1976 (3) TMI 55 - SC - Customs

Supreme Court affirms High Court decision on import license validity, quashing confiscation orders.

The Supreme Court affirmed the High Court's decision to quash the orders of confiscation and penalties in a case involving the validity of importation by ... Whether property in the goods had passed to the Cycle Company when the contract had been entered by the respondent with it, that is to say, prior to the arrival of the goods at Calcutta port for clearance? Held that:- We are dealing with an order of confiscation of certain goods imported under a licence granted to the respondent. It was never disputed that it was a valid licence. It was also not an Actual User licence. The respondent, therefore, could sell these imported goods to others. The whole matter, therefore, turned on the legal issue as to whether property had passed at the time the respondent had entered into the contract for the sale of the imported goods. Even the Customs Authority in its additional show cause notice made particular reference to Section 20 of the Sale of Goods Act and pointed out that 'the ownership in the goods under consideration appears to have passed on to M/s. Bombay and Calcutta Cycle Company right from the time the sale contract was concluded'. When, therefore, on the terms of the contract along with other relevant facts and circumstances which had to be looked into by the adjudicator for application of Section 20 of the Sale of Goods Act, he committed a manifest error of law apparent on the face of the order, the High Court's jurisdiction to interfere under Article 226 of the Constitution is clearly attracted. The submission of Mr. Sanghi is, therefore, without any force. The orders of confiscation of the goods and penalties imposed are invalid and the High Court was right in quashing the same by issuing the appropriate writs Issues Involved:1. Validity of importation by the respondent under the granted import license.2. Allegation of unauthorized importation by the Cycle Company.3. Transfer of property in goods and timing of the property transfer.4. Application of Sections 18, 19, and 20 of the Sale of Goods Act, 1930.5. Jurisdiction of the High Court under Article 226 of the Constitution.Issue-wise Detailed Analysis:1. Validity of importation by the respondent under the granted import license:The respondent, prior to its liquidation, was a private limited company engaged in importing and dealing in sewing machines. On April 16, 1958, the respondent was granted an import license by the Joint Chief Controller of Imports and Exports, Bombay, authorizing the import of industrial sewing machines and spare parts up to Rs. 47,406/-. The respondent imported goods worth Rs. 9,919/- through Bombay port and arranged to import the remaining goods through Calcutta port. The Customs authorities of Bombay issued a release order for the remaining goods to be imported through Calcutta port.2. Allegation of unauthorized importation by the Cycle Company:The Customs authorities issued show cause notices alleging that the Cycle Company, not the respondent, was the real owner of the goods and had imported them without a valid license. It was further alleged that the respondent had aided and abetted this unauthorized importation and transferred the license to the Cycle Company. The respondent denied these allegations, contending that the oscillating rock shafts were spare parts permissible under the license.3. Transfer of property in goods and timing of the property transfer:The main legal question was whether the property in the goods had passed to the Cycle Company before the goods arrived at Calcutta port. The Division Bench of the High Court concluded that no property could pass before the goods were delivered at the buyer's godown in Bombay. The Supreme Court agreed, stating that the contract to sell related only to part of the imported goods and that the property in the goods could not pass until they were delivered in Bombay. The Court held that the property in the goods did not pass to the Cycle Company at the time of the contract on February 20, 1959.4. Application of Sections 18, 19, and 20 of the Sale of Goods Act, 1930:The Court referred to Sections 18, 19, and 20 of the Sale of Goods Act, 1930, to determine the passing of property in the goods. The Court found that the property in the goods could not pass until the goods were separated and delivered to the buyer in Bombay. The Court rejected the argument that the financial guarantee by the Cycle Company indicated that the property had passed at the time of the contract.5. Jurisdiction of the High Court under Article 226 of the Constitution:The Customs Authority's decision to confiscate the goods and impose penalties was based on a manifest error of law regarding the passing of property in the goods. The High Court's jurisdiction to interfere under Article 226 of the Constitution was clearly attracted. The Supreme Court upheld the High Court's decision to quash the orders of confiscation and penalties.Conclusion:The Supreme Court dismissed the appeals, affirming the High Court's decision to quash the orders of confiscation and penalties. The Court held that the property in the goods did not pass to the Cycle Company at the time of the contract and that the importation by the respondent was valid under the granted import license. The High Court's jurisdiction under Article 226 was rightly invoked to correct the manifest error of law by the Customs Authority.