Supreme Court of India
UNION OF INDIAversusSAMPAT RAJ DUGAR AND ANR.
- Citation
- 1992 INSC 15
- Decided
- 21 January 1992
- Disposal
- Dismissed
- Bench
- S RANGANATHAN
Holding
Clause 5(3)(ii) creates a regulatory fiction of ownership that does not deprive the exporter of title when the importer abandons the goods, and the goods are not liable to confiscation; the exporter may re‑export them.
Summary
The Union of India and the Collector of Customs appealed against a Bombay High Court order that allowed the exporter S.R. Dugar to re‑export four consignments of raw silk yarn. The silk had been imported by Ms. Renu Pahilaj under an advance import licence that was later cancelled. The licence required the silk to be used for garment export, a condition the importer failed to satisfy. When the goods arrived, the importer did not pay or take delivery, effectively abandoning them. The question was whether, under Clause 5(3)(ii) of the Imports (Control) Order and Section 2(26) of the Customs Act, the importer became the owner, making the goods liable to confiscation under Section 111 of the Customs Act, and whether the cancellation of the licence rendered the import illegal. The Supreme Court held that the provision creates a fiction of ownership for regulatory purposes only and does not transfer title when the importer abandons the goods; the export licence remained valid at the time of import, and the subsequent cancellation did not make the import illegal. Consequently, the goods were not subject to confiscation and the exporter retained title, allowing re‑export. The appeal was dismissed.
Issues considered
- The effect of cancellation of an advance import licence on the legality of the import and on confiscation powers under Section 111 of the Customs Act.
- Whether Clause 5(3)(ii) of the Imports (Control) Order deems the importer to be the owner of imported goods for the purpose of confiscation.
- The determination of title to goods when the importer fails to pay and takes delivery, i.e., abandons the goods.
- The permissibility of re‑export of the goods by the exporter.
Legislation cited
- Customs Act, 1962s. 111(d), s. 111(o), s. 112, s. 120, s. 124
- Imports and Exports (Control) Act, 1947s. 4G
- Imports (Control) Order, 1955s. Clause 5(3)(ii)
Subjects
import licenceconfiscationtitle to goodscustoms lawre‑exportClause 5(3)(ii)Section 111advance import licenceabandonmentexporter rights
Judgment
UNION OF INDIA A
I'.
SAMP.AT RAJ DUGAR AND ANR.
JANUARY 21, 1992
[S. RANGANATHAN, V. RAMASWAMJ AND B
B.P. JEEVAN REDDY, JJ.]
!111ports (('011rrol) (Jrder, /'J55 ·
Cla11se 5(3) (ii)-llhie<:t a11d i111e1pretcllio11 of-fmpol'I
lice1u:e--( '011ditio11 clee111ing guods i111ported as pro11erty r?llic:ensee al the C
ti111e <~( i11111ort and 11pto (:/eura11t:e tltro11gh ('usto111s-IV!ten not
l1ppl it'.ahle--< ;oods i1111Jrn·ted-ln1port er /i1i/ing ro c/eur goods Ji·o111 ('us-
to111s hy 111aking pay111e11ts and re1:ei1'i11g dot:11111e11rs r~l title sent hy
scller-Wlle1her goods re111ain proper(1· t~(selfer-rVht'tlier seller e11titled
to re-exporl sue Ii goods--('usto111 A1:t. J'J62 : Sett ion 2 (26)-f111por1 1111(/
Exporr l'olicy. I fJ85-86 : / 1ara 26 (ir). D
('11sto111s Act, ff)(J2:
S('<:tio11 I I I (ti} ---A/Jf1/i1·ahility (~l--<ioods i111porred 111Hlcr 1•a/id li-
r·ence and nor 1·011tra1y to la11•----,\'1thser111e11f 1:11111:ellatio11 r~llice11ce-lf11tetl1er
renders i111port r·o11tr111:r to lair and goods i111purtetl liuhlej(Jr cor!fisr:ation E
Ser:tio11 111 (o)-ffl1e11 app/ii:ah/e-!ntport licence granti!d s11ly.e"i·f
to l'011ditions-No11-oh.,·er1 u11r:e o( r:o11di1ion.,· hy i11111orter in earlier
1
.
co11sii:1111u'11/s-VVhetl1ei· i111/ir:ati1·e 11{ . si111ilar l/l!l/-ohsen'aru:e i11. suhse-
ljltent t :onsig11111e111s also--{ _·,Jl!/isr :at ion l !!'g1 HJds-1¥ Itel herjust!fied---!111;Jorrs
a11d J;~rports (('0111rol) Ai:r. 1947: Section 4-<.i. F
l11ti'l'fJl'efatio11 _r!(Stat11res-VVonls and phrases take cololf1 ji·o111 tl1e
co111e.rt i11 1rhil:h they an' 11sed.
H'onls and l'hrases--'l'roj){'rty of" r111d 'Vest '-/l,fea11i11;.: r~(
G
The second respondent doinJ..! husinl'SS in India, ohtaincd an
advance hnport licence for in1portini: ran silk. The liccncr n·as J!rantcd
1
suhjcl't to the l'Olldition that ra"· silk ilnportcd '''ould he utilised for
1nanufacturinJ! and exportinJ! ~arrncnts. Soml'tirnc thereafter. the
Scl:ond respondent rcccivl•d thrCl' consif!11111ents hut did not fulfil the
stipulatl~d condition. Suhscqucntt~·. the first respondent, an Indian H
269
270 SUPREME COURT REPORTS [1992J I S.C.R.
A national, residing abroad, and doing business, sent certain quanti-
ties of raw silk in four lots, deliverable to the second respondent ..
The requisite documents were sent to the first respondent's bankers
with instructions to deliver the same to the second respondent on
receiving the payment. When the four consignments arrived in In-
dia, the second respondent appeared before the customs authorities
B and claimed the right to take delivery of the goods, but the authori-
ties, who had come to know by then of the non-compliance of the
stipulated condition with respect to the three earlier consignments
and also of the alleged misrepresentation made by her while obtain- ~
ing the Advance import licence, initiated proceedings against her
and two other persons. In view of the proceedings, the second re- -
C spondent failed to make the payment and receive the documents;
she did not take any steps to clear the goods, in effect abandoning
them.
The first respondent appeared in the proceedings on his own
and submitted that title to the goods had not passed to the second
D respondent and he was still the owner of the goods, and therefore,
the said goods could not be confiscated or proceeded against for
violations, if any, committed by the second respondent, and that he
was •not a party to the misuse of the earlier imports, nor was he
aware of the alleged fraud practised by the second respondent in
obtaining the advance import licence, and that he may be permitted
E to re-export the goods in question.
While the proceedings were pending, the competent authority
cancelled the advance import licence granted to the second respond-
ent.
F
The Collector of Customs was of the view that as the advance
import licence had since been cancelled by the competent authority
there was no valid import licence for clearance of those goods, and
j
{
since for re-exporting the said goods, a valid import licence was r
necessary and because it was not there, and also because the second
G respondent had abandoned the goods, permission for re-export could
nof be granted. Accordingly, he rejected the claims of the first re-
spondent, imposed a penalty of Rs. 5 lakhs on the second respondent
and ordered confiscation of the four consignments in question.
Aggrieved, the first respondent filed a Writ Petition before the
H High Court directly. The appellants contended that the second re-
spondent must be deemed to be the owner of the four consignments
·U.0.1.v. S.R.DUGAR .271
by virtue of the definition of 'importer' in Section 2 (26) of the A
Customs Act read with Clause 5 (3) (ii) of the In;tflorts (Control)
Order. 1955. Reliance was also placed on para 26 (i\<) of the Import
and Export Policy issued for the year 1985-86, and it was submitted
that the goods in question were liable to be confiscated for the acts
and defaults of the second respondent. It was also submitted that by
virtue of the non-compliance with the condition (relating to' export B
of garments manufactured out of the imported raw ·silk yarn) the
second respondent had rendered all the goods covered by the im-
port licence liable to confiscati'on.
Allowing the Writ Petition, a Si~gle Judge of the High Court
held that on the date the goods were imported, they were covered C
by a valid import licence, and the subsequent cancellation thereof
· was of no consequence, that since the second respondent had failed
to pay and receive the documents of title, the title to the goods did
not pass to her, and as the first respondent continued to be the
owner of the goods, he was entitled to re-export the same. Accord-
ingly, he quashed the confiscation order of the Collector under Sec- D
tion 111 (d) of the Customs Act, and directed the appellants to (I)
hand over the four consignments in question to the first respondent
or his clearing agent, for reshipment, and (2) issue a detention certi-
fication for the period the goods were detained.
The Division Bench of the High Court rejected the appeals of E
the Union of India and the Customs authorities. Hence the appeal
before this Court.
Dismissing the appeal, this Court,
HELD : I.I Conditio.n (ii) of suh-c!ause (3) of Clause 5 of the
Imports (Control) Order, 1955 says that the goods for the import of F
which a licence is granted "shall be the property of the licensee at
the time of impori and thereafter upto the time of clearance through
customs." The Rule-making authority (Central Government), which
issued the order, must be presumed to he aware of the fact that in
many cases, the importer is not the owner of the goods imported at
the time of their import and that he becomes their owner only at a G
later stage, i.e., when he pays for and obtains the relevant docu-
ments. Still the Central Governmen.t declared that such goods shall
be the property of the licensee from the time of import.[282 D; E-F]
.~ 1.2 The interpr.etation to be placed upon the provision should
he consistent with and should he designed to achieve the object. The H
272 Slll'Rl:MI' ('O\IRT REPORTS [\<J<J2[ I S.C.R.
A expressions like 'Propcrt~' of' and 1 \r't•st' do not have a single uni-
versal 1ncaning. Their content varies \\'ifh the context. The apho-
rism that a word is nnt a rr)'Slal and that it takes its cnlnur from the
ronfl'\f is nn l<•ss true in the case nf these wonls. j2H2 G-H; 283 AI
1.3 The nlij<'cl undcrl)·ing rnndilinn (ii) in Clause 5(3) is tn
B cnsur<' a prnp<'r implrrnentation of the Imports (Conlrol) Order and
lhc Imports and Exports (Conlrol) Ari. 1'147. The idea is lo hold the
licL'llSL'l' rl'SIHtn.\ihlc for anythint! and l'VL'rythinl! that happl•ns fron1
thc time nf import Iii! lhl')' arc dcarl'fl through Customs. The ex-
porter is nutsidL· tl1L· rountr~'· \\·hilc tht..• in1portcr. i.e., the licensee is
in India. II is at the instanl'L' of the liL'l'llSCC that the !,!nods ar•:
C imporf<'d into this counlr)" \\'hclhcr nr nol he is the owner of such
goods in .law, the Imports (Control) Order crcalcs a fil'lion !hat he
shall he deemed to hc the owner of such goods from the lime of
their imporl rill they arc dcarcd through Customs. This fil'lion is
crcatcd for lhc proper and effel'li\'e implementation of the said or-
der· and the lmpnrl and Expor·ts (Control) Act. The fiction, how-
[) e\'er, cannot hc carried '"')'lllHI lhat. It cannot he cmplo)'cd to at-
tribute 0\\'11L•rship of llu.• irnportccl l!Oods to the in1portcr (.l\'Cn in a
c:.tsl' \\'ht..•rc he ahandons tht..•n1. that is, in a situation \\'here he docs
not 1>ay for and rt..•t..'t..•ivt..• tht..• documt..•nts of title. For such act of
ahandon1nent. al·tion 1nay he taken acainst hin1 .for suspension/can-
cellation of lic.:cnt..·c. and sun1c otht•t· prot..·ccdinJ,?s can also he taken
E against him. But ccrtairrl)' he cannot he lr·cated as the owner of the
i,!Ood.lii t•vcn in sut..·h a t..•ase. Jloldinl! nthcr\\·ise ,,·ouhl plac·c the ex-
porter in a ''cry diffil'ult position: ht~ loses the l!Oods \\'ithout rccciv-
inJ,:: the pa~·n1t..•nt and his onl)' rt..•1ncdy is lo sue the i1nporter for the
price of l!,nods and for sut:h da1nacc as he 1nay have suffered. This
would nol he conducin In inlcrnational lradc. I2H3 A-EI
F
1.4 .<\s in the instant case. \\'here an in1portcr chooses or fails
to pay for and take dt..•livery of lhc i1nporlcd l!Onds and just ahandon
thcrn, condition (ii) in suh-t..·lausc (3) of ('lausc 5 docs not O(Jcratc to
deprive the exporter of his title tu the said f.!Oods. provided fht•
iinport is not contrary to la'"'· 12X3 E-FI
G
1.5 l·ln\\'t..'vcr, \\'here th(' intportcr opens a ll'ttcr of crt'dit and
rnakes son1t• other arranf..!C1ncnt cnsurinl,!/1,!uarantecinl! payrncnt of
priCl' of irnportl'd l!OtHls, h '"ill he opl.'n to thl.' exporter, in case of
non-pa~·n1cnt of price or ahandonn1t•nt h~'. the irnportt•r. t11 rollect
thl.' prict..• hy in"nkini,: such arrangcrncnt. In sut..·h a case, the cx-
H portl.'r "ill not ht• allo"·cd to clai111 title tn and/or to rc-expor.t the
U.0.1. v. S.R. DUCiAR 273
goods. In all such cases, the authority should issue a notice to the A
importer and/or his agent before allowing the exporter to deal with
or seek to re-export the goods. In the instant case, both the im-
porter and exporter were present before the Collector (Customs) as
well as before the High Court. The importer did not plead any such
arrangement. [283 F-H]
B
1.6 None of the clauses (d) and (o) in Section 111 of the Cus-
toms Act is attracted in the instant case. Clause (d) contemplates an
import which is contrary to any prohibition imposed either by the
Customs Act or any other law for the time being in force. No such
prohibition can be pleaded in the instant case since on the date of
the import the said goods were covered by a valid import licence. C
The subsequent cancellation of licence is of no relevance nor docs it
retrospectively. render the import illeg~I. [284 A-BJ
East India Commercial Co. Ltd. v. The Collector of Customs,
Calcutta, [1963) 3 S.C~R. 338 at 372, relied on. D
1.7 Clause (o) contemplates confiscation of goods which are
exempted from duty subject to a condition, which condition is not
observed by the importer. Occasion for taking action under this
clause arises only when the condition is not observed within the
period prescribed, if any, or where the period is not so prescribed E
within a reasonable period. It, therefore, cannot be said that in the
instant case the goods were liable to be confiscated on the date of
their import under Clause (o). Further, merely because the second
respondent had not complied with the condition imposed with re-
spect to three earlier consignments, it may not be possible to prc-
SJJme that it would not he observed even with respect to the four F
'1'~ consignments in question. Section 4-G of the Import-Export (Con-
trol) Act, 1947, which is also conceived to meet such a situation,
says that non-compliance with any condition of licence relating to
utilisation of such goods renders the said goods liable to confisca-
tion notwithstanding that such goods arc mixed up with other goods
or material. In the instant case, even though a period of more than G
five years has passed by, no action has been take11 either under the
Customs Act or under Section 4-G of the Imports-Exports (Control)
Act, though the import licence of the second respondent has hccn
j cancelled. In the circumstances it must he presumed that no such
··""-' action was or is contemplated. Hence, the title of the first respond-
ent to the said goods remains free of any cloud. [284 C-G) H
274 SUPREME COURT REPORTS [1992] I, S.C.R.
A 1.8 The definition of 'importer' in Section 2 (26) of the Cus-
toms Act is not really relevant to the question of title. It only de-
fines the expression 'importer'. The first respondent does not claim
to be the importer. [281 H; 282 A)
1.9 Para 26 (iv) of the Import-Export Poli•y for the year 1985-
B 86 says that an import is valid if it fulfils, inter-alia, all the terms
and conditions contained in the licence and all other connected. mat-
ters. This para has no relevance to the question of title to goods in a
situation arising ln the instant case. [285 BJ
1.10 In the circumstances, there is no reason to interfere
C · with the direction for re-export. The same shall be permitted and
allowed in accordance with law and subject to payment of such dues
or other charges as may be leviahle in that behalf. [285 C·D)
CIVIL APPELLATE JURISDICTION : Civil Appeal No. ~23 (NM)
of 1992.
D
From the Judgment and Order dated 10.1.1991 of the Bombay High
Court in Appeal No. 807of1987 in Writ Petition No. 85of1987.
G. V. Rao and P. Parmeshwaran for the Appellants.
E Harish N. Salve, Vikram Nankani; Jaideep Patel, Ms. Monika Mobil
and Ms. Bina Gupta for the Respondents.
The Judgment of the Court was delivered by
B.P. JEEV AN REDDY, J. Leave granted.
F
This appeal is directed against the Judgment and Order of a Division
Bench of the Bombay High Court dismissing. the Letters Patent Appeal
No.807 of 1987 preferred by Union of India and the Collector of Customs.
The said appeal was preferred against the judgment and order of a Learned'
Single Judge allowing the Writ Petition (85 of 1987) filed by the first
G respondent herein. The learned Single Judge had, by his judgment, quashed
the order dated 15.9.1986 passed by the Collector of Customs, Bombay
confiscating .the goods in question under Section 111 (d) of the Customs
Act, 1962, and directed the Collector of Customs and the Union of India
to hand over the said goods (four consignments of raw silk yarn) to the
first respondent or his clearing agent, for reshipment to Hong Kong in
H terms solicited by him. The learned Judge granted a further direction to
U.O.!. v. S.R. DUGAR [JEEVAN REDDY, J.] 275
the effect that for the period the goods were detained, rendering the first A
respondent liable to pay demurragti to Bombay Port Trust, the Collector of
Customs and the Union of India shall issue a detention certificate in his
favour.
The second respondent Ms. Renu Pahilaj is doing business at Delhi
in the name and style of "Acquarius." The first respondent is an Indian B
national resident abroad doing bnsiness at Hong Kong in the name and
style o( UNISILK. The second respondent obtained an advance import
Hcence on 20.5.1985 for importing raw silk vaild for a period of 18 ·
months from .the date of its issue. The import licence was granted subject
to the condition that raw .silk imported should be utilised for 111anufacttir-
ing garments which ought to be exported by the second respondenh Some C
time prior to October 1985, the se9ond respondent received three consign-
ments but she did not fulfii the ·aforesaid condition. During October-
November 1985, the first respondent exported certain quantities of raw
silk in four lots, deliverable to the second respondent. The requisite docu-
ments were sent to the first respondent's bankers with instructions to
deliver the same to the second respondent on receiving the payment. D
When the said four consignments arrived at Bombay, ihe second respond-
ent appeared before the customs authorities and claimed the right to take
delivery of the goods. By this time, however, the customs authorities had
coine to know of the non-compliance of the aforesaid condition with
respe~t to the three earlier consignments and also of the alleged misr~pre
sentation made by her while obtaining the Advance import licence. Pro- E
ceedings were accordingly initiated against her and two other persons by
the Collector of Customs, Bombay. The first respondent appeared..in the
said proceedings on his own and was heard. Probably in view of the
proceedings taken against her - or otherwise. - the second respondent
failed to make the payment and receive the documents: She. took no steps
whatever to clear the goods. In effect, she abandoned them: F
The first respondent submitted before the Collector that title to the
goods has not passed to the second respondent, that he is still the owner of
the goods and that therefore the said goods cannot be confiscated or
proceeded against for the violations, if any, committed by the second
respondent. He submitted that he was not a party to the misuse of the G
earlier imports nor was he .aware of the alleged fraud practiced by the
second respondent in obtaining the advance import licence. He requested
that he may be permitted to re-export the said goods to Hong-Kong.
While the said proceedings were pending before the Collector of
Customs, the advance import licence· granted to second respondent was H·
276 SUPREME COURT REPORTS (1992] I S.C.R.
A cancelled by the Competent Authority on May 12, 1986. No orders were
passed with respect to the said goods.
The Collector of Customs, Bombay passed orders on September 9,
1986, whereunder he imposed a penalty of rupees five lacs on the second
respondent. Penalties were also levied upon two other persons, said to be
B associates of the second respondent. So far as the first respondent's claims
were concerned, they were rejected on the following ground: the advance
import licence against which the said four consignments were imported
has since been cancelled by the appropriate authority which means that
there is no valid import licence for clearance of those goods; since, for _\
re-exporting the said goods, a valid import licence is necessary and be-
C cause it is not there - and also because the second respondent has aban- ·
doned the goods-pennission for re-export cannot be granted.
The first respondent did not prefer an appeal against the said order.
He directly challenged the same in the Bombay High Court by way of a
Writ Petition. He reiterated his contention viz., since the second respond-
D ent has failed to pay and receive the documents regarding the said four
consigmnents, he himself continues to be the owner thereof; if.so, the said
goods cannot be confiscated or proceeded against in any manner for any
act or default of the second respondent. He claimed to be enoi,tled to re·
export the same to Hong Kong. The case of the Collector of Ct$toms and
.the Union of India was that the second respondent must be deemed to be
E the owner of the said four consignments by virtue of the definition of
'importer' in Section 2 (26) of the Customs Act read with Clause 5(3) (ii)
of the Imports (Control) Order 1955. Reliance was also placed upon para
26 (iv) of the Import and Export Policy issued for the year 1985-86. It was
accordingly submitted that the said goods are liable to be confiscated for
the acts and defaults of the second respondent. It was also submitted that
F. by virtue of the non-compliance with the condition (relating to export of
gannents manufactured out of the imported raw silk yarn) the second
respondent has rendered all the goods covered by the import licence liable
to confiscation.
The learned Single Judge allowed the Writ Petition on the following
G findings: On the date the goods were imported, they were covered by a
valid import licence. The subsequent cancellation thereof is of no conse-
quence inasmuch as Section 111 (d) of the Customs Act provides for
confiscation of the imported goods only where they are imported contrary
to law. Even ifthe second respondent was guilty of any misuse or of non-
compliance with any of the conditions of licence, it only furnished a
H ground for cancellation/suspension of licence: so long as the licence was
U.0.1. 1· S.R. [)lJ(iAR [JEEVAN REDDY, J.] 277
not suspended or cancelled. it was valid and effective. The importing of A
the goods was thus under a valid licence and was not contrary to law.
Since the second respondent has failed to pay and receive the documents
of title, the title to the goods did not pass to her. The provision in Clause
5(31 (iii of the Imports (Control) Order. is offonited effect. Where the
clearance of goods through customs is not even attempted but abandoned,
such importer cannot be treated as the owner. The definition of 'importer' B
in Section 2(26) of the Customs Act also does not avail the authorities.
Since the first respo11de11t continued to be the owner of the goods. he is
entitled to re-export the same.
The Letters Patent Appeal preferred by the Collector of Customs
and the Union of India was dismissed by the Division Bench affirming the C
reasoning of the Learned Single Judge in its entirety.
In this' appeal, it is contended by the learned counsel appearing for
the Union of India that the learned Judges of the Bombay High Court
have not correctly appreciated the meaning and effect of the provisions
contained in Clause 5(31 (ii) of the Imports (Control) Order and Section D
111 of the Customs Act. He submitted that by virtue of the defi11ition of
the expression "importer" contained ·in Section 2(26) of the Customs Act
read with Clause 5(3,1 (iii of the lmpo11s (Control'i Order, the second
respondent must be deemed to be the owner of the goods and the first
respo11dent ca11not be heard to say that he is the owner of the goods,
Whatever may be the positio11 under the Sale of Goods Act and/or the E
Co11tract Act, so far as the authorities under the Customs Act and Imports
(Co11trol) Order are concerned, the second respondent is the owner of the
said goods and no 011e else. For the acts and defaults of the second re-
spo11dent, therefore, the said goods are liable to be confiscated. The first
respo11de11t'> remedy is to sue the second respondent for damages and/or
such other reliefs as he may be entitled to in law but he· cannot claim title F
to said goods once they are imported into this country. lt is also submitted
that because of 111isuse of earlit~r co11sign1nents by the second respondent.
the authorities were entitled to confiscate the said four consign1nents~
covered as they were by the sa1ne hnport Licence. In any event, once the
i111port licence was cancelled. the goods could not have bee11 cleared by
anyone fro111 the customs. On the other hand. Sri Salve. learned counsel G
for the first respondent sub1nitted that confiscation of the said consign-
ments has been ordered by the Collector of Customs only under the provi-
sions of the Customs Act, i.e .. under Section 111 (di thereof. The said
confiscation is wholly unsustainable for the reason that on the date of
i1nport, there \Vas a valid licence. The subsequent cancellation of the
import licence does not render the said import illegal. The provisions H
278 SUPREME COURT REPORTS [1992] 1 S.C.R.
A contained in Clause 5(3) (ii) of the Imports (Control) Order are of limited
application. They are designed only to prevent the licencee from trading
in the said licence in any manner whatsoever, but it cannot have the effect
of conferring title to the said goods upon the importer even before he
makes the payment and obtains the documents of title. Similarly, the
definition of the importer under Section 2 (26) of Customs Act is for a
B limited 'purpose. Since the title to tlfe goods continues to vest in the first
respondent, he is entitled to re-export the same. The learned counsel
emphasised the fact that the first respondent is not a party nor was he
aware of the alleged misuse of earlier consignments or of the alleged
fraud practised by the second respondent in obtaining the import licence.
C For a proper appreciation of the controversy arising herein, it is
necessary to notice certain provisions of the Customs Act as well as of the
Imports and Exports (Control)Act, 1947 and the Imports (Control) Order,
1955.
The definition of 'Importer' in Clause 26 of Section 2 of the _Cus-
D toms Act reads as follows:
" 'importer', in relation to any goods at any time between their
importation and the time when they are cleared for home con-
sumption, includes any owner or any person holding himself
out to be the importer."
E
Section 111 which provides for confiscation of improperly imported
goods, in so far as it is relevant reads thus:
"Section 111. Confiscation of improperly imported goods, etc.-
The following goods brought from a place outside India shall
be lial:Jle to confiscation-
F
(d) any goods which are imported or attempted to be im-
ported or are brought within the Indian customs waters
for the purpose of being imported, contrary to any prohi-
bition imposed by or under this Act or any other law for
the time being in force;
G
(o) any goods exempted, subject to any condition, from duty
or any prohibition in respect of the import thereof under
this Act or any other law for the time being in force, in
H respect of which the condition is not observed unless the
U.Q.I. v. S.R .. DUf'AR [JEEVAN RED.DY, J.] 279
non-observ ance of the condition was sanctioned by the A
proper officer:"
Section 112 provides for levy of penalty for improper importation of
goods. For the purpose of this case, it is not necessary to set out Section
112. Section 120 provides that the smuggled goods may be confiscated
notwithstanding any change in their form. Section 124 provides for the
issuance of a Show Cause Notice before the goods are confiscated and for
B
affording a reasonable opportunity of being heard in the matter to the
person affected.
The Imports and Exports (Control) Act, 1947 empowers the Central
Government to prohibit, restrict or otherwise control import and export of C
goods, by an order published in the Official Gazette Act (Section 3).
Section 4G provides. for confiscation of goods in certain situations. The
Section reads thus:
"Section 40. Confiscation-Any imported goods or materials in
respect of which-
D
(a) any condition of the licence or letter of authority under
which they were imported, relating to the utilisation or
distribution of such goods or materials, or
(b) any condition relating to the utilisation or distribution of
such goods or materials subject to which they were re-
ceived from, or through, a recognised agency, or E
(c) any direction given under a control-order with regard to
the sale of such goods or material, '
has been, is being, or is attempted to be, contravened, shall
together with any package, covering or receptacle in which
such goods are found, be liable to confiscation, and, where F
,.,_ such goods or materials are so mixed with any other goods or
mat.erials that they cannot be readily separated such other goods·
or materials shall also be liable to confiscation:
Provided that where it is established to the satisfaction of the
adjudicating authority that any goods or materials, which are
liable to confiscation under this Act, had been imported for G
personal use, and not for any trade or industry, and that they
belong to a person other than the person who has, by any act or
omission, rendered them liable to confiscation; and such act or
omission was without the knowledge or connivance of the per-
-.J son to whom they belong such goods or materials shall not be
H
ordered to be confiscated; but such other action a5 authorised
280 SlJPREME COIJRT Kl'l'ORTS ll<J921 l S.C.R.
A by this Act may be taken against the person who has by such
act of 0111ission, rendered such goods or 1naterials liable to
confiscation."
The Imports (Control) Order 1955 has been issued by the Central
Government under the I 947 Act. Clause 3 (I) provides that:
B "Save as otherwise provided in this Order, no person shall
import any goods of the description specified in Schedule I,
except under and in accordance, with a licence or a custon1s
clearance perm it granted by the Central Government or by any
Officer specified in Schedule JI."
c Clause 5 which is crucial for our purposes may be set out in its
entirety. It reads thus:
"5. Conditions of Licences.-( I) The licensing authority issuing
a licence under this Order may issue the same subject to one or
more of the conditions stated below:-
D (i) that the goods covered by the licence shall not be disposed
of except in the n1anner prescribed by the licensing authority
or otherwise. dealt with. without the written permission of the
licensing authority or any person duly authorised by it:
(ii) that the goods covered by the licence on importation shall
E not be sold or distributed at a price exceeding that which may
be specified in any direction attached to the licence:
(iii) that the applicant for a licence shall execute a bond for
co1nplying \vith the tenns subject to \vhich a licence 111ay be
granted.
F
(2) A licence granted under this Order shall also be subject to
the conditions contained in Schedule V.
(3) It shall be deemed to be a condition of every such licence
that :-
G
(i) no person shall transfer and no person shall acquire by
transfer any lict'nce issued by the licensing authority except
under and in accordance \vith the \vritten pennission of the
authority which granted the licence or of any other person
e1npov1.rered in this behalf by such authority.
H
(ii) that the goods for the import of which a licence is granted
llO.I. v. S.R. DUGAR [JEEVAN REDDY, l] 281
shall be the property of the licencee at the time of import and A
thereafter upto the tiine of clearance through Customs:
Provided that the conditions under items (i) and (ii) of
this sub-clause shall not apply in relation to licences is-
sued to the State Trading Corporation of India, the Miner-
als and Metals Trading Corporation of India and other
similar institutions or agencies owned or controlled by
B
the Central Government and which are entrnsted with ca-
nalisation of imports:
Provided further that the conditions under items (i) and
(ii) of this sub-clause shall also not apply in relation to
(a) licenses issued to eligible export houses or trading c
houses for import of goods meant for disposal to actual
users under the import policy for registered exporters, and
(b) licences issued to Public Sector agencies owned or
controlled by Government, Central or State for disposal
of goods to Actual Users under the import policy in force.
D
(iii) the goods for the import of which a licence is granted
shall be new goods, other than disposal goods unless
otherwise stated in the licence.
(4) A licence !!ranted under this Order may contain such other
conditions, not inconsistent \vith the Act or this Order, as
the licensing authority n1ay dee1n fit. E
(5) The licensee shall comply with all conditions imposed or
deemed to be imposed under this clause."
The Order provides for cancellation/suspension of licences issued
thereunder for reasons specifie<1 therein. Schedule I to the Order mentions
several goods. It is not disputed that raw silk yarn is one of the goods F
included in the Schedule.
We 1nay first consider the question of title to the said goods. If \Ve
keep aside the provisions of Jaw relied upon by the appellants viz., defini-
tion of 'importer' in Section 2 (26) of the Ctbtoms ..\ct_ Clause 5 (1 I (ii)
of the I1nports (Control) Order as \Veil as para 26 (i\ i nfthe hnport-Export G
Policy, the position is quite sin1ple. Since the second respondent did not
pay for and receive the docu1nents of the title she did not beco1ne the
O\vner of the said goods. \Vhich n1eans thnt the first respondent co1Hinued
to be the O\Vner. HO\\' do the aforesaid provisions n1ake any difference to
thi~ position? 'rhe definition of 'i1nporter' in Section 2(26) of the Custon1s
Act i.s not re-ally relevant to the question of title. It only defines the H
282 SU~REMECOURT REPORTS [1992] I S.C.R.
A expression 'importer'. The first respondent does not claim to be the im-
porter. The provision upon which strong reliance is placed by the appel-
lants in this behalf is the one contained in Clause 5 (3) (ii) of the Imports
(Control) Order. Sub-clause (1) of Clause 5 specifies conditions which can
be attached to an import licence at the time of its grant. Sub-clause (2)
says that a Hcence granted under the Order shall be subject to the condi-
B tions specified in Fifth Schedule to the Order. Sub-clause (3) sets out three
other conditions mentioned as (i); (ii), and (iii) which shall attach to every
import licence granted under the Order. First of these conditions says that
the import licence shall be non-transferable except under the written per-
mission of the Licensing Authority or other Competent Authority. Condi-
tion (ii)-which Is the provision relevant herein--;;ays that the goods for
c the import of whicli a licence is granted "shall be the property of the
licensee. at the time of import and thereafter upto the time of clearance
through customs." This condition, however, does not apply to STC, MMTC
and other similar institutions entrusted with canalisation of imports. It also
does not apply to certain eligible export houses, trading houses and public
sector agencies mentioned in the second proviso. Condition (iii) says that
D the goods for which the import licence is granted shall be new goods
unless otherwise mentioned in the licence. Now coming back to Condition
(ii), the question is what does it mean and what is the object underlying it
when it says that the imported goods shall be the property of the lice11see
from the time of import till they are cleared through customs. It is neces-
sary to notice the language of the sub-clause. It says "it shall be deemed
E to be a condition of every such licence that-the goods for the import of
which a licence is granted shall lie the property of the licensee at the time
of import aud thereafter upto the time of clearance through Customs." The
Rule-making authority (Central Government), which issued the order, must
be pre.sumed to be aware of the fact that in many cases, the importer is not
the owner of the goods imported at the time of their import and that he
F becomes their owner only at a later stage, i.e., when he pays for and
obtains the relevant documents. Why did the Central Govt. yet declare
that such goods shall be the property of the .licensee from the time of
itnport? For·appreciating this, one has to ascertain the object underlying
the said provision. The interpretation to be placed upon the provision
should be consistent with and should be designed to achieve such object.
G In this context, it should also be remembered that expressions like 'Prop:
erty of and 'Vest' do not have a single universal meaning. TI1eir content
varies with the context. The aphorism that a word is not a crystal and that
it takes its colour from the context is no less true in the .case of these
words. In our opinion the object underlying condition (ii) in Clause 5 (3).
is to ensure a proper implementation of the Imports (Control) Order and
H the Imports and Exports (Control) Act, 1947. The idea is to hold the
U.0.1. v. S.R. DUGAR [JEEVAN REDDY, J.] 283
licensee responsible for anything and everything that happens from the A
time of import till they are cleared through Custom. The exporter is out-
side the country, while the importer, i.e., the licensee is in India. It is at
the instance of the licensee that the goods are imported into this country.
Whether or not he is the owner of such goods in law, the Imports (Co11-
trol) Order creates a fiction that he shall be deemed to be the owner of tbe
such good.s from the time of their import till they are cleared through B
Customs. This fiction is created for the proper and effective implementa-
tion of the said order and the Import and Exports (Control) Act. The
fiction however cannot be carried beyond that. It cannot be employed to
attribute ownership of the imported goods to the importer even in a case
where he abandons them, i.e., in a situation where he does not pay for
and receive the documents of title: It may be that for such act of abandon- C
ment, action may be taken against him for suspension/cancellation of
If licence. May be, some other proceedings can also be taken against him.
But certainly he cannot be treated as the owner of the goods even in such
a case. Holding otherwise would place the exporter in a very difficult
position; he loses the goods without receiving·¢e payment and his only
• remedy is to sue the importer for the price of goods and for such damage D
' as he may have suffered. This ·would not be conducive to international
trade. We can well imagine situations where for one or other reason, an
importer chooses or fails to pay for and take delivery of the imported
goods. He just abandons them. (We may reiterate that w.; are speaking of
a case where the import is· not contrary to law). It is <Jnly with such a
situation that we are concerned in this case and our decision is also E
.
confined only to such a situation. '
Condition (ii) in sub-clause (3) of Clause
5, in our opinion, does not operate to deprive the exporter ~f his title to
said goods in such a situation.
At this stage, it may be appropriate to clarify one aspect. There may
be cases, where the importer opens a letter of credit and makes some other F
arrangement ensuring/guaranteeing payment of price of imported goods.
In such a case, it will be open to the exporter, in case of non-payment of
price or abandonment by the importer, to collect the price by invoking
such arrangement. In such a case, it ·is obvious, the exporter will not be
allowed to claim title to and/or to re-export the goods. (Indeed, it is
unlikely that in such a case, the importer abandons the goods ordinarily G
• speaking.) It is therefore necessary that in all such cases; the authority
should issue a notice to the importer and/or his agent before allowing the
exporter to deal with or seek to re-export the goods. So far as this case is
concerned, both the importer and exporter (RR 2 and I respectively) were
present before the Collector (Customs) as well as before the High Court.
R2 did not plead any such arrangement. H
284 SUPREME COURT REPORTS [1992] 1 S.C.R.
A The next question is whether the import of the said goods was con-
trary to law in any manner and whether the said goods are liable to be
confiscated under the Customs Act. The "only provisions relied upon the
-
appellants are Clauses (d) and (o) in Section 111 of the Customs Act
which we have set out hereinabove. In our opinion none of these clauses
are attracted in the present case. Clause (d) contemplates an import which
B is contrary to any prohibition imposed either by the Customs Act or any
other law for the time being in force. No such prohibition can be pleaded
in this case since.on the date of the import the said goods were covered by
a valid import licence. The subsequent cancellation of licence.is of no
relevance nor does it retrospectively render the import illegal. (East India
Commercial Co. Ltd. v. The Collector of Customs, Calcutta, [1963] 3 ~r~
c S.C.R. 338 at 372.) Clause (o) contemplates confiscation of goods which
are exempted from duty subject to a condition, which condition is not
observed by the importer. Occasion for taking action under this clause
arises only when the condition is not observed within the period pre-
scribed, if any, or where the period is not so prescribed, within a reason-
able period. It, therefore, callllot be said that the said goods were liable to
D be confiscated on the date of their import under Clause (o). Further,
merely because the second respondent had not complied With the condi-
tion imposed with respect to three earlier consignments, it may not be
possible to presume that it would not be observed even with respect to the ~·
four consignments in question. Be that as it may, it is sufficient for the
present to notice that so far no action has been taken on that account
E either under the Customs Act or under section 4-G of the Imports-Exports
(Control) Act, 1947. Section4-G of 1947 Act is also conceived to ·meei
such situation, as a reading thereof would disclose. It says that non-com-
pliance with any condition of licence relating to utilisation of such goods
renders· the said goods liable to confiscation notwithstanding that such
goods are mixed up with other goods or material. Even though a period of
F more than five years has passed by, no action has been taken either under
the Customs Act or under Section 4-G of Imports-Exports (Control) Act, )''
though the import licence of the second respondent has been cancelled.
We must presume in the circumstances that no such action was or is
contemplated. In these circumstances the title of the first respondent to.the
said goods remains free of any cloud.
G
Coming to para 26(iv) of the Import-Export Policy for the year
1985-86, it too; in our opinion,"is or no material relevance herein. It reads:
•
"26. Import is valid if it fulfils, among other things the follow-
ing conditions:-
~-·
H (iv) The terms and conditions contained in the licence/Open
U.0.l. v.. S.R. DUGAR [JEEVAN REDDY,).]"' 285
General Licence/Customs Clearance Pennit and the lmpoft' A
Export Policy and procedures in regard to the items (s) of the
import and all other connected matters are fulfilled."
, This provision, so to speak states the obvious. It says that an import
is viitid if it fulfils,.inter alia, all the tenns and condhions contained in the
licence and all other connected matters. This para has indeed no relevance B
to the question of title to goods in a situation dealt with by us herein.
It is also significant to notice that it is not the case of the appellants
that the first respondent was a party to any conspiracy or other fraudulent
'"";-' plan hatched or sought to be implemented by the second respondent. If
that were the case, different considerations would have arisen. C
So far as the directions for re-export is concerned, we see no reason
to interfere. Jhe same shall be pennitted and allowed in accordance. with
law.and subject to payment of such.dues or other charges as may be levi-
able in that behalf. The other direction with respect to issuance of deten-
tion certificate has not been assailed before us and we need express no D
opinion thereon.
The appeal is accordingly dismissed but in .the circumstances with-
out costs.
N.P.V. · Appeal dismissed.
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