to set aside the order of clearance made in regard to the goods in question and proposed to confiscate the same under Sections 111(d) and 111(m) of the Act. He also proposed to impose a fine of Rs. 27 lakhs and a penalty of Rs. 4 lakhs under Section 112 of the Act. It was also proposed to recover the amount of duty alleged to be short levied and was stated to be amounting to Rs. 6,13,841.59. The show cause notice said that the goods imported were stainless steel sheets and not stainless steel angles. Adjudication proceedings were held and the Collector passed the order on 7 February 1971 which has been noticed above. A revision was then filed before the Government of India which modified the order of the Collector and which has also been noticed above. In the writ petition filed against the order of the Government of India the learned Single Judge partly allowed the petition and this fact has also been mentioned above.

(13) Various contentions have been raised before us by Dr. Shankar Ghosh appearing for the petitioner (appellant) :

1.A show cause notice under Section 130 of the Act can be issued only by the Central Board of Excise and Customs (the Board) and whole of the proceedings were, therefore, incompetent. .

2.Assuming the Collector of Customs had jurisdiction, he could exercise his power only if on the basis of the record before him as it existed at the time of clearance of the goods. He could examine that record for the purpose of satisfying himself as to the legality or propriety of the order for clearance of the goods. The Collector could not rely on any enquiry made subsequent to that. His satisfaction had to be based on the basis of the original record till the date of clearance of the goods.

3.After the goods had been cleared for home consumption the customs authorities had no jurisdiction to confiscate the same;

4.Petitioner was not given full opportunity and it asked for certain material which was not disclosed to it;

5.A fine of Rs. 10 lakhs had been imposed but under Section 125 of the Act fine could not be more than the market value of the imported goods.

6.Proceedings under Section 130 are quasi criminal proceedings and the finding has to be beyond any reasonable doubt, and if two views could be possible, jurisdiction had to be exercised in favor of the party (importer).

7.The impugned orders ignored the evidence on record that the stainless steel angles imported could be used in hospitals as angles and a wrong approach was adopted that unless angles could be used for house building or construction work, it would not be angles. Relevant material produced by the petitioner was ignored. Section 130 gives powers of revision of the Board :

"(1)The Board may of its own motion or on the application of any aggrieved person call for and examine the record of any proceeding in which an officer of customs has passed any decision or order under this Act (not being an order passed in appeal under Section 128) for the purpose of satisfying itself as to the legality or propriety of any such decision or order and may pass such order thereon as it thinks fit: Provided that no order enhancing any penalty or fine in lieu of confiscation or confiscating goods of greater value shall be passed under this section unless the person affected by the proposed order . has been given a reasonable opportunity of showing cause against it: Provided further that where the Board is of opinion that any duty of customs has not been levied or has been short-levied, no order levying or enhancing the duty shall be made unless the person affected by the proposed order is given notice to show cause against it within the time-limit specified in Section 28. (2) No decision or order passed by an officer of custom shall be revised under this section by the Board of its own motion and no application for the revision of any such decision or order shall be entertained, after the expiry of two years from the date of such decision or order."

(14) Under Section 152. the Central Government may by notification direct that subject to such conditions, if any, as may be specified in the notification, any power exercisable by the Board under the Act shall also be exercisable by the Collector of Customs empowered in that behalf by the Central Government. Admittedly, the Notification-Cus. No. 101/64 dated 1 July 1964, was issued by the Government of India under Section 152 of the Act delegating the power of the Board of review under Section 130 of the Act to the Collector of Customs. We. therefore, find no substance in the submission of the petitioner that Collector of Customs could not exercise powers of review under Section 130 of the Act.

(15) In support of the second submission Dr. Ghosh referred to a decision of the Supreme Court in The State of Kerala v. KM. Charta Abdulla and Co., . In this case Commercial Tax Officer was authorized, either suo motu, or on application in cases in which an appeal did not lie to him, to exercise revisional jurisdicition. Sub-section (2) of Section 12 of the Madras General Sales Tax Act which is relevant is as under : "(2)The Deputy Commissioner may- (i) Suo motu, or (ii) in respect of an order passed or proceeding recorded by the Commercial Tax Officer under Sub-section (1) or any other provision of this Act and against which no appeal has been preferred to the Appellate Tribunal under Section 12-A, on application, call for and examine the record of any order passed or proceeding recorded under the provisions of this Act by any officer subordinate to him for the purpose of satisfying himself as to the legality or propriety of such order, or as to the regularity of such proceeding, and may pass such order with respect thereto as he thinks fit."

The Court said as under : "THERE is no doubt that the revising authority under Section 12 may only call for the record of the order or (.he proceedings, and the record alone may be scrutinised for ascertaining the legality or propriety of an order or regularity of the proceeding. But there is nothing in the Act that for passing an order in exercise of his revisional jurisdiction, if the revising authority is satisfied that the subordinate officer has committed an illegality or impropriety in the order or irregularity in the proceeding, he cannot make or direct further enquiry. The words of Sub-section (2) of Section 12 that Deputy Commissioner " may pass such order with respect thereto as he thinks fit" mean such order as may in the circumstances of the case for rectifying the defect be regarded by him as just. Power to pass such order as the revising authority thinks fit may in some cases include power to make or direct such further enquiry as the Deputy Commissioner may find necessary for rectifying the illegality or impropriety of the order or irregularity in the proceeding. Hence, conferment of power to make further enquiry in cases where after being satisfied about the illegality or impropriety of the order or irregularity in the proceeding, the revising authority thinks it just for rectifying the defect to do so does not amount to enlarging the jurisdiction conferred by Section 12(2)."

(16) We do not think it is necessary for us to analyze this judgment and examine the provisions of the Madras General Sales Tax Act vis-a-vis those of the Customs Act, 1962. There is sufficient material for the Collector of Customs to exercise his power under Section 130 of the Act. The experts had given opinion on cut samples shown to them and not on the basis of full length of the imported article. Description of the goods given in the bill of entry did not tally with that given on the cases in which the goods had been imported. There is therefore, no merit in this contention of the petitioner.

(17) Reference was then made to Bench decision of the Delhi High Court in Jain Sudh Vanaspati Ltd. and Another v .Union of India and Others F1982 E Lt 43 (Del)] and that of the Bombay High Court in Union of India &0rs. v. Popular Dyechem, [1987 (28) E.L.T. 63 (Born)]. In Jain Sudh Vanas. pati case a Bench of this Court held that an order under Section 47 is one of the orders against which a revision can lie under Section 130 of the Act. This section required that before revising an order the party affected should be heard In that case after clearance of the goods for home consumption under Section 47 of the Act notices were issued under Sections 28 and 124 of the Act. The Court held that the notice under these sections amounted to review of the order of the proper officer under Section 47 and these notices were contrary to law and were, therefore, set aside. In Popular Dyechem case the Bombay High Court relying on the decision of this Court in Jain Sudh Vanaspati case observed that where the goods have been cleared under Section 47 of the Act these could not be confiscated except in contemplation of an order in pursuance of an order passed in revision under Section 129D of the Customs Act, 1962 This section is akin to old Section 130 of the Act.

(18) Under Section 47 of the Act when the proper officer makes an order permitting clearance of the goods for home consumption it cannot be said to have final when action under Section 130 of the Act is either taken or proposed to be taken while issuing a show cause notice. Goods which are brought from a place outside India shall be liable to confiscation on various grounds mentioned in Section 111 of the Act. Grounds (d) and (m) which are as under are relevant : "(D)any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force. (m) any dutiable or prohibited goods which do not correspond in any material particular with the entry made under this Act or in the case of baggage with the declaration made under Section?? in respect thereof."

(19) The show cause notice under Section 130 of the Act was issued on these two grounds. The word "entry" appearing in ground (m) has been defined under Sub-section (16) of Section 2 of the Act. In that "entry" in relation to goods means an entry made in a bill of entry, shipping bill, etc. Then under Section 112 of the Act, if any person, who in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111, shall be liable to penalty prescribed therein. Under Section 125, whenever confiscation of any goods is authorized by the Act, the Collector of Customs could give to the owner of the goods an option to pay in lieu of confiscation such fine as he thought fit, but then such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon. We, therefore, see no force in the argument of the petitioner that the Collector of Customs or the Government of India could not confiscate the goods if contravention of Section 111 was there.

(20) With reference to fourth ground of attack, we find this is how the Collector of Customs dealt with the same :- "DURING the course of personal hearing the. Counsel for importers made a request for a copy the notes recorded by the Scrutinising Appraiser, the Principal Appraiser and the Assistant Collector (S/Shri V.R. Gangurde, V.D. Gupte and K. Sankar Raman respectively) which were referred to by the Counsel at the time of their examination as defense witnesses. At the request of the Counsel for the importers, these nothings were permitted to be shown to the witnesses to refresh their mind to enable them to answer questions put to them fully. These notes are in the nature of confidential communications and discussions between officers of the Deptt. and cannot be disclosed to outside parties in public interest. I therefore do not accede to the request made by the Counsel for a copy of the aforesaid notes."

(21) We do not think that Collector was at all justified in declining the request of the petitioner on the plea mentioned by him. It is not that the Collector said that the documents of which inspection was sought were not relevant. We find the request had been declined on a spacious plea of public interest which was nowhere there. The petitioner, therefore, rightly said that it had suffered prejudice in the case. The Government of India do not appear to have given much thought to this submission.

(22) On the fifth ground the learned Single Judge accepted the contention of the petitioner and directed the Collector to reassess the amount of fine in lieu of confiscation in terms of Section 125 of the Act. The petitioner, therefore, cannot have any grievance on this score.

(23) Adjudication proceedings under the Act may lead to confiscation of goods and imposition of penalty. These are, thus, quasi criminal in nature.

(24) In Shanti Prasad Jain and Another v. The Director of Enforcement Fera, and Another, , enquiry was set afoot against the appellant under Section 4 of the Foreign Exchange Regulation Act, 1947. Certain penalties imposed on the appellant were contravening the provisions of that Act. The Court held that. it was only right to observe that the proceedings under the Act were quasi criminal in character and it was the duty of the respondents as prosecutor to make out beyond all reasonable doubt that there had been violation of the law.

(25) In Amba Lalv. Union of India and Others, Air 1961 Supreme Court 264, the Court observed that relevant provisions of the Sea Customs Act and the Land Customs Act were penal in character, and that the appropriate customs authority was empowered to make an enquiry in respect of an offence alleged to have been committed by a person under those Acts, summon and examine witnesses, etc., where an offence was committed, make an order of confiscation of the goods in respect of which the offence was committed and impose penalty on the person concerned: The Court held that if so, the burden of proof was on the customs authorities and they had to bring home the guilt to the person alleged to have committed a particular offence under the said Acts and by adducing satisfactory evidence.

(26) An order of administrative authority or quasi authority is liable to challenge if it takes into account irrelevant material or ignores relevant material. When the consequences may result in deprivation of property, these authorities have to act fairly, reasonably and- in a just manner. It is not for us while sitting in a writ jurisdiction to reappraise the evidence, nor we think we are entitled to do so. But then the authorities have to act on sound principles which are now .well entrenched in the administrative law. In the present case, we think these principles have been violated making us interfere in the matter.

(27) If we now refer to the impugned order of the Government of India it says the goods were stainless steel strips while the Collector says these were stainless steel sheets. Government of India has held that it could not be that the action of the petitioner in staling the goods to be stainless steel angles could be held to be an attempt at evasion of duty since the stainless steel strips are liable to a low rate of duty than the stainless steel angles. Victoria Jubilee Technical Institute, Bombay, which is a Central Technological Institute of the State of Maharashtra, had certified that goods imported were stainless steel angles. In the impugned order it is stated that the Government of India is not inclined to attach an undue weight to it in the light of the opinion of other three experts. One of the experts (Mr. N.B. Sahukar) had said that the goods could be used for racks in their application in tables, trolleys for surgical appliances. Yet another expert (Dr. Brahmaprakash) could not deny that the goods could be used for any of the items mentioned in the letter of the Iron and Steel Controller. He also could not say that the article imported could never be used for structural purposes after being cut into sections. The third expert also said that the angles could be made out of 26 gauge sheet. All this evidence has been ignored saying that these were stray sentences from the statements made by the experts. There is no justification for the Government of India to ignore the report of the Victoria Jubilee Technical Institute, Bombay. The Japanese suppliers had also said that the goods were stainless steel angles. Two English companies also certified that the goods of the type were usually used in the construction of hospital sterilisers, storage tanks for Chemical solutions and generally for the construction of such items within the hospital were reasonable sterilised conditions prevail. In fact one English Company said that the goods in question were used in the manufacture of light hospital equipment, e.g., hospital tanks for storage of solutions, trolleys, cupboards, washing trays and sterilisers, etc. etc. The licensing authority also stated that it had no objection to the import of stainless steel angles of 26 gauge in any section against the licenses in question suitable for the purpose of manufacture of hospital and surgical equipments and appliances tables, racks. X-ray illuminators, hospital trolleys, surgical cupboards, etc. Mr. H.D. Paul, Deputy Assistant Iron & Steel Controller, even appeared before the adjudicating authority and testified to this fact. With all this evidence on record the Government of India in the impugned order said that the fact remained that the clarification given by the Iron . and Steel Controller did introduce a certain amount of ambiguity in the matter. It also found force in the submission of the petitioner that para 277 of the Itc said that the customs classification and Itc classification could be on a different footing. Obviously, the customs classification would be based on the nature of the goods which were ordinarily brought and sold in the market. On the other hand, if the licensing authority issued a license for something different it could not be held against the party. Government of India also noticed that it was difficult to go behind the intention of the licensing authority in the present case but then said that clarification they gave could be read either way.

(28) In M.G. Abrol, Additional Collector of Customs, Bombay and An. otherv.M/s. Shantilal Chhotelal and Co., , Iron and Steel Controller had issued a license to export 900 tons steel skull scrap to the respondent firm. After inspection an officer authorized by the Iron and Steel Controller certified the goods to be fit for export under the license granted. However, customs authorities took the view that 320 tons of the goods were not steel skull scrap and they seized the same under the Sea Customs Act. The goods were, however, allowed to be exported ultimately after imposing a fine in lieu of confiscation and after imposing a personal penalty on the firm. The Court held that there was no conflict between the jurisdiction of the licensing authority under the Exports (Control) Order and that of the Customs Authority under the Sea Customs Act. While under the former certain articles can be exported only under a license issued by the appropriate authority prescribed there under, the appropriate Customs Authority can prevent the export of the articles if they are not covered by such license. The Court also held as under :- "MOREOVER,since the license was issued in respect to the specified goods identified by the appropriate authorities it could not be said that goods other than those in respect whereof the license was issued were sought to be exported."

(29) We find the approach of the Government to be not correct in the circumstances of the case, and if there was any doubt the benefit should have gone in favor of the importer.

(30) We would, therefore, allow the appeal and would set aside the order of the learned Single Judge. The result is that all proceedings emanating from the notice issued under Section 130 of the Customs Act by the Collector of Customs are set aside. In this view of the matter, petitioner will not be entitled to any refund of the duty of customs on the grounds that in the revision arising out of the adjudication proceedings the Government of India held that the goods in question were assessable under Item 62(14) Ict and, thus, liable to duty at the rate of 10 %, ad valorem. The imported goods will remain assessed under Item 62(2) Ict and no refund will be permissible to the petitioner on that ground since the proceedings arising' out of the show cause notice under Section 130 of the Customs Act are being aside. This in fact, in substance, is the prayer of the petitioner as well when the petitioner said that the notice under Section 130 of the Act was not tenable and that the record showed that the goods imported were stainless steel angels. In the interim order dated 15 January 1979 reproduced above the petitioner had given undertaking that the refund of Rs. l,45,155.00 as ordered by the Central Government shall not be withdrawn. The amount shall not be allowable to the petitioner in view of what we have said, otherwise the bank guarantee furnished by the petitioner shall stand discharged.

(31) There will be no order as to costs.