Bombay High Court
Sanjay Sanwarmal Agarwal vs Union Of India (Uoi) And Ors. on 31 March, 2004
Equivalent citations: 2004(94)ECC504, 2004(169)ELT261(BOM)
Author: V.C. Daga
Bench: V.C. Daga, J.P. Devadhar
JUDGMENT V.C. Daga, J.
1. The petitioner is a sole proprietor of M/s. Siddhivinayak Impex, Bombay and deals in import and export of various goods. This petition is directed against the act of respondent Nos. 2 and 3 in seizing the consignment imported by the petitioner and not allowing the said consignment to be cleared by respondent Nos. 4 and 5 on the alleged ground that the import of goods has become illegal as the import having been done under the transferred Advance Licence, which has been suspended by the Licensing Authorities at Ahmedabad as the same was prima facie found to be obtained fraudulently.
THE FACTS:
The facts giving rise to the present petition, in nut shell, are as under:
2. The petitioner is holder of Advance Licence bearing No. P/K/3489550 dated 15th November, 1994 having purchased the same for a valuable consideration of Rs. 14,47,600 from the original licensor one M/s. Omkar Exports of Ahmedabad, a Government recognised export house. Under the said licence import of Polyester Yarn to the extent of 30,800 kgs. was allowed. The petitioner claimed to have purchased the said licence as per the Import Export Policy, 1992-97 following procedure provided in the procedure of hand book after verification of audited documents and receipt of certificate certifying that the export obligation had been completed by the transferor. The licence was transferred on 16th June, 1995 in favour of the petitioner. According to the petitioner, as per the aforesaid policy the transfer of licence was freely transferable without any restriction to any other person.
3. The manufacturers based at Jakarta offered the said Polyester Yarn to the petitioner on 13th June, 1995. The petitioner opened Letter of Credit in favour of the supplier on 19th June, 1995. On 16th August, 1995, he filed Bill of Entry for clearance of the goods under Section 46 of the Customs Act, 1962 ("Act" for short) bearing No. 1736 and produced import licence alongwith Bill of Entry for duty free clearance of the said Polyester Yarn.
4. Respondent No. 5, the Assistant Collector of Customs, J.N.P.T. issued query memo to the petitioner on 23rd August, 1995 which was replied by the petitioner on 6th September, 1995. It appears that after arrival of the goods the Licensing Authorities on 20th September, 1995 suspended operation of the licence on the sole ground that some enquiry was conducted by the Customs Authorities against the original licence holder i.e. the transferor and that the grant of licence was found to be fraudulent. The Customs Authorities on 25th September, 1995 without informing anything about alleged suspension of the licence to the petitioner issued a seizure memo through subordinate Inspector of Customs and seized the consignment comprising of goods and refused to permit delivery of goods to the petitioner. The respondents also refused to accept the licence produced by the petitioner as valid licence for import of the subject goods. This act of the respondent is being challenged in this petition contending that the goods having been imported much prior to the suspension of licence and the petitioner being bona fide purchaser of the licence without notice of the alleged fraud alleged to have been committed by the original licence holder/transferor, the imports made by him could not be held to be illegal. At the time when the petitioner was filed, the petition had placed reliance on the judgment of the Apex Court in the case of East India Commercial Co. Ltd. v. Collector of Customs, in support of his submission; wherein the Apex Court ruled that a licence obtained by fraud is voidable. It would be good till it was avoided in the manner prescribed by law.
5. Learned counsel for the petitioner contends that when the manufacturer has completed export obligation under the Advance Licence and DEEC Books have been audited and checked by the Customs Authorities then they neither have authority to travel beyond the scope of the Customs Act and the Import Export Policy nor could they refuse to allow duty free clearance of the petitioner's goods, admittedly, covered under the definition of import licence.
6. The contentions sought to be advanced by the petitioner are identical with the contentions which were raised in the case of Taparia Overseas v. Union of India, 2002 (2) Bom. C.R. 7; wherein this Court had occasion to deal with the similar contentions and to hold that the concept that fraud vitiates everything would not apply to the cases where the transaction of transfer of licence for a value without notice of alleged fraud arising out of mercantile transaction governed by common law. It was also held that import made under the valid licence could not be subjected to levy of customs duty as such it is not open for the Customs Authorities to withhold the clearance of the imported goods. In that case, the licence was suspended after the import goods was completed. Same is the situation in the case in hand. Under these circumstances, having heard rival parties, we are in agreement with the submissions made by the petitioner that the issue in this petition is squarely covered by the judgment of this Court in the case of Taparia Overseas v. Union of India (supra) and the petitioner is liable to succeed on merits.
7. At this juncture, it will not be out of place to mention that when this petition was filed, rule was issued on 20th October, 1995 and pending final disposal of the petition, clearance of the goods was allowed on payment of duty under protest. It was also made clear that if, ultimately, the Court passes order that amount is liable to be refunded to the petition and petitioner is held to be entitled to the duty exemption, the respondent shall have to refund the same alongwith interest as the Court may award. Pursuant to this order petitioner, ultimately, paid Rs. 22,55,001 by way of duty under protest. Since the petitioner is being allowed that the impugned action of the respondents is being set aside, the petitioner would be entitled to refund of the said amount of duty paid under protest.
8. In the result, following law laid down by this Court in case of Taparia Overseas v. Union of India (supra) petition is allowed.
Action of the respondents/Revenue refusing to accept licence produced by the petitioner bearing No. P/K/3489550 dated 15th November, 1994 is set aside and the imports made by the petitioner are held to be legal and valid. There shall be an order of prohibition against the Customs Authorities from proceeding against the petitioner. The petitioner shall be entitled to claim refund of duty paid under protest in the sum of Rs. 22,55,001 with interest thereon at the rate of 6% per annum from the date of payment till refund in full and final. The respondents are directed to refund the said amount to the petitioner within a period of eight weeks after adjudication as to whether or not the petitioner has passed over the duty liability on the customers. In the event it is found that the petitioner has not passed on the duty liability to the customers, then, the petitioner would be entitled to refund of duty as indicated. If the finding is recorded against the petitioner, then, it would be open for the respondents to pass appropriate order in accordance with law the provisions of the Customs Act.
Rule is made absolute in terms of this order with no order as to costs.