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TMI Blog1996 (1) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... licences were ordered absolute confiscation and the above penalties were imposed on the firm and the kartha of the firm Shri Motilal Gupta. 3. Consequent on investigation, carried out by officers of DRI, on the basis of intelligence gathered by them indicating that the above firms obtained DEEC licences by false representation and fraud, the licences in question were cancelled ab initio by the licensing authorities. However before such cancellation, 100% Polyester fabrics were imported against the said licences and sought to be cleared. However they were seized, pending completion of investigation, which ultimately resulted in cancellation of these licences ab initio. Thereafter, adjudication proceedings were held by the Collector, which resulted in passing of the impugned orders. 4.1 Shri J.C. Patel, the Ld. Advocate on behalf of the appellants, does not dispute that the licences were cancelled ab initio. However, he pleads that in all these cases, goods were imported against valid licences. They were detained consequent on investigation by DRI. The goods were seized in Dec., 1985, whereas the licences were cancelled only on 21-2-1986. Hence there is no legal justification fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the judgment of the Supreme Court in the U.O.I v. Sampat Raj Dugar 1992 (58) E.L.T. 163 (SC), he points out that it has been held by the Apex Court that subsequ.ent cancellation of licence is of relevance nor does it retrospectively render the import illegal. This observation is based on their earlier judgment in the case of East India Commercial Co. (v) In the case of Sneh Sales Corporation decided by Tribunal Spl. Bench `A , reported in 1993 (63) E.L.T. 128, in paras 9 and 10 of this decision, it is held that where a licence is obtained by fraud or misrepresentation it continues to be valid, till it is avoided. In other words, cancellation did not operate with retrospective effect. 4.2 Based on the above decisions, he pleads that their appeals be allowed. 5.1 After hearing both the sides, the only issue to be decided in these appeals is whether the goods, imported against DEEC licences, which were cancelled ab initio subsequent to import, could be held to be imported unauthorisedly and they could be held liable to confiscation under Section 111(d) of the Customs Act and whether the appellants are liable to penalty. 5.2 The ld. Counsel heavily relies on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms officers, who are now presented with an order of the licensing authority cancelling the licences from inception may not be justified in allowing clearance of the goods. Such goods cannot, in our view, be allowed clearance, unless the said cancellation orders are set aside by the competent authority. In this view of the matter, prima facie, even without going into the citation made before us, it would appear to us that confiscation of the goods cannot be averted in the facts and circumstances of the present appeals. 5.4 However, we would not like to base our conclusions only on this prima facie view, without considering the implications of the judgment cited before us. 5.4.1 Let us first have a look at the judgment of East India Commercial Co. The facts involved in that case can be briefly stated as below. The petitioners obtained a licence for import of fluorescent tubes and fixtures, representing that they are needed for their actual use and the licence was issued with a condition that the goods will be utilised only for consumption as raw material or accessories in the licence holder s factory and no portion thereof will be sold to any party. On information, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs Act. From the above observations of the Apex Court in the same Para 35, it is evident that the Apex Court dealt with a case, where goods were imported and cleared against valid licences and even those licences were not cancelled. In these circumstances, the observations of the Supreme Court have been made. Let us look at the facts of the present appeals. Here the goods are to be cleared by Customs and are in the Customs area. Licences have been cancelled ab initio by the order of the competent authority prescribed under the Act. Hence even applying the provisions of Contract Act, when fraud is detected before performance of contract by allowing the goods, contract is revoked by cancelling the licence ab initio. The contract has become non-est and cannot seek to cover the import of the goods. It would be a hazardous step to apply the case of East India Commercial in such a case, where the facts are totally different from the ones considered by the Supreme Court. 5.4.2 Now coming to the other decision of the Supreme Court in Sampat Raj Dugar s case, we take note of the following factual position in that case. A consignment of raw silk was imported by a D.E.E.C. licence h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the contract by cancellation of licence, the Apex Court held the supplier holding title to the goods to be eligible for re-shipment. It is not a case of ordering release of the goods to the importer, who obtained the licence by mis-representation. The Apex Court itself have observed in Para 24 as below : It is also significant to notice that it is not the case of the appellants that the first respondent was a party to any conspiracy or other fraudulent plan hatched or sought to be implemented by the second respondent. If that was the case, different considerations would have arisen. (emphasis supplied by us) From the above, it is clear that the Apex Court made the observation based on East India Commercial only in the context of the case, when the supplier, being not a party to any fraud, having exported the goods against a valid licence cannot be deprived of his goods, by refusing re-shipment. These observations are made to protect the interest of a totally innocent third party, who supplied the goods on a valid contract existing. These observations do not lead us to the conclusion that the Supreme Court would have allowed the goods to the importer being party to the fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssumption that principles of contract would apply in the case of licence, if fraud has been practised in obtaining the licence, goods imported but pending clearance, have not been permitted clearance to the importers by the Supreme Court in any of the three cases. This would support our prima facie view expressed in Para 5.3 above. 5.5 In the judgment of Bombay High Court in the case of Uttamlal Exports 1990 (46) E.L.T. 527, there was no order cancelling the licence. The licence was under suspension. Before suspension, transfer of the licence has taken place, when it was in operation. Hence the ratio of East India Commercial was adopted in the judgment in support. 5.6 In the case of Sneh Sales Corpn. 1993 (63) E.L.T. 128 (Tribunal), the Tribunal applied the ratio of East India Commercial, in preference to Fedco, because the goods were allowed clearance against valid licences. Thereafter seizure took place of such goods cleared, and the cancellation of licence was cited as the ground for confiscation. We, ourselves, have indicated that our view might be different, if goods had been already cleared. Hence we find that there is no reason for us to refer the issue to a larger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at the time of obtaining licence, a clear design to defraud the Government and flout the Policy provisions. 11. It is settled proposition of law that none be permitted to take advantage of his own fraud. Notwithstanding any other thing therefore the appellants could not be permitted to take shelter into legal jugglery and claim same benefit which they otherwise, are not entitled to. 12. It is also pertinent to note that, at the time of clearance itself the Customs Authority suspected the foul play and informed the licensing authority, by withholding the clearance and pursuant to such approach to the licensing authority, the subject licences came to be cancelled ab initio. Such a course of action by the Customs Authority is always permissible. 13. The word ab initio means from the very inception and when the licences are cancelled ab initio, they are deemed to have never existed. 14. Thus when the occasion to clear the goods arose, the licences had already stood cancelled. 15. Even assuming that the provisions of Contract Act are held as applicable and the licences are held as valid till they are cancelled, Section 65 of the said Act, clearly provides that whatever ..... X X X X Extracts X X X X X X X X Extracts X X X X
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