TMI Blog2003 (12) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... port-material, the raw material for which is imported. This is called 'Advance Licence'. The advance licences are issued by the Joint Director of Foreign Trade, who is essentially an officer under the Ministry of Commerce, Government of India and more particularly an officer working under the Central Excise Department. On the basis of that licence, the imports are permitted to be made by the manufacturing units, who hold the advance licences and after using that raw material which is imported the matching exports are expected to be made by these advance licence holders. There is a power under the Foreign Trade Act via Section 10 in the Union Government to appoint any person, vesting him the powers such as searching, inspecting and seizing of goods, etc. and in case of the contravention of the provisions of the Act or, as the case may be, the conditions of licence, which has been dealt with under Section 11 of the Foreign Trade Act. It is, therefore, the case of the petitioners that they can be dealt with in respect of any breach committed by them (if at all) in respect of their advance licence conditions only by the authority under the Foreign Trade Act, which authority is their li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Judge secondly found that merely because there were powers in the first respondent or, as the case may be, the licensing authority to monitor the said licences, it could not be said that the second respondent was divested of his powers to investigate. In short, the contention raised was that there could not be a parallel enquiry also. Relying on the judgment of the Supreme Court, the learned Judge came to be conclusion that if there was any activity of smuggling as understood in the Customs Act, there could be no impediment in the way of the officers of the Customs Department to initiate an investigation for which purpose, a notice could always be given under Section 108 of the Act. Holding so, the learned Judge dismissed the writ petitions, necessitating the present batch of writ appeals. 6.Arguments for the appellants were laid by Shri Habibullah Basha, learned Senior Counsel as also Shri K.M. Vijayan, learned Senior Counsel, who pointed out that there were intervening circumstances after the judgment of the learned single Judge, which made the whole enquiry as a meaningless and a fortuitous enquiry. Learned Senior Counsel took this stand that even if the customs authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definite information that there were no manufacturing units available which had the capacity of manufacturing the exported goods which these exporters had exported allegedly utilising the imported raw materials. He points out that there is every possibility of the imported material being siphoned off in the market and some other inferior material is being used only to complete the export obligation. He points out that there was nothing wrong in investigating the matter because after the investigation, the concerned authorities under the Customs Act could also come to the conclusion that there was nothing wrong with the dealings of the petitioners. Learned senior Counsel heavily relies on the reported decision of the Supreme Court in Sheshank Sea Foods Pvt. Ltd., Karnataka v. Union of India and Others [1996 (88) E.L.T. 626 (S.C.) = 1996 (11) SCC 755] points out that this case will clinch the issue. As regards the contention of the adjudication proceedings, the learned Counsel has to say that he would have nothing against that order but, in spite of that order there would still be areas left to investigate. 8.On these rival submissions, we have to see as to whether the learned Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the possible power and more particularly described under Section 108 of the Act to summon any person obviously to enquire as to whether any goods have been smuggled or not. If, therefore, any goods are brought in India, which enjoy the exemption from the payment of customs duty on certain conditions then, the Customs Officer will have all the powers to enquire as to whether the conditions, subject to which the said duty is exempted, have been followed or not and it is obvious that, in case of the breach of those conditions, those goods will be smuggled goods. We, therefore, do not see as to how a simple summons issued under Section 108 of the Act could be termed to be a proceeding without jurisdiction, when it is the inherent power of the every Gazetted Officer of the Customs Department to enquire into the matter of smuggling. 11.It is tried to be suggested, more particularly from the accompanying documents of the adjudication order dated 10-10-2003, that atleast in case of the licence obtained by M/s. Varadhariya Exporters in Chennai, who are the appellants in W.A. No. 1890 of 2003, in fifteen licences the export obligations had been made and the licences were also redeemed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mand notice is issued? 5. Whether the firm is placed under Denied Entities List/Defaulters List? 6. Whether their IEC has been suspended? 7. Concerned provisions of Foreign Trade Act, 1992 can be applied in the case, i.e. for penal case. The officer then has given a finding that the orders redeeming fifteen licences were in order as the matching exports were done and the foreign exchange was also earned for the country. The order quotes : "In the absence of conclusive evidence against the noticee firm for having violated the conditions stipulated in either Clause 9(4) or Clause 10 above, I would be doing a great injustice to the noticee firm in ordering the cancellation of the licence ab initio. Even the DRI, Chennai in their letter dated 18-10-2002 have only informed that the noticee firm "appears" to have diverted the duty-free imported raw materials instead of utilising the same for the export products ... ... ... Although the noticee firm declared their factory address in their SSI certificate produced along with the application, one should appreciate the entire stainless steel industry and the type of machinaries they use in manufacturing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Customs authorities of their innocence and further convince them that there has been no violation of the export obligation or, as the case may be, the conditions of the Advance Licence. Learned Counsel wonders as to how a fault can be found in the matter of jurisdiction of the officer to issue a summons and, according to the learned Counsel, the whole issue was being pre-judged. 13.The contention is undoubtedly correct. The concerned officer, who passed the order in adjudication proceeding, did not have the evidence before him nor was such evidence ever referred to in the said adjudication order. We do not mean to sit in an appeal over the said adjudication order because that is not our jurisdiction. However, we must say and express that there is hardly any reference to the evidence in that order, which evidence is undoubtedly presently available with the customs authorities as per their own claim. We fail to follow that merely because of this adjudication order, how is it that the customs authorities would be divested of any jurisdiction even to enquire into the matter. Learned Counsel took us to the Foreign Trade Act and more particularly Section 12 therein, which reads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms authorities had issued the summons to the petitioner to furnish the details about the transactions. The learned Judge has tabulated the contentions in the following words : "(i) that the Customs Department had no right or authority to call upon the petitioners to furnish details of the import of the raw materials and the utilisation thereof. The petitioners imported the raw materials under an advance licence granted by the Controller of Imports and Exports subject to the conditions attached to the said licence/licencees; (ii) Any breach of the conditions should attract the jurisdiction of the concerned authority, namely the Enforcement Wing of the licensing authority and it is not for the Customs Department to exercise powers of search, seizure and confiscation. For any breach of the conditions of licence, the constituted authority under the Imports and Exports (Control) Act, is vested with ample powers to investigate and initiate action for any contravention; (iii) Conditions under the licence and the breach thereof come under the immediate, direct and effective control of the Controller of Imports and Exports and the liability to pay customs duty wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nataka High Court reported in Pooja Exporters v. Assistant Director, DRI [1989 (41) E.L.T. 21]. The learned Judge ultimately came to the conclusion that the petition was liable to be dismissed. 15.Now turning to the case of Sheshank Sea Foods case, cited supra, paragraph 2 of the said judgment would suggest that the learned Judges had considered the facts in the writ petition filed by Kamath Packaging Limited only. A similar contention was raised before the Supreme Court that only the licensing authority had the jurisdiction to investigate the violations, if any, as the duty exemption scheme, under which the licences had been issued, was a Code by itself and excluded the investigation by the Customs Authorities. The Supreme Court then in paragraph 6 referred to Section 111(o) of the Customs Act and came to the conclusion in paragraphs 8 and 9 in the following words : "Section 111(o) states that when goods are exempted from customs duty subject to a condition and the condition is not observed, the goods are liable to confiscation. The case of the respondents is that the goods imported by the appellants, which availed of the said exemption subject to the condition that they woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following effect : "If on a reading of the said notice, it is manifest that on the assumption that the facts alleged or allegations made therein were true, none of the conditions laid down in the specified sections was contravened, the respondent would have no jurisdiction to initiate proceedings pursuant to that notice. To state it differently, if on a true construction of the provisions of the said two sections the respondent has no jurisdiction to initiate proceedings or make an enquiry under the said sections in respect of certain acts alleged to have been done by the appellants, the respondent can certainly be prohibited from proceeding with the same." From this, the learned Counsel suggests that where there was a lack of jurisdiction, the writ of prohibition will lie against the impending enquiry or investigation. 18.We have absolutely no difficulty with this proposition. However, the further question is as to whether there is anything in the judgment suggesting that there cannot be an enquiry by the Customs Department in respect of the licence not issued by it but by some other Department. Learned Counsel again relied on the observations in paragraph 35, which read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Section 178 could not be attracted. Such is clearly not the case in our matter. We have already referred to Section 111(o) only with an idea to suggest that any goods which were brought in contravention of Section 111(o) could be said to be an act of smuggling and that under the provisions of the Customs Act, any Customs authority had the necessary power to initiate the enquiry or the investigation, as the case may be. Such a provision did not fall for consideration in the aforementioned judgment of East India Commercial Company case, cited supra and, according to us, this would be a distinguishing feature. We have already pointed out that the facts and the principles of law involved in Sheshank Sea Foods case, cited supra, would be almost applicable on all fours. 19.In Pooja Exporters case, cited supra, the learned single Judge of the Karnataka High Court, Justice K.A. Swami (as His Lordship then was) has given a clear reason, distinguishing the case of East India Commercial Company case, cited supra. We respectfully agree with that. 20.The other decisions which were relied upon by the learned Counsel are Sampat Raj Dugar case and Titan Medical Systems case, cited supra. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is tried to be urged that if the import of the goods was not illegal then, there will be no question of enquiring into with the aid of Section 108 of the Customs Act. 21.We do not agree. The observations therein were made in an entirely different context and in that case, the Supreme Court was not considering the question as to whether there was any jurisdiction on the part of the Customs authorities to enquire into the matter or to institute an investigation or an enquiry, as the case may be. We do not think that anything was wrong in merely starting an investigation or an enquiry, as the case may be, because the importers, appellants herein, could have even convinced the Customs authorities about the aspects of the legality of the imports. We do not see anything wrong if the Customs authorities enquiring into the matter particularly because of the power in them to confiscate such goods as contemplated under Section 111(o) of the Act. We do realise that the goods in this case cannot be confiscated. However, as to whether the importer could be exempted from paying the customs duty would still be a question which can be gone into by the Customs authorities and in case they foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Customs authorities appears to be as to whether there at all was a manufacturing factory or manufacturing unit for utilising the imported stainless steel sheets and if such manufacturing unit was not there, how the imported stainless steel sheets were actually utilised. It is also true that the further question in that enquiry is going to be as to whether it was the imported material alone which was used in the manufacturing activity. Now, if there was no manufacturing unit available or any such manufacturing unit as would have the capacity to manufacture the goods worth crores of rupees, how was the imported stainless steel utilised. The question would not only be misrepresentation while getting the Advance Licence but also about the utilisation of the imported material, which would squarely fall under Section 111(o) of the Customs Act. In our opinion, the decision in Titan case, cited supra, also does not help the appellants. 24.Learned senior Counsel for the appellants very earnestly urged that there was nothing which remained to be done particularly because : (1) The imports were cleared and the matching exports also were cleared by the Customs authorities with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No. 80/95, there is a clear reference to the export obligation being discharged after the necessary documents in support of the export are produced to the satisfaction of the Assistant Commissioner of Customs. It is pointed out that in this case, out of sixteen licences, fifteen have been so discharged and in respect of the sixteenth licence also a major portion of the export obligation has also been fulfilled. From this learned senior Counsel argues that, therefore, there will be no question now of re-opening the matters particularly when the licences have been redeemed. 29.We do not think that such an approach would be a right approach to the problem. We have already clarified that even if the redemption of the licences is completed, still there would be a power in the Customs authorities to effect the investigation or, as the case may be, enquiries to see that whether there was any evasion of the Customs duty. Therefore, in our opinion, the discharge of the export obligation per se cannot put an end to the whole story. 30.Insofar as the second notification, Notification No. 30/97, is concerned, a similar provision regarding the export obligation also appears there. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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