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1993 (7) TMI 74 - SC - CustomsWhether the facts and circumstances of this case warrant a total or partial waiver of the redemption fine? - Held that - The importers contention that the redemption fine should be wholly waived or substantially reduced as their action in importing the goods under OGL was bona fide is not well founded. Even if the transaction has in fact resulted in a loss (we cannot delve into it for the first time in this Court) it will not make any difference. We feel that taking cover under the earlier orders passed in the case of M/s. Jain Shudh Vanaspati Ltd. and the letter of the STC the importers have tried to create the impression that they were innocent victims of the subsequent interpretation put on the relevant entry ignoring the fact that the licences were revalidated on certain terms and conditions which did not permit import except through the STC. We are therefore satisfied that the import under OGL was not a bona fide act. We therefore dismiss both the appeals as well as the writ petition with costs
The core legal questions considered in this judgment revolve around the legality and validity of the import of Refined Industrial Coconut Oil under the import policy applicable during 1980-81, the interpretation of the import policy regarding canalisation of coconut oil, the authority and jurisdiction of customs officials and appellate bodies in adjudicating such matters, and the quantum and justification of redemption fines imposed for illegal imports. Specifically, the issues include:
(1) Which import policy period governs the import transactions-the period when licenses were issued or when the actual import took place? (2) Whether the term "coconut oil" in the relevant import policy entry includes both edible and non-edible (industrial) varieties or only the edible variety? (3) Whether lower-tier customs authorities can take a view contrary to that of higher statutory appellate and revisional authorities regarding the classification and canalisation of imported goods. (4) Whether the orders of confiscation and imposition of redemption fines suffered from breach of natural justice or were influenced by collateral considerations. (5) Whether the importers acted bona fide in importing the industrial coconut oil under the Open General Licence (OGL) despite the canalisation provisions, and consequently, whether the redemption fines imposed should be waived or reduced. (6) The appropriate quantum of the redemption fine in light of the importers' conduct, bona fides, and the facts and circumstances of the case. Issue-wise detailed analysis: 1. Applicability of Import Policy Period The Court examined whether the import policy governing the transaction was that in force when the licenses were issued or when the import actually occurred. The importers contended that the policy period when licenses were issued should apply, while the department argued for the policy in force at the time of import. The Court referred to the import policy of 1980-81 and the dates of import in September 1982, noting that although the Letters of Credit were opened in July 1982, the import policy of 1980-81 was applicable. This was consistent with the importers' reliance on additional licenses issued during that period. The Court held that the terms of the 1980-81 import policy applied to the facts of the case, thereby rejecting the importers' contention that the later policy should govern. 2. Interpretation of "Coconut Oil" in Import Policy The Court considered whether the phrase "coconut oil" in Entry 5 of Appendix 9 of the 1980-81 import policy was confined to edible coconut oil or included industrial (non-edible) varieties. The importers argued that only edible coconut oil was canalised and industrial coconut oil could be imported freely under OGL. The department disputed this, asserting that all varieties were canalised. The Court undertook a detailed interpretation of the import policy and concluded that the entry covered both edible and non-edible varieties. Therefore, the import of industrial coconut oil without going through the State Trading Corporation (STC) was illegal and contravened the canalisation provisions. This interpretation was consistent with the policy's language and subsequent clarifications issued by the Chief Controller of Imports & Exports. The Court rejected the importers' narrow interpretation. 3. Authority of Customs Collector versus Higher Appellate and Revisional Authorities The importers contended that the Collector of Customs was bound by the decisions of the Board and Central Government, as statutory appellate and revisional authorities, and thus could not take a contrary view. The Court clarified that while the Collector is generally bound by such decisions, this matter had already crossed that stage, and the Court was free to interpret the import policy afresh. The Court emphasized that the Collector's quasi-judicial order was not vitiated by any breach of natural justice or collateral considerations. The Court upheld the Collector's authority to impose confiscation and redemption fines based on its interpretation. 4. Breach of Natural Justice and Collateral Considerations The Court examined allegations that the Collector's orders were tainted by breach of natural justice or influenced by extraneous factors. The importers argued that the show cause notices and adjudication orders did not afford them proper opportunity or were based on improper considerations. The Court found no such procedural infirmity or unfairness. The importers were given adequate opportunity to respond, and the Collector's orders were reasoned and based on relevant statutory provisions. The Court dismissed these contentions. 5. Bona Fides of the Importers and Quantum of Redemption Fine The pivotal issue concerned whether the importers acted bona fide in importing industrial coconut oil under OGL, believing it was not canalised, and whether this justified waiver or reduction of the redemption fine imposed under Section 125 of the Customs Act. The importers relied on several grounds:
The Court acknowledged these points but emphasized that the importers were experienced and well-versed in import-export policies and procedures. It noted that the importers failed to produce crucial evidence regarding the financial details of the high-seas sale transactions, including profits or losses, despite multiple opportunities from the High Court, Tribunal, and Supreme Court. This failure undermined their claim of bona fides. The Court further observed that the letter from the STC was not authoritative, as the STC was not competent to bind customs authorities. The relevant competent authority was the Chief Controller of Imports & Exports, who had issued circulars clarifying that industrial coconut oil was canalised. The importers, given their expertise, should have been aware of these developments, especially since the licenses were revalidated with explicit conditions prohibiting import except through STC. The Court found that the importers attempted to use earlier conflicting orders and letters as a cover to claim bona fide belief, ignoring the changed legal position. The Court also rejected reliance on the 1985 DGTD letter and subsequent clearances, as these post-dated the imports and could not influence the importers' state of mind at the time of import. Accordingly, the Court held that the importers did not act bona fide in importing the goods under OGL contrary to the canalisation provisions. 6. Discretionary Nature of Redemption Fine and Judicial Interference The Court reiterated that the imposition and quantum of redemption fines under the Customs Act are discretionary matters for the customs authorities. Judicial interference is warranted only if the discretion is exercised arbitrarily or results in gross miscarriage of justice. The Court clarified that bona fide conduct by importers does not automatically entitle them to full waiver of redemption fines; the totality of facts and benefits derived from the illegal import must be considered. In this case, the Court found no basis to interfere with the Collector's imposition of the redemption fine or the Tribunal's refusal to reduce it, given the importers' failure to prove bona fide conduct or absence of benefit from the import. 7. Procedural Conduct and Late Submission of Evidence The Court expressed strong disapproval of the importers' counsel seeking adjournments and attempting to introduce crucial documents and financial evidence at a belated stage, including after the hearing had concluded. The Court emphasized the importance of timely production of evidence and rejected applications for rehearing or adjournment to accommodate such late submissions. The Court held that allowing such delays would encourage multiplicity of hearings and set a wrong precedent. Conclusions: The Court concluded that the importers' contention for waiver or reduction of redemption fines based on bona fide belief was not established. The import of industrial coconut oil under OGL was illegal and not bona fide, and the redemption fines imposed were justified. The appeals and writ petition were dismissed with costs. Significant holdings and principles established include:
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