Madras High Court
Union Of India vs Oceanic Export Corporation on 9 September, 1988
Equivalent citations: 2000(116)ELT19(MAD)
Author: S. Ratnavel Pandian
Bench: S. Ratnavel Pandian
ORDER Sathiadev, J.
1. These appeals are preferred against the order, dated 8-7-1988 passed in W.M.P. Nos. 7594 of 1988 in W.P. No. 5263 of 1988, etc. (Batch).
2. The learned Judge has relied upon orders passed by this Court pending W.P. No. 6063 of 1988 to pass orders of injunction as prayed for. While passing the order on 8-7-1988 in W.M.Ps filed in W.P. No. 6083 of 1988, the learned Judge had relied upon the decision of a Division Bench of this Court in W.P. Nos. 1126 and 1127 of 1985 and, therefore, made the order of interim injunction absolute. In allowing these Writ appeals by order, dated 13-5-1986, a Writ of Mandamus was issued forbearing the respondent therein from taking any proceedings or action against the petitioner under the Customs Act, 1962. Since these writ appeals are preferred against order passed in interlocutory application and as the Writ Petitions themselves are pending, disposal and elaborate arguments have been advanced by Counsel appearing for both parties, yet, in the interests of the parties, only the prima facie point involved is considered for finding out whether the grant of injunction and directions issued are justified or not.
3. The averments in W.P. No. 6494 of 1988 are taken into account to appreciate the points involved in these appeals. Petitioner has claimed that it is engaged in manufacture of handloom fabrics etc. The petitioner is entitled to net duty exemption import licence to the value of 40% of the value of the finished goods, which is known as Advance Licencing Scheme introduced in 1976-77. Under the Scheme, there is an export obligation to export handloom goods and for which purpose, licences were issued as mentioned in paragraph 3. Under the scheme, being entitled to a duty exemption while importing goods, it had imported the goods as mentioned in paragraph 4. The entries on these aspects of export and imports have been entered in Duty Entitlement Certificate. After referring to various imports and exports done by it, it is stated that respondents No. 3 and 4 searched the premises of the petitioner and took away various files including licence from its premises and that a statement had been recorded. Aggrieved with the scheme of the licence and non-clearance of goods already imported and to be imported and because of interference with the manufacturing business of the petitioner, it had to file the writ petition. It is claimed that the Duty Exemption Entitlement Scheme contained in Appendix 19 of Import Policy for 1985-88, the Import Control Act, 1947, and the Import Control Order, 1955 form a complete Code by themselves and the rights and obligations arising out of advance licences are exclusively governed by only these provisions and not by the provisions of the Customs Act. It had been issued with advance licence against firm export orders and the execution of bond was waived by the joint Chief Controller of Exports and imports, Madras. When the policy book itself contains several schemes under which raw materials are permitted to be imported with an export obligation attached thereto, and in case of any failure to fulfil such obligation, the concerned authority having been conferred with power to initiate action, the Customs Authorities had no jurisdiction to seize the goods of the petitioner. Their only duty is to question the classification and value of the goods in question, and even in instances like this wherein the import is covered by the Scheme, once the goods have been cleared under valid Import Licence, it is not within the domain of the Customs Authorities to investigate into the utilisation of the materials imported under the Scheme. The power under Section 3(1) of the Import Control Act, is not restricted to that authority and the said Department alone had the jurisdiction to ascertain whether there has been a proper utilisation of imported materials or not and hence the Customs Authorities have no jurisdiction to find out whether under the Scheme, the goods have been properly utilised or not. Section 111(a) of the Customs Act is not attracted when the said Scheme is implemented. Therefore, when the Customs Authorities have without authority, seized the goods/books on 1-4-1958, and having prevented the imported goods to be cleared, the petitioner had to file a Writ of Prohibition to restrain respondents 1 to 4 therein from conducting or holding any enquiry in respect of the goods imported pursuant to the advance licence issued and from interfering with petitioner's rights to perform their export obligations under the Duty Exemption Scheme and consequently direct them to issue detention certificates for goods lying in the harbour. Pending disposal of this Writ Petition, they had filed W.M.P. No. 9399 of 1988 for grant of interim injunction restraining the said respondents from proceeding with the enquiry and investigation and W.M.P. No. 9400 of 1988 was filed for issue of directions to them to return the documents, licences including DEEC books seized from them and also for permitting them to clear the imported goods. W.M.P. No. 9401 of 1983 was filed to direct them to release the imported dyes and pigments which are kept in the bonded warehouse. W.M.P. No. 9403 of 1988 when filed to direct them to issue detention certification for the said goods. All these petitions were taken up together and on the learned Judge ordered the petitioners, these appeals have been preferred.
4. Learned Advocate General appearing for the appellants submits that whatever actions that may be taken by the Controller of Imports and Ex- ports relating to the licence issued by him, yet when the goods in respect of which actions have been taken, have not suffered payment of Customs Duty, the Authorities of the Customs Department, have the necessary jurisdiction to investigate and find out whether the imports made under the Scheme had been utilised, according to the scheme or not. If it be found that any portion of the goods imported under the Scheme had been misutilised or misapplied, then, under the Scheme, when, for these goods Customs Duty requires to be paid, the jurisdiction of the Authorities of the Customs Deptt. is in no manner taken away, because the Controller of Imports and Exports may also have certain powers to monitor the transactions of the importers Then the power of seizure is available under the Customs Act, investigation made in the direction of Collection of Customs Duty should not be prevented by grant of injunction in the manner prayed for.
5. Mr. Thyagarajan, learned Counsel appearing for certain respondents in this batch of petitions in his lengthy submissions had referred to the nature of powers that could be exercised by the Controller of Imports and Exports and as to how far when he has the direct control over the goods imported under the Scheme, the Customs Authorities cannot alongside exercise powers under the Customs Act.
6. It is indispute that respondents in these appeals have been issued licences by Controller of Imports and Exports and that under the Imports and Exports (Control) Act, 1947, the licences are covered by the Import Trade Control Policy and is subject to the condition contained in Clause 5(2) and (3) of the Import (Control) Order, 1955, as amended from time to time. The imports made are covered by advance licences issued, which in clause 4 states that in the event of the importer failing to fulfil the export obligation within the prescribed time limit, he will be liable to pay customs duty on the proportionate quantity of export materials imported corresponding to the products not exported. Clause 5 states that he has to pay customs duty on any excess items that have been left over after utilisation of the resultant product and completion of the corresponding export. Licensees are also bound to pay 18% interest per annum on the total amount of customs duty from the date on which amount due from them is actually paid. Hence even the obligations of the licences are under the control of the Controller of Imports and Exports and the liability to pay customs duty would be dependent upon the nature of performance by the importer relating to the export obligations in respect of goods which have been imported under the Scheme till the contingency arises for payment of duty as provided in the advance licences, the Customs Authorities will have no jurisdiction to demand payment of customs duty. When import had been made based on a licence issued by a co-ordinating authority constituted under another enactment, unless and until he takes a decision as to whether customs duty had become payable or not; the Customs Authorities cannot entrench upon the powers of the Controller. The duty exemption entitlement certificate states that, after completion of exports, these certificates shall be produced with endorsement for discharge of the bond/legal agreement, before the licensing authority concerned, who, after discharging the bond/legal agreement, shall retain the certificate with him. While importing, the importer under clause 2(1) in Appendix 19 to import and Export Policy, has to execute a bond with a bank guarantee to the licensing authority. Clause 29(1) deals with follow up panel action with the licence fails to abide by the Scheme. Clause 29(4) states that the customs authorities shall also take suitable action for the recovery of customs duty on the duties and interest thereon under Section 112 of the Customs Act of 1962, when the defaulted licence fails to act, according to sub-para 3. As for right to enter and inspect the premises and accounts books and to effect search and seizure in the event of non-compliance with the terms and conditions of the licence of the scheme, sections 4(b), (c), (d), (e) and (f) of Import and Exports (Control) Act provides for them. Confiscation is contemplated under Section 4(g) and (h) and penalty could be imposed under Section 4(i). The Act provides for powers to be exercised by authority functioning under the Act and, therefore, in respect of goods imported under licence issued under the Act, if there is any misutilisation or misapplication of the goods covered by the licence or the export obligation is not carried out properly, then in respect of those transactions, and until it is decided by the concerned authorities functioning under the said Act, that customs duty had become payable, the Authorities under the Customs Department would have no jurisdiction to seize these goods of change exercise any of the powers under the said Act. Once a decision is taken by the constituted Authority under the Import and Exports Control Act, in respect of recovery of customs duty, then the Authorities of the Customs Deptt. will have the power to exercise all the powers under the Customs Act.
7. Learned Advocate General had relied upon Section 110(o) of the Customs Act, which reads as follows :
"The following goods brought from a place outside India shall be liable to confiscation :
(O) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer".
Thus while confiscation would arise only after the Controller takes a decision that the goods which had already been permitted to be imported under licence because of the subsequent conduct of the licence and invited collection of customs duty which may arise under various circumstances. If the imported materials are not fully utilised for no fault of the licence, the balance of it, imported under the Scheme, would suffer payment of customs duty with interest thereon as found in paragraph 29(3) of Duty Exemption Scheme.
8. Circumstances would certainly arise in cases therein, in inspection in a factory and Authorities of the Customs Department may come across certain goods which are covered by the said Scheme and found irregularities of evasion of customs duty and in such of these instances what they will have to do is to forward the particulars which have come to their notice to the Controller of Imports and Exports who will have to take the follow-up actions and determine whether any customs duty would become payable, as stipulated in the Scheme in respect of goods which are not covered by the Scheme, certainly, it is the customs duty personnel who would have the jurisdiction to seize and take-up follow-up actions under the Customs Act.
9. Such a view had been taken in Shivshankar Tilakraj v. Union of India [1987 (28) E.L.T. 342 (Bom.)] by holding that Customs Authorities are not empowered to sit in judgment over the powers exercised by the Controller of Imports and Exports. It was held that the Customs Authorities are not empowered to find out whether an import licence had been given by a competent authority correctly and whether the conditions precedent for grant of import licence, were satisfied or not. Further, the learned Judge having relied upon a Division Bench decision of this Court in The Union of India and Others v. ......... Incorporation (W.A. Nos. 1126 and 1127 of 1985, dated 18-2-1986) and as the respondents have made out a prima facie case about lack of jurisdiction of the Customs Authorities to deal with the goods covered by the said Scheme, these writ appeals deserves to be dismissed.
10. An attempt is made by the appellant to seek for permission to take up the adjudication proceedings, but in a similar matter this Division Bench of this Court in C.W. Nos. 7926 & 7527 (sic) of 1986, W.A. Nos. 585-586 of 1986, dated 17-8-1986 and allowed the adjudication proceedings to go on the Supreme Court by order, dated 4-9-1986 in Special Leave to Appeal (Civil) Nos. 198 and 199 of 1986, has directed that the said adjudication proceedings may not go on. Therefore, at this stage, appellant Nos. 2 to 4 have forwarded whatever materials/particular they have collected to the Controller of Imports and Exports, who could take up such proceedings/circumstances.
11. Mr. M. T. Vanamamalai and Mr. Dolia have supported the contentions put forward by Mr. Thiagarajan and they claim that as on date when no violation had been committed relating to payment of customs duty, the appellant had no jurisdiction whatsoever to deal with the goods covered by a valid licence.
12. The points involved in all these appeals are identical and for reasons stated above, all the appeals are dismissed. No costs.