1. Import of goods in banned containers camouflaged as permissible items — Issuance of show cause notices under Sections 28 and 124 of the Customs Act. (Para 1 )
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1996 Supreme(SC) 1224
1996(6) Supreme 560
SUPREME COURT OF INDIA
S.P. Bharucha and S.B. Majmudar, JJ.
Union of India & Ors. -Appellants
versus
Jain Shudh Vanaspati Ltd. & Anr. -Respondents
Civil Appeal No. 2360 of 1980
Decided on 8-8-1996
Counsel for the Parties :
For the Appellants : A.K. Ganguli, Sr. Advocate, A. Subba Rao and C.V. Subba Rao, Advocates.
For the Respondents : Dinesh Kumar Garg, Advocate (M/s. Gagrat & Co.) Advocates, (NP).
Show cause notices under Section 28 of the Customs Act are issued after Section 47 clearance. Additionally, a clearance order obtained through fraud does not require prior revision under Section 130 before initiating confiscation proceedings under Section 124, as fraud unravels all.
Headnote:Customs Act-Sections 28 and 124-Show cause notices under-Challenged-Respondents imported palm oil in containers made of stainless steel, which was a banned item-Containers were painted over to give impression that they were made of mild steel-Writ Petition-Allowed-High Court held that no notices u/s 28 or 124 could have been issued unless and until order u/s 47 had been revised-Appeal-Whether impugned judgment of High Court is sustainable? -(No)-High Court ought not to have entered into thicket of evidence, in exercise of power under Article 226 of Constitution.
Held : The case of the appellants in the show cause notices is that that the stainless steel containers in which the said oil was imported were banned, that the stainless steel containers were deliberately camouflaged by painting them to resemble mild steel containers, and that this was done with a view to enabling their clearance. A clearance order under Section 47 obtained by fraudulent means such as this (if it, in fact, be so) cannot debar the issuance of a show-cause notice for confiscation of goods under Section 124. Fraud, if established, unravels all. An order under Section 47 obtained by the employment of fraudulent methods does not have to be set aside by the exercise of revisional powers under Section 130 before the ill-effects of the fraud can be set right by initiation of the process of confiscation of the fraudulently cleared goods under Section 124. (Para 6)
The High Court noticed that the appellants allegation was that the stainless steel containers were painted over to suppress their true nature, but it took the view that the respondents were not required to disclose the nature or price of containers. We do think that the High Court ought to have taken some note of the significance of painting of stainless steel. If the stainless steel containers were painted, and so painted as to resemble mild steel containers, there can be little doubt that the intention was to slip them through the Customs. (Para 8)
Further held : Certainly, the High Court ought not to have entered into the thicket of evidence. Evidence was something for the authorities hearing the parties under Section 28 and 124 to accept and weigh. We do not approve of stultifying, in exercise of powers under Article 226, an investigation, still at the show-cause stage, by going into facts. (Para 9)
Act Referred
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2. Whether show cause notices under Sections 28 and 124 of the Customs Act require prior revision of the clearance order under Section 130. (Para 4 )
3. High Court erred by evaluating evidence at the show-cause stage and incorrectly requiring prior revision of clearance orders under Section 130 for initiating confiscation proceedings. (Para 5 , 6 , 8 , 9 , 10 )
4. Fraudulent clearance under Section 47 does not bar show cause notices under Section 124, nor does Section 28 require prior revision of clearance orders under Section 130. (Para 5 , 6 )
5. Appeal allowed — High Court judgment set aside — Writ petition dismissed — Proceedings pursuant to show cause notices under Sections 28 and 124 to continue. (Para 12 , 13 )
6. When can a show cause notice for unpaid customs duties be issued under Section 28 of the Customs Act?
A notice under Section 28 can be issued subsequent to the clearance of goods under Section 47. The permissible period for issuance begins from the relevant date, which is the date of the clearance order in cases where duty has not been levied. (Para 5 )
7. Does a clearance order under Section 47 prevent the issuance of a show cause notice for confiscation under Section 124 if fraud is alleged?
No. A clearance order obtained by fraudulent means does not debar the issuance of a show cause notice for confiscation under Section 124. Fraud unravels all, and the order does not need to be set aside under Section 130 before initiating confiscation proceedings. (Para 6 )
8. Can a High Court, exercising powers under Article 226, evaluate evidence to stop an investigation at the show-cause notice stage?
No. The High Court should not enter into the thicket of evidence or evaluate facts to stultify an investigation that is still at the show-cause stage. (Para 9 )
ORDER
The 1st respondents imported RBD palm oil during the period November, 1978, to March, 1979, and cleared the same in the quantity of 13,500 metric tonnes. Import of the said oil was permissible. On 11th October, 1979, the 1st respondents were served with show cause notices under Section 28 of the Customs Act and, on 21st January, 1980, with show cause notices under Section 124 thereof. The show cause notices stated that the said oil had been imported in containers made of stainless steel, which was a banned item, but which had been painted over to give the impression that they were made of mild steel. Thus, Customs duty had not been levied and the stainless steel containers were liable to be confiscated. The respondents were required to show cause there against. The respondents filed a writ petition in the Delhi High Court on 8th February, 1980, impugning the issuance of the Section 28 and Section 124 show cause notices. On 22nd August, 1980 the High Court allowed the writ petition.
2. This appeal is directed against the judgment and order of the High Court. When special leave was granted on 9th October, 1980, this court ordered that the stainless steel containers which had been seized by the appellants would continue to remain under seizure and be kept in the factory premises of the 1st respondents under the supervision of a Customs Officer. We are told that they so remain.
3. For completeness, it is necessary to mention that the appeal was dismissed on 28th November, 1991, but, on the review petition of the appellants, that judgment and order was set aside and the appeal was directed to be heard afresh, which is how we come to hear it.
4. The High Court based its judgment on material produced by the respondents before it to show that modern marketing practice required the movement of refined oil only in stainless steel or epoxy-coated tanks. It found that the material acceptable, particularly because one of the letters that the respondents produced had been written by the State Trading Corporation. The High Court held that the stainless steel containers that were used by the 1st, respondents to import the said oil could not be treated as separate or independent items of importation. What had been imported was only the said oil and not the stainless steel containers. The High Court looked to the law and stressed Section 47, whereunder clearance for home consumption had been given. It took the view that no show cause notices under Section 28 or Section 124 could have been issued unless and until the order under Section 47 had been revised under the provisions of Section 130 .
Section 47 reads thus :-
"47. Clearance of goods for home consumption.-Where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption."
Section 28 reads thus :-
"S. 28.- Notice for payment of duties not levied, short levied or erroneously refunded.-(1) When any duty has not been levied or has been short levied or erroneously refunded, the proper officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or which has been so short levied or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice;
Provided that where any duty has not been levied or has been short levied or has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this sub-section shall have effect as if for the words "six months" the words "five years" were substituted.
(2) The Assistant Collector of Customs after considering the repr
