SUPREME COURT OF INDIA

Before:-S.C. Agrawal and D.P. Wadhwa, JJ.

Civil Appeal Nos. 4957-58 of 1992. D/d. 3.9.1998.

Collector of Customs, Bombay - Petitioner

Versus

Sneha Sales Corporation - Respondent

For the Petitioner:- Shri Anoop Chowdhary, Counsel

For the Respondent:- None.

Import licence having been cancelled after import and clearance of goods,

Case Referred :-

East India Commercial Company Ltd. v. Collector of Customs, Calcutta, 1963 (3) SCR 338.

JUDGMENT

M/s. Surjan Singh Balbir Singh had obtained four licences bearing Nos. 3082282 dated June 24, 1986, 3160049 dated August 5, 1986, 3051479 dated March 18, 1985 and 3158010 dated June 30, 1986. The said licences were issued under Appendix 21 of Import Policy 1985-86 with an endorsement - Duty free imports against Replenishment of Licence. The said licences were first transferred by M/s. Surjan Singh Balbir Singh in favour of M/s. Chakradhar International India who transferred the same in favour of Sneh Sales Corporation, respondent No. 1 herein. On the basis of the said licences respondent No. 1 imported two consignments of Polyester filament yarn from Japan. One consignment consisting of 509 cartons was cleared through the Inland Container Deport (ICD), New Delhi against Bill of Entry No. 1974 dated October 31, 1986 and the second consignment consisting of 132 cartons was cleared through ICD, New Delhi against Bill of Entry No. 1906 dated October 23, 1986. The goods were assessed under section 17 of the Customs Act, 1962 [hereinafter referred to as `the Act'] and were allowed clearance for home consumption under Section 47 of the Act. After clearance the goods were despatched to Bombay and were stored there. It appears that some information was received from the Directorate of Revenue Intelligence, New Delhi on the basis of which the Director of Revenue intelligence, Bombay Zonal Unit, made certain inquiries and during the course of inquiry the office of respondent No. 1 at Bombay was searched and certain documents were seized on November 1, 1986. The goods were not found stored at the place notified to the concerned customs authorities but were found stored at another place. Since the goods were not covered by regular transport vouchers as required by Section 11 of the Act and were not found at the place notified to the concerned customs authorities, they were detained by the officers of the Directorate of Revenue Intellgence on November 13, 1986. After investigation show cause notice dated January 15, 1987 was issued by the Directorate of Revenue Intelligence to which the appellants submitted their reply.

2. By his order dated September 24, 1990 the Collector of Customs, Bombay [hereinafter referred to as `the Collector'] ordered for absolute confiscation of the goods in question under clauses (d), (l), (m) and (p) of Section 11 of the Act read with Section 3(2) of the Import and Exports (Control) Act, 1947 and imposed a penalty of Rs. 5,00,000/- on respondent No. 1 and a penalty of Rs. 2,50,000/- on Nitin Shah, respondent No. 2, the son of the sole proprietor of respondent No. 1, under Section 112(a) of the Act. In his order the Collector has taken note of the fact that by order dated December 18, 1986 passed by the Deputy Chief Controller of Imports and Exports under clause 9 of the Import and Export (Control) Order, 1955 the four import licences on the basis of which goods were imported by respondent No. 1 had been cancelled ab initio on the ground that the party had obtained the said licences by fraud and misrepresentation. The Collector held that since the licences had been cancelled ab initio by the Deputy Chief Controller of Imports and Exports there was no licence in existence at the time of import and the goods had been imported in contravention of the provisions of Import and Export (Control) Act and the goods were liable to be confiscated under Section 111(d) of the Act. The Collector further found that the goods are notified for the purpose of Chapter IVA of the Act and were not stored at the premises which were intimated and were found stored in the premises of Arun Rawat and Arvind Rawat. As regards the plea of the respondents that sufficient space was not available and the goods were temporarily stored in some other premises, the Collector held that before storing the goods in other premises even temporarily, there should have been suitable intimation to the customs authorities and that there was technical violation in respect of the provision of Chapter IVA rendering the goods liable to confiscation under Section 111(p) of the Act. The Collector was also of the view that the goods were liable to be confiscated under Section 111(m) for the reason that there was misdeclaration in value inasmuch as the value of the bobbins was not included in the valuation. Although in the operative part of the order the Collector has said that the goods were liable to confiscation under Section 111(l) but in the findings recorded by him we do not find any discussion or any reason given by the Collector for holding that the goods were liable to be confiscated under Section 111(l) of the Act. The Collector further found that Nitin Shah respondent No. 2, who was looking after the import business of respondent No. 1, had sufficient knowledge of the fact that the four licences had been fraudulently obtained by the concerned parties by producing forged documents. The Collector did not accept the plea of respondent No. 1 that they were bona fide purchaser of the licences. In view of the fact that Nitin Shah knew that the licences were fraudulently obtained and also keeping in view the fact that respondent No. 1 are only traders in the goods the Collector did not give the importers an option to pay fine in lieu of confiscation and he held that respondents Nos. 1 and 2 were liable to penalty under Section 112(a) of the Act and imposed the penalty of Rs. 5,00,000/- on respondent No. 1 and Rs. 2,50,000/- on respondent No. 2.

3. The respondents filed an appeal against the said order passed by the Collector which has been disposed of by the Customs, Excise and Gold (Control) Appellate Tribunal [hereinafter referred to as `the Tribunal'] by the impugned judgment dated May 15, 1992. Separate judgments have been rendered by the Judicial Member and the Technical Member. Both the learned Members have agreed that the appeal be allowed and the order of the Collector be set aside. The Judicial Member has held that the finding of the Collector that since the licences under which the goods were imported were cancelled ab intiothe goods were imported in violation of the Import Control Order, 1955 and Imports and Exports Act, 1947 could not be sustained in view of the decision of this Court in East India Commercial Company Ltd. v. Collector of Customs, Calcutta, 1963 (3) SCR 338. The Judicial Member was also of the view that the confiscation of goods on the ground of misrepresentation could not be upheld since the finding recorded by the Collector that there is misdeclaration of value is based on no evidence. The Judicial Member was also of the view that since the goods were cleared at New Delhi and order under Section 47 was passed by New Delhi Collectorate, the Bombay Collectorate has no jurisdiction to pass the order and confiscate the goods. The Technical Member has differed with the Judicial Member on the question of jurisdiction and has held that the Bombay Customs Authorities which seized the goods has jurisdiction to deal with the matter but observed that this finding is only of academic interest because he was in agreement with the Judicial Member on the question that the cancellation of the licences took place on the date of confiscation and not with retrospective effect. The Technical Member agreed with the finding recorded by the Judicial Member on the question of valuation.

4. Shri Anoop Choudhary, the learned Senior Counsel appearing for the appellant in support of the appeal, has urged that the Tribunal was in error in interfering with the order passed by the Collector regarding confiscation of the goods as well as the imposition of penalty. As regards confiscation under Section 111(d) of the Act the submission of the learned counsel is that since the licences have been cancelled by Deputy Chief Controller of Imports and Exports ab initio the Collector was right in holding that there was no valid authorisation for the import of the goods and goods have been imported in contravention of the provisions of the Import (Control) Order, 1955 read with Imports and Exports (Control) Act, 1947. We are unable to accept this contention of the learned counsel in view of the law laid down by this Court in East India Commercial Company Ltd. v. Collector of Customs, Calcutta (supra) wherein this Court has said :-

"Nor there is any legal basis for the contention that licence obtained by misrepresentation makes the licence honest. With the result that the goods should be deemed to have been imported without licence in contravention of the order issued under S. 3 of the Act so as to bring the case within cl. (8) of s. 167 of the Sea Customs Act. Assuming that the principles of law of contract apply to the issue of a licence under the Act, a licence obtained by fraud is only voidable; it is good till avoided in the manner prescribed by law."

5. In the aforementioned decision of this Court it has been clearly laid down that in a case where the licence is obtained by misrepresentation or fraud it is not rendered non est as a result of its cancellation so as to result in the goods that were imported on the basis of the said licences and being treated as goods imported without a licence in contravention of the order passed under Section 3 of the Import and Export Act that fraud or misrepresentation only renders a licence voidable and it becomes inoperative before it is cancelled. In the present case the licences were cancelled by order dated December 18, 1986 after the goods had been imported and cleared. The Tribunal was, therefore, right in holding that the import of the goods was not in contravention of the provisions of Import and Export Order, 1955 and Import and Export (Control) Act, 1947 and the goods were not liable to be confiscated on that basis under Section 111(d) of the Act.

6. As regards confiscation of goods under Section 111(m) Shri Choudhary has invited our attention to para 22 of the order passed by the Collector wherein it is said :-

"The value of these 6,367 bobbins therefore was appraised locally. It was noticed that similar bobbins had been imported at Bombay at the price of Japanese Yen 350 per piece CIF Bombay vide Invoice No. 6Y1A057-1 dated 28-7-1986 and cleared through the customs under Bill of Entry no. 2016/25. Accordingly the total CIF/Accessable value of these 6,367 bobbins worked out to Rs. 1,85,000/- and Rs. 1,86,941 respectively (at the exchange rate of 1201 100 then prevailing and after adding usual landing charges)."

The submission of Shri Choudhary is that the Tribunal was in error in holding that the finding recorded by the Collector that there is misdeclaration of value was based on no evidence. We find merit in the aforesaid contention of Shri Choudhary.

7. Shri Choudhary has also urged that although the Collector had also ordered confiscation of the goods under Section 111(p) of the Act for the reason that there was violation of the provisions of Section 11C of the Act, the Tribunal, while allowing the appeal and setting aside the order of the Collector, has not dealt with the part of the order of the Collector. This submission finds support from the order of the Tribunal because the Tribunal while setting aside the order passed by the Collector has not dealt with the question whether the goods were liable to be confiscated under Section 111(p) on account of contravention of the requirement of Section 11C of the Act. In these circumstances, we are of the view that the matter is required to be remitted to the Tribunal for consideration of the question whether the goods are liable to be confiscated under Sections 111(m) on the ground of misdeclaration of the value of bobbins and under Section 111(p) on the ground of contravention of the provisions of Section 11C of the Act. The appeal is accordingly allowed, the impugned judgment of the Tribunal is set aside and the matter is remitted to the Tribunal for consideration of the question whether the goods are liable to be confiscated under Sections 111(m) and (p) of the Act.

8. During the pendency of this appeal this Court had passed an interim order dated December 11, 1992 giving the following directions :-

"We permit the sale of the goods on the following conditions :

(a) The goods shall not be sold for a sum which will be less than the price to be determinded by the appellant.

(b) The entire amount shall be deposited with the appellant-Collector and only then either the respondents or the purchaser shall be permitted to take delivery of the goods. They will be entitled to do so by including the additional amount of penalty of Rs. 7.5 lacs imposed on the respondent."

The learned counsel for the parties state that they are not in a position to say as to what further steps were taken after the passing of the said order. They can move the Tribunal for appropriate directions in that regard. No costs.

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