PETITIONER:
RIB TAPES (INDIA) PVT. LTD. & ANR.
Vs.
RESPONDENT:
UNION OF INDIA & ORS.
DATE OF JUDGMENT02/09/1986
BENCH:
OZA, G.L. (J)
BENCH:
OZA, G.L. (J)
NATRAJAN, S. (J)
CITATION:
1986 AIR 2014 1986 SCR (3) 697
1986 SCC (4) 189 JT 1986 312
1986 SCALE (2)367
ACT:
Customs Act, 1962;-Section III(m)-Difference in
'value'- Whether could be made basis of breach prior to
1973.
Statutory Interpretation:- Object and Reasons of Bill-
Resort to - for intention of Legislature re-Permissible.
HEADNOTE:
The appellants, owners of a hosiery factory, imported
27 knitting machines in 1972 under the import licence held
by them. According to the Customs authorities the machinery
was not new as the licence permitted to import, but was old
reconditioned, and that the price shown was much lower than
the actual value. After hearing the appellants, the
Collector of Customs found that the appellants had committed
breach of s. l l l(d) and also of s. l ll(m) of the Customs
Act 1962 and for both the counts he imposed the penalty,
which was maintained by the Board. On revision the Central
Government reduced the penalty from Rs. 1,47,000 to Rs.
1,00,000 which had been imposed for breach of s. 111 (m). A
writ petition filed by the appellants was dismissed by the
High Court.
In the appeal to this Court, on behalf of the
appellants it was contended that a penal provision has to be
construed strictly and in absence of specific words
requiring 'value' to be mentioned, it could not be inferred
that any difference in value could be made the basis of
penalty.
On behalf of the respondents it was contended that
although the term 'value' was not in s. 1 l l(m) before the
1973 amendment but that will make no difference as even
without the term 'value' a mis-description could be
interpreted to be a mis-description on the basis of value
stated and ultimately the goods found to be of a higher
value. By the amendment the Legislature had only tried to
explain or clarify the position.
698
Allowing the Appeals, the Court,
^
HELD: 1. The impugned orders are set aside and the
penalty imposed on the appellants under s. Ill(m) read with
s. 111(d) of the Customs Act 1962 is quashed. [704A-B]
2. Before the amendment in 1973, s. 111(m) did not
contemplate any difference in material particulars in
respect of value but it referred matters other than the
value. [703B-C]
3. Unamended s. 111(m) indicated that wherever goods
actually imported are different in material particulars than
the goods which were shown in the bill of entry or a
declaration as contemplated in s. 46 then it will be a
breach of s. 11 l(m). The difference in particulars could be
in respect of anything but value, as this sub-clause clearly
shows that the difference in value could not be made the
basis of breach of this sub-clause before the amendment of
1973, when the term 'value' has been introduced into this
sub-clause. [70 1 B-C ]
4. In order to interpret a particular provision and to
infer the intention of the Legislature, the objects and
Reasons stated in the Bill, when it is presented to the
Legislature, could be used. [703B ]
5. The amendment inserting the term 'value' in s.
111(m) cannot be said to be explanatory. [703Fl
Union of India & ors. v. M/s. Rai Bahadur Shree Ram
Durga Prasad (P) Ltd. & ors., [1969] 2 SCR 727, relied upon.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 172 of
1979
From the Judgment and order dated 4.4.1978 of the Delhi
High Court in Civil Writ No. 261 of 1978.
B.R. Aggarwala for the Appellants.
O.P. Sharma for the Respondents.
The Judgment of the Court was delivered by
OZA, J. This appeal on special leave arises out of a
Judgment of
699
the Delhi High Court dated 4th April, 1978. The leave is
granted on a limited question as regards the question of
interpretation of sub-clause . (m) of Section 111 of the
Customs Act, 1962 (‘Act’ for short). The appellants imported
27 knitting machines as the appellants owns a hosiery
factory in 1972. The appellants held an import licence for
import of knitting machinery.
According to the Customs authorities the machinery was
not new as the licence permitted to import, but was old
reconditioned. The Customs authorities also held that the
price shown by the appellant on the basis of invoice was
much lower than what the price actually should be. The price
shown by the appellant on the basis of invoice was Rs.77441
whereas according. to the Customs authorities the price came
to Rs.2,98,359. On this basis, a show cause notice was
issued and after hearing the appellant, the Collector of
Customs Bombay by order dated 29.12.73 found that the
appellants had committed breach of Section 111(d) of the Act
and also Section 111(m) of the Act and for both the counts
the penalty was imposed on the appellants. Under Section
111(d) the penalty imposed was Rs.1,12,000 in lieu of
confiscation of goods and for breach Section 111(m) a
penalty of Rs. 1.47,000 was imposed under Section 112 of the
Act.
Against this order passed by the Collector of Customs,
an appeal was filed by the appellants before the Board and
the Board maintained the order passed by the Collector of
Customs. On revision, the Central Government reduced the
penalty from Rs.1,47.000 to Rs. One lac only. Against this
the appellant preferred a writ petition before the Delhi
High Court which was dismissed by a Division Bench of the
High Court by its judgment dated 4th April, 1978 and
aggrieved by this the present appeal has been preferred.
So far as the penalty under Section 111(d) in lieu of
confiscation was concerned, the leave has not been granted
and it is not disputed that the appellants have taken away
the goods after paying the duty and in this appeal therefore
we are not concerned with it. The only challenge before us
therefore is in respect of penalty of Rs. One lac imposed
under Section 111(m) of the Act.
It is not disputed that Section 111(m) of the Act has
been amended in 1973 by Act No. 36 of 1973 but this
amendment will not be applicable to the present case.
Section 111(m) as it stood before the amendment reads as
under:
700
“Any dutiable or prohibited goods which do not
correspond in any material particular with the
entry made under this Act or in the case of
baggage with the declaration made under Section 77
in respect thereof.”
and After the Amendment Act 1973 this provision now reads
like:
“any goods which do not correspond in respect of
value or in any other particular with the entry
made under this Act or in the case of baggage with
the declaration made under Section 77 in respect
thereof.”
It is therefore clear that the word ‘value’ was inserted in
this provision. Before the insertion of this word ‘value’;
Section 111(m) appears to mean that if the dutiable or
prohibited goods are imported which do not correspond in any
material particular with the entry made under Section 46 of
the Act and in case of baggage with the declaration made
under Section 77, then alone Section 111(m) could be
attracted:
Section 46 of the Act provides:
“46(1) The importer of any goods, other than goods
in tended for transit or transhipment, shall make
entry thereof by presenting to the proper officer
a bill of entry for home consumption or
warehousing in the prescribed form:
Provided that if the importer makes and
subscribes to a declaration before the proper
officer, to the effect that he is unable for want
of full information to furnish all the particulars
of the goods required under this sub-section, the
proper officer may, pending the production of such
information, permit him, previous to the entry
thereof (a) to examine the goods in the presence
of an officer of customs or (b) to deposit the
goods in a public warehouse appointed under
Section 57 without warehousing the same.
XX XX XX XX
XX XX XX XX
XX XX XX XX
(4) The importer while presenting a bill of entry
shall at the foot thereof make and subscribe to a
declaration as to
MANOHAR
701
the truth of the contents of such bill of entry
and shall, in A support of such declaration,
produce to the proper officer the invoice, if any,
relating to the imported goods.”
XX XX XX XX
It is in respect of this that Section 111(m) indicated that
wherever goods actually imported are different in material
particulars than the goods which were shown in the bill of
entry or a declaration as contemplated in Section 46 then it
will be a breach of Section 111(m). The difference in
particulars could be in respect of anything but value, as
this sub-clause clearly show that the difference in value
could not be made the basis of breach of this sub-clause
before the amendment of 1973, when the term ‘value’ has been
introduced into this sub-clause.
It was contended by the learned counsel for the
appellants that in fact in the decision of this Court in
Union of India & ors. v. M/s Rai Bahadur Shree Ram Durga
Prasad (P) Ltd. & ors., [1969] 2 SCR 727 this Court
considered the question of description and came to the
conclusion that a penal provision has to be construed
strictly and in absence of specific words requiring ‘value’
to be mentioned, it could not be inferred that any
difference in value could be made the basis of penalty.
Whereas learned counsel appearing for the respondents
contended that although the term ‘value’ was not in Sec.
111(m) of the Act before the amendment but that will make no
difference as according to him even without the term ‘value’
a mis-description could be interpreted to be a mis-
description on the basis of value stated and ultimately the
goods found to be of a higher value. By the amendment the
Legislature had only tried to explain or clarify the
position and he contended that this was the view taken by
the High Court while considering this question.
In Union of India’s case the Court held:
“If we are to hold that every declaration which
does not state accurately the full export value of
the goods exported is a contravention of the
restrictions imposed by s. 12(1) then all exports
on consignment basis must be held to contravene
the restrictions imposed by s. 12(1). Admittedly
s. 12(1) governs every type of export. Again it is
hard to believe that the legislature intended that
any minor mistake in giving the full export value
should be penalised in the manner provided in s.
23(A). The wording of s. 12(1) does
702
not support such a conclusion. Such a conclusion
does not accord with the purpose of s. 12(1).
It is true that the regulations contained in
the Act are enacted in the economic and financial
interest of this country. The contravention of
those regulations which we were told are
widespread are affecting vital economic interest
of this country. Therefore the rigour and sanctity
of those regulations should be maintained but at
the same time it should not be forgotten that s.
12(1) is a penal section. The true rule of
construction of a section like s. 12(1) is, if we
may say so with respect, as mentioned by Plowman,
J. in Re H.P.C. Productions Ltd.-[1962] Ch. Dn.
466 at 473.”
It is therefore clear that their Lordships relied on the
rule of construction holding that penal provision has to be
strictly construed and held that where the provision itself
did not require the value to be stated for any error in
respect of that, no penalty could be imposed. Learned
counsel contended that it was because of this decision that
the Amendment Act 1973 was passed by the Parliament and the
term ‘value’ was inserted in Sec. 111(m) of the Act. Learned
counsel referred to objects and Reasons for the amendment
mentioned in the Bill, which resulted in Act No. 36 of 1973.
The material words mentioned in the objects and Reasons for
the amendment as stated in the Bill reads as under
“The amendments to these Acts proposed in the Bill
mainly seek to make the punishments prescribed
thereunder more severe and to make certain other
provisions the rein with regard to the rules of
evidence and procedure with a view to removing the
loopholes noticed in the working of these Acts and
making their enforcement more effective.
2. The notes on clauses explain in detail the
various provisions of the Bill.
-Clause(2). This clause seeks to amend Section 111
of the Customs Act, 1962, with a view to providing
for the confiscation of goods in cases of mis-
declaration of the value or imported goods
irrespective of whether or not such goods
703
are dutiable or prohibited, in order to cover
cases of over invoiced imports.”
It is not in dispute that in order to interpret a particular
provision and to infer the intention of the Legislature, the
objects and Reasons stated in the bill, when it is presented
to the Legislature, could be used. In this view of the
matter it appears that before the amendment in 1973, Sec.
111(m) did not contemplate any difference in material
particulars in respect of value but it referred matters
other than the value.
It is not disputed that penalty under Sec. 111(m) has
been imposed solely on the ground that the price shown by
the appellant in the declaration was much less than what was
ultimately found by the Department to be the price of
imported goods and in respect of this difference of price,
it was held that there is a difference in material
particulars which brought the matter within the mischief of
Sec. 111(m) of the Act. But in view of the fact that the
term ‘value’ was not in Sec. 111(m) before the amendment of
1973 this difference on the basis of value could not be said
to be a difference in material particulars within the
meaning of the language of Sec. 111(m) and in this view of
the matter, the view taken by the authorities could not be
maintained.
The High Court in its judgment realising this
difficulty observed that this amendment where the term
‘value’ has now been inserted is merely explanatory and that
was what was also contended by learned counsel for the
respondents.
It is not in dispute that a penal provision has to be
strictly construed and reading Sec. 111(m) before the
amendment it is not possible to draw an inference that any
difference in material particulars may be referable to
‘value’. This argument therefore can not be accepted. The
scheme of Sec. 111(m) as it stood then nowhere referred to
the difference of value as one of the ingredients which may
attract this provision. In such a situation therefore if it
was not the specific intention of the provision, a
difference in respect of value therefore could not be said
to attract this provision and on that basis no penalty could
be imposed.
704
The appeal is allowed and the orders passed by the
Collector, Board, Central Government and the High Court are
hereby set aside. The penalty imposed on the appellants
under Sec. 111(m) read with Sec. 112 is hereby quashed. The
appellant shall be entitled to get refund of the penalty if
already deposited. No order as to costs.
A.P.J. Appeals allowed.
705