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TMI Blog1990 (9) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and about the competency of the Customs Department to call upon the petitioners to furnish details about the same and the related enquiry/investigation about the contravention of the conditions of the import licence. 4. The main prayer of petitioners in this writ petition is for issue of a writ of prohibition restraining the respondents from proceeding with any further enquiry relating to the utilisation and the movement of the raw materials and other related matters. 5. The contentions of the petitioners in this behalf are : (i) that the Customs Department had no right or authority to call upon the petitioners to furnish details of the import of the raw materials and the utilisation thereof. The petitioners imported the raw materials under an advance licence granted by the Controller of Imports and Exports subject to the conditions attached to the said licence/licences; (ii) Any breach of the conditions should attract the jurisdiction of the concerned authority, namely - the Enforcement Wing of the licensing authority and it is not for the Customs Department to exercise powers of search, seizure and confiscation. For any breach of the conditions of licence, the const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it was argued that any post-import action can be taken by the Customs Department. 7. In the light of the contentions of both sides, it becomes necessary to examine the relevant provisions of the two enactments relating to import of goods, prohibition of import of certain goods, the scheme of licensing to import and other related matters. 8. Let me first examine the relevant provisions of the Customs Act, 1962. The object of the Customs Act is to consolidate and amend the law relating to customs. "Customs" is duty imposed on imports and exports. Law relating to customs relate back to 1878 when Sea Customs Act, 1878, was enacted. This Act was repealed after the Customs Act of 1962 was enacted by Parliament. The main object of the Act is (to) prohibit importation or exportation of goods notified by the Central Government either absolutely or partially or subject to certain conditions. Elaborate procedure is laid down in the Customs Act relating to detection, prevention and levy of duty and to take penal action for offences and contravention. 9. Section 12 is the charging section. The rates of duty of customs to be levied are provided in the Customs Tariff Act, 1975, under whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al exemptions relating to Import Tariff issued under Section 25(1) of the Customs Act. The important clause for purposes of this case is clause (d), which is one of the conditions under which the whole of the duty payable under the Customs Tariff Act is exempt. The said condition reads thus : "(d) the exempt materials shall be utilised for the manufacture of resultant products specified in Part 'E' of the said Certificate or for export as mandatory spares, and no portion thereof shall be sold, loaned, transferred or disposed of in any other manner." 16. The advance issued in this case under the Import Trade Control read with Duty Exemption Scheme contains a specific condition No. 3, which reads thus : "3. The goods imported against this advance licence shall be utilised in accordance with the provisions of the Customs Notification No. 116-Customs, dated 30-3-1988". Condition No. 2 in the said licence which is relevant is also reproduced below: "2. To ensure fulfilment of export obligation as mentioned in 1 above the firm shall before clearance of the first consignment would execute a joint legal undertaking/joint for 100% customs duty backed by bank guarantee as in Append ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin its powers. It is, therefore, contended for the Department that the investigation now being carried on relating to the diversion of the raw materials is being done to collect evidence, and no show-cause notice is yet issued to the petitioners. 20. Elaborating the contentions of the petitioners it was argued that the customs have no authority to call upon them to furnish details of the utilisation of the raw materials and its movement. Their main plank is that the licensing authority alone is competent to investigate into the utilisation of the raw materials also. They have quoted in extenso the provisions of the Imports and Exports Control Act and the rules and orders issued thereunder to show that the competent authority under the Act is empowered to take action to penalise the petitioners and recover the customs duty payable besides power to confiscate the goods. 21. No doubt, the Imports and Exports (Control) Act does empower the adjudicating authority to confiscate the imported goods or materials for any contravention of the conditions of licence, which includes non-utilisation/diversion of such goods or materials. But the question that still remains to be decided i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty exemption scheme, is detected. 27. An authority which grants exemption is also equally competent to cause enquiries to be made for the purpose of satisfying itself whether the importer has complied with the conditions of the licence. That such enquiry and investigation could be necessarily a post-import enquiry cannot be disputed.' 28. I now proceed to examine the decisions cited by Sri Thyagarajan for the petitioners. He laid great stress on the decisions of the Supreme Court in : (i) M/s. East India Commercial Co. Ltd., Calcutta Anr. v. Collector of Customs Anr. - AIR 1962 S.C. 1893 = 1983 (13) E.L.T. 1342 (SC), (ii) Bennett Coleman and Co. Ltd. Ors v. Union of India Ors. - AIR 1973 S.C.106, and (iii) Union of India v. Oceanic Export Corporation. (Writ Appeal Nos. 1043 to 1049/1988 of Madras High Court). In the first case, Sri Subba Rao, J. (as he then was), delivering the majority Judgment held, that the customs had no jurisdiction to initiate proceedings under Section 167(8) of the Sea Customs Act read with Section 3(2) of the Imports and Exports (Control) Act. That was also a case wherein the petitioners had prayed for issue of a writ of prohibition re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation in accordance with the provisions of the Act. 34. I respectfully agree with the views expressed by Sri K.A.S., J. and supplement my order with additional reasons. 35. The second case relied upon by Sri Thyagarajan is Bennett Coleman Co. Ltd. - AIR 1973 SC 106. The Supreme Court was dealing with the challenge made to the Newsprint Policy of the Government of India as violative of Articles 19(2) and 14 of the Constitution. While dealing with the scope of Section 3(1) of Imports and Exports (Control) Act, 1947, the Supreme Court observed that the power under that Section is not restricted merely to prohibit or restrict imports but extends also to controlling the subsequent disposal of the goods imported and further observed that the importer would be amenable to the jurisdiction of the licensing authority in the matter of utilisation of those goods. 36. Same is the view expressed by the Supreme Court in the two other decisions of the Supreme Court in : (i) Abdul Aziz v. State of Maharashtra - AIR 1963 S.C. 1470, and (ii) State of West Bengal v. Mothilal Kanoria - AIR 1966 S.C. 1586, which dealt with the conditions of licence under Imports and Exports (Contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. It was also observed by the High Court that the licence was issued by the Co-ordinate Authority, viz., the Controller of Imports and Exports, and, unless a decision was taken by that authority, whether Customs Duty had become payable or not, the Customs Authority had no jurisdiction to entrench upon the powers of the Controller. It was, therefore, held that the Customs Department would have no jurisdiction to seize the goods or choose to exercise any of the powers under the Customs Act, even in case of information about mis-utilisation, mis-application or even sale of the raw materials to third parties. 42. It was ruled by the Madras High Court that even in cases of gross irregularities or evasion of customs duty, the Customs Department will have to forward the particulars of such information to the Controller of Imports and Exports and will have to take the follow-up action only after the Controller decides, whether any duty had become payable. 43. Against the Judgments the Division Bench of the Madras High Court, petitioners filed special-leave-petitions before the Supreme Court and by order dated 4-9-1986, it was ordered that the SLPS, be listed along with the connected- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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