Import licence scope controls customs jurisdiction; a notice based on a mistaken exclusion was quashed.

An industrial licence under Entry 23(1) of the First Schedule to the Industries (Development and Regulation) Act, 1951 was construed with the contemporaneous import policy and Government notice permitting import of polyester filament yarn under Open General Licence to actual users. On that construction, the imported yarn fell within the scope of the licence, so the customs authorities proceeded on an erroneous premise. Because the basic assumption underlying the proposed confiscation and penalty was incorrect, the show cause notice was without jurisdiction and was quashed.

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Issues: Whether the impugned show cause notice proposing confiscation of the imported goods and penalty was without jurisdiction on the ground that the industrial licence covered the import of polyester filament yarn under the applicable import policy.

Analysis: The industrial licence issued under Entry 23(1) of the First Schedule to the Industries (Development and Regulation) Act, 1951 was read in the light of the contemporaneous import policy and the Government of India notice permitting import of polyester filament yarn under Open General Licence to actual users. On that construction, the imported yarn was not outside the scope of the petitioners' licence, and the premise on which the customs authorities proceeded was mistaken. As the basic assumption underlying the notice was erroneous, the customs authority lacked jurisdiction to issue the notice for confiscation and penalty.

Conclusion: The show cause notice was quashed as being without jurisdiction and the petition succeeded.

Ratio Decidendi: Where an import is permitted under the governing licence and import policy, a customs notice founded on the contrary assumption is without jurisdiction and liable to be set aside.

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