WA/1884/2003 of M/S.SOUTH INDIA EXPORTS, Vs THE JOINT DIRECTOR OF FOREIGN on 22 December 2003

:JUDGMENT

V.S. SIRPURKAR, J.

Being aggrieved by the judgment of the learned single Judge of this Court, dismissing the five writ petitions and the writ miscellaneouspetitions therein, the petitioners have come up before us in these writappeals.

2. All the petitioners are the export-oriented units. The Government of India has formulated an Export-Import Policy under Sec.3 of theForeign Trade (Development and Reguation) Act, 1992 (hereinafter referred toas the 'Foreign Trade Act'). Under the said policy, concessions were givenfor imports as well as exports. On the basis of such concessions, thepetitioners could import raw materials without payment of duty with theobligation to export the 'manufactured goods' from that imported raw material.The petitioners are manufacturing exporters in the sense, that they areexpected to have their factories for the manufacturing of someexport-material, the raw material for which is imported. This is called'Advance Licence'. The advance licences are issued by the Joint Director ofForeign Trade, who is essentially an officer under the Ministry of Commerce,Govenrment of India and more particularly an officer working under the CentralExcise Department. On the basis of that licence, the imports are permitted tobe made by the manufacturing units, who hold the advance licences and afterusing that raw material which is imported the matching exports are expected tobe made by these advance licence holders. There is a power under the ForeignTrade Act via Sec.10 in the Union Government to appoint any person, vestinghim the powers such as searching, inspecting and seizing of goods, etc. andin case of the contravention of the provisions of the Act or, as the case maybe, the conditions of licence, which has been dealt with under Sec.11 of theForeign Trade Act. It is, therefore, the case of the petitioners that theycan be dealt with in respect of any breach committed by them (if at all) inrespect of their advance licence conditions only by the authority under theForeign Trade Act, which authority is their licensing authority. While so,all the petitioners received the notices in the nature of a notice underSec.108 of the Indian Customs Act issued by the second respondent, SeniorIntelligence Officer, Directorate of Revenue Intelligence, who is an officerunder the Customs Act in Finance Ministry. The petitioners, by this notice,were called upon to face an enquiry.

3. The petitioners challenged these notices and their case

3. The petitioners challenged these notices and their case before the learned single Judge was that firstly, they could be dealt withonly under the Foreign Trade Act and that too, by their Licensing Officer.They pointed out that the said notice under Sec.108 was an unnecessaryharassment to the petitioners as it entailed the personal appearance of thepetitioners before the concerned officer. They further plead that theconcerned officer had no powers to interfere in the imports and exports madeby the licence-holder since the entire exports and imports of the petitionerson the basis of the advance licence is governed under the duty-free scheme,which is monitored and governed only by the first respondent. Lastly it wascontended that the notice was not issued by the Gazetted officer and hence wasa nonest notice.

4. As against this, the contentions raised by the Department was that there was nothing wrong in the second respondent issuing the noticewas purely for the purposes of investigation and that such a hue and cry could not be made about the notice. It is pointed out by the second respondent thaton a tip off, the second respondent came to know about the graveirregularities by these manufacturing importers. It is pointed out that thesemanufacturing importers had made misrepresentations regarding the fact thatthey owned a factory whereas, some of the petitioners had even given the fakeaddresses of their factory while the others did not have any machinery in thatfactory and their contentions that they conducted the manufacturing activityin respect of the imported raw materials was per se false. It was furthersuggested that merely because the licences were given under the Foreign TradeAct, it did not divest the officers of the Customs Department to makeinvestigation and for that purpose making the efforts via Sec.108 of theCustoms Act.

5. Learned single Judge held that firstly, it could not be said that the officer giving the notice was not a Gazetted officer. Thelearned Judge secondly found that merely because there were powers in thefirst respondent or as the case may be, the licensing authority to monitor thesaid licences, it could not be said that the second respondent was divested ofhis powers to investigate. In short, the contention raised was that therecould not be a parallel enquiry also. Relying on the judgment of the SupremeCourt, the learned Judge came to be conclusion that if there was any activityof smuggling as understood in the Customs Act, there could be no impediment inthe way of the officers of the Customs Department to initiate an investigationfor which purpose, a notice could always be given under Sec.108 of the Act.Holding so, the learned Judge dismissed the writ petitions, necessitating thepresent batch of writ appeals.

6. Arguments for the appellants were laid by Shri Habibullah

6. Arguments for the appellants were laid by Shri Habibullah Basha, learned senior counsel as also Shri K.M. Vijayan, learned seniorcounsel, who pointed out that there were intervening circumstances after thejudgment of the learned single Judge, which made the whole enquiry as ameaningless and a fortuitous enquiry. Learned senior counsel took this standthat even if the customs authorities could be said to have jurisdiction toissue a notice under Sec.108 of the Customs Act, the whole exercise was ameaningless exercise because the authorities under the Foreign Trade Act hadalso issued a show cause notice to the petitioners alleging therein certainirregularities and during the pendency of these appeals, the said proceedingscame to be closed holding that there was nothing wrong with the dealings ofthe petitioners. In fact, we were taken through the said adjudication orderpassed by Joint Director General of Foreign Trade, Enforcement -cum-Adjudication. It is argued that this would clinch the issue and there wouldbe no necessity even to investigate any matter as, in fact, everything stoodclosed by this adjudication. Learned counsel also urged that it was a settledlaw by the celebrated decision of the Supreme Court in East India CommercialCompany case (AIR 1962 SC 1893), which was followed later on right up to thecase of UNION OF INDIVA v. SAMPAT RAJ DUGAR (1992 (58) ELT 163) and TITANMEDICAL SYSTEMS PVT. LTD. v. COLLECTOR OF CUSTOMS, NEW DELHI (2003 (151)ELT 254) that there could be no parallel proceedings and, therefore, therewould be no necessity of proceeding even with the investigation and the wholeexercise wold not even be a bona fide exercise of investigating alone. Wewere taken through the various investigations as also through the conditions of licence by the learned counsel, who, on that basis, contended that therewas in fact no jurisdiction in the concerned officer to issue a notice underSec.108 of the Customs Act.

7. As against this, Shri Arvind Datar, learned senior counsel appearing on behalf of the second respondent urged that what was being donewas merely the investigation of certain irregularities which are suspected tohave taken place. He pointed out that the department had a definiteinformation that the information, on the basis of which the advance licence,was obtained was false in almost all the cases. He pointed out that there wasno question of lack of bona fides on the part of the Department because thisexercise was taken in respect of practically all the persons having theadvance licence and it is only these present petitioners, who are refusing toco-operate with the department by complying with the said notice. Learnedcounsel argued that there was a definite information that there were nomanufacturing units available which had the capacity of manufacturing theexported goods which these exporters had exported allegedly utilising theimported raw materials. He points out that there is every possibility of theimported material being siphoned off in the market and some other inferiormaterial is being used only to complete the export obligation. He points outthat there was nothing wrong in investigating the matter because after theinvestigation, the concerned authorities under the Customs Act could also cometo the conclusion that there was nothing wrong with the dealings of thepetitioners. Learned senior counsel heavily relies on the reported decisionof the Supreme Court in SHESHANK SEA FOODS PVT. LTD., KARNATAKA v. UNION OFINDIA AND OTHERS (1996 (11) SCC 755) points out that this case will clinch theissue. As regards the contention of the adjudication proceedings, the learnedcounsel has to say that he would have nothing against that order but, in spiteof that order there would still be areas left to investigate.

8. On these rival submissions, we have to see as to whether the learned Judge was right in dismissing the writ petitions.

9. We will not deal with the question as to whether the

officer, who sent the notice under Sec.108 of the Customs Act, could not havesent the same owing to his not being a Gazetted officer. A statement is madeon behalf of the respondents that the concerned officer is a Gazetted officerunder the notification and that statement is not seriously disputed by theother side. Even otherwise, there is no reason for us not to accept thestatement made by the learned senior counsel at the Bar that all suchofficers, holding the post of Senior Intelligent Officer, have been given thestatus of the Gazetted officer. Hence that question is concluded against theappellants.

10. A glance at Sec.108 of the Customs Act, under which the summons is given, would suggest that it is a power given to any Gazettedofficer of the Customs Department to summon any person during any enquirywhich the officer would make in connection with the smuggling of any goods. Asummons can be for the production of the documents or those in possession or under the control of the persons summoned and such a summoned person is boundto attend and to state the truth upon any subject respecting which he isexamined by the summoning officer. These powers are given obviously with anidea to check the smuggling. The definition of 'smuggling' is to be found inSec.2(39) of the Act, which is as under:

"smuggling in relation to any goods, means any act or omission which willrender such goods liable to confiscation under Sec.111 or section 113"When Sec.111 is seen, it is clear that any goods brought from a place outsideIndia would be liable for confiscation provided under any of the eventualitiesdescribed in clause (a) to (p). It will be enough for us to quote sub-section(o), which reads as under:

"Sec.111. Confiscation of improperly imported goods, etc.- The followinggoods brought from a place outside India shall be liable to confiscation:-

... ... ...

(o) any goods exempted, subject to any condition, from duty or any prohibitionin respect of the import thereof under this Act or any other law for the timebeing in force, in respect of which the condition is not observed unless thenon-observance of the condition was sanctioned by the proper officer;"It is therefore clear that a Customs Officer would have all the possible powerand more particularly described under Sec.108 of the Act to summon any personobviously to enquire as to whether any goods have been smuggled or not. If,therefore, any goods are brought in India, which enjoy the exemption from thepayment of customs duty on certain conditions then, the Customs Officer willhave all the powers to enquire as to whether the conditions, subject to whichthe said duty is exempted, have been followed or not and it is obvious that,in case of the breach of those conditions, those goods will be smuggled goods.We, therefore, do not see as to how a simple summons issued under Sec.108 ofthe Act could be termed to be a proceeding without jurisdiction, when it isthe inherent power of the every Gazetted officer of the Customs Department toenquire into the matter of smuggling.

11. It is tried to be suggested, more particularly from the

11. It is tried to be suggested, more particularly from the accompanying documents of the adjudication order dated 10-10-2003, thatatleast in case of the licence obtained by M/s. Varadhariya Exporters inChennai, who are the appellants in W.A. No.1890 of 2003, in fifteen licencesthe export obligations had been made and the licences were also redeemed. Itis urged that it is only in respect of the sixteenth licence wherein, theimport values are Rs.24,47,46,004/- and Rs.26,4 3,25,684/- and that 75% of theexport obligation is also over. Learned counsel for the appellants suggestthat if the goods were imported and the matching exports were done under thevery supervision of the Customs Officers, there will be no question ofre-opening these transactions and finding out as to what really was theirregularities committed. Learned counsel also points out that show causenotices were given to all the appellants and one such show cause notices isrelied upon, which is dated 13-12-2002. It is then pointed out that in thatshow cause notice it was alleged that the noticee diverted the duty-freeimported raw material instead of utilising the same for " manufacturing" theexport-product as required under the Actual User Advance Licence and no properaccounts were maintained for consumption and utilisation of the imported rawmaterials as prescribed in the EXIM policy and, therefore, the noticee was noteligible for Actual Users Advance Licence and misdeclared the facts and obtained the licence in a fraudulent manner, causing loss to the tune ofcrores of rupees to the exchequer and, therefore, this would attract theprovisions of Sec.11(1) and Sec.11(2) of the Foreign Trade Regulations Actand, therefore, the noticee was directed to show cause as to why the saidlicence should not be cancelled and penalties imposed. It is then pointed outthat the same Joint Director General of Foreign Trade, after holding theenquiry, has exonerated the noticee-appellant and has not chosen to invokeSec.9(4) and/or Rule 10 for cancellation of the licence.

12. We have gone through the said order very carefully. We were also taken through the relevant paragraphs wherein, it has been held thatunder the Foreign Trade Regulations Act and the Rules framed thereunder, thelicensing authority has got ample powers to deal with the holders of thelicence by bringing them to books of law (see internal page 15 para 2therein). In that order, after quoting various paragraphs from the EXIMpolicy, the concerned officer has culled out seven points on which theexamination would have to be made:

1. Power under the Handbook.

2. Whether it is a bonafide default?; or

3. Whether it is a malafide default?

4. Whether demand notice is issued?

5. Whether the firm is placed under Denied Entities List/

Defaulters List?

6. Whether their IEC has been suspended?

7. Concerned provisions of Foreign Trade Act, 1992 can be applied in the case, i.e. for penal case.

The officer then has given a finding that the orders redeeming fifteenlicences were in order as the matching exports were done and the foreignexchange was also earned for the country. The order quotes:"In the absence of conclusive evidence against the noticee firm for havingviolated the conditions stipulated in either Clause 9(4) or Clause 10 above, Iwould be doing a great injustice to the noticee firm in ordering thecancellation of the licence ab-initio. Even the DRI, Chennai in their letterdated 18-10-2002 have only informed that the noticee firm "appears" to havediverted the duty-free imported raw materials instead of utilising the samefor the export products ... ... ... Although the noticee firm declaredtheir factory address in their SSI certificate produced along with theapplication, one should appreciate the entire stainless steel industry and thetype of machinaries they use in manufacturing the stainless steel utensils.The learned advocate had explained that the industry should not be comparedwith the other units having fully automated and highly complicated machines.Their industry needs a mould, a die and a pressing machine and a host ofsemiskilled labour force to polish and pack the goods manufactured andtherefore, the manufacturing activity can be done either in a factory or in ashed for that purpose as per the capacity and the duration of themanufacturing process. During the relevant period in question the noticeefirm was in possession of the SSI certificate issued by the concernedauthority and no authority including the Director of Industries and Commercequestioned about the bona fide of their factory. The issue has now beenhighlighted by the DRI on a mere assumption that the noticee firm "appears" to have not used those imported materials in the manufacturing process of thefinal product. "

These observations would suggest as if everything was alright with themanufacturing industry of the appellants. However, the learned counsel forthe respondents points out that the factory, where crores of rupees worth ofimported stainless steel was used for manufacturing the utensils, was, oninspection by the customs officer, found to be of having an area of 600 sq.ft.Learned counsel further pointed out that there was material on record of thecustoms authorities that the so-called landlord of that factory completelydisowned any knowledge about the appellants or their carrying on themanufacturing activities therein. Learned counsel further suggests that inone of the appellants' case, there was no factory at all as the door number ofthe factory was 10-A, while there was no house bearing that door number onthat street. He submits that in the wake of this, the customs authoritiesfelt that what was being done was importing the costly stainless steels fromforeign countries and disposing them of in the local market and honouring theexport obligations, perhaps, with inferior quality of goods again, perhaps,without using the imported stainless steel sheets. Learned counsel suggestedthat with this evidence, it was necessary for the Customs Department toenquire into the matter and it was only with an objective of the enquiry thatthe summos was issued. Learned counsel further urges that it was fully openfor all the appellants to convince the Customs authorities of their innocenceand further convince them that there has been no violation of the exportobligation or as the case may be the conditions of the Advance Licence.

Learned counsel wonders as to how a fault can be found in the matter ofjurisdiction of the officer to issue a summons and, according to the learnedcounsel, the whole issue was being pre-judged.

13. The contention is undoubtedly correct. The concerned

Arguments

officer, who passed the order in adjudication proceeding, did not have theevidence before him nor was such evidence ever referred to in the saidadjudication order. We do not mean to sit in an appeal over the saidadjudication order because that is not our jurisdiction. However, we must sayand express that there is hardly any reference to the evidence in that order,which evidence is undoubtedly presently available with the customs authoritiesas per their own claim. We fail to follow that merely because of thisadjudication order, how is it that the customs authorities would be divestedof any jurisdiction even to enquire into the matter. Learned counsel took usto the Foreign Trade Act and more particularly Sec.12 therein, which reads asunder:

"12. Penalty or confiscation not to interfere with other punishments. -- Nopenalty imposed or confiscation made under this Act shall prevent theimposition of any other punishment to which the person affected thereby isliable under any other law for the time being in force."This provision would knock out all the basis of the claim made by theappellants. All the while, the appellants have been harping that even if thecustoms authorities have the jurisdiction to enquire into the matter, therewould be no question of any further enquiry in view of the adjudication orderpassed by the Zonal Joint Director General of Foreign Trade. If theappellants have smuggled the goods or have engaged themselves in smuggling of the goods in importing the goods without paying the proper customs duty, or ifthey have brought exempted goods and have not complied with the conditions ofwhich the exemption was granted, that would certainly be an act of smuggling,in which event, any concerned Customs Officer empowered under the Act wouldhave jurisdiction to enquire. It cannot be a defence, to nip such an enquiryin the bud, that there has already been an adjudication regarding the advancelicence on the basis of which the imports have been made and that suchadjudication has been closed in favour of the appellants. That may be so.However, the jurisdiction of the Customs Officer to enquire into the matterwould not stand concluded merely because of that. It was tried to be urgedthat this is the law laid down by the Supreme Court in East India CommercialCompany case, cited supra, which has been followed in UNION OF INDIA v.SAMPAT RAJ DUGAR (1992 (58) ELT 163) and further in TITAN MEDICAL SYSTEMS PVT.LTD. v. COLLECTOR OF CUSTOMS, NEW DELHI (2003 (151) ELT 254.

14. On the other hand, learned counsel for the respondentsurged that this question stood concluded in Sheshank Sea Foods case, citedsupra. It is seen from Sheshank Sea Foods case, that it is against thejudgment of the Karnataka High Court in KAMATH PACKAGING LIMITED v. UNION OFINDIA 1992 (61) ELT 548. Learned counsel for the Department took us throughthe said judgment of the Karnataka High Court to appraise us of the factsinvolved therein. That was also a case where the petitioner had themanufacturing advance licence under the Foreign Trade Regulation Act and EXIMPolicy and there also, the customs authorities had issued the summons to thepetitioner to furnish the details about the transactions. The learned Judgehas tabulated the contentions in the following words:

"(i) that the Customs Department had no right or authority to call uponthe petitioners to furnish details of the import of the raw materialsand the utilisation thereof. The petitioners imported the raw materialsunder an advance licence granted by the Controller of Imports andExports subject to the conditions attached to the said licence/licencees;(ii) Any breach of the conditions should attract the jurisdiction of theconcerned authority, namely the Enforcement Wing of the licensingauthority and it is not for the Customs Department to exercise powers ofsearch, seizure and confiscation. For any breach of the conditions oflicence, the constituted authority under the Imports and Exports(Control) Act, is vested with ample powers to investigate and initiateaction for any contravention;

(iii) Conditions under the licence and the breach thereof come underthe immediate, direct and effective control of the Controller of Importsand Exports and the liability to pay customs duty would depend upon thenature of performance by the importer, which includes the utilisation,misutilisation, non-utilisation or diversion, as the case may be."A mere look at these contentions would suggest that the contentions of thepetitioners herein are identical. The learned Judge took stock of theprovisions under the Customs Act like Sections 12, 25, 25(1) as also Section25(1)(d). The learned Judge also took into consideration the conditions.Condition No.3 of the Advance Licence, which was to the effect that the goodsimported against the Advance Licence shall be utilised in accordance with theprovisions of the Customs Notification No.116/88 dated 30-3-1988. ConditionNo.2 of the Advance Licence was also referred to and ultimately, relying on

Sec.111(o) of the Customs Act, which we have quoted above, the learned Judgeheld that the section conferred a power of confiscation of the imported goodsif they were not properly utilised and the conditions of the licence notobserved. It was then held by the learned Judge that the Customs Departmentwas thoroughly justified and had the jurisdiction to investigate or enquireinto the matter. In paragraph 21 even the power of adjudication under ForeingTrade Regulation Act. Then Import and Export (Control) Act, was referred toby the learned Judge and it was held that though there was an authority forconfiscation under the Foreign Trade Regulation Act, the identical powers areconferred on the authorities under the Customs Act also and that, in the casein hands, the customs authorities, on the basis of the credible information,had effected the search of the various premises of the petitioner company andseized some documents and hence the Customs Department had issued letters,calling upon the petitioner to furnish more information. In paragraph 25, theoverlapping aspect in respect of the enquiries under the two enactments wasalso considered and in that behalf, the learned Judge referred to the decisionin East India Commercial Company case, cited supra as also the subsequentdecisions in BENNETT COLEMAN COMPANY v. UNION OF INDIA (AIR 1973 SC 106) andUNION OF INDIA v. OCEANIC EXPORT CORPORATION (W.A. Nos.1043 to 1049 of 1999before the Madras High Court). The learned Judge distinguished the decisionin East India Commercial Company case and chose to follow the earlier decisionby the Karnataka High Court reported in POOJA EXPORTERS v. ASSISTANTDIRECTOR, DRI (1989 (41) ELT 21). The learned Judge ultimately came to theconclusion that the petition was liable to be dismissed.

15. Now turning to the case of Seshang Sea Foods case, cited supra, paragraph 2 of the said judgment would suggest that the learned Judgeshad considered the facts in the writ petition filed by Kamath PackagingLimited only. A similar contention was raised before the Supreme Court thatonly the licensing authority had the jurisdiction to investigate theviolations, if any, as the duty exemption scheme, under which the licences hadbeen issued, was a Code by itself and excluded the investigation by theCustoms Authorities. The Supreme Court then in paragraph 6 referred toSec.111(o) of the Customs Act and came to the conclusion in paragraphs 8 and 9in the following words:

"Section 111(o) states that when goods are exempted from customs duty subjectto a condition and the condition is not observed, the goods are liable toconfiscation. The case of the respondents is that the goods imported by theappellants, which availed of the said exemption subject to the condition thatthey would not be sold, loaned, transferred or disposed of in any othermanner, had been disposed of by the appellants. The Customs authorities,therefore, clearly had the power to take action under the provisions ofSection 111(o).

We do not find in the provisions of the Import and Export Policy or the Handbook of Procedures issued by the Ministry of Commerce, Government ofIndia, anything that even remotely suggests that the aforesaid power of theCustoms authorities had been taken away or abridged or that an investigationinto such alleged breach could be conducted only by the licensing authority.That the licensing authority is empowered to conduct such an investigationdoes not by itself preclude the Customs authorities from doing so."Learned counsel for the respondents, therefore, suggests that this judgment in

16. On the other hand, Shri Habibullah Basha, learned senior counsel suggests that the judgment in Sheshang Sea Foods case, cited supra,need not be followed by us more particularly in view of the judgment in EastIndia Commercial Company case, cited supra, which is a judgment by the largerBench and which judgment was not brought to the notice of the Supreme Court inSheshang Sea Foods case, cited supra.

17. We are unable to accept this argument firstly, there is a

very clear reference to the decision in East India Commercial Company Limited,cited supra, in the High Court judgment which fell for consideration inSheshang Sea Foods case. We have, therefore, deliberately made a detailedreference to the High Court judgment which fell for consideration therein. Wehave also pointed out that in the High Court judgment, the judgment of EastIndia Commercial Company case was clearly referred to and the learned Judgehad distinguished it on the same grounds as the earlier Bench of the KarnatakaHigh Court had done. It, therefore, cannot be said that the said judgment wasnot available to the learned Judges, who decided the Sheshang Sea Foods case.This is apart from the fact that East India Commercial Company case cannot bean authority for the proposition which has fallen for consideration in thepresent case. Heavy reliance was placed by Mr. Basha on the followingobservations in paragraph 27 of the majority judgment by Subba Rao, J. (asHis Lordship then was) to the following effect:

"If on a reading of the said notice, it is manifest that on the assumptionthat the facts alleged or allegations made therein were true, none of theconditions laid down in the specified sections was contravened, the respondentwould have no jurisdiction to initiate proceedings pursuant to that notice.To state it differently, if on a true construction of the provisions of thesaid two sections the respondent has no jurisdiction to initiate proceedingsor make an enquiry under the said sections in respect of certain acts allegedto have been done by the appellants, the respondent can certainly beprohibited from proceeding with the same."

From this, the learned counsel suggests that where there was a lack ofjurisdiction, the writ of prohibition will lie against the impending enquiryor investigation.

18. We have absolutely no difficulty with this proposition.

However, the further question is as to whether there is anything in thejudgment suggesting that there cannot be an enquiry by the Customs Departmentin respect of the licence not issued by it but by some other Department.Learned counsel again relied on the observations in paragraph 35, which readsas follows:

"Nor is there any legal basis for the contention that licence obtained bymisrepresentation makes the licence non est, with the result that the goodsshould be deemed to have been imported without licence in contravention of theorder issued under Sec.3 of the Act so as to bring the case within cl.(8) ofS.167 of the Sea Customs Act. Assuming that the principles of law of contractapply to the issue of a licence under the Act, a licence obtained by fraud is

only voidable: it is good till avoided in the manner prescribed by law. ....This order, therefore, authorised the Government of India or the ChiefController of Imports to cancel such licences and make them ineffective. Thespecified authority has not cancelled the licence issued in this case on theground that the condition has been infringed. We need not consider thequestion whether the Chief Controller of Imports or the Government of India,as the case may be, can cancel a licence after the term of the licence hasexpired, for no such cancellation has been made in this case. In thecircumstances, we must hold that when the goods were imported, they wereimported under a valid licence and therefore it is not possible to say thatthe goods imported were those prohibited or restricted by or under Ch.IV ofthe Act within the meaning of cl.(8) of S.167 of the Sea Customs Act."Learned counsel wants to draw our attention to the fact that in this case, theimports were made under a valid licence and those imports were made under thesurveillance of the Customs authorities. He further points out that at thetime of importing the goods, the Customs authorities had not objected to inany manner and further the matching exports were also made and the licenceswere also redeemed and, therefore, there would be no question of there beingany jurisdiction in the Customs authorities to enquire into the matter. Whenwe see the majority judgment, which was read out to us, it is obvious that thelearned Judges came to the conclusion that the matter was not covered underSec.178 of the Customs Act unless there was a violation of Sec.3 of that Act.Learned Judges further held that the infringement of the condition in thelicence not to sell the goods imported to the third parties was not theinfringement of the order under Sec.3(1) of the Act and, therefore, theprovisions of Sec.178 could not be attracted. Such is clearly not the case inour matter. We have already referred to Sec.111(o) only with an idea tosuggest that any goods which were brought in contravention of Sec.111(o) couldbe said to be an act of smuggling and that under the provisions of the CustomsAct, any Customs authority had the necessary power to initiate the enquiry orthe investigation, as the case may be. Such a provision did not fall forconsideration in the aforementioned judgment of East India Commercial Companycase, cited supra and, according to us, this would be a distinguishingfeature. We have already pointed out that the facts and the principles of lawinvolved in Sheshang Sea Foods case, cited supra, would be almost applicableon all fours.

19. In Pooja Exporters case, cited supra, the learned single Judge of the Karnataka High Court, Justice K.A. Swami (as His Lordship thenwas) has given a clear reason, distinguishing the case of East IndiaCommercial Company case, cited supra. We respectfully agree with that.

20. The other decisions which were relied upon by the learned

counsel are Sampat Raj Dugar case and Titan Medical Systems case, cited supra.Considering the law laid down by the Supreme Court in Sampat Raj Dugar case,it must be pointed out that the facts therein are entirely different. There,the controversy was as to whether the importer had actually became owner ofthe goods. While considering the impact of Sec.111(o), the Supreme Courtclarified that the occasion to take an action under this clause arises onlywhen the condition is not observed subject to which the goods were allowed tobe imported without customs duty. In that case, the goods were confiscated by the Government on their being abandoned by the importer and that waschallenged. In our opinion, the judgment in this case is not apposite to thepresent controversy excepting for the observations in paragraph 21, which areheavily relied upon. The observations are to the following effect:

"The next question is whether the import of the said goods was contrary to lawin any manner and whether the said goods are liable to be confiscated underthe Customs Act. The only provisions relied upon by the appellants areClauses (d) and (o) in Section 111 of the Customs Act, which we have set outhereinabove. In our opinion none of these clauses are attracted in thepresent case. Clause (d) contemplates an import which is contrary to anyprohibition imposed either by the Customs Act or any other law for the timebeing in force. No such prohibition can be pleaded in this case since on thedate of the import the said goods were covered by a valid import licence. Thesubsequent cancellation of licence is of no relevance nor does itretrospectively render the import illegal. [East India Commercial Co. Ltd.v. The Collector of Customs, Calcutta - 1963 (3) SCR 338 at 372]. Clause (o)contemplates confiscation of goods which are exempted from duty subject to acondition, which condition is not observed by the importer. Occasion fortaking action under this clause arises only when the condition is not observedwithin the period prescribed, if any, or where the period is not prescribedwithin a reasonable time. It therefore cannot be said that the said goodswere liable to be confiscated on the date of their import under Clause (o)."(emphasis supplied)

What is very heavily relied upon is the observation that the subsequentcancellation of licence is not relevant to show that the import is illegal.From this, it is tried to be urged that if the import of the goods was notillegal then, there will be no question of enquiring into with the aid ofSec.108 of the Customs Act.

21. We do not agree. The observations therein were made in an entirely different context and in that case, the Supreme Court was notconsidering the question as to whether there was any jurisdiction on the partof the Customs authorities to enquire into the matter or to institute aninvestigation or an enquiry, as the case may be. We do not think thatanything was wrong in merely starting an investigation or an enquiry, as thecase may be, because the importers, appellants herein, could have evenconvinced the Customs authorities about the aspects of the legality of theimports. We do not see anything wrong if the Customs authorities enquiringinto the matter particularly because of the power in them to confiscate suchgoods as contemplated under Sec.111(o) of the Act. We do realize that thegoods in this case cannot be confiscated. However, as to whether the importercould be exempted from paying the customs duty would still be a question whichcan be gone into by the Customs authorities and in case they found to be thatthe exemption could not be availed by the importers, they could still be madeto pay the said exemption.

22. In Titan case, cited supra, also the importer was enjoying the Advance Licence under the EXIM policy. That Advance Licence wasfor import of certain components for manufacture of ultrasound scanners.These imports were made on the basis of an exemption notification withoutpaying any customs duty. However, a show cause notice came to be issued to the appellants, enquiring as to why duty and penalty should not be levied onthem for not having complied with the conditions of the exemption notificationand ultimately, penalty was imposed. That was challenged before the CentralExcise Gold Control Appellate Tribunal. The appeals were dismissed thoughafter reducing the quantum of penalty. It was against that the importer wentto the Supreme Court. The Supreme Court, therefore, was dealing with the saidimposition of duty. In paragraph 13, it is observed:

"To be noted that the licensing authority (sic) having taken no steps tocancel the licence. The licensing authority have not claimed that there wasany misrepresentation. Once an advance licence was issued and not questionedby the licensing authority, the Customs authorities cannot refuse exemption onan allegation that there was misrepresentation. If there was any misrepresentation, it was for the licensing authority to take steps in thatbehalf."

From this, it is suggested that it is only the licensing authority and in thiscase, the first respondent, which alone would be required to take any stepsagainst the importers for the breach of conditions of the licence, etc. It issuggested that the licence in this case has not been granted by the Customsauthorities and, therefore, the Customs authorities would not have anyjurisdiction to initiate even an enquiry.

23. Though there will be no question of the binding principle as laid down by the Supreme Court being watered down, in our opinion, theobservations have been made in an entirely different context. There was noquestion regarding the power of the Customs authorities to initiateinvestigation or the enquiry, as the case may be. Again, this was not a caseof manufacturing licence but pertained to the import of raw materials underthe exemption notifications issued under the EXIM Policy. The basic issued inthe proposed enquiry by the Customs authorities appears to be as to whetherthere at all was a manufacturing factory or manufacturing unit for utilizingthe imported stainless steel sheets and if such manufacturing unit was notthere, how the imported stainless steel sheets were actually utilized. It isalso true that the further question in that enquiry is going to be as towhether it was the imported material alone which was used in the manufacturingactivity. Now, if there was no manufacturing unit available or any suchmanufacturing unit as would have the capacity to manufacture the goods worthcrores of rupees, how was the imported stainless steel utilized. The questionwould not only be misrepresentation while getting the Advance Licence but alsoabout the utilization of the imported material, which would squarely fallunder Sec.111(o) of the Customs Act. In our opinion, the decision in Titancase, cited supra, also does not help the appellants.

24. Learned senior counsel for the appellants very earnestly urged that there was nothing which remained to be done particularly because:1. The imports were cleared and the matching exports also were cleared bythe Customs authorities without any demur and the licences were redeemed underthe scheme.

2. A specific enquiry in respect of the misrepresentation was made in theadjudication proceedings where the appellants were exonerated.

Learned counsel argues that beyond that nothing would survive to be decided oreven to be enquired into. The plea of limitation was also raised that the

25. In our opinion, it will not be for us to see as to what

would be the objective of such an enquiry. We are also not concerned with asto what transpires in the enquiry or whether the ultimate result in theenquiry could legitimately result in the payment of additional customs duty.The question is only of the jurisdiction on the part of the Customsauthorities to initiate an enquiry and in case of the result of the enquiry,any proceedings are initiated against the appellants, it would be for theappellants to allege all these points in those proceedings. We do not thinkthat the recovery of the evaded customs duty can be the only result or thefall out of the enquiry. There could be number of other issues involved,which we would be slow to discuss. In view of the fact that the enquiry hasyet not been completed and it is not decided as to whether the action shouldensue from the same or not, the contention that the exercise is redundant and,therefore, without jurisdiction has, therefore, to be rejected.

26. It was pointed out to us that in their counter though the 1st respondent has candidly admitted the liability of the appellants forpunishment under Sec.12 of the Foreign Trade Regulation Act, in paragraph 7 astand is taken that the issue regarding the violation of conditions of thelicence can be decided only by the Licensing authority. Some halting reliancewas tried to be place on this so-called admission.

27. We do not think this is an admission at all because there will be no question of there being no authority to the firstrespondent in enquiring into the breach of the conditions of the licence.However, that authority cannot exclude the jurisdiction of the Customsauthorities to enquire into the matter.

28. We were taken through the Notification Nos.80/95

and 30/97 issued under Sec.25 of the Customs Act. In the first notification,i. e. Notification No.80/95, there is a clear reference to the exportobligation being discharged after the necessary documents in support of theexport are produced to the satisfaction of the Assistant Commissioner ofCustoms. It is pointed out that in this case, out of sixteen licences,fifteen have been so discharged and in respect of the sixteenth licence also amajor portion of the export obligation has also been fulfilled. From thislearned senior counsel argues that, therefore, there will be no question nowof re-opening the matters particularly when the licences have been redeemed.

29. We do not think that such an approach would be a right approach to the problem. We have already clarified that even if theredemption of the licences is completed, still there would be a power in theCustoms authorities to effect the investigation or, as the case may be,enquiries to see that whether there was any evasion of the Customs duty.Therefore, in our opinion, the discharge of the export obligation per secannot put an end to the whole story.

30. In so far as the second notification, Notification No.30/97, is concerned, a similar provision regarding the export obligationalso appears there. However, there appears to be a specific clause added,i.e. Clause (vii), which is to the following effect:

"(vii) Exempt materials shall not be disposed of or utilized in any mannerexcept for utilization in discharge of export obligation or for replenishmentof such materials and the materials and the materials so replenished shall notbe sold or transferred to any other person."

Learned senior counsel appearing on behalf of the Department very heavilyrelies on this clause and says that it is in this direction that the enquiryhas to be made. We agree with the learned senior counsel that there can be ascope to enquire and the summons issued under Sec.108 of the Customs Act foreffecting the enquiry such as these cannot be bad for the lack ofjurisdiction.

31. It is trite law that where it is only a summons, there will be no question of considering the fall-out, at least at this stage.Learned senior counsel for this proposition has relied upon the celebrateddecision in UNION OF INDIA v. PRAKASH P. HINDUJA (2003 SCC (Cri.) 1314)wherein the Apex Court held that there is no power in the Magistrate or theCourt to interfere in the investigation or during the course of theinvestigation. Though the said decision pertains to an entirely differentjurisdiction like criminal jurisdiction, learned senior counsel wants us toread the observations to be applicable even to the present proceedings, whichare likely to be penal in nature. He says that even before any penalty iscontemplated or ordered, the Court should not interfere in the matter ofinvestigation. There can be no dispute about the proposition. However, inour opinion, there would always be a question of jurisdiction, as for example,if such a notice has been given by an authority of the Sales Tax Department,this Court could always have interfered on the ground of the lack ofjurisdiction. Such is not the case here, which we have shown by referring tothe various provisions of the Customs Act.

32. Lastly, learned senior counsel appearing on behalf of the Department expressed a great surprise over the adjudication order passed andmore particularly as regards the sixteenth licence where the exportobligations were almost complete to the extent of 70%. Learned counselexpressed as to what has happened to that unfulfilled part of the exportobligation is still not clear and insisted that it was strange that thequestion should have been left open by the concerned authority in the ultimateparagraph of his order.

33. We would have nothing to say about the merits of the order as we have already expressed that it is not our task to see thecorrectness of the order. We do feel that the criticism, atleast about thelast licence, is justified.

34. In short, there will be no question of interfering with the notice issued by the Customs Department and, in our view, the learnedsingle Judge has correctly dismissed the writ petitions. The writ appealsare, therefore, dismissed with the costs of Rs.3,000/- each. Connected WAMPsare closed.

Jai