1984 (11) TMI 72 - HC - Customs

Summary

Issues Involved:
1. Validity of the confiscation order of woollen rags.
2. Interpretation of the term "woollen rags" under the Import Trade Control Manual.
3. Impact of the judgment in the Nagesh Hosiery Mills case on the petitioners' consignments.
4. Compliance with the arrangement for conditional clearance of consignments.
5. Finality of the judgment in the Nagesh Hosiery Mills case and its implications.

Issue-wise Detailed Analysis:

1. Validity of the Confiscation Order of Woollen Rags:
The petitioners imported five consignments of woollen rags in 1972-73. On 10th January 1973, a notice was served to show cause why the consignments should not be confiscated as they contained second-hand clothing. The Collector of Customs held on 13th June 1973 that the import was unauthorized and contravened Section 111(d) of the Customs Act read with Section 3 of the Imports and Exports (Control) Act, ordering absolute confiscation. The Collector noted that the imported goods were a mixture of rags and second-hand clothing and could not be called 'woollen' rags.

2. Interpretation of the Term "Woollen Rags" Under the Import Trade Control Manual:
The judgment in the Nagesh Hosiery Mills case, decided by R.P. Bhatt, J., was pivotal. Bhatt J. held that the term "woollen rags" should be construed in its popular sense, as understood by persons dealing in or commercially conversant with the articles, rather than a scientific or technical sense. The Collector's reliance on dictionary meanings and dissection of the term into "woollen" and "rags" was deemed a patent error. Bhatt J. concluded that mutilation was not a condition precedent for the import and did not affect its validity.

3. Impact of the Judgment in the Nagesh Hosiery Mills Case on the Petitioners' Consignments:
An arrangement was made between the importers of woollen rags and Customs authorities, pending the final decision in the Nagesh Hosiery Mills case. Consignments were allowed to be cleared subject to the withdrawal of appeals, mutilation of goods, and execution of bank guarantees. The appeal against Bhatt J.'s judgment was withdrawn on 26th April 1979, making the judgment final. Consequently, the orders of confiscation became inoperative, and the consignments could be cleared freely and without conditions.

4. Compliance with the Arrangement for Conditional Clearance of Consignments:
The petitioners withdrew their appeals on 13th February 1978. The Assistant Collector's letter dated 3rd March 1978 outlined the conditions for clearance. The petitioners cleared two consignments by furnishing bank guarantees. However, the Assistant Collector, on 18th April 1981, refused to allow clearance of the remaining three consignments, citing non-execution of the required bond.

5. Finality of the Judgment in the Nagesh Hosiery Mills Case and Its Implications:
The finality of Bhatt J.'s judgment meant that the confiscation orders were inoperative. The Assistant Collector's refusal to clear the remaining consignments was challenged. The court held that the three consignments could be cleared freely once the appeal in the Nagesh Hosiery Mills case was withdrawn. The order dated 18th April 1981 was quashed and set aside, allowing the petitioners to clear their consignments without conditions.

Conclusion:
The court ruled in favor of the petitioners, quashing the order dated 18th April 1981, and allowing the clearance of the three consignments. The bond given by the petitioners was discharged, and they were permitted to withdraw the deposited sum with accrued interest. The respondents were ordered to pay the petitioners' costs.