M/S. Industrial Cables (India) Ltd. and Another Vs. the Board of Trustees of the Port of Bombay and Others - Court Judgment

Excerpt:
[a] customs act (52 of 1962) - section 48 - major port trusts act (38 of 1973), sees. 61 and 62 - both acts and their provisions operate in different fields - action of authorities under two acts are not controlled by each other - sale of goods by port trust authorities for recovery of dues - custom authority have no role to play.;section 61 of the major port trusts act entitled the said authorities to sell the goods for duty purposes which are included in that provision some of which relate to the non-payment of rent etc. section 62 of the said act further entitles the authorities of the bombay port trust to sell the goods if those are not cleared from the warehouse within a particular time. it is thus apparent that under these two clauses the bombay port trust have an independent and.....order1. though the discussion under the controversy has fallen on quite a specious and expanded field still the point involved is very short one and, therefore, it is in that smaller field that this petition can be conveniently disposed of. since, however, the learned counsel for the petitioners, argued some other points in deference only a passing reference to these points would suffice the purpose. this is more so since the petitioners are bound to succeed on the short premises that is avalable on the record which appears to be unassailable.2. only a short narration of the facts would suffice the purpose. the petitioners are a limited company inter alia dealing in manufacture of electrical cables. they have their registered office outside the state. the 1st respondent is the authority.....

Judgment:
ORDER

1. Though the discussion under the controversy has fallen on quite a specious and expanded field still the point involved is very short one and, therefore, it is in that smaller field that this petition can be conveniently disposed of. Since, however, the learned Counsel for the petitioners, argued some other points in deference only a passing reference to these points would suffice the purpose. This is more so since the petitioners are bound to succeed on the short premises that is avalable on the record which appears to be unassailable.

2. Only a short narration of the facts would suffice the purpose. The petitioners are a limited company inter alia dealing in manufacture of electrical cables. They have their registered office outside the State. The 1st respondent is the authority acting under the Major Ports Trusts Act and the 2nd respondent is the authority acting under the Customs Act. Respondent No. 3 is the Union of India. The petitioners through their indenting agents viz., M/s. Priya Chemicals, Bombay, placed a particular indent in December1977 on the foreign suppliers viz., Messrs Phillip Overseas Incorporated, U.S.A. for about 40 M.Ts. of defective stainless steel sheets having 22 and 23 guages. In pursuance thereof they opened the letter of credit on the foreign supplier through the State Bank of Patiala for a particular amount of U. S. Dollars. That letter of credit was amended. The suppliers under the bills of lading which are four in number of all dated 31st January,1978 and corresponding invoices dated 21st February, 1978 supplied approximately each of the aforesaid documents. This was confirmed by the office of the Regional Iron and Steel Controller, Bombay, by letter dated 7thFebruary, 1978 that the item of stainless steel sheets defective would fall in the category of non-channalised items with the stipulation that the petitioners would be entitled to import as actual users in term of the policy in question. All the said letters of credit, invoices and bills of lading etc., are placed on record. After observing these formalities the said goods arrived at Bombay some time in March 1973 and the bills of entry were filled and noted with the Customs House at Bombay to cover each of the consignments through their Customs House agents and those were noted in the Import Department.

3. A development then occurred when the officers attached to the Customs Department examined some consignments and reported that the goods were of prime stainless steel sheets though they were described in all documents as defective stainless steel sheets. The Customs House Agents endorsed the said bills of entry registering their protest and disagreement with that opinion. Much correspondence then ensued between the parties, one was staking its claim while the other its rival claim and the tussle was going on. The Customs Authorities reexamined the articles and ultimately endorsed their earlier report with which the petitioners were not satisfied and a grievance is made that the officers had only a visual examination which could not have been enough to detect the deficiencies and defects in the goods. That aspect also falls in the background in the present proceedings though that was the main point of agitation before the Customs Department. Some communication was obtained from the foreign suppliers who also specifically mentioned that those were defective sheets and mentioned not less than 4 items of such defects. The Customs Officers were, however, not satisfied and maintained their stand that these were prime sheets. On account of this dispute, acceding to the petitioners, they could not clear the goods which were by then lying in the custody of the Bombay Port Trust. The said authority on a parallel track had communications with the petitioners for clearance of the goods and the petitioners were reagitating that because of this dispute with the Customs Department they could not clear the goods.Then on that forum also some tussle was going on and the petitioners claimed that they had thus the two forums. It is not necessary to refer in detail to the correspondence ensued between the parties.

4. However, ultimately, it was disclosed to the petitioners that the Bombay Port Trust authorities had actually sold the goods presumably under Sections 61 and 62 of the Major Port Trusts Act mainly on the ground that their charges were not paid and also on the ground that the goods were not cleared within the stipulated time. The petitioners claim that this was in spite of their protest not to sell the goods until the dispute was resolved by the Customs Department because it was on account of that dispute that they could not clear the goods. That a notice was received by the petitioners before such an auction sale effected by the Bombay Port Trust is controverted on behalf of the petitioners.

5. Ultimately, the goods were actually sold by the Bombay Port Trust under Ss. 61 and 62 of the said Act on 6th July 1980. The total amount under different heads was claimed to be Rs. 18,96,226.66, out of which expenses of sale amounted to Rs. 1,00,515.48 while the other two items related to Customs Duty and I.T.C. fine and the 4th item of Rs. 1,23,024.99 related to BPT charges. The gross proceeds collected were to the tune of Rs. 12,36,065.00 and that is how a balance of Rs. 6,60,161.56 was held to be outstanding and recoverable from the petitioners under S. 131 of the Major Port Trusts Act.

6. After this order was passed it was the turn of the Customs Department to have a follow up action and that is how the impugned order was recorded on 1st September 1979 which was despatched on 4th September 1979 and under that order the goods were confiscated under S. 111 of the Customs Act, 1962 read with S. 3(2) of the Imports and Exports (Control) Act, 1947. The petitioners were given an option under S. 125 of the Customs Act to pay a fine in lieu of confiscation. This order contained the necessary table giving all the details and it was endorsed to the Docks Manager, Bombay Port Trust, suggesting that they have no objection for theremoval of the goods provided their dues are guaranteed. It is this order that is being challenged in this petition under Article 226 of the Constitution along with some other orders issued by the Bombay Port Trust incluing the auction sale effected by that authority.

7. At the time of admission, the learned single Judge restricted the rule only to this impugned order and the orders following to that passed by the Customs Department but refused to grant any rule in respect of the orders passed by the Bombay Trust including the event of auction sale.

8. Shri Deshpande, learned Counsell appearing on behalf of the petitioners, no doubt raised multifold contentions and as stated at the threshold only a passing reference would be enough to negative many of those contentions, since those contentions do not affect the ultimate fate of this proceeding. Thus for instance it has been repeatedly argued that Section 48 of the Customs Act controls the provisions of Sections 61 and 62 of the Major Port Trusts Act and in fact the concept as contained in Section 48 of one Act is sought to be transplated in the provisions of the other Act. The argument is to the effect that it is only under the authority and permission that could be granted by the Customs Department under Section 48 of the Customs Act that the authorities of the Bombay Port Trust would be entitled to sell the property even under Sections 61 and 62 of the Major Port Trusts Act. It is difficult to subscribe to this view for obvious reasons. It is rightly contended by Mr. Sethna, learned Counsel for respondents Nos. 2 and 3, that these provisions under these two statutes fall independently in different fields, each being independent of the other and each is not controlled by the other. This appears to be so. Section 48 has its own independent existence and parameters and has nothing to do about the independent authority of the Port Trust to resort to Sections 61 and 62 of the Major Port Trusts Act. Thus, it would be clear that under Section 48 of the Customs Act, the Customs Officer concerned has to satisfy himself that it is necessary to sell the goods; the ground forsuch satisfaction is reflected in that provision itself such as the goods are not cleared for home consumption or warehoused or have been relinquished etc. Then comes the third clause under which he has to take the permission of the concerned authority of the Customs department and under the last clause the goods are to be sold. It is actually the mode of sale that is prescribed under the last clause that the goods are to be sold by the person having the custody thereof.

9. Shri Deshpande, learned Counsel for the petitioners, sought to argue that by reading all thse clauses together and especially clause 4 it would mean that the goods are to be sold by the Port Trust authority only under the permission of the Customs Officer. Obviously that is an incorrect reading of this provision because the Customs Department has an independent discretion to direct the sale of the goods; the only requirement is that the goods are to be sold in a particular manner and since the goods are in the custody of the Bombay Port Trust these are required to be sold by the Officer of that department. This, however, does not mean that this is a sale under the powers of the Bombay Port Trust. The authority continues with the Customs Department for a specified purpose though only the implementation of that order is through the Bombay Port Trust because the goods are in their custody. Section 61 of the Major Port Trusts Act entitled the said authorities to sell the goods for duty purposes with which are included in that provision some of which relate to the non-payment of rent etc. Section 62 of the said Act further entitles the authorities of the Bombay Port Trust to sell the goods if those are not cleared from the warehouse within a particular time. It is thus apparent that under these two clauses the Bombay Port Trust have an independent and unfettered discretion and authority to sell the property provided the prescription under these two sections is fulfilled. It is worth noting that the prescription entitling the authorities to sell the goods is entirely different in Sections 61 and 62 of the Major Port Trusts Act on the one side and Section 48 of the Customs Act. Thus it is apparent that both the authorities are acting in differentfields of operation and their actions are not controlled by the other. The contention raised by Shri Deshpande cannot, therefore, be accepted.

10. It was then sought to be contended by Shri Deshpande that the impugned order recorded on 1st September, 1979 itself suggests that the sale was effected by the Bombay Port Trust only under the permission of the Customs Department. For that purpose reliance was placed on the endorsement on the reverse. That copy was forwarded to BPT ,suggesting that the Customs House has no objection under Section 48 of the Customs Act to the removal of the goods mentioned in the sale list. However, the most important feature is overlooked that there is positive reference even in this endorsement making it unmistakably clear that the sale was effectd not under Section 48 of the Customs Act but exclusively under Sections 61 and 62 of the Major Port Trusts Act. They merely stated that they have no objection to the removal of the goods provided of course that the payment of Customs duty is guaranteed and really speaking the Customs department was more concerned with that aspect including the imposition of fine. It is worth noting that even in the order recording the auction and the sale proceeds the BPT has referred to an item of Customs duty which could be recovered by the Customs Department. Both these documents when read together make it clear that this order of 1st September 1979 has nothing to do with the actual auction sale which was effectd expressly by the B.P.T. authorities but the Customs department addressed themselves more to the resultant consequence vis-a-vis the sale proceeds for the purpose of recovery of Customs duty and that is made very clear in the order. Further, the substantive part of the order unmistakably shows that it was out and out an order of confiscation under Section 111 of the Customs Act which was according to them was post sale because the sale was to be held on 28th and 31st August, 1979. Clearly, therefore, his plank of the argument advanced by Shri Deshpande has also no substance.

11. Then, however, comes the main question and it is mere germane to the question in this proceeding about the validity of the impugned order dated 1st September, 1979 issued by the Collector of Customs, Bombay. The said order makes no secret that the confiscation was made under Section 111 of the Customs Act relating to the same goods which were sold or sought to be sold by the BPT. Shri Deshpande has raised two preliminary questions in that behalf and in my opinion he must succeed on both these counts. The first is that before passing this order no show cause notice was issued as contemplated by Section 124 of the Customs Act as also no personal hearing was given nor any explanation was tendered much less it could be considered by the Customs Department. That such a notice preceding this order has not been issued to the petitioners is not disputed on behalf of the Customs Department. I may incidentally observe that significantly no affidavit in reply has been filed and the recitals in the petition in that behalf have gone unchallenged. Even othewise the factum of non-issuance of notice is not disputed. Under Section 111 of the Customs Act certain hems of goods are liable for confiscation and under sub-clause (d) those goods include which are 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. Once these goods are liable to be confiscated under this provision then the legal formalities under the Act are to be followed. Under Section 124 of the Act is it prescribed as a mandate that no order confiscating any goods or imposing any penalty on any person shall be made under that Chapter unless the owner of the goods or such person is given a notice in writing informing of the grounds on which the confiscation is proposed and also unless he is given an opportunity of making a representation in writing within a certain period and further he is given a reasonable opportunity of being heard in that mutter. It is only after these formalities are followed that the goods can be confiscated under Section 111(d) which is already referred to. As stated onfacts admittedly no such notice was given; admittedly the petitioners were not given an opportunity of making any representation and equally admittedly no reasonable opportunity was given of being heard. All the three prescriptions under this provision of Section 124 are blissfully missing. There is obviously a salutary purpose in enacting this provision which purpose need not be restated because it is well settled apart from observace of principles of natural justice. In this case it was equally necessary because under this notice the petitioners would have been given an opportunity to explain that these goods arc not liable for confiscation because they do not fall under the label of prime stainless steel sheets and those do not fall under the description of Section 11(d). The petitioners were also not heard and obviously the ultimate order was passed outright behind their back. This assumes importance in view of the petitioners' contention right from the beginning that these are the defective stainless steel sheets in contrast to the departments contention that these are the prime sheets. A valuable forum to agitate that point was thus lost. The impact, therefore, is obvious and the impugned order is, therefore, liable to be set aside on this ground alone.

12. As stated the petitioners are entitled to succeed even on the second point as canvassed by Shri Deshpande. This impugned order was recorded on 1st September 1979. Learned counsel however, submits that this order was never served on the petitioners at any time and in fact the petitioner learnt about it as a surprise for the first time when they filed a previous petition in this court on 4th March 1983 and, therefore, with the permission of the court they withdraw the earlier petition and filed the present one obviously challenging this impugned order. This statement in the petition is not controverted by the department by the filing any affidavit in reply. No other record is also shown even to inferentially suggest that the petitioners were served with this order. Apart from all other consequences the more prominent one is that the order thus stipulates that the petitionerswould be entitled to file an appeal against that order within a particular time and non-service of this order of non-endorsing this order to the petitioners has snatched this valuable right from the petitioners when before the appellate forum they could have reagitated their basic contention also about the nature of the goods not being prime stainless steel sheets. Therefore, it is on the second occasion that such an opportunity was snatched away from the petitioners. There is no explanation or justification for this lapse. Shri Sethna, learned Counsel for the respondents, no doubt endeavoured to submit that there is enormous delay in filing this petition since the order was passed in 1979 while the petition was filed in 1983 and according to him the record reveals and is indicated by the order of the learned single Judge passed at the time of admission that the petitioners must have been aware in 1980 itself about the auction-sale effected by the BPT authorities. In my opinion that can hardly make any difference and the reasons are obvious. Correspondence was being exchanged between the parties even thereafter and what is of importance, as discussed, no show cause notice was issued and on the top of it the petitioners were not aware of this order at all and the effect of this deficiency remains very much in tact even assuming that the petitioners were aware of the auction effected by the BPT authorities. It also suggests that the impugned order has really no existence in law because of all these illegalities. Consequently, therefore, firstly it cannot be said that there was any delay or there were any laches on the part of the petitioners and secondly on the firm foundation that the illegality of the impugned order is manifest which cannot be sustained on any basis. Consequently, therefore, the impugned order dated 1st September, 1979 will have to be set aside about the confiscation of the goods in its entirety. As to what would be the consequences of this order is not the subject-matter of this proceeding as was sought to be suggested by Shri Sethna, learned Counsel for the Revenue and, therefore, it is not necessary to express any opinion in that behalf.

13. The net result, therefore, is that the petition succeeds. The impugned order dated 1st September, 1979 recorded by the Collector of Custom, Exhibit-21 to this petition, confiscating the goods in question under Sec. 111 of the Customs Act is set aside.

14. Rule is made absolute accordingly with no order as to costs.

15. Petition allowed.