TaxTMI 
TaxTMI 
2003 (12) TMI 73
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....could import raw materials without payment of duty with the obligation to export the 'manufactured goods' from that imported raw material. The petitioners are manufacturing exporters in the sense, that they are expected to have their factories for the manufacturing of some export-material, the raw material for which is imported. This is called 'Advance Licence'. The advance licences are issued by the Joint Director of Foreign Trade, who is essentially an officer under the Ministry of Commerce, Government of India and more particularly an officer working under the Central Excise Department. On the basis of that licence, the imports are permitted to be made by the manufacturing units, who hold the advance licences and after using that raw material which is imported the matching exports are expected to be made by these advance licence holders. There is a power under the Foreign Trade Act via Section 10 in the Union Government to appoint any person, vesting him the powers such as searching, inspecting and seizing of goods, etc. and in case of the contravention of the provisions of the Act or, as the case may be, the conditions of licence, which has been dealt with under....
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....e Act, it did not divest the officers of the Customs Department to make investigation and for that purpose making the efforts via Section 108 of the Customs Act. 5. Learned single Judge held that firstly, it could not be said that the officer giving the notice was not a Gazetted Officer. The learned Judge secondly found that merely because there were powers in the first respondent or, as the case may be, the licensing authority to monitor the said licences, it could not be said that the second respondent was divested of his powers to investigate. In short, the contention raised was that there could not be a parallel enquiry also. Relying on the judgment of the Supreme Court, the learned Judge came to be conclusion that if there was any activity of smuggling as understood in the Customs Act, there could be no impediment in the way of the officers of the Customs Department to initiate an investigation for which purpose, a notice could always be given under Section 108 of the Act. Holding so, the learned Judge dismissed the writ petitions, necessitating the present batch of writ appeals. 6. Arguments for the appellants were laid by Shri Habibullah Basha, learned Senior Counsel a....
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....des on the part of the Department because this exercise was taken in respect of practically all the persons having the advance licence and it is only these present petitioners, who are refusing to co-operate with the department by complying with the said notice. Learned Counsel argued that there was a definite information that there were no manufacturing units available which had the capacity of manufacturing the exported goods which these exporters had exported allegedly utilising the imported raw materials. He points out that there is every possibility of the imported material being siphoned off in the market and some other inferior material is being used only to complete the export obligation. He points out that there was nothing wrong in investigating the matter because after the investigation, the concerned authorities under the Customs Act could also come to the conclusion that there was nothing wrong with the dealings of the petitioners. Learned senior Counsel heavily relies on the reported decision of the Supreme Court in Sheshank Sea Foods Pvt. Ltd., Karnataka v. Union of India and Others [1996 (88) E.L.T. 626 (S.C.) = 1996 (11) SCC 755] points out that this case will clin....
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....mpted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer;" It is therefore clear that a Customs Officer would have all the possible power and more particularly described under Section 108 of the Act to summon any person obviously to enquire as to whether any goods have been smuggled or not. If, therefore, any goods are brought in India, which enjoy the exemption from the payment of customs duty on certain conditions then, the Customs Officer will have all the powers to enquire as to whether the conditions, subject to which the said duty is exempted, have been followed or not and it is obvious that, in case of the breach of those conditions, those goods will be smuggled goods. We, therefore, do not see as to how a simple summons issued under Section 108 of the Act could be termed to be a proceeding without jurisdiction, when it is the inherent power of the every Gazetted Officer of the Customs Department to enquire into the matter of smuggling. 11. It ....
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....e 15 Para 2 therein). In that order, after quoting various paragraphs from the EXIM policy, the concerned officer has culled out seven points on which the examination would have to be made : 1. Power under the Handbook. 2. Whether it is a bona fide default? or 3. Whether it is a mala fide default? 4. Whether demand notice is issued? 5. Whether the firm is placed under Denied Entities List/Defaulters List? 6. Whether their IEC has been suspended? 7. Concerned provisions of Foreign Trade Act, 1992 can be applied in the case, i.e. for penal case. The officer then has given a finding that the orders redeeming fifteen licences were in order as the matching exports were done and the foreign exchange was also earned for the country. The order quotes : "In the absence of conclusive evidence against the noticee firm for having violated the conditions stipulated in either Clause 9(4) or Clause 10 above, I would be doing a great injustice to the noticee firm in ordering the cancellation of the licence ab initio. Even the DRI, Chennai in their letter dated 18-10-2002 have only informed that the noticee firm "appears" to....
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....oods again, perhaps, without using the imported stainless steel sheets. Learned Counsel suggested that with this evidence, it was necessary for the Customs Department to enquire into the matter and it was only with an objective of the enquiry that the summons was issued. Learned Counsel further urges that it was fully open for all the appellants to convince the Customs authorities of their innocence and further convince them that there has been no violation of the export obligation or, as the case may be, the conditions of the Advance Licence. Learned Counsel wonders as to how a fault can be found in the matter of jurisdiction of the officer to issue a summons and, according to the learned Counsel, the whole issue was being pre-judged. 13. The contention is undoubtedly correct. The concerned officer, who passed the order in adjudication proceeding, did not have the evidence before him nor was such evidence ever referred to in the said adjudication order. We do not mean to sit in an appeal over the said adjudication order because that is not our jurisdiction. However, we must say and express that there is hardly any reference to the evidence in that order, which evidence is un....
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.... High Court in Kamath Packaging Limited v. Union of India - 1992 (61) E.L.T. 548. Learned Counsel for the Department took us through the said judgment of the Karnataka High Court to appraise us of the facts involved therein. That was also a case where the petitioner had the manufacturing advance licence under the Foreign Trade Act and EXIM Policy and there also, the customs authorities had issued the summons to the petitioner to furnish the details about the transactions. The learned Judge has tabulated the contentions in the following words : "(i) that the Customs Department had no right or authority to call upon the petitioners to furnish details of the import of the raw materials and the utilisation thereof. The petitioners imported the raw materials under an advance licence granted by the Controller of Imports and Exports subject to the conditions attached to the said licence/licencees; (ii) Any breach of the conditions should attract the jurisdiction of the concerned authority, namely the Enforcement Wing of the licensing authority and it is not for the Customs Department to exercise powers of search, seizure and confiscation. For any breach of the conditions....
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....ra as also the subsequent decisions in Bennett Coleman Company v. Union of India (AIR 1973 SC 106) and Union of India v. Oceanic Export Corporation [W.A. Nos. 1043 to 1049 of 1999 before the Madras High Court - 2000 (116) E.L.T. 19 (Mad.)]. The learned Judge distinguished the decision in East India Commercial Company case and chose to follow the earlier decision by the Karnataka High Court reported in Pooja Exporters v. Assistant Director, DRI [1989 (41) E.L.T. 21]. The learned Judge ultimately came to the conclusion that the petition was liable to be dismissed. 15. Now turning to the case of Sheshank Sea Foods case, cited supra, paragraph 2 of the said judgment would suggest that the learned Judges had considered the facts in the writ petition filed by Kamath Packaging Limited only. A similar contention was raised before the Supreme Court that only the licensing authority had the jurisdiction to investigate the violations, if any, as the duty exemption scheme, under which the licences had been issued, was a Code by itself and excluded the investigation by the Customs Authorities. The Supreme Court then in paragraph 6 referred to Section 111(o) of the Customs Act and came to the....
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....able to the learned Judges, who decided the Sheshank Sea Foods case. This is apart from the fact that East India Commercial Company case cannot be an authority for the proposition which has fallen for consideration in the present case. Heavy reliance was placed by Mr. Basha on the following observations in paragraph 27 of the majority judgment by Subba Rao, J. (as His Lordship then was) to the following effect : "If on a reading of the said notice, it is manifest that on the assumption that the facts alleged or allegations made therein were true, none of the conditions laid down in the specified sections was contravened, the respondent would have no jurisdiction to initiate proceedings pursuant to that notice. To state it differently, if on a true construction of the provisions of the said two sections the respondent has no jurisdiction to initiate proceedings or make an enquiry under the said sections in respect of certain acts alleged to have been done by the appellants, the respondent can certainly be prohibited from proceeding with the same." From this, the learned Counsel suggests that where there was a lack of jurisdiction, the writ of prohibition will lie against....
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....s obvious that the learned Judges came to the conclusion that the matter was not covered under Section 178 of the Customs Act unless there was a violation of Section 3 of that Act. Learned Judges further held that the infringement of the condition in the licence not to sell the goods imported to the third parties was not the infringement of the order under Section 3(1) of the Act and, therefore, the provisions of Section 178 could not be attracted. Such is clearly not the case in our matter. We have already referred to Section 111(o) only with an idea to suggest that any goods which were brought in contravention of Section 111(o) could be said to be an act of smuggling and that under the provisions of the Customs Act, any Customs authority had the necessary power to initiate the enquiry or the investigation, as the case may be. Such a provision did not fall for consideration in the aforementioned judgment of East India Commercial Company case, cited supra and, according to us, this would be a distinguishing feature. We have already pointed out that the facts and the principles of law involved in Sheshank Sea Foods case, cited supra, would be almost applicable on all fours. 19. I....
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....not observed within the period prescribed, if any, or where the period is not prescribed within a reasonable time. It therefore cannot be said that the said goods were liable to be (emphasis confiscated on the date of their import under Clause (o)." supplied) What is very heavily relied upon is the observation that the subsequent cancellation of licence is not relevant to show that the import is illegal. From this, it is tried to be urged that if the import of the goods was not illegal then, there will be no question of enquiring into with the aid of Section 108 of the Customs Act. 21. We do not agree. The observations therein were made in an entirely different context and in that case, the Supreme Court was not considering the question as to whether there was any jurisdiction on the part of the Customs authorities to enquire into the matter or to institute an investigation or an enquiry, as the case may be. We do not think that anything was wrong in merely starting an investigation or an enquiry, as the case may be, because the importers, appellants herein, could have even convinced the Customs authorities about the aspects of the legality of the imports. We do not see anyth....
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.... being watered down, in our opinion, the observations have been made in an entirely different context. There was no question regarding the power of the Customs authorities to initiate investigation or the enquiry, as the case may be. Again, this was not a case of manufacturing licence but pertained to the import of raw materials under the exemption notifications issued under the EXIM Policy. The basic issue in the proposed enquiry by the Customs authorities appears to be as to whether there at all was a manufacturing factory or manufacturing unit for utilising the imported stainless steel sheets and if such manufacturing unit was not there, how the imported stainless steel sheets were actually utilised. It is also true that the further question in that enquiry is going to be as to whether it was the imported material alone which was used in the manufacturing activity. Now, if there was no manufacturing unit available or any such manufacturing unit as would have the capacity to manufacture the goods worth crores of rupees, how was the imported stainless steel utilised. The question would not only be misrepresentation while getting the Advance Licence but also about the utilisation o....
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.... do not think this is an admission at all because there will be no question of there being no authority to the first respondent in enquiring into the breach of the conditions of the licence. However, that authority cannot exclude the jurisdiction of the Customs authorities to enquire into the matter. 28. We were taken through the Notification Nos. 80/95 and 30/97 issued under Section 25 of the Customs Act. In the first notification, i.e. Notification No. 80/95, there is a clear reference to the export obligation being discharged after the necessary documents in support of the export are produced to the satisfaction of the Assistant Commissioner of Customs. It is pointed out that in this case, out of sixteen licences, fifteen have been so discharged and in respect of the sixteenth licence also a major portion of the export obligation has also been fulfilled. From this learned senior Counsel argues that, therefore, there will be no question now of re-opening the matters particularly when the licences have been redeemed. 29. We do not think that such an approach would be a right approach to the problem. We have already clarified that even if the redemption of the licences is com....