1. This appeal arises out of the order-in-original bearing No.S/10-124/83 dated 3-1-1984 passed by the Collector of Custorris, Bombay.
The respondents, M/s. Liwe International imported 100% Cotton Denim Indigo Dyed Double Preshrunk finished colour Sulphur Black length 25630 yards valued at HK 1,92,225 c.i.f. (Rs. 2,46,395/-), as letters of authority holders of the licensees M/s. Binod Mills Co. Ltd., Bombay, The Anna Exporters, Bombay and M/s. Literate Wear, Bombay. After the import but before clearance, M/s. Literate Wear, Bombay appeared to have addressed a letter to the Assistant Collector of Customs, informing that they have withdrawn the facility given to the letter of authority, viz., the respondents herein. Having regard to the withdrawal of the facility by M/s. Literate Wear, the respondents herein appeared to have cancelled the remittance particulars against the licence issued in the name of M/s. Literate Wear and transferred the remittances to their own licence bearing No. P/W/2983148 dated 15-12-1982. This cancellation and substitution of the exchange remittance entry in the exchange control copy of the licence in the Bank was done on 16-11-1983. It appears the vessel "Dhaulgiri" by which the goods in question were imported entered Bombay Port on 14-11-1983.
Since the goods to the extent of the value of Rs. 1,00,879/-belonged to M/s. Literate Wear, Bombay on the date of import, a show cause notice was issued to the respondents stating that their licence No. P/W/298 dated 15-12-82 was not valid for the goods imported and the value of the goods imported exceeded the value of the valid licence produced by them to the tune of Rs. 1,00,879/-. The respondents herein were called upon to explain why the goods of the above value should not be confiscated under the provisions of Section lll(d) of the Customs Act, read with Section 3(2) of the Imports & Exports Control Order, 1955 and why action should not be taken against them under Section 112 of the Customs Act, 1962. In reply to the show cause notice, among other things, the respondents contended that M/s. Literate Wear, withdrew the letter of authority in their favour after the goods have been shipped and therefore they have no other alternative but to produce the import licence standing in their own name. They further relied upon the paragraphs 323 to 325 of Chapter 13 of Handbook of Import and Export Procedures, 1983-84. They further contended that the law does not require that the letter of credit should be against a particular licence. They also drew the attention of the Customs authorities the practice of clearing goods against licences other than the licence mentioned in the letter of credit.
3. The Collector of Customs, who held the enquiry held that the substitution of the licence and exchange debit transfer took place after the goods had been imported. Therefore, at the time of import part of the goods remained the property of M/s. Literate Wear. The learned Collector was of the view that Clause 5(3)(ii) of the Imports (Control) Order, 1955 will not be satisfied if the substitution of the licence is permitted. The learned Collector further observed, "It is immaterial whether the importer is M/s. Liwe International. The import was against M/s. Literate Wear's licence and the importers were only agents whose role is limited to that of placing orders, opening L.Cs.
and clearance through Customs. In so far as the ownership is concerned, it vests in the licence holder only. M/s. Liwe International cannot change their role from that of agent to that of owner." Having regard to the above, the learned Collector held that the goods to the extent of Rs. 1,00,879/- have been imported without a proper licence. He, however, took a lenient view and imposed a fine of Rs. 10,000/- in lieu of confiscation as the letter of authority holder had sought to clear the goods against his own licence and no malafides are involved.
4. The Central Board of Excise & Customs in exercise of its power under Section 129-D(1) of the Customs Act called for the records for the purpose of satisfying itself as to the legality and propriety of the order passed by the Collector of Customs, Bombay. After examining the records, the Board agreed that the finding of the Collector that the import to the extent of Rs. 1,00,879/- was unauthorised and therefore, the goods of that value became liable for confiscation. The Board, however, felt that the imposition of redemption fine by the Collector worked out to approximately 10% of the c.i.f. value of the goods, which in the opinion of the Board, did not wipe out entire margin of profit estimated to be more than 100% of the c.i.f. value of the goods. The Board also observed that even though the importers had effected import of Denim 100% cotton, after getting the licence endorsed fraudulently to cover the goods, an offence which ordinarily should have been attracted severe penal action, no personal penalty was imposed on the importers. The Board, therefore, in exercise of its powers under Section 129-D(1) of the Customs Act, 1962 directed the Collector of Customs, Bombay to make an application against his order to the Customs, Excise Gold (Control) Appellate Tribunal for enhancement of quantum of redemption fine and for imposition of personal penalty on the respondents herein. This order of the Board is dated 26th June, 1984. The Collector of Customs, Bombay on 31-7-1984 filed an appeal and instead of seeking the reliefs which the Board directed him to seek he sought the following reliefs : (2) the case remanded for de novo examination by the Collector of Customs, Bombay.
5. The application filed by the Collector was registered as an appeal as required under Sub-section (4) of Section 129-D. At the request of the Appellants this appeal was taken up for consideration out of turn and was heard on 30-8-1984.
6. During the hearing of this appeal, Shri J.M. Jain, Senior Departmental Representative for the appellant urged that the Collector was not justified in imposing a fine of Rs. 10,000/- in lieu of confiscation when there was evidence before him as to the margin of profit. Shri Jain submitted that the margin of profit was more than 100%. Therefore, the Collector should have atleast imposed a fine equivalent to the value of the unauthorised import. Shri Jain further submitted that the respondents herein got cleared the unauthorised import by producing a licence containing forged endorsements. When the party had used forged documents for the clearance the learned Collector besides imposing a fine equivalent to 100% of the value of the unauthorised import also ought to have imposed a personal penalty. Shri Jain further submitted that subsequent investigation disclosed that the respondents herein transferred the goods imported by them to M/s. Avis International, Kirti Nagar, New Delhi who have declared the value for the purpose of insurance at Rs. 13,58,079/-. This circumstance also goes to show that the Collector was not justified in imposing a paltry sum of Rs. 10,000/- as line in lieu of confiscation. He, therefore, prayed that a line equivalent to 100% of the value of the unauthorised import may be imposed and appropriate personal penalty may also be imposed on the respondents herein.
7. Shri L.U. Balani, learned Advocate for the respondents, however, supported the order passed by the Collector. He contended that the respondents were only letter of authority holders. On the basis of letters of authority they placed orders and opened irrevocable letter of credit, it was only after the shipment and after the goods arrived in Bombay Port, one of the firms M/s. Literate Wear, Bombay whithdrew the facility and in the said circumstances there is no malafides whatsoever on the part of the respondents. The import was validly made against valid licence but at the time of clearances, the respondents had to produce their own licence by reason of withdrawal of the facility by M/s. Literate Wear, Bombay. In the circumstances if the Collector had imposed a fine of Rs. 10,000/- in lieu of confiscation, it cannot be said that the order passed by the Collector is illegal or improper. He also submitted that the facts and circumstances of the case did not call for imposition of any penalty on the respondents herein.
8. I have carefully considered the submissions made on both sides. I have also perused records of the case.
9. This appeal involves certain interesting question of law. They may be formulated as under : (i) Whether the Collector who was directed to make an application under Section 129-D(1) by the Central Board of Excise & Customs, could seek reliefs other than those specified by the Board.
(ii) Whether a personal penalty can be imposed on a letter of authority holder.
(iii) Whether the Board for the purposes of exercising its powers conferred under Section 129-D(1) take into consideration the facts and circumstances which were not existing at the time of adjudication, but were subsequently discovered and could on the subsequently discovered facts seek modification of the order passed by the Collector.
10. Question No. (i).Section 129-D(1) confers suo moto power to the Board to call for and examine the records of any proceedings in which a Collector of Customs as an adjudicating authority has passed any decision or order under the Customs Act for the purpose of satisfying itself as to the legality and propriety of any such decision or order.
The said Section further empowers the Board to direct the Collector by an order to apply to the Appel-late Tribunal for the determination of points arising out of the decision or order passed by the Collector.
The said section, however, requires the Board to specify the points in its order. Sub-section (4) of Section 129-D requires the Adjudicating authority or an officer of customs authorised by the Collector of Customs to make an application to the Appellate Tribunal in pursuance of an order passed under Sub-section (1) within a period of three months from the date of communication of the order under Sub-section (1). When such an application is made the Appellate Tribunal shall hear the application as if it is an appeal against a decision or order of the adjudicating authority.
Sub-section (1) of Section 129-D is explicit and unambiguous. The Collector, whose order was examined by the Board, is required to apply to the Appellate Tribunal for determination of those points which the Board had specified in its order. The Collector has not been conferred with power to apply to the Tribunal for determination of points which the Board had not specified in its order. Neither Section 129-D(i) nor any other sections in the Act authorises the Collector to apply to the Tribunal for determination of any points arising out of the order passed by him as an adjudicating authority. The Collector becomes functus officio immediately on passing an order as an adjudicating authority. If the Collector realises later that the order passed by him is either illegal or improper he may administratively move the Board to exercise its power under Section 129-D(1) but he cannot himself apply to the Appellate Tribunal to determine any points that might arise from his decision or order.
In the present appeal, the appellant has produced a copy of the order passed by the Central Board of Excise & Customs. The operative portion of the Board's order reads : "The Board, therefore, in exercise of powers conferred upon it under Section 129-D(1) of the Customs Act, 1962 directs the Collector of Customs, Bombay to make an application against the said order passed by him to the Customs, Excise, Gold (Control) Appellate Tribunal under Section 129-D(4) of the said Act for enhancement of quantum of redemption fine which should be imposed to the extent of actual margin of profit and also for imposition of personal penalty commensurate with the gravity of the offence under Section 112 of the said Act and for suitably modifying the said orders of the Collector." The two points specified by the Board in its order are : (1) that there should be enhancement of quantum of redemption fine and (2) imposition of personal penalty. But the reliefs claimed by the Collector in his application dated 31-7-84 before the Appellate. Tribunal are altogether different. The Collector desired that the order passed by him as an adjudicating authority should be set aside and the matter should be remanded for de novo examination by the Collector. Granting of the first relief would have the effect of setting aside the order of confiscation passed by the Collector, which order, according to the Board's order, was correct. The Board did not require the Collector to apply to the Tribunal for setting aside that part of the order.
Granting of the second relief would not only result in setting aside the order passed by the Collector as a whole but would authorise the Collector to examine the case afresh and to pass orders which he deems fit. The Board did not require any of the above. It only wanted the Collector to apply to the Tribunal for enhancement of the quantum of redemption fine and for imposition of personal penalty.
Having regard to the scheme of Section 129-D(1) the Collector is incompetent to seek the reliefs which he had sought in the application.
He has no competence to apply to the Tribunal for determination of points other than those specified by the Board in its order.
11. Questions (ii) to {iv).As these are inter-related they are taken up together for consideration. Before answering these questions it is necessary to set out certain undisputed facts, and also certain of the facts which were stated in the appeal memo Board's order and during the arguments addressed by Shri Jain.
The respondents herein placed orders with the foreign suppliers for the supply of the imported goods as letters of authority holder of the three firms, viz., M/s. Binod Mills Co. Ltd., Bombay, The Anna Exporters, Bombay and M/s. Literate Wear, Bombay.
The shipment took place on 10-10-1983 as evidenced by the Bill of Lading.
On 15-11-1983, the respondents made a request to the Bankers to transfer the exchange remittance entry from the licence standing in the name of M/s. Literate Wear, Bombay to their own licence.
It appears the cancellation and substitution of the exchange remittance entry was because of the withdrawal of the facility by M/s. Literate Wear. Neither the order of the Collector of Customs nor any other documents disclosed as to the exact date on which M/s. Literate Wear withdrew the facility given to the respondents herein.
M/s. Literate Wear by their letter dated 6-12-83 intimated the Assistant Collector of Customs of the withdrawal of the facility given to the respondents.
The definite finding of the learned Collector was that the cancellation and substitution of the exchange remittance entry in the exchange control copy of the licence in the Bank was done on 16-11-83, after the import of the consignments.
His further finding was that at the relevant time of the import, a part of the consignment to the extent of Rs. 1,00,879/- belong to M/s.
Literate Wear, Bombay.
His further finding was that the substitution in the exchange control copy was done subsequent to the import of the goods.
The Collector also held that the goods valued at Rs. 1,00,879/- were the property of M/s. Literate Wear upto the time of clearance through customs.
The Collector further held that the import was against the licence of M/s. Literate Wear and the importers were only agents whose role is limited to that of placing orders, opening L/Cs. and clearance through Customs. In so far as ownership is concerned, it vested in the licence holder only and further M/s. Liwe International cannot change their role from that of agents to that of owner.
The conclusion of the Collector, however, was that the goods to the extent of Rs. 1,00,879/- have been imported without cover of a valid licence, an offence attracting the provisions of Section lll(d) of the Customs Act read with Section 3(2) of Imports & Exports (Control) Act, 1947 was established.
12. I may at this stage interrupt the narration and examine as to whether the Collector was right in holding that the importation has been made without cover of a valid ITC licence and that the goods became liable for confiscation under Section lll(d) of the Customs Act read with Section 3(2) of the Imports & Exports (Control) Act.
13. From the various dates mentioned in the preceding paragraphs it is seen that there was valid licences not only at the time when the respondents herein opened letters of credit but also at the time of shipment and when the goods arrived in India. The finding of the Collector was that at the time of import, the ownership of the goods vested with M/s. Literate Wear, the licence holders. If the import, as has been held by the Collector was against a valid licence, it is not clear how Collector could subsequently record a finding that the import was not covered by a valid licence. It is not further clear, how the Collector could order confiscation or impose a fine in lieu of confiscation.
14. Section 111 provides for confiscation of improperly imported goods.
Clause (d) reads : "any goods which are imported or attempted to be imported or are brought within the Indian Customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force".
The goods becomes liable for confiscation under this clause if the import was contrary to any prohibition imposed by or under the Customs or any other law for the time being in force. The finding of the Collector was that the import was not covered by a valid licence. The contravention was that of the Import Trade Control Order. The question is whether the respondents herein has contravened the import control order. As has been stated earlier, and as accepted by the Collector, till the goods arrived in India, the goods were covered by a valid licence. Therefore, it cannot be said that the import was contrary to the provisions of Import Control Order. In the said circumstances, the finding of the Collector that Section 1ll (d) was attracted to the facts of the case is incorrect. If once it is held that the import was valid the Collector cannot order confiscation nor could he impose a fine in lieu of confiscation nor could he impose any personal penalty.
Therefore, the reliefs claimed by the Board for enhancement of quantum of fine and imposition of personal penalty cannot be granted.
15. The power conferred under Section 129-D(1) is circumscribed.
Board's examination of the order passed by the Collector of Customs as an adjudicating authority should be for the purpose of satisfying itself as to the legality and propriety of the decision or order passed by the Collector. The Board did not state in its order that the order passed by the Collector was not legal. Therefore, it is not necessary for me to examine whether the order passed by the Collector was legal or not.
16. The Board seems to think that the order passed by the Collector is not proper. From the order of the Board and the statement made in the appeal memo and the arguments addressed by Shri Jain, it can be gathered that the Board came to the conclusion that the order passed by the Collector was not proper because the subsequent investigation or enquiry disclosed that the respondents herein have obtained a fraudulent endorsement on the licence against which the Collector released the goods on payment of fine. It was not contended that the Collector was aware of the fraud committed by the respondents when he ordered release. It was also not contended that there was any malafide on the part of the Collector in releasing the goods against the licence produced by the respondents. The imporpriety, if any, should, therefore, be confined to the quantum of fine in lieu of confiscation and not for imposing personal penalty.
17. The finding of the Collector was that the import was against a valid licence held by M/s. Literate Wear. He had rightly treated the respondents as agents. In law till the goods are cleared the ownership vests with the licensee. If the licensee after the import withdraws the authority given to L.A. holder, the course open to the Customs authorities was not to allow clearance or with the concurrence of the licensing authority to grant clearance in favour of another licensee.
If the Collector, in the circumstances of the case, had allowed the respondents to clear the goods against their own licence, under no stretch of imagination, it can be said that he acted improperly or committed any impropriety. As a matter of fact, there was not even an allegation of negligence on the part of the Collector. In the said circumstances it cannot be said that the order passed by the Collector suffers from impropriety.
18. Coming to the quantum of fine imposed, I have already held that the Collector committed no error in considering that the import was not covered by a valid licence and therefore, the goods became liable for confiscation. If M/s. Literate Wear were to approach the Collector and seek clearance against their licence, the Collector could not have refused to clear the goods. As has been stated earlier, it would have been open to the Collector to refuse clearance against the licence produced by the respondents herein but law does not authorise him to order confiscation or impose a fine. Since there was no appeal or cross-appeal by the respondents, there is no need to set aside that part of the order of the learned Collector.
19. Imposition of fine in lieu of confiscation is provided under Section 125 of the Act. The quantum of fine required to be imposed is left to the discretion of the officer who orders confiscation.
Excepting stating that the margin of profit was 100% the Board has not given any other reason to modify the amount of fine imposed by the Collector. It cannot be said that the fine imposed in this case is either nominal or manifestly inadequate. The Collector has recorded the reasons as to why he has taken a lenient view. The discretion exercised by the Collector in the facts and circumitances of the case cannot be considered as arbitrary, capricious or even improper.
20. In any case, the facts and circumstances established did not call for any interference as to the quantum of fine imposed.
21. Personal penalty could be imposed only under Section 112 of the Customs Act. The Board did not specify in its order which act or omission of the respondents herein rendered the imported goods liable for confiscation under Section 111. If the import is considered as valid as has been held by the Collector, the question of imposition of personal penalty on the respondents does not arise. Even otherwise, the respondents herein were only letters of authority holders. Till the import they acted in that capacity alone. As a letter of authority holder they could place orders, open L/C and clear the goods for and on behalf of the owners. For this limited purpose they will also be treated as owners under Section 147. The licence holders vicariously became liable for the acts done by the letter of authority holders.
Having regard to the limited authority conferred on the letter of authority holders it is not permissible under law to impose any personal penalty on them, unless, of course, the adjudicating authority records a finding that the act or omission on the part of the letter of authority holder requiring imposition of personal penalty, was done without the knowledge and consent of the licence holder. In the instant case, it was with the knowledge and consent of M/s. Literate Wear the respondents herein placed orders and imported the goods. Therefore, no personal penalty could be imposed on them.
22. The only other aspect that remains for consideration is about the subsequent discovery of the forgery alleged to have been committed by the respondents herein. The Board, in my opinion, cannot take into consideration the subsequent facts or events for the purpose of exercising its power under Section 129-D(1). The examination of the Collector's order by the Board is to find out whether it suffers from any illegality or impropriety. This examination should be with reference to the facts and events existing at the time the Collector passed the order. If the Collector had knowledge of the alleged forgery or if the department at the time of enquiry had placed the material from which the Collector could either hold or come to a reasonable conclusion that the appellants herein were guilty of forgery but if the Collector ignores the aspect of forgery then, of course, the Board could probably hold that the order passed by the Collector was improper.
23. Having regard to my findings, I hold that no personal penalty could be imposed on a letter of authority holder. I further hold that the Board for the purpose of exercising its power under Section 129-D(1) cannot take into consideration the facts and circumstances which were not existing at the time when the adjudicating authority passed the order but were subsequently discovered and the Board also cannot seek modification of the order on the basis of the subsequently discovered facts.
In the result, for the reasons stated in this order, this appeal fails and the same is rejected.