COMMISSIONER OF CUSTOMS, KOLKATTAversusM/S. GRAND PRIME LIMITED AND ORS.

             COMMISSIONER OF CUSTOMS, KOLKATTA                                A
                                    v.
               M/S. GRAND PRIME LIMITED AND ORS.

                             JULY 7, 2003

                 [M.B. SHAH AND ARUN KUMAR, JJ.]                              B


       Customs Act, 1962-Section //I (d) and (o)-Applicability of-Import
restricted goods-Advance licence-Grant of-Subject to condition oJ re-export
of goods-Importer failing to comply with the condition of re-export of goods C
in case of earlier import-Importer importing another consignment-
Consignment awaiting clearance-Notice-Fearing action regarding previous
import, importer not appearing-Non filing of bill of entry-Confiscation of
goods-Justification of-Held: Import violative of import restrictions-Also
the licence against which import took place was found to contain forgery, thus
import contrary to law being without a valid licence-Hence, section I II (d) D
attracted and goods liable to confiscation-Order of the Tribunal permitting
re~export of the goods unsustainable.

      A firm through its proprietor imported certain goods against
advance licence. It cleared five consignments of raw silk through the port
free of duty subject to the condition of re-exporting after conversion. The   E
Department came to know that the firm had imported and cleared two
consignments of raw silk against a fraudulently obtained advance licence
and had sold the goods in the open market without discharging the export
obligation. Department again came to know that the firm had imported
consignments of silk fabric and tussah silk through the port and the said     F
consignments were awaiting clearance but the importer did not turn up
to get the goods released. Department issued summons to the firm and its
proprietor but they could not be served and they never appeared.
Summons were also issued to other parties involved in the import of
consignments. Parties appeared and their statements were recorded.
Thereafter, notice was issued to the firm to show cause against the           G
confiscation of the two consignments under Section 11 l(d) of the Customs
Act, 1962 and imposition of penalties. The firm did not respond to the show
cause notice. Respondent No. I claiming to be the exporter wrote to
Commissioner of Customs that they had failed to locate the importer and

                                   401                                        H
    402                     SUPREME COURT REPORTS (2003] SUPP. I S.C.R.

A there was no alternative purchaser, therefore the permission be granted
    to re-ship/re-export the goods comprising the said consignments.
    Respondent No l was represented by an attorney and a supplementary
    show cause notice was issued to the Respondent and its Director.
    Thereafter Commissioner of Customs held that as the importer was guilty
B   of misrepresentation of facts and falsification of documents, the import
    was contrary to law and thus the goods were liable for confiscation.
    Respondent No. I filed a writ petition, however the proceedings were still
    pending before the Commissioner of Customs. Commissioner of Customs
    passed an order and High Court thereafter held that the party had a right
    of appeal again~t the said order. It further directed that the Tribunal
C   would 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. Tribunal relying
    on Union of India v. Sampat Rai Dugar case held that the goods could be
    re-exported and set aside the penalties imposed. Hence the present appeal.

          Appellant contended that the Tribunal erred in relying 011 Dugar 's
D case since there is a clear distinction between the two cases; that there is
    no valid import of goods, thus the import is contrary to law; that Section
    lll(d) of the Customs Act, 1962 is applicable in the instant case; that there
    is no provision for re-export of goods in the Customs Act, thus, there was
    no question of re-export being permitted.

E         Respondent No.I contended that the importer had not retired the
    document of title to goods which were sent through the bank, therefore,
    the exporter had title to the goods and was entitled to re-export the goods.

          Allowing the appeals, the Court

F         HELD: l.l. In the instant case, the goods are in the restricted list
    under the Import-Export Policy for the relevant period. The import of
    these goods is permitted only against a licence which 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
G   imports iilready 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 bill of entry was filed to
    complete the process of importation. This rendered the import against the
    prohibition imposed regarding the import. Also the licence against which
H
               COMMR. OF CUSTOMS v. GRAND PRIME LTD.                     403
the import took place was found to contain forgery. This rendered the           A
licence invalid. 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          B
import attracts the provisions of Section 111 of the Act and thus, the action
of the Department in confiscating the goods was in accordance with law.
The order of the Tribunal permitting re-export of the goods and waiver
of the penalties imposed by the Commissioner on the respondent cannot
be sustained. (407-C, D, El

       1.2. The Customs Act, 1962 does not contain any provision regarding
                                                                                c
re-export of goods. It gives power of confiscation of goods which are
illegally imported and for various other reasons enumerated in Section
ll 1. (408-A)

      1.3. Respondent No.I surfaced only after the show cam;e notice had        D
been issued and put in appearance through an advocate and prayed for
permission to re-export the goods. 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. 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      E
a front to retrieve the situation. (407-G)

     Sheikh Mohd. Omer v. Collector of Customs, Calcutta and Ors., (1970(
2 SCC 728 and Sheshank Sea Foods Pvt. Ltd., Karnataka v. Union of India
and Ors., 11996) II SCC 755, referred to.
                                                                                F
     Union of India v. Sampat Roi Dugar, (1992( 2 SCC 66, distinguished.

       1.4. The submission that the importer had not retired the document
of title to goods which were sent through the bank, therefore, the exporter
had title to the goods and was entitled to re-export the goods cannot be
accepted. Instant case is of illegal import and provisions of Section 11 l(d)   G
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. (410-C-D(

      Garden Silk Mills ltd. v. Union of India, (1999) 113 E.L.T. 358 S.C.,
distinguished.                                                                  H
    404                     SUPREME COURT REPORTS [2003] SUPP. I S.C.R.

A           MJ. Exports ltd. and Anr. v. CEGAT. Bombay. 119931 (Suppl.) I SCC
    169, referred to.

            CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4151-4157 of
    2002.

B         From the Judgment and Order dated 20.11.2000 of the Custom Excise
    and Gold (Control) Appellate Tribunal, Calcutta in Order No. A-1884-911
    Cal./2000 in Appeal Nos. C-214, 215, 199, 225, 226, 227 and 235 of2000.

         Mukul Rohatgi, Additional Soliciter General, N.K. Bajpai, A. Subba
    Rao, Hemant Sharma and B. Krishna Prasad for the Appellants.
c        Dr. Rajeev Dhawan and ATM Ramaranganujam, Sudhir Gupta, R.P.
    Gupta, Anant Vijai Palli, Mrs. Rekha Patil and K. Shrivraj Choudhuri for the
    Respondent.

            The Judgment of the Court was delivered by
D         ARUN KUMAR, J. These appeals are directed against the order of the
    Customs Excise & Gold (Control) Appellate Tribunal (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
E   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 Mis. Olympia Exports of New Delhi through
F its proprietor Shri Mahesh Cl'iowhan 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
G consignments of raw silk through the Kolkatta port free of duty subject to the
  condition that the imported gopds after conversion had to be re-exported.
  Intelligence was gathered by the officers of the Directorate of Revenue
  Intelligence, Kolkatta to the effect that Mis. 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
H the open market without discharging the export obligation. Thus they had
     COMMR. OF CUSTOMS v. GRAND PRIME.., TD. (ARUN KUMAR. J.]              405
 violated the provisions of the revenue exemption notification and the export- A
 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 B
 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 Mis. Olympia Exports and Shri Mahesh Chowhan,
 proprietor of Mis. Olympia Exports, New Delhi to appear before the Directorate
 of Revenue Intelligence. The summons could not be served on either Mis. C
 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 D
the said Act was issued on 14th May, 1999 to Mis. 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 E
why penalties should not be imposed. The importer did not respond to the
show cause notice. Instead Mis. Grand Prime Limited respondent No. I
addressed a communication dated 27th May, 1999 to the Commissioner of
Customs stating that they had exported the goods subject matter of the two
consignment. In the letter respondent No. I stated that it had failed to locate
that importer. It was further stated that efforts were made to find an alternative F
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 G
and purported to represent respondent No. I 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. I a supplementary show cause notice was issued
to the said respondent and its Director Shri Rajesh Kumar Khattar on I Ith
February, 2000. Vide order dated 1st May, 2000, the Commissioner of
Customs, Kolkatta confirmed confiscation of goods, duty and the penalties
    406                      SUPREME COURT REPORTS [2003] SUPP. I S.C.R.

A 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. I had filed a Writ Petition
    in the Kolkatta High Court while the proceedings were still pending before
B   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
C   show cause notice. The High Coutt noticed that the party had a right of
    appeal against the said order. The Writ Petition was disposed of with the
    direction :

            "CEGA T, 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
D           be re-exported.

                 The appeal will be preferred by the petitioner within a period of
            seven days from the date of communitation of this order and if it is
            filed, it will be decided by the CEGA T, Eastern Bench within a
            period of one month from the date of filing of the appeal.
E               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
p goods is concerned on Union of India v. Sampat Raj Dugar and Ors., [I 992]
  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
G 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. I never directed the Tribunal to
  deci<le 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
H it cannot be inferred from the said decision that there is any direction to pass
    COMMR. OF CUSTOMS v. GRAND PRIME LTD. [ARUN KUMAR. J.]                 407
an order in te1ms of Dugar 's case. The learned Additional Solicitor General      A
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
 11 l(d) of the Customs Act, 1962 squarely applies. In this context, he further   B
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.                                                           C
       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 D
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 E
process of importation. This rendered the import against the prohibition
imposed regarding the import. As such Section 11 l(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 accordanGe with
law.
                                                                                  F
     It is to be found from the facts on record that respondent No. I 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. I prayed for
permission to re-export the goods. In any case, the transaction leaves doubts     G
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 H
    408                    SUPREME COURT REPORTS [2003) SUPP. I S.C.R.

A 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
B   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
C   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
D   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 c:uestion.

          On the power of confiscation of goods imported contrary to any
    prohibition or restriction under Section 111 (d), this court had occasion to
E   observe in Sheikh Mohd. Omer v. Collector of Customs, Calcutta and Ors.,
    [1970) 2 sec ns :

               "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
F          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
           11 l(d) of the Customs Act, 1962 includes restrictions. Merely because
G          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."
H
      COMMR. OF CUSTOMS v. GRAND PRIME LTD. [ARUN KUMAR. J.] 409

       On the question of breach of conditions contained in the exemption             A
notification by the importer, this cou1t held in Sheshank Sea Foods Pvt. Ltd.,
Karna/aka v. Union of India and Ors., [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             B
        111 (o) in respect thereof. It is true that the terms of the said exemption
        notification were made part of the appellants· lic~nces 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        C
        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             D
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         E
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)           F
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.                                                                            G

      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
befor~ the Customs Authorities and claimed the right to take delivery of
goods. The importer in Dugar 's case participated in adjudication proceedings H
    410                     SUPREME COURT REPORTS 12003] Slll'P. I S.C.R.

A 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
B licence. This was prohibited. In Ougar'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
C the respondent No. I.

          The learned senior counsel for respondent No. I - 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
D 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
E 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. I, relied on Garden
    Silk Mills ltd. v. Union of India, ( 1999) 113 E.L.T. 358 S.C.On the ba~is of
    this judgment, it was argued that the importation of goods had not been
F   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
G   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 Cow1 in M.J Exports limited and Anr. v. The
  CEGA T, Bombay, [1993] Suppl. I SCC I69 that export of goods contrary to
  any prohibition imposed under the law for the time being in force will render
H the goods liable to confiscation. The same principle applies to illegal import.
       COM MR. OF CUSTOMS v. GRAND PRIME LTD. [ARUN KUMAR . .I.] 411

The Import-Export Policy, 1988-91 permitted issuance of Open General               A
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. 1t was held that object of permitting import of life
saving goods being that the goods may be available for use in the country,         B
re-export thereof was prob ibited 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 I 13(d) and
penalty under Section 114 of Customs Act.

      The result of the above discussion is that import of the consignments        C
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         D
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            E
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.

N.J.                                                         Appeals allowed.
                                                                                   F