The Commissioner of Customs (Prev.) Mumbai v. Leela Scottish Lace Pvt. Ltd.

Bombay HC24 Sept 2009CUSTA/9/2001

Case brief

AI extract

What is this about?

The High Court rejected Revenue's reference application regarding customs confiscation. Upholding the CEGAT Tribunal, the Court held that section 111(o) does not apply when goods are not cleared and exemption conditions have not arisen, rendering the quoted questions academic.

What did the court decide?

Application for reference rejected; questions held not to arise as confiscation cannot be invoked before goods clear and exemption is granted.

The Commissioner of Customs (Prev.) Mumbai Vs Leela… — Customs and Excise | Bombay HC (2009)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

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ORDINARY ORIGINAL CIVIL JURISDICTION

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CUSTOMS APPLICATION NO. 9 OF 2001

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Commissioner of Customs (Preventive) & Anr. .. Applicants

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V/s

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M/s Leela Scottish Lace Pvt. Ltd. & Ors. .. Respondents

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Mr. P.S. Jetly with Mrs. S.V. Bharucha for the applicants.

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Mr. Vikram Nankani with Mr. S. Murthi i/b Mr. M.G. Gawde for the respondents.

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CORAM : FERDINO I. REBELLO & D.G. KARNIK, JJ.

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DATE : 24TH SEPTEMBER 2009

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ORAL JUDGMENT : (Per Ferdino I. Rebello, J.)

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The Revenue has moved this Court for reference on the following questions:

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(1)Whether on the facts and in the circumstances of the case

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the Tribunal was justified in following the decision of the Supreme Court in the case of UOI v. Sampat Raj Dughar [1992 (58) ELT 163 (SC)] and setting aside the order of confiscation of goods and imposition of penalty even

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though the said decision was distinguishable on facts inasmuch as in the instant case the Bills of Entry were filed and the same were assessed and debit of duty, quantity and CIF Value has already been logged in Import Export Pass Book?

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(2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that at the time of seizure, since the goods were not cleared from docks, no exemption was granted and therefore the contravention of any of the conditions of Notification No.117/88-Cus cannot be alleged and hence the goods were not liable for confiscation under section 111(o) of the Customs Act, 1962?

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It is not necessary to set out the facts in detail. The respondents who were holders of a passbook under the DEEC Scheme, had imported as many as 16 consignments. After coming to know of the investigations that were going on, they disclaimed the goods. There is a further finding of fact by the Assessing Officer as under:

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“Having failed in their attempt to clear the goods free of duty,

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presumably on account of M/s Leela Scottish Lace Pvt. Ltd. backing out of the deal in view of ongoing investigations, Naresh Modi S. Biren Shah sought to clear the goods themselves.”

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The Assessing Officer then arrived at the conclusion that the import of 16 consignments was not only in contravention of law but also as a result of conspiracy. There is a further finding as under:

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“The impugned three consignments had also been sold before they were imported into the country in violation of para 281 of the Import Export Policy 1988-91. Therefore the goods are liable for confiscation under section 111(o) of the Customs Act., 1962.”

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Considering these findings, the Assessing Officer was pleased to pass an order of confiscation of the three consignments under section 111(o) with an option to redeem the goods. In view of the earlier findings, a penalty of Rs. 50,000/- was imposed on the respondents under section 112(a)(ii) of the Customs Act.

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The respondents herein went in appeal before the CEGAT. The learned Tribunal after considering the judgment of the Supreme Court in Union of India v. Sampat Raj Dugar, 1992 (58) ELT 163 (SC), observed that there was no dispute that importation of the goods was not illegal, having been made under a passbook which at the relevant time was a kind of licence. Learned Tribunal then noted that clause (o) of section 111 of the Act makes liable for confiscation, goods exempted from duty or any prohibition in respect of which condition is not observed. Where the goods have not been exempted from duty or any prohibition subject to any condition, the provisions of clause (o) of section 111 of the Customs Act will not apply. It further observed that exemption of duty which had been claimed in the bill of entry had not yet been granted as as such it was premature to invoke clause (o) of section 111 of the Act. In the light of that, the learned Tribunal held that there was no ground for confiscation of goods or imposition of penalty and set aside the order of confiscation of goods and penalty imposed.

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It is against that order that the Revenue has applied for a reference on the questions formulated above.

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At the hearing of this application, on behalf of the applicant, the learned counsel has submitted that from the order of the Assessing Officer it would be clear that the respondents had in fact sold the goods to a third

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person. The goods were imported under the DET licence and could have only been used for captive consumption. It is submitted that the learned Tribunal ignored all findings in arriving at the conclusion that the goods were not liable for confiscation and consequently that penalty could not have been imposed.

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We may gainfully refer to para 21 of the judgment in the case of Sampat Raj Dugar (supra), which reads as under:

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The next question is whether the import of the said goods was contrary to law in any manner and whether the said goods are liable to be confiscated under the Customs Act. The only provisions relied upon the appellants are Clauses (d) and (o) in Section 111 of the Customs Act which we have set out hereinabove. In our opinion none of these clauses are attracted in the present case. Clause (d) contemplates an import which is contrary to any prohibition imposed either by the Customs Act or any other law for the time being in force. No such prohibition can be pleaded in this case since on the date of the import the said goods were covered by a valid import licence. The subsequent cancellation of licence is of no relevance nor does it retrospectively render the import illegal. (East India

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Commercial Co. Ltd. v. The Collector of Customs, Calcutta, [1963] 3 S.C.R. 338 at 372) 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 so 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). Further, merely because the second respondent had not complied with the condition imposed with respect to three earlier consignments, it may not be possible to presume that it would not be observed even with respect to the four consignments in question. Be that as it may, it is sufficient for the present to notice that so far no action has been taken on that account either under the Customs Act or under section

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4-G of the Imports-Exports (Control) Act, 1947. Section 4-G of 1947 Act is also conceived to meet such situation, as a reading thereof would disclose. It says that non-compliance with any condition of licence relating to utilization of such goods renders the said goods liable to confiscation notwithstanding that such goods are mixed up with other goods or material.

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Even though a period of more than five years has passed by, no action has been taken either under the Customs Act or under Section 4-G of Imports-Exports (Control) Act, though the import licence of the second respondent has been cancelled. We must presume in the circumstances that no such action was or is contemplated. In these circumstances that no such action was or is contemplated. In these circumstances the title of the first respondent to the said goods remains free of any cloud. ”

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From the aforesaid judgment, it would be clear that what the Supreme Court has held that clause (o) of section 111 of the Act contemplates confiscation of goods which were exempted from duty subject to a condition which is not observed by the importer within the time prescribed. The occasion for the action under this clause arises only when the condition is not observed within the period prescribed. In the instant case, the respondents had not cleared the goods. The Bill of Entry was filed by some other person. Therefore, the question of breach of condition by the respondents would not arise. What section 111(o) of the Act reiterates is “the condition is not observed”. The stage for observing the condition had not yet arisen as the goods themselves had not been cleared by the respondents.

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In our opinion, therefore, the learned Tribunal was right in placing reliance on the judgment of the Supreme Court in the case of Sampat Raj Dugar (supra). The learned counsel is unable to point out any other provision under which the goods could be confiscated or penalty imposed insofar as the respondent no.1 is concerned.

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Considering the above, in our opinion, the questions as framed in respect of the reference sought by the Revenue would not arise. Consequently, the application is rejected.

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(D.G. KARNIK, J.)

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(FERDINO I. REBELLO, J.)

The Commissioner of Customs (Prev.) Mumbai v. Leela Scottish Lace Pvt. Ltd.

Case brief

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The Commissioner of Customs (Prev.) Mumbai v. Leela Scottish Lace Pvt. Ltd.

Case brief

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