2003 (7) TMI 73 - SC - Customs

Whether import of the goods was contrary to law? Whether the goods were liable to confiscation under the Customs Act? Held that - The present is a case of illegal import and provisions of Section 111(d) and (o) of the Customs Act clearly apply. The goods are liable to confiscation. The considerations which are relevant under the sale of Goods Act cannot be applied in the context of present facts. The Import-Export Policy, 1988-91 permitted issuance of Open General Licence for import of life saving goods. Life saving equipment was imported from Germany under the OGL after obtaining customs clearance without payment of customs duty. It was re-packed and sought to be exported to the USSR under a contract. It was held that object of permitting import of life saving goods being that the goods may be available for use in the country, re-export thereof was prohibited by necessary implication by or under the OGL. Such goods being prohibited within the meaning of Section 2(33), re-export thereof rendered them liable to confiscation under Section 113(d) and penalty under Section 114 of Customs Act. The result of the above discussion is that import of the consignments in question being contrary to law, the goods were liable to confiscation under Section 111 of the Customs Act. The order of confiscation of goods passed by the Commissioner of Customs is held to be in accordance with law. We are unable to agree with the view taken by the Tribunal in permitting re-export of the goods. Further, the Tribunal in its impugned order has waived the penalties imposed by the Commissioner on respondents 3 to 7. This part of the order of the Tribunal is without any reasons.The appeals are thus allowed with costs.

Issues Involved:
1. Legality of import of goods under a forged advance license.
2. Confiscation of goods under Section 111(d) of the Customs Act, 1962.
3. Permissibility of re-export of confiscated goods.
4. Validity of penalties imposed by the Commissioner of Customs.
5. Applicability of the precedent set in Union of India v. Sampat Rai Dugar and Others.

Issue-wise Detailed Analysis:

1. Legality of import of goods under a forged advance license:
The importer, M/s. Olympia Exports, imported goods purportedly against an advance license, which was later found to be forged. The goods were on the restricted list under the Import-Export Policy, and their import was permitted only against a valid license. The importer failed to comply with the condition of re-exporting the goods after conversion, violating the provisions of the revenue exemption notification and the export-import policy. The import was deemed illegal due to the forged license, rendering the import contrary to law.

2. Confiscation of goods under Section 111(d) of the Customs Act, 1962:
The goods were confiscated under Section 111(d) of the Customs Act, 1962, which empowers the confiscation of goods imported contrary to any prohibition imposed by law. The Tribunal's decision to allow re-export was challenged, with the appellant arguing that the import was fraudulent and contrary to law, thus attracting Section 111(d). The Supreme Court upheld the confiscation, noting that the import was without a valid license and in violation of the conditions imposed under the Import-Export Policy, making the goods liable for confiscation under Section 111(d).

3. Permissibility of re-export of confiscated goods:
The Tribunal allowed the re-export of the goods based on the precedent set in Union of India v. Sampat Rai Dugar and Others. However, the Supreme Court distinguished the present case from Dugar's case, noting that the present case involved fraud and misrepresentation, whereas Dugar's case did not. The Court emphasized that there is no provision for re-export of goods in the Customs Act, and equity considerations do not apply in cases of fraud. Consequently, the Supreme Court held that the re-export of the goods was not permissible.

4. Validity of penalties imposed by the Commissioner of Customs:
The Commissioner of Customs had imposed penalties on several individuals involved in the import transaction. The Tribunal set aside these penalties without providing any reasons. The Supreme Court found this part of the Tribunal's order to be unjustified, as the Tribunal did not consider the evidence against the individuals or provide any justification for waiving the penalties. The Supreme Court restored the penalties imposed by the Commissioner of Customs.

5. Applicability of the precedent set in Union of India v. Sampat Rai Dugar and Others:
The Tribunal based its decision on the precedent set in Dugar's case, which allowed re-export on equitable grounds. However, the Supreme Court distinguished the present case, noting that Dugar's case involved a valid import license and no fraud, whereas the present case involved a forged license and fraudulent import. The Court held that Dugar's case was not applicable, and the import in the present case was illegal and subject to confiscation under Section 111(d) and (o) of the Customs Act.

Conclusion:
The Supreme Court set aside the Tribunal's order allowing re-export and waiving penalties, restoring the Commissioner of Customs' order of confiscation and penalties. The appeals were allowed with costs, reaffirming the legality of the confiscation and penalties imposed due to the fraudulent import under a forged license.

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