Once it is clear that the goods in question are improperly imported and fall in the category of ‘prohibited goods’, are liable to confiscation: Supreme Court

The SC on June 17, 2021 {UNION OF INDIA & ORS. vs. M/S. RAJ GROW IMPEX LLP & ORS.} held that when the matter was left for decision by the Commissioner (Appeals), there was neither any occasion nor any justification for the High Court to pass the order for release of the goods for the simple reason that any order for release of goods was to render the material part of the matter a fait accompli. This, simply, could not have been done.

It was also held by the Bench, comprising of Justice DINESH  MAHESHWARI, Justice A.M. KHANWILKAR and Justice KRISHNA MURARI that apart from the fundamental flaws of contradictions, the order passed by the High Court on 15.10.2020 further suffers from the shortcomings that while issuing mandamus for release of goods, the High Court omitted to take into account the relevant facts as also the material factors concerning the imports in question, including the reasons for issuance of the notifications in question that the same were to safeguard the agriculture market economy of India.

The SC also held that the High Court seems to have also omitted to consider that the writ petition was filed against the order-in-appeal passed by the Appellate Authority and the alternative remedy of regular statutory appeal to CESTAT was available to the importer.

The root question in these matters before the SC was as to whether the goods in question are liable to absolute confiscation under Customs Act, 1962 or they could be released with payment of fine in lieu of confiscation?

The Supreme Court held that the present case is of an entirely different restriction where import of the referred peas/pulses has been restricted to a particular quantity and could be made only against a licence. It was held that the letter and spirit of this restriction, as expounded by the Court earlier, is that, any import beyond the specified quantity is clearly impermissible and is prohibited. The Court has also highlighted the adverse impact of excessive quantity of imports of these commodities on the agricultural market economy in the earlier cases.

Thus, the Court held that the goods in question, having been imported in contravention of the notifications dated 29.03.2019 and trade notice dated 16.04.2019; and being of import beyond the permissible quantity and without licence, are ‘prohibited goods’ for the purpose of the Customs Act.

It was held that once it is clear that the goods in question are improperly imported and fall in the category of ‘prohibited goods’, the provisions contained in Chapter XIV of the Customs Act, 1962 come into operation and the subject goods are liable to confiscation apart from other consequences.

Whether the goods in question are liable to absolute confiscation?

It was held by the SC that when it comes to discretion, the exercise thereof has to be guided by law; has to be according to the rules of reason and justice; and has to be based on the relevant considerations. It was held that the exercise of discretion is essentially the discernment of what is right and proper; and such discernment is the critical and cautious judgment of what is correct and proper by differentiating between shadow and substance as also between equity and pretence. It was held that a holder of public office, when exercising discretion conferred by the statute, has to ensure that such exercise is in furtherance of accomplishment of the purpose underlying conferment of such power. It was held that the requirements of reasonableness, rationality, impartiality, fairness and equity are inherent in any exercise of discretion; such an exercise can never be according to the private opinion.

It was also held that it is true that, ordinarily, when a statutory authority is invested with discretion, the same deserves to be left for exercise by that authority but the significant factors in the present case are that the Adjudicating Authority had exercised the discretion in a particular manner without regard to the other alternative available; and the Appellate Authority has found such exercise of discretion by the Adjudicating Authority wholly unjustified.

It was held by the SC that the exercise of discretion is a critical and solemn exercise, to be undertaken rationally and cautiously and has to be guided by law; has to be according to the rules of reason and justice; and has to be based on relevant considerations. It was held that the quest has to be to find what is proper. It was held that an authority acting under the Customs Act, when exercising discretion conferred by Section 125 thereof, has to ensure that such exercise is in furtherance of accomplishment of the purpose underlying conferment of such power.

It was observed by the SC that it needs hardly any elaboration to find that the prohibition involved in the present matters, of not allowing the imports of the commodities in question beyond a particular quantity, was not a prohibition simpliciter. It was held that it was provided with reference to the requirements of balancing the interests of the farmers on the one hand and the importers on the other. It was held that any inflow of these prohibited goods in the domestic market is going to have a serious impact on the market economy of the country. 

It was held that the cascading effect of such improper imports in the previous year under the cover of interim orders was amply noticed by the Court in earlier cases. It was also held that the imports were not bona fide and were made by the importers only for their personal gains. 

It was held by the SC that the sum and substance of the matter is that as regards the imports in question, the personal interests of the importers who made improper imports are pitted against the interests of national economy and more particularly, the interests of farmers. It was held that this factor alone is sufficient to find the direction in which discretion ought to be exercised in these matters. It was held that when personal business interests of importers clash with public interest, the former has to, obviously, give way to the latter.

It was observed by the SC that in addition to the general principles for exercise of discretion, a few features specific to the matters of interim relief need special mention. It was held that it is rather elementary that in the matters of grant of interim relief, satisfaction of the Court only about existence of prima facie case in favour of the suitor is not enough. It was held that the other elements i.e., balance of convenience and likelihood of irreparable injury, are not of empty formality and carry their own relevance; and while exercising its discretion in the matter of interim relief and adopting a particular course, the Court needs to weigh the risk of injustice, if ultimately the decision of main matter runs counter to the course being adopted at the time of granting or refusing the interim relief. One may usefully refer to the relevant principle stated in the decision of Chancery Division in Films Rover International Ltd. and Ors. v. Cannon Film Sales Ltd.: [1986] 3 All ER 772 as under: -

“….The principal dilemma about the grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a risk that the court may make the “wrong” decision, in the sense of granting an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong” in the sense I have described. The guidelines for the grant of both kinds of interlocutory injunctions are derived from this principle.”

The SC held that these appeals deserve to be allowed and, while setting aside the orders passed by the High Court and approving the orders-in-appeal, the goods in question are to be held liable to absolute confiscation but with a relaxation of allowing re-export, on payment of the necessary redemption fine and subject to the importer discharging other statutory obligations.