Calcutta High Court
Collr. Of Cus. vs Narayani Trading Concern (Pvt.) Ltd. on 31 October, 1995
Equivalent citations: 1997(89)ELT668(CAL)
Author: Tarun Chatterjee
Bench: Tarun Chatterjee
JUDGMENT K.C. Agarwal, C.J.
1. This appeal has been preferred against the judgment of a learned Single Judge allowing the Writ Petition of M/s. Narayani Trading Concern (Private) Limited by issuing Writ of Mandamus for returning the Poppy Seeds imported from Pakistan through the Calcutta Port is transit to Nepal.
2. The respondent was engaged in importation of various goods for consumption in Nepal. In that connection it imported 32 Metric Tonnes of White Poppy Seeds in 458 bags at Kathmandu, Nepal through the Calcutta Port in transit to Birganj. Invoice necessary for that purpose was accordingly raised and the said goods were shipped to Calcutta by M.V. Eagle Moon Breeze under Bill of Lading No. 5699581, dated 30th June, 1994.
3. On 6th December, 1991 a 'TREATY OF TRANSIT between HIS MAJESTY'S GOVERNMENT OF NEPAL and GOVERNMENT OF INDIA' was entered into. That Treaty was animated by the desire to maintain, develop and strengthen the existing friendly relations and co-operation between the two countries recognising that Nepal is lani-locked country and as such, it needs access to and from the sea to promote its international trade. The object of the Treaty further was that the Contracting Parties shall accord to "traffic in transit" freedom of transit across their respective territories through routes mutually agreed upon. No distinction shall be made which is based on flag of vessels, the places of origin, departure, entry, exit, destination, ownership of goods or vessels.
4. The term "traffic in transit" means the passage of goods including unaccompanied baggage across the territory of a Contracting Party when the passage is a portion of a complete journey which begins or terminates within the territory of the other Contracting Party. 'Traffic in transit' is undertaken for the convenience of transportation. Articles IV and V of the said agreement are as follows:
"ARTICLE IV Traffic in transit shall be exempt from customs duties and from all transit duties or other charges except reasonable charges for transportation and such other charges as are commensurate with the costs of services rendered in respect of such transit."
"ARTICLE V For convenience of traffic in transit the Contracting Parties agree to provide at point or points of entry or exit, on such terms as may be mutually agreed upon and subject to their relevant laws and regulations prevailing in either country, warehouses or sheds, for the storage of traffic in transit awaiting customs clearance before onward transmission."
5. Traffic in transit is subject to the procedure laid down in the Protocol as modified by mutual agreement. Article IX of the said Treaty which is relevant for the purpose of deciding this Appeal reads as under :
"ARTICLE IX Nothing in this Treaty shall prevent either Contracting Party from taking any measures which may be necessary in pursuance of general international conventions, whether already in existence or concluded hereafter, to which it is a party relating to transit, export or import of particular kinds of articles such as narcotics and psychotropic substances or in pursuance of general conventions intended to prevent infringement of industrial, literary or artistic property or relating to false marks, false indications of origin or other methods of unfair competition."
6. The agreement entered into between India and His Majesty's Government of Nepal is valid for seven years from 6th December, 1991.
7. In the instant case what happened was that Poppy Seeds had been imported from Pakistan as per requirement. A declaration was given that the said firm was importing the goods from Pakistan. Under the Memorandum prepared in pursuance and subject to the provisions of the Protocol to the Treaty of Transit between Nepal and India the import procedure has also been laid down. Relevant portion of Clause 10 is quoted below :
"10. After the Customs House is satisfied as regards the checks contemplated in the preceding paragraphs, it shall endorse all the copies of the Customs Transit Declaration. The original copy shall be handed over to the importer. The duplicate and triplicate will be sent by post to the Indian border Customs Officer and the remaining copies shall be retained by the Customs House. In order to avoid delay in postal transmission, duplicate and triplicate copies of the C.T.D. along with copy of the original railway receipt shall be handed over to the importer or his authorised representative in a sealed cover, if he so desires. This facility shall however be denied to the importer who defaults in the production of these documents within a reasonable time to the Indian Border Customs Officer."
8. The Government of India has started proceedings for its satisfaction as to whether the goods have been imported from the place of declaration. Communication in between Pakistan and Government of India officials were exchanged. First Paragraph of the letter dated August 12,1994 of the Narcotics Control Bureau expressed doubt about the place. For the sake of convenience the said paragraph is quoted below :
"Large scale exports of Poppy Seeds from Pakistan to Nepal via India have been noticed of late. One of the enforcement agencies of this country has brought to the notice of this Bureau that as many as 26 consignments of Poppy Seeds weighing 250 MT have been certified to have originated from Pakistan for Nepal and are currently detained at Calcutta Port. Veracity of the certificates showing the Poppy Seeds of Pakistani origin appears to be doubtful because such huge amount of Poppy Seeds are not legally grown in Pakistan."
9. Indian Government was not satisfied with the declaration about the place of import of Poppy Seeds. The same was seized at Calcutta in July, 1995. The seizure has been challenged by means of the petition giving rise to the present appeal.
10. We have heard the learned Counsel for the parties and are of opinion that under the agreement a corridor had been provided for transportation of goods from India to Nepal in view of the peculiar geographical situation of Nepal and when no Customs Duty was leviable on the same the detention during the course of traffic in transit appears to us to be unjustified. It was made with a view to unnecessarily harassing the respondent. In the instant case however, we find from the facts that there was no intention to cause unnecessary harassment but it was only an attempt to be satisfied that the Poppy Seeds had been brought from the place of declaration and further that it was not an item on which Customs was leviable. In adopting the whole procedure much time has been spent but there could be no justification for a feeling that in between the two neighbouring countries the intention was to cause harm to the respondent. The appellant knew that there was no evasion of Customs or Excise Duty as the same was not leviable. We however feel that the detention/seizure of Poppy Seeds when it was not excisable or any custom duty was payable, the appellant should have been more careful and not detained the same. Under the agreement the Government of India had a right to take any measure which was necessary in pursuance of the general international convention. It is for this purpose the checking was permissible. Treaties create legal rights and duties, and it is this obligatory aspect that makes them part of International Law. Agreement between two sovereign States are to be respected.
11. In an 'Introduction to International Law' by Mark W. Janis, Law of Treaties have been defined as follows :
"The Law of Treaties International agreements are not only a principal source of international legal rules but are also themselves the subject of a considerable body of international law called the law of treaties. The law of treaties serves much the same function in international law as the law of contracts does in municipal law. It sets forth the accepted rules respecting the making, the effect, and the amendment, invalidity, and termination of agreements among states."
12. Like the civil law of contracts, the international law treaties looks primarily to consent and the wills of the parties to determine whether an agreement in law has been concluded. The emphasis of international law on the consent of the parties is due not only to the influence of civil law, but also to the realities of the international legal system where state sovereignty and independence loom so large. In the instant case the two countries had given their consent to the various terms and conditions of the treaty. On a reading of the various terms and conditions of the agreement it would be found clear and established that a corridor had been provided by the Indian Government to Nepal. As to what is the effect of Treaties has been considered by Mr. Janis in his book "An Introduction to International Law" which is as follows :
"The basic principle regarding the observance of treaties, pacta sunt servanda, finds its place in the Vienna Convention: "Every treaty in force is binding upon the parties to it and must be performed by them in good faith." The notion of good faith in the observance of international agreements is of course, a fundamental principle of international law. As Judge Lauterpacht observed in his separate opinion in the Norwegian Loans case in 1957, "Unquestionably, the obligation to act in accordance with good faith, being a general principle of law, is also part of international law."
13. We have already quoted above the relevant terms of the treaties. Under those terms the Indian Government was entitled to satisfy itself about the veracity and contents of the goods. It could do so for the purpose of finding whether the goods imported was contraband. In the instant case we have mentioned above that slight delay was caused in checking the correctness of the declaration but that will not render Indian Government in any way responsible to damage or demurrage apart from the fact that neither the quantum of damages nor demurrage has been established. We find that in this case the Government of India acted in good faith, in checking up the correctness of the declaration. It was acting honestly and without malice. It had no desire to seek a [conscionable] advantage. From what we have stated above we are in agreement with the learned Single Judge that the respondent was entitled to the return of Poppy Seeds in question. We are not satisfied that the seizure and detention of goods was deliverate and that the respondent could be held responsible to reimburse the importer on account of the delay in delivery of Poppy Seeds which are now to be made at the earliest without fail on the production of the certified copy of this judgment.
14. In the result, the appeal fails and is dismissed. There will be no order as to costs.
Chatterjee, J.
15. I have had the advantage of going through the judgment delivered by my Lord the Chief Justice before hand. Although I agree with the conclusions reached by his lordship that the appeals must be dismissed but I like to give my own reasons for reaching such conclusions.
16. The facts which would be required for the purpose of deciding this appeal would only be taken into consideration. The writ petitioner-respondent claimed to have entered into a contract with M/s. Waquob Yousuf of Karachi, Pakistan for supply of 32 Metric Tonnes of white Poppy Seeds in 458 bags at Kathmandu, Nepal through the Calcutta Port in transit to Birganj, Nepal. Necessary invoice was accordingly raised and the goods in question were shipped to Calcutta Port by M.V. Eagle Moon Breeze under Bill of Lading No. 5699581, dated 30th June, 1994. In view of insular location of Nepal without access to any sea port a treaty of transit, a treaty of trade and an agreement of cooperation to control unauthorised trade were entered into between the Government of India and Government of Nepal to felicitate traffic in transit through their territories and to prevent infringement and circumvention of the Law, Rules and Customs norcotics and Psychotropic substances, foreign exchange and foreign trade. According to the respondent, after arrival of the goods in question at the Calcutta port, its authorised customs housing clearing agent filed a customs transit declaration in accordance with the merit procedure prepared in terms of the Treaty of Transit containing the required particulars along with the shipping documents, for the purpose of examination of the goods and necessary clearance for transit of goods to Nepal by the prescribed routes. According to the procedure, after the customs authorities are satisfied about the goods to be carried in transit through the territory of India they are to endorse all the copies of the customs transit declaration, the original whereof is to be made over to the importer and the duplicate and triplicate copies are to be sent to the Indian border customs officer. The remaining copies are to be retained by the customs authorities. It appears that the goods in question were detained by the Directorate of Revenue Intelligence at the Calcutta Port. Since the goods were detained the writ application was moved by the writ petitioner-respondent inter alia for a direction upon the concerned respondent to release the detained goods and to allow the writ petitioner-respondent to transit the same by the approved route. A learned single judge of this Court allowed the writ application and directed the concerned respondent to release the goods and to allow the writ petitioner-respondent to transit the same to Nepal by the approved route. Feeling aggrieved by this judgment of the learned single Judge the present appeal has been preferred by the Collector of Customs, Calcutta.
17. Before I proceed further, it is stated at this juncture that an application for acceptance of a document which is a letter dated 31st of May, 1995 issued by the Director of Intelligence, Directorate General Anti Narcotic Force, Govt. of Pakistan was filed at the instance of the appellants in this appeal. Mr. Mullick appearing for the appellants sought to argue that in view of the disclosure made by the Pakistan Government that the Poppy Seeds in question were not grown in Pakistan and they were of Afghanistan origin, the judgment of the learned judge must be set aside on the ground that as there was false declaration on the part of the writ petitioner-respondent as to the origin of the goods in question the appellants were justified in detaining the goods in question. Mr. Mitra the learned counsel appearing for the writ petitioner-respondent however, contested the submission of Mr. Mullick who had appeared on behalf of the appellants. Before the Trial Court it was urged that the Poppy Seeds in question were narcotic or narcotic derivative, therefore, such goods in question can be detained on the ground that such goods are narcotic or narcotic derivative. Mr. Mullick however, contended that in view of false declaration made regarding the origin of the Poppy Seeds in question the customs authority have ample power to detain such goods on the basis of the treaty entered into by the Union of India and the Government of Nepal and to confiscate the same goods under the relevant provisions of the Customs Act. Let us therefore, first consider as to whether the provisions of the Customs Act can be invoked for the alleged false declaration made by the writ petitioner-respondent while applying for transit pass from the appellants. In my view, the application of Customs Act in the facts and circumstances of this case does not arise at all. Therefore, the question of confiscation of such goods also under the Customs Act does not arise. Section 110 of the Customs Act deals with seizure [Sub-section (1)] and documents or things [Sub-section (3)]. Under Sub-section (1) of Section 110 of the Customs Act, the proper officer has ample power to seize such goods which he has reason to believe are liable to confiscation under Chapter XIV of the Act. Section 111 of the Customs Act (hereinafter referred to as the 'Act') says that the goods mentioned in Sub-sections (a) to (p) of Section 110 of the Customs Act brought from a place outside India shall be liable to confiscation. Mr. Mullick, after taking us through Sub-sections (c) and (m) of Section 111 of the Act contended that the Poppy Seeds in question were liable to be confiscated under Section 111(c) and (m) of the Act. Mr. Mullick then contended that, assuming that the Poppy Seeds in question cannot come within the meaning of "prohibited goods" under Section 111(c) of the Act, even then such goods must come under Section 111(m) of the Act. So far as the 'prohibited Goods' within the meaning of Section 111(c) of the Act is concerned, Mr. Mullick sought to contend that the Poppy Seeds would come within the meaning of "prohibited goods" as Poppy Seeds must come within the definition of 'narcotic drug' as defined in Section 2(xiv) of the Narcotic Drug and Psychotropic Substances Act, 1985 (hereinafter referred to as the N.D.P.S. Act) which means coco leaf, carnabis (hemp), opium, poppy straw and includes all manufactured drugs. Section 2(xviii) of the N.D.P.S. Act, however, defines "poppy straw" which includes all parts of the Poppy but excludes the seeds, (Emphasis added). In view of such specific exclusion Poppy Seeds cannot come within the meaning of 'Narcotic drug' under the N.D.P.S. Act and, therefore, the Poppy Seeds cannot be said to be prohibited goods under Section 111(c) of the Act. Let me now consider Section 111(m) of the Act on which Mr. Mullick also based his argument as noted hereinabove. According to Mr. Mullick, any goods which do not correspond in respect of value or in any other particular with the entry made under this Act are liable to confiscation under the Act and, therefore, the Customs Authorities had ample power under the Act to detain the Poppy Seeds in question. Section 111 of the Act makes provision for the Customs authority to confiscate any improperly imported goods. Section 111(m) of the Act, however says, as follows :
"any goods which do not correspond in respect of value or any other particular with the entry made under this Act or in the case of package with the declaration made under Section 77 in respect thereof/can be liable to confiscation if the said goods have been brought from a place outside India."
From a perusal of Section 111(m) of the Act it appears to me that any goods which do not correspond in respect of value or in other particular with the entry made under this Act is liable to be confiscated under this Section. So far as this case is concerned the authorities did not say that the valuation declared by the writ petitioner-respondent in respect of the Poppy Seeds in question did not correspond with the entry made by the writ petitioner-respondent under this Act. Mr. Mullick appearing on behalf of the appellant however, submitted that since in the declaration made by the writ petitioner-respondent that the Poppy Seeds in question were of Pakistan origin the entry already made did not correspond in respect of such declaration. Mr. Mullick however contended that in view of the letter written by the Pakistan Government intimating that Poppy Seeds were of Afghanistan origin the particulars declared by the writ petitioner-respondent that they were of Pakistan origin and not of Afghanistan origin were a true declarations and as the said particulars did not correspond to the entry made, such goods were liable to be confiscated, under Section 111(m) of the Act. In my view, this submission of Mr. Mullick cannot be accepted for the reasons given hereinunder. In order to appreciate the aforesaid submission of Mr. Mullick it is necessary to take into consideration some other relevant provisions of the Customs Act. Before I do that let me say as noted hereinabove that Section 111 deals with confiscation of goods which have been improperly imported from a place outside India. Therefore, Section 111(m) of the Act applies in cases where the goods were improperly imported into India and not otherwise. It is not in dispute in this case the goods were not imported for consumption in India. It is a case where on the basis of a Treaty entered into by the Indian Government and Nepal Government to import goods from outside India to Nepal through the territory of India. Therefore, on the basis of such Treaty entered into by the aforesaid countries the importer or his agent shall present a Customs Transit declaration containing the particulars regarding country of consignment origin, if different and also a declaration at the end in the following words :
"I/We declare that the goods entered herein are for Nepal in transit through India and shall not be diverted enroute to India or retained in India."
"I/We declare that all the entries made therein above are true and correct to the best of my/our knowledge and belief."
From the aforesaid declarations which are enumerated in the Memorandum (Article II) entered into by the aforesaid countries for importing goods from third countries for Nepal in transit through India the writ petitioner-respondent made a declaration on the basis of a certificate given by the Pakistan Government that the origin of the Poppy Seeds in question were of Pakistan. Before I proceed further all the relevant articles in respect of the aforesaid treaty between His Majesty's Government of Nepal and the Government of India should be taken into consideration at this stage. Article I says that the contract in parties shall accord to 'traffic in transit' freedom of transit across their respective countries through routes mutually agreed upon. But no destination shall be made which is based on flag of vessels, the places of origin, departure, entry, exit, destination, ownership of goods of vessels. Article 4 exempts duty in respect of goods which are in transit from a third country to Nepal. Article IX for our purpose is very important. Therefore it is felt that the whole of Article IX should be reproduced which runs as follows:
"Nothing in this treaty shall prevent either contracting party from taking any measures which may be necessary in pursuance of general international conventions, whether already in existence or concluded hereafter, to which it is a party relating to transit, export or import of particular kinds of article such as narcotics and psychotropic substances or in pursuance of general conventions intended to prevent infringement of industrial, literary or artistic property or relating to false marks, false indications of origin or other methods of unfair competition."
From a plain reading of Article IX of the said Treaty there cannot be any dispute that in respect of Article such as narcotics and psychotropic substances or in pursuance of general conventions intended to prevent infringement of industrial literary or artistic property or relating to false marks, false indications of origin or other methods of unfair competition the contracting party can take any measure against the erring parties which may be necessary in pursuance of general international conventions. It also appears from Article IX that such measures can be taken relating false marks, false indications of origin or other methods of unfair competition. In this case we are interested in the expression 'false indications of origin' as expressed in Article IX of the said Treaty. Article II of the Memorandum says that before the Customs House, the importer or his agent shall present a Custom transit declaration containing inter alia the particulars in relation to country of consignment (origin) if different and also a declaration which has already been quoted hereinbefore. So far as the first declaration as quoted hereinbefore is concerned there is no dispute in this case that the goods entered in India are for Nepal in transit through India and have not been diverted enroute to India or retained in India. So far as the declaration that all the entries made therein are true and correct is concerned it appears that an exception has been taken by the appellants that the declaration of the writ petitioner-respondent in respect of the origin of the Poppy Seeds in question. In the facts and circumstances of this case can it be said that the declaration made by the writ petitioner-respondent that the Poppy Seeds in question were of Pakistan origin on the basis of a certificate issued by the Pakistan Government could be treated as a false declaration, when the Poppy Seeds in question are not narcotic drug which are prohibited goods under the Customs Act and also under the N.D.P.S. Act? In my view, in the facts and circumstances of this case and in view of my discussions made hereinabove it cannot be said that such a declaration having been made by the writ petitioner-respondent on the basis of the confiscation issue by the Pakistan Government would amount to a false declaration and, therefore, the customs authorities had ample power to confiscate the goods or to detain the goods in question.
18. As noted hereinabove Article II of the Memorandum invites a declaration that all the entries made therein are true and correct to the best of my/our knowledge and belief. It is, therefore, evident that the writ petitioner-respondent must declare that all the entries are true and correct to the best of knowledge and belief of the writ petitioner-respondent. In this case admittedly a certificate of Pakistan Government showing that the goods were of Pakistan origin was obtained by the writ petitioner-respondent which was annexed with the declaration. Even at the time of final hearing of the appeal the letter issued by the Director, Intelligence of Anti Narcotic Force, Rawalpindi, Pakistan on 31st May, 1995, produced by the appellant clearly says that although the Poppy Seeds are of Afghanistan origin but that being a harmless commodity suitable for edible purposes alone, export certificates are issued by Karachi Chamber of Commerce and Industry as per existing rules, the declaration made by the Writ petitioner-respondent that the said goods were of Pakistan Government cannot be said to be false as in my view the entries in respect of such declaration made by the respondent were to the best of the knowledge and belief of the writ "petitioner-respondent. The writ petitioner-respondent had relied on a certificate issued by Pakistan Government and on the basis of such certificate such declaration was made by them. There is nothing on record that an export certificate was procured by the writ petitioner-respondent in connivance with the Pakistan government, nor such a case has been made out by the appellants in their affidavit-in-opposition filed before the Trial Court and no such argument has been advanced by Mr. Mullick on this score. Therefore, declaration made by the writ petitioner-respondent on the basis of export certificate issued by the Pakistan Government cannot said to be a false declaration as it was so done with the best knowledge and belief of the writ petitioner-respondent. Therefore, it cannot be said that the writ petitioner having declared the goods in question of Pakistan origin had made false declaration of origin in respect of the said goods in question. Keeping in mind that the goods are not narcotic and psychotropic substances and in view of the nature of the declaration made by the writ petitioner-respondent I do not find any reason to hold that in view of the declaration made in report of the origin of the Poppy Seeds in question it can be said that for such a declaration the goods could be detained by the Customs Authorities. Apart from that Section 111(m) of the Act in my view, applies to a case where the goods did not correspond in any particular with the entry made under this Act. The expression 'entry' has also been defined in Section 2(16) of the Act.
"Entry in relation to goods means entry made in a bill of entry shipping bill or bill of export and includes in the case of goods imported or be exported by post the entry referred to in Section 82 or the entry made under the regulations under Section 84."
19. From a reading of Section 2(16) of the Act which defines 'entry' and firm expression is also used in Section 111 of the Act, I am of the view that the word 'entry' in Section 111(m) of the Act would only include a bill of entry, shipping bill or bill of export and includes in the case of goods imported or to be exported by post the entry referred to in Section 82 or the entry made under the regulations made under Section 84 and no other entry. In the case before us there was no question of entry under the Customs Act. A declaration however, was made on the basis of the memorandum as indicated hereinabove. Therefore, in my view, Section 111(m) cannot be applicable in the present case.
20. For the reasons aforesaid I do not find any merit in this appeal. I therefore, agree with my Lord the Chief Justice that the appeal should be dismissed. But before parting with this judgment it may be stated that the decisions which were relied by the learned Counsel for the parties (sic.) AIR 1972 Supreme Court 542 (Padam Kumar v. Addl. Collector of Customs), (Gramphone Company of India Ltd. v. Birendra Bahadur Pandey) and the other decision {Eruesin Equipments & Chemicals v. Collector of Customs) (Full Bench) would not be required to be dealt with in view of my findings made hereinabove for the purpose of deciding this appeal. My Lord the Chief Justice in his judgment has elaborately dealt with the question of payment of demurrage for detention of goods in question as was argued by the learned Counsel for the writ petitioner-respondent. Since I entirely agree with the conclusion reached by my lord the Chief Justice on his point it is not necessary to go into this question once more in my judgment.
21. Accordingly the appeal is dismissed.
22. There will be no order as to costs.