Fraudulently obtained import licences cancelled ab initio cannot support clearance; customs confiscation remains sustainable.

Import licences obtained by fraud or misrepresentation and cancelled ab initio before clearance cease to have effect from inception for customs clearance purposes, so the importer cannot insist on release of goods on their strength. The commentary distinguishes cases where goods had already been cleared or cancellation was not in issue, and relies on the principle that no person may benefit from his own fraud, supported by the restitutionary effect of Section 65 of the Indian Contract Act. On that basis, confiscation under customs law is described as sustainable, the firm-level penalties as upheld, and the separate penalty on Shri M.L. Gupta as remitted.

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Issues: Whether goods imported against DEEC licences, which were subsequently cancelled ab initio before clearance, were liable to confiscation under Section 111(d) of the Customs Act and whether the penalties imposed were sustainable.

Analysis: The licences had been obtained by fraud and misrepresentation and were cancelled ab initio before the goods were cleared from customs control. In that situation, the licence ceased to have effect from inception for the purpose of clearance, and the customs authorities were not bound to permit release of the goods on the strength of such licences. The authorities and precedents relied upon by the appellants were distinguished because they concerned situations where goods had already been cleared or where the cancellation of licence was not in issue. The principle that a person cannot take advantage of his own fraud, together with the restitutionary effect of Section 65 of the Indian Contract Act, supported the view that the importers could not retain the benefit of licences procured by fraud.

Conclusion: The goods were liable to confiscation and the penalties on the firms were upheld, while the separate penalties on Shri M.L. Gupta were remitted.

Ratio Decidendi: Where import licences are cancelled ab initio for fraud or misrepresentation before clearance of goods, the importer cannot claim release of the goods on the strength of such licences and confiscation under the Customs law is sustainable.

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