1981 (9) TMI 135 - HC - Customs

Summary

Issues Involved:
1. Validity of penalty imposed under Section 112 of the Customs Act, 1962.
2. Alleged unauthorized amendment of import licenses.
3. Liability for import of synthetic yarn not covered by original licenses.
4. Alleged negligence by the petitioners in handling the import licenses.

Detailed Analysis:

1. Validity of Penalty Imposed under Section 112 of the Customs Act, 1962:
The core issue was whether the petitioners were liable for a penalty under Section 112 of the Customs Act, 1962. Section 112 stipulates that any person who does or omits to do any act which renders goods liable to confiscation under Section 111, or abets the doing or omission of such an act, shall be liable to a penalty. The learned Single Judge concluded that the petitioners had not committed any act or omission that would render the synthetic yarn liable to confiscation. The petitioners had sold staple fibre of non-viscose origin to Dhanraj Mills with the permission of the Textile Commissioner and had no involvement in the subsequent unauthorized amendment of the licenses or the import of synthetic yarn. Therefore, the penalty imposed was quashed.

2. Alleged Unauthorized Amendment of Import Licenses:
The petitioners had obtained licenses for the import of staple fibre of non-viscose origin. These licenses were amended without the petitioners' knowledge or consent to include synthetic yarn, an item not covered by the original licenses. The amendment was carried out by Messrs Madhusudan Gordhandas & Co. through Messrs Universal Export-Import Agency. The Collector of Customs found that this amendment was done behind the petitioners' back, and they had no knowledge or involvement in it. The court upheld this finding, stating that the petitioners were not responsible for the unauthorized amendment.

3. Liability for Import of Synthetic Yarn Not Covered by Original Licenses:
Messrs Madhusudan Gordhandas & Co. imported synthetic yarn using the amended licenses. The Collector of Customs initially imposed a penalty on the petitioners, holding them liable for the unauthorized import. However, the court found that the petitioners had no knowledge of the amendment or the import of synthetic yarn. They had only sold staple fibre of non-viscose origin to Dhanraj Mills, and their actions did not contribute to the unauthorized import. Therefore, the court ruled that the petitioners were not liable for the import of synthetic yarn.

4. Alleged Negligence by the Petitioners in Handling the Import Licenses:
The appellants argued that the petitioners were negligent in handing over the licenses to Dhanraj Mills, which enabled the unauthorized import. However, the court found that the petitioners had acted in good faith by selling the staple fibre with the required permissions and had taken steps to prevent misuse of the licenses once they became aware of the fraud. The court concluded that there was no negligence on the part of the petitioners that could render them liable under Section 112 of the Customs Act.

Conclusion:
The court upheld the judgment of the learned Single Judge, concluding that the petitioners were not liable for the penalty imposed under Section 112 of the Customs Act, 1962. The unauthorized amendment of the licenses and the subsequent import of synthetic yarn were carried out without the petitioners' knowledge or involvement. The petitioners had acted in good faith and had taken steps to prevent misuse of the licenses. Therefore, the appeal was dismissed with costs.