Commissioner Of Customs, Kolkatta vs M/S. Grand Prime Limited And Ors

(hereinafter referred to as the 'Tribunal') dated 20th

November, 2000. By the impugned order the Tribunal

allowed re-export of the three consignments of tussah silk

and one consignment of silk fabric having a total value of

Rs.45,85,291/-. The Tribunal further set aside the penalties

imposed on individuals by the Commissioner of Customs,

Kolkatta. The individuals had filed appeals before the

Tribunal against the order of the Commissioner of Customs

and the Tribunal allowed the same. Hence these appeals by

the Department.

Briefly the facts are that M/s. Olympia Exports of New

Delhi through its proprietor Shri Mahesh Chowhan imported

the goods in question from Hong Kong purportedly against

an advance licence. The goods in question fall within list of

restricted items import whereof is permitted subject to certain

conditions. The importer had obtained an advance licence in

July, 1997. Against the said licence the importer had

imported and cleared five consignments of raw silk through

the Kolkatta port free of duty subject to the condition that the

imported goods after conversion had to be re-exported.

Intelligence was gathered by the officers of the Directorate of

Revenue Intelligence, Kolkatta to the effect that M/s.

Olympia Exports based in New Delhi had imported and

cleared five consignments of raw silk against a fraudulently

obtained advance licence and had sold the said imported silk

in the open market without discharging the export obligation.

Thus they had violated the provisions of the revenue

exemption notification and the export-import policy. Further

intelligence was gathered to the effect that the same

importer had again imported two consignments of silk fabric

and tussah silk through Kolkatta port and the said

consignments were awaiting clearance. It appears that while

the investigation by the Directorate of Revenue Intelligence,

Kolkatta was going on, the importer got a wind of it and

therefore it never turned up to get the goods under the

aforesaid two consignments released. According to the

revenue the advance licence obtained by the importer was

forged. Summons under the provisions of the Customs Act,

1962 were repeatedly issued to M/s. Olympia Exports and

Shri Mahesh Chowhan, proprietor of M/s. Olympia Exports,

New Delhi to appear before the Directorate of Revenue

Intelligence. The summons could not be served on either

M/s. Olympia Exports or Shri Mahesh Chowhan and they

never appeared in response to the summons. Summons

were also issued to various other parties involved in the

previous transaction of import of five consignments which

had been cleared through customs. They appeared in

response to the summons and their statements were

recorded. Ultimately a demand-cum-show cause notice

under Section 124 of the Customs Act, 1962 read with

Section 28 of the said Act was issued on 14th May, 1999 to

M/s. Olympia Exports, New Delhi, Shri Mahesh Chowhan

and others. So far as the consignment, subject matter of the

present appeals is concerned, the show cause notice called

upon the noticees' to show cause why goods subject matter

of the two consignments, should not be confiscated under

Section 111(d) of the Customs Act, 1962 and why penalties

should not be imposed. The importer did not respond to the

show cause notice. Instead M/s. Grand Prime Limited

respondent No.1 addressed a communication dated 27th

May, 1999 to the Commissioner of Customs stating that they

had exported the goods subject matter of the two

consignments. In the letter respondent No.1 stated that it

had failed to locate that exporter. It was further stated that

efforts were made to find an alternative purchaser for the

goods which it had failed to arrange. Request was made to

the Commissioner to grant permission to re-ship/re-export

the goods comprising the said consignments. An advocate

named Shri Om Prakash Chowdhary of Kolkatta sent a

Power of Attorney purported to be executed in his favour by

respondent No.1 to the Commissioner of Customs, Kolkatta

and purported to represent respondent No.1 in the

proceedings by virtue of the said Power of Attorney. It

appears that in view of the representation made on behalf of

respondent No.1 a supplementary show cause notice was

issued to the said respondent and its Director Shri Rajesh

Kumar Khattar on 11th February, 2000. Vide order dated 1st

May, 2000, the Commissioner of Customs, Kolkatta

confirmed confiscation of goods, duty and the penalties

proposed in the show cause notice. The Commissioner

found that the importer was guilty of misrepresentation of

facts and falsification of documents. The import was

contrary to law and therefore the goods were liable for

confiscation.

At this stage, it is noted that respondent No.1 had filed

a Writ Petition in the Kolkatta High Court while the

proceedings were still pending before the Commissioner of

Customs, Kolkatta. At the initial stage the High Court had

passed an order giving four months' time to the

Commissioner of Customs to adjudicate upon the show

cause notice. However, the Writ Petition was disposed of on

5th July, 2000. By that time the Commissioner of Customs

had already passed an order in the adjudication proceedings

arising out of the show cause notice. The High Court

noticed that the party had a right of appeal against the said

order. The Writ Petition was disposed of with the direction :

" CEGAT, Eastern Bench will proceed only on

the point as to whether the petitioner is the

owner of the goods and the goods are entitled

to be re-exported.

The appeal will be preferred by the

petitioner within a period of seven days from

the date of communication of this order and if

it is filed, it will be decided by the CEGAT,

Eastern Bench within a period of one month

from the date of filing of the appeal.

The matter is disposed of accordingly.

No order is passed as to costs."

The Tribunal vide its order dated 20th November, 2000

allowed the appeals solely basing its judgment so far as the

question of re-export of goods is concerned on Union of

India versus Sampat Raj Dugar and others [ (1992) 2 SCC

66]. Further without assigning any reasons at all the

Tribunal set aside the penalties imposed on the various

parties by the Commissioner of Customs. These appeals

are directed against the said judgment of the Tribunal. The learned Additional Solicitor General – Mr. Mukul

Rohtagi appearing for the appellant submitted that the

Tribunal clearly misunderstood the order passed by the

Kolkatta High Court in as much as it considered that it had to

dispose of the appeal in terms of Dugar's case (supra). The

High Court while disposing of the Writ Petition filed by

respondent No.1 never directed the Tribunal to decide the

case as per Dugar's case (supra). The operative part of the

decision of the High Court has already been reproduced

hereinbefore and in our view it cannot be inferred from the

said decision that there is any direction to pass an order in

terms of Dugar's case. The learned Additional Solicitor

General then proceeded to distinguish the present case from

Dugar's case. His basic contention is that the present is a

case of fraud while in Dugar's case it was not so. Secondly,

according to the learned counsel there is no valid import of

goods in the present case. Rather the import is contrary to

law and Section 111(d) of the Customs Act, 1962 squarely

applies. In this context, he further submitted that there is no

provision for re-export of goods in the Customs Act and

therefore there was no question of re-export being permitted. It was pointed out that in Dugar's case because of the

peculiar facts of the said case re-export was permitted in

equity. The present case being a case of fraud and

misrepresentation, equity had no place and therefore

Dugar's case cannot be treated as a precedent.

We have already noticed the facts of the present case.

The goods in question are in the restricted list under the

Import-Export Policy for the relevant period. The import of

the goods in question is permitted only against a licence.

The licence is granted subject to the condition of re-export of

goods. The importer had failed to comply with the condition

of re-export of finished or semi-finished goods, qua, the

imports already made under the same licence. When the

consignments in question were imported, the importer did

not even turn up inspite of notice for fear of action regarding

the previous imports and likelihood of action being taken

regarding the current imports. No licence was produced and

no bill of entry was filed to complete the process of

importation. This rendered the import against the prohibition

imposed regarding the import. As such Section 111(d) of the

Customs Act comes into play. It clearly empowers

confiscation of the goods. The action of the Department in

confiscating the goods was clearly in accordance with law.

It is to be found from the facts on record that

respondent No.1 surfaced only after the show cause notice

had been issued. It put in appearance through an advocate

purportedly appointed as an Attorney. The actual party

never came forward. This gives rise to a suspicion that the

importer and exporter were same or they were acting in

collusion. Respondent No.1 prayed for permission to re-

export the goods. In any case, the transaction leaves doubts

in the mind about its genuineness. It gives an impression

that when the importer found itself to be in troubled waters,

the exporter was set up as a front to retrieve the situation.

It is also true that the Customs Act does not contain any

provision regarding re-export of goods. It gives power of

confiscation of goods which are illegally imported and for

various other reasons enumerated in Section 111 of the Act.

From the facts of the case, we have seen that the

imported goods are in the list of restricted goods. They

could be imported against valid advance import licence

issued by the authorities. The licence against which the

import took place in the present case was found to contain

forgery. This rendered the licence invalid. As per conditions

of licence the goods were meant for re-export and they could

not be sold in India. The importer was found to have

violated this condition of the licence in case of an earlier

import. Fearing action in case of present import, the

importer did not even come forward to clear the goods. No

body presented a Bill of Entry or took any other step to clear

the goods. Thus the import was clearly contrary to law being

without a valid licence and in violation of

condition/restrictions imposed under the licence. Section

3(1) of the Imports and Exports (Control) Act, 1947

empowers the Central Government to provide for prohibition,

restricting or otherwise controlling import and export of

specified goods. Such an import clearly attracts the

provisions of Section 111 of the Customs Act and the

appellant was within its right to confiscate the goods in

question.

On the power of confiscation of goods imported

contrary to any prohibition or restriction under Section

111(d), this court had occasion to observe in Sheikh Mohd.

Omer versus Collector of Customs, Calcutta and others

[ 1970 (2) SCC 728 ] :

"What clause (d) of Section 111 says

is that any goods which are imported or

attempted to be imported contrary to "any

prohibition imposed by any law for the time

being in force in this country" is liable to be

confiscated. "Any prohibition" referred to in

that section applies to every type of

"prohibition". That prohibition may be

complete or partial. Any restriction on import

or export is to an extent a prohibition. The

expression "any prohibition" in Section 111(d)

of the Customs Act, 1962 includes restrictions.

Merely because Section 3 of the Imports and

Exports (Control) Act, 1947, uses three

different expressions "prohibiting", " restricting"

or "otherwise controlling", we cannot cut down

the amplitude of the word "any prohibition" in

Section 111(d) of the act. "Any prohibition"

means every prohibition. In other words all

types of prohibitions. Restriction is one type of

prohibition."

On the question of breach of conditions contained

in the exemption notification by the importer, this court held

in Sheshank Sea Foods Pvt. Ltd., Karnataka versus

Union of India and others [(1996) 11 SCC 755 ] that :

"The communication of the Central Board

of Excise and Customs dated 13.5.1969,

refers to the breach of the condition of a

licence and suggests that it may not be

possible to take action under Section 111(o) in

respect thereof. It is true that the terms of the

said exemption notification were made part of

the appellants' licences and, in that sense, a

breach of the terms of the said exemption

notification is also a breach of the terms of the

licence, entitling the licensing authority to

investigate. But the breach is not only of the

terms of licence, it is also a breach of the

condition in the exemption notification upon

which the appellants obtained exemption from

payment of customs duty and, therefore, the

terms of Section 111(o) enable the Customs

authorities to investigate."

In this case the goods imported by the appellant

were exempted from customs duty subject to the condition

that they would not be sold, loaned, transferred or disposed

of in any other manner. The appellants had however

disposed of the goods. It was observed that the customs

authorities had the power to take action under the provisions

of Section 111(o).

In Dugar's case (supra) relied upon by the respondents,

this court had permitted re-export of goods in special

circumstances on equitable grounds. The goods in that case

had been imported under a valid licence but had not been

cleared from customs. This court was concerned with the

question whether import of the goods was contrary to law

and whether the goods were liable to confiscation under the

Customs Act. After considering clauses (d) and (o) of

Section 111 of the Customs Act, this court took the view that

the said clauses were not attracted in the facts of the case

and therefore the power to confiscate goods could not be

exercised. It was in this background that the court also

considered the question of passing of property in goods in

favour of the importer and ultimately the foreign exporter was

permitted to re-export the goods.

The points of distinction between the present case and

Dugar's case (supra) are that the importer did not disappear

in that case. Rather it appeared before the Customs

Authorities and claimed the right to take delivery of goods. The importer in Dugar's case participated in adjudication

proceedings before the Customs Authorities and during the

course of the proceedings the exporter appeared on its own

and pleaded that the goods be not confiscated as title in the

goods had not passed. In Dugar's case, there was a valid

import licence while in the present case it is not so. There is

forgery on the licence which rendered the licence invalid.

Therefore, the import was without a licence. This was

prohibited. In Dugar's case this court had held that none of

the clauses of Section 111 of the Customs Act were

attracted, the import being under a licence. The import was

legal. In the present case, the import is without a valid

licence and is clearly in violation of Section 111 (d) and (o) of

the Customs Act. This is a clear distinction between Dugar's

case and the present case. Therefore, in our view Dugar's

case can be of no help to the respondent No.1.

The learned senior counsel for respondent No.1 – Shri

Rajeev Dhawan had argued that the exporter continued to

be the owner of the goods as the property in goods had not

passed. The importer had not retired the document of title to

goods which were sent through the bank. Therefore, it was

submitted that the exporter had title to the goods and was

entitled to re-export the goods. In our view, this argument

has no merit so far as the facts of the present case are

concerned. The present is a case of illegal import and

provisions of Section 111 (d) and (o) of the Customs Act

clearly apply. The goods are liable to confiscation. The

considerations which are relevant under the sale of Goods

Act cannot be applied in the context of present facts.

In support of his argument that the property in goods

had not passed, Mr. Dhawan, learned senior counsel for

respondent No.1, relied on Garden Silk Mills Ltd. versus

Union of India [ 1999 (113)E.L.T. 358 (S.C.) ]. On the basis

of this judgment, it was argued that the importation of goods

had not been completed. In that case, the goods had not

crossed the customs barrier and had not become part of

mass of goods in India. Hence, this judgment has no

relevance so far as the present case is concerned. In the

present case, importation of goods was complete. Further,

the present is a case where the appellant is invoking its

power to confiscate the goods and we are called upon to

decide whether appellant is entitled to exercise power under

Section 111 of the Customs Act to confiscate the goods.

It has been held by this Court in M.J. Exports Limited

and another versus the CEGAT, Bombay [ 1993 (Suppl.)1

SCC 169 ] that export of goods contrary to any prohibition

imposed under the law for the time being in force will render

the goods liable to confiscation. The same principle applies

to illegal import. The Import-Export Policy, 1988-91

permitted issuance of Open General Licence for import of life

saving goods. Life saving equipment was imported from

Germany under the OGL after obtaining customs clearance

without payment of customs duty. It was re-packed and

sought to be exported to the USSR under a contract. It was

held that object of permitting import of life saving goods

being that the goods may be available for use in the country,

re-export thereof was prohibited by necessary implication by

or under the OGL. Such goods being prohibited within the

meaning of Section 2(33), re-export thereof rendered them

liable to confiscation under Section 113(d) and penalty

under Section 114 of Customs Act.

The result of the above discussion is that import of the

consignments in question being contrary to law, the goods

were liable to confiscation under Section 111 of the Customs

Act. The order of confiscation of goods passed by the

Commissioner of Customs is held to be in accordance with

law. We are unable to agree with the view taken by the

Tribunal in permitting re-export of the goods. Further, the

Tribunal in its impugned order has waived the penalties

imposed by the Commissioner on respondents 3 to 7. This

part of the order of the Tribunal is without any reasons. The

Tribunal has not considered the evidence against these

persons which lead the Commissioner to impose the

penalties. Nothing has been said in the order to justify

waiver of the penalties. Therefore, that part of the order of

the Tribunal also can not be sustained. Accordingly, the

impugned order of the Customs Excise and Gold (Control)

Appellate Tribunal dated 20th November, 2000 is set aside

and the order of the Commissioner of Customs, Kolkatta

dated 1st May, 2000 is hereby restored.

The appeals are thus allowed with costs.