JUDGMENT
D.K. Seth, J.
1. The petitioner, Rajan Ghoshal, carries on business under the name and style of Shyam Sundar Enterprises, a sole proprietorship concern. He had exported certain goods in five containers from Kolkata Port through M.V. Kota Bintang. These containers were off-loaded from the vessel M.V. Kota Bintang at Vizag Port by the Customs Authorities. A notice dated 11th January, 2002 was addressed to the shipping agent M/s. S.K. Kanjilal, through whom the petitioner had shipped the consignment. This Annexure “P-4 is the subject matter of challenge in this petition. In the said letter, the shipping agent was informed that those five containers were off-loaded at Vizag Port for 100% examination. Therefore, the shipping agent was asked to depute a representative in whose presence the examination would be carried out on 12th January, 2002. This notice was issued by Deputy Commissioner of Customs, Special Investigation Branch, Kolkata.
Submission on behalf of the petitioner:
2. Mr. Mullick, learned Counsel for the petitioner, has challenged the action of the Customs Authorities on various grounds. According to him, the Customs Authority purported to Act on the basis of suspicion as is reflected from the notices issued by the Appraiser, Special Investigation Branch, Dock Intelligence Unit (Appraising) contained in Annexure “P-5” series. Relying on those notices, he contends that the said notice was issued on the basis of suspected over-invoicing. Thus, the basis of off-loading the said goods and initiating the investigation purporting to 100% examination, was founded purely on suspicion. According to him, such investigation can be carried out under Section 110 of the Customs Act, 1962, if the proper officer has reason to believe that the goods are liable to confiscation. He points out that suspicion is not a reason to believe. He relied on the decision in State (Collector of Central Excise) v. Tapan Kumar Shome ; Smt. Pushpa Devi v. Union of India (Head Note) and Income Tax Officer v. Lakhmani Mewal Das 103 ITR 437 (SC) at page 448. Relying on these decisions, he had elaborated that in the present case there is nothing to show that the Proper Officer had any reason to believe. The reason to believe being the foundation of the whole action initiated, in its absence, the entire process fails. As such the entire process should be quashed and the goods should be exported. Therefore, the Customs Authority cannot proceed to confiscate or seize the goods.
2.1 Sections 50 and 51 of the Customs Act, 1962 hereinafter referred to as Customs Act, deals with clearance of goods for exportation. It is only at the stage of exportation, as contemplated in Sections 50 and 51, the exporter can be held liable. Once the goods are cleared and the exportation takes place, no liability can be fixed on the exporters. The Customs Authority cannot assume jurisdiction to seize any goods once it is cleared to exportation and the goods are shipped and left the port. Section 130 provides for confiscation of goods attempted to be improperly exported. The Section prescribes that only when attempt is made to export the goods, it may be confiscated, but once the goods are exported by reason of the clearance given by the Customs Authority under Section 51, it cannot be said to have been improperly exported. That apart, when it is exported, it is no more an attempt to export improperly. Therefore, goods, which has since been exported after clearance given under Section 51 cannot be confiscated under Section 113. Inasmuch as the conditions as enumerated in different clauses of Section 113 does not apply in the case of the petitioner. The goods that had been attempted to be seized, does not come within the purview of any of the said clauses. He pointed out that at best it can be attempted to be brought within any of the Clauses (h) or (i), (ii) and (k). Except these four clauses, the present case cannot be fit in, in any of the other clauses.
2.2 He explained that the goods, which were exported, are not dutiable as defined in Section 2(4) read with Section 12, Customs Act, and as such it cannot come under Clause (h). Inasmuch as it is alleged that the goods that were exported were found in excess of the goods declared. But, the goods not being dutiable goods, Clause (h) cannot be attracted. Similarly Clause (i) also cannot be attracted, which relates to dutiable or prohibited goods, though it is alleged that the declarations given do not correspond to the material particulars with the entry made in the declaration. The question of drawback also does not come at this stage as contemplated in Clause (ii). Clause (k) also cannot be applied since this covers cases where the goods after clearance are not loaded for exportation. Inasmuch as, in this case, after clearance, the goods have been loaded. Therefore, the goods cannot be confiscated. If the goods cannot be confiscated, it neither can be seized nor can be subjected to 100% examination.
2.3 On similar ground Section 114, Customs Act, has also no manner of application in the present case. Section 114 applies in a case for attempt to export goods improperly. On the same analogy that the goods have since been exported, 114 is inapplicable.
2.4 The other provision for confiscation emanates from Section 106, Customs Act, which provides the power to stop and search conveyance. In the present case, this provision is alleged to have been applied. This provision can be exercised only when there are reasons to believe. On the same ground that this case was initiated on the basis of suspicion, Mr. Mullick contends that the stoppage and search is wholly without jurisdiction. Then again this provision can be applied only in respect of a goods where the goods are being smuggled. In the present case, the goods having been cleared for exportation, there is no question of smuggling of those goods.
2.5 Even if under Section 106, Customs Act, the goods could be searched, still then the power to search is confined to Clauses (a), (b) and (c) of Sub-section (1) of Section 106. None of these provisions empowers 100% examination. Clause (a) provides for rummage and search of any part of aircraft, vehicle or vessel. Clause (b) provides for examination and search of goods in the aircraft, vehicle or vessel. Clause (c) empowers breaking up of lock or any door or package if the keys are withheld. Thus, Section 106 does not empower the Customs Authority to carry on 100% examination.
2.6 The notices under Section 108, Customs Act, are wholly without jurisdiction in view of the fact that the Customs Authorities could not proceed to confiscate or seize or search under Sections 113, 110 and 106 respectively. Therefore, the entire proceeding being is incompetent, the notices issued under Section 108 are without jurisdiction.
2.7 The attempt to confiscate is incompetent since no notice under Section 124, Customs Act, has since been issued to the petitioner. This provision requires not only giving of reasons but also indicating of the grounds on which the confiscation is attempted to. Neither any notice nor any information with regard to the grounds for purported attempt to confiscate has since been communicated to the petitioner.
2.8 Properly declared goods cleared by the authority after random search, cannot be subjected to search and seizure, nor can the same be confiscated. Relying on Section 2(19), which defines ‘export goods’ to mean goods, which are to be taken out of India to a place outside India, he contends that the goods are not export goods, since it has already left the Kolkata Port. That apart, according to him, Clauses (i) and (ii) of Section 114 does not affect the present case, since the goods are neither prohibited nor dutiable.
2.9 The petitioner has not yet claimed drawback as contemplated in Section 75, Customs Act. Even then Section 75 prescribes that in case draw back is allowed though not allowable, then the same may be recovered. The Customs Authority did not have any jurisdiction to confiscate any goods or seize it, in case drawback is not allowable.
2.10 The Customs Act being a fiscal statute, it has to be interpreted strictly. Unless the law prescribes the Customs Authority cannot be permitted to proceed with the proceedings. He relied on Commissioner of Sales Tax U.P. v. Modi Sugar Mills Limited, . He had also relied on Lucas TVS, Madras v. Assistant Collector of Customs, Madras . On these grounds he prayed that the writ petition be allowed and the purported seizure, the purported investigation and the process for confiscation, if any, should be quashed and the goods should be exported again. Submission on behalf of the shipping agent:
3. The learned Counsel appearing on behalf of the shipping agent of the petitioner, S.K. Kanjilal, who is added as party, supported the contention of Mr. Mullick. He pointed out that once the goods are exported and leaves the port, the title to the goods passes on to the person to whom the goods are exported or in other words the importer of the exported goods. Therefore, the exporter cannot be held liable in respect of those goods.
Submission on behalf of the Customs Authority:
4. Mr. Ghosh, learned Counsel for the Customs Authority, points out that the contention of Mr. Mullick is fallacious. According to him, the expression “attempt to export” does not mean to wipe out the liability of improper attempt to export, once the goods are exported. So long it is within the Indian waters, the Customs Authority has every right to seize the goods. According to him, the Customs Authority had invoked Section 106, Customs Act. He contends that the rummage and search having not been specifically explained in Section 106, it has to be understood in its ordinary grammatical meaning, which includes 100% examination, if necessary.
4.1 If the officer has reason to believe that the goods are being smuggled, it can exercise such power. In the present case, it was pointed out that the declaration given does not conform to the goods attempted to be exported. The over-invoicing is an attempt to claim more duty drawback. Admittedly, these goods are exported under the Duty Drawback Scheme. Therefore, the expression “smuggling” as defined in Section 2(39), Customs Act, in relation to any goods means any act or omission, which render such goods liable to confiscation under Section 113. If the goods could be confiscated under Section 113, in that event, the carriage of goods are smuggling within the meaning of Section 2(39) and as such are subjected to search under Section 106. Under Section 113 Clause (i), goods entered for exportation under claim for drawback, if 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, are liable to be confiscated. According to him, in the present case, the goods were entered for exportation under a scheme for drawback and the same does not correspond to the declaration under Section 77. The present goods also covered under Clause (ii) of Section 113. As such the same are liable to confiscation. Therefore, it was case of smuggling within the meaning of Section 106.
4.2 The initiation of investigation, therefore, is not without authority or jurisdiction. As such notices under Section 108, Customs Act, as issued are competent and cannot be questioned.
4.3 Under Section 110, Customs Act, goods can be seized if there are reasons to believe that the goods are liable to confiscation. Since prima facie at appears that the goods are liable to confiscation, therefore, it can be seized and was rightly seized.
4.4 He relies on the decision in Assistant Collector of Customs, Special Section v. United India Minerals Limited, , where a Division Bench of this Court had held that any act or omission before export, if becomes liable for any offence, then it does not cease to be an offence nor it is wiped out after the actual export. This decision is supported by a Judgment of the Full Bench of this Court in Euresian Equipment And Chemicals Limited and Ors. v. Collector of Customs and Ors., 1980 ELT 38 (FB)(Cal.).
4.5 He contends that if a clearance order is obtained by fraudulent means, the show-cause notice for confiscation of the case cannot be debarred. In support he relies on the decision in Union of India v. Jain Shudh Vanaspati Limited . Relying on Union of India v. Tata Engineering & Locomotive Company Limited , he contends that once a proceeding for investigation is initiated, it should be allowed to be completed, it cannot be prevented at the threshold. On these grounds, he contends that the writ petition should be dismissed, M Ghosh has also pointed out from the statement made in the writ petition that the petitioner had admitted the discrepancy, though he wanted to shift the blame on someone else. Therefore, even on facts, he cannot challenge the initiation of the investigation only after which the facts can be asserted.
The Scope:
5. I have heard the learned Counsel for the respective parties at length.
5.1 The moot question that requires determination is as to whether the initiation of the investigation could be sustained. If it could be sustained, whether Section 106, Customs Act, could be resorted to. In order to resort to Section 106, whether the conditions contained in Section 113 read with Section 2(39) and Section 106 could be attracted. It also calls for determining the meaning of the word “attempt to export”, namely whether it includes a stage after it is exported and the goods had left the port.
Facts:
6. In order to appreciate the situation, we may briefly refer to the facts of the present case. The facts are more or less admitted. The petitioner had exported certain goods under a Duty Drawback Scheme. These goods were exported through containers. The goods were shipped through the shipping agent and are brought for exportation in terms of Sections 50 and 51, Customs Act. There was a random search of the packages. After such search, the goods were cleared. The goods were shipped on Board M.V. Kota Bintang, which left the port. This M.V. Kota Bintang was intercepted at Vizag Port. The goods were off-loaded from the ship. Notice was given to the shipping agent to be present for 100% examination of the goods. Butno one was present when examination was made. Notices were also issued under Section 108. The petitioner in his writ petition had pleaded manipulation by rival party at whose behest the Customs Authority is acting.
6.1 On the other hand, in the Affidavit-in-Opposition, it was pointed out that some intelligence report was received to the extent that few exporters are trying to misuse the export benefit under the Duty Drawback Scheme by gross over-invoicing of the export goods. On the basis of such information, the Special Investigation Branch, Customs House, took up investigation. On enquiry, it was learnt that some containers in M.V. Kota Bintang had left Kolkata Port on 8th January, 2002 for Vizag Port en route Singapore. The intelligence was developed and it was gathered that there was shortage in quantity of the goods actually contained as compared to the declared quantity. After 100% examination, it was found that there were shortages of quantity and that in some cases, the packages consisted of old and used/soiled unserviceable garments of no commercial value and not corresponding to the declared description of the goods said to be contained in the container. It was further found that those goods were over-invoiced for availing under export incentives. It is also pointed out that the said Shri Rajan Ghoshal could not be found the address declared in the shipping bills and on the IEC Certificate. M/s. Shyam Sundar Enterprises does not exist at the address declared on the shipping bill and the IEC Certificate. The address appears to be in occupation of a third party.
Improper attempt to export:
7. In Chapter VII, clearance of imported goods and exported goods are dealt with. It spares only two sections namely 50 and 51, Customs Act, for clearance of exported goods, while Sections 44 to 49 dealt with imported goods. Section 50 provides that the exporter of any goods shall make entry of such goods by presenting to the Proper Officer. If the goods are to be exported in a vessel or aircraft, a shipping bill. Under Sub-section (2), the exporter has to give a declaration to the truth of the contents at the foot of the shipping bill or bill of export, while presenting the same. Section 51 prescribes that where the proper officer is satisfied that any goods entered for export are not prohibited goods, or that the exporter had paid the duty, if any, assessed thereon, then he may permit clearance and loading of the goods for exportation. These two sections deal with the entry for exportation. It deals with the stage before the goods are exported.
7.1 Relying on these provisions, Mr. Mullick wanted to substantiate that no liability can be fixed once the goods are cleared and loaded in the vessel and are transshipped. In other words, once the exportation takes place or the goods are exported, the liability relating attempt to export improperly ceases. In the present case, admittedly, the goods had left Kolkata Port after the clearance.
7.2 But, the contention seems to be fallacious. Inasmuch as, in the present case, the liability on the basis of which Section 106 or 113, Customs Act, are being attempted to be resorted to, are related to Sections 50 and 51, namely, a stage before the actual exportation. Two allegations are being made as against the petitioner. One is over-invoicing and the other is shortage of packages than were declared. This over-invoicing is made with the presentation of the shipping bill or export bill, which, under Section 50, requires a declaration at the foot that the contents thereof are true. The shipping bill or the export bill includes over-invoicing and the declarations are alleged to be incorrect. Therefore, the liability accrued at the stage of Sections 50 and 51. This act or omission at the stage of exportation or at the stage of attempt to exportation, forms the basis of the liability. On account of this liability, the goods can be subjected to Sections 106 read with Sections 113 and 114, as the case may be, even if the attempt is successful and the goods are actually exported. An attempt to export improperly does not become proper exportation since the exportation has taken place on the basis of the clearance given, when it is really an improper exportation. Therefore, when there may be reason to believe that the goods are being smuggled or that the goods are liable to confiscation, Section 106 and Section 113 can be resorted to.
Can investigation be stopped at the threshold?:
8. The investigation, if initiated, cannot be nipped in the bud and be prevented simply on the basis of certain technicalities. If the Court is satisfied that there are certain material on the basis whereof, a prima facie case could be made out, the investigation cannot be forestalled. This scope of forestalling investigation is very limited. It can be done so, only when it appears that it is without jurisdiction or that it is mala fide or that no ingredient is made out to establish a prima facie case.
8.1 The investigation should not be thwarted by the Court, if some ingredients of an offence are available on the records before the Court, as was held in P.N. Mishra v. State of U.P. (Criminal Misc. App. No.6486 of 1997) disposed of by me on 24th May, 2000.
8.2 The same principle with regard to the quashing of F.I.R. can be attracted and applied in respect of initiation of an investigation by the Customs Authority in a case where there are reasons to believe that there are some violation of the Customs Act. The extent of interference in such a case was crystallized in State of West Bengal v. Swapan Kumar Guha and Ors., . The Customs Act provides unfettered power to investigate where there are reasons to believe that there had been infraction of the provision of the Customs Act. On similar principle, an aggrieved person may approach the High Court under writ jurisdiction, In order to intervene, the High Court is supposed to follow the same principles as are applied in respect of criminal investigation under the Code of Criminal Procedure, if it is of opinion that the legal power is being illegally exercised (S.N. Sharma v. Bipen Kumar Tiwari, ). The only difference would be in a criminal investigation a reason to suspect, while under the Customs Act reason to believe. If the condition is satisfied, the investigation must continue as was laid down in King Emperor v. Khwaja Nazir Ahmed, AIR 1945 PC 18. This has been followed by the Apex Court time without number. If conditions are satisfied, the Court has no power to stop investigation. If it does so, it would be trenching upon the lawful power of the Customs Authority to investigate, Court cannot interfere with the investigation when there are reasons to believe under the Customs Act.
8.3 In the name of guarding the life and liberty of a citizen, who is alleged to have committed an offence, the Court cannot permit its process to be abused much to the detriment of the justice delivery system and thereby sending wrong signal and massage down to the society where honest people feel frustrated and disheartened, while dishonest goes of unpunished having taken advantage of the judicial system, abusing its process much to his advantage.
8.4 In Madhavrao Jiwaji Rao Scindia and Anr. v. Sambhajirao Chenrojirao Angre and Ors., , the same view was taken by the Apex Court to the extent that when a prosecution in the initial stage is asked to be quashed, the test to be pleaded by the Court is as to whether the uncontroverted allegations as made prima facie establish the offence. It is also for the Court to take into consideration any special features, which appear in a particular case to consider where it is expedient in the interest of justice to permit a prosecution to continue.
Matters to be considered:
9. In case of Radhey Shyam Khemka and Anr. v. State of Bihar, , the Supreme Court has observed that “seeking quashing of proceeding was a futile attempt to close the chapter before it was unfolded itself. It will be for the Trial Court to examine the matter on the materials produced on behalf of the prosecution. The exercise cannot be performed either by the High Court or by the Apex Court”.
Whether the investigation should proceed?:
10. We will discuss the extent of reason to believe having regard to the facts of this case, at appropriate stage. But now we may refer to the materials placed before this Court, in order to examine as to whether the investigation should be allowed to proceed or not. Admittedly, in the present case, some plastic dot pens have been exported. The value of such dot pen was alleged to be at the extreme higher side. Specimen of such of dot pens was produced before this Court. But this Court is not an expert. It did not undertake to assess the value thereof. The investigating authority may value it. If it is alleged that it cannot be valued at such higher rate, this Court cannot throw away the said contention, simply because the petitioner is asserting that it was rightly valued. It is a matter of investigation. Therefore, the investigation should be allowed to ascertain the same. This valuation relates to over-invoicing. Therefore, the investigation with regard that too cannot be forestalled.
10.1 The other ingredient that is placed before this Court through Affidavit-in-Opposition is that on examination, discrepancy with regard to packages were found. The details have been mentioned in paragraph 6 (c) and (d) respectively. Therefrom, it appears that there were shortage of packages, coupled with the fact that 126 packages consisted of old and used/soiled/ unserviceable garments of no commercial value and not corresponding to the declared description of the goods contained in the container, apart from 40% less the declared number of packages. This might have been done for the purpose of availing of undue export incentives as pleaded in paragraph 6 (e) of the Affidavit-in-Opposition. It was also contended that the petitioner was not available at the address given, above, which were found to be fictitious. Therefore, there appears to be sufficient material for continuing the investigation.
Reasons to believe:
11. Now, we may examine as to whether there are reasons to believe or not. The use of the word “suspect” in the notice under Section 108, Customs Act, has nothing to do with Section 106 or 113. Section 108 is a notice to be issued for the purpose of giving evidence. These are summons. For issuing summons reason to believe has no manner of application. Therefore, mentioning of suspicion in such summons cannot be a determining factor for ascertaining existence of reason to believe. Though, Mr. Mullick has sought to bank upon this expression in Annexure “P-5” series, but the same is wholly misplaced. Inasmuch as, the reason to believe is to be found out from the ingredients leading to the investigation, particularly, those which are placed before this Court. The statement made in the Affidavit-in-Opposition, to my mind, appears to disclose sufficient ingredients for establishing existence of reason to believe. Once an attempt is made for exportation improperly and such attempt succeeds on being cleared by the proper officer and the actual exportation takes place on the basis of the records, it is not possible to detect what the container contains. The Customs Department has its own investigation cell and intelligence wing. It may make its own enquiry and investigation. When investigation is developed and the same is considered by the Proper Officer and on the basis of such materials received on investigation on developed information may be factors or ingredients for forming a belief, which can very well be said to be reasonable. It cannot be thrown out on technical grounds. That apart, on examination when materials are available to support such reason to believe and that the belief appears to have some support from the materials disclosed, then the Court cannot stop investigation on the ground that it was incompetent, since there was no reason to believe in existence, at the time when the investigation was undertaken. If on investigation, it appears that there are some materials, which support the reason to believe, then the Court cannot interfere, even though these materials might not have been there with the authority to support the reason to believe. The information that was developed through enquiry can also construe reason to believe which has to discover facts on information. Therefore, I do not think it a fit case, where the investigation can be thwarted.
11.1 In State (Collector of Central Excise) v. Tapan Kumar Shome 1984 (23) ELT 42 (Orissa); Smt. Pushpa Devi v. Union of India and Income Tax Officer v. Lakhmani Mewal Das 103 ITR 437 (SC), the question of reasons to believe was under consideration. It is a consistent view of the High Courts and the Apex Court that the phrase “reason to believe” must have a greater foundation than mere suspicion. It is a right of a citizen with which interference is being made. In order to protect such right, the legislature had always provided for certain restrictions. Unless, there are sufficient materials, which may lead a person to believe something against a citizen, it cannot be said that there are reasons to believe. Mere wishful thinking or ipse dixit of the authority or a mere suspicion will not constitute reasons to believe. It must be founded on some materials, which through a rational approach, in the mind of the authority, would form a basis to rest his belief. There is no doubt about the proposition laid down in the decisions cited by Mr. Mullick. But such question is to be examined having regard to the facts of each case. As discussed above, there being sufficient materials to constitute the basis for formation of an opinion with regard to the existence of reasons to believe, the principle laid down in those decisions cannot be attracted in the present case.
11.2 Mr. Mullick had also relied on State (Collector of Central Excise) v. Tapan Kumar Shome . In the said decision, it was held that reasonable belief can be entertained on the basis of internal indicia or on the basis of some internal information that the goods have been illegally imported into India in contravention of prohibition imposed and must be such as any reasonable man in these circumstances would entertain about existence or non-existence of a thing without being based on suspicion or speculation. There is no doubt about the proposition. In the present case, there are materials on the basis of which the existence or non-existence of the allegations could be believed as has discussed above,
11.3 In Phool Chand Bajranglal and Anr. v. Income Tax Officer , the question of reasons to believe came for consideration by the Supreme Court. In the said decision, it was held that if on the basis of specific, reliable and relevant information coming to the possession of the authority at a subsequent stage, if he has reasons to believe, which he must record that there were income, which escaped assessment, then the Income Tax Officer has jurisdiction to re-open the same. It is not necessary that such reason should be full proof, but it must be such that on the basis of which a reasonable man can conclude about the existence of some ingredients with regard to the infraction. The belief is that of an office Sufficiency of the reasons for forming belief is not for Court to judge. However, the assessees could establish that there, in fact, existed no belief or that the belief was not bona fide or was based on vague, irrelevant and non-specific information. The Court in such event can examine whether there was any material available on record from which requisite belief could be formed. It had also pointed out that subsequent information can also be relied upon. As discussed above, in the present case, it appears that the Customs Authority had its Special Intelligence Branch and Revenue Intelligence Department, which had gathered materials through enquiry and investigation and had developed the same. Upon such information, which the authority may consider reliable and relevant, once can form an opinion one way or the other. The Authority having formed an opinion, it is not for the Court to judge the sufficiency thereof.
11.4 Then again upon examination when such belief appears to be justified and those materials are brought before the Court, the Court cannot close its eyes and dwell on technicalities. Court has to look into the materials available at the time when it decides the question. If such materials justify the belief, even if those were not available at the time of formation of the opinion, then the Court cannot interfere with the process. Inasmuch as, it justifies the reliability and relevance of the information on which the enquiry was initiated and developed, leading to formation of opinion about the existence of the reason to believe. Improper exportation:
12. The material that is disclosed is over-invoicing and discrepancy in the declared description of goods and the actual goods exported and shortage of the declared number of packages by 40% in one container and different shortage of packages in different containers as disclosed in the Affidavit-in-Opposition, brings the case within the scope and ambit of Clauses (i) and (ii) of Section 113, Customs Act. Inasmuch as, admittedly, these goods are not dutiable goods. But these goods were entered for exportation under claim for drawback. As alleged, these goods did not correspond to the material particular with the declaration made under Section 77 in respect of baggage. Admittedly, these goods are entered for exportation under claim for drawback. It appears that it does not correspond in material particular with the information furnished by the exporter in relation to fixation of rate of drawback under Section 75. Inasmuch as, over-invoicing and shortage of packages are matters in relation to fixation of rate of drawback. These particulars do not correspond to the information furnished by the exporter. Thus, prima facie these goods are liable to confiscation. As already held that these goods were attempted to be improperly exported with the wrong description given by the exporter. Therefore, even though actual exportation has taken place, yet the liability arising out of the attempt to improper export had already accrued before the actual exportation. This liability cannot be wiped out by exportation or in other words on the attempt to export improperly having been successful by reason of the clearance and the actual exportation.
12.1 Mr. Mullick relied on Lucas TVS, Madras v. Assistant Collector of Customs, Madras and Ors. to contend that once the goods are loaded in the vessel after they were duly cleared under Section 51, Customs Act, the goods must be deemed to be goods exported for the purpose of Section 75 of the Customs Act. It would be enough for the exporter to show that the goods were out of his control and were on their way to the country of destination. But, this interpretation was given in relation to the effect of Section 75, but not in relation to an investigation contemplated under Section 106, 110, or 113. Thus, the said decision does not help us in the facts and circumstances of the present case.
Application of Sections 106, 110 and 113:
13. Thus, as soon the said goods become subject to confiscation under Section 113, Customs Act, Section 106 can very well be attracted. As soon the goods appear to be liable to confiscation, it comes within the definition of smuggling defined in Section 2(39). Section 2(39) includes any act or omission that render the goods liable to confiscation under Section 113, as smuggling. Since these goods are liable to be confiscated under Section 113, Clause (i) and (ii), these goods can be said to be smuggled out. As soon it is a smuggling, it is covered under Section 106. Therefore this ship was rightly stopped, searched and the goods were rightly seized. Once the goods are liable to confiscation, it can also be seized in exercise of power under Section 110. Therefore, the seizure of the goods is also well within the jurisdiction of the Customs Authority.
13.1 Admittedly, these goods were being exported under the Duty Drawback Scheme. Therefore, on the basis of the materials now disclosed, prima facie, it appears that there are sufficient ingredients to subject the goods under Section 106 read with Section 110 and Section 113. Is 100% examination permissible:
14. Section 106 provides for search, but it does not specify as to how the search is to be made. Rummage and search of the aircraft, vehicle or vessel or examining and searching any goods in the aircraft, vehicle or vessel or to break open the lock of any door or package for examining, appears under Clauses (a) and (b) includes power to examine the goods even 100%. Unless 100% examination is made, the investigation cannot establish the discrepancies. Therefore, in an appropriate case, where there are reasons to believe; the Customs Authority is empowered even to examine 100% in a given case. In the present case, as the materials revealed, it appears to be a fit case where 100% examination is justified. The petitioner also has not disputed the discrepancies. On the other hand, it had admitted the same in its own pleadings made in the writ petition. While admitting the discrepancies, the petitioner is purporting to shift the blame to some rival business party without naming any of them. The allegation is so vague that it is very difficult to place any reliance upon it. Therefore, the petitioner cannot now turn round and contradict the discrepancy and oppose 100% examination.
Interpretation of fiscal statute: Attempt to export: Meaning:
15. The fiscal statute has to be interpreted very strictly. This is an established principle and proposition of law. It was so held in Commissioner of Sales Tax U.P. v. Modi Sugar Mills Limited, . Similar view was taken in series of decisions of the Apex Court. It would be unnecessary to multiply the citations for this established principle of law. In the present case, the interpretation that I have ascribed to attempt to export improperly in Section 113, Customs Act, does not seem to travel beyond the strict interpretation of the fiscal statute. We may remember that attempts are being made to obtain undue advantage of a scheme by over-invoicing and under-packaging. This is not only jeopardizing the export prospect for which the incentives are allowed, but also costing the state exchequer. Unscrupulous exporters are draining out the state exchequer by unscrupulously realising duty drawback facilities. Over-invoicing, under-packaging or exporting of goods of no value, are counter-productive to export promotion. The duty drawback policy is conceived only to promote export and earn foreign exchange. The over-invoicing or shortage of packages or exportation of goods without any commercial value, would not enable earning of foreign exchange and as such the incentive is being misused. This is putting the state to double jeopardy, by draining out the state exchequer and, at the same time, non-earning of foreign exchange and even jeopardizing the whole export prospect.
15.1 Assistant Collector of Customs, Special Section v. United India Minerals Limited, , the very question attempt to export goods had cropped up. A Division Bench of this Court had held that the actual exportation, if takes place, will not wipe out the liability accrued while attempting to export. Clearance under Section 51, Customs Act, does not prevent the authorities from taking steps provided under the statute, even if the attempt to export improperly succeeds. This decision was sought to be distinguished by Mr. Mullick that it related to not only a prohibited item but also a dutiable item, which is not a case here. But such distinction is wholly misplaced. No distinction has been made in the statute with regard to improper exportation of prohibited goods or dutiable goods or non-prohibited or non-dutiable goods. When the statute has not made any distinction, the Court cannot find out such a distinction. The distinction sought to be made out by Mr. Mullick seems to be of no substance. The view taken by the Division Bench in United India Minerals (supra) finds support in the decision in Euresian Equipment And Chemicals Limited and Ors. v. Collector of Customs and Ors. of the Full Bench 1980 ELT 38 (Cal). The same view was taken by the Full Bench that actual exportation does not wipe out the liability that might have accrued in the attempt to improperly export. Such goods are liable to confiscation so long it is within the reach of the Customs Authorities provided the conditions stipulated in Section 113 are satisfied.
15.2 In Union of India v. Jain Shudh Vanaspati Limited , it was held that if clearance order for imported goods obtained by fraudulent means, issuance of show-cause notice of confiscation under Section 124 is not debarred. The liability continues even after exportation upon being cleared. However, in the said decision, it was further held that the High Court is not supposed to enter into the thicket of evidence. It should be well advised to leave these questions to be decided by the statutory authorities. It has also held that the provision of the statute should be allowed free play and that the proceedings ought not to be interfered with by the High Court in exercise of writ jurisdiction. Similar view was taken in Union of India v. Tata Engineering & Locomotive Company limited . In this case also the High Court was cautioned from interfering with the proceedings. It was held that the authority has every right to make appropriate enquiries. High Court is not excepted to control the mode and manner in which the enquiry is to be completed. Such a remedy is available by way of an appeal or revision, if there be any. High Court should not tinker with it. Passing of Property hot a bar:
16. In the present case, one ground was taken that the goods after it was exported, the property has since passed to the importer. Under the Bill of Lading Act, unless the master’s receipt is issued, the the cannot be said to have passed. Nothing has been shown by production of any document, which results in passing of the title to the goods. Therefore, the exporter cannot avoid its liability. That apart, it appears that the exporter has made himself scare. Even when Mr. Mullick was asked to produce his client, Mr. Mullick did not agree to do so on the ground that if he is produced, he will be immediately arrested by the Customs Authorities. At the same time, the addresses were alleged to be fictitious. That apart, it is alleged that the petitioner had described himself with the name in different spelling. However, we need not go into those questions. These are subject-matter of investigation.
16.1 The consignee or importer of the goods at the destination cannot be said to be concerned with the investigation. Inasmuch as, it is a liability arising out of an attempt for exportation improperly. Such attempt can only be made by the exporter. It is his liability which gives rise to the cause of investigation. Passing of title of the goods or its ownership is wholly irrelevant for such purpose.
16.2 That apart, the passing of title would be immaterial for the purpose of exercising power under Sections 106, 110 and 113, Customs Act. These provisions are not dependant on the title of the goods. Admittedly, these are export goods as defined in Section (19), Customs Act. These are goods, which were attempted for exportation improperly by the exporter. Success of the attempt does not wipe out the liability. If there is attempt to export improperly, it comes within the definition smuggling defined in Section 2(39). Once it is smuggling, the goods becomes subject to Section 106. Once the goods become liable to confiscate under Section 113, it is liable to seizure under Section 110. It is immaterial as to whom the title of the goods belong. The provisions of Section 106, 110 and 113 are related to the goods subject to the said provisions. It has nothing to do with the title to the goods. The free play of these provisions cannot be objected to on the ground of title to the property or otherwise. It is the exporter, who will be enjoying the benefit of duty drawback on the basis of such export So long it is within the territorial waters of India, it is within the power of the Customs Authority to resort to Section 106, 110 and 113, as the case may be.
Section 124 : if applicable?
17. As soon the attempt is made in respect of goods under Duty Drawback Scheme, it becomes liable to confiscation under Section 113(i) or (ii), Customs Act, as the case may be. Section 124 provides the process how confiscation is to be made. The matter is at the stage of Sections 106 and 110. That stage is yet to come, Therefore, the ground of non-compliance of Section 124 is a premature ground at this stage.
Section 114:
18. Question of Section 114 is also not relevant at this stage. It is too early to dwell with the said provision. Section 108:
19. Since the investigation can continue, the summons under Section 108 are competent. It cannot be interfered with in the facts and circumstances of the case.
Claim for Duty Drawback : Immaterial:
20. The question of claiming duty drawback is of no substance. The confiscation under Section 113(i) and (ii), Customs Act, is not dependant on the claim made. It is under such a scheme whether drawback is claimed or not is immaterial. The liability is not dependant on the claim. The liability is complete as soon the attempt to export improperly is made. Non-allowance of duty drawback or its recovery, if allowed, are matters which are misplaced. Section 106 or 110 are not related to duty drawback. As discussed above, as soon the ingredients of Sections 106, 110 and 113 are satisfied the liability is complete.
Conclusion:
21. In these circumstances, the initiation of investigation, the exercise of power under Sections 106 and 110 appears to be competent and within the jurisdiction of the authority concerned and the goods appears to be prima facie liable to be confiscated. Those are to be established on investigation, which is to be carried out in accordance with law by the Customs Authority.
Order:
22. In the result, the writ petition fails and is accordingly dismissed. The Customs Authority shall take appropriate steps for seizing the goods, if not already seized and complete the investigation, in accordance with law, within a period of three months from the date of communication of this order and shall also take appropriate steps as admissible in law and as the Customs Authority may be advised, as early as possible, preferably within the same period.
There will be no order as to costs. All parties concerned are to act on a xerox signed copy of the operative part of this Order on the usual undertaking.