1. Import of goods — Alleged misdeclaration — Confiscation and subsequent sale by customs authorities — Order of confiscation set aside by court. (Para 2 , 3 , 4 )
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1999 Supreme(SC) 1073
SUPREME COURT OF INDIA
G.T.Nanavati : S.N.Phukan
Northern Plastics Limited
Versus
Collector Of Customs And Central Excise
Case No. : 4196 of 1989, 3325 of 1990
Date of Decision : 9/17/99
Advocates Appeared: Dave Dushyant A. : Khaitan : Khawairakpam Gautam : Mehta S.K. : Parameswaran P. : Parmeshwaran P. : Patra A.T. : Shobha : Tripathi Parag P.
When goods are illegally confiscated and subsequently sold by authorities, the authorities are liable to refund the money value of the goods to the owner, as they cannot benefit from their own wrongful acts in preventing the release of the goods.
Headnote:(A) Constitution of India - Article 142; Supreme Court Rules, 1956 - Order 47 Rule 6 - Illegal confiscation of imported goods - Return of money value - Where an order of confiscation is set aside as illegal, the authority is liable to return the goods or their money value if the goods have been sold - The authority cannot escape liability by claiming the goods were perishable or that the sale proceeds were exhausted by duties and storage charges, especially when the authority's own actions prevented the release of the goods. (Paras 7, 9)
(B) Customs Duty - Liability - Import of goods - Duty becomes payable as soon as the goods land on the land mass of the country, regardless of whether they were cleared for home consumption. (Para 9)
(C) Compensation/Refund - Determination of value - In case of illegal confiscation and subsequent sale, the importer is entitled to the value of the goods as on the date they ought to have been cleared. (Para 9)
Facts of the case:
An importer brought in photographic films which were confiscated by customs authorities due to alleged misdeclaration. While appeals against the confiscation were pending in various courts, the authorities sold the goods, citing their perishable nature and storage requirements. The court subsequently held the confiscation to be illegal and the goods to be eligible for import. The importer then sought the money value of the goods with interest, as the goods could no longer be returned.
Findings of Court:
The court found that the confiscation was illegal and the respondent was responsible for the situation leading to the sale of the goods. While the importer is liable to pay customs duty, the respondent must refund the value of the goods (CIF value) as the importer was deprived of their use due to the wrongful acts of the authority.
Issues: Whether the respondent is liable to return the money value of the goods after an illegal confiscation order was set aside, and how the value and interest should be determined.
Ratio Decidendi: A party cannot take advantage of its own wrong. Since the authority illegally confiscated the goods and prevented their release, leading to their deterioration and sale, it is legally obligated to return the money value of the goods to the owner. The value is determined based on the cost of the goods at the time they should have been cleared for home consumption.
Result: Applications allowed. The respondent is directed to return the amount of Rs. 33.04 lacs with 12% interest from 1/2/1989 till the date of payment.
Legal Category Hierarchy
Table of Contents
2. Applicant seeks return of goods' value with interest — Respondent contends sale proceeds are offset by customs duty and storage charges. (Para 5 , 6 , 8 , 9 )
3. Illegal confiscation and sale of perishable goods by authorities creates liability to return money value; authorities cannot benefit from their own wrongful acts. (Para 7 , 9 )
4. Where goods are illegally confiscated and sold by authorities, the owner is entitled to the money value of the goods minus applicable duties. (Para 7 , 9 )
5. Application allowed — Respondent directed to return the money value of the goods with interest. (Para 10 )
6. Is the government liable to pay the money value of goods if they were illegally confiscated and subsequently sold?
Yes. If the order of confiscation is declared illegal and the goods have been disposed of by the authorities, the respondent is liable to return the money value of the goods to the owner. (Para 7 )
7. Is customs duty payable on goods that were confiscated and sold by authorities without being cleared for home consumption?
Yes. Import duty becomes payable as soon as the goods land on the land mass of India, regardless of whether they were cleared for consumption. (Para 9 )
8. How should the value of illegally confiscated and sold goods be determined for refund purposes?
The value should be determined based on the value at the time they ought to have been cleared, rather than the lower price realized from a sale caused by the authorities' own wrongful retention. (Para 9 )
9. Must an importer file a separate action in tort to recover the value of goods illegally confiscated and sold by customs?
No. While a tort action may be available for additional losses, the court can order the return of the money value of illegally confiscated goods within the same proceeding. (Para 9 )
JUDGMENT
G.T. Nanvati, J.
(1) THE applicant in both these applications in Northern Plastic Limited (now merged with Consolidated Photo & Finest Ltd.). It was the appellant in the above Civils which have been allowed by this court by its decision dated 14/7/1998. These applications have been filed for direction under Article 142 of the Constitution read with Order 47 Rule 6 of the Supreme court Rules, 1956.
(2) THE applicant had imported 59 jumbo rolls of Photographic Colour Files (Unexposed Positive in January, 1989. He filed the bill of entry on 11/1/1989 for clearance of the said goods. The were not cleared by the customs authorities as they had some doubt regarding its correct classification and entitlement to the benefit of exemption of customs duty and countervailing duty under the notifications mentioned in the bill of entry. That ultimately led to issuance of show cause notice on 14/8/1989 for confiscation of the said goods on the grounds that there was misdeclaration of description in the bill of entry for the purpose of classification and availing of exemption and the goods were not eligible for import under the O.G.L. By an order dated 14/9/1989 the collector of Customs ordered confiscation of those goods. However, taking into account the entire facts and circumstances of the case he gave the applicant an option to redeem those goods on payment of redemption fine of Rs. 5,00,000.00. He also imposed a penalty of Rs. 10,00,000.00
(3) THE goods were earlier ordered to be released by an interim order dated 27/4/1989 passed by the Gujarat High court. But as the said order was challenged both by the Union of India and by Hindustan Photo Films in this court by filing S.L.P. NOs. 8225 of 1989 and 9012 of 1989 they were not released. Meanwhile on 16/8/1989 Dehi HIgh court had also passed an order restraining he applicant to deal with or sell the said goods in any manner even if released in their favour by the customs authorities. The goods thus could not be obtained by the appellant and they came to be sold by the customs authorities even while the above appeals were still pending in this court. Against the order of Collector dated 14/9/1989 the applicant had preferred an appeal to CEGAT. The appeal was virtually dismissed except that the fine of Rs. 10,00,000.00 was reduced to Rs. 5,00,000.00 Aggrieved by the Collectors order dated 14.9.89 as confirmed by CEGAT the applicant had filed Civil No. 3325 of 1990. Civil No. 4196 of 1989 was filed against the earlier order of the Collector.
(4) SETTING aside the order dated 14.9.89 and the order passed by CEGAT this court held that the goods were not mis-declared by the appellant and they were also eligible for import under OGL. This court further held that for these reasons the goods imported by the appellant were not liable to confiscation and the impugned orders passed by the Collector and CEGAT were illegal. Both the appeals were therefore allowed.
(5) WHAT is now contended by learned senior Counsel Mr. Dave in these applications is that the order of confiscation having been set aside the respondent is liable to return the goods to the applicant. He also submitted that the respondent should not have, without obtaining the order of this court, sold away the goods during the pendency of the appeals. Since the respondent had wrongfully prevented clearance of the goods for consumption by the applicant and as the respondent has wrongfully confiscated the goods and sold them away he should be held liable to return the value of the said with 21% interest from 21/12/1988 till payment thereof.
(6) IN the counter affidavit filed on behalf of the respondent by the Under secretary to the government of India Ministry of Finance, opposing these applications it is stated that as the goods had specific expiry date and were also required to be stored in an air conditioned place, the Collector of Customs had informed the applicant on 28/5/1990
