Dive into the intricate legal analysis of a recent court case regarding goods confiscation and imposition of penalties. The case delves into the nuances of import restrictions, redemption fines, and penalties under the Customs Act. Uncover the court’s examination of prohibited versus restricted goods, discretionary release of goods, and the application of statutory provisions. Follow the complex legal arguments presented by the parties and the court’s scrutiny of the legal framework governing import policies and penalties.
Facts
- The Union of India challenged notifications on import restrictions of beans, peas, and pulses issued under the Foreign Trade (Development and Regulation) Act, 1992.
- Multiple writ petitions filed in various High Courts contested the notifications, leading to interim orders favoring importers.
- Dismissal of these writ petitions ultimately by the High Courts and the failure of an appeal in the Supreme Court.
- Central Government’s notifications amended import policy conditions for certain items under the Foreign Trade Policy in March 2019.
- Challenges to notifications resulted in litigations under the Customs Act, leading to confiscation liabilities on imported goods.
- Importers faced penalties and confiscation threats due to imports made under interim orders.
- Various legal actions taken by both the importers and customs authorities in response to the ongoing litigations.
- The importer sought waivers of show cause notices under the Customs Act but faced obstacles in goods clearance due to restrictions.
- DGFT and customs authorities halted goods release despite payment, citing import policy violations and legal considerations.
- Ongoing litigation involving multiple importers, customs authorities, and the DGFT, with legal complexities and administrative challenges.
- Importers sought permissions for imports based on contractual obligations despite the ongoing legal disputes and import restrictions.
- The timeline of events and legal actions leading to the current litigations and challenges in goods clearance and import permissions.
- The Appellate Authority proceeded to calculate the margin of profit while imposing fines and penalties on the importer.
- There were issues related to the release of goods covered by bills of entry mentioned in the judgment.
- The High Court made observations and issued directions regarding various orders and judgments related to the case.
- The Appellate Authority enhanced penalties under Section 112( a )( i ) of the Customs Act in certain cases.
- There were concerns raised about the impact of large-scale imports on local farmers’ interests.
- Various High Courts dismissed writ petitions challenging import restrictions, upholding the notifications and trade notices.
- There were instances of modification of orders by the High Court based on importer applications.
- The High Court issued directives related to contempt proceedings and compliance with its orders.
- Interim orders issued by High Courts were crucial in permitting imports without restrictions.
- The orders passed by authorities and courts were subject to significant review and challenge.
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Issue
- The High Court’s decision to release the goods questioned by the appellants as incompatible with the purpose of adjudication by the Appellate Authority.
- The appellants argue that the goods in question fall under the prohibited category due to non-compliance with licensing requirements and exceeding the prescribed limits.
- The appellants contend that the prohibited goods should be confiscated absolutely as per the relevant laws and notifications, and should not be released into the Indian market.
- The appellants distinguish the present case from the Atul Automations case.
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Arguments
- The learned ASG argued against the orders passed by the High Court, asserting that the goods in question are liable to absolute confiscation.
- The ASG contended that the discretionary release of goods defeated the purpose of the notifications and the judgment in Agricas.
- Reference was made to the distinction between ‘prohibited’ and ‘restricted’ goods, with an emphasis on the relevant legal provisions.
- The argument focused on the conformity to law in the exercise of judicial discretion, highlighting previous court decisions.
- The ASG emphasized the adverse impact of allowing excess imports beyond specified quotas, especially in the context of trade violations and lack of bona fide intentions.
- The ASG referred to the DGFT’s interpretation and relevant statutes to support the contention that restricted goods could be treated as prohibited if conditions were violated.
- The discussion also touched upon the power of the Adjudicating Authority under Section 125 of the Customs Act regarding redemption/release of goods on payment of fines.
- The respondent importer’s stance was in support of the orders-in-original and the High Court’s decisions, arguing that the release of goods with redemption fine was in accordance with the law.
- Revenue objected on the quantum of Redemption Fine and Penalty citing it as abysmally low.
- Argument made that demand and supply of pulses is dynamic and not static, thus what was abundant earlier may not be easily available now.
- Union of India issued import licenses for 9 Lakh MTs of pulses, indicating a short supply.
- Applicant argues that releasing confiscated goods will help meet excess demand without adverse effects.
- Perishable nature of goods and feasibility issues for re-export due to pandemic cited as reasons for releasing goods for domestic market on payment of fine and penalty.
- Intervener Agricas LLP’s history of importing black mapte/urad and ongoing dispute over release of goods discussed.
- Similar arguments made for releasing goods based on Section 11(9) of the FTDR Act and/or Section 125 of the Customs Act, emphasizing equity and lack of prohibition on the goods.
- Principal submissions on behalf of importers reiterate arguments that goods are not prohibited and could be released upon payment of charges.
- Reference to Atul Automations case where goods imported without authorization were considered restricted goods, supporting the argument for release of goods upon payment.
- Revenue’s explanation on the purpose of Redemption Fine and Penalty, highlighted as serving mutually exclusive purposes of nullifying profit margin and acting as a deterrent.
- Question raised on the adjudicating authority’s allocation of profit margin between Redemption Fine and Penalty, deemed questionable and legally flawed.
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Analysis
- The Court observed that the statutory authority can be commanded by a writ of mandamus to perform its duty by exercising discretion according to the law.
- Imported goods were confiscated, and redemption fine under Section 125 of the Customs Act was imposed.
- Guidelines for granting interlocutory injunctions include considering the strength of the plaintiff’s case for trial and the risk of injustice in granting or not granting the injunction.
- Court held that any restriction on import or export is a form of prohibition, and the term ‘any prohibition’ in Section 111(d) of the Customs Act includes restrictions.
- The Court discussed the case of Hargovind Das K. Joshi where zip fasteners became subject to confiscation but free import of the item was later allowed.
- Principles stated in the decision of the Chancery Division in Films Rover International Ltd. v. Cannon Film Sales Ltd. were referred to.
- The Court emphasized the need for proper value judgment with fairness and equity in such matters.
- The decision in Om Prakash Bhatia involved rejection of declared values of imported goods and re-assessment of values leading to differential duty and interest recovery.
- The Appellate Authority found want of proper analysis in the original order regarding margin of profit and penalty calculation.
- The exercise of discretion by the authority was discussed concerning the prohibition or restriction of imported goods.
- The Court reiterated the importance of exercising discretion diligently, free from arbitrariness, and in accordance with legislative intent.
- The principle of taking whichever course carries lower risk of injustice in granting or not granting an injunction was highlighted.
- Guidelines for the grant of interlocutory injunctions were discussed based on the principle of avoiding injustice.
- The Court emphasized that discretion must be exercised reasonably, rationally, and impartially.
- The observations and findings of the Court in the Agricas case regarding discretion and legality of exercise were referenced.
- Section 125 of the Customs Act allows for the option to pay a fine in lieu of confiscation for prohibited goods or other goods.
- A distinction is made between prohibited goods and other goods in the provision of Section 125.
- The release of confiscated goods, other than prohibited goods, is obligated against a redemption fine.
- Section 11 empowers the Central Government to prohibit the import or export of goods under specified conditions.
- Prohibition of importation or exportation could be subject to prescribed conditions to be fulfilled before or after clearance of goods.
- The Principal Commissioner of Customs or Commissioner of Customs can call for and examine the record of any proceeding for legality or propriety.
- Goods imported contrary to any prohibition imposed by law are liable to be confiscated under Section 111.
- The judgment in Raj Prakash Chemical v. Union of India has no application to the present case.
- Importers cannot claim to have a bona fide belief when importing goods under the cover of interim orders.
- The consequences of such improper imports fall on the importers in law.
- Granting interim relief without considering implications can lead to avoidable legal complications.
- Principles regarding interim relief should be followed diligently to prevent unintended consequences.
- Respondent-importers are held responsible for improper imports and the ensuing litigation, warranting heavier costs.
Decision
- All pending applications stand disposed of with costs of Rs. 2,00,000/- each to be paid by the respondent-importers to the appellants.
- The impugned orders and interim order by the High Court are set aside, and the writ petitions filed by the respondent-importers are dismissed.
- The orders-in-appeal dated 24.12.2020 are approved, quashing the orders-in-original dated 28.08.2020 in the cases of the respondent-importers.
- Goods covered under certain Bills of Entry are accepted as cleared and not available for absolute confiscation, with redemption fine already paid, if any, to be appropriated.
- A penalty of Rs. 10,00,00,000/- is imposed on M/s Harihar Collections under Section 112(a)(i) of the Customs Act 1962, with any previous penalty paid ordered to be appropriated towards this new penalty.
- The High Court issued a modification order on 09.12.2020 directing the release of certain goods on payment of redemption fine, penalty, customs duty, and other dues.
- Intervenors’ matters are to be governed by the judgment, with options of further appeal on the quantum of amount payable left open.
- Writ petitions filed by intervenors and pending applications are dismissed with no order as to costs.
- Operation of the order dated 24 December 2020 is stayed until further orders, and compliance with court directions is required by Respondent Nos. 3 and 4.
- A penalty of Rs. 5,00,00,000/- is imposed on M/s Raj Grow Impex LLP under Section 112(a)(i) of the Customs Act 1962, with any previous penalty paid ordered to be appropriated towards this new penalty.
- The order of the lower authority dated 28.08.2020 is modified accordingly.
- The High Court placed a stay order on the order-in-appeal dated 24.12.2020.
- Goods in question are held liable to absolute confiscation, with the option for re-export on payment of necessary redemption fine and compliance with statutory obligations.
Case Title: UNION OF INDIA Vs. M/S RAJ GROW IMPEX LLP (2021 INSC 307)
Case Number: C.A. No.-002217-002218 / 2021
