UNION OF INDIA AND ORS. v. JAIN SHUDH VANASPATI LTD. AND ANR.

The following Order of the Court was delivered :

The 1.,t, respondents imported RBD palm oil during the period November, 1978, to March 1979, and cleared the same in the quantity of 13,500 metric tonnes. Import of the said oil was permissible. On 11th October, 1979, the 1sl, respondents were served with show cause notices under Section 28 of the Customs Act and, on 21st January, 1980, with show cause notices under Section 124 thereof. The show cause notices stated that the said oil had been imported in containers made of stainless steel, which • was a banned item, but which had been painted over to give the impression that they were made of mild steel. Thus, Customs duty had not been levied and the stainless steel containers were liable to be confiscated. The respon- dents were required to show cause there against. The respondent filed a writ petition in the Delhi High Court on 8th February, 1980, impugning the issuance of the Section 28 and Section 124 show cause notices. On 22nd August, 1980 the High Court allowed the writ petition. E This appeal is d;_rected against the judgment and order of the High Court. When special leave was granted on 9th October, 1980 this Court ordered that the stainless steel containers which had been seized by the appellants would continue to remain under seizure and he kept in the factory premises of the 1st, respondents under the supervision of a Customs Officer. We are told that they so remain. F

For completeness, it is necessary to mention that the appeal was dismissed on 28h November, 1991, but on the review petition of the appellants, that judgment and order was set aside and the appeal was directed to be heard afresh, which is how we come to hear it. G The High Court based its judgment on material produced by the respondents before it to show that modern marketing practice required the movement of refined oil only in stainless steel or epoxy-coated tanks. It found that the material acceptable, particularly because one o{ the letters that the respondents produced had been written by the State Trading H

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A Corporation. The High Court held that the stainless steel containers that were used by the 1st, respondents to import the said oil could not be treated as separate or independent items of importation. What had been imported was only the said oil and not the stainless steel containers. The High Court looked to the law and stressed Section 47, whereunder clearance for home consumption had been given. It took the view that not B show cause notices under Section 28 or Section 124 ':ould have been issued and until the order under Section 47 had been revised under the provisions of Section 130.

Section 47 reads thus : c "47. Clearance of goods for home consumption. - Where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption."

Section 28 reads thus :

"S. 28. - Notice for payment duties 11ot levied, shon levied or er- ro11eously refimded. - (1) When any duty has not been levied or has been short levied or erroneously refunded, the proper officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or which has been so short levied or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice;

Provided that where any duty has not been l1~vied or has been short levied or has been erroneously refunded by-reason of collusion or any wilful mis-statement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this· sub-section shall have effect as if for the words "six months" the words "five years" were substituted.

(2) The Assistant Collector of Customs after considering the representation, if any, made by the the person on whom notice is served under sub-section (1) shall determi:ne the amount of duty •

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due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.

(3) For the purposes of sub-section (1), the· expression "relevant date" means - B (a) in a case were duty is nor levied, rhe dare on which the proper officer makes an order for t)le clearance of the goods;

(b) in a case where duty is provisionally assessed under section 18, the date of adjustment of duty after the final assessment thereof; c (c) in ·a case where duty has been erroneously refunded, the date of refund;

(d) in any other case, the date of payment of duty."

It is patent that a show cause notice under the provisions of Section D 28 for payment of Customs duties not levied or short- levied or erroneously refunded can be issued only subsequent to the clearance under Section 47 J of the concerned goods. Further, Section 28 provides time limits for the issuance of the show cause notice thereunder commencing from the "relevant date"; "relevant date" is defined by sub-section (3) of Section 28 E for the purpose of Section 28 to be the date on which the order for clearance of the goods has been made in a case were duty has not been levied; which is to say that the date upon which the permissible period begins to run is the date of the order under Section 47. The High Court was, therefore, in error in coming to the conclusion that no show cause notice under Section 28 could have been issued until and unless the order under Section 47 had been first revised under Section 130.

Section 124 reads thus :

"S. 124. - Issue of show-cause notice before confiscation of goods, etc. - No order confiscation any goods or imposing penalty on any person shall be made under this Chapter unless the owner of the goods or such person -

(a) is given a notice in writing informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty; H

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(b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty men- tioned therein, and B (c) is given a reasonable opportunity of being heard in the matter:

Provided that the notice referred to in clause (a) and the repre- sentation referred to in clause (b) may, at the request of the person concerned be oral. 11 c The case of the appellants in the show cause notices is that the stainless steel containers in which the said oil was imported were banned, that the stainless steel containers were deliberately camouflaged by paint- ing them to resemble mild steel containers, and that this was done with a D vie ' to enabling their clearance. A clearance order under Section 47 obtained by fraudulent means such as this (if it, in fact, be so) cannot debar the issuance of a show-cause notice confiscation of goods under Section

124. Fraud, if established, unravels all. An order unde; Section 47 obtained by the employment of fraudulent methods does not have to be set. aside by the exorcise of revisional powers under Section 130 before the ill-effects of the fraud can be set rigbt by initiation of the process of confiscation of the frau'dulently cleared goods under Section 124.

It is relevant to bear in mind that the issuance of the show-cause notice under Section 124 conte~plates that the respondents' response shall be considered and only thereafter 1 will the matter be decided. The respon- dents shall, therefore, have full opportunity to satisfy the authorities tc at there was no importation of banned goods which them liable to confisca- tion.

The High Court noticed that the appellants' allegation was that the stainless steel containers were painted over to suppress their true nature, but it took the view that the respondents were not required to disclose the nature or price of containers. We do think that the Higb Court ought to have taken some note of the significance of painting of stainless steel. If the stainless steel containers were painted, and so painted as to resemble mild steel containers, there can be little doubt that the intention was to slip

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them through the Customs. A Certainly, the High Court ought not to have entered into the thicket of evidence. Evidence was something for the authorities hearing the parties under Section 28 and 124 to accept and weigh. We do not approve of stultifying, in exercise of powers under Article 226, an investigation, still at the show-cause stage, by going into facts. B

We are also of the view that the High Court in any event, ought not to have allowed the writ petition without reserving liberty to the appellants to proceed against the respondents under Section 130 which, as the High Court looked at it, was the appropriate couse of action. c We have refrained from expressing ourselves, so far as we could, upon the merits of the controversy between the parties. In deciding upon · the show cause notices under Section 28 and 124, the authorities shall not take into the account our observation of those. of the High Court in the order under appeal. D The appeal is allowed. The judgment and order of the High Court is set aside. The writ petition filed by the respondents is dismissed. Proceedings pursuant to the show cause notices under Sections 28 and 124 shall continue. The respondents shall have the opportunity therein to place such evidence as they may deem appropriate. E Pending the adjudications, the stainless steel containers shall remain under seizure, but in the premises of the 1st. respondents under the supervision of a Customs Officer.

There shall be no order as to costs. F R.P. Appeal allowed.

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