Bombay High Court
I.S. Lulla vs H.R. Syiem, Asst. Collector Of Customs on 26 September, 1963
ORDER
1. In this petition under Article 226 of the Constitution, the Petitioner has challenged the validity of the order dated August 28, 1962, passed by Respondent No. 1 (Assistant Collector of Customs) for confiscation under Clause (8) of Section 167 of the Sea Customs Act read with Section 3 of the Imports and Exports (Control) Act, 1947, of certain goods of import of the Petitioner and further orders. The relevant facts are as follows :
The Petitioner is a sole proprietor of and carries on business of importing goods in the firm name of Messrs. I. S. Lulla & Sons. The Petitioner was holder of an import licence dated August 3, 1961, authorising him to import "electric insulations" under Serial No. 38 Part II of the I.T.C. Schedule of the approximate C.I.F. value of Rs. 1,000/-. In pursuance of the licence, the Petitioner imported from Japan 10 cases of black insulating tapes of the C.I.F. value of Rs. 995/-. The goods arrived at Bombay from Japan by s.s. "Nakashi Maru" on or about April 3, 1962.
2. The goods were not allowed to be cleared. The Petitioner was served with a memo to show cause dated April 24, 1962, on the ground that the Petitioner's licence was not valid to cover the goods of import. The contention was that the goods of import were "adhesive tapes" and the import of "adhesive tapes" was banned under Serial No. 38 Part II of the I.T.C. Schedule. The Petitioner submitted his written explanation in May 1962. In due course, the Petitioner was given personal hearings, in the first instance by one S. B. Sarkar, the then Assistant Collector of Customs, and ultimately by Respondent No. 1. The Petitioner's case is that before the Respondent 1 passed the above order the Petitioner's representatives were informed by the Assistant Collector of Customs that the file containing the Petitioner's case had been sent for consideration to the Additional Collector of Customs and to the Collector of Customs and that after the file was returned by the Collector, the Respondent 1 passed the above order in accordance with decisions made by the Collector.
3. Ultimately, the impunged order dated August 28, 1962, was passed. The order was served on the Petitioner in October 1962. By the order, all the goods of import were ordered to be confiscated and in lieu of confiscation a fine of Rs. 2,000/- was imposed and the Petitioner was informed that option was given to him to clear the goods upon payment by him of Rs. 2,000/- as fine in lieu of confiscation. He was given an additional option to re-ship the goods on payment of a fine of Rs. 100/-. As and by way of foot-note, after the signature of the 1st Respondent of the above order, it was also stated that "the goods are dutiable and proper duty will have to be paid before they are cleared".
4. The Petitioner has challenged the above order on the grounds, which are summarised in paragraph 11 of the petition.
5. The petitioner's main contention is that the goods of import are admittedly "black insulating tapes". There was no ban at any time on the import of "black insulating tapes". There was ban on import of "adhesive tapes" of all material, but the Petitioner's goods are not "adhesive tapes". The 1st Respondent has in this connection failed to approach the matter in appropriate manner. The 1st Respondent's duty was in the first instance to look at the Petitioner's licence and to find out what goods were permitted to be imported under the licence. The 1st Respondent then ought to have looked at the Petitioner's goods and if he had found that the Petitioner's goods were "electric insulations" permissible to be imported under the licence, he should have in fact made a finding that the goods of import were legitimately liable to be imported under the licence. The 1st Respondent, however, did not approach the matter in the above manner. Having found that there was ban on import of "adhesive tapes", the 1st Respondent by making wrong approach inspected and examined the Petitioner's goods to find out if in these goods there was quality of adhesiveness. Finding that there was such quality in the Petitioner's goods, he wrongfully held that the Petitioner's goods were "adhesive tapes". In this connection, the 1st Respondent failed to give proper effect to the index and diverse categories of goods relating to the item "electric insulations" contained in the index to the Import Trade Control Policy Book published by the Central Government. The index in fact shows that "adhesive tapes" is a separate category by itself. The index also shows that "black insulating tapes" is also a separate category in respect of "electric insulations". If the 1st Respondent had approached the matter in a correct way, having regard to the two distinct categories mentioned in the index to the Policy Book as regards "adhesive tapes" and "black insulating tapes", he would not have permitted himself to make a finding that the Petitioner's goods were "adhesive tapes". The Petitioner's contention is that the phrase "adhesive tapes" refers to a distinct category of goods. To ascertain whether the goods of import are "adhesive tapes", it is not permissible for the Customs officers to find out whether the goods have the quality of adhesiveness. The Petitioner's contention is that as there is no positive specific provisions of law restraining and/or banning import of "black insulating tapes", the findings made by the 1st Respondent were altogether unjustified. The findings are the result of wrong approach to the facts of the Petitioner's case by the 1st Respondent and accordingly arbitrary and perverse.
6. The Petitioner's further contention is that in fact the case of Rikhbdoss v. Collector of Customs, M.B.B., , a Division Bench of the High Court of Madras had considered the question of import of "black insulating tapes" under a licence held by the Appellant in that case for importing articles described as "electric insulations" under Serial No. 38 Part II of the I.T.C. Schedule. As has been done by the 1st Respondent in the case of the Petitioner, the Customs at Madras had held that "black insulating tapes" were "adhesive tapes" and had passed orders of confiscation and imposed fine. That order was struck down as illegal and un-warranted specifically on the ground that the index to the Policy Book as regards the item "electric insulations" made a distinct category in respect of the goods known in the market as "black insulating tapes". For this reason, the Court found that these goods could not be held to be "adhesive tapes". The finding of the Customs Officer that the goods were illegally imported since there was ban on import of "adhesive tapes" was not accepted by the Court and the order was struck down. The judgment of the Madras High Court was produced before the 1st Respondent. The findings were relied upon on behalf of the Petitioner. The 1st Respondent's attempt to distinguish the judgment of the Madras High Court is described in the petition as "making a pretence of perversely distinguishing it from identical facts of this case". The Petitioner's contention is that the failure of the 1st Respondent to follow the decision of the Madras High Court is abundant proof of the fact that the decision of the 1st Respondent is arbitrary and contrary to law. The Petitioner further contends that insofar as the Customs enforce Import Trade Control Order in all the States in India, the Customs act as quasi judicial officers and are bound on the principle of judicial comity and certainty of law to follow the decisions of officers of coordinate jurisdiction and more so the decisions of any of the High Courts. This law must be the same in all the States. The true effect of the law as declared by any of the High Courts must be followed by the officers of Customs at all places in India. The failure of the 1st Respondent not to follow the decision of the Madras High Court was unjustified and the order, therefore, must be struck down.
7. The third contention made on behalf of the Petitioner is that in the matter of other importers of "black insulating tapes" the Customs Officers have allowed the clearance of the goods of import by issuing mere warnings. The confiscation of the goods of import and imposition of fine by the impugned order is accordingly discriminatory and violative of the provisions in Article 14 of the Constitution.
8. The next contention of the Petitioner is that the fine of Rs. 2,000/- imposed has no rational relation to the value of the goods of import. The fine is accordingly excessive. The fine imposed without any rational relation to the value of the goods of import and object of the provisions in Section 183 of the Sea Customs Act is liable to be set aside as arbitrary.
9. The last contention made on behalf of the Petitioner is that by the impugned order directions are given for payment of Customs duty before clearance of the goods. Those directions do not give to the Petitioner the option to clear the goods upon mere payment of fine. The condition attached to the right to clear the goods upon payment of fine in lieu of confiscation is invalid having regard to the provisions in section 183 of the Sea Customs Act.
10. On behalf of the Respondents, each and all the contentions made on behalf of the Petitioner are controverted. The main contention on behalf of the Respondents is that the jurisdiction of High Court is limited in the matters of challenge to the orders passed by the Customs authorities. The Sea Customs Act is a complete code by itself. It is primarily for the Import Control authorities to determine the head or entry under which a particular commodity falls. The High Court does not interfere with decisions of these authorities unless the authorities adopt a construction which no reasonable person could adopt. In other words, if the construction is perverse, then only it is a case in which the Court is competent to interfere. If in this case the Court finds that there were two constructions possible and one was adopted by the first Respondent, it is not permissible for the Court to make a finding that the 1st Respondent should have adopted another construction which was more favourable to the Petitioner. The contention is that admittedly there was ban on import of "adhesive tapes". In fact, there is no category of goods known as "adhesive tapes" meant for electrical insulating. It was, therefore, permissible for the 1st Respondent to make a finding that ban on "adhesive tapes" was meant to apply to electric insulations including insulating tapes which had the quality of adhesiveness. This was a possible construction having regard to the language of Serial No. 38 Part II of the I.T.C. Schedule. There was nothing wrong in the 1st Respondent arriving at the above conclusion. That conclusion cannot be described as perverse.
11. It is further contended on behalf of the Respondents that the judgment of the High Court of Madras was given in a case where equity was entirely in favour of the Appellant. In that case, on enquiries made, the Appellant had been informed on behalf of the Joint Chief Controller of Imports that "black insulating tapes" could be imported and there was no objection to the import thereof. Having regard to those facts, appeal was not filed against the judgment. The judgment was binding in the State of Madras, but was not binding in other States. The Customs at Bombay had been throughout refusing to permit import of "black insulating tapes" on the footing that ban on import of "adhesive tapes" applied to "black insulating tapes". That was the correct view and it was permissible, therefore, for the 1st Respondent to distinguish the judgment of the High Court of Madras. That fact by itself cannot and does not make the order of the 1st Respondent perverse and arbitrary as contended on behalf of the Petitioner.
12. In connection with these rival contentions made by the parties, it is first necessary to notice the contents of entry Serial No. 38 Part II I.T.C. Schedule, which runs as follows :
----------------------------------------------------------------------- Part Description Licensing Policy Validity Remarks & S. Authority for of No. Estab- Licences of lished I.T.C. Importers Schedule ----------------------------------------------------------------------- (1) (2) (3) (4) (5) (6) ----------------------------------------------------------------------- 38 Electric Ports 20% Six (i) Quota Insulation months licences will not including be valid for the press-pahn import of (Electrical adhesive tapes, Grade), but adhesive tape excluding cloth in rools ebonite and sheets and rods, tubes phenolic resin & sheets. laminated in the form of sheets, rods and tubes, including such phenolic resin laminated under the trade names of Bakelite and Tuffnol.
(ii) Not more than 2 1/2 % of the face value of quota licences can be utilised for import of oil resisting impregnated high tension insulating tapes, oil/resin impregnated protective jointing high tension insulating tapes and bituminous impregnated high tension insulating tapes.
(iii) Quota licences will not be valid for import of Vulcanised Fibre Sheets for insulation purposes and Varnished Cambric cloth/tapes/ tubes/sleevings and oiled cloths and tapes known by whatever brand names or trade names. -----------------------------------------------------------------------
13. It is also necessary to refer to the index in respect of the above entry Serial No. 38 relating to "electric insulations" as contained in the I.T.C. Policy Book. The index runs as follows :
"Insulations electric. - Adhesive Tapes; Asbestos varnished paper; Asbestos Varnished tubings and tapes; Bitumen compounds; Black Insulating tapes; Cable Box compounds : Cotton insulating tapes : Glass, Silk, Tape; Fibre glass tape; Impregnated Tapes & Cloth; Introhm sheet & Rods; Leatheroid; Micanite sheet and tube, micanite silk tube; Paper jointing sleeves; Plastic compound; Pressphan sheet & Paper; Preservative compounds; Rubber tapes; Trough filling compounds; Tuffnol sheet & rods, Varnished Cambric Tubing; yellow empire cloth & Tapes."
14. In connection with the contents of the index, reliance has been placed on behalf of the petitioner on paragraph 5 at page 2 in Chapter 1 relating to "scope of Import Control" contained in the Import Trade Control Hand Book of Rules and Procedure, 1961, published by the Central Government. Paragraph 5 runs as follows :
"5. Correct classification to be ascertained before making an application. - It is necessary for the intending importer to ascertain the correct classification of the goods he intends to import (with reference to the S. No. and Part of the I.T.C. Schedule) so that he may be able to apply to the proper licensing authority for a licence and to know exactly the licensing policy in respect of the items for which he is applying. For the sake of convenience, an exhaustive alphabetical index of articles is attached to the six monthly policy statements issued from time to time hereinafter called the Red Book and this will enable the importer to ascertain the correct I.T.C. classification of any particular item".
15. The question that arose in respect of the Petitioner's goods of Import was whether the licence held by the Petitioner for import of "electric insulations" entitled the Petitioner to import the 10% cases of black insulating tapes. The answer must be in the positive unless the contents in the remarks column No. 6 indicated prohibition on import of these goods. Whilst detaining the Petitioner's goods, the contention that was made in this connection on behalf of the Customs was that there was a ban on the import of these goods by reason of the contents of item (ii) in the remarks column No. 6 in the entry Serial No. 38 part II. In other words, reliance was placed on the following words in item (ii) in the remarks column No. 6 :-
"Quota licences will not be valid for the import of adhesive tapes, ........".
16. The Customs contended that the Petitioner's goods were "adhesive tapes". In this connection, on behalf of the Petitioner reliance was rightly placed on the contents in the index relating to the goods known as "Insulations, electric". These are all quoted above and show "adhesive tapes" separately from several other categories of goods such as "black insulating tapes" "glass, silk tape", "fibre glass tape", "impregnated tapes and cloth", "micanite silk tape", "rubber tapes", etc. There is no doubt that there is very great force in the petitioner's contention that the contents of the index clearly indicate different categories of goods which form part of the goods which can be generally described as "Insulations, electric". The petitioner's contention that the index is binding on the Customs also appears to be correct. If one goes to the I.T.C. Schedule, in several items, phrases like "others", which indicate no particular goods, are used. Such phrases are meant to include goods which are not indicated and/or specifically described by name or otherwise in the Schedule itself. In this connection, for illustration, reference may be made to page II of the index, where one article mentioned is "adhesive tapes paper backed". The index states that these articles are classified under serial No. 168 Part IV of the Schedule. The serial No. 168 in the Schedule runs as follows :-
----------------------------------------------------------------------- Part and Description Licensing Policy for Validity of Remarks S. No of authority Established licences I.T.C importers Schedule ----------------------------------------------------------------------- (1) (2) (3) (4) (5) (6) ----------------------------------------------------------------------- 168. Articles made of paper and papier-mache; stationery including drawing and copy books, labels.
(a) Printed XXXX XXXX XXXX XXXX advertising material supplied free of charge.
(b) Printed XXXX advertising material not supplied free of charge.
(c) Others XXXX XXXX XXXX XXXX -----------------------------------------------------------------------
17. There is no reference in the main item in Serial No. 168 in the Schedule to "adhesive tapes paper backed" at all. By the index, it is indicated that "adhesive tapes paper backed" are covered by S. No. 168 Part IV of the Schedule. This Article is indicated to be included in "(c) others" in the S. No. 168. As regards the Import Trade Control regarding these articles, the contents of the index indicate that one must get all information from the entry Serial No. 168 in the schedule. It is clear that the purpose of the index is to give notice to all concerned that as regards the articles severally described in the index and mentioned in the index, the relevant provisions in the Import Trade Control Order and the Schedule are those mentioned against such articles in the index. This matter can be illustrated in various ways by referring to various items of different kinds of goods mentioned in the index. It can hardly be denied that the index and the Schedule to the Import Trade Control order are relevant connecting documents which when read together bring all and every kind of goods within the cover of Import Trade Control Order. Obviously, therefore, whilst deciding the question of legality and otherwise of the imports made in respect of different articles Customs Officer is bound to consider the contents of the index as binding. He is bound to arrive at his decisions on the footing that the index forms part of the law of Import Trade Control Order.
18. In this connection, it is convenient to refer at this stage to the observations made in the case Rikabdoss v. Collector of Customs, M.B.B. "xxxx in the index goods of different description were included in the same item 38 of Section II "Adhesive tapes" and "Black insulating tapes" were enumerated separately. Mr. Gopalratnar (counsel for the Appellant) contended that these two categories must be exclusive. If there was a category of goods known in the market as 'black insulating tape', such category would not fall within the category of 'adhesive tape' even assuming that the tape had an adhesive quality. The learned Govt. Pleader (for the Respondent) on the other hand, contended that adhesive tape is a qualitative description and not a particular commercial article and any of the categories enumerated in the Index under item 38 would fall within this class of adhesive tape if it had the adhesive quality".
19. On these contentions, the Court came to the following findings :-
"It is common ground that there is a category of goods known in the market as 'black insulating tape'. Prima facie, therefore, without further clarification such kind of tape cannot be taken out of that category simply because it has an adhesive quality and may fall within the other class of adhesive tape. xxxxx".
20. It appears to me that the only argument that could be advanced on behalf of the Respondents against the above findings of the High Court of Madras was that in the market there were no articles or goods known as "adhesive tapes" for electric insulations. It is for this reason that Mr. Sorabji for the Respondents has now contended before me that there are no such goods known in the market. This fact is not mentioned in the impugned order. It is, however, true that for the first time in the affidavit in reply this fact and contention is made on behalf of the Respondents Mr. Sorabji has further contended by referring to other items in the Schedule that the import of all types of "adhesive tapes" was banned. He, therefore, contends that "adhesive tapes" as mentioned in the index and column No. 6 in the Serial No. 38 of the I.T.C. Schedule is not a separate category of goods.
21. It appears to me that all provisions of law which are by way of restraints on imports and make imports penal must be construed strictly. If it was intended by the provisions in column No. 6 item (ii) of Serial No. 38 Part II of the I.T.C. Schedule to prevent imports of "black insulating tapes" and/or other insulating tapes which had also the quality of adhesiveness, appropriate language ought to have been used in that column. The contents of the index indicate clearly that "adhesive tapes" are mentioned in the Index as being a separate category of articles from the other articles, mentioned in the index. In those circumstances, it is difficult to accept the contention made on behalf of the Respondents at this stage that there are no goods in the market which are known as "adhesive tapes" meant for electric insulations. Having regard to the contents of the index, in any event, it must be held that "adhesive tapes" are a separate category of articles and are not the same as "black insulating tapes" mentioned in the index. Under those circumstances, I am in respectfully agreement with the findings made by the High Court of Madras.
22. In this connection, it is necessary to record that in making the above finding I am not negativing the contention made by Mr. Sorabji that the phrase "adhesive tapes" as mentioned in column No. 6 of Serial No. 38 Part II of the I.T.C. Schedule does not refer to adhesive tapes generally. That reference must obviously be and is reference to "adhesive tapes" (being articles) used for electric insulations. I am, however, unable to accept his argument that the index contained in the Policy Book is merely for convenience and has no particular importance with reference to diverse categories of goods and articles mentioned in the index. In fact, all sorts of different articles are mentioned in the index along with the relevant entries in different parts of the I.T.C. Schedule. Without such reference, due administration of the import trade control legislation would be impossible.
23. Under the above circumstances, the question which arises is as to whether because the Sea Customs Act provides for a complete code and the decisions of the Tribunals prescribed by that Act are final, this Court should not interfere or give relief to the Petitioner in respect of the order challenged in this petition. Now, in this connection, there can be no dispute that the Sea Customs Act is a complete code and decisions of the Tribunals prescribed by it are final. Even so, it is well established that in respect of decisions of the Tribunals prescribed by the Act, this Court has jurisdiction under Article 226 of the Constitution to give all necessary directions in appropriate cases and also for that purpose to set aside decisions of such Tribunals. The jurisdiction is wide, but the Court has, having regard to the provisions of the Act and the policy of law, refused to exercise this jurisdiction to set aside the decisions of such Tribunals except in cases where (i) there is error apparent on the face of the record, or (ii) the decisions are so outrageous as no reasonable person would arrive at and/or (iii) are arbitrary or (iv) capricious. The question is as to whether in this case Mr. Sorabji is right when he argues that no such factors are involved and the Court should not therefore, set aside the impugned order. In this connection, it appears to me that in cases where the relevant questions of law are finally decided by any of the High Courts, as was done in this case by the High Court of Madras, the failure of the Customs Officers to follow such decisions in cases where they are applicable must be held to be perverse and capricious conduct. Such failure would at once enable this Court to go behind the decisions and find out the correctness or otherwise of the decisions of the departmental Tribunals. In such cases, it would be obviously difficult for this Court not to decide the matter on the merits of the cases and in accordance with the findings made by the Court itself. Having once gone behind the decision of the departmental Tribunal on the ground of its being arbitrary and capricious, the Court would have to pronounce its own decision on the merits of the case. In the impugned order, the 1st Respondent has tried to state grounds for explaining why he had not followed the decision of the High Court of Madras. The attempt, prima facie, has proved futile. On reading the relevant paragraph, I have not found any valid reasons mentioned in the order enabling the 1st Respondent not to follow the decision of the High Court of Madras. Under the circumstances, in my view, the order made by the 1st Respondent must be held to be arbitrary and perverse. In the result, I was bound to examine the contentions made on behalf of the Petitioner on the merits of the case. As the contentions made on behalf of the Petitioner have been accepted by me the impugned order must be set aside.
24. As I am in favour of the Petitioner on the above main ground, it is unnecessary for me to discuss the other contentions made by the Petitioner which I have already summarised above. It requires to be recorded that prima facie I see no substance in the Petitioner's contention that the impugned order is liable to be struck off - as discriminatory and violative of the provisions in Article 14 of the Constitution. There is no substance in the contention of the Petitioner that the fine imposed is excessive. In that connection, the statement made on behalf of the Respondents that the margin of profit that the Petitioner would have earned on clearance of the goods was 200 per cent must be accepted as correct. The Petitioner's contention that the statement at the foot of the impugned order that the goods are liable to Customs duty is a condition of the order is also without any substance. This point has been considered in the case of Parmar & Co. v. V. R. Gupte, 61 B.L.R. 1482 at p. 1489. In view of the observations in that case, if necessary, I would have negatived this contention made on behalf of the Petitioner.
25. Under the circumstances, the Petitioner is entitled to have the impugned order set aside. The order dated August 28, 1962, passed by the 1st Respondent is accordingly quashed and set aside.
26. Respondents to pay costs.