1962 (5) TMI 23 - SC - Customs

Has the Collector jurisdiction to adjudicate whether the goods are liable to be confiscated? Whether goods have been imported contrary to the prohibition or restriction imposed by an order made under Section 3(1) of the Act of 1947? Whether there has been a breach of a condition of a licence and whether therefore confiscation should be ordered under Section 167(8) of the Sea Customs Act and further penalty imposed? Held that - Appeal allowed. Order of prohibition restraining the Customs authority from proceeding with the enquiry under Section 167(8) of the Sea Customs Act. The tribunal has no jurisdiction to proceed with the inquiry under Section 167(8) of the Sea Customs Act.

Summary

The core legal questions considered in this judgment are:

1. Whether the Collector of Customs has jurisdiction under Section 167(8) of the Sea Customs Act, 1878 read with Section 3(2) of the Imports and Exports (Control) Act, 1947, to confiscate goods imported under a valid licence on the ground that a condition of that licence was breached.

2. Whether a breach of a condition imposed in an import licence issued under an order made under Section 3(1) of the Imports and Exports (Control) Act amounts to a contravention of the order itself, thereby attracting confiscation and penalty provisions under the Sea Customs Act.

3. Whether a licence obtained by fraudulent misrepresentation is to be treated as no licence at all for the purposes of confiscation under the Sea Customs Act.

4. Whether the Collector of Customs can confiscate the proceeds of sale of goods that were originally imported and subsequently sold under court order.

5. Whether the decision of a High Court on a point of law is binding on the Customs authorities and the Collector of Customs within its territorial jurisdiction.

6. Whether a writ of prohibition under Article 226 of the Constitution is maintainable to restrain the Collector of Customs from proceeding with confiscation proceedings when jurisdiction is disputed.

Issue-wise Detailed Analysis:

Issue 1 & 2: Jurisdiction of Collector of Customs to confiscate goods for breach of licence condition and whether such breach amounts to contravention of order under Section 3(1) of the Imports and Exports (Control) Act

The legal framework includes Section 3(1) of the Imports and Exports (Control) Act, 1947 empowering the Central Government to prohibit or restrict imports by order; Section 3(2) deeming goods subject to such orders as prohibited or restricted under Section 19 of the Sea Customs Act, 1878; Section 167(8) of the Sea Customs Act providing for confiscation and penalty for goods imported contrary to such prohibition or restriction; and Section 182 of the Sea Customs Act authorizing Customs officers to adjudicate confiscation and penalty.

The appellants contended that the Collector's jurisdiction is limited to confiscation where importation is in contravention of a prohibition or restriction imposed by an order under Section 3(1), and that breach of a licence condition is not a breach of such an order. They argued that the licence condition restricting sale after import was not itself an order under Section 3(1), and hence the Collector could not confiscate goods for breach of such condition.

The Court examined the relevant notifications: Notification No. 23-ITC/43 issued under Defence of India Rules (deemed under Section 4 of the Act) prohibited import of electrical instruments except under licence; Notification No. 2-ITC/48 authorized licences to be issued subject to conditions including restrictions on disposal of goods. The licence in question was issued under these notifications with a condition prohibiting sale of goods post-import.

The Court reasoned that the power to restrict or control imports under Section 3(1) includes the power to impose conditions regulating the use or disposition of goods after import. Therefore, a breach of a licence condition legitimately imposed under such an order is itself a breach of the order. The Court relied on the principle established in English authorities (Willingale v. Norris and Wicks v. Director of Public Prosecutions) that regulations validly made under a statute are to be treated as part of the statute itself, and on Indian precedent (Emperor v. Abdul Hamid) that notifications issued under statutory powers have the force of law. Hence, breach of a licence condition is a contravention of the order under the Act and attracts confiscation under Section 167(8) of the Sea Customs Act.

The Court rejected the contention that once goods are imported under a valid licence, they cannot be said to be imported contrary to restrictions. It held that the term "import" in Section 167(8) includes post-import acts violating conditions imposed by the order, since otherwise the statute's efficacy would be undermined.

Regarding the Collector's jurisdiction, the Court held that the Collector has jurisdiction to decide whether the goods were imported contrary to an order, which necessarily includes deciding whether breach of a licence condition is breach of the order. Even if the appellants' contention that breach of condition is not breach of order were accepted, it would only be a defence to be decided on merits and would not oust the Collector's jurisdiction to adjudicate.

The Court also addressed the argument that a High Court decision (Sen, J.) held that breach of licence condition is not breach of order, and thus the Collector was bound by that decision. The Court declined to hold that a High Court decision is absolutely binding on the Collector in such matters, but even if it were, it would only affect the merits and not the jurisdiction of the Collector.

Issue 3: Effect of licence obtained by fraudulent misrepresentation

The appellants argued that a licence obtained by fraud is void, so goods imported under it should be treated as imported without licence and hence liable to confiscation. The Court examined the statutory scheme, including an order dated May 1, 1948 empowering cancellation of licences obtained by misrepresentation or in breach of conditions.

The Court held that a licence obtained by fraud is voidable, not void ab initio, and remains valid until cancelled by the appropriate authority. Since the licence in question was not cancelled, the goods were imported under a valid licence, and therefore not goods imported without licence within the meaning of the Sea Customs Act. Thus, this argument did not support confiscation.

Issue 4: Confiscation of sale proceeds of goods

The appellants contended that only goods imported can be confiscated, not the money obtained from their sale. The Court noted that the goods were sold under a High Court order due to deterioration, with proceeds kept in court custody. The Court held that the sale proceeds represent the goods and are liable to confiscation as the goods themselves would be. The appellants could not deny that the money represented the goods given the court order.

Issue 5: Binding effect of High Court decisions on subordinate authorities

The appellants argued that the Collector was bound by the High Court's decision in a related case that breach of licence condition is not breach of order. The Court held that under Article 215 and Article 227 of the Constitution, High Courts have supervisory jurisdiction over subordinate courts and tribunals, and it would be anomalous for such authorities to ignore the law declared by the High Court. Therefore, the law declared by the highest court in the State is binding on authorities under its superintendence, and they cannot ignore it in initiating or deciding proceedings. However, the Court also noted that the Collector's jurisdiction to decide the question remains unaffected, and the binding nature of the High Court decision affects the merits rather than jurisdiction.

Issue 6: Maintainability of writ of prohibition against Collector's proceedings

The appellants sought a writ of prohibition to restrain the Collector from proceeding with confiscation. The Court explained that writ of prohibition is appropriate to prevent proceedings without or in excess of jurisdiction. The Court held that the notice served by the Collector was a valid quasi-judicial notice specifying the alleged contravention. If on true construction of the law the Collector had no jurisdiction to proceed, prohibition would lie. However, since the Court found that the Collector had jurisdiction to adjudicate whether the goods were liable to confiscation, the writ of prohibition was not justified on that ground.

However, the majority ultimately held that the Collector did not have jurisdiction because the breach of licence condition was not a breach of the order under Section 3(1) of the Imports and Exports (Control) Act, 1947, and the licence was valid and subsisting. Therefore, the proceedings under Section 167(8) of the Sea Customs Act were without jurisdiction, and the writ of prohibition was granted restraining the Collector from proceeding.

Application of Law to Facts and Treatment of Competing Arguments

The appellants imported electrical instruments under a licence with a condition prohibiting sale of the goods post-import. The Collector initiated confiscation proceedings alleging breach of this condition. The appellants challenged the Collector's jurisdiction, relying on the High Court's earlier decision that breach of licence condition is not breach of order and that the licence was valid. The Collector and respondent authorities argued that the licence condition was imposed under statutory orders and breach thereof amounted to breach of order attracting confiscation.

The Court analyzed the nature of orders and conditions, the statutory scheme, and precedents. It distinguished between statutory orders under Section 3(1) and public notices, holding that only the former have statutory force. It found that the licence condition was not imposed by a statutory order but was a condition in the licence issued administratively. Therefore, breach of licence condition was not breach of order under Section 3(1). The Court also rejected the argument that fraudulent procurement of licence rendered it void for confiscation purposes, since no cancellation was effected.

The Court emphasized the binding nature of High Court decisions on subordinate authorities and the importance of legal certainty and administrative coherence. It found that the Collector's proceedings were contrary to the law declared by the High Court and hence without jurisdiction.

Significant Holdings:

"A breach of a condition of a licence legitimately imposed in exercise of the power under Section 3(1) of the Imports and Exports (Control) Act is to be read as a breach of the order by which the power was exercised and the condition imposed." (Majority view discussed but ultimately rejected)

"Public notices issued by the Government for general information are not orders under Section 3(1) of the Imports and Exports (Control) Act and do not have statutory force."

"A licence obtained by fraudulent misrepresentation is voidable and remains valid until cancelled by the competent authority."

"The sale proceeds of goods sold under court order represent the goods and are liable to confiscation if the goods themselves would be liable."

"The law declared by the highest court in the State is binding on authorities and tribunals under its superintendence and they cannot ignore it in initiating or deciding proceedings."

"The Collector of Customs has jurisdiction to adjudicate confiscation under Section 167(8) of the Sea Customs Act only if the goods are imported contrary to an order under Section 3(1) of the Imports and Exports (Control) Act."

"In the present case, the breach of a licence condition not imposed by a statutory order does not amount to breach of an order under Section 3(1) and therefore the Collector has no jurisdiction to confiscate under Section 167(8) of the Sea Customs Act."

"The writ of prohibition under Article 226 of the Constitution is maintainable to restrain the Collector of Customs from proceeding with confiscation proceedings when jurisdiction is lacking."

"The appeal is allowed with costs and there will be an order of prohibition restraining the Customs authority from proceeding with the enquiry under Section 167(8) of the Sea Customs Act."