Sunshine International and Another vs The Collector of Customs and Others

Bakthavatsalam, J.—The prayer in the writ petition No. 2501 of 1993 is as follows:

�to issue a writ of certiorarified mandamus calling for the records of the proceedings of the Deputy Collector of Customs in order No.

S8/305/92-Gr.H dated 9.10.1992, quash the same, direct the respondents to release the goods in accordance with the past practice.

The prayer in the writ petition W.P. No. 2503 of 1993 is as follows:

�to issue a writ of certiorarified mandamus calling for the records of the proceedings of the Deputy Collector of Customs in order S8/297/92-

Gr.I. & II dated 15.10.1992, quash the same and direct the respondents to release the goods in accordance with the past practice�.

Though the petitioners are different, the issue raised in both the writ petitions is one and the same. The petitioner in W.P.No. 2501 of 1993

imported 13000 kilograms of cassia from Singapore valued at Rs. 3,49,906/- and when he filed bill of entry No. 30327 dated 4.9.1992 for

clearance of the goods for home consumption, on the arrival of the goods, the customs authorities took the view that cassia is specifically covered

by the negative list under para 156 (restricted items) Part A (Consumer goods) Sl. No. 8 and hence requires a specific licence for import of the

same. After giving a personal hearing to the petitioner, an order of adjudication was passed on 9.10.1992 confiscating the goods and imposing a

penalty of Rs.1,50,000/-. Against that, the petitioner filed an appeal before the Collector (Appeals) and it is pending.

The petitioner in W.P. No. 2503 of 1993 imported 13,230 kilograms of cassia from Singapore valued at Rs. 5,53,350/- and on the arrival of

the goods, the petitioner filed bill of entry No. 29161 dated 26.8.1992 for clearance of the goods for home consumption. Here also a personal

hearing was fixed on 12.10.1992 and since no one appeared for the personal hearing, an order of adjudication was passed confiscating the goods

absolutely and imposing a penalty of Rs. 1,51,000/- on the petitioner. The petitioner has preferred an appeal before the appellate authority and it is

pending.

The petitioners allege in the affidavits [that] with regard to import of cassia, Madras Customs House was allowing clearance on imposing

redemption fine and penalty during the past several years and as such any importer of the said item can reasonably entertain a belief that the pattern

of the order in the impost [import?] of that item will be the same, since the authorities have not confiscated the item absolutely in the earlier

occasions. It is also alleged that the petitioners can have a legitimate expectation that they will also be placed in a similar position like any other

importers who are importing cassia and they will be subjected to the same condition. It is also alleged that having regard to the past practice of the

department there is no reason why the petitioners alone have been singled out for a differential treatment and as such, the orders of adjudication in

these cases offend Article 14 of the Constitution of India. It is also alleged in the affidavit that cassia is not subjected to total prohibition or ban

warranting absolute confiscation, that the adjudicating authority has completely overlooked the true scope and effect of Section 125 of the

Customs Act before ordering confiscation of the goods. It is alleged that the imposition of penalty in both cases is arbitrary and unsustainable in

view of the absence of any discussion as to the deliberate and the contumacious conduct of the importer of the goods warranting imposition of

penalty. It is also stated that the imposition of penalty is highly excessive and purely arbitrary.

Separate counter-affidavits have been filed by respondents for both cases. It is stated in the counter-affidavit filed in W.P. No. 2501 of 1993

that the order of adjudication passed by the third respondent is an appealable order passed u/s 128 of the Customs Act, and that since the

petitioner preferred an appeal before the appellate authority, this Court should not interfere with the same under Article 226 of the constitution. It is

also stated in the counter-affidavit that the petitioner imported about 13000 kgs. of cassia from Singapore valued at Rs. 5,49,906/- and filed a bill

of entry No. 30327 dated 4.9.1992 for clearance of the same under Open General Licence. It is also claimed.that, however, as cassia is a

restricted item and figures as Serial No. 8 in paragraph 156 of the Import and Export Policy of 1992 to 1997 and requires a specific licence

subject to export obligations and that the clearance of the same was not permitted without a specific licence from the Competent. Authority. It is

also stated that the import of cassia causes a severe drain OR the country''s limited foreign exchange resources and that since the petitioner has not

possessed the licence, the third respondent has passed an order confiscating the goods absolutely u/s 111(d) of the Customs Act and levied the

imposition of penalty. It is also stated in the counter affidavit that since cassia is a restricted item requiring a specific licence under the relevant

Import Policy, the petitioner was not permitted to clear the goods without such licence. It is also claimed in the counter-affidavit that the petitioner

is only a trader, that it is not a genuine importer and that therefore the third respondent passed the order of adjudication and that it is a valid one. It

is also claimed in the counter-affidavit that importation of goods is governed only by the Import Policy and that goods cannot be permitted to be

imported or cleared contrary to the conditions laid down in the Policy. It is also stated that after the order of confiscation, the goods have vested

with the Central Government u/s 126 of the Customs Act and that the petitioner would not be able to seek release as sought for in the writ petition.

It is also pointed out in the counter-affidavit that the appeal is pending and as such the petitioner ought not to have approached this Court under

Article 226 of the Constitution of India. It is also stated that so far the very same petitioner had imported two consignments of cassia in the years

1990 and 1991 and that considering the fact that the import was contrary to the Policy, the third respondent confiscated the goods absolutely. It is

also admitted in the counter-affidavit, that importation was not totally prohibited or banned and that the petitioner had not complied with the

mandatory requirements of the Policy and as such the goods have become prohibited goods for the purpose of Sections 111(d) and 125 of the

Customs Act. It is also pointed out that the facts and circumstances of the case do not warrant any interference from this Court.

Almost identical counter-affidavit has been filed in W.P.No. 2503 of 1993 except the difference in facts, i.e., the imported goods of cassia as

13,230 kilograms and its value being Rs.5,53,350/-. It is also pointed out in the counter-affidavit that the petitioner ought to have been aware that

in terms of the new Policy for the years 1992 to 1997, cassia was a restricted item requiring a specific licence and in the absence of a licence, the

goods would be liable for confiscation.

Mr. R. Thiagarajan, the learned Senior Counsel appearing for the petitioners contends that with regard to the very same item, no order of

confiscation was passed earlier when cassia was imported. The learned Senior Counsel further points out that cassia is not a banned item; but it is

only a restricted item. The learned Senior Counsel points out. that with regard to the very same item, a learned Single Judge of this Court had

passed an order of release of goods on a petition and it had also been affirmed by a Division Bench of this Court, and as such, the respondents-

Department ought to have considered the earlier orders passed in such cases and ought to have followed the same principle in these cases insofar

the petitioners herein are concerned. The learned Senior Counsel appearing for the petitioners relies upon a judgment of a learned single Judge of

the of the Calcutta High Court in S.S. Kothari, In re [1995] 5 E.C.C. 81 wherein it has been Sield that in similar matters of imports, they have

been allowed after payment of redemption fine and that to deny the petitioner of that benefit by passing an order of confiscation is arbitrary. The.

learned Senior Counsel also relies upon another decision of a learned Single Judge of the Bombay High Court in Gujarat State Export Corporation

v. Union of India 1984 ELT 570 where the Customs House was in doubt as to whether the import was valid or not and had released the import of

identical items on previous occasions and therefore the goods cannot be liable for confiscation. The learned Senior Counsel also contends that the

reasoning given in the impugned orders is perverse and that the authorities have not considered the question of releasing the goods on payment of

redemption fine which has been done earlier in similar cases. As such, the learned Senior Counsel argues that the impugned orders are arbitrary

and illegall. The learned Senior Counsel refers to a circular with regard to Liberalised Exchange Rate Management System (LERMS) dated

29.2.1993 and points out paragraph 2 therein and that the reasons given in the impugned orders are perverse.

Per contra, Mr. C.A. Sundaram, the learned Additional Central Government Standing Counsel, appearing for the respondents-Department

contends that the goods had vested with the Department and that they cannot be released by way of interim orders. Learned Additional Central

Government Standing Counsel relies upon the decision in Sheikh Mohd. Omer Vs. Collector of Customs, Calcutta and Others, and contends that

when considering the expression ""any prohibition"" in Section 111(d) of the Customs Ad, 1962, it includes restrictions. According to the learned

Additional Central Government Standing Counsel, the orders, of confiscation cannot be assailed on any ground.

I have considered the arguments of the learned Senior Counsel for the petitioner and of the learned Additional Central Government Standing

Counsel, appearing for the respondents-Department. In both the cases, it is clear that cassia is not a prohibited item. In fact, cassia had been

ordered to be released on certain conditions, on the earlier occasions by this Court. In these cases, it is to be seen that with regard to similar item

in similar cases, when confiscation has not been ordered, whether it could be ordered and if it ordered whether it would offend Article 14 of the

Constitution of India. It is necessary to refer to the earlier order of this Court passed by Kanakaraj, J. in two cases which are affirmed by a

Division Bench of this Court and also by this Court in M/s. Popular Traders v. Union of India rep. by its Secretary, Ministry of Finance

Department, New Delhi W.P.10518 of 1991 dated 21.8.1991. In both these cases, the goods in question have been released on certain

conditions, i.e., on payment of admitted duty and on payment of cash towards redemption fine and if necessary execution of personal bond for the

redemption of fine, penalty while ordering the release of goods. It is also seen that in the two judgments of the Division Benches of this Court as

well as in the orders of Kanakaraj, J. and of this Court allowed the importers to file appeals under the Customs Act. Though the said petitions

were ordered, the petitioners therein were allowed to pursue the appellate remedy. As such, I am of the view that the respondents in these cases

ought to have considered the earlier orders of this Court and the usual practice adopted by them with regard to import of cassia before ordering

the confiscation and levying penalty. It has not been done in this case and as such the impugned orders offend Article 14 of the Constitution of

India. In S.S. Kothari, In re ([1985] 5 Excises & Customs Cases 81) considering the scope of Section 125 of the Customs Act, the learned Judge

has held as follows: (atp.86).

Section 125 of the Customs Act, 1962 provides that whenever confiscation of any goods is authorised under the said Act, the officer adjudicating

it may, in the case of any goods the importation or exportation whereof is prohibited under the said Act or under the law for the time being in force,

give to the owner of the goods an option to pay in lieu of confiscation such fine as the officer thinks fit. Even if the importation of the goods is

prohibited under the Act, the adjudicating officer has the discretion to give an option to the importer to pay in lieu of confiscation such fine as the

officer thinks fit. The Act has not provided the circumstances under which the prohibited goods should be released upon payment of fine in lieu of

confiscation. The adjudicating officer may, in his discretion, give the importer an option to pay in lieu of confiscation a fine. The exercise of this

discretion by the adjudicating officer is a quasi-judicial function and cannot be controlled by the dictates of the Central Board of Excise and

Customs or any other authority. The power to give option to the importer to release the prohibited goods upon payment of fine is power coupled

with the duty and in any event it should be exercised fairly and reasonably and not arbitrarily and capriciously�.

It has been further held at p.88:

�Whether the doctrine of precedents applies in its full rigour to administrative agencies and officers, and whether a reasonable latitude should be

given to them or administrative tribunals to correct or modify their previous decisions may still remain a debatable controversy in the world of law;

nevertheless I am clearly of the opinion that neither the Appraiser nor the Collector of Customs can change his mind from time to time in respect of

the same articles by assessing them in the case of one importer under one Section and then assessing them for another importer under different

Section. To allow the customs to do so will lead to utter confusion in the very basis and principles of taxation and grave uncertainty in business and

foreign trade of India. Its more serious result will be the most unfair discrimination of taxes in respect of the same goods with regard to different

importers. That cannot be permitted by the Constitution which insists on the equality of law as one of its fundamental guarantees. I am, therefore,

inclined to hold that the customs are bound by their own precedents in administering taxing statutes involving the very basis of taxation in respect of

a-particular article and not leave it to them to modify their own previous decisions but to leave it to them to apply to courts or parliament or

Legislatures as the case may be put the law beyond doubt....

With respect, 1 entirely agree with the views of the learned Single Judge in the above mentioned case. The Customs Authority cannot take a

different view, in my view, at different times, with regard to imports of same goods as to whether to confiscate completely or pass an order of

confiscation giving an option to the bill [sic] by paying a fine. It is true that it is the discretion of the authority u/s 125 of the Customs Act. But the

discretion has got to be exercised fairly. There is no doubt that, with regard to cassia, orders were passed by the Department earlier only ordering

release on payment of redemption fine or penalty only, in lieu of confiscation. It has to be followed in these cases also.

The principle of legitimate expectation which is laid down in Halisbury Law of India -- [sic England?] 4th Edition � Volume 1(1) para 81 �

can be usefully referred to and applied also.

�A. person may have a legitimate expectation of being treated in a certain way by an administrative authority though he has no legal right in

private law to receive such treatment the legitimate expectation arises either from a representation or promise made by the authority including and

implied representation or from consistent past practice. (Underlining is mine ).

That apart a reading of the findings of the Authority in both cases show the non-application of the mind of the adjudicating authority. Para 6 of

the impugned order in W.P.2501 of 1993 and para 5 of the impugned order in W.P.2503 of 1993 is one and the same and it is to the following

effect:

Findings

The imported goods are specifically mentioned in the negative list of the Import Policy for April 1992-March 1997. The import is permissible only

against a licence subject to export obligation of twice the value of the imports. In the present case, the goods have been imported without a licence

and hence the import is not permissible under the present policy. The goods are liable to confiscation. The import of these goods not only causes a

drain on the country''s foreign exchange resources and is contrary to the policy of the Government, but also encourage other importers to make

similar importations. For these reasons it is necessary that the goods should be absolutely confiscated.�

A reading of the impugned orders, mentioned above, clearly shows how perverse it is. The reasoning given for the confiscation of goods u/s

111(d) of the Customs Act cannot be supported by any stretch of imagination. As pointed out by the learned Counsel for the petitioners,

considering the Reserve Bank of India''s Circular with regard to liberalised exchange rate management system, the finding. that there will be a drain

in the foreign exchange is absolutely wrong. When the Reserve Bank of India itself has liberalised the system and has given the liberalised exchange

rate management system, the Custom department cannot ignore it.

In Hargovind Das K. Joshi and Others Vs. Collector of Customs and Others, when considering the scope of Section 125 of the Act, and

when an order of absolute confiscation was made, the Supreme Court has held as follows (Para 3, pages 233-234 of [1987] 14 ECC):

We are of the view that in so far as the order directing confiscation of the goods is concerned, it is unassailable in facts or in law. So also the order

levying penalty is justified by facts and warranted by law. There is, however, substance in the last contention urged on behalf of counsel for the

appellants. The Collector of Customs has passed an order for absolute confiscation of the imported goods without giving the appellants an option

to redeem the same on payment of such fine as may be considered appropriate by him. Reliance has been placed by learned Counsel for the

appellant on Section 125(1) Customs Act, in support of the plea that the Collector had the discretion to pass such an order and he should have

addressed himself to the question whether or not the discretion should be so exercised having regard to the facts and circumstances of the case.

The Additional Collector of Customs who passed the order of confiscation undoubtedly had the discretion to give an option to the appellant to pay

a fine in lieu of confiscation. Presumably the Additional Collector of Customs assumed that he was bound to confiscate the goods because he has

not adverted to this aspect in his order. He had undoubtedly the authority under law to give an option to the importers to pay such fine as was

considered appropriate by him (not exceeding the full market value of the goods in question) in lieu of confiscation of the goods. We are of the

opinion that since the Additional Collector of Customs who passed the order for absolute confiscation had the discretion to give the option for

redemption, it was but just, fair and proper that he addressed himself to this question

The adjudicating authority has failed in its authority as pointed out by the Apex Court of the land in the above mentioned case, with regard to the

giving up of an option to redeem. As such, in my view, the impugned orders have got to be set aside.

Learned Additional Central Government Standing Counsel contends that the goods are vested with the Government after confiscation and as

such by way of interim directions, no orders of release could be made. Since this order is made in the main writ petitions and the orders of

adjudication have been quashed no question of vesting with the Government arises. As such, the contention raised by the department cannot stand.

Learned Additional Central Government Standing Counsel also contends that appeals filed by the petitioners are pending and in my view, such

contention has no substance since it is settled law that existence of alternative remedy is not a bar for this Court to entertain writ petitions under

Article 226 of the Constitution of India.

Having held that the orders of adjudication in these cases cannot stand, the next question will be as to what will be the order to be passed in

these cases. Since the respondent-Department has not considered about giving an option to redeem by paying a penalty, considering the peculiar

facts and circumstances of these cases, I set aside the impugned orders and remit the matters to the Collector of Customs to consider about the

quantum of redemption fine to be imposed on the importers--the petitioners herein, to redeem the confiscated goods and for considering the levy

of penalty to be imposed. The respondents are directed to pass an order afresh in both cases, within a period of two weeks from to-day after

giving notice to the petitioners. These writ petitions are allowed and the impugned orders are set aside. However, there will be no order as to

costs.