Full Judgment Text
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CASE NO.:
Appeal (civil) 3711-12 of 2000
PETITIONER:
COMMISSIONER OF CUSTOMS, MUMBAI
Vs.
RESPONDENT:
M/S. VIRGO STEELS, BOMBAY & ANR.
DATE OF JUDGMENT: 04/04/2002
BENCH:
CJI, N. Santosh Hegde & Arijit Pasayat
JUDGMENT:
(With C.A.Nos.48-49 of 2001)
J U D G M E N T
SANTOSH HEGDE, J.
M/s. Associated Cement Company Ltd. (for short ’ACC’)
had embarked upon a project of substantial expansion and
modernisation of its cement factory at Shahabad in Karnataka.
The ACC had floated a tender inviting supply of high standard
deformed steel bars. In that tender, ACC had claimed that the
project was aided by the International Bank for Reconstruction
and Development (for short ’the IBRD’), which would give the
importer exemption from the import duty. In response to the
said tender, M/s. Virgo Steels made an offer to supply 5,187
MT of steel. The offer was accepted by the ACC and the said
Virgo Steels obtained an advance licence under the Deemed
Export Scheme for duty-free import of the concerned steel
under Notification No.210/82. This notification specifically
required that if the goods in question was not used for the
purpose for which importation was permitted then the importer
was liable on demand to pay a sum equivalent to the duty
leviable. Sometime in November, 1988, the ACC decided to
abandon the work of expansion, hence, the licence obtained
under the above said scheme for importation of duty-free steel
became invalid. In spite of the same M/s. Virgo Steels imported
certain quantities of steel duty-free knowing very well that the
expansion project by the ACC had been abandoned. It is on
record that M/s. Virgo Steels asked ACC to issue a signed
export certificate in regard to actual quantities of steel supplied
by it for the purpose of duty exemption, but the ACC pleaded
their inability to provide such Deemed Export Certificate in
view of the fact that it had abandoned its project.
In the above factual background and on the basis of
certain information received by the Marine Preventive Wing of
Mumbai, Customs investigations were conducted in regard to
the import and illegal sale of steel by M/s. Virgo Steels. Based
on the said investigation, Commissioner of Customs, Mumbai
came to the conclusion that the import made by M/s. Virgo
Steels after the abandonment of the project by the ACC was in
contravention of the provisions of the Customs Act, 1962 (’the
Act’), hence, decided to initiate proceedings against M/s. Virgo
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Steels and ACC. Having come to know of this decision of the
Commissioner of Customs, to pre-empt any penal proceedings,
consequences of which could have been very serious, M/s.
Virgo Steels wrote a letter dated 30.3.1991 to the Assistant
Collector of Customs, Marine Preventive Wing, Mumbai
admitting in clear terms that the import of 24,326 MT of Billets
and 2300 MT of Lead Ingot by them, and cleared duty-free
under the DEC Scheme was illegal. They also admitted that the
said material was sold in the market contrary to the terms of
said Import Scheme and assured the former that they were
ready to pay the duty chargeable under the said import as also
any other penalty that may be imposed on them. The relevant
part of the said letter is as under:- "In this respect it is our
humble submission that we are ready to pay the duty chargeable
of 24,326 MT of Billets and 2300 MT of Lead Ingot along with
any other penalty imposed on us. We do not want any show
cause notice and personal hearing in the matter." (emphasis
supplied). Along with the said letter they also enclosed a
cheque for a sum of Rs.50 lacs though post dated as a token of
their commitment made in the said letter.
Based on the said letter, the Collector of Customs vide
his order dated 16.3.1993 held that duty amounting to Rs.
1,50,11,858/- was leviable on the goods cleared by M/s. Virgo
Steels and after giving deductions for such amounts already
deposited by them, a demand for the balance sum of
Rs.72,02,060/- was made on M/s. Virgo Steels along with a
penalty of Rs.5 lacs. In regard to ACC, the Collector imposed a
penalty of Rs.5 lacs for having abetted the illegal import of the
said sale.
M/s. Virgo Steels and ACC preferred their respective
appeals before the Customs, Excise & Gold (Control) Appellate
Tribunal (for short ’the Tribunal’). The Tribunal by the
impugned order though rejected the contention of M/s. Virgo
Steels as to the genuineness of the imports, still allowed their
appeal holding that the non issuance of show cause notice as
required under Section 28 of the Act had vitiated the
proceedings initiated by the Collector of Customs, hence,
partially allowed their appeal. The appeal of the ACC was also
allowed holding that there was no intentional or otherwise
abetment by ACC because they had already informed M/s.
Virgo Steels of their decision to abandon their expansion
project and had also refused to give M/s. Virgo Steels a
certificate justifying the import made by them.
It is against this order of the Tribunal made in appeal
No.C-1994/92-B2 of M/s. Virgo Steels and Appeal
No.C/151/94.Bom. filed by the ACC, the abovenoted four
appeals have been preferred before this Court, out of which
Revenue has filed two appeals out of which C.A.No.3711 of
2000 is against the order of the Tribunal allowing the appeals
filed by M/s. Virgo Steels, in part, and C.A. No.3712 of 2000 is
against the order of the Tribunal, allowing the appeal of ACC in
its entirety, while M/s. Virgo Steels being aggrieved by that
part of the order which has gone against has preferred
C.A.Nos.48-49 of 2001.
Learned Solicitor General appearing for the Revenue,
contended before us that the tribunal has erred in coming to the
conclusion that the principle of waiver did not apply to the
requirement of notice under Section 28 of the Act. He
submitted that by the letter of 30.3.1991, the Managing Partner
of M/s. Virgo Steels had in specific terms admitted the violation
of conditions of the licence granted to it under the Deemed
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Export Scheme as also the firm’s liability to pay duty and
penalty. He further submitted that the firm having expressly
waived its right to receive a show-cause notice as also personal
hearing, it cannot be permitted to turn around and say that non-
issuance of notice under Section 28 of the Act is fatal to the
Revenue. Mr. Rajiv Dutta, learned senior counsel appearing for
M/s. Virgo Steels, while defending the order of the tribunal,
submitted that a notice under Section 28 of the Act being a
condition precedent to invoke the jurisdiction of the Officer
concerned, in the absence of such notice proceedings initiated
for the recovery of duty became void. He also submitted that
the principle of waiver does not apply to a mandatory
requirement of law. He further contended that the letter of
30.3.1991 was obtained by the Customs Authorities under
coercion and duress, therefore, there could be no waiver based
on such letter. He further assailed the finding of the Tribunal
that the import made by M/s. Virgo Steels was not for the
purpose of a project aided by the IBRD.
We will first consider the argument of learned counsel for
M/s. Virgo Steels that their letter of 30.3.1991 was written by
the firm because of coercion and duress, hence, cannot be relied
upon. This argument was raised for the first time before the
Collector during the course of arguments of learned counsel
appearing for M/s. Virgo Steels in the adjudicatory
proceedings. It is to be seen that the said letter is dated
30.3.1991 and the argument of learned counsel was addressed
on 3.12.1992 i.e. more than one and a half years after the said
letter was sent to the Collector concerned. During that period of
over one and a half years, the Partner of the Company who had
signed the letter or anybody else on behalf of the firm, made no
attempt to resile from the contents of the said letter. They have
neither made any complaint nor taken any steps to get over the
contents of the letter written on behalf of the firm on 30.3.1991.
It is relevant to note at this stage that along with the letter, a
post-dated cheque was sent and no steps were taken to stop
payment against that cheque either. Before the Collector,
though an oral submission was made by learned counsel that
the letter in question was obtained by coercion not even an
affidavit was filed in support of that allegation. The Collector
by his order, had rejected the said contention holding that at no
stage till the final submission of reply on 3.12.1992, M/s. Virgo
Steels had made any grievance of coercion or any other undue
influence in obtaining the letter of 30.3.1991. It is also
necessary to note herein that this argument of coercion in
obtaining the letter of 3.12.1992 seems not to have been pressed
before the Tribunal. The Tribunal in its impugned order in paras
8 and 9 has extracted the argument of learned counsel for M/s.
Virgo Steels where we find no reference whatsoever as to the
non-voluntary nature of the letter of 30.3.1991. For all these
reasons, we have no hesitation in rejecting this contention of
M/s. Virgo Steels that the letter of 30.3.1991 was not
voluntarily submitted by them. This argument before us, in our
opinion, is totally baseless and an afterthought.
We will next consider the requirement of Section 28 of
the Act and the applicability of the principle of waiver to the
said requirement of that Section. While so doing, it is to be
noted that our discussion of Section 28 of the Act is with
reference to the Section as it stood at the relevant time and not
with reference to the existing Section 28 of the Act. The
Tribunal by the impugned order has held that in the absence of
a notice under Section 28 of the Act, the recovery of duty which
has escaped collection, is impermissible in law. While
accepting this argument, the Tribunal has placed reliance on a
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judgment of this Court in Collector of Customs, Calcutta v. Tin
Plate Co. of India Ltd. (1996 (87) ELT 589). It is true that in
the course of the above-cited judgment, this Court had held that
a notice under Section 28 is a condition precedent, but having
perused the said judgment carefully, we are of the opinion that
this Court used the expression "condition precedent" with
reference to issuance of notice under Section 28 and not with
reference to the jurisdiction of the proper Officer under that
Section. While the absence of notice may invalidate the
procedure adopted by the proper Officer under the Act, it will
not take away the jurisdiction of the Officer to initiate action for
the purpose of recovery of duty escaped. This is because of the
fact that the proper Officer does not derive his power to initiate
proceedings for recovery of escaped duty from Section 28 of
the Act. Such power is conferred on him by other provisions of
the Act which mandate the proper Officer to collect the duty
leviable. By a perusal of Chapter V of the Act in which Section
28 is found, it is seen that the charging Section which
authorises the levy of customs duty is found in Section 12 of
the Act. Section 17 contemplates the procedure for making an
assessment in regard to duty payable while sub-section (4) of
Section 17 makes a provision to empower the proper Officer to
reassess the imported goods for duty if it is found that the
assessment made at the time of importation was based on
incorrect or false information. Section 142 of the Act found in
Chapter XVIII provides for actual recovery of sums due to the
Government. A cumulative reading of these provisions found in
the Act clearly shows that the jurisdiction of a proper Officer to
initiate proceedings for recovery of duty which has escaped
collection, is not traceable to Section 28. The power to recover
duty which has escaped collection is a concomitant power
arising out of the levy of customs duty under Section 12 of the
Act, and the same does not emanate from Section 28 of the Act.
In our opinion, Section 28 only provides for the procedural
aspect for recovery of duty, hence, any irregularity committed
by a proper Officer in following the procedure laid down in
Section 28 would not denude that Officer of his jurisdiction to
initiate action for recovery of escaped duty but it may make
such proceedings initiated by that Officer voidable. In that view
of the matter, in our opinion, the term "condition precedent"
used in the case of Tin Plate Co. (supra) is referable to the
procedural requirement of Section 28 and not to the
jurisdictional aspect of the proper Officer to recover the
escaped duty. In the said view of the matter, we are of the
opinion that the law laid down by this Court in Tin Plate Co.’s
case (supra) is that issuance of a notice under Section 28 is a
mandatory requirement of that Section, with which we are in
agreement. We also notice the very important fact that in that
case the question of waiver did not arise and what was
considered by this Court was the contention of the Revenue that
a subsequent letter written by the Revenue after the expiry of
the period of limitation would cure the defect of non-issuance
of a notice.
The next question for our consideration is: can a
mandatory requirement of a statute be waived by the party
concerned ? In answering this question, we are aided by a
catena of judgments of this Court as well as of the Privy
Council. We will first refer to the judgment of the Privy
Council which has been consistently followed by the Supreme
Court in a number of subsequent cases involving similar points.
In Vellayan Chettiar v. Government of Province of Madras
(AIR 1947 PC 197), the Privy Council held that even though
Section 80 C.P.C. is mandatory, still non-issuance of such
notice would not render the suit bad in the eye of law because
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such non-issuance of notice can be waived by the party
concerned. In the said judgment, the Privy Council held that the
protection provided under Section 80 is a protection given to
the person concerned and if in a particular case that person does
not require the protection he can lawfully waive his right.
In the case of Dhirendra Nath Gorai and Subal Chandra
Shaw and Ors. V. Sudhir Chandra Ghosh and Ors. (1964 (6)
SCR 1001), this Court followed the judgment of the Privy
Council in Vellayan Chettiar (supra) and held that even though
the requirement of Section 35 of the Bengal Money Lenders’
Act is mandatory in nature, such mandatory requirement could
be waived by the party concerned. On a true construction of
Section 35 of that Act, this Court held that the said Section is
intended only for the benefit of the judgment-debtor and,
therefore, he can waive the right conferred on him under the
said Section.
In the case of S. Raghbir Singh Gill v. S. Gurcharan
Singh Tohra & Ors. (1980 Supp SCC 53), this Court negatived
an argument that the requirement of Section 94 of the
Representation of the People Act, 1951 cannot be waived. This
argument was based on the principle that public policy cannot
be waived. Rejecting the said argument, this Court held that the
privilege conferred or a right created by a Statute, if it is solely
for the benefit of an individual, he can waive it. It also held that
where a prohibition enacted is founded on public policy, courts
should be slow to apply the doctrine of waiver but if such
privilege granted under the Act is for the sole benefit of an
individual as is the case under Section 94 of the Representation
of the People Act, the person in whose benefit the privilege was
enacted has a right to waive it because the very concept of
privilege inheres a right to waiver.
In Krishan Lal v. State of J & K (1994 (4) SCC 422), this
Court while considering the requirement of furnishing copy of
inquiry proceedings under Section 17(5) of the J & K
(Government Servants) Prevention of Corruption Act, 1962
held following the judgment in V. Chettiar’s case (supra) and
D.N. Gorai (supra) that though the requirement mentioned in
Section 17(5) of the Act was mandatory, the same can be
waived because the requirement of giving a copy of the
proceedings of the inquiry mandated by Section 17(5) of the
Act is one which is for the benefit of the individual concerned.
In Martin & Harris Ltd. V. 6th Additional Distt. Judge &
Ors. (1998 (1) SCC 732), this Court while considering the
provision of Section 21(1)(a) first proviso of the U.P. Urban
Buildings (Regulation of Letting, Rent and Eviction) Act, 1972
negatived a contention advanced on behalf of the appellant
therein that the said provision was for public benefit and could
not be waived. It held that it is true that such benefit enacted
under the said proviso covered a class of tenants, still the said
protection would be available to a tenant only as an individual,
hence, it gave the tenant concerned a locus poenitentiae to avail
the benefit or not. It also held that the benefit given under the
said section was purely personal to the tenant concerned, hence,
such a statutory benefit though mandatory, can be waived by
the person concerned.
From the ratio laid down by the Privy Council and
followed by this Court in the above-cited judgments, it is clear
that even though a provision of law is mandatory in its
operation if such provision is one which deals with the
individual rights of person concerned and is for his benefit, the
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said person can always waive such a right.
Bearing in mind the above decided principle in law, if we
consider the mandatory requirement of issuance of notice under
Section 28 of the Act, it will be seen that that requirement is
provided by the Statute solely for the benefit of the individual
concerned, therefore, he can waive that right. In other words,
this Section casts a duty on the Officer to issue notice to the
person concerned of the proposed action to be taken. This is not
in the nature of a public notice nor any person other than the
person against whom the proceedings are initiated has any right
for such a notice. Thus, this right of notice being personal to the
person concerned, the same can be waived by that person.
If the above position in law is correct, which we think it
is, M/s. Virgo Steels, having specifically waived its right for a
notice, cannot now be permitted to turn around and contend that
the proceedings initiated against them are void for want of
notice under Section 28 of the Act, so as to frustrate the
statutory duty of the Revenue to demand and collect customs
duty which M/s. Virgo Steels had intentionally evaded.
Since the sole ground on which the appeal of M/s. Virgo
Steels was allowed by the Tribunal is based on non-issuance of
a notice under Section 28 and we having found such a notice
was not necessary in the facts and circumstances of the case, the
appeal of the Revenue as against M/s. Virgo Steels has to be
allowed.
In C.A. Nos.48-49 of 2001, M/s. Virgo Steels have, inter
alia, questioned the correctness of the findings of the tribunal as
to the illegality of the import of steel made by them, the
Tribunal after considering the material on record by the
impugned order, has agreed with the finding of the Collector
that M/s. Virgo Steels had imported the steel in question, duty-
free representing that the same was being imported for
utilisation in a project financed by the IBRD but was in fact
sold in the open market. This finding being one of facts and
having been arrived at by the Collector and the Tribunal on the
basis of the material on record, we are not inclined to disturb
this finding, nor, indeed, do we find any good ground to do so.
Hence, we find no merit in these appeals and these appeals fail.
C.A. No.3712 of 2000 is filed by the Revenue against the
order of the Tribunal which has allowed the appeal filed by
ACC holding that there was no material to come to the
conclusion that ACC had abetted the illegal import of steel by
M/s. Virgo Steels. This finding also being a finding on a
question of fact, we are not inclined to interfere with this
finding. At this stage we must place on record the fact that
learned Solicitor General has very fairly conceded that he is not
in a position to persuade us to take a contra view in this appeal,
therefore, this appeal also fails.
For the reasons stated above, C.A. No.3711 of 2000 is
allowed, the impugned order of the Tribunal is set aside and
that of the Collector restored. The appellant shall be entitled to
costs payable by M/s. Virgo Steels, Mumbai.
C.A. No.3712 of 2000 is dismissed. No costs.
C.A. Nos.48-49 of 2001 are dismissed with costs.
Ordered accordingly.
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CJI
...J.
(N. Santosh Hegde)
. J.
April 4, 2002. (Arijit Pasayat)