Customs, Excise and Gold Tribunal - Mumbai
M. Lallubhai And Company vs Collector Of Customs on 13 October, 1987
Equivalent citations: 1989(22)ECR573(TRI.-MUMBAI), 1989(43)ELT127(TRI-MUMBAI)
ORDER K. Gopal Hedge, Member (J)
1. This appeal arises out of and is directed against order No. S/10-141/82 B dated 21-1-1983 passed by the Additional Collector of Customs, Bombay.
2. The facts necessary for the disposal of this appeal are practicably undisputed and lie in a small compass. REP Licence No. P/K/0462834 dated 21-12-1981 was originally issued to Western India Dyestuff Corporation. The licence was valid for the imports of goods specified in the list attached to the licence. At the instance of the Original licence an endorsement dated 11-1-1982 came to be made on the licence which permitted import of Camphor and Menthol all grades. On 14 Sep. 82 the original licensee transferred the said REP licence to the appellants for valuable consideration. This transfer was effected as per Paras 140 and 141 of the Import Policy for April/March 1982.
3. On 23-9-1982 the appellants entered into a contract with the foreign supplier for the supply of Menthol Crystals of the value of Rs. 1,22,407/-. On 24-9-1982 the appellant established an irrevocable letter of credit in favour of the foreign supplier through Canara Bank, Bombay. On 25-10-1982 the foreign supplier shipped the goods. The goods arrived at the port of Bombay during first week of November 1982. On 03 November 1982 the appellants entered Bill of Entry for clearance of the goods. The Customs, however, did not order clearance. The Asstt. Collector of Customs Group Bombay by his letter dated 08 December 82 informed the Appellants Advocate that the Customs House had been advised by the licensing authority that the endorsement made on the licence permitting import of Camphor and Menthol all grades had been wrongly obtained by the original licensee by mis-representation of facts and that the licensing authority was contemplating cancellation of the licence and that the Customs House was requested by the licensing authority not to grant clearance to the goods.
4. It appears that the Dy. Chief Controller of Imports and Exports Bombay by his order dated 10th December, 1982 suspended the licence pending the proceedings for cancellation thereof.
5. Since the licence has been suspended by the licencing authority, a show cause notice was issued to the appellant as to why the goods imported by them should not be confiscated. The appellant sent a suitable reply.
6. The Additional Collector of Customs who held the inquiry after consideration of the reply to the show cause notice and after affording personal hearing ordered confiscation of the goods but gave an option to the appellant's to redeem the goods on payment of fine of Rs. 50,000/- in lieu of confiscation. It is this order of the Additional Collector that has been challenged in this appeal.
7. Shri J.C. Patel, the appellant's learned Advocate, contended that the licence in question was validly acquired by the appellant for valuable consideration without notice. The licence was valid on the date it was transferred to the appellant, it was also valid on the date by which the appellant entered into contract with the foreign supplier. It was further valid on the date the appellant obtained the irrevocable letter of credit. It was also valid on the date of shipment as well as on the date of arrival of the goods and was also on the date of entering Bill of Entry by the appellant. Shri Patel submitted that the suspension of the licence on 10-12-1982 would not make the import unauthorised or illegal and therefore, the Additional Collector committed an error in ordering confiscation. Shri Patel submitted that the licence if at all would become ineffective from the date of suspension namely on 10-12-1982 or after it was cancelled on 17-1-1983. The suspension or cancellation of the licence subsequent to the import would not vitiate the import. It was urged by Shri Patel that the licence obtained by fraud and mis-representation will be valid till it is avoided. The licence will not become invalid ab initio. In support of this contention Shri Patel relied on the Supreme Court's decision in the case of East India Commercial Co. Ltd., Calcutta v. Collector of Customs, Calcutta, reported in ATR 1962 SC 1893 [1983 ELT 1342 (SC)]. Shri Patel also relied on the judgment of the Calcutta High Court reported in 1987 (30) ELT 175 (Cal.) Chemi Colour Agency and Anr. v. The Chief Controller of Imports and Exports and Ors.
8. In East India Commercial Co. Ltd., Calcutta, the Supreme Court observes "nor there is any legal basis for the contention that licence obtained by mis-representation makes the licence non est, with the result that the goods should be deemed to have been imported without licence in contravention of the order issued under Section 3 of the Act so as to bring the case within clause (b) of Section 167 of the Sea Customs Act". Assuming that the principles of law of contract applied to issue of the licence under the Act, a licence obtained by fraud is only voidable. It is good till voided in the manner prescribed by law.
9. In Chemi Colour Agency's case the Calcutta High Court relying on the above quoted Supreme Court Judgment also held that the licence obtained by mis-representation does not make it invalid. The Calcutta High Court further held that the suspension and/or cancellation of the licence cannot make importation of the goods invalid inasmuch as when the licence transferred it was a valid licence and the goods were imported the licence was valid and only after importation, the licence had been suspended. The Calcutta High Court went further and held that the Customs Authority had acted illegally in refusing to clear the goods on the basis of order of the suspension of the licence when on the basis of the licence goods have already been imported and when already there is a provision for taking action against the original exporter in whose favour the REP Licence was granted, by way of adjustment against import entitlement of the exporter.
10. Shri Prabhu appearing for the respondent Collector did not dispute the factual statement namely as to the date of transfer of licence, the entrying into contract with the foreign supplier, the date of shipment, the date of arrival of the goods and the date of entering of Bill of Entry. It was also not contended by Shri Prabhu that the misrepresentation if any was by the present appellant or to their knowledge. In short, it was not disputed that the appellants were the bona fide transferee of the REP Licence for value without notice. Shri Prabhu, however, contended that the Additional Collector had considered the contention urged by the appellant relying on the judgment of the Supreme Court in the case of East India Commercial Co. Ltd., Calcutta. Shri Prabhu pointed out that according to the order of the Additional Collector they are short legal opinion from the Law Ministry and had acted on the legal opinion which was to the effect that the licence was void ab initio. In short Shri Prabhu supported the order of the Additional Collector.
11. In his order the learned Additional Collector after referring to the contention urged by the learned Advocate "observes the solicitor said that if this Supreme Court Judgment is not followed in this particular adjudication then it will be tantamount to contempt of Court. I, however, told him that we have obtained Law Ministry's opinion saying that when the licence is cancelled for fraud the licence is treated as void ab initio whereas when the licence is cancelled from the date of issue of the order of cancellation".
12. "I also observed that the Supreme Court Judgment was under the Sea Customs Act and for the special circumstance of the particular case in question M/s. Eastern Indian Commercial Co. Ltd., it cannot be generalised as a directive to be observed in this case."
13. "In view of the two reasons I hold that the licence did not exist right from its inception because it has been cancelled ab initio. As such the importation is treated as unauthorised."
14. The adjudicating authority is a quasi-judicial authority. Though it may be permissible for the adjudicating authority to consult the department of law or refer to any lawbook the ultimate judgment should be the judgment of the authority and not another authority. It is the adjudicating authority who is required to form his own opinion and if he relies on some others judgment then the judgment will not be his judgment. On this ground alone has order gets vitiated. Neither the adjudicating authority nor Shri Prabhu had cited any other decision of the Supreme Court wherein a view different from the view taken by the Supreme Court in M/s., East India Commercial Co. Ltd., was taken. A copy of the Law Ministry's opinion is also not produced. It is also not known whether the law Ministry's opinion was as set out by the Additional Collector in his order. The judgment of the Supreme Court in East India Commercial Company Ltd. case is very specific and clear. The Supreme Court had hold that the licence obtained by fraud is only voidable, it is good till voided in the manner prescribed by law.
15. Admittedly all the process of import as well as actual, import took place not only before the licence was cancelled but also before the licence was suspended. In the circumstances it is to be held that when the goods were imported they were imported under the valid licence and in such circumstance the Additional Collector committed an error of law in ordering confiscation and levying fine in lieu of confiscation.
16. Following the ratio of the decision of the Supreme Court as well as Calcutta High Court, I allow this appeal set aside the inpugned order. The fine, if paid, shall be refunded to the appellant.