Naveen Jain vs Commissioner Of Customs
2001 Latest Caselaw 554 Del

ORDER

Arijit Pasayat, C.J.

1. This is an application for reference under Section 130A of the Customs Act, 1962 (in short 'the Act')- Following are the questions proposed, describing them as questions of law :

"1. Whether the Customs Authorities have the jurisdiction to arraign the applicant on the charge of inflating the value of the goods, admittedly exempted from Customs duty, considering the express provisions of Rule 1(3) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 ?

2. Whether the Customs Tribunal has misinterpreted and misconstrued Section 111(m) of the Customs Act, which must qualify the condition imposed by Rule 1(3) cited above, before it is applied ?

3. Whether Section 111(m) has no application de hors Rule 1(3) of the Rules cited above ?

4. Whether the legislative intention to keep the goods not dutiable under the Customs Act out of the purview of the Customs Act is demonstrably clear from the fact that Section 111 of the Customs Act providing for confiscation of goods and imposition of penalties, in its numerous clauses preponderantly employ the words 'dutiable or prohibited' and only Clause (o) of Section 111 deals with the goods exempted from Customs duty ?

5. Whether the Courts below have acted without jurisdiction ?"

2. Factual background in which the application has been filed is as follows:

Applicant was issued a show cause notice by the Commissioner of Customs, Air Cargo, New Delhi (in short the 'Commissioner'). As per the said notice applicant and other noticees were called upon to explain as to why 4908 pieces of 'Computer Software CD ROMs Lotus Smart Suite-97", seized from the godown and office premises of M/s. Somerset International Limited on 16th April, 1998, should not be confiscated under Section 111(m) of the Act. In the reply submitted, applicant raised the contention that he was not connected with the import of the disputed CD ROMs and that he was not liable for any penalty. By order-in-original, dated 8th September, 1999, the adjudicating authority imposed a penalty of Rs. 5 lakhs on the applicant under Section 112(a) of the Act. Penalty imposed was challenged before the Customs, Excise and Gold (Control) Appellate Tribunal (in short 'Tribunal'). Two pleas were essentially raised before the Tribunal. First was that the show cause notice did not specify the clauses under which Section 112 of the Act was made applicable and in any event there was no question of levying penalty because applicant was not connected with the import. So far as the first plea is concerned, Tribunal rejected it holding that if the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. So far as the applicability of Section 111(m) is concerned it was held that noticees were aware of the factual situation. In fact, the first point on which reply was called for was as to why there should not be confiscation under Section 111(m) of the Act and why penalty shall not be imposed for contravention of the provisions contained in the Act. In fact in the reply to the show cause notice, learned Counsel for the applicant had stated that since the goods did not belong to him, he has no objection for its confiscation and he in no way is concerned with the import. Since the involvement of value was more than Rs. 6 crores penalty of Rs. 5 lakhs was held to be not in any manner excessive or too harsh.

3. In support of the application it is submitted that Section 111(m) has application only when the goods are dutiable and not otherwise. Reference is made to Clause (o) for the purpose and also to Rule 1(3) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (in short 'Rules'). In other words, it is submitted that the Legislative intent being to deal with the goods which are dutiable under the Act, if goods are not dutiable, there is no scope for bringing in application of Section 111(m) of the Act.

4. It would be appropriate to quote the entire Section 111 which is the pivotal provision. The same reads as follows :

"111. Confiscation of improperly imported goods, etc. - The following goods brought from a place outside India shall be liable to confiscation :

(a) any goods imported by sea or air which are unloaded or attempted to be unloaded at any place other than a customs port or customs airport appointed under Clause (a) of Section 7 for the unloading of such goods;

(b) any goods imported by land or inland water through any route other than a route specified in a notification issued under Clause (c) of Section 7 for the import of such goods;

(c) any dutiable or prohibited goods brought into any bay, gulf, creek or tidal river for the purpose of being landed at a place other than a customs port;

(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 any other law for the time being in force;

(e) any dutiable or prohibited goods found concealed in any manner in any conveyance;

(f) any dutiable or prohibited goods required to be mentioned under the regulations in an import manifest or import report which are not so mentioned; unloaded from a conveyance in contravention of the provision of Section 32, other than goods inadvertently unloaded but included in the record kept under Sub-section (2) of Section 45;

(h) any dutiable or prohibited goods unloaded or attempted to be unloaded in contravention of the provisions of Section 33 or Section 34;

(i) any dutiable or prohibited goods found concealed in any manner in any package either before or after the unloading thereof;

(j) any dutiable or prohibited goods removed or attempted to be removed from a customs area or a warehouse without the permission of the proper officer or contrary to the terms of such permission;

(k) any dutiable or prohibited goods imported by land in respect of which the order permitting clearance of the goods required to be produced under Section 109 is not produced or which do not correspond in any material particular with the specification contained therein;

(l) any dutiable or prohibited goods which are not included or are in ex-cess of those included in the entry made under this Act, or in the case of baggage in the declaration made under Section 77 in respect thereof or in the case of goods under transhipment, with the declaration for transhipment referred to in the proviso to Sub-section (1) of Section 54;

(m) any goods which do not correspond in respect of value or in any other particular with the entry made under this Act or in the case of baggage with the declaration made under Section 77 in respect thereof or in the case of goods under transhipment, with the declaration for transhipment referred to in the proviso to Sub-section (1) of Section 54;

(n) any dutiable or prohibited goods transmitted with or without transhipment or attempted to be so transmitted in contravention of the provisions of Chapter VIII;

(o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer;

(p) any notified goods in relation to which any provisions of Chapter IVA or of any rule made under this Act for carrying out the purposes of that Chapter have been contravened."

5. We find that in Section 111, in various clauses, the goods have been described either to be in respect of dutiable or prohibited goods. For example clauses (c), (e), (g), (f), (i), (j), (k), (1) and (n). That being the position, in view of the specific language used in Section 111(m) that it relates to any goods, which do not correspond in respect of value and or in any other particular, with the entry made under the Act the plea that Section 111 has application only to dutiable goods has no substance.

6. When the material words are capable of bearing two or more constructions, the most firmly established rule for construction of such words "of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law)", is the rule laid down in Heydon's case (1584) 3 Co. Rep. 7a, which has now attained the status of a classic. The rule which is also known as "'purposive' construction" or "mischief rule" enables consideration of four matters : (1) "What was the law before making of the Act, (2) What was the mischief for which the law did not provide, (3) What is the remedy that the Act has provided and (4) What is the reason of the remedy". The rule then directs that the Courts must adopt the construction "which shall suppress the mischief and advance the remedy". The rule was explained by the Apex Court in Bengal Immunity Co. v. State of Bihar . It is to be noted that rule in Heydon's case (supra) is applicable only when the words in question are ambiguous and are reasonably capable of more than one meaning. (See : CII.M.P. & Bhopal v. Sodra Devi ). Recourse to the object and policy of the Act or consideration of the mischief and defect which the Act purports to remedy is only permissible when the language is capable of two constructions. After the words have been construed in their content if it is found that the language is capable of bearing one construction the rule in Hey don's case ceases to be controlling and gives way to the plain meaning rule. (See : Kanailal Sur v. Paramnidhi Sadhu Khan ).

7. We may add here that in Pine Chemical Suppliers and Ors. v. Collector of Customs (Bombay) - Apex Court dealt with Section 111(m) vis-a-vis Section 112. In paragraphs 8 to 12 of the judgment, it was inter alia observed as follows :

"8. Section 111 of the Customs Act, 1962 provides for confiscation of improperly imported goods and specifies the goods liable to confiscation in the several clauses therein, of which Clause (m) is as under :-

(m) any goods which do not correspond in respect of value or any other particular with the entry made under this Act or in the case of baggage with the declaration made under Section 77 in respect thereof.

9. Section 2 contains the definitions in which Clause (16) defines "entry" to mean :-

"an entry made in a bill of entry...."

10. On the conclusion that the goods imported by the appellants were 'WG' grade Gum Rosin and not 'OFF' grade Gum Rosin, it is beyond dispute that the imported goods did not correspond in respect of value as well as description with the entry made under the Act and was, therefore, liable to confiscation under Section 111(m) of the Act. This conclusion is irresistible from the facts which are beyond challenge and the appellant's readiness for adjudication accepting the laboratory rest reports. The contention of learned Counsel for appellants is that the appellants did not incur any consequential liability on account of the fact that there is no material to indicate further that mis-declaration by appellants was deliberate and not bonafide. We do not find any merit in this contention.

11. Section 112, insofar as it is material for the present purpose, is as under :-

"112. Penalty for improper importation of goods etc. - Any person -

(a) 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, or abets the doing or omission of such an act, or

(b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under Section 111, shall be liable -

(i)....

(ii) to (v)...."

12. We have earlier indicated that the imported goods were liable to confiscation under Section 111(m) and this was obvious to appellants at least when they requested for acquiring possession thereof accepting the laboratory test reports indicating that there was mis-declaration of the goods and agreeing to adjudication on that basis. The declaration that the imported goods were 'OFF' grade Gum Rosin while in fact they were 'WG' grade Gum Rosin was made by the appellants and it was the appellants who had acquired possession and appropriated the goods agreeing to the adjudication being made under the Act on mis-declaration being found. These undisputed facts clearly bring the appellants within the ambit of Section 112 wherein Clause (b) is wide enough to penalise even a person acquiring possession or in any manner dealing with the goods which he knows or has reason to believe are liable to confiscation under Section 111. The undisputed facts are sufficient to satisfy this requirement. The appellants acquired possession of the goods knowing very well or at least having reason to believe that the imported goods were liable to confiscation under Section 111(m) since they did not dispute the test reports and agreed to adjudication. The further question of also the requirement of definite proof that they know when they made the declaration does not arise in the present case for incurring the liability of penalty under Section 112 of the Act on these facts. The dispute raised by the appellants was confined only to liability for penalty and not its quantum."

8. The language used in the concerned provision i.e. Section 111(m) is clear and unambiguous. Therefore, there is no need to seek help from any external aid like objects of the statute to interpret the same.

Above being the position, we find no substance in the plea that Section 111(m) has no application to the goods which are not dutiable.

The application is accordingly dismissed. CM No. 6/01 in Customs Act Case No. 5/01

This application is stated to be in terms of Section 130E of the Customs Act, 1962. The said provision reads as follows :

130E Appeal to Supreme Court

An appeal shall lie to the Supreme Court from -

(a) any judgment of the High Court delivered on a reference made (under Section 130 or Section 130A) in any case which, on its own motion or on an oral application made by or on behalf of the party aggrieved, immediately after the passing of the judgment, the High Court certifies to be a fit one for appeal to the Supreme Court, or

(b) any order passed by the Appellate Tribunal relating among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment.

The order passed by us on 20th April, 2001 was not delivered on a reference made under Section 130 of the Act and therefore, Section 130E of the Act has no application to present case