Andhra HC (Pre-Telangana)
Sriram Mills And Anr. vs Union Of India And Ors. on 19 April, 1998
Equivalent citations: 1998(3)ALD441, 1998(4)ALT207, 1998(61)ECC456
Author: T.N.C. Rangarajan
Bench: T.N.C. Rangarajan
ORDER S.V. Maruthi, J.
1. These seven writ petitions and Criminal Petition are disposed of by a common judgment as the issue involved are common and interconnected.
2. These writ petitions are filed for a declaration declaring the action of the respondents in not passing orders permitting surrender of imported raw material to a transferable licence holder as arbitrary, illegal and violative of the provisions of the Foreign Trade (Development and Regulation) Act, 1992 (hereinafter called as the Act) and the Export and Import Policy of the Government of India and for consequential direction to treat the surrender of imported raw material 20-6-95 in accordance with the Export and Import Policy as welt as the Handbook of Procedures and also the provisions of the Act and the Rules impugned thereunder, to further direct the respondents not to take any coercive steps against the petitioners under the Act or the Customs Act pending disposal of the writ petitions.
3. The facts in brief in W.P.No.23103 of 1996 are that the petitioner is a proprietary concern engaged in the business of textiles.
It is registered with the Deputy Director-General of Foreign Trade, Government of India, Ministry of Commerce as an export . house and was assigned Export Code No.0991015823. Its principal office is at Hyderabad and branch office at Bombay. The Government of India formulated policy governing exports and imports from and to India respectively from 1-4-92 to 31-3-1997 under the Act Under Chapter VII of the Export and Import policy duty exemption scheme is provided and under the said scheme a person can import raw material duty free for the purpose of manufacture and exporting the same on value addition. An advance licence is granted which is a value based or quantity based licence. Under this scheme an advance licence is granted for the import of inputs/ raw materials without payment of basic customs duty. Such import shall be subject to fulfilment of time bound export obligation and value addition as may be specified in the licence and in accordance with the policy and procedure.
4. The petitioner made an application to the respondents for grant of advance licence for import of 231 metric tonnes of Polyster Filament Yam (PFY)/Partial Oriented Yam (POY) and the value of which was 4,18,318.75 US $ as on 13-12-1993. The licence was granted by the Respondent No.4 on 29-12-1993. Under the scheme there is an obligation to export value added finished goods and the licence is granted subject to the exemption of customs duty on the value of the goods to be exported. The petitioner therefore has to export goods worth 6,09,000 US $. Since the petitioner had an export order for finished goods he applied for an advance licence. The petitioner accordingly imported 197.409 metric tonnes of PFY/POY out of the licenced quantity of 231 metric tonnes on various dates during the period from 14-1-1994 to 31-3-1994. Due to sudden fall in prices of the finished goods in the international market the party who had agreed to purchase the exported fabric went back on its commitment therefore it became impossible for reasons beyond the control of the petitioner to export the finished product. However, since the export and import policy licence is transferable the petitioner initially tried to identify some party who had already exported finished goods and would be willing to purchase import and export licence since the raw material imported by the Petitioner No. 1 being a petroleum produce loses its strength with the passing of time. If the said raw material is not texturised and weaved it loses its intrinsic properties and becomes disfunctional. Therefore, the petitioner was constrained to search for purchasers who had export orders who could use raw material within the country. Keeping the same in view he applied on 25-4-94 to Respondent No.4 for permission to sell it to an import licence holder or to nominate somebody to whom the raw material could be surrendered as contemplated under the policy. Till 20-6-95 the petitioner has not received any reply. Since there was no response from the authorities the petitioner having waited for fourteen months identified a party who was holding a transferable licence who is eligible to import raw material without payment of customs duty without any corresponding obligation to export under para 127 of the Hand Book of Procedures. The petitioner surrendered the raw material to M/s Abhinandan Exports who had become the holder in due course of the transferable licence of M/s R.K. Exports. The quantity of the material that could be imported under the transferable licence holder by M/s. Abhinandan Exports 239.75 metric tonnes whereas the first petitioner had imported only 109 metric tonnes of valued at 3,86.406 US $ under its advance licence and the same was surrendered to M/s. Abhinandana Exports on 20-6-95 with intimation to the Government. On account of the surrender there is no loss of foreign exchange as M/s Abhinandana Exports could have imported 238.75 metric tonnes of POY and PFY valued at 4,88,345 US $ without any corresponding obligation to export value added finished product. The fact of surrender to M/s Abhinandana Exports on 20-6-93 was intimated to the respondents.
5. The respondents, however, started initiating coercive steps against the petitioners and are likely to initiate prosecution against the petitioners under the Customs Act and under the provisions of the Act. The action of the respondents both under the Act and Customs Act is arbitrary and discriminatory, hence this writ petition was filed by the petitioner.
5(a) W.P.No.23103 of 1996 is filed by M/s. Sriram Mills, represented by its proprietor Mr. B.P. Agarwal.
5(b) W.P.No.23329 of 1996 is filed by M/s. Sum International, represented by Mr. Suresh Kumar Aganval. The facts and circumstances are similar to the facts and circumstances mentioned in W.P.No.23103 of 1996. The petitioners in this writ petition were allowed to import 3,02,500 KGs of PFY and POY. Since the international party went back on its commitment to purchase the finished product he applied for conversion of licence into imprest licence. However, no action was taken by the respondents and on the other hand their premises was raided on 18-10-95, hence the writ petition.
5(c) W.P.No.23330 of 1996 the petitioner is M/s. Suvidha Internationals, rep. by Mr. Vishnu Agarwal, Proprietor. The total quantity allowed to be imported is 2,20,000 KGs and actual imports made are 1,96,438 KGs. Imports made are from 7-2-94 to 6-4-94. Export order received on 3-11-93 was for 200 tonnes valued at 3.50 US $ per KG. The facts in this case arc more or less similar to the facts mentioned in W.P.No.23329 of 1996.
5(d) W.P.No.25888 of 1996 is filed by M/s. Santosh Overseas, rep. by Mrs. Santosh Agarwal. The facts mentioned in this writ petition are similar to the facts in W.P.No.23103 of 1996 and the only difference is that they have applied for nominating an agency for surrender of imported raw material on 21-2-95. Since they have not received any reply from the respondents for a period of seven months they have surrendered the raw material to M/s. Jiwan Enteprises. M/s. Jiwan Enterprises could have imported 84.100 metric tonnes of PO Y/PFY without any corresponding obligation to export value added finished products whereas the petitioner surrendered a quantity of 80.448 metric tonnes only.
5(e) W.P.No.27304 of 1996 is filed by M/s. Piccadilly Tradisons rep. by Mr. C.N. Shah. They have applied for advance licence for import of 100% Mulbery Raw Silk yam. As per the conditions of the licence the initial period to complete the value added export was 12 months from the date of issue of the licence and the petitioners were entitled to get one year extension as per the Hand Book of Procedure at para 124 page 47 on an application which should be made within one month from the date of expiry of the original application period- The petitioners imported the raw material during the second week of December, 1995. The petitioner applied for extension of time to fulfill the export obligation. However, on 10-1-1996 the premises of the petitioner was raided, hence this writ petition.
5(f) W.P.No.20306 of 1996 is field by M/s. Rajaji Associates represented by its proprietor Mr. R.K. Sharma. The petitioner was doing business in garments and obtained an advance licence for goods under Duty Exemption Scheme (hereinafter referred to as Scheme). He applied for import of 50 tonnes of raw silk worth Rs.9,58,800 US $ The licence ends on 1-3-95 and he applied for extension of the licence on 29-2-96. He imported 2,14,722 kgs. Since the licence was not extended the petitioner is challenging the action of the respondents in taking action under the Customs Act and the Act. The facts are more or less similar to the facts mentioned in the connected W.P.Nos.27304 of 1996.
5(g) In W.P.No.25905 of 1996 the petitioner applied for advance licence for import of 100% mulberry raw silk yarn. The facts are more less similar to the facts mentioned in W.P.No.20306 of 1996 5(h) Crl.P.No.5700 of 1996 is filed by Suresh Kumar Agarwal, S/o B.P. Agarwal for quashing the proceedings initiated against them in file No.VIII/26/10/95-DRI-HRO on various grounds. It is not necessary to refer to the grounds at this stage, in the light of the view which we propose to take in the writ petitions.
6. Before referring to the averments in the counter it is to be pointed out that originally the customs department was not made a party to the writ petitions, and, they got themselves impleaded as parties to the writ petitions. It is also pointed out that the parties in all the writ petitions are inter-related. It is necessary to refer to the relationship between the parties of all the writ petitions. The proprietor of M/s. Sum International is Sri Suresh Kumar Agarwal, S/o B.P. Agarwal. He filed W.P.No.23329 of 1996. M/s. Suvidffa International which has filed W.P.No.23330 of 1996 is the nephew of Sri B.P. Agarwal. The proprietor of M/s. Sriram Mills is Sri B.P. Agarwal and he filed writ petition No.23103 of 1996. Mrs. Santosh Overseas is the wife of B.P. Agarwal and she filed W.P.No. 25888 of 1996. In other words all the parties the writ petitions are related to each other.
7. On behalf of the Respondents 3 and 4 countour was filed. The main averment in the the letters addressed by the petitioners seeking transfer of the imported material to export oriented units or seeking extension of time, was not received by them. The action of the petitioners in disposing of the raw material is contrary to the exim policy of 1992-97 as the licence was subject to actual user condition and the petitioners have sold the material in violation of the said condition. Under the licence after completion of export obligation and documents are submitted to the licencing authority for endorsement of transfer as per para 126 of Hand Book which the petitioners failed to do so. The petitioners have failed to fulfil the export obligation. Nonfulfillment of export obligation entitled them to issue show cause notice and to pass a forfeiture order after giving an opportunity in writing and oral representations to the petitioners. Since no forfeiture order has been passed, no cause of action arose for approaching this Court under Article 226 of the Constitution. In other words, the contention of Respondents 3 and 4 is that the petitioners are granted advance licence under the scheme and they are entitled to import the raw material subject to exemption of import duty on condition that on manufacture of finished goods they should export them. Failure to satisfy the export obligation entitles Respondents 3 and 4 to take action in accordance with the Act, and any order passed under the Act is appealable and since no action is initiated, the writ petition is premature.
8. According to the counter of Assistant Director, Directorate of Revenue Intelligence, Department of Customs, the petitioner M/s. Sriram Mills in terms of the licence, imported 232.974 tonnes of Polyester yam and 4219.535 Kgs Disperse Dyes. The goods were allowed clearance by the customs department at Mumbai without payment of customs duty in terms of the notification No.204 of 1992 dated 19-5-92. In terms of the customs notification, export/import Policy 1992-97 read with note book of procedures 1992-97 the duty free raw material imported is required to be used in the manufacture of fabric for the purpose of export and cannot be sold or transferred or disposed of otherwise until and unless the export obligation stipulated in terms of the licence is fulfilled. The export obligation under, the licence cannot be waived and unless and until the export obligation is fulfilled the imported material cannot be transferred. There is no provision under the scheme to transfer the imported material to another transferable licence holder, In contravention of the above provisions of law M/s. Sriram Mills disposed of the imported raw materials as soon as they were imported direct from the port of importation at Mumbai. Therefore, a case was registered in file No.VIII/26/6/96 HRU dated 17-7-1996 for not fulfilling the obligation in licence No.2139363 dated 5-11-1993 against M/s Sriram Mills for which utilisation of advance licence scheme leading to evasion of customs duty amounting to Rs.2.31 crores. The imported material was diverted to the domestic market -from the port of importation. Transport documents recovered by the investigating agency of the Respondent No.3 corroborates the above facts. The petitioner paid voluntarily an amount of Rs.30 lakhs out of the total duty of Rs.2.31 crores in respect of the licence bearing No.2139363 dated 5-11-93. Mr. B.P. Agarwal applied for and obtained another licence No.2140086 dated 29-12-1993 under the name of Sriram Mills, Hyderabad under which he is entitled to import 231 tonnes of polyester yam and 4200 Kgs. of Disperse Dyes. The petitioners failed to fulfil the export obligation as stipulated under the licence. A case was registered on 16-10-1996 vide No.VIII/26/8/96 HRU for fraudulent evasion of duty against them under the Customs Act. The imported material was diverted to the domestic market directly from the port of importation itself. The customs duty evasion in this case works out to Rs.2.54 crores. Out of Rs.4.85 crores of duty, the petitioners have voluntarily paid Rs.30 lakhs of duty. It is also stated that the statements of various persons were recorded under Section 108 of the Customs Act.
9. Before considering the arguments of the Counsel for the petitioners as well as the respondents, it is necessary to refer to the legal position obtaining under the Act and the Customs Act, 1962 and the respective jurisdiction and powers of officers under both the acts; The field of import and export was originally occupied by the Imports and Exports (Control) Act, 1947. In 1992 as a change in the economic policy, the Act was framed for regulation and developing the foreign trade. The Act repealed the Imports and Exports Control Act of 1947 by Section 20. The relevant sections under the Act are Sections 3, 4, 5, 9, 11, 14 and 15. Prior to the commencement of this Act, an ordinance was issued known as Foreign Trade (Development and Regulation) Ordinance, 1992. Section 3 of the Act reads as follows :
Powers to make provisions relating to imports and exports:
(1) The Central Government may, by order published in the official Gazette, make provision for the development and regulation of foreign trade by facilitating imports and increasing exports.
(2) The Central Government may also, by order published in the official Gazette, make provision for prohibiting, restricting or otherwise regulating, in all cases or in specified classes of cases and subject to such exceptions, if any, as may be made by or under the order, the import or export of goods.
(3) All goods to which any order under sub-section (2) applies shall be deemed to be goods the import or export of which has been prohibited under Section 11 of the Customs Act, 1962 (52 of 1962), and all the provisions of that Act shall have effect accordingly.
Section 4 provides for continuance of orders made under the Imports and Exports (Control) Act, 1947 insofar as they are not inconsistent with the provisions of the Act.
Section 5 envisages the Central Government to formulate and commence by the notification in the official gazette the export and import policy and empowers the Central Government to amend the same.
Section 9 provides for the grant, renewal and cancellation of licence under the Act.
Section 11 prohibits export and import in contravention of the Rules and Orders of the Export and Import Policy for the time being in force. It also provides for the issue of a notice by the adjudicating authority and the consequences for violation or contravention of Rules, orders and the policies made by the Government. The consequence is confiscation of goods.
10. In exercise of the power conferred under Section 5 of the Act empowering the Central; Government to formulate the export and import policy, the policy has been formulated for the period from 1-4-92 to 31-3-1997. One of the items which is relevant for the purpose of disposing of the present writ petition is Duty Exemption Scheme (it is stated in the introduction to the policy that the policy is deemed to have been issued under, the Act).
11. Before referring to the Duty Exemption Scheme, it is necessary to refer to the Rules framed under the Act known as Foreign Trade (Regulation) Rules, 1993. Rule 2(d) provides for the licensing authority who is an authority authorised by the Director-General under Section 9(2) to grant or renew a licence under the Rules. Section 2(E) defines a policy to mean the export and import policy formulated and enforced by the Central Government under Section 5. Rule 6 provides for the conditions of the licence. One of the conditions of licence under Rule 6(2) is that the goods covered by the licence shall not be disposed of except in accordance with the provisions of the policy or in the manner specified by the licensing authority in the licence and he shall execute a bond to comply with the terms and conditions of the licence. It is not necessary to refer to the other Rules, except saying that the Rules provide for the grounds on which the licence can be suspended or cancelled and the procedure for confiscation of goods and other similar matters.
12. As pointed out in the earlier paragraph one of the items of the policy is Duty Exemption Scheme. Under this Scheme a licence is granted for import of goods without payment of import duty subject to the condition of manufacture and export. An application for grant of duty free licence is to be made in the format given in the appendix-XVII. There are two types of licences. One is value based advance licence and the other is quantity based advance licence.
13. Para 118 of the Scheme provides that at the time of the issue of the licence the acceptance of the legal undertaking given by the applicant to the licencing authority concerned in the form given in Appendix 17 will be endorsed on the reverse of the advance licence. In addition, before clearance of goods through the customs, the importer shall execute a bond supported by a Bank guarantee with the customs authorities in the manner as may be prescribed by the Department of Revenue, Ministry of Finance from time to time. Para 122(a) of the scheme provides that the imports and exports shall be restricted in relation to the individual duty free licence issued under this scheme. The export obligation may be fulfilled by export by the same party which has placed the order or by any other party. Para 124 provides for the period during which the export obligation is to be fulfilled and for extension of the said period. Para 125(a) of the scheme provides for the monitoring of the obligation imposed in the licence and it is the licensing authority who is competent to monitor the same. Para 126 of the scheme provides that upon the redemption of LUT, the customs authorities shall within a period of 30 days thereof or before the expiry of the BG, whichever is shorter, cancel/discharge the bond with surety or security. The licensee has to furnish the relevant material mentioned under this para. One of the material is a document viz. DEEC containing the details of import and export duly endorsed and signed by the customs authority, declaration statement by the licence holder and a statement duly certified by a Chartered Accountant showing details of actual imports and exports. Para 127 provides for the consequences to be followed on the fulfilment of the export obligation. Para 128 provides for regularisation of default in fulfilment of export obligation. Para 128(a)(III) provides that if the export obligation is not fulfilled both in terms of quantity and value the licence holder shall for the regularisation pay to the customs authorities customs duty on the unutilised imported material along with interest at the rate of 24 per cent per annum thereof and to the licensing authority a sum of rupees which is equivalent to the CIF value of the unutilised material. Alternatively the licence holder can surrender to the licensing authority special import licence of the value equivalent to twice the value of CIF (value of the unutilised material) and so on and so forth. Para 129provides the time for depositing fines, customs duty in case of failure to fulfil the export obligation and on regularisation of such failure.
14. It appears from the Act, Rules and the Policy that the Scheme under the Act is provided for the development and regulation of foreign trade by facilitating imports and increasing exports. For the said purpose under Section 3(2) the Government is authorised to publish orders prohibiting, restricting or otherwise regulating import or export of goods. In exercise of the said power, if any order is issued prohibiting import or export of goods the said prohibition shall be deemed to be a prohibition under Section 11 of the Customs Act and all the provisions of the Customs Act' are applicable. Though no orders are issued in exercise of the powers conferred under Section 3(2) by virtue of Section 4 of the Act all orders issued under the Imports and Exports Control Act, 1947 shall be deemed to be orders issued under Section 3(2) of the Act. A licence is to be obtained for the purpose of import and export of the goods and the said licence shall be granted subject to the conditions under the Rules. If there is a contravention of the provisions of the Act, the goods are liable to be confiscated and the person is liable to pay a penalty. The confiscation of the goods for violation of the provisions of the Act and the penalty imposed is in addition to the punishment which a person is liable for violation of any other provisions of any other law for the time being in force. Against the order of the confiscation, cancellation of licence or suspension of licence an appeal lies to the Central Government, in case the order is that of the Director-General and to the Director General if the order is made by an Officer Subordinate to him. The licence granted shall be subject to the condition that the goods shall not be disposed of except in accordance with the provisions of the policy or in the manner specified by the licensing authority in the licence. If this condition is violated it amounts to violation of a condition of licence and therefore, the consequences are that the licence is liable to be suspended, cancelled and the goods are liable to be confiscated and he is also liable to penalty. Therefore, a distinction is drawn between violation of the control orders published in the official gazette controlling the export and import of the goods and the conditions of the licensee. If there is violation of control order under Section 3(2) the consequences are provided under Section3(3). The consequences are that the violation of the control orders attracts Section 11 of the Customs Act and oilier provisions of the Customs Act, while the violation of the condition of licence attracts cancellation, suspension of licence, in addition imposing penalty and confiscating the goods imported in violation of condition of licence.
15. Let us now examine the licence granted under the scheme as it is not disputed that the licence is granted under the Duty Exemption Scheme. The description of goods in the licence is PFYYPOY, it is not necessary to refer to the quantity that is to be imported. The conditions imposed under the licence are as follows :
"(1) The advance licence is issued with DEES No-089011 dated 16-12-93 in para (1) and (2). (ii) Export obligation condition sheet is attached, (iii) This licence is not transferable, (iv) The foreign exchange remittances against this licence will be governed by the guidelines issued by the RBI from time to time, This licence is also with the condition that fifty per cent export obligation will be completed within six months from the date of issue of licence for considering further licence. Under the export obligation condition sheet attached to the licence - it says "that the firm shall export/supply fabrics of 100% polyester texturised filament yam 2,75,000 Kgs for a FOB value of 2,60,012-50 to Silkaria, Dubai, UAE within a period of twelve months from the date of issue of the licence under the Duty exemption." Condition II of the sheet provides for the execution of the Bank guarantee and legal undertaking etc. Condition 2, 3 and 5 of the Export Obligation sheet are relevant which, reads as follows :
(2) To ensure fulfilment of export obligation as mentioned in Part I above, the firm before clearance of the first consignment of imports would execute a Bond backed by a Bank Guarantee legal undertaking as in the pro forma given in Appx.XXXIV-A/XXXIV-B of the Hand Book of Procedures, 1992-97 for fulfilling export obligation within this licence. The Bond backed by Bank Guarantee/Legal undertaking shall be valid for a period of the years until all export obligation under aforesaid licence are not fulfilled.
(3) The goods imported against this advance/Special Imprest licence shall be utilised in accordance with the provisions of the customs Notification No.204 and 203 - customs dated 19-5-92 as amended from time to time.
(4) In the event of the firm's failure to fulfil the export obligation within the prescribed time limit as stipulated above the Bond backed by Bank guarantee/ Legal undertaking will be endorsed and the shortfall in the export obligation shall be adjusted against the firm's future/REP entitlements. The licence holder shall also pay to Customs Authorities the duty on the proportionate quantity of the material correspondence to the products not exported. The above action will be without prejudice to any other action that may be taken against the licence-holder under the provision of Import Trade Control Regulations.
16. A reading of the licence makes it clear that the licence was granted for the import of POY/PFY subject to the condition that they should manufacture and export the finished goods namely fabrics. Further, the goods thus imported are subject to the notification No.203 and 204 of the Customs Act, 1962. Non-fulfilment of the export obligation within the stipulated period makes the licence holder liable to pay the customs authorities the duty on the imported quantity of the material corresponding to the products not exported and the action will be without prejudice to any other action that may be taken against the licence holder under the provisions of the Import Trade Control Regulations.
17. It is also pointed out that the petitioners are granted Duty Exemption Entitlement Certificate which reads as follows:
"Materials imported against advance licence No.P/K/328873611/01/90/1/05 dated 16-12-1993 issued by the order of Joint Director-General of Foreign Trade to the above importer and covered by the list of materials under Part 'C' of this Certificate would be eligible for exemption from import duty subject to the conditions specified in the notification of Government of India, Ministry of Finance, Department of Revenue and Banking No.204, Customs, dated 19-5-92.
18. Now we will examine the provisions of the Customs Act, 1962 which have a bearing on the facts of the present case.
19. Section 12 of the Customs Act provides for levy and exemption from the customs duty. It says duties of customs shall be levied at such rates as may be specified under the customs tariff or any other law for the time being in force on goods imported into or exported from India.
20. Section 25 provides for exemption from duty of any goods imported or exported. It empowers the Central Government, if it is satisfied that it is necessary in the public interest so to do, it may by notification in the official gazette generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification goods of any specified description from the whole or in part of duty on customs leviable thereon. For the purpose of disposing of this case it is not necessary to refer to Section 25(2) and 3). Section 11 provides for confiscation of improperly imported goods. It says the goods brought from a place outside India shall be liable for confiscation. One of such goods are covered by Section 111(o) i.e. any goods imported subject to a condition are liable to be confiscated if there is a violation of the condition subject to which they are imported...Section 112 provides for the penalty for improper importation of goods which says any person who in relation to any goods, does or omits to do any act which act or omission would render such goods to confiscation under Section 111 or abets to doing or omission of such an act or, shall be liable for the penalties mentioned therein.
21. Section 143(A) provides for deferment of duty and the relevant part of this section is Section 143(a)(s)(b). It says that the permission for clearance without payment of duty under sub-section (1) shall be subject to condition. (It is not necessary to refer to the other part of this section).
22. A comparative reading of the Act and the Customs Act, 1962 indicates that the Act provides for restricting, prohibiting and regulating by publishing orders and issue of licences for import and export of goods and consequent penalties for violation of the orders and the licence, while the customs Act provides for levy of duties on import and export of goods into and from India and the consequences for import and export without payment of duty. It also empowers the grant of exemption from payment of duty by notification. The two Acts viz., the Act and the Customs Act, 1962 occupy two different fields. The Act provides for regulating the import and export trade while the Customs Act provides for levy of duty (import and export). That is why Section 12 of the Act says that:
' 'No penalty imposed or confiscation made under this Act shall prevent the imposition of any other punishment to which the person affected thereby is liable under any other law for the time being in force.''
23. Therefore, if there is contravention of the provisions of the Act, the punishments imposed under the Act are in addition to the punishments to which a person is liable under any other law provided any other law is also violated. Since the two acts operate in two different fields, the action under the Customs Act, 1962 does not depend on the action to be taken under the Act as the action under the Customs Act, 1962 is not consequential upon the action to be taken under the Act. One is complimentary to the other and there is no prohibition in the Act prohibiting the authority under the Customs Act action to be taken provided there is violation of the Customs Act, 1962. The liability under the Customs Act, 1962 is co-extensive with the liability under the Act.
24. At this stage it is necessary and relevant to refer to the notification issued under Section 25 of the Customs Act, 1962. It provides for the exemption of import duty against an advance licence. The relevant condition subject to which the said exemption is granted reads as follows :
"(i) that the materials imported are covered by a quantity Based Duty Exemption Entitlement Certificate (hereinafter referred to as the said Certificate), issued by the Licensing Authority in the form specified in the schedule annexed to this notification; in respect of the value, quantity description, quality and technical characteristics:
Provided that where quantity allowed for a particular description of materials cannot be imported within the specified value under the said certificate, the Collector of Customs may allow adjustment of individual value within the total value;
(ii) that the importer at the time of clearance of the imported materials produces proof of having executed a bond or a legal undertaking before the Licensing Authority concerned, for complying with the conditions of this notification; and
(iii) makes a declaration before the Assistant Collector of Customs binding himself to pay on demand an amount equal to the duty leviable but for the exemption, on the imported materials in respect of which the conditions specified in this notification have not been complied with:
Provided that a bond or a legal undertaking and the declaration shall not be necessary in respect of imports made after discharge of export obligation in full, as evidenced by endorsement of Licensing authority in the said Certificate;
(iv) that the export obligation is discharged, within the period specified in the said Certificate or within such extended period as may be granted by the Licensing Authority or the Chief Controller of Imports and Exports, by exporting goods manufactured in India in respect of
(v) exempt materials shall not be disposed of or utilised in any manner, except for utilisation in discharge of export obligation, before the export obligation under the said licence has been discharged in full and export proceeds realised; provided that the materials imported against an Advance Intermediate Licence issued after 31st March, 1993, shall not be disposed, of after the discharge of export obligation and realisation of sale proceeds and such materials may be utilised by the importer for manufacture of any other goods.
We will now examine the facts of the case in the light of the above analysis of the two acts and the condition subject to which the licence was granted. The undisputed facts are that the petitioners were granted an advance licence in th- case of W.P.No.23103 of 1996 for import of 231 Metric Tonnes of PFY/POY on 29-1-1993. We are examining the facts with reference to W.P.No.23103 of 1996 as the decision in the said writ petition will apply to the other cases also. The petitioner imported 194.409 metric tonnes of PFY/POY on various dates during the period from 14-1-94 to 31-3-94. Since, they could not fulfil the export obligation on account of the international party going back on its commitment to purchase the manufactured fabrics, the petitioner alleges that he made an application on 25-4-94 to Respondent No.4 requesting permission to sell it to an import licence holder or to nominate somebody to whom the raw material would be surrendered-as contemplated under the policy. Since he did not receive any reply and since the raw material imported by the petitioner being a petroleum product it loses its strength with the passage of time if the said raw material is not texturised and weaved it loses its intrinsic properties and bepomes disfunctional, the petitioner surrendered the raw material to M/s. Abhinandana Exports which had become the holder in due course of the transferable licence of M/s. R.K. Exports. The said M/s. Abhinandana Exports is entitled to import 239-75 metric tonnes whereas the first petitioner imported 197.408 metric tonnes under its advance licence and the same was surrendered to M/s. Abhinandana Exports.
25. A perusal of the licence makes it clear that the customs notification No.204 of 1992 is made part and parcel of the licence. Under the said notification the importer is entitled to import goods without payment of customs duty subject to the condition that the duty free raw material imported is required to be used in the manufacture of fabric for the purpose of export and cannot be sold or transferred or disposed of otherwise unutilised unless the export obligation stipulated in the terms of the licence is fulfilled. In contravention of the above provisions, the petitioners have disposed of the imported raw materials as soon as they were imported direct from the port of importation at Mumbai, therefore, there is an evasion of customs duty to an extent of Rs.2.54 crores.
26. The question is what is the effect of failure to fulfil export obligation under the Act and under the Customs Act, 1962 as pointed out in the earlier paragraphs under the Act there are two types of violations. (1) violation of conditions of licence granted under the Act read with policy and the other violation of control orders issued under Section 3(2) of the Act. On the facts of the case it is not the case of the respondents that the petitioners have violated the Control Orders published under Section 3(2) of the Act. Therefore, there is no violation of any of the Control Orders published under Section 3(2) prohibiting restraining or regulating the import and export of goods. If there is no violation of the Control Orders published under Section 3(2) of the Act, Section 3(3) of the Act has no application. The learned Counsel for the petitioner is right in his contention that Section 3(3) of the Act has no application to the facts of the case on hand as there is no violation of the Control Orders, but not on the ground that the provisions of the Customs Act, 1962 are not applicable.
27. If there is no violation of Control Orders issued under Section 3(2) of the Act, what is the violation on the facts of the present case.
28. The petitioners have admitted that there is failure to fulfil the export obligation. We have pointed out one of the conditions of licence is that the petitioners have to export the fabrics after manufacture and therefore, mere is violation of the condition of licence and so they are liable for action under the Act unless the failure to fulfil export obligation is regularised.
29. If there is violation of the conditions of licence, the Licensing Authority under the Act is entitled to cancel or suspend the licence, search and seize the goods and also confiscate the goods after imposing necessary penalties. Under the scheme the Licensing Authority is empowered to regularise a bona fide default in fulfilling the export obligation. After the regularisation the Customs duty with interest is to be recovered from the Licensee or the Bank guarantee of LUT is to be deposited by the licence holder within 30 days of the demand raised by the licencing authority. On receipt of the documentary evidence from the licence-holder the Licensing Authority shall intimate the details of the recovery of deposits made to the customs authority concerned whether the DEEC is registered. In other words if the failure to fulfil export obligation is bona fide it can be regularised by the Licensing Authority and thereafter, they can recover the customs duties.
30. Coming to the consequences of failure to fulfil export obligations under the Customs Act, 1962, we have already stated that violation of condition of an exemption notification issued under Section 25 of the Customs Act, 1962 are liable to be confiscated under Section 111(o) of the Act. Therefore, the goods diverted from the Customs Port attract Section 111(o) of the Act unless the Customs Authorities regularise such diversions.
31. The next question is : is it necessary before the proceedings are initiated under the Customs Act, 1962 that the authority under the Act has to determine whether the failure to fulfil the export obligation is bona fide.
32. In our view the answer to the above question is in the negative. It is not necessary for the customs authorities to await for the decision of the Licensing Authorities on the question whether non-fulfilment of export obligation is bona fide or otherwise. When there is violation of exemption notification, the Customs authorities are competent to take action under the Customs Act, 1962. The reason being as we have already stated that Section 12 of the Act provides that no penalty imposed, or confiscation made under the Act shall prevent the imposition of any other punishment to which the person affected thereby is liable under any other law for the time being in force. Therefore, the action for violation of conditions of licence namely failure to fulfil the condition imposed under exemption notification No.204 of 1992 can be taken under the Customs Act, 1962 in addition to the action under the Act. Therefore, the contention of the learned Counsel that without deciding the default in fulfilling the export obligation is bonafide or not under the policy of the Act, no action can be initiated under the Customs Act, 1962 cannot be sustained. The power to take action for violation of the conditions of exemption notification is statutory and is conferred under Section 111(o) of the Act. Whereas the enquiry into the failure to fulfil the export obligation is vested under the policy which no doubt is framed under Section 5 of the Act, but still it is not a provision of the Act. Therefore, Section 111(o) of the Act prevails over the procedure contemplated under the DEEC policy. We arc fortified in our view by the following decisions of the Supreme Court. In Customs Collector, Bombay v. Shantilal and Co., AIR 1966 SC 197 it was held that:
"Is there any conflict between the two jurisdictions, i.e. the jurisdiction of the licensing authority under the Exports (Control) Order and that of the Customs Authority under the Sea Customs Act ? While under the Exports (Control) Order certain articles can be exported only under a licence issued by the appropriate authority prescribed thereunder, the appropriate Customs Authority can prevent the export of the articles if they are not covered by such licence. To take an extreme case, if the licence issued permitted the export of iron and the licensee seeks to export gold, the Customs Authorities can certainly prevent the export of gold, for it is not covered by the licence. In this view, there is no conflict between the jurisdictions of the two authorities : Indeed, their functions are complementary to each other.'' In Jackson Thevara v. Collector of Customs and Central Excise, 1992 (61) ELT 343 also expressed similar view. It held as follows :
'The learned Counsel for the appellant has urged that clause (o) of Section 111 envisages that the goods are exempted from payment of duty or any prohibition in respect of import thereof and that in the present case the goods that were imported by the appellant were not exempted from duty but were chargeable to duty and, therefore, it cannot be said that the present case falls under the said clause and the goods imported by the appellant were liable to be confiscated under it. We are unable to agree with this submission.'' The appellant obtained the benefit of the said concession and got the goods cleared from customs on payment of concessional rate of duty by making a declaration that the goods were required for substantial expansion of the existing industrial unit of the appellant. The said declaration of the appellant was not correct inasmuch as the goods were not to be used for substantial expansion of the unit of the appellant but were to be used for setting up a new unit by the Company. The appellant, after getting goods cleared from the customs transferred the same to the Company and thereby the appellant failed to observe the condition on the basis of which the benefit of concessional rate duty under Heading 84.66 of the Customs Tariff was obtained. The goods were, therefore, liable to confiscation under clause (o) of Section 111 of the Act and penalty could be imposed under Section 112 of the Act.
In Sheshank Sea Goods Pvt. Ltd v. Union of India, 1996 (88) ELT 626 SC the Supreme Court held as follows :
''We do not find in the provisions of the Import and Export policy or the Hand book of Procedure issued by the Ministry of Commerce, Government of India, anything that even remotely suggests that the aforesaid power of the Customs authorities had been taken away or abridged or that an investigation into such alleged breach could be conducted only by the licensing authority. That the Licensing authority is empowered (to) conduct such an investigation does not by itself preclude the Customs authorities from doing so."
We may also refer to the judgment of the Karnataka High Court in Kamath Packaging Ltd. v. Union of India, 1991 (55) ELT 304. On a consideration of the notification No. 116 of-1988 and the terms and conditions of the advance licence and Section 25(1) and 111(o) of the Customs Act, it held as follows :
"The licences arc issued in favour of the Appellants under the Customs Exemption Entitlement Scheme. Condition No.3 specifically mentions that the goods imported against advance licences shall be utilised in accordance with the provisions of the Customs Notification No. 116/88 dated 30-3-88. No doubt Section 2(33) of the Customs Act while defining prohibited goods, expressly excludes goods permitted to be imported, but if a notification has been issued under Section 25(1); Section 111(o) of the Customs Act would be applicable. When the importation of goods takes place under Advance licence Scheme it is governed by the conditions imposed under Section 25 of Customs Act. As such, the Customs Authorities have always the power to find out whether the condition of the notification arc complied with. If prima facie, there is contravention of the conditions imposed by the notification which form part of the advance licence also, the customs authorities are entitled to seize the goods and proceed with the matter in accordance with the provisions contained in the Act viz., Section 111(o) of the Customs Act which is very widely worded.''
33. The next question that arises for consideration is whether the authorities under the Customs Act, 1962 are entitled to collect the duty without any demand ?
34. As pointed out earlier one of the conditions of the exemption notification is that the importer at the time of the clearance of the imported materials makes a declaration before the Assistant Collector of Customs binding himself to pay on demand an amount equivalent to the duty leviable but, for the exemption on the imported materials in respect of which the conditions specified in the notification have not been complied with. Therefore, the violation of the conditions of the exemption notification makes the importer liable to pay the customs duty on demand made by the Assistant Collector of Customs. Evidently, in this case there is no demand issued by the customs authorities. It is no doubt true that it is only at the investigation stage the petitioners have approached this Court and obtained stay- According to the respondents the petitioners themselves have voluntarily paid certain amounts of customs duty while the petitioners contend that they were coerced to pay the said customs duty and it was not a voluntary payment. Be that as it may, since the exemption notification itself says that the importer is liable to pay the customs duty leviable, but for the exemption of imported material on demand, it is open to the customs authorities to initiate the proceedings in accordance with law for the recovery of the duty as the petitioners have admitted that they have not fulfilled the export obligation. Therefore, they are liable to pay the duty. The notification says "on demand an amount equal to the duty leviable." In other words the petitioner is liable to pay duty "on demand" by the Assistant Collector of customs only.
35. The argument of the learned Counsel for the petitioners relying on East India Commercial Co. Ltd Calcutta v. Collector of Customs, AIR 1962 SC 1893 that in the absence of an action taken by the Licensing Authority under that Act, the Customs Authorities do not have any jurisdiction to initiate proceedings under the Customs Act, cannot be sustained as the above judgment is distinguishable on facts. It is a case where the appellant brought into India from USA a large quantity of electrical instruments under a licence. The respondent, the Collector of Customs, Calcutta started proceedings for confiscation of the goods under the Customs Act. The petitioners contend that the proceedings are entirely without jurisdiction as the Collector can confiscate only when there is an import in contravention of an order prohibiting or restraining it and in the present case the Collector was proceeding to confiscate on the ground that the condition of the licence under which the goods had been imported had been disobeyed. The petitioners therefore, prayed for a writ of prohibition directing the respondent to stop the proceedings. On a construction of the provisions of Section 3 of the Imports and Exports Control of 1947 and Section 168 of the Sea Customs Act, it was held that if any goods, the importation and exportation of which is for the time being prohibited or restricted by or under Chapter 4 of the Act be imported into or exported from India contrary to such prohibition or restriction such goods shall be liable for confiscation under Section 167(8) of the Sea Customs Act.
36. Section 3(2) of the Imports and Exports (Control) Act, 1947 read with Section 19 and 167(8) of the Sea Customs Act, 1878 does not expressly or by implication empower the authority concerned to confiscate the goods imported under a valid licence on the ground that a condition of the licence not imposed by the order made under the Act, 1947 is infringed or violated. Therefore, on the true construction of the said provisions the allegations made in the notice does not bring the goods imported within the provision of Section 167(8) &." the Sea Customs Act. In other words, the confiscation of the goods under Section 167(8) can be made only in cases where there is an improper importation of goods and after importation a subsequent sale is not a violation of Section 167(8) and therefore, confiscation of goods cannot be made under Section 167 as the violation is a condition of the licence.
37. The Judgment in East India Commercial's case (supra) has been followed in Additional Director, Customs v. Best and Co. . The facts in brief are as follows : In excess of quantity mentioned in the licence the goods were imported. Under Section 5 if there is a violation of condition of licence, penalty can be imposed and confiscation of goods is permissible under Section 167(8) of the Sea Customs Act for improper importation of the goods into India. Since it is not a case of importation in violation of Section 167(8) of Sea Customs Act, no proceeding for confiscation can be made.
38. It is also a case of violation of a condition of the licence, therefore, confiscation of the goods under Section 167(8) of the Customs Act could not have been made. The principle laid down in the case is not applicable to the facts of the case on hand.
39. In Union of India v. Sampath Raj Dugar, 1992 (58) ELT 163 (SC) Respondent No.4 has obtained an advance import licence for importing raw silk valid for a period of 18 months from the date of its issue. The licence was granted subject to the condition that the raw silk imported should be utilised for manufacturing garments which arc to be exported by Respondent No.2, Respondent No.1 is an Indian national resident abroad doing business at Hongkong in the name of UNISILK. Respondent No.2 did not fulfil the obligation of exporting the garments. Respondent No. 1 exported certain quantities of raw silk in four lots deliverable to Respondent No.2 When the said four consignments arrived at Bombay, Respondent No.2 appeared before the customs authorities and claimed to take delivery of the goods. The customs authorities having come to know the non-compliance of the aforesaid condition with respect to the three earlier consignments, initiated proceedings under the Customs Act, 1962. The contention of Respondent No.1 was the confiscation of the consignment under Section 111(d) is unsustainable for the reason that on the date of the import there was a valid licence. The subsequent cancellation of import licence does not render the said import as illegal. It was held that the subsequent cancellation of licence is of no relevance nor does it retrospectively invalidate the imported material. Clause (o) contemplates confiscation of goods which are exempted from duty subject to a condition, which condition is not observed by the importer. Occasion for taking action under this clause arises only when the condition is not observed within the period prescribed if any, or where the period is not prescribed within a reasonable period. It therefore, cannot be said that the said goods were liable to be confiscated on the date of their import under clause (o).
40. From the above it is clear that the learned Judges were of the view that the goods can be confiscated under Section 111(o) if the importer fails to observe the condition of an exemption notification issued under the Customs Act, 1962. In their view if the licence incorporates a condition that the goods imported arc subject to an exemption notification exempting the duty payable on the goods at the time of import under the Customs Act, 1962 subject to the fulfilment of a condition, failure to fulfil the condition attracts the provisions of the Customs Act, 1962 and the customs authorities are empowered to initiate proceedings.
41. The next aspect to be considered is that what is the action to be taken under the Act as the petitioners have admitted that they have not utilised the imported raw material in the manufacture of fabrics and failed to export the same consequently there is failure to fulfil the export obligation which is one of the conditions mentioned under the advance licence. We have already pointed out that Section 9 of the Act empowers the concerned authority to grant or renew a licence and the said licence is subject to the conditions imposed under Rule 6(2) of the Rules framed under the Act. We have also pointed out that under Section 5 of the Act the Central Government has to formulate the export and import policy and under the export and import policy the duty exemption scheme has been formulated. Under para 128 of the scheme the cases of bona fide default in fulfilment of export obligation can be regularised by the licensing authority in the manner indicated in the said para. The case of the petitioners is that on account of fact that the international party went back on its commitment and since the raw material imported by the petitioners being a Petroleum product loses its strength with the passage of time,-unless the said raw material is texturised and weaved, it becomes disfunctional and hence there was an urgency to transfer the commodity to an authorised agent and therefore, they have surrendered the raw material to M/s. Abhinandan Exports which was the holder in due course of the transfer of licence of M/s. R.K. Exports as having not received any reply to their letter dated 25-4-1994. It is an admitted fact that the letter dated 25-4-94 was not sent by a registered post but only sent under a certificate of posting. It is something surprising that having fully known the consequences of transferring the raw material imported under the exemption notification issued under the Customs Act, 1962 that the petitioner has sent the letter under Certificate of posting. Consequences of non-fulfilment of conditions of licence results in cancellation of licence, confiscation of goods and other penalties. Further, all the petitioners in the writ petitions are inter-connected and related to each other which speaks volumes, however, we do not propose to comment on the conduct of the petitioners as much can be said on both sidesf while the case of the licensing authority under the Act is that they have not received the letter dated 25-1-1994.
42. It is also pointed out that under the scheme para 128 provides for regularisation of bona fids default in fulfilment of export obligation. It does not stipulate the time or the period within which a licensee has to approach the authority for regularisation of default in fulfilment of export obligation. There is lacunae in the scheme. Therefore, it is still open to the petitioners to approach the licensing authority under para 128 of the scheme for regularisation of default in fulfilment of export obligation. We have already referred to the penalties that are leviable under the act for violation of the conditions of licence. As no export or import shall be made by any person except in accordance with the provisions of the Act, the Rules and orders made thereunder and the export and import policy for the time being in force. Therefore, since the petitioner have admitted that they have not fulfilled the export obligation under the licence granted they are liable to be proceeded with under Section 11 read with Rule 9 of the Rules under the Act, unless the failure to fulfil the export obligation is regularised.
43. At this stage it is not out of place to refer to the attitude of the customs authorities. The licensing authority under the Act has not so far initiated any action. Even the Customs Authority as such has not taken any action. Only the Asst. Director of Revenue Intelligence exercising the powers of a Customs Officer has conducted a raid on the office of the petitioners on 1-12-1995. The statement of the petitioners were recorded and they were detained for three days i.e. from 7-10-96 to 9-10-96. An arrest memo was prepared on 8-10-96 and the petitioner was produced before the Special Judge for economic offences on 9-10-96, therefore, the petitioner filed a Criminal Petition No.4366 of 1966 on the file of the High Court for quashing on the ground that the said proceedings are without jurisdiction.
44. The detention of the petitioners pending investigation is, in our view, a highhanded action. As pointed in the earlier paragraphs on failure to fulfil the export obligation, the liability to pay an amount equivalent to the duty leviable, but for the exemption on the imported material arises and the said duty is payable duty on demand by the petitioners. The question of prosecution and confiscation of goods for non-payment of the customs duty arises provided there is no reasonable cause for violating the conditions of licence and the exemption notification. Before initiating proceedings and detaining the petitioners they could have issued a demand notice for payment of duty payable by the petitioners. In our view, the action of the Revenue intelligence appears to be not only high-handed but amounts to causing harassment to the petitioners without any substantial reason.
45. At this stage it is necessary to point out that the relief claimed in the writ petition is to direct the respondents not to take any coercive steps under the Customs Act of 1962 and also the Act. Having asked the relief directing the respondents not to take any action under the Customs Act, 1962, the petitioners have not impleaded the competent authority under the Customs Act, 1962. Therefore, the Revenue Intelligence got itself impleaded and filed a counter-affidavit. The petitioners ought to have impleaded the Revenue Intelligence having sought a relief restraining them from taking any coercive steps.
46. It follows from the above that the customs authorities are competent to initiate the proceedings for violation of customs notification No.204/92 and recover the duty by issuing a demand notice to the petitioners. The licensing authority is also competent to initiate proceedings under the Act and both the proceedings can be initiated simultaneously as non-fulfilment of export obligation is admitted by the petitioners.
47. We, therefore, direct the regular customs authorities to issue a demand notice for recovery of duty payable by the petitioners for violation of the conditions of licence coupled with the exemption notification No.204/92. The amount of customs duty already paid shall be adjusted towards the duty payable by the petitioners.
48. The petitioners are directed to file a representation before the licensing authority under para 128 of the policy and procedure seeking regularisation of non-fulfilment of export obligation within a period of three months from today. On such receipt of the application the licensing authority is directed to consider the same for regularisation in accordance with law.
49. The petitioners are also directed to make a representation before the Customs authorities seeking for regularisation of non-fulfilment of export obligations imposed under the Exemption notification No.204 of 1992 within a period of three months from today. On receipt of the application, though, there is no such provision under the Customs Act, 1962 or Rules for regularisation or condonation of failure to fulfil the condition of an exemption notification, the customs authorities are directed to consider the same and pass appropriate orders in accordance with law. It is open to the Customs authorities as well as the licensing authority to take action pursuant to the decision taken by them on the representations filed by the petitioners seeking regularisation of the default committed by them. Till a decision is taken in the representations filed by the petitioners, the prosecution is stayed. The Director of Revenue Intelligence is also directed not to take any steps without specific authorisation from Customs/Licensing Authority.
50. With the above directions, the writ petitions and the Criminal Petition are disposed of.
51. While agreeing with the directions proposed to be given by Justice Ms. Maruthi, I wish to highlight certain aspects of the case which call for urgent attention of the Government. The Imports and Exports Control Act, 1947 was intended to control the trade. Customs exemption given under the Customs Act was independent of that Imports and Exports Control Act with the result that any violation of the Customs regulations were taken care of under the Customs Act independent of the Imports and Exports Control Act. Consequently, the Supreme Court held in Sheshank Sea Foods Pvt. Ltd v. Union of India, (1996) 88 ELT 626 that while action for breach of terms of the licence will be within the jurisdiction of the Licensing Authority, action for breach of terms of the exemption notification under the Customs Act will be within the jurisdiction of the Customs Authority. But the Imports and Exports Control Act has been repealed and replaced by the Foreign Trade (Development and Regulation) Act, 1992 which provides for the policy pf developing foreign trade and also grants independent powers of investigation to the Foreign Trade Department. The duty exemption scheme has been formulated under that policy. Even though the exemption from Customs is given by a separate notification under the Customs Act, the Hand book of Procedure clearly states that the Licensing Authority shall monitor the discharge of the obligations of the licensee.
52. In the present case, the facts are very simple. The petitioners were granted value based advance licences for importing certain inputs on condition that the manufactured goods will be re-exported. According to the petitioners, due to adverse market conditions such an export could not be made and since there was no response for the application to transfer the goods they have actually transferred the goods and applied for regularisation. The defence of the Foreign Trade Department is that such an application has not been received and no action has been taken in respect of the default. The Customs Department has also refrained from stating clearly that any action was initiated in respect of the default inasmuch the export obligation is a condition for Customs Duty exemption also. The picture that emerges is that the petitioners are having the advantage of dealing with the goods without fulfilling their export obligation because of lack of co-ordination between the two departments.
53. Enter a third Wing namely Directorate of Revenue Intelligence which is an Organisation set upto investigate economic offences. Sri K.C. Sekhar, Assistant Director of Revenue Intelligence, Hyderabad registers a case by recording information from an informant, arrests the Manager of one of the petitioners, collects several cheques for the Duty on goods. The petitioners protested and obtained bail from the High Court after the claim of the prosecution that the arrest was made for recovering Duty is rejected as irrelevant for such a drastic action. The picture that emerges is that an Investigating Agency takes advantage of the situation to harass the petitioners because there is nothing on record to show that any information other than whatever is already on record has been obtained by such an investigation,
54. The case of the petitioners is that in case of default it is the Licensing Authority that has to take steps, recover the Duty payable and remit the same to the Customs as envisaged by the Finance Ministry's letter F.No.605/17/ 92-DBK dated 18-1-1994 and Ministry of Finance Circular No.21/95-Cus., F.No.307/ 91-FTT, dated 10-3-1995. The collection of cheques without any demand and without disposing of the application for regularisation was high-handed.
55. It appears to me that there is much force in these contentions because any agency given the power to investigate irregularities derives its power and must report back to the Licensing Authority. Even if it can initiate proceedings for investigation, the Revenue Intelligence cannot act independent of the two Departments so as to collect the money when the Department concerned itself has not raised a demand. The Investigating Agency is an adjunct of the parent Department to gather and furnish information to enable the parent Department to take necessary action.'' But when the investigating agency acts by itself it is as if the tail wags the dog and in this case it is as if the tail is wagging by itself When the two Departments have not cared to take any action, the investigating department has been very aggressive and it has not been shown as to how the Departments reacted to this.
56. It is in this context, that I wish to advert to the proceedings in the Court when these cases were admitted. I was a member of the Bench when Sri K.C. Sekhar, Assistant Director, made an application for impleading himself. The learned Standing Counsel for the Central Government opposed that plea stating, very rightly, that the Government is one though there may be more than one Department and the Central Government Standing Counsel can take care of the Government's interest without the Assistant Director of the Directorate of Revenue Intelligence seeking to intervene as if he alone is the custodian of the affairs of the Government. Thereafter, the Assistant Director when impleaded, was represented by his own advocate. Surprisingly when there is a change in the office of the Central Government Standing Counsel, the new incumbent has represented the Assistant Director. It appears to me that there is a clear conflict of interest because there was an allegation of mala fides on the part of the Assistant Director which he has to defend by himself. If the Central Government Standing Counsel were to defend him, and it is proved that there were mala fides on his part, the Government will be put in an embarrasing situation with regard to taking action against him. The learned Standing Counsel for the Central Government merely stated that he has been transferred and a domestic enquiry has been ordered. I am of the view that such a situation should have been avoided particularly when serious allegations are made against the Assistant Director.
57. I also consider it significant that the Department have not filed affidavits explaining the exact action that was taken or was not taken and why and the records were also not kept ready for reference in the Court, I am of the view that though technically it is possible that action may be taken by two-Departments in respect of two offences under two separate enactments arising from the same facts, it would be appropriate if they co-ordinate with each other and work in tandem. Otherwise, complaints of harassment arc sure to arise as the situation itself will be a fertile ground for corruption. It is, therefore, imperative that the Government takes a serious look at this situation and gives proper instructions particularly by evaluating the role of the Directorate of Revenue Intelligence.
58. In a case such as this where there is an admitted contravention and all the facts are already on record, the question of arresting anybody may even involve violation of Human Rights as it would appear as if the agency is looking for a confession as the easy way out. Moreover, the conferment of powers under Customs Act docs not make the Investigating Agency the Customs Department for taking such decisions Added to this, if parallel proceedings arc allowed in respect of the same irregularity, it would be arbitrary and unreasonable. It is also a moot question whether and in what circumstances criminal prosecution should be launched on the same facts indicating a default which could be either regularised or visited with a civil penalty. In view of the directions given by us, any decision on this aspect by the Court may be premature. But a serious look at the situation by the Government is certainly called for. I hope and trust that the Finance Ministry will take note of this and take appropriate steps to allow me trade to develop without getting bogged down in litigation such as this.