1987 (7) TMI 110 - HC - Customs

Import of raw materials as actual user on misdeclaration - Confiscation and penalty - Industrial licence - Revision by Collector - Review proceedings

Summary

Issues Involved:
1. Validity of the industrial licence for the import and use of raw materials.
2. Compliance with the conditions of the industrial licence.
3. Legality of the importation and clearance of raw materials under Open General Licence (OGL).
4. Jurisdiction and authority of the Collector of Customs under Section 130 of the Customs Act.
5. Applicability of Section 12 of the Industrial (Development and Regulation) Act, 1951.
6. Imposition of redemption fine and penalty.
7. Deemed consent due to non-reply by the authorities.

Detailed Analysis:

1. Validity of the Industrial Licence for the Import and Use of Raw Materials:

The appellants were issued an industrial licence on 23rd April 1974 for the manufacture of sulphamethoxazole (SMX). Clause 4 of the licence mandated that the manufacture of new articles and commercial production be established within two years. Clause 5(iv) specified the raw materials to be used for production, and Clause 10 limited the licence's validity to two years unless an extension was granted. The appellants' import licence issued on 13th October 1977 was valid for 24 months, permitting the import of isoxamine, a raw material for SMX. However, the industrial licence stipulated that after two years, the production of SMX should be based on locally produced materials.

2. Compliance with the Conditions of the Industrial Licence:

The appellants requested an extension to import isoxamine till mid-1979, citing complications in developing the raw material locally. Their request was denied on 20th January 1979. Despite this, they imported the material between March and June 1979, declaring themselves as actual users. The Collector of Customs found that the industrial licence only permitted the import of raw materials for two years and that the appellants were not authorized to use imported materials after 22nd April 1976. The appellants' declaration was deemed false, making the importation illegal.

3. Legality of the Importation and Clearance of Raw Materials under OGL:

The appellants cleared the imported material under OGL, declaring themselves as actual users. The Collector of Customs noted that the industrial licence required local production of raw materials after two years, thus invalidating the appellants' claim as actual users. The importation was considered in contravention of the law, leading to the confiscation of the material and imposition of fines.

4. Jurisdiction and Authority of the Collector of Customs under Section 130 of the Customs Act:

Section 130(2) allowed the Collector to review and pass orders on the legality of importations. The Collector confiscated the imported material and imposed a fine and penalty, finding the importation unauthorized. The appellants argued that the Collector could not impose penalties if not already imposed in the original order. However, the court upheld the Collector's authority under Section 130, stating that the provisions of the Customs Act allowed for such actions.

5. Applicability of Section 12 of the Industrial (Development and Regulation) Act, 1951:

The appellants argued that their industrial licence had not been revoked under Section 12. The court noted that even if the licence had not been revoked, it did not permit the use of imported materials after 22nd April 1976. The appellants' request for an extension was refused, and they falsely declared themselves as actual users, making the importation illegal.

6. Imposition of Redemption Fine and Penalty:

The Collector imposed a redemption fine of Rs. 19,000,00/- and a penalty of Rs. 5,000,00/-. The court found these amounts reasonable given the appellants' conduct. The appellants' argument that the wrong declaration did not invalidate the importation was rejected, as the importation was made with the objective of clearance, and both were deemed illegal.

7. Deemed Consent Due to Non-reply by the Authorities:

The appellants argued that the non-reply to their extension request should be construed as deemed consent. The court rejected this, noting that the appellants placed an order for the material before receiving a response and that the authorities had refused the extension before the material arrived. The court found no basis for deemed consent.

Conclusion:

The appeal was dismissed, and the appellants were ordered to pay the costs of the appeal. The court upheld the Collector's actions and found the appellants' importation and clearance of the raw material unauthorized and illegal.