Full Judgment Text
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PETITIONER:
UNION OF INDIA
Vs.
RESPONDENT:
SAMPAT RAJ DUGAR AND ANR.
DATE OF JUDGMENT21/01/1992
BENCH:
JEEVAN REDDY, B.P. (J)
BENCH:
JEEVAN REDDY, B.P. (J)
RANGNATHAN, S.
RAMASWAMI, V. (J) II
CITATION:
1992 AIR 1417 1992 SCR (1) 269
1992 SCC (2) 66 JT 1992 (1) 554
1992 SCALE (1)167
ACT:
Imports (Control) Order, 1955:
Clasuse 5(3) (ii)-Object and interpretation of-Import
licence-Condition deeming goods imported as property of
licensee at the time of import and upto clearance through
Customs-When not applicable-Goods imported-Importer failing
to clear goods from Customs by making payments and receiving
documents of title sent by seller-Whether goods remain
property of seller-Whether seller entitled to re-export such
goods-Custom Act, 1962 : Section 2 (26)-Import and Export
Policy, 1985-86 : Para 26(iv).
Customs Act, 1962 :
Section III (d)-Applicability of-Goods imported under
valid licence and not contrary to law-subsequent
cancellation of licence-Whether renders import contrary to
law and goods imported liable for confiscation.
Section III (o)-When applicable-Import licence granted
subject to conditions-Non-observance of conditions by
importer in earlier consignments-Whether indicative of
similar non-observance in subsequent consignments also-
Confiscation of goods-Whether justified-Imports and Exports
(Control) Act, 1947 : Section 4-G.
Interpretation of Statutes-Words and phrases take
colour from the context in which they are used.
Words and phrases-’Property of’ and ’Vest’-Meaning of.
HEADNOTE:
The second respondent doing business in India, obtained
an advance import licence for importing raw silk. The
licence was granted subject to the condition that raw silk
imported would be utilised for manufacturing and exporting
garments. Sometime thereafter, the second respondent
received three consignments but did not fulfill the
stipulated condition. Subsequently, the first respondent,
an Indian
270
national residing abroad, and doing business, sent certain
quantities of raw silk in four lots, deliverable to the
second respondent. The requisite documents were sent to the
first respondent’s bankers with instructions to deliver the
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same to the second respondent on receiving the payment.
When the four consignments arrived in India, the second
respondent appeared before the customs authorities and
claimed the right to take delivery of the goods, but the
authorities, who had come to know by then of the non-
compliance of the stipulated condition with respect to the
three earlier consignments and also of the alleged
misrepresentation made by her while obtaining the Advance
import licence, initiated proceedings against her and two
other persons. In view of the proceedings, the second
respondent failed to make the payment and receive the
documents; she did not take any steps to clear the goods, in
effect abandoning them.
The first respondent appeared in the proceedings on his
own and submitted that title to the goods had not passed to
the second respondent and he was still the owner of the
goods, and therefore, the said goods could not be
confiscated or proceeded against for violations, if any,
committed by the second respondent, and that he was not a
party to the misuse of the earlier imports, nor was the
aware of the alleged fraud practised by the second
respondent in obtaining the advance import licence, and that
he may be permitted to re-export the goods in question.
While the proceedings were pending, the competent
authority cancelled the advance import licence granted to
second respondent.
The Collector of Customs was of the view that as the
advance import licence had since been cancelled by the
competent authority there was no valid import licence for
clearance of those goods, and since for re-exporting the
said goods, a valid import licence was necessary and because
it was not there, and also because the second respondent had
abandoned the goods, permission for re-export could not be
granted. Accordingly, he rejected the claims of the first
respondent, imposed a penalty of Rs. 5 lakhs on the second
respondent and ordered confiscation of the four consignments
in question.
Aggrieved, the first respondent filed a Writ Petition
before the High Court directly. The appellants contended
that the second respondent must be deemed to be the owner of
the four consignments
271
by virtue of the definition of ’importer’ in Section 2 (26)
of the Customs Act read with Clause 5 (3) (ii) of the
Imports (Control) Order 1955. Reliance was also placed on
para 26 (iv) of the Import and Export Policy issued for the
year 1985-86, and it was submitted that the goods in
question were liable to be confiscated for the acts and
defaults of the second respondent. It was also submitted
that by virtue of the non-compliance with the condition
(relating to export of garments manufactured out of the
imported raw silk yarn) the second respondent had rendered
all the goods covered by the import licence liable to
confiscation.
Allowing the Writ Petition, a Single Judge of the High
Court held that on the date the goods were imported, they
were covered by a valid import licence, and the subsequent
cancellation thereof was of no consequence, that since the
second respondent had failed to pay and receive the
documents of title, the title to the goods did not pass to
her, and as the first respondent continued to be the owner
of the goods, he was entitled to re-export the same.
Accordingly, he quashed the confiscation order of the
Collector under Section III (d) of the Customs Act, and
directed the appellants to (1) hand over the four
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consignments in question to the first respondent or his
clearing agent, for reshipment, and (2) issue a detention
certification for the period the goods were detained.
The Division Bench of the High Court rejected the
appeals of the Union of India and the Customs authorities.
Hence the appeal before this Court.
Dismissing the appeal, this Court,
HELD : 1.1 Condition (ii) of sub-clause (3) of Clause 5
of the Imports (Control) Order, 1955 says that the goods for
the import of which a licence is granted "shall be the
property of the licensee at the time of import and
thereafter upto the time of clearance through customs." The
Rule-making authority (Central Government), which issued the
order, must be presumed to be aware of the fact that in many
cases, the importer is not the owner of the goods imported
at the time of their import and that he becomes their owner
only at a later stage, i.e., when he pays for and obtains
the relevant documents. Still the Central Government
declared that such goods shall be the property of the
licensee from the time of import. [282 D; E-F]
1.2 The interpretation to be placed upon the provision
should be consistent with and should be designed to achieve
the object. The
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expressions like ‘Property of’ and ‘Vest’ do not have a
single universal meaning. Their content varies with the
context. The aphorism that a word is not a crystal and that
it takes its colour from the context is no less true in the
case of these words. [282 G-H; 283 A]
1.3 The object underlying condition (ii) in Clause 5(3)
is to ensure a proper implementation of the Imports
(Control) Order and the Imports and Exports (Control) Act,
1947. The idea is to hold the licensee responsible for
anything and everything that happens from the time of import
till they are cleared through Customs. The exporter is
outside the country, while the importer, i.e., the licensee
is in India. It is at the instance of the licensee that the
goods are imported into this country. Whether or not he is
the owner of such goods in law, the Imports (Control) Order
creates a fiction that he shall be deemed to be the owner of
such goods from the time of their import till they are
cleared through Customs. This fiction is created for the
proper and effective implementation of the said order and
the Import and Exports (Control) Act. The fiction, however,
cannot be carried beyond that. It cannot be employed to
attribute ownership of the imported goods to the importer
even in a case where he abandons them, that is in a
situation where he does not pay for and receive the
documents of title. For such act of abandonment, action may
be taken against him for suspension/cancellation of licence,
and some other proceedings can also be taken against him.
But certainly he cannot be treated as the owner of the goods
even in such a case. Holding otherwise would place the
exporter in a very difficult position; he loses the goods
without receiving the payment and his only remedy is to sue
the importer for the price of goods and for such damage as
he may have suffered. This would not be conducive to
international trade. [283 A-E]
1.4 As in the instant case, where an importer chooses
or fails to pay for and take delivery of the imported goods
and just abandon them, condition (ii) in sub-clause (3) of
Clause 5 does not operate to deprive the exporter of his
title to the said goods, provided the import is not contrary
to law. [283 E-F]
1.5 However, where the importer opens a letter of
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credit and makes some other arrangement
ensuring/guaranteeing payment of price of imported goods, it
will be open to the exporter, in case of non-payment of
price or abandonment by the importer, to collect the price
by invoking such arrangement. In such a case, the exporter
will not be allowed to claim title to and/or to re-export
273
the goods. In all such cases, the authority should issue a
notice to the importer and/or his agent before allowing the
exporter to deal with or seek to re-export the goods. In
the instant case, both the importer and exporter were
present before the Collector (Customs) as well as before the
High Court. The importer did not plead any such
arrangement. [283 F-H]
1.6 None of the clauses (d) and (o) in Section III of
the Customs Act is attracted in the instant case. Clause
(d) contemplates an import which is contrary to any
prohibition imposed either by the Customs Act or any other
law for the time being in force. No such prohibition can be
pleaded in the instant case since on the date of the import
the said goods were covered by a valid import licence. The
subsequent cancellation of licence is of no relevance nor
does it retrospectively render the import illegal. [284 A-B]
East India Commercial Co. Ltd. v. The Collector of
Customs, Calcutta, [1963] 3 S.C.R. 338 at 372, relied on.
1.7 Clause (o) contemplates confiscation of goods which
are exempted from duty subject to a condition, which
condition is not observed by the importer. Occasion for
taking action under this clause arises only when the
condition is not observed within the period prescribed, if
any, or where the period is not so prescribed within a
reasonable period. It, therefore, cannot be said that in
the instant case the goods were liable to be confiscated on
the date of their import under Clause (o). Further, merely
because the second respondent had not complied with the
condition imposed with respect to three earlier
consignments, it may not be possible to presume that it
would not be observed even with respect to the four
consignments in question. Section 4-G of the Import-Export
(Control) Act, 1947, which is also conceived to meet such a
situation, says that non-compliance with any condition of
licence relating to utilisation of such goods renders the
said goods liable to confiscation notwithstanding that such
goods are mixed up with other goods or material. In the
instant case, even though a period of more than five years
has passed by, no action has been taken either under the
Customs Act or under Section 4-G of the Imports-Exports
(Control) Act, though the import licence of the second
respondent has been cancelled. In the circumstances it must
be presumed that no such action was or is contemplated.
Hence, the title of the first respondent to the said goods
remains free of any cloud. [284 C-G]
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1.8 The definition of ‘importer’ in Section 2 (26) of
the Customs Act is not really relevant to the question of
title. It only defines the expression ‘importer’. The
first respondent does not claim to be the importer. [281 H;
282 A]
1.9 Para 26 (iv) of the Import-Export Policy for the
year 1985-86 says that an import is valid if it fulfills,
inter-alia, all the terms and conditions contained in the
licence and all other connected matters. This para has no
relevance to the question of title to goods in a situation
arising in the instant case. [285 B]
1.10 In the circumstances, there is no reason to
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interfere with the direction for re-export. The same shall
be permitted and allowed in accordance with law and subject
to payment of such dues or other charges as may be leviable
in that behalf. [285 C-D]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No 223 (NM)
of 1992.
From the Judgment and Order dated 10.1.1991 of the
Bombay High Court in Appeal No. 807 of 1987 in Writ Petition
No. 85 of 1987.
G.V. Rao and P. Parmeshwaran for the Appellants.
Harish N. Salve, Vikram Nankani, Jaideep Patel, Ms.
Monika Mohil and MS. Bina Gupta for the Respondents.
The Judgment of the Court was delivered by
B.P. JEEVAN REDDY, J. Leave granted.
This appeal is directed against the Judgment and Order
of a Division Bench of the Bombay High Court dismissing the
Letters Patent Appeal No.807 of 1987 preferred by Union of
India and the Collector of Customs. The said appeal was
preferred against the judgment and order of a Learned Single
Judge allowing the Writ Petition (85 of 1987) filed by the
first respondent herein. The learned Single Judge had, by
his judgment, quashed the order dated 15.9.1986 passed by
the Collector of Customs, Bombay confiscating the goods in
question under Section III (d) of the Customs Act, 1962, and
directed the Collector of Customs and the Union of India to
hand over the said goods (four consignments of raw silk
yarn) to the first respondent of his clearing agent, for
reshipment to Hong Kong in terms solicited by him. The
learned Judge granted a further direction to
275
the effect that for the period the goods were detained,
rendering the first respondent liable to pay demurrage to
Bombay Port Trust, the Collector of Customs and the Union of
India shall issue a detention certificate in his favour.
The second respondent Ms. Renu Pahilaj is doing
business at Delhi in the name and style of "Acquarius". The
first respondent is an Indian national resident abroad doing
business at Hong Kong in the name and style of UNISILK. The
second respondent obtained an advance import licence on
20.5.1985 for importing raw silk valid for a period of 18
months from the date of its issue. The import licence was
granted subject to the condition that raw silk imported
should be utilised for manufacturing garments which ought to
be exported by the second respondent. Some time prior to
October 1985, the second respondent received three
consignments but she did not fulfil the aforesaid condition.
During October-November 1985, the first respondent exported
certain quantities of raw silk in four lots, deliverable to
the second respondent. The requisite documents were sent to
the first respondent’s bankers with instructions to deliver
the same to the second respondent on receiving the payment.
When the said four consignments arrived at Bombay, the
second respondent appeared before the customs authorities
and claimed the right to take delivery of the goods. By this
time, however, the customs authorities had come to know of
the non-compliance of the aforesaid condition with respect
to the three earlier consignments and also of the alleged
misrepresentation made by her while obtaining the Advance
import licence. Proceedings were accordingly initiated
against her and two other persons by the Collector of
Customs, Bombay. The first respondent appeared in the said
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proceedings on his own and was heard. Probably in view of
the proceedings taken against her - or otherwise - the
second respondent failed to make the payment and receive the
documents. She took no steps whatever to clear the goods.
In effect, she abandoned them.
The first respondent submitted before the Collector
that title to the goods has not passed to the second
respondent, that he is still the owner of the goods and that
therefore the said goods cannot be confiscated or proceeded
against for the violations, if any, committed by the second
respondent. He submitted that he was not a party to the
misuse of the earlier imports nor was he aware of the
alleged fraud practiced by the second respondent in
obtaining the advance import licence. He requested that he
may be permitted to re-export the said goods to Hong-Kong.
While the said proceedings were pending before the
Collector of Customs, the advance import licence granted to
second respondent was
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cancelled by the Competent Authority on May 12, 1986. No
orders were passed with respect to the said goods.
The Collector of Customs, Bombay passed orders on
September 9, 1986, whereunder he imposed a penalty of rupees
five lacs on the second respondent. Penalties were also
levied upon two other persons, said to be associates of the
second respondent. So far as the first respondent’s claims
were concerned, they were rejected on the following ground:
the advance import licence against which the said four
consignments were imported has since been cancelled by the
appropriate authority which means that there is no valid
import licence for clearance of those goods; since, for re-
exporting the said goods, a valid import licence is
necessary and because it is not there-and also because the
second respondent has abandoned the goods-permission for re-
export cannot be granted.
The first respondent did not prefer an appeal against
the said order. He directly challenged the same in the
Bombay High Court by way of a Writ Petition. He reiterated
his contention viz., since the second respondent has failed
to pay and receive the documents regarding the said four
consignments, he himself continues to be the owner thereof;
if so, the said goods cannot be confiscated or proceeded
against in any manner for any act or default of the second
respondent. He claimed to be entitled to re export the same
to Hong Kong. The case of the Collector of Customs and the
Union of India was that the second respondent must be deemed
to be the owner of the said four consignments by virtue of
the definition of ‘importer’ in Section 2 (26) of the
Customs Act read with Clause 5(3) (ii) of the Imports
(Control)Order 1955. Reliance was also placed upon para 26
(iv) of the Import and Export Policy issued for the year
1985-86. It was accordingly submitted that the said goods
are liable to be confiscated for the acts and defaults of
the second respondent. It was also submitted that by virtue
of the non-compliance with the condition (relating to export
of garments manufactured out of the imported raw silk yarn)
the second respondent has rendered all the goods covered by
the import licence liable to confiscation.
The learned Single Judge allowed the Writ Petition on
the following findings: On the date the goods were
imported, they were covered by a valid import licence. The
subsequent cancellation thereof is of no consequence
inasmuch as Section III (d) of the Customs Act provides for
confiscation of the imported goods only where they are
imported contrary to law. Even if the second respondent was
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guilty of any misuse or of non-compliance with any of the
conditions of licence, it only furnished a ground for
cancellation/suspension of licence; so long as the licence
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was not suspended or cancelled, it was valid and effective.
The importing of the goods was thus under a valid licence
and was not contrary to law. Since the second respondent
has failed to pay and receive the documents of title, the
title to the goods did not pass to her. The provision in
Clause 5(3) (ii) of the Imports (Control) Order is of
limited effect. Where the clearance of goods through
customs is not even attempted but abandoned, such importer
cannot be treated as the owner. The definition of
‘importer’ in Section 2(26) of the Customs Act also does not
avail the authorities. Since the first respondent continued
to be the owner of the goods, he is entitled to re-export
the same.
The Letters Patent Appeal preferred by the Collector of
Customs and the Union of India was dismissed by the Division
Bench affirming the reasoning of the Learned Single Judge in
its entirety.
In this appeal, it is contended by the learned counsel
appearing for the Union of India that the learned Judges of
the Bombay High Court have not correctly appreciated the
meaning and effect of the provisions contained in Clause
5(3) (ii) of the Imports (Control) Order and Section III of
the Customs Act. He submitted that by virtue of the
definition of the expression "importer" contained in Section
2(26) of the Customs Act read with Clause 5(3) (ii) of the
Imports (Control) Order, the second respondent must be
deemed to be the owner of the goods and the first respondent
cannot be heard to say that he is the owner of the goods.
Whatever may be the position under the Sale of Goods Act
and/or the Contract Act, so far as the authorities under the
Customs Act and Imports (Control) Order are concerned, the
second respondent is the owner of the said goods and no one
else. For the acts and defaults of the second respondent,
therefore, the said goods are liable to be confiscated. The
first respondent’s remedy is to sue the second respondent
for damages and/or such other reliefs as he may be entitled
to in law but he cannot claim title to said goods once they
are imported into this country. It is also submitted that
because of misuse of earlier consignments by the second
respondent, the authorities were entitled to confiscate the
said four consignments, covered as they were by the same
Import Licence. In any event, once the import licence was
cancelled, the goods could not have been cleared by anyone
from the customs. On the other hand, Sri Salve, learned
counsel for the first respondent submitted that confiscation
of the said consignments has been ordered by the Collector
of Customs only under the provisions of the Customs Act,
i.e., under Section III (d) thereof. The said confiscation
is wholly unsustainable for the reason that on the date of
import, there was a valid licence. The subsequent
cancellation of the import licence does not render the said
import illegal. The provisions
278
contained in Clause 5(3) (ii) of the Imports (Control) Order
are of limited application. They are designed only to
prevent the licencee from trading in the said licence in any
manner whatsoever, but it cannot have the effect of
conferring title to the said goods upon the importer even
before he makes the payment and obtains the documents of
title. Similarly, the definition of the importer under
Section 2 (26) of Customs Act is for a limited purpose.
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Since the title to the goods continues to vest in the first
respondent, he is entitled to re-export the same. The
learned counsel emphasised the fact that the first
respondent is not a party nor was he aware of the alleged
misuse of earlier consignments or of the alleged fraud
practised by the second respondent in obtaining the import
licence.
For a proper appreciation of the controversy arising
herein, it is necessary to notice certain provisions of the
Customs Act as well as of the Imports and Exports (Control)
Act, 1947 and the Imports (Control) Order, 1955.
The definition of ‘Importer’ in Clause 26 of Section 2
of the Customs Act reads as follows:
"importer’, in relation to any goods at any time
between their importation and the time when they
are cleared for home consumption, includes any
owner or any person holding himself out to be the
importer."
Section III which provides for confiscation of
improperly imported goods, in so far as it is relevant reads
thus:
"Section III. Confiscation of improperly imported
goods, etc.- The following goods brought from a
place outside India shall be liable to
confiscation-
(d) 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;
-- -- -- -- -- -- -- -- -- -- -- -- --
(e) any goods exempted, subject to any condition,
from duty or any prohibition in respect of the
import thereof under this Act or any other law for
the time being in force, in respect of which the
condition is not observed unless the
279
non-observance of the condition was sanctioned by
the proper officer."
Section 112 provides for levy of penalty for improper
importation of goods. For the purpose of this case, it is
not necessary to set out Section 112. Section 120 provides
that the smuggled goods may be confiscated notwithstanding
any change in their form. Section 124 provides for the
issuance of a Show Cause Notice before the goods are
confiscated and for affording a reasonable opportunity of
being heard in the matter to the person affected.
The Imports and exports (Control) Act, 1947 empowers
the Central Government to prohibit, restrict or otherwise
control import and export of goods, by an order published in
the Official Gazette Act (Section 3). Section 4G provides
for confiscation of goods in certain situation. The Section
reads thus:
"Section 4G. Confiscation-Any imported goods or
materials in respect of which-
(a) any condition of the licence or letter of
authority under which they were imported, relating
to the utilisation or distribution of such goods or
materials, or
(b) any condition relating to the utilisation or
distribution of such goods or materials subject to
which they were received from, or through, a
recognised agency, or
(c) any direction given under a control-order with
regard to the sale of such goods or material,"
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has been, is being, or is attempted to be,
contravened, shall together with any package,
covering or receptacle in which such goods are
found, be liable to confiscation, and, where such
goods or materials are so mixed with any other
goods or materials that they cannot be readily
separated such other goods or materials shall also
be liable to confiscation:
Provided that where it is established to the
satisfaction of the adjudicating authority that any
goods or materials, which are liable to
confisication under this Act, had been imported for
personal use, and not for any trade or industry,
and that they belong to a person other than the
person who has, by any act or omission, rendered
them liable to confiscation, and such act or
omission was without the knowledge or connivance of
the person to whom they belong such goods or
materials shall not be ordered to be confiscated;
but such other action as authorised
280
by this Act mny be taken against the person who has
by such act of omission, rendered such goods or
materials liable to confiscation."
The Imports (control) Order 1955 has been issued by the
Central Government under the 1947 Act. Clause 3 (1) provides
that:
"Save as otherwise provided in this Order, no
person shall import any goods of the description
specified in Schedule I, except under and in
accordance, with a licence or a customs clearance
permit granted by the Central Government or by any
Officer specified in Schedule II."
Clause 5 which is crucial for our purposes may be set
out in its entirety. It reads thus:
"5. Conditions of Licence. -(1) The licensing
authority issuing a licence under this Order may
issue the same subject to one or more of the
conditions stated below :-
(i) that the goods covered by the licence shall not
be disposed of except in the manner prescribed by
the licensing authority or otherwise, dealt with,
without the written permission of the licensing
authority or any person duly authorised by it;
(ii) that the goods covered by the licence on
importation shall not be sold or distributed at a
price exceeding that which may be specified in any
direction attached to the licence;
(iii) that the applicant for a licence shall
execute a bond for complying with the terms subject
to which a licence may be granted.
(2) A licence granted under this Order shall also
be subject to the conditions contained in Schedule
V.
(3) It shall be deemed to be a condition or every
such licence that :-
(i) no person shall transfer and no person shall
acquire by transfer any licence issued by the
licensing authority except under and in accordance
with the written permission of the authority which
granted the licence or of any other person
empowered in this behalf by such authority.
(ii) that the goods for the import of which a
licence is granted
281
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shall be the property of the licencee at the time of
import and thereafter upto the time of clearance
through Customs :
Provided that the conditions under items (i) and
(ii) of this sub-clause shall not apply in relation
to licence issued to the State Trading Corporation
of India, the Minerals and Metals Trading
Corporation of India and other similar institutions
or agencies owned or controlled by the Central
Government and which are entrusted with
canalisation of imports :
Provided further that the conditions under items
(i) and (ii) of this sub-clause shall also not
apply in relation to (a) licenses issued to
eligible export houses or trading houses for import
of goods meant for disposal to actual users under
the import policy for registered exporters, and (b)
licences issued to Public Sector agencies owned or
controlled by Government, Central or State for
disposal of goods to Actual Users under the import
policy in force.
(iii) the goods for the import of which a licence
is granted shall be new goods, other than disposal
goods unless otherwise stated in the licence.
(4) A licence granted under this Order may contain
such other conditions, not inconsistent with the
Act or this Order, as the licensing authority may
deem fit.
(5) The licensee shall comply with all conditions
imposed or deemed to be imposed under this clause."
The Order provides for cancellation/suspension of
licences issued thereunder for reasons specified therein.
Schedule I to the Order mentions several goods. It is not
disputed that raw silk yarn is one of the goods included in
the Schedule.
We may first consider the question of title to the said
goods. If we keep aside the provisions of law relied upon
by the appellants viz., definition of ‘importer’ in Section
2(26) of the Customs Act, Clause 5(3) (ii) of the Imports
(Control) Order as well as para 26 (iv) of the Import-Export
Policy, the position is quite simple. Since the second
respondent did not pay for and received the documents of the
title she did not become the owner of the said goods, which
means that the first respondent continued to be the owner.
How do the aforesaid provisions make any difference to this
position ? The definition of ‘importer’ in Section 2(26) of
the Customs Act is not really relevant to the question of
title. It only defines the
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expression ‘importer’. The first respondent does not claim
to be the importer. The provision upon which strong
reliance is placed by the appellants in this behalf is the
one contained in Clause 5(3) (ii) of the Imports
(Control)Order. Sub-clause (I) of Clause 5 specifies
conditions which can be attached to an import licence at the
time of its grant. Sub-clause (2) says that a licence
granted under the Order shall be subject to the conditions
specified in Fifth Schedule to the Order. Sub-clause (3)
sets out three other conditions mentioned as (i), (ii), and
(iii) which shall attach to every import licence granted
under the Order. First of these conditions says that the
import licence shall be non-transferable except under the
written permission of the Licensing Authority or other
Competent Authority. Condition (ii)-which is provision
relevant herein-says that the goods for the import of which
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a licence is granted "shall be the property of the licensee
at the time of import and thereafter upto the time of
clearance through customs." This condition, however, does
not apply to STC, MMTC and other similar institutions
entrusted with canalisation of imports. It also does not
apply to certain eligible export houses, trading houses and
public sector agencies mentioned in the second proviso.
Condition (iii) says that the goods for which the import
licence is granted shall be new goods unless otherwise
mentioned in the licence. Now coming back to Condition
(ii), the question is what does it mean and what is the
object underlying it when it says that the imported goods
shall be the property of the licensee from the time of
import till they are cleared through customs. It is
necessary to notice the language of the sub-clause. It says
"it shall be deemed to be a condition of every such licence
that-the goods for the import of which a licence is granted
shall be the property of the licensee at the time of import
and thereafter upto the time of clearance through Customs."
The Rule-making authority (Central Government), which issued
the order, must be presumed to be aware of the fact that in
many cases, the importer is not the owner of the goods
imported at the time of their import and that he becomes
their owner only at a later stage, i.e., when he pays for
and obtains the relevant documents. Why did not Central
Govt. yet declare that such goods shall be the property of
the licensee from the time of import ? For appreciating
this, one has to ascertain the object underlying the said
provision. The interpretation to be placed upon the
provision should be consistent with and should be designed
to achieve such object. In this context, it should also be
remembered that expressions like ‘Property of’ and ‘Vest’ do
not have a single universal meaning. Their content varies
with the context. The aphorism that a word is not a crystal
and that it takes its colour from the context is no less
true in the case of these words. In our opinion the object
underlying condition (ii) in Clause 5(3) is to ensure a
proper implementation of the Imports (control) Order and the
Imports and Exports (Control) Act, 1947. The idea is to hold
the
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licensee responsible for anything and everything that
happens from the time of import till they are cleared
through Custom. The exporter is outside the country, while
the importer, i.e. the licensee is in India. It is at the
instance of the licensee that the goods are imported into
this country. Whether or not he is the owner of such goods
in law, the Imports (Control) Order creates a fiction that
he shall be deemed to be the owner of the such goods from
the time of their import till they are cleared through
Customs. This fiction is created for the proper and
effective implementation of the said order and the Import
and Exports (Control) Act. The fiction however cannot be
carried beyond that. It cannot be employed to attribute
ownership of the imported goods to the importer even in a
case where he abandons them, i.e. in a situation where he
does not pay for and receive the documents of title. It may
be that for such act of abandonment, action may be taken
against him for suspension/cancellation of licence. May be,
some other proceedings can also be taken against him. But
certainly he cannot be treated as the owner of the goods
even in such a case. Holding otherwise would place the
exporter in a very difficult position; he loses the goods
without receiving the payment and his only remedy is to sue
the importer for the price of goods and for such damage as
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he may have suffered. This would not be conducive to
international trade. We can well imagine situations where
for one or other reason, an importer chooses or fails to pay
for and take delivery of the imported goods. He just
abandons them. (We may reiterate that we are speaking of a
case where the import is not contrary to law). It is only
with such a situation that we are concerned in this case and
our decision is also confined only to such a situation.
Condition (ii) in sub-clause (3) of Clause 5, in our
opinion, does not operate to deprive the exporter of his
title to said goods in such situation.
At this stage, it may be appropriate to clarify one
aspect. There may be cases, where the importer opens a
letter of credit and makes some other arrangement
ensuring/guaranteeing payment of price of imported goods.
In such a case, it will be open to the exporter, in case of
non-payment of price or abandonment by the importer, to
collect the price by invoking such arrangement. In such a
case, it is obvious, the exporter will not be allowed to
claim title to and/or to re-export the goods. (Indeed, it
is unlikely that in such a case, the importer abandons the
goods ordinarily speaking.) It is therefore necessary that
in all such cases, the authority should issue a notice to
the importer and/or his agent before allowing the exporter
to deal with or seek to re-export the goods. So far as this
case is concerned, both the importer and exporter (RR 2 and
1 respectively) were present before the Collector (Customs)
as well as before the High Court. R2 did not plead any such
arrangement.
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The next question is whether the import of the said
goods was contrary to law in any manner and whether the said
goods are liable to be confiscated under the Customs Act.
The only provisions relied upon the appellants are Clauses
(d) and (o) in Section 111 of the Customs Act which we have
set out hereinabove. In our opinion none of these clauses
are attracted in the present case. Clause (d) contemplates
an import which is contrary to any prohibition imposed
either by the Customs Act or any other law for the time
being in force. No such prohibition can be pleaded in this
case since on the date of the import the said goods were
covered by a valid import licence. The subsequent
cancellation of licence is of no relevance nor does it
retrospectively render the import illegal. (East India
Commercial Co. Ltd. v. The Collector of Customs , Calcutta,
[1963] 3 S.C.R. 338 at 372) clause (o) contemplates
confiscation of goods which are exempted from duty subject
to a condition, which condition is not observed by the
importer. Occasion for taking action under this clause
arises only when the condition is not observed within the
period prescribed, if any, or where the period is not so
prescribed, within a reasonable period. It, therefore,
cannot be said that the said goods were liable to be
confiscated on the date of their import under Clause (o).
Further, merely because the second respondent had not
complied with the condition imposed with respect to three
earlier consignments, it may not be possible to presume that
it would not be observed even with respect to the four
consignments in question. Be that as it may, it is
sufficient for the present to notice that so far no action
has been taken on that account either under the Customs Act
or under section 4-G of the Imports-Exports (Control) Act,
1947. Section 4-G of 1947 Act is also conceived to meet such
situation, as a reading thereof would disclose. It says that
non-compliance with any condition of licence relating to
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utilsation of such goods renders the said goods liable to
confiscation notwithstanding that such goods are mixed up
with other goods or material. Even though a period of more
than five years has passed by, no action has been taken
either under the Customs Act or under Section 4-G of
Imports-Exports (Control) Act, though the import licence of
the second respondent has been cancelled. We must presume in
the circumstances that no such action was or is
contemplated. In these circumstances that no such action was
or is contemplated. In these circumstances the title of the
first respondent to the said goods remains free of any
cloud.
Coming to para 26(iv) of the Import-Export Policy for
the year 1985-86, it too; in our opinion, is or no material
relevance herein. It reads:
"26. Import is valid if it fulfills, among other
things the following conditions:-
(iv) The terms and conditions contained in the
licence/Open
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General Licence/Customs Clearance Permit
and the Import-Export Policy and
procedures in regard to the items (s) of
the import and all other connected matters are
fulfilled."
This provision, so to speak states the obvious. It says
that an import is valid if it fulfills, inter alia, all the
terms and conditions contained in the licence and all other
connected matters. This para had indeed no relevance to the
question of title to goods in a situation dealt with by us
herein.
It is also significant to notice that it is not the
case of the appellants that the first respondent was a party
to any conspiracy or other fraudulent plan hatched or sought
to be implemented by the second respondent. If that were the
case, different considerations would have arisen.
So far as the directions for re-export is concerned, we
see no reason to interfere. The same shall be permitted and
allowed in accordance with law and subject to payment of
such dues or other charges as may be leviable in that
behalf. The other direction with respect to issuance of
detention certificate has not been assailed before us and we
need express no opinion thereon.
The appeal is accordingly dismissed but in the
circumstances without costs.
N.P.V. Appeal dismissed.
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