Canalised import policy and proportionality: bona fide actual-user steel import led to deletion of confiscation and fine.

Imported steel bars were treated as canalised goods under the 1982-83 Import Trade Control Policy because steel containing 12% or more chromium fell within the description of stainless or heat-resisting steel, so import through the canalising agency was required. However, although the import technically breached the policy, confiscation and a substantial fine were held disproportionate where the goods were for manufacture of engine valves, the importers were actual users, and prior Customs practice had permitted similar imports. Penal action was therefore set aside and a warning was considered the more appropriate response.

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Issues: (i) Whether the imported steel bars were stainless steel and hence a canalised item under the Import Trade Control Policy for 1982-83, requiring import through the canalising agency; (ii) Whether confiscation of the goods with fine was justified in the circumstances.

Issue (i): Whether the imported steel bars were stainless steel and hence a canalised item under the Import Trade Control Policy for 1982-83, requiring import through the canalising agency.

Analysis: The policy for 1982-83 placed bars and rods of stainless or heat-resisting steel under Appendix 8 as canalised goods. Para 219(v) of Chapter 21 stated that steel containing 12% or more chromium would fall within that description. On the facts, the imported material answered that description and therefore attracted the canalisation requirement. The fact that the goods had earlier been treated as alloy steel or that a similar understanding was reflected in other standards did not alter the express policy position for 1982-83.

Conclusion: The imported goods were correctly treated as a canalised item and be imported only through SAIL.

Issue (ii): Whether confiscation of the goods with fine was justified in the circumstances.

Analysis: Although the import technically contravened the policy, the surrounding circumstances showed that the goods were intended for manufacture of engine valves for an essential industrial purpose, the importers were actual users, the Customs authorities had previously permitted similar imports, and the goods had even been treated as alloy steel for the exemption notification. In these circumstances, there was a strong equitable case against penal action, and confiscation with a substantial fine was considered disproportionate. A warning would have been the more appropriate course.

Conclusion: Confiscation and the fine of Rs. 1,00,000/- were not justified and were set aside.

Final Conclusion: The appeal succeeded in part: the canalised character of the goods was affirmed, but the confiscation and monetary penalty were deleted and the fine directed to be refunded.

Ratio Decidendi: Where an import technically falls within a canalised category under the governing policy, confiscation and penalty may still be set aside if the import was for an essential actual-user purpose and the surrounding conduct shows bona fide circumstances making penal action disproportionate.

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