1994 (1) TMI 91 - HC - Customs

Summary

Issues Involved:
1. Jurisdiction of the respondents to investigate or enquire into the manner of imports and exports under Advance Licences.
2. Compliance with the conditions of the Duty Exemption Entitlement Scheme (D.E.E.C. Scheme).
3. Authority of Customs Authorities versus Licensing Authority.
4. Applicability of Customs Notification 159/90 and related legal provisions.
5. Validity of summons issued under Section 108 of the Customs Act.

Issue-wise Detailed Analysis:

1. Jurisdiction of the respondents to investigate or enquire into the manner of imports and exports under Advance Licences:
The primary issue in both writ petitions was whether the respondents had the jurisdiction to investigate or enquire into the manner of imports and exports made under certain Advance Licences issued to the petitioners. The petitioners argued that the D.E.E.C. Scheme, as contained in the Policy Book and Hand Book of Procedures, is a complete code by itself, and any violation of the conditions imposed in the licence should be addressed solely within the framework of the Scheme. They contended that the Customs Authorities had no jurisdiction to verify compliance with the conditions of the licence post-importation. However, the respondents maintained that they had the authority to investigate potential violations under the Customs Act and the Imports and Exports Control Policy, particularly in light of Customs Notification 159/90.

2. Compliance with the conditions of the Duty Exemption Entitlement Scheme (D.E.E.C. Scheme):
The petitioners asserted that they had complied with all the conditions attached to their Advance Licences, including the export obligations. They provided documentation to support their claims of compliance. However, the respondents alleged that the petitioners had violated the conditions by selling imported Cassia in the local market and exporting groundnut oil instead of Cassia Oil. The respondents argued that such actions would attract provisions of the Imports and Exports Control Policy and Customs Notification 159/90, necessitating an investigation to determine compliance.

3. Authority of Customs Authorities versus Licensing Authority:
The petitioners argued that the jurisdiction to initiate action for post-importation violations rested solely with the Licensing Authority and not the Customs Authorities. They relied on previous judgments to support their contention. However, the court noted that Customs Authorities have a role to play if the licence holder fails to fulfill the export obligation both in terms of quantity and value, as indicated in Clause 366(l)(c) of the D.E.E.C. Scheme. The court also referenced ALC Circular 8/90, which suggests that Customs Authorities can take action for non-fulfillment of export obligations and mis-utilization of imported materials.

4. Applicability of Customs Notification 159/90 and related legal provisions:
Customs Notification 159/90, issued under Section 25 of the Customs Act, exempts certain goods imported under an Advance Licence from duty, subject to conditions. The court emphasized that any violation of this notification would involve action under the Customs Act. The notification requires importers to execute an undertaking to comply with the conditions of the licence and binds them to pay the duty leviable if the conditions are not met. The court highlighted that a violation of this notification could lead to the goods being liable for confiscation and the imposition of penalties under the Customs Act.

5. Validity of summons issued under Section 108 of the Customs Act:
The respondents issued summons under Section 108 of the Customs Act, seeking the petitioners' attendance to give evidence and produce documents. The petitioners challenged the validity of these summonses, arguing that the Customs Authorities lacked jurisdiction. However, the court found that the Officers of the Directorate of Revenue Intelligence, acting under the Customs Act, had the authority to issue such summonses as part of their investigation. The court noted that the investigation might reveal violations warranting action under Section 113(i) of the Customs Act, which pertains to the confiscation of goods attempted to be improperly exported.

Conclusion:
The court dismissed the writ petitions, holding that the Customs Authorities had the jurisdiction to investigate the alleged violations of the D.E.E.C. Scheme and Customs Notification 159/90. The court relied on relevant legal provisions, including Sections 111 and 113 of the Customs Act, and previous judgments to support its decision. The court emphasized that the investigation would determine whether there had been a misdescription at the time of export or any other violations, and the petitioners could raise jurisdictional arguments at the show cause notice stage. The court also referenced a recent judgment of the Karnataka High Court, which supported the view that Customs Authorities had jurisdiction to investigate such matters.