1985 (3) TMI 150 - HC - Customs

Summary

Issues Involved:

1. Validity of the suspension of the import license.
2. Refusal to clear the imported goods based on the suspended license.
3. Rights and obligations of the transferee of the import license.
4. Estoppel against the licensing authority due to inaction.
5. Legal remedies available to the licensing authority.

Issue-wise Detailed Analysis:

1. Validity of the Suspension of the Import License:

The petitioners challenged the validity of the order suspending the import license. The suspension was communicated via a letter dated 5th December 1984, which cited false and misleading declarations by the original licensee as the reason. The petitioners argued that they had purchased the license bona fide and without any knowledge of the alleged misrepresentation by the original licensee. They contended that the licensing authority should have promptly canceled the license upon discovering any irregularities, rather than allowing the petitioners to act on it.

2. Refusal to Clear the Imported Goods Based on the Suspended License:

The petitioners imported goods based on the R.E.P. license and paid the customs duties for the first consignment. However, the customs authorities refused to accept the duty for the second consignment, citing the suspension of the license. The petitioners argued that since the goods were imported when the license was valid, the suspension should not affect the clearance of these goods. They emphasized that the suspension order came after the goods had already been imported.

3. Rights and Obligations of the Transferee of the Import License:

The petitioners, as transferees of the license, argued that they should not suffer for any misrepresentation or fraud committed by the original licensee. They purchased the license for valuable consideration and duly informed the licensing authority about the transfer. They relied on paragraph 8 of Appendix 17 of the Import and Export Policy 1984-85, which states that if a license is found to be obtained under false pretenses, its value should be adjusted against the import entitlement of the exporter, not canceled outright if already used.

4. Estoppel Against the Licensing Authority Due to Inaction:

The petitioners argued that the licensing authority's inaction and silence after being informed about the transfer created an estoppel. They contended that the licensing authority's failure to act promptly on any irregularities induced them to import goods and alter their position to their detriment. The court upheld this argument, stating that the long silence and inaction by the licensing authority created an estoppel, preventing the authority from penalizing the petitioners.

5. Legal Remedies Available to the Licensing Authority:

The court noted that the law provides specific remedies for dealing with licenses obtained through misrepresentation. According to the Supreme Court's ruling in M/s. East India Commercial Company Limited v. Collector of Customs, a license obtained by misrepresentation does not become non-existent; the value of such a license should be adjusted against the exporter's entitlement. The court held that the respondents could proceed against the original licensee but could not penalize the petitioners, who acted in good faith.

Conclusion:

The court ruled in favor of the petitioners, stating that the customs authorities acted illegally by refusing to clear the goods based on the suspended license. The suspension of the license after the importation of goods could not invalidate the importation. The court issued a writ of mandamus commanding the respondents to clear the imported goods upon payment of customs duties and compliance with usual formalities. It also issued a writ of prohibition preventing the respondents from refusing to clear the goods based on the license suspension. The order was made without prejudice to the respondents' right to take action against the original licensee.