17 Jun 2121

The goods imported beyond the permissible quantity and also without the license, are the prohibited goods for the purpose of the Customs Act, 1962 - Supreme Court of India

Case : Union of India v. M/S Raj Grow Imlex LLP & Ors Civil Appeal No(s). 2217-2218 of 2020 with Civil Appeal No. 2219 of 2021

Court : Supreme Court of India

Bench : Justice A. M. Khanwilkar, Justice Dinesh Maheshwari and Justice Krishna Murari

Decided on : 17 Jun 2121

Relevant Statutes

Section 125 and 129D(2) of the Customs Act, 1962

Section 3(2) of Foreign Trade (Development and Regulation) Act, 1922

Brief Facts and Procedural History

1. The central government issued a notification under the Foreign Trade (Development and Regulation) Act, 1922 restricting the import of certain beans, peas and pulses. In the preceding years, the same notifications were passed and against which petitions were filed in various High Courts and those petitions were dismissed by the High Courts and one of such was also dismissed by Supreme Court. And also due to such challenges, various transfer petitions were filed before this court and after hearing matter on merits while deciding the challenge of notification, Supreme Court passed judgment in Union of India v. Agricas LLP and Ors., 2020 SCC OnLine SC 675, and uphold the notification dated 29-03-2019 as also the consequential trade notice issued by DGFT.

2. In the said judgment Supreme Court held that importers should not affect any import under the bona fide belief under this order and they would face the consequences and also any import made while relying on the interim order will be considered contrary to this notification and events taking place after this order gave rise to this present appeal.

3. After the decision of this court, the private respondents of these appeals, M/S Raj Grow Impex LLP and M/S Harihar Collections, address the respective communication to Additional Commissioner of Customs, Mumbai on the very day of judgment requesting for waiver of show cause notice, and Commissioner while ordering confiscation gave them an option to redeem the goods in the lieu of paying fine under section 125(1) of the Customs Act, 1962. After paying fine, DGFT taking exception against the release of certain goods considering them as restricted items and therefore other consignments were not released.

4. Aggrieved by such communication and stoppage of the release of goods, importers approached the High Court by way of a writ petition seeking mandamus and High Court took the view that the grounds do not make any case of illegality or impropriety as to call for the exercise of suo moto revisional power by the commissioner under section 129D(2) of the Customs Act, 1962 and with regard to the release of goods and its justification, High Court was of the view that importers had complied with the terms and condition and were incurring an expenditure of warehouse any further holding of imported goods was not justified and therefore the goods of the importers should be released.

5. Against which the union of India and its authority related with customs approach the Supreme Court and before the matter could be heard by the Supreme Court, some important events took place -

a. One of the importers M/S Raj Grow Impex ask the High Court for modification of the order as some of its bills of entry had not been included.

b. The order in appeal before the commissioner was allowed which was preferred by the department and ordered the absolute confiscation of goods and also enhances the amount of penalty.

c. This order of commissioner is challenged by M/S Raj Grow Impex before the High Court through another writ petition and High Court stayed the operation of order by the commissioner and directed them to comply with the order of the High Court.

Issues of the Case

Whether the impugned goods are liable for confiscation or they shall be released after the payment of the fine in lieu of confiscation?

Whether the orders passed by High Court are legal and hold validity in the eye of law?

The Observations of the Court

1. The importers approached the High Court against goods not being released even after the orders in original passed in their favour and also during the pendency of the matter in High Court the commissioner passed an order which suggested on behalf of the department that writ petition were rendered infructuous.

2. The Honourable Supreme Court in the present petition referred to section 129D(2) of the Customs Act, 1962 court noted down that it will be very much appropriate that this section reserves legendary power in the highest controlling authority of the department apart from the appellate power of the departmental appellate authority and also apart from the power of revision of central government and this is very much required in order to satisfy the controlling authority of the department regarding the legality and proprietary of any decision given by subordinate appellate authorities.

3. The other matter was regarding the time of passing of the order when the matter was submitted in High Court so, the Honourable Supreme Court was of the opinion that when one matter is sub-judice with the High Court being the higher forum and also the constitutional court, then the executive authority should not attempt to bring about any new state of affairs without the permission of the court and for determining all the relevant surrounding factors should be examined so as to find that it was with the administration of justice or was a bona fide exercise of power.

4. Even though the matter was pending in the High Court against the communication of denial of release of goods, therefore, we found it correct that High Court was totally justified in giving the judgment that the appellate authorities were justified in rendering the writ petition before the High Court totally infructuous and one additional circumstance which High Court neglected was that the writ petitions were filed for the execution of the order in original and therefore goods have to be released and this was decided totally on merit by the appellate authority and if for any other reason this order was interfered by the appellate forum this would have done irreparable damage because the goods would have been released for the domestic market.

5. The Honourable Supreme Court observed that the High Court after ordering the release of the goods confiscated other matter was left open to be decided by the commissioner but it can be clearly construed that he cannot order absolute confiscation of goods because the High Court has already ordered the release of goods and further even after various observations made by the High Court, the High Court has stopped short of setting aside the order of the commissioner and also did not pronounce anything finally on the order in original because they order that over the subject matter of a field High Court committed a serious error. What has been observed from the above observations is that the orders made by the High Court suffers from inherent contradictions and inconsistencies and therefore cannot be approved.

6. The Honourable Supreme Court observed that the High Court also failed to take into account various relevant facts and also the material factors concerning the import in question including the reason for the seed notification issued by the central government mobile issuing mandamus for release of goods therefore the orders passed by High Court in the second position are hereby disapproved. The High Court while entertaining the second petition did not mention the alternative remedy of regular statutory appeal to CESTAT is available to the importer and therefore in the view of the Supreme Court the High Court should not have entertained the writ petition.

7. Moving on to the question of “prohibited goods”, The Honourable Supreme Court referred to Union of India v. Agricas LLP and Ors., 2020 SCC OnLine SC 675, wherein it has noted down that the purpose of the notification was to set a balance between the farmers of the country on the one hand and importers, on the other hand, and further held that the impugned notification is valid in accordance with the power conferred to the central government under Section 3(2) of Foreign Trade (Development and Regulation) Act, 1922 and court referred to section 3 of Foreign Trade (Development and Regulation) Act, 1922 for the meaning of “prohibited goods” and The Honourable Supreme Court noted down that apart from all these requirements under Foreign Trade (Development and Regulation) Act, 1922, that is, having being imported under the cover of the interim order, contrary to the notification and also without the requisite license, these will be deemed to be prohibited goods under section 11 of the Customs Act, 1962.

8. The Honourable Supreme Court referred to the cases of P. T. R. Exports (Madras) Pvt. Ltd. And Others vs. Union of India, 1996 SCALE (5) 362, and Commissioner of Customs (Import), Mumbai v. ASB International Pvt. Ltd., and noted down that applicant has no vested right to export or import license and granting of a license is totally dependent on policy prevalent on the date and for granting the license, authorities have to satisfy themselves with respect to all the requirements of this scheme. So, when notification puts a certain cap on the import of goods and every imported good in excess of that cap will be considered as import of “prohibited goods” and therefore Honourable Supreme Court is of the view that the goods imported in contravention of the notification issued by central government and imported beyond the permissible quantity and also without the license, are the prohibited goods for the purpose of the Customs Act, 1962.

9. While moving on to the other question of whether absolute confiscation is valid or not, The Honourable Supreme Court noted down that once it is clear that imported goods fall in the category of private goods and therefore the goods are liable to confiscation apart from other consequences, The Honourable Supreme Court while referring to section 125 of Customs act, 1962 noted down that it clearly makes a distinction between ‘prohibited goods’ and ‘other goods’ and it is very much evident that the latter part of section 125 mandates the release of confiscated goods against the redemption fine but the earlier part does not mention such compulsion with regards to the prohibited goods and is left to the discretion of adjudicating authorities and in the present case the adjudicating authorities ordered absolute confiscation with the enhancement of the amount of penalty.

10. With respect to the discretion exercise by an authority, the Honourable Supreme Court referred to Sant Raj and Anr. v. O.P. Singla and Anr.: (1985) 2 SCC 349 and Reliance Airport Developers (P) Ltd. v. Airports Authority of India and Ors.: (2006) 10 SCC 1, U.P. State Road Transport Corporation and Anr. v. Mohd. Ismail and Ors.: (1991) 3 SCC 239, Assistant Commissioner (CT) LTU, Kakinada and Ors. v. Glaxo Smith Kline Consumer Health Care Limited: 2020 SCC OnLine SC 440, noted down that when the question of discretion arises, it has to be exercised in accordance with the law and this discretion is essential in order to determine what is right and proper. And there is no doubt that this has to be exercised judicially while considering all the material and relevant surrounding factors properly balanced and therefore in the present case the appellate authority found such exercise of discretion by the adjudicating authority after citing Hargovind Das K. Joshi and Ors. v. Collector of Customs and Ors.: (1987) 2 SCC 230 and an authority acting under the customs act has to ensure that exercise must be with reference to the accomplishment of the purpose underline the conferment of this power to the authorities

11. The Appellate Authorities have noted down various reasons as to why they consider absolute confiscation the proper exercise of discretion and therefore, from the above discussion it has been noticed that the only discretion which would be exercised is absolute confiscation with the penalty and at most another option is re-export which could be given to importers but that too on the payment of redemption fine.

The Decision Held by the Court

1. The Honourable Supreme Court allowed the appeals.

2. The impugned order dated 15.10.2020 (read with modification order dated 09.12.2020), as passed by the High Court in Writ
123 Petition (L) Nos. 3502-3503 of 2020, is set aside and the writ petitions so filed by the respondent-importers are dismissed;

3. The impugned interim order dated 05.01.2021, as passed by the High Court in Writ Petition (ST) No. 24 of 2021 is also set
aside and the said writ petition shall be governed by this judgment;

4. The orders-in-appeal dated 24.12.2020, as passed by the Appellate Authority in the respective appeals, are approved and
consequently, the orders-in-original dated 28.08.2020 in the respective cases of the respondent-importers stand quashed;

5. The orders-in-appeal having been approved by the Honourable Supreme Court, the questions of the release of goods as also the quantum of penalty stand concluded with this judgment and hence, the prayer for keeping open the option of further statutory appeal stands rejected; and

6. The subject goods are held liable to absolute confiscation but, in continuity with the order dated 18.03.2021 in these appeals, it is
provided that if the importer concerned opts for re-export, within another period of two weeks from today, such a prayer for reexport
may be granted by the authorities after recovery of the necessary redemption fine and subject to the importer discharging
other statutory obligations. If no such option is exercised within two weeks from today, the goods shall stand confiscated absolutely.

7. The Honourable Supreme Court directed the respondent-importers shall pay costs of this litigation to the appellants, quantified at Rs. 2,00,000/- (Rupees two lakhs) each.

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