Holding

Before the 1973 amendment, Section 111(m) did not cover differences in value, so the penalty imposed under that provision is invalid.

Summary

RibTapes (India) Pvt. Ltd. imported 27 knitting machines in 1972 under a licence. Customs authorities held the machines were reconditioned and that the declared price (Rs. 77,441) was far below the actual value (Rs. 2,98,359). The Collector of Customs found the company in breach of sections 111(d) and 111(m) of the Customs Act, 1962 and imposed penalties, which were upheld by the Board and later reduced by the Central Government. The company challenged the penalty for the alleged breach of section 111(m) before the High Court, which dismissed the petition. The Supreme Court examined whether, before the 1973 amendment inserting the word "value" into section 111(m), a discrepancy in value could constitute a breach of that provision. Relying on strict construction of penal statutes and the objects and reasons of the amendment, the Court held that the pre‑amendment provision did not contemplate value differences, so the penalty could not be imposed. Consequently, the penalty under section 111(m) read with section 112 was quashed.

Issues considered

Whether, prior to the 1973 amendment, Section 111(m) of the Customs Act, 1962 could be invoked for a discrepancy in the declared value of imported goods.
Whether the objects and reasons of the 1973 amendment can be used to interpret the pre‑amendment provision.
Whether a penal provision must be strictly construed in the absence of explicit reference to 'value'.

Legislation cited

Customs Act, 1962s. 111(d), s. 111(m), s. 112, s. 46
Customs (Amendment) Act, 1973 (Act No. 36 of 1973)

Subjects

Customs lawStatutory interpretationPenal provisionValue discrepancySection 111(m)Amendment 1973Import valuationMis‑description

Judgment

A

RIBTAPES (INDIA) PVT. LTD. & ANR.
v.
UNION OF INDIA & ORS.
B
SEPTEMBER 2, 1986

[G.L. OZA AND S. NATARAJAN, JJ.)

Customs Act, /962;~Section III(m)-Difference in 'value'-
Whether could be made basis of breach prior to 1973. ·
c
Statutory Interpretation:-Object and Reasons of Bill-Resort
to-For intention of Legis/aaae-Permissib/e.

The appellants, owners.of a hoisery factory, imported 27 knitting
machines in 1972 under the import licence held by them. According to D
the Customs authorities the machinery was not new as the licence
permitted to import, but was old reconditioned, and that the price
shown was much lower than the actual value. After hearing the appel-
lants, the .Collector of Customs found that the appellants had commit-
ted breach of s. l l l(d) and also of s. l l I(m) of the Customs Act 1962
and for both the counts he imposed the penalty, which was maintained E
by the Board. On revisfon the Central Government reduced the penalty
from Rs. 1,47 ,000 to Rs.1,000,00 which had been imposed'for breach
of s. 11 l(m). A writ petition filed by the appellants was dismissed by the
High Court.

In the appeal to this Court, on behalf of the appellants It was F
contended that a penal proviSion has to be construed strictly and in
absence of specific words requiring 'value' to be mentioned, it could not
be inferred that any difference in value coul!J be made the basis of
penalty. '

On behalf of the respondents it was contended that although the G
term 'value' was not ins. lll(m) before the 1973 amendment but that
will make no difference as even without the term 'value' a mis·
.description could be interpreted to be a mis-description on the basis of
value stated and ultimately the goods found tO be of a higher value. By
the amendment the Legislature had only tried to explain or clarify the
.position.

6'17
698 SUPREME COURT REPORTS [1986] 3 S.C.R.

A Allowing the Appeals, the Court,
'r
HELD: I. The impugned orders are set aside and the penalty
imposed on the appellants under s. l ll(m) read with s. 11 l(d) of the
Cnstoms Act 1962 is.quashed. [704A-B]
B
2. Before the amendment in 1973, s. lll(m) did not contemplate
any difference in material particulars in respect of value but it referred
matters other than the value. [703B-C]
*·'
3. Unamended s. lll(m) indicated that wherever goods actually

'
~
imported are different in material particulars than the goods which
c were shown in the bill of entry or a declaration as contemplated in s. 46
then it will be a breach of s. 11 I(m). The difference in particulars could
be in respect of anything but value, as this sub-clause clearly shows that
the difference in value could not be made the basis of breach of this
~
sub-clause before the amendment of 1973, when the term 'value' has
been introduced into this sub-clause. [701B-C]
D
4. In order to interpret a particular provision and to infer the
intention of the Legislature, the Objects and Reasons stated in the Bill,
when it is presented to the Legislature, could be used. [703BJ

5. _The amendment inserting the term 'value' ins. lll(m) cannot ~
E
be said to be explanatory. [703F]

Union of India & Ors. v. Mis. Rai- Bahadur Shree Ram Durga
Prasad (P) Ltd. & Ors., [1969] 2 SCR 727, relied upon. ;

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 172 ~\
F
of 1979

From the Judgment and Order dated 4.4.1978 of the Delhi High
Court in Civil Writ No. 261of1978.

B.R. Aggarwala for the Appellants.
G
O.P. Sharma for the Respondents.

The Judgment of the Court was delivered by

OZA, J. This appeal on special leave arises out of a Judgment of
H
RIB TAPES PVT .. LTD. v. U.0.1. [OZA. J.J 699

the Delhi High Court dated 4th April, 1978. The leave is granted on a A
...,. limited question as regards the question of interpretation of sub-clause
(m) of Section 111 of the Customs Act, 1962 ('Act' for short). The
appellants imported 27 knitting machines as the appellants owns a
hosiery factory in 1972. The appellants held an import licence for
import of knitting machinery. B
According to the Customs authorities the machinery was not new
-.J as the licence permitted to import, but was old reconditioned. The
Customs authorities also held that the price shown by the appellant on
the basis of invoice was much lower than what the price actually should
·~ be. The price shown by the appellant on the basis of invoice was
·, Rs.77441 whereas according to the Customs authorities the price came c
to Rs.2,98,359. On this basis, a show cause notice was issued and after
hearing the appellant, the Collector of Customs Bombay by order
dated 29.12.73 found that the appellants had committed breach of
1 Section lll(d) of the Act and also Section lll(m) of the Act and for
both the counts the penalty was imposed on the appellants. Under
D
Section lll(d) the penalty imposed was Rs. l,12,000 in lieu of confisca-
tion of goods and for breach Section 1ll(m) a penalty of Rs. 1.47,000was
imposed under Section 112 of the Act.

Against this order passed by the Collector of Customs, an appeal
).-- was filed by the appellants before the Board and the Board maintained
E
the Order passed by the Collector of Customs. On revision, the Cent-
ral Government reduced the penalty from Rs. l,47,000 to Rs. one lac
only. Against this the appellant preferred a writ petition before the
Delhi High Court which was dismissed by a Division Bench of .the
~
High Court by its judgment dated 4th April, 1978 and aggrieved by this
). the present appeal has been preferred.
F
So far as the penalty under Section lll(d) in lieu of confiscation
~ was concerned, the leave has not been granted and it is not disputed
that the appellants have taken away the goods after paying· the duty
and in this appeal therefore we are not concerned with it. The only
challenge before us therefore is in respect of penalty of Rs. one lac
imposed under Section lll(m) of the Act. G

It is not disputed that Section lll(m) of the Act has been
,... amended in 1973 by Act No. 36 of.1973 but this amendment will not be
applicable to the present case. Section lll(m) as it stood before the
amendment reads as under:
H
'

700 SUPREME COURT REPORTS [1986] 3 S.C.R.

A "Any dutiable or prohibited goods which do not corres-
pond in any material particular with the entry made under
this Act or in the case of baggage with the declaration made
under Section 77 in respect thereof."

and After the Amendment Act 1973 this provision now reads like:
B
"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."

c It is therefore clear that the word 'value' was inserted in this provision,
Before the insertion of this word 'value'; Section lll(m) appears to
mean that if the dutiable or prohibited goods are imported which do
not correspond in any material particular with the entry made under
Section 46 of the Act and in case of baggage with the declaration made
under Section 77, then alone Section lll(m) could be attracted:
D
Section 46 of the Act provides:

"46(1) The importer of any goods, other than goods in-
tended for transit or transhipment, .shall make entry
thereof by presenting to the proper officer a bill of entry for
E
home consumption or warehousing in the prescribed form:

Provided that if the importer makes and subscribes to
a declaration before the proper officer, to the effect that he
is· unable for want of full information to furnish all the
particulars of the goods required under this sub-section,
F
the proper officer may, pending the production of such
information, permit him, previous to the entry thereof (a)
to examine the goods in the presence of an officer of
customs or (b) to deposit the goods in a public warehouse
appointed under Section 57 without warehousing the same.
G xx xx xx xx
xx xx xx xx
xx xx xx xx
(4) The importer while presenting a bill of entry shall at
the foot thereof make and subscnbe to a declaration as to
H
RIB TAPES PVT. LTD. v. U.0.1. {OZA. J.] 701

the truth of the contents of such bill of entry and shall, in A
support of such declaration, produce to the proper officer
the invoice, if any, relating to the imported goods."
I)
xx xx xx xx
It is in respect of this that Section. 1ll(m) indicated that wherever B
goods actually imported are different in material particulars than the
goods which were shown in the bill of entry or a declaration as contem-
-j plated in Section 46 then it will be a breach of Section lll(m). The
difference in particulars could be in respect of anything but value, as
this sub-clause clearly show that the difference in value could not be
' ~. made the basis of breach of this sub-clause before the. amendment of
\ 1973, when the term 'value' has been introduced into this sub-clause. c
: It was contended by the learned counsel for the appellants that in
fact in the decision of this Court in Union of India & Ors. v. Mis Rai
Bahadur Shree Ram Durga Prasad (P) Ltd. & Ors., [1969] 2 SCR 727
this Court considered the question of description and came to the D
conclusion that a penal provision has to be construed strictly and in
absence of specific words requiring 'value' .to be mentioned, it could
not be inferred that any difference in value could be made the basis of
penalty. Whereas learned counsel appearing for the respondents con-
tended that although the term 'value' was not in Sec. lll(m) of the Act
before the amendment but that will make no difference as according to
E
him even without the term 'value' a mis-description could be inter"
preted to be a mis-description on the basis of value stated and ultimately
the goods found to be of a higher value. By the amendment the Legis-
lature had only tried to explain or clarify the position and he con-
tended that this was the view taken by the High Court while consideP
} ing this question.

In Union of India's case the Court held:

"If we are to hold that every declaration which does not
state accurately the full export value of the goods exported
is a contravention of the restrictions imposed by s. 12(1)
then all exports on consignment basis must be held to con-
travene the restriciions imposed by s. 12(1). Admittedly s.
12(1) governs every type of export. Again it is hard to
believe that the legislature intended that any minor mistake
in giving the full export value should be penalised in the
manner provided ins. 23(A); The wording of s. 12(1) does H
RIB TAPES PVT. LTD. v. U.0.1. [OZA. J.] 701

the truth of the contents of such bill of entry and shall," in · A
support of such declaration, produce to the proper officer
the invoice, if any, relating to the imported goods."
xx xx xx xx
It is in respect of this that Section lll(m) indicated that wherever B
·goods actually imported are different in material particulars than the·
gocids which were shown in the bill of entry or a declaration as contem-
_J._ plated in Section 46 then it will be a breach of Section lU{m). The
difference in particulars could be in respect of anything but value, as '

r this sub-clause clearly _show ihat the difference in value could not be
· ·made the basis of breach of this sub-clause before the amendment of
, 1973, when the term 'value' has been introduced into this sub-clause. .
_.,....
c
i It was contended by the learned counsel for the appellants that in
l-i fact in the decision of this Court in Union of India & Ors. .v. Mis Rai
Bahadur Shree Ram Durga Prasad (P) Ltd, & Ors., [1969] 2 SCR 727
this Court considered the question of description and came to the D
conclusion thiit a penal provision has to be construed strictly and in
absence of sPecific words requiring 'value' to be mentioned, it. could
not be inferred that any difference in value could be made the basis of
penalty. Whereas learned counsel appearing for the respondents con-
tended that although the term 'value' was not in Sec. lll(m) of the Act
before the amendment but that will make no difference as according to E
-~ him even withoui the term 'value' a mis-description could be inter- ·
preted to be a mis-description on the basis of value stated and ultimately·
the goods found to be of a higher value. By the amendment the Legis-
lature had only tried to explain or clarify the position and he con-
., , tended that this was the view taken by the High Court while consider-
1' fo~ this ~uestion. · · · F
\ -,~ '

--{ ·-...,_ In Union of India's case the Court held:

"Ifwe are to hold that every declaration which does not
state accurately the full export value of the goods exported
is a contravention of.the restrictions imposed bys. 12(1). G
then all exports on consignment basis must be held to con-
travene ·the restrictions imposed bys. 12(1). Admittedly s.
12(1) governs every type of export. Again it is hard to
believe that the legislature intended that any minor mistake
in giving the full export value should be penalised in the
manner provided ins. 23(A). Th~ wording of s. 12(1) does H
702 SUPREME COURT REPORTS [1986] 3 S.C.R.

A not support such a conclusion. Such a conclusion does not
accord with the purpose of s. 12(1). 're

It is true that the regulations contained in the Act are
.·enacted in the economic and financial interest of this
B country. The contravention of those regulations which we
were told are widespread are affecting vital economic in-
terest of this country. Therefore the rigour and sanctity of
those regulations should be maintained but at the same
time it should not be forgotten that s. 12(1) is a penal
section. The true rule of construction of a section like s.
*
12(1) is, if we may say so with respect, as mentioned by ,,.' ·}!
c Plowman, J. in Re H.P.C. Productions Ltd.-[1962] CIJ.
Do. 466 at 473."

It is therefore clear that their Lordships relied on the rule of construe-
tion holding that penal provision has to be strictly construed and held 'r
that where the provision itself did not require the value to be stated for
D
any error in respect of that, no penalty could be imposed. Learned
counsel contended that it was because of this decision that the Amend-
ment Act 1973 was passed by the Parliament and the term 'value' was
inserted in Sec. lll(m) of the Act. Learned counsel referred to Ob-
jects and Reasons for the amendment mentioned in the Bill, which
resulted in Act No. 36 of 1973. The material words mentioned in the
E
Objects and Reasons for the amendment as stated in the Bill reads as ~-
under:

"The amendments to these Acts proposed in the Bill
>
mainly seek to make the punishments prescribed thereun-
F
der more severe and to make certain other provisions the-.
rein with regard to the rules of evidence and procedure
--\
'
with a view to removing the loopholes noticed in the work-
ing of these Acts and making their enforcement more 'r
effective.

2. The notes on clauses explain in detail the various provi-
G sions of the Bill.
;
-Clause(2). This clause seeks to amend Section 111 of the
Customs Act, 1962, with a view to providing for the confis- I
A
cation of goods in cases of m;s-declaration of the value or
imported goods irrespective of whether or not such goods
H
RIB TAPES PVT. LTD. v. U.O.l. [OZA. J.J 703
A
are dutiable or prohibited, in order to cover cases of over-
invoiced imports."
I
'
It is not in dispute that in order to interpret a particular provision and
to infer the intention of the Legislature, the Objects and Reasons B
stated in the bill, when it is presented to the Legislature, could be
used. In this view of the mattter it appears that before the amendment
in 1973, Sec. lll(m) did not contemplate any difference in material
particulars in respect of value but it referred matters other than the
value.
'
.\ c
It is not disputed that penalty under Sec. lll(m) has been im-
posed solely on the ground that the price shown by the appellant in the
declaration was much less than what was ultimately found by the De-
partment to be the price of imported goods and in respect of this
difference of price, it was held that there is a difference in material
particulars which brought the matter within the mischief of Sec. D
lll(m) of the Act. But in view of the fact that the term 'value' was not
in Sec. lll(m) before the amendment of 1973 this difference on the
basis of value could not be said to be a difference in material particu-
lars within the meaning of the language of Sec. 1 ll(m) and in this view
of the matter, the view taken by the authorities could not be
maintained. E

. The High Court in its judgment realising this difficulty observed
that this amendment where the term 'value' has now been inserted is
merely explanatory and that was what was also contended by learned
counsel for the respondents.
F

It is not in dispute that a penal provision has to be strictly con-
strued and reading Sec. lll(m) before the amendment it is not possi-
ble to draw an 'inference that any difference in material particulars may
be referable to 'value'. This argument therefore can not be accepted.
The scheme of Sec. lll(m) as it stood then nbwhere referred to the G
difference of value as one of the ingredients which'may attract this
provision. In such a situation therefore if it was not the specific inten-
tion of the provision, a difference in respect of value therefore could
not be said to attract this p~ovision and on that basis no penalty could
be imposed. -.,-
H
704 SUPREME COURT REPORTS [1986) 3 S.C. R. '
A The appeal is allowed and the orders passed by the Collector,
r
Board, Central. Government and the High Court are hereby set aside.
The penalty imposed on the appellants under Sec. lll(m) read with
Sec. 112 is hereby quashed. The appellant shall be entitled to get
refund of the penalty if already deposited. No order as to costs.
B
A.P.J. Appeals allowed.