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High Court Of Calcutta
AJIT KUMAR SENGUPTA, NURE ALAM CHOWDHURY
COLLECTOR OF CUSTOMS - Appellant
Versus
LEXUS EXPORTS PRIVATE LTD. - Respondent
APPEAL 2988 Of 1992
Decided On : 06/28/1993
FOREIGN EXCHANGE REGULATION ACT - SECTION 18 (1) (A) - CUSTOMS ACT - SECTION 11 - CONFISCATION OF GOODS - IPRS SCHEME - INTERPRETATION AND APPLICATION: - In the instant case, the respondent-writ petitioner, while exporting non-stainless steel rods, mentioned in the Customs documents that the goods were stainless steel rods. The Customs Authorities seized the goods and initiated confiscation proceedings alleging violation of Section 18 (1) (a) of the Foreign Exchange Regulation Act, 1973 (FERA) and Section 11 of the Customs Act, 1962. The respondent-writ petitioner challenged the seizure and confiscation proceedings in a writ petition. The High Court held that there was no violation of Section 18 (1) (a) of FERA as the incorrect description of the goods in the Customs document did not amount to under-invoicing, but rather over-invoicing, which is not prohibited under FERA. Consequently, there was no deemed violation of Section 11 of the Customs Act under Section 67 of FERA. The High Court further held that Section 113 (d) of the Customs Act, which provides for confiscation of goods attempted to be improperly exported, was not applicable as there was no prohibition on the export of non-stainless steel rods under the Customs Act or any other law. The High Court also rejected the contention of the Customs Authorities that the incorrect description of the goods was made to obtain benefits under the International Price Reimbursement Scheme (IPRS), as the respondent-writ petitioner had to fulfil several conditions and provide supporting documents to claim reimbursement under the scheme. Therefore, the High Court dismissed the appeal filed by the Customs Authorities and directed them to allow the respondent-writ petitioner to export the goods in question forthwith.
Fact of the Case:
The respondent-writ petitioner, Lexus Export Private Ltd., entered into a contract with Messrs. Omega Enterprises, U.S.A. for the supply of stainless steel rods and non-stainless steel rods. While the supply was pending, the respondent-writ petitioner mentioned stainless steel rods in the Customs documents for the export of non-stainless steel rods. The Customs Authorities seized the goods and initiated confiscation proceedings alleging violation of Section 18 (1) (a) of the Foreign Exchange Regulation Act, 1973 (FERA) and Section 11 of the Customs Act, 1962. The respondent-writ petitioner challenged the seizure and confiscation proceedings in a writ petition.
Finding of the Court:
The High Court held that there was no violation of Section 18 (1) (a) of FERA as the incorrect description of the goods in the Customs document did not amount to under-invoicing, but rather over-invoicing, which is not prohibited under FERA. Consequently, there was no deemed violation of Section 11 of the Customs Act under Section 67 of FERA. The High Court further held that Section 113 (d) of the Customs Act, which provides for confiscation of goods attempted to be improperly exported, was not applicable as there was no prohibition on the export of non-stainless steel rods under the Customs Act or any other law. The High Court also rejected the contention of the Customs Authorities that the incorrect description of the goods was made to obtain benefits under the International Price Reimbursement Scheme (IPRS), as the respondent-writ petitioner had to fulfil several conditions and provide supporting documents to claim reimbursement under the scheme.
Issues: 1. Whether the incorrect description of goods in the Customs document violated Section 18 (1) (a) of the Foreign Exchange Regulation Act, 1973 (FERA) and Section 11 of the Customs Act, 1962? 2. Whether the goods were liable to confiscation under Section 113 (d) of the Customs Act? 3. Whether the incorrect description of goods was made to obtain benefits under the International Price Reimbursement Scheme (IPRS)?
Ratio Decidendi: 1. Section 18 (1) (a) of FERA only imposes an embargo on taking or sending goods out of India unless a declaration in the prescribed form is filed, inter alia, mentioning the full export value of the goods. Violation of Section 18 (1) (a) only restricts export. There is no other offence prescribed in the Statute for such violation. The Act does not provide for any punishment for such violation. Therefore, once the full export value is mentioned, export cannot be stopped. 2. Section 113 (d) of the Customs Act provides for confiscation of goods attempted to be improperly exported. However, there was no prohibition on the export of non-stainless steel rods under the Customs Act or any other law. Therefore, Section 113 (d) of the Customs Act was not applicable. 3. The incorrect description of goods in the Customs document was not made to obtain benefits under the International Price Reimbursement Scheme (IPRS) as the respondent-writ petitioner had to fulfil several conditions and provide supporting documents to claim reimbursement under the scheme.
Final Decision: The High Court dismissed the appeal filed by the Customs Authorities and directed them to allow the respondent-writ petitioner to export the goods in question forthwith.
( 1 ) THE respondent-writ petitioner, Lexus Export Private Ltd. (in short "lexus Export") entered into a contract with Messrs. Omega Enterprises, U. S. A. through Messrs. Hind International and Investment Ltd. , their sole procurement agent for China, South Korea, Taiwan and India for supply of 1,20,000 pieces of stainless steel rods, also known as stainless steel earth rod.
( 2 ) WHILE the supply under the aforesaid contract was pending, the respondent-writ petitioner entered into another contract with Messrs. Omega Enterprises, U. S. A. through Messrs. Hind International and Investment Ltd. for supply of 48,000 pieces of non-stainless steel rods, also known as non-stainless steel stay rods.
( 3 ) THERE is no dispute about the existence of both the contracts and about the obligation of the respondent-writ petitioner to supply stainless steel rods as well as non-stainless steel rods to Messrs. Omega Enterprises, U. S. A.
( 4 ) THE respondent-writ petitioner in terms of the second contract manufactured 36,000 pieces of non-stainless steel rods and loaded the same in six containers for effecting export. It is claimed that due to inadvertence in the documents that were filed with the Customs Authorities these goods were mentioned as stainless steel rods, i. e. rods required to be supplied by the respondent-writ petitioner under the first contract.
( 5 ) IT is claimed that the respondent-writ petitioner could not have done this deliberately. Before any export could be effected the Excise Authorities are obliged to take samples. In the instant case, the Excise Authorities took samples on 2nd September 1992 which they forwarded to the Customs Department for necessary test. Since the respondent-writ petitioner was always aware that Excise Authorities would take samples and these would be tested by the Customs Authorities, it could not have deliberately mentioned stainless steel rods in the Customs document while despatching non-stainless rods.
( 6 ) THE Customs Authorities upon testing the samples found that the goods were of non-stainless steel variety. The Customs Authorities thereupon, not only seized the goods but also started random raids at all conceivable places, i. e. the respondent-writ petitioner's office, factory, residence of its Directors, office of its suppliers of raw materials, office of its Chartered Accountants and seized all books and records of the respondent-writ petitioner and took them away from the factory including Excise records and even went to the extent of freezing all bank accounts of the respondent-writ petitioner.
( 7 ) SUCH action of the Customs Authorities was challenged in the writ petition on the ground that the action is high-handed and arbitrary. The said writ application was moved in the presence of the appellants on 24th September 1992. It was urged that the Customs Authorities had no power to freeze the bank accounts of the respondent-writ petitioner. It was also contended that after the description of the goods in the Customs papers were corrected, the Customs Authorities had no power to withhold export of 36,000 pieces of non-stainless steel stay rods. The Customs Authorities could not show any ground on the basis of which they could seize or confiscate those export goods.
( 8 ) UPON hearing the parties on 24th September 1992, Umesh Chandra Banerjee, J. the learned Judge of the Court of the first instance, passed an order of injunction in terms of prayer (g), g (i), g (ii) and g (v) of the writ petition. The learned Judge clarified that the release of the goods for the purpose of export shall take place in accordance with law. An ad interim order in terms of prayer (h) was also passed. It was made clear that the said order would not prevent the Customs Authorities to initiate any proceedings in accordance with law, if not already initiated. The prayers referred to above are as follows :-" (g) order of injunction to issue restraining the respondents and each of th
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