Gujarat High Court
M/S Mahansaria Tyres Private Limited vs Union Of India on 21 February, 2023
Author: Sonia Gokani
Bench: Sonia Gokani
NEUTRAL CITATION
C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 2248 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MS. JUSTICE NISHA M. THAKORE
==========================================================
1 Whether Reporters of Local Papers may be allowed NO
to see the judgment ?
2 To be referred to the Reporter or not ? NO
3 Whether their Lordships wish to see the fair copy NO
of the judgment ?
4 Whether this case involves a substantial question NO
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
==========================================================
M/S MAHANSARIA TYRES PRIVATE LIMITED
Versus
UNION OF INDIA
==========================================================
Appearance:
LD SR ADV. MR.J.V.NIRANJAN WITH MR CHETAN K PANDYA(1973) for
the Petitioner(s) No. 1
LD ASG MR DEVANG VYAS(2794) ASSISTED BY MS MAITHILI MEHTA
LD.SR.STANDING COUNSEL, for the Respondent(s) No. 1
MR NIKUNT K RAVAL(5558) for the Respondent(s) No. 5
NOTICE SERVED for the Respondent(s) No. 2,3,4
==========================================================
CORAM:HONOURABLE THE CHIEF JUSTICE MS. JUSTICE
SONIA GOKANI
and
HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 21/02/2023
Page 1 of 57
Downloaded on : Sun Sep 17 22:04:52 IST 2023
NEUTRAL CITATION
C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023
undefined
CAV JUDGMENT
(PER : HONOURABLE THE CHIEF JUSTICE MS. JUSTICE SONIA GOKANI)
1. This is a petition preferred under Article 226 of the Constitution of India. The petitioner is incorporated under the provisions of the Companies Act, 1956 and its Directors are the citizens of this country, who are before this Court claiming the fundamental rights conferred under the Constitution of India. The petitioner has his factory at the cause title shown in the petition at Bharuch and through the authorized representative of the company by a resolution passed by the Board of Directors No.8/2020-2021 dated 18.12.2020 this petition has been preferred. The challenge is to the notification No.32/2015-2020 dated 20.01.2016 vide which the Natural Rubber is allowed for import only from the ports of Chennai and Nhava Sheva.
2. Brief facts in a capsulized form are as follow:
Page 2 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined 2.1 A Special Economic Zone ('the SEZ' hereinafter) unit was set up by the petitioner for manufacture of tyres based on letter of approval granted by the respondent No.4-The Zonal Development Commissioner, Kandla SEZ, Gandhidham, Kutch vide letter dated 02.08.2018 at Plot No.B, HBS-SEZ, GIDC, Panoli, Bharuch and the commercial operations were commenced in September 2020.
2.2 The petitioner being the SEZ unit, it is averred that the import of the goods is required for the purpose of manufacture of its finished goods without payment of Customs Duty in terms of Section 26 of the SEZ Act, 2005 (to be referred to hereinafter as 'the Act'), a unit is also entitled to procure all the goods and services, which are required for its authorised operations duty free. To make them export from India competitive, the Government of India has contemplated the Page 3 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined SEZ as the centres of their excellence free from any kind of restrictive movement for exports and thus, the restrictions which otherwise operate for a domestic unit are not imposed on the SEZ unit essentially for the purpose of competitiveness.
2.3 It is further averred that to provide a level playing field to the Domestic Manufacturers, and Advance Authorisation Scheme has also been notified under which Domestic Manufacturers, who intent to export their manufactured goods are entitled to procure the raw materials and consumables, which would be necessary for their export goods duty free.
2.4 In the year 2002, the Government of India vide notification No.41(RE 2001) 92- 02 dated 19.12.2001 had imposed the restrictions on the ports from where the Natural Rubber could be imported and permitted imports only from the ports of Vishakhapatnam and Kolkata.Page 4 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023
NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined 2.5 Thereafter, vide notification No.32/2015-2020 dated 20.01.2016 the restrictions of the Court had come for importing the Natural Rubber and Chennai and Nhava Shiva ports are the only ports notified for the said purpose. Thus, the import of natural rubber into India if permitted only through two ports by way of this notification namely from Chennai and Nhava Sheva ports.
2.6 Due to such restrictions, the petitioner company which is located within the distance of 76 kilometers from Hazira where they could import Natural Rubber right from inception are forced to import Natural Rubber from the port of Nhava Sheva which is about 350 kilometers from the factory of the petitioner-company.
2.7 It is further averred by the petitioner that the notification
No.11/2015-2020 dated 12.06.2018 indicates that the restriction imposed on ports Page 5 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined through which imports of Natural Rubber can be made was withdrawn to advance authorisation holders under Advance Authorisation Scheme. The petitioner vide its email dated 04.08.2020 addressed to the respondent No.2-The Director General of Foreign Trade, New Delhi requested to clarify that the port restrictions could not be applicable to SEZ unit.
2.8 On 17.08.2020, the request was reiterated. Thereafter, by reminder emails dated 27.08.2020, 15.09.2020, 08.10.2020 and 06.11.2020, the request has been repeated, but to no avail of the respondent.
2.9 The representations since have fallen on deaf-ears, the petitioner company had felt the pain in increasing the total transport cost to the tune of Rs.2.57 Crore for the year 2020-2023, which is a needless expense. There is an additional grievance of burning of the fossil fuels without any Page 6 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined real contribution to the value of the goods to the economy.
2.10 The exemption given to the holders of Advance Authorisation have not been given to the petitioner or other similarly situated hence, this petition. As according to the petitioner, this affects the fundamental right of the citizen and therefore, the following prayers:
"9...
(A) To issue a Writ, Order or Direction, in the nature of a WRIT OF CERTIORARIFIED MANDAMUS to call for the records leading to issuance of Notification No.31/2015-2020 dt.20.01.2016 by the 2nd Respondent and QUASH the same.
(B) In the alternate, direct the 2 nd Respondent to clarify that the restrictions imposed vide Notification No.31/2015-2020 dt.20.01.2016 regarding the sea port from which Natural rubber can be cleared be exempted for SEZ units.Page 7 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023
NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined (C) Pending admission, hearing and final disposal of this petition, to stay the operation of Notification No.32/2015-2020 dt.20.01.2016.
(D) Pending admission, hearing and final disposal of this petition, to direct the 5th Respondent to allow import of natural rubber through the Port of Hazira.
(E) To pass any other and further orders as may be deemed fit and proper.
(F) To provide for the costs of this petition."
3. On issuance of notice, the affidavit- in-reply on behalf of the respondent No.1 is tendered. The Deputy Director General of Foreign Trade-Mr.Rohit Soni has denied all averments and contentions raised by the petitioner. This notification No.32/2015- 2020 dated 20.01.2016 which restricts the import of Natural Rubber through the seaports of Chennai and Nhava Sheva (Jawaharlal Nehru Port, Mumbai) is a policy decision of the Government of India, which cannot be subjected to judicial review. It Page 8 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined is a part of the Export and Import Policy of Central Government based on the statistics, economy of the country and its impact on the different segments of the stakeholders, public interest, expert opinion and other relevant factors and other relevant considerations, thus such policy is made and it is not subjected to judicial review.
3.1 Heavy reliance is placed on the decision of the Apex Court rendered in case of BALCO Employees Union vs. Union of India, reported in 2002 (2) SCC 333 while analyzing the scope of judicial review in respect of policy decision, it has been clearly laid down that unless any illegality is committed in the execution of the policy and which contrary to the law and mala fide, a decision cannot be interfered with.
3.2 According to the respondent, it is power of the Central Government to control Page 9 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined rubber sector and impose restriction on export and import.
3.3 Power under the Rubber Act, 1947, according to the respondent, permits the power of Central Government to control the natural rubber sector. Section 2 for the purpose of expediency in the public interest, the Central Government is entitled to control the rubber industry. Section 11 speaks of power to prohibit or control import and export of rubber and Section 25 speaks of power of Central government to make rules by notification in the Official Gazette to carry out the purpose of this Act.
3.4 Further more reliance is placed on the powers given under the Foreign Trade (Development and Regulation) Act, 1992. Section 3 of the said Act provides that the Central Government has powers to make provisions relating to import and export by order published in the Official Gazette for Page 10 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined the development and regulation of the foreign trade. Section 3(2) also permits prohibition, restriction or other regulations in all cases or in specified classes of cases and subject to such exception as may be made or under the Order.
3.5 Section 3 of the said Act also empowers the Central Government to regulate the export as well as import. Reliance is placed on the decision of the Apex Court rendered in case of Union of India vs. M/s.Asian Food Industries, reported in AIR (2007) SC 750 to hold that, the purport and object for enacting the Foreign Trade Act, 1992 was to make provision for development and regulation of foreign trade by augmenting the export from India.
3.6 It is urged that the notification which is impugned is dated 20.01.2016 made by respondent No.2 restricting the import of Natural Rubber in exercise of the powers Page 11 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined conferred on the Central Government. Such an action cannot be held either arbitrary or irrational. The interest of the Domestic Natural Rubber producers and the workmen is paramount for the Government and the object behind the notification which is under challenge falls within the four corners of FTP 2015-2020 and the Act.
3.7 The notification challenged are based on the policy decision of the
Government and since it is in the public interest of the FTDR Act and Rubber Act to regulate the number of ports through which the Natural Rubber could be imported, no interference could be desiring.
3.8 It is emphatically urged that if the decision of the Government is against the business interest of the petitioner, that by itself can never be the ground to justify invalidation of the policy. Permitted ports for import of Natural Rubber being Chennai and Nhava Sheva, they Page 12 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined were accounted for almost 67% of the Natural Rubber imported into India. This was to ensure that importers of Natural Rubber will not be adversely affected by the measure. The SEZ requests for totally commercial area specially established for the promotion of foreign trade. The SEZ is a geographical region that has economic laws more liberal than a country's typical economic laws, but Advance Authorisation is an export promotion scheme of Government of India which can be modified/withdrawn at any point of time by the competent authority.
3.9 Again, the reason why this has been done was to protect the interest of small holders in context of prolong lower rubber price to monitor strictly the import of Natural Rubber as only BIS certified grades of Natural Rubber can be imported as per notification dated 12.12.2001 and there had been a wide spread complaint on low quality of rubber imported in India. Hence, strict Page 13 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined monitoring can be done only, if import of Natural Rubber is restricted to a minimum number of ports. The purpose is to induce manufactures to buy Natural Rubber from domestic market and the data shows that the Government has achieved the purpose by port restrictions, which would neutralize the freight cost advantage enjoyed by the import made at the ports nearer to the domestic producers in the country, whereby the domestic farmers also can be provided adequate remunerative prices. There has been a considerable rise in the production of the natural rubber also from 2015-16 to 2019-20. Any further dilution in the import policy would further aggravate the situation challenging the livelihood concerns of small and marginal rubber growers.
3.10 All in all, it is urged that this being a policy decision, the Court may not interfere. The principal intention of the ports restriction is to induce manufactures Page 14 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined to buy Natural Rubber from domestic market and thereby, promoting the marginal /small rubber growers to get a fair and a reasonable price.
3.11 The respondents-authorities has not filed Rejoinder affidavit.
4. On 13.12.2019, an application had been moved by the original writ applicant to allow the Natural Rubber instead of Natural Rubber Latex and also sought the interim relief by bringing to the notice of the Court that the very same notification has been stayed from its implementation, operation and execution by the High Court of Kerala. The Court allowed it by way of interim direction and provisionally permitted the petitioner to import Natural Rubber Latex through Hazira port pending consideration of this notification. It also permitted the word 'Latex' to be deleted from para 4.
5. This Court has heard extensively the Page 15 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined learned senior advocate, Mr.J.V.Niranjan with learned advocate, Mr.Chetan Pandya for the petitioner. Learned ASG, Mr.Devang Vyas with Ms.Maithili Mehta,learned senior standing counsel for respondent No.1 and Mr.Nikunt Raval, learned senior standing counsel. Both the sides have argued along the lines of their pleadings and have also relied on various decisions.
6. The Ministry of Commerce Industry on production of Natural Rubber has given State wise production of Natural Rubber upto 2018-19 where the State of Gujarat does not figure.
"The total production of Natural Rubber (NR) during 2018- 2019 is provisionally estimated at 648000 tonnes. The production of NR during April-May 2019 is provisionally estimated at 74000 tonnes.
The Natural Rubber prices have been at relatively low levels during the past few years in domestic and international markets. However, the rubber prices started increasing during the recent weeks and the average price for the RSS4 grade in Page 16 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined June, 2019 was 150.29 per kg. The Natural Rubber prices are determined by market forces and a range of factors which inter-alia include trends in economic growth in major consuming countries, oil/synthetic rubber prices, weather conditions and developments in future markets.
The domestic NR market generally follows the trend in world market with occasional divergences due to region specific and seasonal factors. No quantitative restrictions can be imposed on the import of NR under WTO commitments. The domestic NR price is sensitive to import of NR. Therefore, to regulate the import of NR, the Government has increased the duty on import of dry rubber from "20% or Rs. 30 per kg whichever is lower" to "25% or Rs. 30 per kg whichever is lower" from 30.4.2015.
The Government has also reduced the period of utilization of imported dry rubber in January 2015 under advance licensing scheme from 18 months to 6 months. The Director General of Foreign Trade (DGFT) has imposed port restriction on the import of Natural Rubber by restricting the port of entry to Chennai and Nhava Sheva (Jawaharlal Nehru Port) since 20th January, 2016.
State-wise production of NR upto 2018-19 is given below:
State-wise production of NR (Tonne) Page 17 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined State 2015-16 2016-17 2017-18 (P) 2018-19(P) Kerala 438630 540400 540775 490460 Tamil Nadu 19495 21140 21110 21500 Traditional Total 458125 561540 561885 511960 Tripura 44245 50985 50500 53050 Assam 14560 19970 23300 24300 Meghalaya 7360 8950 9050 9100 Nagaland 3020 4320 4820 4930 Manipur 1660 2090 1790 1850 Mizoram 595 742 742 750 Arunachal 360 478 428 450 Pradesh North east Total 71800 87535 90630 94430 Karnataka 29400 38800 38300 38200 A&N Islands 240 240 240 275 Goa 640 645 575 625 Maharashtra 925 1185 1185 1250 Odisha 315 400 450 480 West-Bengal 325 335 335 380 Andhra Pradesh 230 320 400 400 Others Total 32075 41925 41485 41610 Non Traditional 103875 129460 132115 136040 Total Grand Total 562000 691000 694000 648000
7. The Extract from Foreign Trade Policy ('the FTP' hereinafter) 2015-2020 provides that the Central Government in exercise of powers conferred by Section 5 of the FT (D&R) Act, 1992, as amended from time to Page 18 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined time, reserves the right to make any amendment to the FTP by means of notification in public interest. Under Chapter 2 General Provisions Regarding Imports and Exports para 2.01 under the heading of "Exports and Imports" provides for free export and import with exception.
"2.01 Exports and Imports-'Free', unless regulated
(a) Exports and Imports shall be 'Free' except when regulated by way of 'prohibition', 'restriction' or 'exclusive trading' through State Trading Enterprises (STEs)' as laid down in Indian Trade Classification (Harmonized System) [ITC (HS)] of Exports and Imports. The list of 'Prohibited', 'Restricted', and STE items can be viewed by clicking on 'Downloads' at http://dgft.gov.in
(b) Further, there are some items which are 'free' for import/export, but subject to conditions stipulated in other Acts or in law for the time being in force."
Para 2.07 under the Principles of Restrictions imposes Prohibition and
Restriction this wise. These are the powers of DGFT, who may through a notification prohibits or restricts the export and Page 19 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined import:
"a. on export of foodstuffs or other essential products for preventing or relieving critical shortages;
b. on imports and exports necessary for the application of standards or regulations for the classification, grading or marketing of commodities in international trade;
C. on imports of fisheries product, imported in any form, for enforcement of governmental measures to restrict production of the domestic product or for certain other purposes;
d. on import to safeguard country's external financial position and to ensure a level of reserves.
e. on imports to promote establishment of a particular industry;
f. for preventing sudden increases in imports from causing serious injury to domestic producers or to relieve producers who have suffered such injury;
g. for protection of public morals or to maintain public order;
h. for protection of human, animal or plant life or health;
i. relating to the importations or exportations of gold or silver;Page 20 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023
NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined j. necessary to secure compliance with laws and regulations including those relating to the protection of patents, trademarks and copyrights, and the prevention of deceptive practices;
k. relating to the products of prison labour;
l. for the protection of national treasures of artistic, historic archaeological value;
m. for the conservation of exhaustible natural resources;
n. for ensuring essential quantities for the domestic processing industry;
o. essential to the acquisition or distribution of products in general or local short supply;
p. for the protection of country's essential security interests:
i. relating to fissionable materials or the materials from which they are derived;
ii. relating to the traffic in arms, ammunition and implements of war;
iii. Taken in time of war or other emergency in international relations;Page 21 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023
NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined q. in pursuance of country's obligations under the United Nations Charter for the maintenance of international peace and security."
7.1 Para 9.41 says that "Prohibited" indicates the import/export policy of an item, as appearing in ITC whose import or export is not permitted.
7.2 Para 9.47 defines the term "Restricted" which indicates the import or export policy of an item, which can be imported into the country or exported outside, only after obtaining an authorisation from the offices of DGFT.
8. The Madras High Court in case of M/s.ATC Tyers Private LTD. vs. The Secretary and others was considering the matter where the petitioner in a SEZ unit was located at Gangaikondan, Tirunelveli District engaged in manufacture of offroad tyres. One of the raw materials required was the Natural Rubber. As per Notification No.31/2015-2020 dated 20.01.2016, the Page 22 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined import of Natural Rubber was allowed only through seaports Chennai and Nhava Sheva. The permission was sought to import Natural Rubber through Tuticorin port. The representations were rejected on 18.12.2018. The petitioner assailed the same by way of a writ petition. The validity of the writ petition also came to be challenged. By way of an interim relief, the Court permitted the import of the Natural Rubber Latex. The Government of India Office Memorandum dated 09.10.2017 called upon the Director General of Trade Policy to examine the request of the petitioner. The Court noted that strangely Director General of Trade Policy choose to disregard the communication and mechanically rejected the request. Eventually, it granted the interim relief. The final order of this is not on record.
9. The Apex Court in case of Union of India and Ors. vs. M/s.Raj Grow Impex LLP and others was dealing with the set of Page 23 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined appeals where the Union of India and other had questioned the orders passed by the High Court of Judicature at Bombay. The appellants were aggrieved by the directions issued by the High Court for compliance of the orders-in-original for release of the goods imported. The genesis of the present litigation lies in the notifications issued by the Central Government under the Foreign Trade (Development and Regulation) Act, 19922 as also the consequential trade notices issued by the Directorate General of Foreign Trade, restricting the import of certain beans, peas and pulses. Such notifications and trade notices were put to challenge in different High Courts by way of writ petitions wherein, different interim orders were passed and the importers effected various imports on the strength of such interim orders. However, they were dismissed by the High Courts and one petition seeking Special Leave to Appeal was also dismissed by the Hon'ble the Supreme Court. Similar notifications Page 24 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined and trade notices issued in subsequent years, on restriction of import of certain beans, peas and pulses, were also challenged in different High Courts, notwithstanding the rejection of a similar challenge in the past by other High Courts.
9.1 The Apex Court has discussed at length the various decisions and this being a question of not allowing the imports of the commodities in question beyond a particular quantity, was held to be not a prohibition simpliciter. The Court also held that as regard the imports in question, the personal interests of importers are pitted against the interest of national economy and more particularly, the interest of farmers. This factor alone is sufficient to find the direction in which discretion ought to be exercised in these matters. When personal business interests of importers clash with public interest, the former has to, obviously, give way to the latter.
Page 25 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined 9.2 Relevant findings and observations of the Apex Court are as follow:
"67.
The applicable principles of law relating to the categorisation of goods as 'prohibited' or 'other than prohibited' have been clearly enunciated by this Court in the decisions referred by the learned ASG.
67.1. In the case of Sheikh Mohd. Omer (supra), a particular mare was found to be not a 'pet animal' and, therefore, its import was found to be violative of the Imports Control Order. It was, however, an admitted position that the import of horses or mares was not prohibited as such. The question was as to whether by making such import, the appellant contravened Section 111(d) read with Section 125 of the Customs Act. While answering the question, this Court held that any restriction on import or export is to an extent a prohibition; and the expression "any prohibition" in Section 111(d) of the Customs Act includes restrictions. This Court further underscored that "any prohibition" means every prohibition; and restriction is also a type of prohibition. This Court, inter alia, said, -
"11.... While elaborating his argument the learned counsel invited our attention to the fact that while Page 26 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined Section 111(d) of the Act uses the word "prohibition". Section 3 of the Imports and Exports (Control) Act, 1947, takes in not merely prohibition of imports and exports, it also includes "restrictions or otherwise controlling" all imports and exports. According to him restrictions cannot be considered as prohibition more particularly under the Imports and Exports (Control) Act, 1947, as that statute deals with "restrictions or otherwise controlling"
separately from prohibitions. We are not impressed with this argument. What clause (d) of Section 111 says is that any goods which are imported or attempted to be imported contrary to "any prohibition imposed by any law for the time being in force in this country" is liable to be confiscated.
"Any prohibition" referred to in that section applies to every type of "prohibition". That prohibition may be complete or partial. Any restriction on import or export is to an extent a prohibition. The expression "any prohibition" in Section 111(d) of the Customs Act, 1962 includes restrictions. Merely because Section 3 of the Imports and Exports (Control) Act, 1947 uses three different expressions "prohibiting", "restricting" or "otherwise controlling", we cannot cut down the amplitude of the word "any prohibition" in Section 111(d) of the Act. "Any prohibition" means every Page 27 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined prohibition. In other words all types of prohibitions. Restriction is one type of prohibition....." (emphasis in bold supplied) 67.2. In the case of Om Prakash Bhatia (supra), over- invoicing and fraudulent claim of drawback by the exporter was held to be that of exporting prohibited goods with reference to the requirements of Foreign Exchange Regulation Act, 1973, while rejecting the contention of the exporter that Section 113(d) of the Customs Act was not applicable as the goods were not prohibited as such. A line of argument has been suggested on behalf of one of the respondents that the order ultimately passed in the case of Om Prakash Bhatia operates against the stand of the appellants. It is true that in that case, redemption fine and penalty was imposed but, the exercise of discretion in a particular manner related to the facts of that case. These aspects relating to the exercise of discretion shall be considered a little later, while dealing with the question as to whether the goods in question are liable to absolute confiscation or could be released on redemption fine. Suffice it to notice for the present purpose that the export attempted in violation of the conditions was held to be taking the goods in the category of 'prohibited' goods.
67.3. In the case of Brooks International (supra), the market value of Page 28 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined goods under export was found to be less than the amount of drawback claimed. The question was whether such goods could be confiscated for violation of the provisions of the Customs Act? While considering the import of the definition of "prohibited goods" in Section 2(33) and of Section 11 of the Customs Act, this Court referred to the following exposition in the case of Om Prakash Bhatia (supra):
"10. From the aforesaid definition, it can be stated that: (a) if there is any prohibition of import or export of goods under the Act or any other law for the time being in force, it would be considered to be prohibited goods; and (b) this would not include any such goods in respect of which the conditions, subject to which the goods are imported or exported, have been complied with. This would mean that if the conditions prescribed for import or export of goods are not complied with, it would be considered to be prohibited goods. This would also be clear from Section 11 which empowers the Central Government to prohibit either 'absolutely' or 'subject to such conditions' to be fulfilled before or after clearance, as may be specified in the Page 29 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined notification, the import or export of the goods of any specified description. The notification can be issued for the purposes specified in sub-section (2). Hence, prohibition of importation or exportation could be subject to certain prescribed conditions to be fulfilled before or after clearance of goods. If conditions are not fulfilled, it may amount to prohibited goods...." (emphasis in bold supplied) 67.4. Learned counsel for the importers have strongly relied upon a 3- Judge Bench decision of this Court in Atul Automations (supra) to submit that therein, the goods imported without authorisation were held to be 'restricted' goods; and the same principle applies to the subject goods when they have been imported without import licence and hence, they cannot be taken as prohibited goods. The submissions have been countered by the ASG that the said decision related to the matter under the FTDR Act and different facts and different regulations concerning the goods were involved therein.
67.4.1. In the case of Atul Automations (supra), the goods imported without authorisation were found to be not 'prohibited' but 'restricted' items for import and the orders for their release with payment of fine in lieu of confiscation were approved. However, a close look at the factual aspects puts it beyond the pale of doubt that Page 30 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined therein, this Court has neither laid down the law that in every case of import without authorisation, the goods are to be treated as restricted and not prohibited nor that the goods so imported without authorisation are always to be released on payment of redemption fine.
67.4.2. The factual aspect of Atul Automations (supra) makes it clear that the imported Multi-Function Devices, Photocopiers and Printers (MFDs) involved in that case were restricted items, importable against authorisation under Clause 2.31 of the Foreign Trade Policy. Thus, the MFDs were found to be restricted items for import and not prohibited items. That had not been the case where import was restricted in terms of quantity in the manner that the goods were importable only up to a particular extent of quantity and that too against a licence. It was also found therein that the Central Government had permitted the import of used MFDs having utility for at least five years, keeping in mind that they were not being manufactured in the country.
67.4.3. The present case is of an entirely different restriction where import of the referred peas/pulses has been restricted to a particular quantity and could be made only against a licence. The letter and spirit of this restriction, as expounded by this Court earlier, is that, any import beyond the specified quantity is clearly Page 31 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined impermissible and is prohibited. This Court has highlighted the adverse impact of excessive quantity of imports of these commodities on the agricultural market economy in the case of Agricas (supra) whereas, it had not been the case in Atul Automations (supra) that the import was otherwise likely to affect the domestic market economy. In contrast to the case of Atul Automations, where the goods were permitted to be imported (albeit with authorisation) for the reason that they were not manufactured in the country, in the present case, the underlying feature for restricting the imports by quantum has been the availability of excessive stocks and adverse impact on the price obtainable by the farmers of the country. The decision in Atul Automations (supra), by no stretch of imagination, could be considered having any application to the present case.
68. Thus, we have no hesitation in holding that the goods in question, having been imported in contravention of the notifications dated 29.03.2019 and trade notice dated 16.04.2019; and being of import beyond the permissible quantity and without licence, are 'prohibited goods' for the purpose of the Customs Act.
68.1. The unnecessary and baseless arguments raised on behalf of the importers that the goods in question are of 'restricted' category, with reference to the expression Page 32 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined 'restricted' having been used for the purpose of the notifications in question or with reference to the general answers given by DGFT or other provisions of FTDR Act are, therefore, rejected. The goods in question fall in the category of 'prohibited goods'.
Whether the goods in question are liable to absolute confiscation?
69. Once it is clear that the goods in question are improperly imported and fall in the category of 'prohibited goods', the provisions contained in Chapter XIV of the Customs Act, 1962 come into operation and the subject goods are liable to confiscation apart from other consequences. Having regard to the contentions urged and the background features of these appeals, the root question is as to how the goods in question are to be dealt with under Section 125 of the Customs Act? The relevant part of Section 125 of the Customs Act reads as under: -
Section 125(1) of the Customs Act, 1962 "125. Option to pay fine in lieu of confiscation.--(1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods or, where such owner is not known, the person from whose possession or custody such goods have been seized, an option to pay in lieu of Page 33 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined confiscation such fine as the said officer thinks fit: xxx xxx xxx".
69.1. A bare reading of the provision aforesaid makes it evident that a clear distinction is made between 'prohibited goods' and 'other goods'. As has rightly been pointed out, the latter part of Section 125 obligates the release of confiscated goods (i.e., other than prohibited goods) against redemption fine but, the earlier part of this provision makes no such compulsion as regards the prohibited goods; and it is left to the discretion of the Adjudicating Authority that it may give an option for payment of fine in lieu of confiscation. It is innate in this provision that if the Adjudicating Authority does not choose to give such an option, the result would be of absolute confiscation. The Adjudicating Authority in the present matters had given such an option of payment of fine in lieu of confiscation with imposition of penalty whereas the Appellate Authority has found faults in such exercise of discretion and has ordered absolute confiscation with enhancement of the amount of penalty. This takes us to the principles to be applied for exercise of the discretion so available in the first part of Section 125(1) of the Customs Act.
70. The principles relating to the exercise of discretion by an authority are expounded in various decisions cited by the parties. We may take note of the relevant expositions as follows:Page 34 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023
NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined
70.1. In the case of Sant Raj (supra), referred to and relied upon by both the sides, this Court dealt with the matter as regards the discretion of Labour Court to award compensation in lieu of reinstatement and observed as under:
"4.....Whenever, it is said that something has to be done within the discretion of the authority then that something has to be done according to the rules of reason and justice and not according to private opinion, according to law and not humor. It is to be not arbitrary, vague and fanciful but legal and regular and it must be exercised within the limit to which an honest man to the discharge of his office ought to find himself..... Discretion means sound discretion guided by law. It must be governed by rule, not by humor, it must not be arbitrary, vague and fanciful....."
(emphasis in bold supplied) 70.2. In the case of Reliance Airport Developers (supra), this Court, with reference to various pronouncements pertaining to the legal connotations of 'discretion' and governing principles for exercise of discretion observed, inter alia, as under: -
"30. Discretion, in general, is the discernment of what is right and proper. It denotes knowledge and prudence, that discernment which enables a person to judge critically of what is correct and proper united with caution; nice discernment, and judgment directed by circumspection: deliberate judgment; soundness of Page 35 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined judgment; a science or understanding to discern between falsity and truth, between wrong and right, between shadow and substance, between equity and colourable glosses and pretences, and not to do according to the will and private affections of persons."
70.3. In the case of U.P. State Road Transport Corporation (supra), while dealing with the case of non-exercise of discretion by the authority, this Court expounded on the contours of discretion as also on limitations on the powers of the Courts when the matter is of the discretion of the competent authority, in the following terms: -
"12. The High Court was equally in error in directing the Corporation to offer alternative job to drivers who are found to be medically unfit before dispensing with their services. The court cannot dictate the decision of the statutory authority that ought to be made in the exercise of discretion in a given case. The court cannot direct the statutory authority to exercise the discretion in a particular manner not expressly required by law. The court could only command the statutory authority by a writ of mandamus to perform its duty by exercising the discretion according to law. Whether alternative job is to be offered or not is a matter left to the discretion of the competent authority of the Page 36 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined Corporation and the Corporation has to exercise the discretion in individual cases. The court cannot command the Corporation to exercise discretion in a particular manner and in favour of a particular person. That would be beyond the jurisdiction of the court.
13. In the instant case, the Corporation has denied itself the discretion to offer an alternative job which the regulation requires it to exercise in individual cases of retrenchment. ......It may be stated that the statutory discretion cannot be fettered by selfcreated rules or policy. Although it is open to an authority to which discretion has been entrusted to lay down the norms or rules to regulate exercise of discretion it cannot, however, deny itself the discretion which the statute requires it to exercise in individual cases. ......
xxx xxx xxx "15.......Every discretion conferred by statute on a holder of public office must be exercised in furtherance of accomplishment of purpose of the power. The purpose of discretionary decision making under Regulation 17(3) was intended to rehabilitate the disabled drivers to the extent possible and within the abovesaid constraints. The Corporation therefore, cannot act mechanically. The discretion should not Page 37 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined be exercised according to whim, caprice or ritual. The discretion should be exercised reasonably and rationally. It should be exercised faithfully and impartially. There should be proper value judgment with fairness and equity....."
(emphasis in bold supplied) 70.4. In the case of Glaxo Smith Kline (supra), this Court expounded on the principles that the Constitutional Courts, even in exercise of their wide jurisdictions, cannot disregard the substantive provisions of statute while observing, inter alia, as under: -
"12. Indubitably, the powers of the High Court under Article 226 of the Constitution are wide, but certainly not wider than the plenary powers bestowed on this Court under Article 142 of the Constitution. Article 142 is a conglomeration and repository of the entire judicial powers under the Constitution, to do complete justice to the parties. Even while exercising that power, this Court is required to bear in mind the legislative intent and not to render the statutory provision otiose."
71. Thus, when it comes to discretion, the exercise thereof has to be guided by law; has to be according to the rules Page 38 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined of reason and justice; and has to be based on the relevant considerations. The exercise of discretion is essentially the discernment of what is right and proper; and such discernment is the critical and cautious judgment of what is correct and proper by differentiating between shadow and substance as also between equity and pretence. A holder of public office, when exercising discretion conferred by the statute, has to ensure that such exercise is in furtherance of accomplishment of the purpose underlying conferment of such power. The requirements of reasonableness, rationality, impartiality, fairness and equity are inherent in any exercise of discretion; such an exercise can never be according to the private opinion.
71.1. It is hardly of any debate that discretion has to be exercised judiciously and, for that matter, all the facts and all the relevant surrounding factors as also the implication of exercise of discretion either way have to be properly weighed and a balanced decision is required to be taken.
72. It is true that the statutory authority cannot be directed to exercise its discretion in a particular manner but, as noticed in the present case, the exercise of discretion by the Adjudicating Authority has been questioned on various grounds and the Appellate Authority has, in fact, set aside the orders-in-original whereby the Adjudicating Authority had exercised the discretion to Page 39 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined release the goods with redemption fine and penalty. Having found that the goods in question fall in the category of 'prohibited goods' coupled with the relevant background aspects, including the reasons behind issuance of the notifications in question and the findings of this Court in Agricas (supra), the question is as to whether the exercise of discretion by the Adjudicating Authority in these matters, giving option of payment of fine in lieu of confiscation, could be approved?
73. As regards the question at hand, we may usefully take note of the relevant decisions cited by learned counsel for the parties. However, it may be observed that the decision of the Punjab and Haryana High Court in Horizon Ferro Alloys (supra), dealing with a particular class of goods that were 'restricted' and not 'prohibited', needs no elaboration.
74. On behalf of the appellants, the learned ASG has relied upon the decision in the case of Garg Woollen Mills to support the contention that the subject goods deserve to be confiscated absolutely. In that case, the Additional Collector of Customs had directed confiscation of goods when it was found that there had been an attempt of fraudulently importing huge quantity of raw material in the name of non-existent units; and serviceable garments were concealed against mutilated garments. That being a Page 40 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined case where fraud was involved, the order of absolute confiscation was not interfered with. This Court, inter alia, observed and held as under: -
"5. Another contention that was urged by Shri Mahabir Singh was that the Additional Collector, as also the Tribunal, have failed to take into consideration the provisions contained in Section 125 of the Act which prescribes that whenever confiscation of any goods is authorised by the Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under the Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods or, where such owner is not known, the person from whose possession or custody such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit. We do not find any merit in this contention of Mr Mahabir Singh. Under Section 125 a discretion has been conferred on the officer to give the option to pay fine in lieu of confiscation in cases of goods, the importation or exportation whereof is prohibited under the Act or under any other law for the time being in force but in respect of other goods the officer is obliged to give such an option. In the present case, having Page 41 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined regard to the facts and circumstances in which the goods were said to be imported and the patent fraud committed in importing the goods, the Additional Collector has found that the goods had been imported in violation of the provisions of the Import (Control) Order, 1955 read with Section 3(1) of the Import and Export (Control) Act, 1947. In the circumstances he considered it appropriate to direct absolute confiscation of the goods which indicates that he did not consider it a fit case for exercise of his discretion to give an option to pay the redemption fine under Section 125 of the Act. The Tribunal also felt that since this was a case in which fraud was involved, the order of the Additional Collector directing absolute confiscation of the goods did not call for any interference. We do not find any reason to take a different view."
(emphasis in bold supplied)
75. The learned ASG has also referred to the decision in the case of Shri Amman Dhall Mills (supra) where the Kerala High Court has dealt with the imports made in violation of the subsequent notifications concerning the same commodities as are involved in the present case. Therein, on 22.04.2020, the importer applied for issuance of license for import of 200 MTs of green peas but, before Page 42 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined actual grant of license to import, filed a bill of entry dated 23.06.2020 for clearance of goods declared as Canadian Green Peas. As per declaration in the bill of entry, the quantity declared was 210 MTs with declared assessable value of Rs. 79,28,444/-. The Commissioner of Customs, Kochi, by his order dated 16.10.2020, made on the request of the importer for release of goods, noted that DGFT notification dated 18.12.2019 had revised the policy for import of peas; further policy conditions as regards minimum import price and annual fiscal quota of Rs. 1.5 lakh MTs were incorporated and the imports were permitted through Calcutta seaport. The importer, who had imported the subject goods after the issue of notifications dated 18.12.2019 and 28.03.2020, filed a writ petition in the High Court seeking provisional release of the subject goods but this prayer for provisional release was declined. The importer filed an intra-court appeal that was also dismissed. However, the High Court desired that the customs authorities proceed with the adjudication proceedings expeditiously. The Commissioner of Customs, in his order dated 16.10.2020, while considering the request of importer for provisional release, referred to three conditions in the notification dated 18.12.2019 as modified in the notification dated 28.03.2020; and ordered absolute confiscation of the goods for contravention of the provisions of Section 111(d) of the Customs Act read with Section 3(3) of the FTDR Act; and imposed a penalty of Page 43 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined Rs. 4 lakhs. The importer challenged the order of Commissioner before the Appellate Tribunal. The Appellate Tribunal observed that the subject goods, having been imported in violation of the conditions of EXIM Policy, acquired the nature of prohibited goods in terms of Section 2(33) of the Customs Act and were liable to confiscation in terms of Section 111(d). Thereafter, the Tribunal formulated the question as to whether the Adjudicating Authority had an option to allow such goods to be redeemed on payment of fine in lieu of confiscation. After referring to the judgment of this Court in the case of Atul Automations (supra) and the order passed by the Bombay High Court in the case of M/s. Harihar Collections (impugned herein), the Tribunal directed redemption of impugned goods on payment of Rs. 12 lakhs as fine and confirmed the penalty of Rs. 4 lakhs imposed by the Commissioner.
75.1. In cross-appeals by the importer and by the revenue, the Kerala High Court consciously took note of the decision of this Court in Agricas (supra) and also the fact that the order so passed by the Bombay High Court in the case of M/s. Harihar Collections had been stayed by this Court in the present appeals. Thereafter, the High Court proceeded to disapprove the order passed by the Appellate Tribunal for release of goods, with the following amongst other findings and observations: -
Page 44 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined "25. We hasten to add, that if in every case goods are released on payment of redemption fine, by the primary or appellate Tribunal, then such decisions are unsustainable in law and judicial review. In our considered view, exercise of power and discretion under Section 125 of Customs Act 1962, are specific and generally governed by the applicable policy, notification etc. Notification dated 18.4.2019 stipulates restriction on import of a quantity of 1.5 lakh MT only; stipulates minimum import price of Rs.
200/- and above CIF per kg and the import is allowed through Calcutta Sea Port only. These are the conditions which the licensee for import of the goods is expected to conform. The primary authority has noted that by keeping in view the stand taken by the Union of India before the Supreme Court in Agricas LLP case; the available stock position of green peas is treated as surplus, and declined release and ordered confiscation. The further import according to Customs Commissioner is not needed or alternatively detrimental to the interest of farmers. He has further noted that in his order dated 16.10.2020 that the importer does not conform to any of the conditions applicable for import of green peas. In our considered view the exercise of above discretion by Customs Commissioner is the question for consideration before the Appellate Tribunal. The Appellate Tribunal on the Page 45 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined contrary, as already noted, considered matters not completely germane for appreciating the mode and manner of exercise of authority by the Commissioner of customs, but, however, recorded that the subject goods can be treated as restricted goods and can be released on payment of redemption fine. .... The Tribunal fell in clear error of law. By holding that release of goods is the only option to Customs Commissioner in the case on hand the language of Section 125 of Customs Act is fully liberalised. The reasoning of Tribunal is adopted both by other primary authority/Appellate Tribunal, then Exim policy, notifications are defeated and opens floodgates of the import Green Peas, and such contingencies are commented by Supreme Court in Agricas Case. We are of the view that the consideration of Appellate Tribunal in the case on hand is illegal, ignored relevant notifications, the mandate of FTDR Act and Customs Act 1962."
(emphasis in bold supplied)
76. On the other hand, the importers have placed heavy reliance upon the decision in the case of Hargovind Das K. Joshi (supra). Therein, a consignment of zip fasteners imported by the appellants was ordered for absolute confiscation by the Additional Collector of Customs and a penalty was also imposed. The order was confirmed by the Page 46 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined Appellate Tribunal. In appeal to this Court, three questions were raised by the appellants, namely, on validity of the order confiscating the goods; on validity of the orders imposing penalty; and failure on the part of the customs authority to give an option to them for redeeming the goods on payment of fine in lieu of confiscation. This Court rejected the first two contentions after finding that the order directing confiscation was unassailable in facts or in law and that the order levying penalty was also justified. However, this Court found substance in the third part of the submissions because the Collector of Customs had passed the order for absolute confiscation without giving the appellants an option to redeem the goods on payment of fine. This Court observed that the said Adjudicating Authority, undoubtedly, had the discretion to give an option of payment of fine in lieu of confiscation but omitted to consider such a discretion available with him. In the given circumstances, this Court remitted the matter to the Adjudicating Authority to the limited extent as to whether or not to give an option to the importers to redeem the confiscated goods on payment of fine. In that regard, this Court left it open for the officer concerned to take a decision one way or the other in accordance with law, while observing in the last that the officer concerned will take into consideration all the relevant circumstances including the submission on behalf of the importers that Page 47 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined the free import of the goods in question had also been allowed, of whatever worth that was.
76.1. From the decision in Hargovind Das K. Joshi (supra), it is not borne out as to what was the reason for which the goods (zip fasteners) became subject to confiscation and it appears that at a later point of time, free import of the item had also been allowed. Be that as it may, what this Court found therein was that the Adjudicating Authority omitted to take into consideration one part of the discretion available for him i.e., of giving an option for redemption with payment of fine in lieu of confiscation and for that reason alone, the matter was remitted. The said decision cannot be read as an authority for the proposition that in every case of confiscation, invariably, the discretion has to be exercised by the Adjudicating Authority to give an option for redemption by payment of fine. In our view, the said decision does not make out any case in favour of the importers.
76.2. In fact, the observations made in Hargovind Das K. Joshi (supra) rather operate against the orders-in-original in the present appeals because therein, the Adjudicating Authority, after finding the goods liable to confiscation, straightaway proceeded as if the option for payment of fine in lieu of confiscation has to be given and did not Page 48 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined consider the other part of discretion available with him that the goods could also be confiscated absolutely.
77. Thus, for what has been noticed above, the Kerala High Court has approved absolute confiscation of similar goods while following the decision of this Court in Agricas (supra) and after finding unsustainable the order of Tribunal for release of goods. In the case of Garg Woollen Mills (supra), this Court approved absolute confiscation when fraud was involved. In Hargovind Das K. Joshi (supra), when one part of discretion of Section 125(1) of the Customs Act was not taken into account, this Court remitted the matter for proper exercise of discretion.
78. It is true that, ordinarily, when a statutory authority is invested with discretion, the same deserves to be left for exercise by that authority but the significant factors in the present case are that the Adjudicating Authority had exercised the discretion in a particular manner without regard to the other alternative available; and the Appellate Authority has found such exercise of discretion by the Adjudicating Authority wholly unjustified. In the given circumstances, even the course adopted in the case of Hargovind Das K. Joshi (of remitting the matter for consideration of omitted part of discretion) cannot be adopted in the present appeals; and it becomes inevitable that a final decision is taken herein as to how the subject Page 49 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined goods are to be dealt with under Section 125 of the Customs Act.
79. As noticed, the exercise of discretion is a critical and solemn exercise, to be undertaken rationally and cautiously and has to be guided by law; has to be according to the rules of reason and justice; and has to be based on relevant considerations. The quest has to be to find what is proper. Moreover, an authority acting under the Customs Act, when exercising discretion conferred by Section 125 thereof, has to ensure that such exercise is in furtherance of accomplishment of the purpose underlying conferment of such power. The purpose behind leaving such discretion with the Adjudicating Authority in relation to prohibited goods is, obviously, to ensure that all the pros and cons shall be weighed before taking a final decision for release or absolute confiscation of goods.
80. For what has been observed hereinabove, it is but evident that the orders-in-original dated 28.08.2020 cannot be said to have been passed in a proper exercise of discretion. The Adjudicating Authority did not even pause to consider if the other alternative of absolute confiscation was available to it in its discretion as per the first part of Section 125(1) of the Customs Act and proceeded as if it has to give the option of payment of fine in lieu of confiscation. Such exercise of discretion by the Page 50 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined Adjudicating Authority was more of assumptive and ritualistic nature rather than of a conscious as also cautious adherence to the applicable principles. The Appellate Authority, on the other hand, has stated various reasons as to why the option of absolute confiscation was the only proper exercise of discretion in the present matter. We find the reasons assigned by the Appellate Authority, particularly in paragraph 54.3 of the order-in- appeal dated 24.12.2020 (reproduced in point 'c' of paragraph 38.2 hereinabove) to be fully in accord with the principles of exercise of discretion, as indicated hereinabove and in view of the facts and peculiar circumstances of this case.
81. It needs hardly any elaboration to find that the prohibition involved in the present matters, of not allowing the imports of the commodities in question beyond a particular quantity, was not a prohibition simpliciter. It was provided with reference to the requirements of balancing the interests of the farmers on the one hand and the importers on the other. Any inflow of these prohibited goods in the domestic market is going to have a serious impact on the market economy of the country. The cascading effect of such improper imports in the previous year under the cover of interim orders was amply noticed by this Court in f Union of India and Ors. v. Agricas LLP and Ors. This Court also held that the Page 51 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined imports were not bona fide and were made by the importers only for their personal gains.
82. The sum and substance of the matter is that as regards the imports in question, the personal interests of the importers who made improper imports are pitted against the interests of national economy and more particularly, the interests of farmers. This factor alone is sufficient to find the direction in which discretion ought to be exercised in these matters. When personal business interests of importers clash with public interest, the former has to, obviously, give way to the latter. Further, not a lengthy discussion is required to say that, if excessive improperly imported peas/pulses are allowed to enter the country's market, the entire purpose of the notifications would be defeated. The discretion in the cases of present nature, involving far-reaching impact on national economy, cannot be exercised only with reference to the hardship suggested by the importers, who had made such improper imports only for personal gains. The imports in question suffer from the vices of breach of law as also lack of bona fide and the only proper exercise of discretion would be of absolute confiscation and ensuring that these tainted goods do not enter Indian markets. Imposition of penalty on such importers; and rather heavier penalty on those who have been able to get some part of goods released is, obviously, warranted.
Page 52 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined
83. Before closing on this part of discussion, we may also refer to a decision of Bombay High Court in the case of f Commissioner of Customs (Import), Mumbai v. Finesse Creation Inc.: (2009) 248 ELT 122, cited on behalf of one of the importers. In that case, the declared value of goods imported by the assessee in respect of 13 consignments over a period of about three years was rejected and the Commissioner ordered re-assessment of the value of goods; and after re-determination, differential duty was confirmed under Section 28(2) of the Customs Act with recovery of interest under Section 28AB thereof. Moreover, the imported goods were confiscated and redemption fine under Section 125 of the Customs Act was also imposed in lieu of confiscation. While confirming the differential duty and consequent penalty and interest, CESTAT quashed the imposition of redemption fine because the goods were not available for confiscation. In that context, the High Court said that the concept of redemption fine would arise in the event the goods were available and were to be redeemed; and if the goods were not available, there was no question of redemption of goods. The said decision cannot be pressed into service in the present case merely because the said importer M/s. Harihar Collections has been able to obtain release of all the goods after passing of the order- in-original of the Adjudicating Authority dated 28.08.2020 when the same was under challenge. The present one is not a case where the subject goods were not available on Page 53 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined the day of passing of the order by the Adjudicating Authority."
It is also necessary to specifically make a mention that the emphasis on the part of the learned counsel is that public policy must meet the parameters of equality and logic. When it inhibits anything, it should not be discriminatory. Kerala is the largest rubber growing State, other contributors are Tripura, Assam, Meghalaya, Karnataka, Odisha and West Bengal, if there are geographical reasons under Advance Authorisation, the export has been confirmed and yet Chennai and Nhava Sheva have been permitted the import, the restrictions have been imposed on others. The State of Gujarat does not have any farmers of growing natural rubber and therefore, to put any restrictions in the State of Gujarat defies the logic.
10. We have noticed that the emphasis on the part of the State all along is of Page 54 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined promoting the marginal or small rubber growers to get a fair and reasonable price by restricting the import from those ports. From the State-wise production of natural rubber upto 2018-2019, it has been rightly pointed out to this Court that the State of Gujarat does not figure anywhere. The total production of the natural rubber is estimated to 6,48,000 tonne. It is also culling out from the details provided by the Ministry of Commerce and Industry on production of natural rubber that natural rubber prices are determined by the market forces which include range of factors and it also follows the world market with occasional divergence. It further provides that the domestic natural rubber price is sensitive to import of the natural rubber and hence, to regulate the import, the Government has increased the duty on the import of the dry rubber. The period of utilization of imported dry rubber also had been reduced. The Government has also reduced the period of utilization of Page 55 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined imported dry rubber in January 2015 under advance licensing scheme from 18 months to 6 months and additionally the restriction has also come on ports on the import of the natural rubber and the port entries for the natural rubber have been limited to only Chennai and Nhava Sheva. There appears to be a rational behind restricting this entries and the production of the natural rubber in the State alone cannot be the factor. The range of factors which are to be kept in view while bearing in mind the natural rubber prices in the domestic market and also considering the larger interest of rubber growers, the viewing of these entries and prohibiting the import from all ports shall need to be accordingly considered.
11. Here, it is to be necessarily remembered that when the Central Government of making of the policy and the powers given to it, it has to be read for the entire country and the limited regional Page 56 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023 NEUTRAL CITATION C/SCA/2248/2021 CAV JUDGMENT DATED: 21/02/2023 undefined interest could not be emphasised. The principal object being encouragement to be given to the local and domestic market to get an impetus from the manufacturers, who are otherwise importing the product. That aspect cannot be left sight of while considering the request on the part of the petitioner. Largely, the policy decision which is being taken, there are exceptional circumstances to exist for the Court to interfere.
12. This petition is dismissed accordingly. Notice is discharged.
(SONIA GOKANI, CJ) (NISHA M. THAKORE,J) M.M.MIRZA Page 57 of 57 Downloaded on : Sun Sep 17 22:04:52 IST 2023