TMI Blog1991 (2) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... aw-materials and its utilisation. A writ of prohibition was prayed for to restrain the respondents from proceeding with any further enquiry in relation to the utilisation and the movement of the raw-materials and other related matters. 4. The contentions urged by the 1st appellant in support of the prayer in the writ petition are as follows : (i) Inasmuch as the 1st appellant imported the raw materials under an advance licence granted by the Controller of Imports and Exports subject to the conditions attached to the said licences, the Customs Department has no right or authority to call upon the 1st appellant to furnish the details of the import of raw-materials and its utilisation. (ii) If ever a breach of the conditions had taken place, that could be enquired into by the licensing authority. Therefore, the Customs-Department could not exercise the powers of such a seizure much less confiscation. In so far as for the breach of conditions of licence the constituted authority under the Imports and Exports (Control) Act, has ample powers to investigate, it is that authority which has to take action. (iii) Conditions under the licence and the breach thereon come under the imme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts form a complete code and are administered as forming one scheme. 7. Dealing with the notification, the learned Judge found that the important clause for the purpose of this case is Cl. (d) requiring the manufacture by the utilisation of the exempt materials. The advance licence contained a specific condition requiring the utilisation of the goods imported in accordance with the provisions of the customs Notification No. 116/88. For investigating whether there had been such utilisation, the authority under the Customs Act could enquire for the purpose of satisfying itself whether the importer has complied with the conditions. Such an enquiry and investigation could necessarily be a post-import 8. After referring to the relevant case laws, the learned Judge relying on the decision in Pooja Exporters v. Assistant Director, DRI [1989 (41) E.L.T. 21] held that this decision squarely applies to this case. He also supplemented with other reasons. Ultimately, he concluded that it is the Customs Act which prohibits import of certain notified goods. The contravention of the conditions of the licence issued under the Imports and Exports (Control) Act in respect of the prohibited good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in assuming that both the authorities have jurisdiction. In this regard it is submitted with respect that the learned Judge had committed three errors. While dealing with Section 3 of the Imports and Exports (Control) Act, Section 3(2) alone links with Customs Act namely, Section 11. A breach of conditions of the licence will not attract Customs Act. S. 5 talks of prosecution and penalty. In M/s. East India Commercial Co. Ltd., Calcutta Anr. v. Collector of Customs Anr. (AIR 1962 SC 1893 = 1983 (13) E.L.T. 1342) it has been clearly held that Sec. 167(8) of the Sea Customs Act will not apply. The same view that penal provisions of the Sea Customs Act are not attracted is taken in M/s. East India Commercial Co. Ltd., Calcutta v. Collector of Customs (AIR 1962 SC 316). That was re-affirmed in Ram Kirpal v. State of Bihar (A.I.R. 1970 S.C. 951). In Addl. Collector, Customs v. Best Co. (A.I.R. 1971 SC 170) it was held that the power was available only for prosecution and not for confiscation and the said power is not enlarged even after the amendment. In the background of this case law, the learned Judge was not right in following the decision in Abdul Aaz v. State of Maharashtr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities will have jurisdiction to exempt. Justice K.A. Swami in Pooja Exporters' v. Assistant Director, D.R.L [1989 (41) E.L.T. 21] has also found that no exemption Notification was involved. Where, therefore, the exemption was obtained subject to Customs Notification No. 116/88, there is no justification whatever for the appellants to contend to the contrary. 14. In reply, Mr. Parasaran would urge that the decision in Madan Lal Anand v. Union of India (A.I.R. 1990 S.C. 176) is factually distinguishable because there is no violation at the time of importation. Then again, no Notification has been issued under Section 11 of the Customs Act. Therefore, the appellants are entitled to succeed. 15. In order to appreciate the respective submissions, we propose to refer to the salient features of the statutory provisions. The law relating to customs was originally embodied in Sea Customs Act. That Act was repealed by the Customs Act, 1962. The main object of the Customs Act is to prohibit the importation and exportation of the goods notified by the Central Government. This prohibition may be absolute or partial or even subject to certain conditions. Whenever there is violation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and prosecution under the Imports and Exports (Control) Act and orders issued there under in addition to actions enumerated in sub-para (3). In such cases, the enforcement of this would be in addition to the recovery of customs duty and interest thereon. If the licensee shall be declared a defaulter not entitling him to any licences/release under the Import Policy including the Scheme." It should be noted here that from the above paragraphs it is clear that the action is to be taken for debarment and prosecution. With reference to exemption in relation to goods imported against advance licences, it is stated that the materials imported are covered by a Duty Exemption Entitlement Certificate issued by the licensing authority in the forms produced to this notification in respect of (1) value, (2) quantity, (3) description, (4) quality and (5) technical characteristics. 20. Then Clause (c) of Notification No.115/88 is important. It reads: "(c) The goods corresponding to the resultant products and the mandatory spares, in respect of value, quantity, description, quality and technical characteristics, as specified in Part 'E' of the said Certificate are exported within the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification within . A bond/legal undertaking in terms of condition (b) of the said notification for Rs.. shall be executed within ... before the clearance of the goods from Customs." The Bond contained in Appendix XIX-F lays down three important conditions contained in Clauses (c), (e) and (f). They are extracted below: "(c) Before clearance of the first consignment of import is allowed, the importer shall furnish a Bank Guarantee for an amount equal to…. of the c.i.f. value of the licence/release order or for an amount equal to the…. of the customs duties payable, whichever is higher. The said bank guarantee will be liable to be forfeited in full or equivalent to the shortfall if the importer does not fulfill the export obligation as stipulated. (e) That the importer further agrees and undertakes that in the event of the importer's default in making the export obligation set out in the condition as specified under the Duty Exemption Certificate, the importer would be liable to the Government instituting legal actions against them for confiscation of the imported material and other rights available to the Government under the provisions of the Imports Exports (Control) A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joint legal undertaking/joint for 100% customs duty backed by bank guarantee as in Appendix XIX/F/G of the Hand Book of Import Export procedures 1988-91 for a sum of Rs…. for fulfilling export obligation and a bond mentioned in duty exemption entitlement certificate for utilisation of imported raw materials duty free with this office. The legal undertakings backed by bank guarantee shall be valid for a period of three years." It cannot be denied that the licences are issued in favour of the appellants under the Customs Exemption Entitlement Scheme. It also cannot be denied that condition No. 3 specifically mentions that the goods imported against advance licences shall be utilised in accordance with the provisions of the Customs Notification No. 116/88 dated 30th March 1988. No doubt Section 2(33) of the Customs Act while defining prohibited goods, expressly excludes goods permitted to be imported, but if a Notification has been issued under Sec. 25(1) we do not know how Section 111(o) of the Customs Act would be rendered inapplicable. Sec. III(o) of the Customs Act states as follows: "111. Confiscation of improperly imported goods, etc. The following goods brought from a pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces issued only alleged contravention of the conditions of the licence, even if the allegations contained in the notice were accepted, the same did not amount to contravention of the provisions of the Imports and Exports (Control) Order. Therefore, it was held that the action taken was not sustainable. That position does not obtain in the instant case. Therefore, this decision is of no assistance to the petitioner. 13. However, in a later case in Abdul Aziz v. State of Maharashtra (AIR 1963 SC 1470) while dealing with clause 5 of the Imports (Control) Order and after referring to the aforesaid decision in the case of M/s. East India Commercial Co. Ltd., it was observed thus: "12. In support of the second contentions that the Order does not provide for imposing the condition that the imported goods be not sold, reliance is placed on the decision in East India Commercial Co. v. Collector of Customs - 1983 (13) E.L.T. 1342 (S.C.) = AIR 1962 SC 1893. In that case, a condition was imposed in the licence prohibiting the importer from selling the imported goods. Sub-clause (1) of Clause (a) of Notification No. 2/ITC/48, dated March 6,1948, provided for imposing a condition in the lice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat Clause (o) of Section 111 of the Customs Act is very widely worded. It includes not only contravention of the conditions of the licence but also contravention of the orders issued under the Act." In our considered view, the position is exactly the same in the instant case excepting that the notification differs. We also derive support from the case in M/s. Jacsons Thevara v. Collector of Customs Central Excise [JT 1991 (1) SC 309] relied on by Mr. Ashok Harnahalli, wherein it has been observed in paragraphs 5 and 6 as follows: "5. Shri Avadh Bihari appearing for the appellant has submitted that there was no suppression or willful misstatement on the part of the appellant and that soon after the execution of the agreement dated July 31,1979, a joint application dated August 31,1979, was submitted on behalf of the appellant and the Company whereby the Deputy Chief Controller of Imports Exports was informed about the transfer of business of the appellant to the Company and it was requested that the import licence dated February 14,1979, may be transferred in favour of the Company, Shri Avadh Bihari has also laid stress on the joint letter dated September 18,1979, addressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the machinery imported under import licence dated February 14,1979, the appellant had informed the customs authorities that the said machinery had been transferred to the Company under agreement dated July 31,1979. The office of the Deputy Chief Controller of Imports and Exports, Cochin, had no role in the matter of levy of customs duty on the imported machinery and, therefore, the conduct of the appellant in informing the Deputy Chief Controller of Imports Exports about the agreement dated July 31,1979, entered into by the appellant and the Company with regard to transfer of business can have no bearing on the action taken by the customs authorities for the contravention of the provisions of the Act. The decision of this Court in East India Commercial Company Ltd., Calcutta and Another (supra) is not applicable because the action that has been taken by the Customs authorities is not for breach of the conditions of the import licence but for the contravention of the provisions of the Act. Again in paragraph 11 it has been observed as follows: "The expression "exempted" in Clause (o) does not mean full exemption from duty because under Section 25 of the Act power has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that can be said is that if Section 19 of the Sea Customs Act, 1878 were repealed then the Sea Customs Act, 1878 would not be attracted. Section 19 of the Sea Customs Act, 1878 has not been repealed and was extant and is now re-enacted as Section 11 in the Customs Act, 1962 and there has been corresponding change in the Imports and Exports Control Act, 1947 by reference to the Customs Act, 1962 and Section 11 thereof." This decision again will be of no use to the appellants in view of the notification which was issued under the Customs Act. No doubt in Addl. Collector, Customs v. Best Co. (AIR 1971 SC 170) in paragraphs 10 and 11 it was observed that it was only possible for the Customs authority to prosecute and could not confiscate and such a power is not enlarged even after the amendment. But that can have no bearing since the Notification No. 116/88 dated 30th March, 1988 come to be issued under Section 25 which certainly attracts the provisions under Section 111(o) of the Customs Act. In Durga Prasad Private Ltd. v. Union of India [I. L. R. 1968 (3) Madras 421] it was observed at page 443 as follows: "It is very difficult to sustain the interpretation that Section 167 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49 of 1988 (Union of India v. Oceanic Export Corporation). Thus it will be clear, as rightly urged by the Revenue, in not one case cited by the appellants the Notification under the Customs Act ever came up for consideration. In Addl. Collector, Customs v. Best Co. I.R. 1971 S.C. 170) in paragraph 10 at page 172 it has been held as follows: "In the present case the Customs authorities did not direct prosecution for contravention of any condition of a licence : they directed confiscation of the machinery and imposed penalty in lieu thereof. But on the terms of S. 5 as amended, the right to impose penalty for contravention of any condition of a licence may be exercised under the Sea Customs Act, 1878, and not under the Imports and Exports (Control) Act, 1947. For breach of any condition of a licence it is open to the authorities to direct prosecution, but no order confiscating goods and imposing penalty in lieu of thereof could be made. The order of confiscation could only be made under S. 167 Cl. 8 of the Sea Customs Act 1878: in terms Cl. 8 of S. 167 provides for confiscation of the goods importation or exportation of which is for the time being prohibited or restricted by or u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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