Union of India & Ors. vs M/s. Raj Grow Impex LLP & Ors.

Customs Act, 1962 – s.125 – Import – ‘prohibited goods’ and ‘other goods’ – Distinction between – Latter part of s.125 obligates the release of confiscated goods (i.e., other than prohibited goods) against redemption fine but, the earlier part of this provision makes no such compulsion as regards the prohibited goods; and it is left to the discretion of the Adjudicating Authority that it may give an option for payment of fine in lieu of confiscation – If the Adjudicating Authority does not choose to give such an option, the result would be of absolute confiscation – Principles to be applied for exercise of discretion so available in the first part of s.125(1) – Held: Exercise of discretion is a critical and solemn exercise, to be undertaken rationally and cautiously and guided by law; according to rules of reason and justice; and based on relevant considerations – The purpose behind leaving such discretion with the Adjudicating Authority in relation to prohibited goods is to ensure that all the pros and cons shall be weighed before taking a final decision for release or absolute confiscation of goods – On facts, orders-inoriginal dated 28.08.2020 of the Adjudicating Authority cannot be said to have been passed in a proper exercise of discretion – The Adjudicating Authority did not even pause to consider if the other alternative of absolute confiscation was available to it in its discretion as per the first part of s.125(1) of the Customs Act and proceeded as if it has to give the option of payment of fine in lieu of confiscation – Such exercise of discretion by the Adjudicating Authority was more of assumptive and ritualistic nature rather than of a conscious and cautious adherence to the applicable principles – When personal business interests of importers clash with public interest, the former has to, obviously, give way to the latter – Further, if excessive improperly imported goods are allowed to enter the country’s market, the entire purpose of the notifications would be defeated – Discretion in cases of present nature, involving far-reaching impact on national economy, cannot be exercised only with reference to the hardship suggested by the importers, who made such improper imports only for personal gains – The imports in question suffer from the vices of breach of law as also lack of bona fide and accordingly held liable to absolute confiscation but with a relaxation of allowing reexport, on payment of necessary redemption fine and subject to the importer discharging other statutory obligations – No leniency in the name of equity can be claimed by the importers – Respondentimporters being responsible for improper imports as also for the present litigation, apart from other consequences, also deserve to be saddled with heavier costs – Respondent-importers to pay costs of litigation to appellants, quantified at Rs. 2,00,000/- each. Import-Export – Adjudicating Authority, while ordering confiscation, gave option to the importers to redeem the goods in question on payment of fine in lieu of confiscation u/s.125(1) of the Customs Act – However, the DGFT took exception against release of the goods stating that the same were restricted items – Importers (private respondents) approached the High Court by way of separate writ petitions, seeking mandamus for clearance of the goods ORS.

in question – While the writ petitions were pending, the Commissioner of Customs passed order dated 01.10.2020 in exercise of his powers u/s.129D(2) of the Customs Act, pointing out the alleged deficiencies in the adjudication orders; and directed filing of appeals before the Commissioner (Appeals) – Meanwhile, the High Court by order dated 15.10.2020 held that, prima facie, the grounds stated in the order dated 01.10.2020 did not make out any such case of illegality or impropriety as to call for exercise of suo motu revisional powers by the Commissioner under s.129D(2) of the Customs Act – Having said that, the High Court left the matter to be decided by the Commissioner (Appeals) – However, thereafter, the High Court issued directions to the respondents to forthwith release the goods of the importers – Legality and validity of the orders passed by the High Court – Held: Order dated 15.10.2020 passed by High Court suffers from inherent contradictions and inconsistencies; and cannot be approved – Significantly, if the purport of the order dated 15.10.2020 of the High Court had been that even if Commissioner (Appeals) would be deciding the matter in appeal, he could not order absolute confiscation of the goods because the High Court had ordered their release, it would immediately lead to the position that the order dated 15.10.2020 of the High Court carried inherent contradictions – If release of goods was the only option available with the authorities, the material part of consideration of the Appellate Authority had already been rendered redundant – When the matter was left for decision by the Commissioner (Appeals), there was neither any occasion nor any justification for the High Court to pass the order for release of the goods for the simple reason that any order for release of goods was to render the material part of the matter a fait accompli – This, simply, could not have been done –Apart from the fundamental flaws of contradictions, the order passed by the High Court on 15.10.2020 further suffers from the shortcomings that while issuing mandamus for release of goods, the High Court omitted to take into account the relevant facts as also the material factors concerning the imports in question – Impugned order dated 15.10.2020, having been passed while ignoring the relevant considerations, cannot be approved.

Equity – Claim of – Held: Once the Court has reached to the conclusion that a particular action is wanting in bona fide, the perpetrator cannot claim any relief in equity in relation to the same action – Absence of bona fide in a claimant and his claim of equity remain incompatible and cannot stand together. Interim relief – Grant of – Matter of discretion – Considerations – Held: In matters of grant of interim relief, satisfaction of the Court only about existence of prima facie case in favour of the suitor is not enough – The other elements i.e., balance of convenience and likelihood of irreparable injury, carry their own relevance; and while exercising its discretion in the matter of interim relief and adopting a particular course, the Court needs to weigh the risk of injustice, if ultimately the decision of main matter runs counter to the course being adopted at the time of granting or refusing the interim relief.

Allowing the appeals, the Court

HELD:

Whether the goods in question are of ‘prohibited goods’ category?

1. The categorical findings in the case of Agricas by this Court, read with the provisions above-quoted, hardly leave anything to doubt that sub-section (3) of Section 3 of the FTDR Act applies to the goods in question and, for having been imported under the cover of the interim orders but, contrary to the notifications and the trade notice issued under the Foreign Trade (Development and Regulation) Act, 1992 and without the requisite licence, these goods shall be deemed to be prohibited goods under Section 11 of the Customs Act; and all the provisions of the Customs Act shall have effect over these goods and their import accordingly. [Para 65][451-C-E]

2.1. The contention on the part of the importers, that the subject goods fall in ‘restricted’ category and not ‘prohibited’ category, is baseless and required to be rejected. [Para 66] [451-E]

2.2. In the present case import of the referred peas/pulses has been restricted to a particular quantity and could be made only against a licence. The letter and spirit of this restriction, is that, any import beyond the specified quantity is clearly ORS.

impermissible and is prohibited. This Court has highlighted the adverse impact of excessive quantity of imports of these commodities on the agricultural market economy in the case of Agricas. In the present case, the underlying feature for restricting the imports by quantum has been the availability of excessive stocks and adverse impact on the price obtainable by the farmers of the country. [Para 67.4.3][455-E-G]

2.3. The goods in question, having been imported in contravention of the notifications dated 29.03.2019 and trade notice dated 16.04.2019; and being of import beyond the permissible quantity and without licence, are ‘prohibited goods’ for the purpose of the Customs Act. Even in the orders-in-original dated 28.08.2020 by the Adjudicating Authority, it was clearly held that the goods in question were prohibited goods. [Para 68][455-H; 456-A]

2.4. The unnecessary and baseless arguments raised on behalf of the importers that the goods in question are of ‘restricted’ category, with reference to the expression ‘restricted’ having been used for the purpose of the notifications in question or with reference to the general answers given by DGFT or other provisions of FTDR Act are, therefore, rejected. The goods in question fall in the category of ‘prohibited goods’. [Para 68.1] [456-B]

Whether the goods in question are liable to absolute confiscation?

3. Once it is clear that the goods in question are improperly imported and fall in the category of ‘prohibited goods’, the provisions contained in Chapter XIV of the Customs Act, 1962 come into operation and the subject goods are liable to confiscation apart from other consequences. [Para 69][456-C-D]

4. A bare reading of Section 125(1) of the Customs Act makes it evident that a clear distinction is made between ‘prohibited goods’ and ‘other goods’. The latter part of Section

125 obligates the release of confiscated goods (i.e., other than prohibited goods) against redemption fine but, the earlier part of this provision makes no such compulsion as regards the prohibited goods; and it is left to the discretion of the Adjudicating Authority that it may give an option for payment of fine in lieu of confiscation. It is innate in this provision that if the Adjudicating Authority does not choose to give such an option, the result would be of absolute confiscation. [Paras 69 and 69.1][456-G; 457-A-B]

5.1. The exercise of discretion is a critical and solemn exercise, to be undertaken rationally and cautiously and has to be guided by law; has to be according to the rules of reason and justice; and has to be based on relevant considerations. The quest has to be to find what is proper. Moreover, an authority acting under the Customs Act, when exercising discretion conferred by Section 125 thereof, has to ensure that such exercise is in furtherance of accomplishment of the purpose underlying conferment of such power. The purpose behind leaving such discretion with the Adjudicating Authority in relation to prohibited goods is, obviously, to ensure that all the pros and cons shall be weighed before taking a final decision for release or absolute confiscation of goods. [Para 79][465-F-H]

5.2. It is but evident that the orders-in-original dated 28.08.2020 passed by the Additional Commissioner of Customs (the Adjudicating Authority) cannot be said to have been passed in a proper exercise of discretion. The Adjudicating Authority did not even pause to consider if the other alternative of absolute confiscation was available to it in its discretion as per the first part of Section 125(1) of the Customs Act and proceeded as if it has to give the option of payment of fine in lieu of confiscation. Such exercise of discretion by the Adjudicating Authority was more of assumptive and ritualistic nature rather than of a conscious as also cautious adherence to the applicable principles. The Appellate Authority, on the other hand, has stated various reasons as to why the option of absolute confiscation was the only proper exercise of discretion in the present matter. The reasons assigned by the Appellate Authority, in the order-in-appeal dated 24.12.2020 are fully in accord with the principles of exercise of discretion. [Para 80][466-A-D]

5.3. The prohibition involved in the present matters, of not allowing the imports of the commodities in question beyond a particular quantity, was not a prohibition simpliciter. It was ORS.

provided with reference to the requirements of balancing the interests of the farmers on the one hand and the importers on the other. Any inflow of these prohibited goods in the domestic market is going to have a serious impact on the market economy of the country. The cascading effect of such improper imports in the previous year under the cover of interim orders was amply noticed by this Court in Agricas. This Court also held that the imports were not bona fide and were made by the importers only for their personal gains. [Para 81][466-D-F]

6. The sum and substance of the matter is that as regards the imports in question, the personal interests of the importers who made improper imports are pitted against the interests of national economy and more particularly, the interests of farmers. This factor alone is sufficient to find the direction in which discretion ought to be exercised in these matters. When personal business interests of importers clash with public interest, the former has to, obviously, give way to the latter. Further, if excessive improperly imported peas/pulses are allowed to enter the country’s market, the entire purpose of the notifications would be defeated. The discretion in the cases of present nature, involving far-reaching impact on national economy, cannot be exercised only with reference to the hardship suggested by the importers, who had made such improper imports only for personal gains. The imports in question suffer from the vices of breach of law as also lack of bona fide and the only proper exercise of discretion would be of absolute confiscation and ensuring that these tainted goods do not enter Indian markets. Imposition of penalty on such importers; and rather heavier penalty on those who have been able to get some part of goods released is, obviously, warranted. [Para 82][466-F-H; 467-A-B]

7. On the facts and in the circumstances of the present case, the discretion could only be for absolute confiscation with levy of penalty. At the most, an option for re-export could be given to the importers and that too, on payment of redemption fine and upon discharging other statutory obligations. The orders-inoriginal dated 28.08.2020 cannot be approved. As a necessary corollary, the orders-in-appeal dated 24.12.2020 deserve to be approved. [Paras 84 and 85][467-G-H; 468-A-B]

Invocation of equity by the importers

8. Various submissions invoking equity were made on behalf of the importers while submitting that they have already suffered huge losses and that even re-export of subject goods is not a feasible option. However, no leniency in the name of equity can be claimed by these importers. In fact, any invocation of equity in these matters is even otherwise ruled out in view of specific rejection of the claim of bona fide imports by this Court in Agricas. Once this Court has reached to the conclusion that a particular action is wanting in bona fide, the perpetrator cannot claim any relief in equity in relation to the same action. Absence of bona fide in a claimant and his claim of equity remain incompatible and cannot stand together. [Para 86, 86.1][468-B-E] Prayer for keeping issues open for statutory appeal

9. A prayer was made for keeping the opportunity of further statutory appeal to CESTAT open for the importers. Though in ordinary circumstances, such a prayer might have been of no difficulty but, having regard to the background and the relevant circumstances, any liberty for further rounds of litigation, at least in relation to the respondents, is not called for; and the matters ought to be given a finality. There is no reason to allow any prayer for filing appeal against the orders-in-appeal dated 24.12.2020. [Paras 87, 90][468-H; 469-A; 470-A-B]

Incidentally: principles relating to the grant or refusal of interim relief

10.1. The root cause of the present controversy had not been that much in the notifications in question as it had been in the interim orders passed by the High Court of Rajasthan, Bench at Jaipur. Only under the cover of such interim orders that the importers ventured into the import transactions which resulted in excessive quantities of peas/pulses than those permitted by the notifications reaching the Indian ports. As has been noticed in the present cases, some of the goods so imported got released and the Commissioner (Appeals) had to take that aspect as fait accompli. For what has been held by this Court in Agricas, and further for what has been held in this judgment, the goods in question were not to mingle in the Indian market. Such mingling, ORS.

obviously, has an adverse impact on the agricultural market economy and defeats the policy of the Government of India. This state of affairs was an avoidable one; and would have been avoided if, before passing interim orders, the respective Courts would have paused to consider the implications and impact of such interim orders, which were, for all practical purposes, going to operate as mandatory injunction, whereby the appellants were bound to allow the goods to reach the Indian ports, even if the notifications were prohibiting any such import. Even though granting of an interim relief is a matter of discretion, such a discretion needs to be exercised judiciously and with due regard to the relevant factors. [Paras 91, 91.1][470-B-F]

10.2. In the matters of grant of interim relief, satisfaction of the Court only about existence of prima facie case in favour of the suitor is not enough. The other elements i.e., balance of convenience and likelihood of irreparable injury, are not of empty formality and carry their own relevance; and while exercising its discretion in the matter of interim relief and adopting a particular course, the Court needs to weigh the risk of injustice, if ultimately the decision of main matter runs counter to the course being adopted at the time of granting or refusing the interim relief. [Para 92][470-G-H; 471-A]

10.3. One of the simple questions to be adverted to at the threshold stage in the present cases was, as to whether the importers (writ petitioners) were likely to suffer irreparable injury in case the interim relief was denied and they were to ultimately succeed in the writ petitions. A direct answer to this question would have made it clear that their injury, if at all, would have been of some amount of loss of profit, which could always be measured in monetary terms and, usually, cannot be regarded as an irreparable one. Another simple but pertinent question would have been concerning the element of balance of convenience; and a simple answer to the same would have further shown that the inconvenience which the importers were going to suffer because of the notifications in question was far lesser than the inconvenience which the appellants were going to suffer (with ultimate impact on national interest) in case operation of the notifications was stayed and thereby, the markets of India were allowed to be flooded with excessive quantity of the said imported peas/pulses. [Para 93][472-E-G]

10.4. In fact, the repercussion of the stay orders passed in the earlier years were duly noticed by this Court in Agricas; and unfortunately, more or less same adverse consequences had been hovering over the markets because of the imports made under the cover of the interim orders passed in relation to the notifications dated 29.03.2019. This was not likely to happen if the material factors relating to balance of convenience and irreparable injury were taken into account while dealing with the prayers for interim relief in the writ petitions. This Court had, in unequivocal terms, declared in Agricas, that the importers cannot be said to be under any bona fide belief in effecting the imports under the cover of interim orders; and they would face the consequences in law. It gets, perforce, reiterated that all this was avoidable if the implications were taken into account before granting any interim relief in these matters. [Para 94][472-H; 473-A-B]

Summation

11. The goods in question are held liable to absolute confiscation but with a relaxation of allowing re-export, on payment of the necessary redemption fine and subject to the importer discharging other statutory obligations. The respondentimporters being responsible for the improper imports as also for the present litigation, apart from other consequences, also deserve to be saddled with heavier costs. The respondentimporters shall pay costs of this litigation to the appellants, quantified at Rs. 2,00,000/- (Rupees two lakhs) each. [Paras 96, 99][473-D-E; 474-D]

Commissioner of Customs v. Atul Automations Private Limited, (2019) 3 SCC 539 – held inapplicable.

Hargovind Das K. Joshi and Ors. v. Collector of Customs and Ors., (1987) 2 SCC 230 – explained. Commissioner of Customs (Import), Mumbai v. Finesse Creation Inc., (2009) 248 ELT 122 – distinguished.

Union of India and Ors. v. Agricas LLP and Ors., 2020 SCC OnLine SC 675 – relied on.

ORS.

Garg Woollen Mills (P) Ltd. v. Addl. Collector of Customs, New Delhi, (1999) 9 SCC 175; Sant Raj and Anr. v. O.P. Singla and Anr., (1985) 2 SCC 349 : [ 1985]

3 SCR 623; Reliance Airport Developers (P) Ltd. v. Airports Authority of India and Ors. (2006) 10 SCC 1 : [2006] 8 Suppl. SCR 39; Sheikh Mohd. Omer v. Collector of Customs, Calcutta and Ors: (1970) 2 SCC

728 : [ 1971] 2 SCR 35; Commissioner of Customs, New Delhi v. Brooks International & Ors: (2007) 10 SCC

396 : [2007] 7 SCR 791; Om Prakash Bhatia v.

Commissioner of Customs, Delhi: (2003) 6 SCC 161 : [2003] 1 Suppl. SCR 412; P.T.R. Exports (Madras) Pvt. Ltd. and Ors. v. Union of India and Ors., (1996) 5 SCC

268 : [1996] 2 Suppl. SCR 662; S.B. International Ltd. and Ors. v. Asstt. Director General of Foreign Trade and Ors., (1996) 2 SCC 439 : [1996] 1 SCR 910; Shri Amman Dhall Mill v. Commissioner of Customs, (2021) SCC OnLine Ker 362; U.P. State Road Transport

Corporation and Anr. v. Mohd. Ismail and Ors., (1991)

3 SCC 239 : [1991] 2 SCR 274; Assistant Commissioner (CT) LTU, Kakinada and Ors. v. Glaxo Smith Kline Consumer Health Care Limited, 2020 SCC OnLine SC

440 and Dorab Cawasji Warden v. Coomi Sorab Warden and Ors., (1990) 2 SCC 117 : [1990] 1 SCR 332 – referred to.

Horizon Ferro Alloys Pvt. Ltd. and Ors. v. Union of India and Ors., (2016) 340 ELT 27 – referred to. Rover International Ltd. and Ors. v. Cannon Film Sales Ltd., [1986] 3 All ER 772 – referred to.