Chimanlal Chhotalal Desai vs M.G. Abrol

This is a petition under Article 226 of the Constitution challenging the validity of an order dated January 31, 1958 passed by the first respondent as Assistant Collector of Customs, Bombay, whereby certain goods belonging to the petitioner were ordered to be confiscated under clause (8) of Section 167 of the Sea Customs Act read with Section 3 of the Imports and Exports (Control) Act, 1947. The Petitioner was given an option u/s 183 of the Act to pay in lieu of such confiscation a fine of Rs. 33,000 and clear the goods for home consumption. A personal penalty of Rs. 16,000 was levied against the petitioner u/s 167(8) of the Sea Customs Act.

The relevant facts are as follows :-

The petitioner obtained a licence dated July 4, 1956 under Import Trade Control Order, 1955 dated December 7, 1955. In that licence the description of goods licensed to be imported is "parts of other office machines, i.e. Dictating machines excluding those machines included in appendix XXXV to the Policy Book for June 1956". The petitioner had also obtained licence dated June 5, 1956. In that licence the description of the goods is "other office machines, i.e. dictating machines" and also tape and wire recorders for office use". In both the licences a reference is made to "I.T.C. Schedule" and the serial number. In the first licence serial number is 65(6)(a) (iii)/V. In the second licence the serial number is 65(6) III/V. On October 25, 1957 the petitioner imported 22 cases of tape recorders of the value of Rs. 24,640. The goods had been shipped from Holland and arrived in Bombay on or about October 25, 1957.

By a show cause memo dated November 20, 1957 it was stated that the import licence produced was not valid for the reasons mentioned in clause 2 of the memo and a written explanation was invited from the petitioner and he was also notified to clearly state in the written explanation whether he wished to be heard before the case was decided by the adjudicating officer. The petitioner submitted his explanation dated November 20, 1957, and was given a personal hearing on November 21, 1957. The matter was then admittedly adjourned to enable the petitioner to produce certain further correspondence the details whereof it is not material to state. The respondent''s case is that on December 12, 1957, the time for the petitioner to bring in further materials was extended up to December 27, 1957. The time was again extended by a reminder addressed to the petitioner on January 2nd 1958. The petitioner prepared a written representation to be made to the Joint Committee of the I.T.C. and Customs Authorities. That representation is dated January 11, 1958. The petitioner forwarded that representation to the Assistant Collector of Customs, Bombay, along with his letter dated January 13, 1958.

It is necessary to point out that the aforestated personal hearing was given to the petitioner by one A. V. Venkateshwaran who was in November 1957, Assistant Collector of Customs, Bombay.

By the impugned order dated January 31, 1958 the respondent No. 1, M. G. Abrol, made certain findings and passed orders as above-stated. The petitioner has challenged that order on several grounds in this petition. I will deal with the grounds as pressed before me one after the other as follows :-

Mr. Mehta, counsel for the petitioner described the first ground as "there was an error apparent on the face of the record". He developed that point by relying upon the contents of (i) the impugned order and (ii) item 65(6) of Part V of I.T.C. Schedule and the licence dated June 5, 1956. In the licence dated June 5, 1956 specific reference is made to tape recorders as falling under serial number 65(6) III of the part V of the I.T.C. Schedule. The serial No. 65(6) of Part V of I.T.C. Schedule is as follows :-

"65(6) Machine or parts of machines" which require for their operation less than one quarter of one-brake horse power excluding type-writers and sewing machines and parts thereof"

(a) Office machines and parts thereof -

(i) Hand motel type duplicators.

(ii) Duplicators, power driven.

(iii) Other office machines"

Against the above items (a)(iii) in the Policy Book for the relevant period in clause (d) of the remarks column it is mentioned as follows :-

"(d) Licences for the import of dictaphones, tape and wire recorders and other recording and dictating machines will be granted liberally".

Mr. Mehta has rightly relied upon this clause (d) as also the contents of the licence dated June 5th, 1956 in support of his argument that it was permissible to import completely assembled tape recorders under a licence containing description of the goods as mentioned in item 65(6) of part V of I.T.C. Schedule. Having regard to the contents of the licence dated July 4, 1956 and June 5, 1956 as also clause (d) in the remarks column against item 65(c)(a)(iii) in the Policy Book it would be impossible for the respondent No. 1 to contend that completely assembled tape recorders could not be imported on a licence issued as under serial number 65(6)(a)(iii) of part V of I.T.C. Schedule.

The petitioner''s contention throughout was that the goods imported by them fell in this item 65(6)(a)(iii) and the licence dated July 4, 1956 was valid for importation of tape recorders of the petitioner.

Mr. Mehta for the petitioner has argued that in the whole of the impugned order the above contentions of the petitioner have not been noticed or dealt with and the respondent No. 1 has not applied his mind to relevant contentions. Mr. Mehta has further argued that the only finding and the reasoning of the respondent No. 1 in the order is as follows :-

"the goods imported by the petitioner were complete tape recorders assessable under item 73 of the I.T.C. Schedule".

On the basis of that finding he refused to accept the petitioner''s licence as valid for importation of the petitioner''s goods. Mr. Mehta contends that there is no finding in the impugned order that tape recorders could not be imported under Item 65(6)(a) III/V of I.T.C. Schedule. Mr. Shah for the respondents has argued and submitted that the true construction and reading of this order is that the respondent has made a further finding viz. that the licence dated July 4, 1956 was only for "parts of office machines" and available for the imports of the petitioner''s goods, viz. tape recorders. In connection with these contentions it is necessary to refer to the relevant contents of the show cause memo dated November 28, 1957 and the impugned order.

The charge against the petitioner in the show cause memo was as follows :-

"The Import licence produced is not valid because it is issued for parts of office machines, i.e. dictating machines falling under S. No. 65(6)(a) (iii)/V of the I.T.C. Schedule. The goods imported are complete tape recorders and licence under Schedule 78 part V is required".

An enquiry into the above charge must relate to findings on both the facts mentioned in the show cause memo.

The relevant part of the impugned order runs as follows :

"M/s. Chimanlal Desai and Company imported the goods specified above and claimed their clearance against a licence No. 0-0575586/35 dated 4-7-1956 under Sr. No. 65(6)(a) (iii)/V of the I.T.C. Schedule. On examination of the goods it was however, found that the goods imported were complete tape recorders correctly classifiable under Item 73 of the ITC requiring for their release an Import Licence under serial No. 78/V of the ITC Schedule. The licence produced was specifically for the parts of office machine issued under Liberal Licensing Scheme and as such the same could not be accepted for the import of complete tape recorders. The Clearing Agents in their letter in reply to the Show Cause memo contended that the licence referred to above for parts of other office machines, i.e. dictating machines under Sr. No. 65(6)(a) (iii)/V was issued during J/J 1956 liberally both for Dollar and Soft Currency Areas and would cover the items of machines as well.

In the course of a personal hearing the importers did not adduce fresh arguments. But they urged that they would produce the full correspondence leading to the issue of the licence in question and requested that the case be adjudicated after scrutiny of the correspondence.

The importers did not produce the correspondence despite the fact that they were reminded on 12-12-1957 and 2-1-1958 for the same.

As there is no response from the importers so far, the case warrants adjudication ex-parte as it cannot be kept pending for an inordinate period.

The goods imported are complete Tape Recorders assessable under Item 73 of the I.C.T. corresponding to Sr. No. 78/V of the I.T.C. Schedule. The licence produced cannot therefore, be accepted.

The clearing Agents explanation is therefore not satisfactory. As the importers have no valid licence, the goods are deemed to have been imported in contravention of the Import Control Order No. 17/55 dated 7-12-1955 issued u/s 3 of the Imports and Exports (Control) Act of 1947. The importers have thus committed an offence attracting the provision of Section 167(8) of the Sea Customs Act."

It is apparent to me that the only finding which the respondent No. 1 has made in the above contents of the impugned order is that "the goods imported were complete tape recorders assessable under Item 73 of the I.C.T. corresponding to Sr. No. 78/V of the I.T.C. Schedule. The licence produced cannot therefore be accepted and accordingly the importers had no valid licence ? It is obvious that the respondent No. 1 failed to apply his mind to the contentions of the petitioner arising under Sr. No. 65(6)(a) (iii)/V of I.T.C. Schedule. He also did not consider the petitioner''s contention that having regard to the serial number 65(6)(a)(iii) having been stated in his licence it was immaterial whether the petitioner imported "parts of Tape Recorders" or assembled "tape recorders".

Mr. Shah for the respondents relied upon the first part of the above contents of the impugned order and submits that the first paragraph relates to reasonings and records findings of the respondent No. 1. It is however apparent that as is customary in all orders made by the Collector of Customs, the first paragraph as well as the second paragraph and the third paragraph of the above contents of the order are only recitals of facts which had transpired prior to the considerate of the matters arising before the respondent No. 1 and that the reasonings and findings are only contained in parts which I have already quoted above. It was not the case of the petitioner that tape recorders could only be imported under a licence under serial number 78/V of the ITC Schedule. In my view relevant contentions and facts have not been considered and the respondent No. 1 has made an irrelevant findings that tape recorders assembled could be imported under Item 78 part V of the ITC Schedule. Having regard to the position I must make a finding that there is an error apparent on the face of the record in respect of the impugned order.

The second contention which Mr. Mehta for the petitioner has made is that "principles of natural justice have been violated" in this case because the personal hearing was granted to the petitioner by A. V. Venkateswaran on November 20, 1957 whilst the order was passed by the respondent No. 1 M. G. Abrol, on January 31, 1958 without giving any hearing to the petitioner. In further developing this point Mr. Mehta relied upon the fact that at the date of the adjournment of the personal hearing on November 21, 1957, it was known to the Department that further material by way of evidence would be tendered to the Department on behalf of the petitioner. The Department had at the request of the petitioner (made by the letter dated November 27, 1957) extended the time for the purpose till December 17, 1957 and had also extended time in January, 1958. Though the order was made on January 31st, 1958 the respondent had failed to consider the representation submitted to the Assistant Collector of Customs along with the petitioner''s letter dated January 13, 1958.

29th June, 1960

Mr. Mehta has contended that the representation contains fresh materials which had never been put forward at the personal hearing given on November 21, 1957 and the material is such as must of necessity affect the views of the Tribunal as regards mens rea involved in the offence for which charge was laid against the petitioner. He further contends that in consequence the fine and penalty to be levied against the petitioner would be to a large extent different from the fine and penalty levied by the impugned order.

In support of his contention that he was entitled to a personal hearing before the respondent No. 1, Mr. Mehta has relied upon the decision of the Supreme Court in the case of Gullapalli Nageswara Rao and Others Vs. Andhra Pradesh State Road Transport Corporation and Another, . The question in that case related to a decision of the Chief Minister when hearing was afforded by the Secretary to the State Government. In that connection it was observed as follows :

"This divided responsibility is destructive of the concept of judicial hearing. Such a procedure defeats the object of personal hearing. Personal hearing enables the authority concerned to watch the demanour of the witnesses and clear-up his doubts. During the course of the arguments, and the party appearing to persuade the authority by reasoned argument to accept his point of view. If one person hears and another decides, then personal hearing becomes an empty formality. We therefore, hold that the said procedure followed in this case also offends another basic principle of judicial procedure".

It may be pointed out that Mr. Mehta has relied upon the words "destructive of the concept of judicial hearing" and "offends another basic principle of judicial procedure", and argued that in all matters where decision is to be arrived at by quasi-judicial Tribunals, it is absolutely essential that personal hearing should be afforded by the person who makes the ultimate decision.

Mr. Shah for the respondents has in that connection drawn my attention to the decision of the Division Bench of this Court delivered by Challa C.J. in S. Venkatesan v. Shah Trikamadas Damji (in Appeal No. 75 of 1956 delivered on October 5th 1956) where on similar facts in the proceedings under the Sea Customs Act it was observed that the rules of natural justice do not confer upon a party the wider right of being heard orally, a written representation submitted by a party gives full opportunity to that party to be heard in his defence. Whether the party should be orally heard or not is a matter of procedure. Several strong observations were made in that decision in connection with a party not being entitled to an oral hearing by the officer who ultimately gave decision in the matter on an inquiry. In the case of Messrs Saralal Lakhmichand and Co. v. M. R. Ramachandran (Misc. Application No. 153 of 1959 decided on March 15, 1960) the decision of the Supreme Court as well as of the Division Bench were cited before me. Following the decision of the Division Bench and explaining the decision of the Supreme Court I hold that having regard to the facts involved in that case it was not necessary that the petitioners should have had a personal hearing before M. R. Ramachandran who had given decision in that case. Mr. Shah has relied upon observations made by me in that decision with certain emphasis and argued that the petitioner in this case was not entitled to a hearing before M. G. Abrol because the petitioner was in law not entitled to that opportunity and in any event had a personal hearing before A. V. Venkateswaran on November 21st, 1957. It must be pointed out that the procedure to be followed so as to comply with rules of natural justice depends upon and varies according to circumstances of different cases as also rules of procedure prescribed. Generally stated it is absolutely essential that a party against whom investigations are held must have opportunity to put forward its case in such a manner as the Tribunal giving its decision has before it the whole of the case of the party.

As I have already discussed above in this case M. G. Abrol has failed to consider the case of the petitioner altogether. It appears to me that this is the direct result of failure to afford a personal hearing (by the 1st respondent) to the petitioner. The representation made by the petitioner in January 1958 is not referred to at all in the impugned order and decision. Mr. Mehta has rightly contended that prima facie M. G. Abrol has failed to consider the case of the petitioner and has not looked at the representation made in January 1958. That result would not have followed if a hearing was afforded to the petitioner. It appears to me that in this particular case the petitioner has had no opportunity to put forward the whole of his case in such manner as the deciding Tribunal viz., M. G. Abrol had before him the case of the petitioner. It is therefore having regard to the particular facts of this case that I have come to a finding that rules of natural justice have been violated in this inquiry.

It must be pointed out that by his affidavit dated April 4, 1960 M. G. Abrol has stated that though the order is dated January 31st, 1958, he had come across and looked into the representation of the petitioner made in January 1958 some time in February 1958 and after considering the representation had finally signed this order on February 10, 1958. The order does not make any reference to this representation of January 1958. There is mention in the order of documents read by M. G. Abrol. The statement that the report was looked after January 31st, 1958 which is the date of the order is on prima facie grounds such that I cannot make my finding in this case upon acceptance thereof as true.

It also should be pointed that there is some material in the representation of January 1958 which would affect the Tribunal as regards mens rea involved in the charge against the petitioner and the quantum of fine and penalty to be levied against the petitioner.

Mr. Mehta has further contended that the fine of Rs. 33,000 does not bear any rational relation to the value of the goods and was evidence of non-application of mind. He contended that under the circumstances observations made by Sehlat J. in Misc. Application No. 436 of 1958 Messrs T.M. Thakore and Co. v. Shri D. P. Anand, dated January 13, 1959 were applicable and that following that decision I must hold that the impugned order is not binding. It must be pointed out that as pointed out in that decision "it is no longer mandatory on the part of the Collector of Customs to give the option" in a case under Import Control (Order) and Act. It is further by reference to the provisions of Section 183 of the Sea Customs Act pointed out in that decision that under the section upon adjudicating confiscation it is the duty of the officer to give the owner of the goods an option to pay in lieu of confiscation such fine as the officer thinks fit. In the result it is observed that it must be presumed that the Legislature gave discretion to the officer on the footing that it must be exercised on certain rational basis consistent with the avowed object of the Statute. The officer was bound to apply his mind to the facts of each case before him as also the object of the Statute. The option contemplated u/s 183 which is given to the owner of the goods must be real and not unreasonable or absurd or illusory. Having regard to the proportionate discrepancy in the value of the goods and the fines imposed in that case it was held that the Collector had failed to apply his mind to the facts and that there was no rational relation between the value of the goods and the fines imposed.

In this case the invoice value of the goods of the petitioner is admittedly Rs. 24,640. M. G. Abrol in his affidavit dated April 4, 1960 has pointed out that while imposing fine of Rs. 33,000 he had taken into consideration the market price of the goods then prevailing which includes the margin of profit available to the petitioner. He has further stated that as compared with the market price of the goods the fine imposed is smaller. He denied having not applied his mind to the several factors relevant to the consideration of the quantum of fine to be levied.

Now, the scheme of the Sea Customs Act as regards duties to be levied and enquiries to be held and fines to be imposed is a complete Code by itself. It is not for a Court of law to substitute its judgment in place of the decision of Tribunals as constituted under the Sea Customs Act. M. G. Abrol has specifically stated in his affidavit that he had applied his mind to the facts and had considered that value of the goods in relation to the fine to be imposed. I negative this contention advanced by Mr. Mehta.

Mr. Mehta has next contended that there was no jurisdiction in the first respondent to impose personal penalty of Rs. 16,000. He has pointed out that by several judgments of this Court as also of the Supreme Court it is now finally settled that u/s 167(8) the personal penalty to be imposed can never exceed Rs. 1,000. That position is incontrovertible and does not require any further argument.

Having regard to my aforesaid findings, the petitioner is entitled to relief as prayed in prayer (a). The order dated January 31, 1958 is quashed and set aside.

As regards the question of costs, it appears to me that one of the reasons why the petitioner did not get a personal hearing before M. G. Abrol was that he failed to present himself before him though time was extended twice as already recited by me above. If the petitioner or his agents had interviewed M. G. Abrol in December 1957 or January 1958 (before the date of the order viz. January 31, 1958) I have no doubt that the first respondent would have given a hearing to the petitioner and considered all his arguments. This is not a case where the petitioner is entitled to costs.