TaxTMI 
TaxTMI 
1984 (5) TMI 236
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..... Assurances were given in Parliament. Bureaucracy went into action. It was discovered that though the import of beef tallow, like other animal tallow, had been canalised through the State Trading Corporation with effect from June 5, 1981, there had been considerable import of beef tallow outside the channel of the State Trading Corporation even subsequent to June 5, 1981, on the ostensible pretext that licences had been issued and firm contracts had already been entered into before that date. It was also discovered that beef tallow had been allowed to be imported even by `non-actual users' under letters of authority given by licensees who had obtained import licences against the entitlement based on the value of their exports. As a result of these discoveries it was thought that drastic action was called for. So, a notification was issued under S. 3(3) of the Imports and Exports Control Act totally banning the import of beef, buffalo and pig tallow into India with effect from August 24, 1983. And, on 7th, 9th and 10th November and 17th and 21st December, five circulars, styled abeyance circulars' and marked `secret' were issued by the Deputy Chief Controller of Imports and Exports....
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....t of the above instructions may be reported to the Headquarters. 5. The receipt of this circular may please be acknowledge in the standard proforma. sd/- (J.P. SHARMA) DY. CHIEF-CONTROLLER OF IMPORTS & EXPORTS (Issued from file no. 3/42/HQ/83/ECA-I)" To say the least and to put it mildly, it is a very odd circular, emanating as it does from a high dignitary of the Government of India. Why the secrecy and why the instruction to mislead, as it were ? Are statutory orders to be made and given effect in this furtive manner, almost as if the authorities that be are afraid of wounding the susceptibilities of the persons in respect of whom the orders are made ! We presume they are statutory orders made in exercise of the powers conferred by clause 8 B of the Import Control Order, though they do not themselves cite any statutory authority. The actual direction, the use of the word `abeyance' and the prescription of the six-month period are indicative that clause 8 B is the source of power. In the counter affidavits filed on behalf of the Government of India and the Chief and Deputy Chief Controller of Imports and Exports it is claimed that the power exercised was that conferred by c....
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....Industrial Oil plants. They claim that they require a continuous and steady flow of various imported goods for their several Industrial activities. They allege that if import licences for which they have applied are not granted to them and if the imported goods for which they have applied are not allotted to them, their factories and their plants will have to be closed down, their business will be seriously affected and many of their employees will be thrown out of employment. They state that they have never adulterated the vanaspati manufactured in their factory at Shahpur and that the samples taken from their factory on as many as thirty six occasions had never been found to contain any type of animal tallow. They further state that they had not imported any tallow after July, 1982. Such tallow as was imported by them before July, 1982 was sold to them by other licencees to them as actual users. The tallow so purchased was air-treated by them in their premises at Kurla and sold by them to soap manufacturers and other fatty acid plants. The import of tallow was on the strength of letters of authority issued by licences in respect of additional licences and, replenishment licences ....
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....; "The licence issued during a Policy period is governed by that policy as amended upto the date of issue of the licence and amendments made after the date of issue do not have any application to the licencees." and "A licence is governed by the Policy which is made applicable to it. Restrictions placed on the import of goods in the policy for the subsequent years have to be ignored, unless of course, any such restriction has been specifically made applicable to licences issued earlier either generally or in the particular cases. In this case the licences were issued during the policy for the period AH-81 and were governed by this policy only particularly para 174(v) thereof. These licences were valid for the goods in question as only Mutton Tallow was in the list of canalised items. In terms of para 222(3) of the policy for the period AM-82 these licences continued to be valid for beef tallow as this item continued in the list of OGL items even after the coming into force of the policy for the period AM-82 When vide Public Notice No.29/81 dated June 5, 1981 beef tallow was put in the canalised items it is from this date only that it became canalised. In the public noti....
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....nces that there was public agitation about the import of beef tallow was a totally irrelevant circumstances for making an order under clause 8B. Shri V.P. Raman, learned counsel for one of the interveners suggested that clause 8B did not apply to goods covered by open General Licence in view of clause 11 (4) of the Import Control Order which provided, "Nothing in this order, except paragraph 3-1 of sub-clause 3 of Clause 5, Clause 8, Clause 8A, Clause 8-C and Clause 10-C shall apply to the import of any goods covered by open General Licence or Special General Licence issued by the Central Government." Shri Soli Sorabjee, who appeared for another intervener, submitted that clause 8-B should be construed as providing for an opportunity to be heard and since the abeyance orders made no provision for hearing, they should be struck down, as opposed to the principles of natural justice, and therefore arbitrary and violative of Art. 14 and 19(i) (g) of the Constitution. It was also urged by the learned counsel that the satisfaction contemplated by clause 8B was not an omnibus satisfaction but a satisfaction which must disclose an application of the mind to the facts of each individual cas....
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....ased beef tallow for subjecting it to air treatment was no more than a pretence. It was stated that full particulars of the parties to whom the beef tallow was claimed to have been sold were not made available despite requests for the same. There was great public concern about the manner in which beef tallow had been imported and used by some importers and the authorities very naturally felt that it was their duty in the public interest to investigate into malpractices connected with the import of beef tallow and the misuse of beef tallow after import. The learned Additional Solicitor General placed. before us the relevant files which according to him indicated that the case of Liberty oil Mills (P) Limited as well as the cases of each of the other firms who were included in the abeyance circular had been separately considered and satisfaction duly and properly arrived at by the appropriate authority on relevant material. The learned Additional Solicitor General very fairly did not urge that the decision to keep in `abeyance' need not be communicated or that the principles of natural justice were not required to be observed. But he argued that a pre-decisional hearing was not conte....
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....on of Export Houses and the grant of special facilities to them is to strengthen their negotiating capacity in foreign trade and to build up a more enduring relationship between them and their supporting manufacturers" Paragraphs 183 and 184 enumerate the various import facilities available to Export Houses. Paragraph 185(1) allows Export Houses to import OGL (Open General Licence) items against REP (Replenishment) Licences issued in their own names or transferred to them by others. The facility is stated to be available to them for import of (a) capital goods listed in Appendix II and placed on Open General Licence for Actual Users and (b) Raw Materials, components, consumables and spares (excluding items covered by Appendix V) which have been placed on Open General Licence for Actual Users. Paragraph 185 (1) further stipulates that Capital Goods so imported shall be transferred by them only to such Actual Users as are authorised to purchase them by the concerned Licensing Authority and that raw materials, components and consumables so imported may be transferred by them to eligible Actual Users. Imported spares may be sold to any person. Paragraph 185 (2) provides that import rep....
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.... holders have made firm commitments by opening irrevocable letters of credit through authorised dealers of foreign exchange before April 1, 1981. Paragraph 222(3) provides that REP licences and additional licences held by Export Houses shall cease to be valid for import of any item which could be imported under Open General Licences during 1980-81, but it is no longer so in the Import Policy 1981-82 except for such commitments as have been made by opening irrevocable letters of credit through authorised dealers in foreign exchange before April, 1981. We may notice here that Appendices 1, 3, 4 and 6 contain lists of banned items. Appendix 5 and Appendix 7 contain a list of restricted items. Appendix 8 contains a list of items import of which is canalised through public sector agencies, Appendix 2 contains a list of Capital Goods allowed under Open General Licences and Appendix 10 contains a list of Items allowed to be imported under Open General Licences, subject to the conditions set out therein. It appears that prior to 1978, OGL was confined to certain restricted items only. But in April, 1978, the Government of India issued Import Trade Control Order No. 9 of 1978: the OGL No. 3....
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....e licence granted to the licensee. Licence is defined to mean a licence granted and including a customs clearance permit issued, under any control order. Section 3 of the Act is the pivotal section. Section 3(3) empowers the Central Government, notwithstanding anything contained in the Customs Act, by order published in the official Gazette, to prohibit, restrict or impose conditions on the clearance whether for human consumption or for shipment abroad, of any goods or class of goods imported into India. Section 4A empowers the Central Government to levy fee in respect of licences granted or renewed under any order made or deemed to be made under the Act. Sections 4 B, 4 C, 4 D, 4 E and 4 F are provisions relating to the power to enter and inspect the power to search, the power to seize imported goods or material, the power to stop and seize conveyances. Sections 4 G and 4 H, provide for confiscation and Section 4 I for the levy of penalty. Section 4 J preserves the power to inflict any other punishment under the provisions of the Act or under any other law despite the confiscation or penalty imposed under the Act. Section 4 K provides for adjudications and Section 4 L entitles the....
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....f any conditions embodied in or accompanying, a licence or an application for a licence" and "If he commits a breach of any law (including any rule, order or regulation) relating to custom or the import or export of goods or foreign exchange". Clause 8A empowers the Central Government or the Chief Controller of Imports to suspend the importation of goods by any person or grant of licences or allotment of imported goods through the State Trading Corporation of India, the Minerals and Metals Trading Corporation of India, or any other similar agency, to a licensee or importer or any other person pending investigation into one or more of the allegations mentioned in Clause 8 without prejudice to any other notice that may be taken against him in that behalf. The first proviso to Clause 8A prescribes that the grant of a licence or allotment of imported goods shall not ordinarily be suspended under this clause for a period exceeding 15 months. The second proviso stipulates that on the withdrawal of such suspension a licence or allotment of imported goods may be granted to him for a period of suspension, subject to such conditions, restrictions or limitations as may be decided by the autho....
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....itions of a licence". Another reason is "If the Central Government is or such officer is satisfied that the licence will not serve the purpose for which it has been granted." Yet another reason in "If the licensee has committed a breach of any law relating to customs or the rules or regulations relating to Imports and Exports of goods or any other law relating to foreign exchange." Clause 10(i) provides that no action shall be taken, inter alia, under Clause 8(1) or Clause 8A or Clause 9(1) against a licensee or importer or any other person unless he has been given a reasonable opportunity of being heard. Clause 10(2) enables any person aggrieved by any action taken under Clause 8(1) or 8(3) or 8(A) or 9(1) to prefer an appeal to the authority constituted by the Central Government for that purpose. Clause 11(4) prescribes, "Nothing in this order, except paragraph (iii) of sub- clause(3) of Clause 5, Clause 8, Clause 8A, Clause 8C and Clause 10C, shall apply to the import of any goods covered by Open General Licence or Special General Licence issued by the Central Government." We may notice here the argument of Shri V.P. Raman that ....
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....der under Clause 8 is made. Has a show-cause notice to be issued first, then followed by an investigation and finally concluded by yet another show cause notice ? Or is it enough if a show-cause notice is issued after the investigation is concluded and the person concerned is asked to explain the evidence gathered against him ? When may investigation be said to have commenced ? Should investigation be necessarily preceded by a show-cause notice ? We do not think that the Central Government or the Chief Controller is bound to follow any rigid, hide-bound, pre-determined procedure. The procedure may be different in each case and may be determined by the facts circumstances and exigencies of each case. The authority may design its own procedure to suit the requirements of an individual case. The procedure must be fair and not so designed as to defeat well known principles of justice and thus deny justice. That is all. If the procedure is fair it matters not whether the investigation is preceded, interjected or succeeded by a show-cause notice. The word 'Investigation' is not defined but in the content it means no more than the process of collection of evidence or the gathering of mate....
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....t to issues licences or make allotments to the person concerned, without ascertaining further details with regard to the allegations against him. In such cases, the authority may make an order of 'abeyance' under Clause 8B. Though the language of Clause 8B is capable of being read as if it applies to both allotments already made and allotments yet to be made, a reference to the marginal head, in the background of what has been provided for in Clause 8A, makes it clear that Clause 8B applies only to allotments yet to be made and licences yet to be issued. That clearly is the contextual construction of Clause 8B. Read in any other manner, there will be a totally unnecessary over-lapping of and a needless conflict between Clauses 8A and 8B, with freedom to the authority to pursue action either under Clause 8A or Clause 8B each providing a different procedure of its own. We do not think that it is permissible for us to read clauses 8A and 8B in a manner as to create needless conflict and confusion when the two classes are capable of existing separately, without encroaching upon each other. Contextual construction demands such a construction and we have no hesitation in adopting it. Cla....
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.... authority to rescind or modify the order. The principles of natural justice would be satisfied if the aggrieved party is given an opportunity at the request. There is no violation of a principle of natural justice if an ex-parte ad-interim order is made unless of course, the statute itself provides for a hearing before the order is made as in clause 8A. Natural justice will be violated if the authority refuses to consider the request of the aggrieved party for an opportunity to make his representation against the ex-parte ad-interim orders. In the Qeen v. Randolph et al., the Supreme Court of Canada had to consider the question whether an interim order under s. 7 of the Post Office Act prohibiting the delivery of mail directed to or deposited by a person in a Post Office may be made without prior notice to the person affected, pending the final determination which could only be made after hearing the party affected. The Supreme Court said, "In s. 7 it has not abrogated it (i.e. the application of the maxim audi alteram paterm) Rather it has provided that before any final prohibitory order is made, the party affected shall have noti....
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....n ex-parte order in such cases. Under the power conferred by section 15 upon the Governor-in-Council to make regulations this very course seems to have been adopted. Regulation I provides that if the judge is of the opinion that reasonable grounds have been shown (i) he may make the declaration immediately and ex-parte if this seems to him necessary or desirable, or (ii) if he thinks that an opportunity should be given to the owner or occupier or both to oppose the making of the declaration he may direct them to be served with a copy of the affidavit and to be notified of the day on which the matter will be dealt with, such service and notification to be effected in such manner as may seem to him sufficient: when the matter comes on, the Superintendent or Inspector of Police or counsel or solicitor on his behalf and the owner and occupier or counsel or solicitor on their behalf may attend and be heard, and the matter shall be disposed of in public chambers. This regulation may perhaps he read as leaving the choice of course at large to the judge. But it ought not so to be interpreted. It should be understood as meaning that prima facie the course provided for in para (iii) should b....
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....l statement (under regulation 5(3)) will be made after suspension if any has taken place. Suspension is discretionary. Decisions as to whether to suspend will often be difficult. Members of a board who are appointed or elected to act as the governing body of a school must in the exercise of their responsibilities have regard not only to the interests of teachers but to the interests of pupils and of parents and of the public. There may be occasions when having regard to the nature of a charge it will be wise, in the interests of all concerned, that pending decision whether the charge is substantiated a teacher should be suspended from duty. In many cases it can be assumed that charges would be denied and that only after a full hearing could the true position be ascertained. It is not to be assumed that a board, constituted as it is, will wantonly exercise its discretion." We have referred to these four cases only to illustrate how ex-parte interim orders may be made pending a final adjudication. We however, take care to say that we do not mean to suggest that Natural Justice is not attracted when orders of suspension or like orders of an interim nature are made. Some orders of tha....
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....on made under the Act, and this right of appeal and revision cannot be whittled down by the subordinate legislation. As we mentioned earlier, it does not mean that the requirements of natural justice are not to be met at all in the case of action under clause 8B. The requirements of natural justice will be met in the case of action under clause 8B by considering, bona fide, any representation that may be made in that behalf by the person aggrieved. Clause 8B itself gives an indication that such a post-decisional opportunity on the request of the person concerned is contemplated. We have seen that action under clause 8B is to be taken if the authority is satisfied in the public interest that such action may be taken without ascertaining further details in regard to the allegations. It clearly implies that when further facts are ascertained by the authority or brought to the notice of the authority, such action may be reviewed. As we have earlier pointed out while ex-parte interim orders may always be made without a pre-decisional opportunity or without the order itself providing for a post-decisional opportunity, the principles of natural justice which are never excluded will be sat....
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....8B is really in aid of the ultimate order under clause 8. It must follow that in order to invite the satisfaction contemplated by clause 8B there must be present some strong suspicion of one or other or more of the grounds mentioned in clause 8. Since the action which is of a drastic nature is to be taken ex-parte, it must necessarily be animated by a sense of urgency. The sense of urgency may be infused by a host of circumstances such as the trafficking and unscrupulous peddling in licences, large scale misuse of imported goods, attempts to monopolise or corner the market, wholesale prevalence of improper practices among classes of importers, public sentiment etc. etc. One of the submissions very strenuously pressed before us was that public sentiment was wholly irrelevant in arriving at the satisfaction contemplated by Clause 8B. We are unable to agree. It is true that public administration is not to be run on public sentiment and statutory action may only be taken on grounds permitted by the statute. But strong public sentiment may impart a sense of urgency to a situation such as to compel the authorities to proceed to take action under a statute provided of course grounds for t....
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....gation into the allegations under clause 8B. That would depend on the nature of the allegations, the extent of involvement of the person concerned and, most important, the element of the public interest. If the allegations against a person involve him deeply in trafficking or racketeering in import licences and imported goods, the authority may consider it inexpedient in the public interest to keep in abeyance any application of his for the grant of a licence or allotment of goods. On the other hand even if the allegations are grave, if the effect of an order under clause 8B is likely to result in loses of considerable foreign exchange or to shut down an industry throwing large number of workers out of employment, the authority should restrain itself in larger public interest, from making an order under clause 8B or may make an order confining the abeyance order to applications and goods of certain description only instead to making a, general order which extends to all applications for import licences and allotment of imported goods. Again, the allegations may reveal that the involvement of the person in illegal activity is so remore or minimal that it would be entirely inexpedien....
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....decisions of Bachhittar Singh v. State of Punjab and State of Punjab v. Balbir Singh. We do not think that these decisions are of any facility to us on the facts of the present case. In Bachittar Singh's case, what was decided was that a decision taken in the privacy of a Minister's Chamber, which was not communicative to the party and which was reversed without ever being communicated was of no effect at all. In Balbir Singh case, it was held that once an order was sent out, and went out beyond the control of the authority, the order must be said to have been issued no matter when the party affected actually received it. Communication, according to learned Judges, was the process of setting in motion the despatch of the order. It was held in that case that forwarding of copies to the Accountant General and to the Chief Engineer was sufficient communication. In the present case, the 'abeyance' order was undoubtedly communicated to the licensing authorities, the State Trading Corporation, the Minerals and Metals Trading Corporation and other similar agencies. Despite the attempt at secrecy made by the concerned authority and the failure to formally 'communicate the decision to the p....
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....he Import Policy of 1980-81 which expressly states: "Nothing in the Open General Licence shall affect the application to any goods, of any other prohibition or regulation affecting the import thereof, in force, at the time where they are actually imported." We consider that this is not a matter for the court to decide at this stage in a petition under Article 226 of the Constitution or under Article 32 of the Constitution questioning an ad-interim order under Clause 8B. Again we cannot enter into the controversy whether there has been mis utilisation of the imported goods by the petitioners and whether the petitioners can be termed as 'actual users' within the meaning of that expression in the Import Control Order by the mere fact that they subject the beef tallow to 'air-treatment'. All these questions pertain to the merits of the controversy and it is not for us to embark into a discussion into these matters. But we may properly consider, even at this stage, the question of mala fides or patent lack of jurisdiction. There is no suggestion that the action was mala fides. It was, however, argued that the order as embodied in the abeyance circular did not fulfil the conditions-pre....
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.... with the question of the sufficiency of material before the authority in arriving at its conclusion. A perusal of the files shows that in respect of nine of the firms covered by the abeyance circular dated November 7, 1983 the decision to keep their applications and allotments in abeyance was taken at the highest level, that is, at the level of the Minister for Commerce, Government of India. Thereafter the Deputy Chief Controller of Imports and Exports, the files show, considered the cases of 61 concerns including that of Liberty Oil Mills Limited and issued the abeyance circular dated November 9, 1983. We find that the cases of Liberty Oil Mills Limited as well as other concerns were separately and individually considered. Their cases having been considered by the authority separately and individually before the circular was issued, we do not think that it makes any difference on the peculiar facts of this case that a single circular was issued, covering a large number of concerns. However, we wish to impress upon the authorities that those entrusted by statute with the task of taking prejudicial action on the basis of their subjective satisfaction should, first, bestow careful a....