2003 (1) TMI 127 - HC - Customs

Summary

Issues Involved:
1. Validity of the licences obtained by fraud and their effect on transferees for value without notice.
2. Whether the suspension or cancellation of licences can operate retrospectively.
3. Applicability of principles of natural justice in the suspension or cancellation of licences.
4. Reasonableness of the time taken by Customs Authorities to exercise powers u/s 47 of the Customs Act.

Summary:

1. Validity of the licences obtained by fraud and their effect on transferees for value without notice:
The main issue was whether the fraud committed by the original licence holders affected the validity of the licences in the hands of transferees for value without notice. The court held that a licence obtained by fraud is not void ab initio but merely voidable. It remains valid until avoided in the manner prescribed by law. The court referenced the case of East India Commercial Co. v. Collector of Customs, which established that a licence obtained by fraud is good until avoided. The court also noted that the petitioners were bona fide transferees for value without notice of the fraud, and thus, the concept that fraud vitiates everything does not apply to them.

2. Whether the suspension or cancellation of licences can operate retrospectively:
The court held that the suspension or cancellation of licences cannot operate retrospectively. The petitioners had filed the Bill of Entry for home consumption before the suspension order was served. The court emphasized that the licences were good until they were avoided, and any bona fide action done prior to the order of suspension or cancellation could not be held to be bad and illegal. The court referenced the case of Union of India v. Sampat Raj Dugar, which stated that the subsequent cancellation of a licence does not retrospectively render the import illegal.

3. Applicability of principles of natural justice in the suspension or cancellation of licences:
The court noted that the principles of natural justice and reasonable opportunity of being heard were not extended to the petitioners while suspending the operation of the licences. The court emphasized that the Joint Chief Controller ought to have given an opportunity of being heard to the petitioners since they were well aware that the petitioners were transferees of the licences. The court referenced the case of Sinha Govindji v. Deputy Collector of Imports and Exports, which supported the contention that the order cancelling the licence without notice is in breach of principles of natural justice and thus ab initio void.

4. Reasonableness of the time taken by Customs Authorities to exercise powers u/s 47 of the Customs Act:
The court held that the Customs Authorities are required to exercise their powers u/s 47 within a reasonable period, depending on the facts and circumstances of each case. The court noted that the petitioners had filed the Bill of Entry and furnished all the documents relating to the imports much before the suspension and/or cancellation of the licences. The court emphasized that the goods were imported under valid licences, and the Customs Authorities should have cleared the goods accordingly.

Conclusion:
All the petitions were allowed, and the action of the Revenue in withholding the clearance of goods imported by the petitioners was declared bad and illegal. The court held that all imports were legal and valid and issued an order prohibiting the Customs Authorities from proceeding against the petitioners. The rule in all the petitions was made absolute with no order as to costs.