J.B. Trading Corporation vs Union of India

These petitions coming on for orders as to admission on this day upon perusing the petition and the affidavit field in support there of the order of

the High Court shoe for M/s. D. A. Stewart and M. A. Kalam, Advocates for the petitioner and of Mr. P. Narasimhan, Central Govt. Standing

Counsel for the respondent, and having stood over for consideration till this day the Court made the following order :

All these three writ petitions can be dealt with under a common order,since the writ petitions in the same. The relief asked for in all the writ

petitions is identical except that each of the petitions relates to different consignments.

The short facts are as follows :

One Messrs Continental Silk House, 47, 3rd Main Road, 4th Block, Rajaji Road, Bangalore, filed three bills of entry all dated 29th September,

1986 for the clearance of 25 bales of mulberry silk in each case. The goods were imported by vessel `VELENJI. The vessel arrived on 27-9-

1968. Messrs. Jeena & Co., the clearing agents of M/s. Continental Silk House filed these three bills of entry for the clearance of 25 bales of

mulberry raw silk China origin on behalf of M/s Continental Silk House,Bangalore (the importers). The value of each of the consignments was

declared as Rs. 3,43,651/-, Rs. 3,45,910/- and Rs. 3,45,792/- on the strength of the invoices raised by Messrs. Brightex (H. K.) Corporation in

their favour. Both the importer and the Customs House Agent subscribe to declaration as to the truth of the contents in the bills of entry as

provided for u/s 41(2) of the Customs Act of 1962 (hereinafter referred to as th e`ACT. On the strength of the bills of entry, the goods were

inspected and the sampling was also done. Meanwhile, information was received by respondents 1 to 5 that he said importer was not existence,

and that the licence had been obtained by fraud and misrepresentation on the strength of fabricated documents. Therefore, the Joint Chief

Controller of Imports and Exports issued a show cause notice to the said Importer and the same was not served since there was no such company

in the address given. Consequently, the Joint Chief Controller of Imports and Exports conducted an enquiry and also cancelled the Licence given

to said Importer. Besides, a First Information Report was lodged and the C. B. I. was entrusted with the tasks of investigation. Accordingly the

investigation by the Central Bureau of Investigation was taken up and was being proceeded with. While the matter stood thus, a show cause notice

was issues to the said M/s. Continental Silk House, as to why the goods imported should not be confiscated under the Act. The case is pending

adjudication by the Collector of Customs. Meanwhile, the writ petitioner though its advocate Mr. L. V. Balani requested the Customs Department

to allow the petitioner to file the bills of entry for clearance. The petitioner''s clearing agents M/s. Srinivas Mudaliar & Brothers filed one bill of

entry. It was then noticed by the Customs Department that a bill of entry filed already by M/s. Jeena & Co., the clearing agents of M/s. Continental

Silk House had not been processed yet. The other two bills of entry filed by the clearing agent of the writ petitioner were refused by the

respondents since similar bills of entry had already been filed and the adjudication proceedings were in progress. Under circumstances, the

Department has sent a reply to Mr. L. V. Balani by letter dated 31-3-1987 under Registered post with acknowledgment due giving reasons for not

noting the bills of entry filed by the petitioner.

It also requires to be noticed that by proceedings dated 18th of March 1987, the Joint Chief Controller of Imports and Exports,after satisfying

himself that the licence issued in favour of M/s. Continental Silk House dated 4-4-1986 would not serve the purpose for which it was issued,

cancelled it with immediate effect under the powers vested in him under Clause 2(a) read with Clause 9(1)(d) of the Imports (Control) Order,

1955 dated 7-12-1955 as amended.

it further requires to be noted that M/s. Jeena and Company,the clearing agents of M/s. Continental Silk House by their reply dated 13th April

1987 to the show cause notice dated 27-3-1987 issued by the Department have stated that no import licence was sent to them for the clearance

of the goods in question nor did they receive any money for payment of duty, having no suspicion regarding the bona fides of the Importers as

stated in the shipment documents, in goods faith, the bills of entry were filed by them to avoid the delay. Only from the details contained in the

show cause notice, they came to know about the various offences involved. Any section that may be required may be taken against the goods and

the Importers.

It is at this stage, all these three writ petitions have been filed for identical relief of mandamus directing the second respondent to receive the bills

entry covering the import of 25 bales, of Mulberry Raw Silk imported on board the ship''s Velanje and release the goods after collecting the duty

payable thereon.

Mr. Habibullah Badsha ,learned counsel for the petitioner, would urge as follows :

(i) The definition of an importer is found u/s 2(26) of the Act having regard to the same, if the petitioner, before the goods are cleared for home

consumption, would hold itself out to be the importer, it has every right to clear goods. The petitioner is an Importer under law since the documents

have been transferred to it and bank documents, the bills of lading, invoices etc. are all in the name of the petitioner. Further, it has the requisite

import licenses specifically endorsed for the import of goods now lying in the Madras Harbour. As to who is an Importer has come to be laid

down in J.V. Gokal and Co. (Private) Ltd. Vs. The Assistant Collector Sales-tax (Inspection) and Others, . Therefore, the stand of the Customs

Department is untenable.

(ii) u/s 46 of the Act, all that the importer has to do is to file a bill of entry. Accordingly, the clearing agents of the petitioner wanted to file the bills

of entry. But strangely the Department is not accepting the two bills and on the third bill, no action had been taken so far. Under law, all that is

required is to examine the bills of entry to find out whether the goods are not prohibited. If the same is established,there is no other option available

to the officer concerned except to release the goods on payment of duty, more so when the goods are covered by a valid licence.

(iii) It is one thing to say that the bills of entry filed by M/s. Continental Silk House had been obtained by fraud or misrepresentation and yet

another thing to say that the petitioner who has valid licence and as importer is prepared to pay the necessary duty could be denied the benefit of

import. By allowing the import in favour of the petitioner, the Department is not in any manner prejudiced. Still,whatever action could be taken

against M/s. Continental Silk House, that can be taken. Therefore, the denial of the benefit of import is nothing but arbitrary, violative of Articles 14

and 19(1)(g) of the Constitution.

The learned Senior Standing Counsel for the Central Government would draw my attentions to the definition of Importer occurring in Section

2(2) of the Act and contented that it talks of an `Importer'' in relation to any goods at any time between their importation and the time when they

are cleared for home consumption. This time factor is relevant in this case because the goods in question arrived on 27-9- 1986 on which date the

importation was complete. The person holding the document prior to importation, namely, 27-9-1986, could alone be deemed to be an importer.

The documents in the hands of the importer are invoices dated 15-12-1986 and 16-12-1986 the bills of lading are only after the date of

importation. At the time of importation,therefore,it was Continental Silk House who could, law, be the importer. Therefore,the reliance placed on

this definitions inappropriate, and he citation in this behalf is inapplicable.

The learned counsel then refers to sub-sections (1) and (3) of Section 30 of the Act and then urges that in this case as early as on 12-6-1986,

the C. B. I. enquiry had release of the goods. So far as the goods are concerned, they are liable for confiscation, concerning which adjudication

proceedings are pending. A show cause notice has been issued on 31-3-1987. In order to circumvent the adjudication proceedings, the petitioners

have ingeniously filed these bills of entry and have come upto this Court as though nothing had happened. It is incorrect to contend that no

prejudice will be caused to the Department, nor again it is proper to urge that there is any arbitrariness.

Mr. B. Sriramulu learned counsel appearing for the Central Bureau o Investment would urge that a case in R. C. No. 19 of 1986 is pending

investigation concerning the fraud committed by M/s. Continental Silk House, Bangalore, concerning the very goods in question. The contract for

the import of the goods was between M/s. Continental Silk House and the Joint Chief Controller of Import and Exports. It has now turned out that

the said M/s. Continental Silk House is a bogus firm and on the strength of the forged documents,licence had been obtained by fraud. Under these

circumstances, under the law as laid down in Fedco (P) Ltd. and Another Vs. S.N. Bilgrami and Others, and Sheikh Mohammed Sayeed Vs.

Assistant Collector of Customs for Preventive (I) and Others, , the goods are liable for confiscation. Under these circumstances, there is no

question of any statutory obligation cast on the Customs Department to allow the release of the goods on payment of duty.

Mr. Habibulla Badsha, learned counsel for the petitioner in reply cites the decision in East India Commercial v. Collector of Customs A. I. R.

1932 S. C. 1898and submits that the cancellation of the licence of M/s. Continental Silk House is not always obligatory and it is voidable and

therefore the cancellation of the licence of M/s. Continental Silk House cannot be put against the petitioner.

Before I proceed to consider the legal issues involved the facts may be detailed out. M/s. A. S. Shipping Agencies (P) Ltd., Madras Steamer

Agents, for Vessel `M. V. Velenje'' (by which the goods in question arrived) filed an import Manifest I. M. No. 887/86 on 17-9- 1986. This is in

accordance with Section 30 of the act . The impugned consignments are covered by line Nos. 150, 151 and 152 of the Import Manifest. The

entries indicated in the Manifest against the above three lines are as under :

--------------------------------------------------------------------

Line B/L. No. No. of Bales Marks & Nos.

No.

--------------------------------------------------------------------

(1) (2) (3) (4)

--------------------------------------------------------------------

150 0099/4871 G2 25 C. S. BC/Madras No. 80424/80448

MDS-010

151 C. 990/4873 G 25 CSC/Madras No. 80374/80398

ZMDS-008

152 C/089/4872 G 25 CSC/Madras No. 80399/80423

ZMDS-009

--------------------------------------------------------------------

Description of Goods Name of the Consignee/Importers

----------------------------------------------------------------------

White Steam Filature (in all) M/s. Continental Silk House,

47,

32nd

Main Road, Rajaji

Nagar,

Bangalore- (in all)

--------------------------------------------------------------------

It will be seen that the Importer is M/s. Continental Silk House, the holders of the bills of lading .The Customs House Agents M/s. Jeena & Co.,

Madras filed the bills of entry with invoices dated 4-9-1986 of M/s. Brightex, Hong Kong, on 20-9-1986. The goods arrived on 27-9- 1986. The

bills of entry were admitted by the department. They were assigned Nos. 5059 to 5061. They were manifested as GM-837/86 Line Nos. 150 to

152 on 29-9-1986. It came to the light of the Customs Department that M/s. Continental Silk House was not in existence and the licence itself had

been obtained by fraud and misrepresentation on the strength of fabricated documents. Therefore, a complaint was lodged on 27-11-1986 by the

Deputy Chief Controller of Imports and Exports with the superintendent of Police, C. B. I (EOW), Madras to take up investigation against the

bogus firm. Accordingly, a First Information Report was prepared in Crime No. R. C. 19 of 86, dated 2- 12-1986 and investigation was taken

up. On 13-3-1987, the Joint Chief Controller of Imports and Exports passed an order of cancellation of the imprest licence dated 4- 4-1986 for

C. I. F. value of Rs. 959280/- for the import of mulberry raw silk issued in favour of M/s. Continental Silk House after satisfying himself that it will

not serve the purpose for which it was granted. This was in exercise of the powers conferred under Clause 2 (a) read with Clause 9(1)(d) of the

Imports (Control) Order, 1955. It had also come to the notice of the Customs Department that neither M/s. Continental Silk House nor the

supporting manufacturer indicated by them, namely, M/s. J. K. Silk Industries were functioning at the addresses given by them and also at the other

addresses furnished by M/s. Continental Silk House, at Madras-19. The show cause notice issued on 6th March, 1987 for the proposed

cancellation of the licence dated 4- 4-1986 had been returned by the postal authorities with the remarks `No such Continental Silk House, No. 26,

IInd Street, Kanniappa Gramni Nagar at Tiruvettiyur, Madras-600 019 and hence returned to sender''. On 27-3- 1987 in view of the above, M/s.

Continental Silk House, M/s. J. K. Silk Industries and M/s. Jeena & Co., were called upon to show cause as to why the consignments should not

be confiscated u/s 111(d) of the act read with Section 3(2) of the Imports & Exports (Control) Act, 1947. This was because the licence was

obtained by fraud on the strength of the forged documents. The Importer and the Supporting manufacturers are fictitious firms. The said licence

had, therefore, been cancelled. Meanwhile, by letter dated 21-2-1987 Mr. Balani, Advocate addressed a letter to the Assistant Collector of

Customs on behalf of the petitioner stating that the three bills of entry filed for the clearance of the consignments could be noted and the clearance

of the goods be allowed. To the said letter, the Assistant Collector of Customs replied on 31-3- 1987 as follows :

`Please refer to your Letter dated 21-2-1987 on behalf of M/s. J. B. Trading Corporation, Bombay addressed to the Assistant Collector of

Customs (Imports).

You are hereby informed that one M/s. Continental Silk House filed three Bills of Entry for the clearance of the consignments under reference and

adjudication proceedings were already initiated by this office for confiscation of the goods and imposing penalties on the importers and others by

way of issue of show cause notice. Since, adjudication proceedings are under way, your request for noting the bills of entry in favour of your client

M/s. J. B. Trading Corporation, Bombay cannot be acceded to''.

Mr. Habibullah Badsha, learned counsel for the petitioner strongly relies on the word `Importer'' found in Section 2(26) of the Act. The word

`Importer'' is defined as follows:

Importer'' in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any

owner or any person holding himself out to be the importer. In interpreting that,it is observed as follows in J.V. Gokal and Co. (Private) Ltd. Vs.

The Assistant Collector Sales-tax (Inspection) and Others, .

`The legal position vis-a-vis the import-sale can be summarized thus :

(1) The course of import of goods starts at a point when the goods cross the customs barrier of the foreign country and ends at a point in the

importing country after the goods cross the customs barrier; (2) the sale which occasions the import is a sale in the course of import; (3) a

purchase by an importer of goods when they are on the high seas by payment against shipping documents is also a purchase in the course of import

and (4) a sale by an importer of goods, after the property in the goods passed to him either after the receipt of the documents of title against

payment or otherwise to a third party by a similar process is also a sale in the course of import.''

In my considered view, as rightly contended by the learned Senior Standing Counsel for the Central GOvernment, the words, namely, `at any

time between their importation and the time when they are cleared for home consumption'' occuring in Section 2(26) are important. It has already

been noted that the goods had arrived on 27-9-1986 on which date the importation had become complete having crossed the customs barrier. At

that relevant time it was only M/s. Continental Silk House which was the importer and for that alone the goods were intended. As a matter of fact,

the bills of entry had been filed by M/s. Jeena & Co. They still stand. Those bills have not been cancelled; nor the imported goods were

abandoned. In law, therefore, no other person can claim to be the importer of the goods except the persons shown in the Manifest originally as

seen from the above Tabular Statement against Line Nos. 150, 151 and 152. After the completion of importation on 27- 9-1986, there cannot be

another importer for the very same goods. Therefore, apart from the definition u/s 2(26) not being helpful to the petitioner, I am unable to see how

the ruling of the Supreme Court, referred to above, could be pressed into service. It also requires to be noted that the documents in the hands of

the petitioner are invoices bearing dated 15-12-1986 and 16-12-1986 while the bills of lading are after the date of importation.

On 29-1-1987, one bill of entry Rotation No.887/86; Line No. 150 in the name of the writ petitioner as Importers was filed by the Customs

House Agent M/s. Srinivasa Mudaliar & Bros., Madras on behalf of the petitioner. This bill of entry was not manifested by the Customs

Department because, against this Line No. 150 a bill of entry had been filed by the importer in the correct sense, namely, M/s. Continental Silk

House, Bangalore. The same had not been cancelled. The C. B. I. case is pending. Therefore, there is no question of one bill of entry of the

petitioner having been accepted and the other two being refused. The stand of the Department that the three bills of any entry had already been

filed by M/s. Jeena & Co., with regard to the same consignment and therefore it cannot accept any other person as the Importer for the same

goods is perfectly in consonance with the Customs Law as well as the common sense. Further, the petitioner had been informed that the bills of

entry against Line Nos. 150, 151 and 152 had already been filed on 29th September, 1986 by the said M/s. Jeena & Co., on behalf of M/s.

Continental Silk House, Bangalore.

The fallacy underlying the argument of the petitioner is, it is presumed on behalf of the petitioner that the goods had already been allowed for

clearance and the Importer of M/s. Continental Silk House had not cleared the goods. This is far from fact. On the contrary,the matter is now in

the hands of C. B. I. and a first information report has been registered in R. C. No. 19 of 1986. The licence of M/s. Continental Silk House had

been cancelled by proceedings dated 13-3- 1987, the import of the goods on the strength of the fake documents by fictitious firm on whom even

notices could not be served would undoubtedly constitute fraud. In such a case, Section 111(d) of the Act will clearly get attracted. Consequently,

the goods are liable for confiscation. There is an obligation cast on the Customs House Agent M/s. Jeena & Co., who acted on behalf of M/s.

Continental Silk House to comply with Section 30 of the Act. It is also clear that under- section (2) of Section 30, the person delivering the import

manifest or the import report has to make and subscribe to declaration as to the truth of its contents. When this turned out to be untrue, M/s. Jeena

& Co.,was pushed to the extreme and wrote in reply to the show cause notice on 13th April 1987 that they were not aware of the bonafides of the

importer. In good faith the bills of entry were filed to avoid delay and any action could be taken against the goods or the importer. If the goods

which have been imported,were imported contrary to Section 111(d) of the Act, they are liable for confiscation as categorically laid down in

Fedco (P) Ltd. and Another Vs. S.N. Bilgrami and Others, . This ruling of the Supreme Court was relied on in Sheikh Mohammed Sayeed Vs.

Assistant Collector of Customs for Preventive (I) and Others, . The weighty observations in the following two relevant paragraphs are relevant to

the point in issue.

`Paragraph 32 :-

...The different sections of the Act cannot be read in isolation. The definition of `imported goods'' in Section 2(25) has to be read along with

Section 111 of the Act which deals with goods brought from a place outside India. This section is in Chapter IV of the Act which provides for

confiscation of goods and conveyances and imposition of penalties. u/s 111(d) of the Act any goods which are imported contrary to any

prohibition imposed by or under this Act or any other law for the time being in force shall be liable to confiscation. The goods which have been

seized in this case cannot be imported into India without a licence under the Import Control Act and there is therefore a prohibition in law for the

import of the goods except in compliance within Import Control Act. It is true that the goods were cleared from the Customs Barrier on the basis

of import licence produced by the petitioner, but the respondents'' case is that the import licenses, on the basis of which the goods were cleared

were not genuine. The licenses which were utilised by the petitioner for the purpose of clearing the goods, according to the respondents, were

forged licenses. If a licence is forged it is no licence at all, and any import of goods, of which the importation is prohibited by law, cannot be a valid

import under the Act. Goods so imported cannot therefore be treated to be lawfully `imported goods'' within the definition of that term in Section

2(25) of the Act. Since the respondents'' case is that the licenses on the basis of which the goods were imported were forged licenses, if the

allegation of forgery is true, the goods must be held to have been brought into India contrary to a prohibition imposed by law as contemplated by

Section 111(d) of the Act, and in that case such goods are liable to confiscation and the power to seize u/s 110(1) of the Act can be invoked by

the Customs Authorities and the goods, though cleared after payment of duty can be seized u/s 110(1) of the Act. The contention on behalf of the

petitioner that the goods having been imported into India for home consumption cease to be imported goods and the decision of type Customs

authorities to release the goods upon payment of the duty imposed cannot be revised by any authority other than the Board in exercise of the

power u/s 130(1) of the Act therefore fails and is rejected.

Paragraph 36:

The next contention of the learned counsel for the respondents was that the licenses used by the petitioner for the purpose of clearing the goods

was not a genuine licence, but was a forged one and therefore there was no license at all; and that being so, the import of the goods was unlawful

and the goods even though cleared from the Customs Barrier were liable to confiscation and the petitioner who was responsible for using a forged

license for clearing the goods was in addition liable to an order of penalty. In support of this contention reliance was placed on a decision of the

Supreme Court in Fedco (P) Ltd. and Another Vs. S.N. Bilgrami and Others, . In that case it was held that the entire scheme of control and

regulation of imports by licenses was on the basis that the licence was granted on a correct statement of relevant fact and that if the grant of the

licence was induced by fraud or misrepresent that basis disappeared. It was also held that it would be absolutely unreasonable that such licence

should be allowed to continue. In my view this contention of they learned counsel for the respondents is well founded. The import of goods on a

licence, in the case of goods the import of which is prohibited, must be confined be imports made on a licence lawfully obtained. If a licence is

forged, and I wish to make it clear that in this case I do not say that it has been forged, as that would be a matter for determination in other

proceedings against the petitioner, there is no licence at all. The respondents'' case is the licence used by the petitioner is a forged one, and if such

forgery is proved in appropriate confiscatory and penal provisions of the proceedings, the import of the goods would be unlawful and would attract

the Customs Act and other statutes.

`The position here is similar. If the contention of the petitioner is to be accepted, whenever any consignment is liable for confiscation for some

violation, the importer could be substituted by some other person to file the bill of entry for clearance. It is almost certain that having come to know

of the proceeding, the petitioner, with a view to circumvent the same, is claiming itself as`Importer'' in order to set at naught the adjudication

proceedings and the confiscation of goods. It is rather surprising that when the petitioner has accepted that it''s payment is against S/P. basis,

instead of refusing to retire the document, it is making ingenious attempts to clear the goods which have been illegally imported into India by a

fictitious firm on the strength of forged documents concerning which R. C. No. 19 of 1986 is pending. There is absolutely no scope for the

petitioner to claim the right of an `importer'', more so, after the first information report came to be filed on 2-12-1986 while the petitioner bear the

dates 15- 12-1986 and 16-12- 1986. Fraud is infinite in its variety and this is one such variety.''

There are absolutely no merits in these writ petitions and hence they are dismissed.