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HIGH COURT OF CALCUTTA
H. K. Bose, G. K. Mitter
COLLECTOR OF CUSTOMS - Appellant
Versus
CALCUTTA CYCLE SYNDICATE - Respondent
A. F. O. O. 167 Of 1960
Decided On : NOVEMBER 27, 1963
SEA CUSTOMS ACT - SECTION 167(8) - CONFISCATION OF GOODS - NOTICE TO SHOW CAUSE - OPTION TO PAY FINE IN LIEU OF CONFISCATION - IMPORTS AND EXPORTS (CONTROL) ACT, 1947 - SECTION 3(1) AND (2) - SEA CUSTOMS ACT, 1878 - SECTION 183 - INTERPRETATION.
Fact of the Case:
The respondent, a registered partnership firm, entered into contracts with Rajdhani Motors and S. Nath and Co. for the purchase of auto cycle chains. The respondent guaranteed payment of drafts drawn against letters of credit opened by Rajdhani Motors and S. Nath and Co. with Hind Bank Ltd. in favor of the Japanese supplier. The Japanese company shipped the goods in part fulfillment of the contracts. The respondent paid the customs duty and cleared the goods. Upon examination, it was found that some of the cases contained goods of a different size than declared in the bill of entry and were prohibited from import without a license. Notices were issued to the respondent and the importers to show cause why action should not be taken against them under Section 167(8) of the Sea Customs Act read with Section 3 of the Import and Export Control Act and Section 19 of the Sea Customs Act. The respondent challenged the legality of the confiscation orders passed by the Collector of Customs without giving an option to pay fine in lieu of confiscation.
Finding of the Court:
1. The Customs authorities were justified in issuing notices to the importers, Messrs. S. Nath and Co. and Messrs. Rajdhani Motors, as they were the importers and owners of the goods as per the Bill of Entry submitted in their names. 2. The respondent, who had undertaken to purchase the goods after clearance out of customs control, was not entitled to a notice to show cause against confiscation of the goods under Section 167(8) of the Sea Customs Act before the orders confiscating the goods were passed against the importers. 3. Under Section 183 of the Sea Customs Act, the officer adjudging confiscation must give the owner an option to pay a fine in lieu of confiscation. However, in cases where the Imports and Exports (Control) Act applies, the word 'shall' in Section 183 is to be read as 'may', conferring a discretion upon the officer to give an option in lieu of confiscation if he thinks fit. 4. The orders of confiscation passed by the Collector of Customs were valid and binding on the respondent insofar as they related to the goods that were prohibited from import without a license. However, the orders were invalid and not binding on the respondent insofar as they related to the goods that were not prohibited from import.
Issues: 1. Whether the respondent was entitled to a notice to show cause against confiscation of the goods under Section 167(8) of the Sea Customs Act before the orders confiscating the goods were passed against the importers. 2. Whether the Collector of Customs was required to give the respondent an option to pay fine in lieu of confiscation under Section 183 of the Sea Customs Act.
Ratio Decidendi: 1. The purpose of issuing a notice to show cause is to give the person concerned an opportunity to defend themselves against the proposed action. In the present case, the respondent was not the importer or owner of the goods and had no interest in the goods until after they were cleared out of customs control. Therefore, the respondent was not entitled to a notice to show cause against confiscation of the goods. 2. Section 183 of the Sea Customs Act mandates the officer adjudging confiscation to give the owner an option to pay a fine in lieu of confiscation. However, when the Imports and Exports (Control) Act applies, the word 'shall' in Section 183 is to be read as 'may', giving the officer discretion to grant an option to pay a fine in lieu of confiscation.
Final Decision: The appeal was allowed in part. The orders of confiscation passed by the Collector of Customs were upheld insofar as they related to the goods that were prohibited from import without a license. However, the orders were quashed insofar as they related to the goods that were not prohibited from import. The customs authorities were permitted to take fresh proceedings in respect of the latter goods.
( 1 ) THIS is an appeal from an order of Sinha, J. , dated the 19th May, 1960, making a, Rule issued under Article 226 of the Constitution absolute.
( 2 ) THE respondent Calcutta Cycle Syndicate is a registered partnership firm carrying on business at No. 3, Bentinck Street Calcutta as dealers in cycles and parts and accessories of cycles including auto cycles. Between 20th December, 1956 and 31st December, 1956, the respondent entered into a contract with Rajdhani Motors carrying on business at Kashmere Gate, Delhi, for purchase of about 60,000 pieces of auto cycle chains measuring 1/2" x 3/16" x 104 links of Japanese manufacture at the rate of Rs. 24/- per dozen. Under the terms of the said contract which was entered into by correspondence, the respondent agreed to pay the amount of the bank drafts on Rajdhani Motors and to look after the formalities regarding the clearance of the consignment from the customs at the Calcutta Port and also to pay the customs duty and clearing charges on behalf of Rajdhani Motors. It was further provided, under the said contract that all the documents would be sent to Rajdhani Motors after the clearance of the consignment with a statement of payment made on their behalf. At or about the same time, the respondent entered into another contract with Messrs. S. Nath and Co. , of 6, Esplanade Road, Delhi, upon substantially similar terms for the supply of further 60,000 pieces of auto cycle chains of the same description. This contract was entered into verbally between the parties. On or about 24th December, 1956, S. Nath and Co. , placed an order for the said goods with Messrs. Nigam Brothers of Calcutta, who are the agents in India of a Japanese company carrying on business in Osaka, Japan, under the name and style of Asia Machinery Trading Co. , Ltd. On the same date S. Nath and Co. , opened a letter of credit with Hind Bank Ltd. , in favour of the Asia Machinery Trading Co. , Ltd. , for the invoice value of the said goods in terms of the contract between S. Nath and Co. and the said Japanese Company. The respondent guaranteed to the Hind Bank Ltd. , that it would make payment of the drafts drawn against the said letter of credit. On or about 10th January, 1957, Rajdhani Motors similarly placed an order with Nigam Brothers for supply of the said auto cycle chains by the said Asia Machinery Trading Co. , Ltd. On 16th January, 1957, Rajdhani Motors opened a letter of credit with the Hind Bank Ltd. , in favour of the Japanese Company for the full invoice value of the goods and the respondent similarly guaranteed payment of drafts drawn against the said letter of credit. The Japanese company shipped 250 cases of the said goods in part fulfilment of its contract with S. Nath and Co. , and on or about 31st January, 1957 the respondent made payment to the Hind Bank of the bill of exchange drawn by the Japanese company for the price of the said 250 cases. It appears that the payment made by the respondent as guarantor was credited to the ac- count of S. Nath and Co. , and thereafter appropriated by the bank towards payment of the bill of exchange drawn by the Japanese company on S. Nath and Co. Upon such payment the bank released the shipping documents to the respondent as agent of 5. Nath and Co. , and the respondent instructed the clearing agent Messrs. Nalini Bandho Ray and Co. to clear the goods on behalf of S. Nath and Co. On 2ist February, 1957, the said goods were cleared and the respondent paid the customs duty after 10 cases of the said 250 had been selected at random by the customs authorities for examination. Thereafter the Japanese company shipped a further 53. cases in completion of the deliveries under the contract with S. Nath and Co. , and drew a further bill of exchange against the said letter of credit for, the price of the said 53 cases. On, or about 25th March, 1957, the respondent paid the amount of the bill of ex-change as guarantor and obtained the shipping documents
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