1. The petitioners are a partnership concern registered under the Partnership Act, 1932 and carry on business of buying and selling of non-ferrous metal.
2. On November 26, 1971, two import Licences were issued in favour of Simco Industries (India) for the import of stainless steel pipes and tubes under the provisions of the Import Policy for the year 1971-72. On February 16, 1972, Simco Industries issued a letter of authority in favour of the petitioners authorising them to import the goods specified in the licences. On January 28, 1972, one Ebrahim Enterprises having their offices at Hongkong offered to the petitioners a lot of brand new non-magnetic seamless stainless steel pipes and tubes of diameter 1/4' to 1' in 16/26 gauge, of all mixed lengths of 8 and more. By letter dated February 14, 1972, the petitioners offered to purchase 5 tonnes out of the lot. On February 16, 1972, Ebrahim Enterprises confirmed that the goods would be sold to the petitioners at the price of 550/- per ton. Accordingly, a contract was entered into between the petitioners and Ebrahim Enterprises on February 18, 1972. The goods arrived in Bombay Docks in early May 1972 and the petitioners lodged their bill of entry on May 12, 1972. The goods were not cleared by the Customs authorities after apprising the department called upon the petitioners to explain the use of the goods and the correspondence passed between the parties.
3. The respondents served a show cause notice on the petitioners on June 19, 1972 under Section 124 of the Customs Act, 1962. The show cause notice, inter alia, recites that the goods had been imported in contravention of the Import (Control) Order No. 17/55 and the petitioners have contravened the provisions of Section 111(d) of the Customs Act. The petitioners were called upon to show cause why penal action should not be taken under Section 112 of the Act and the goods should not be confiscated under Section 111 of the Act. The petitioners gave their reply on July 28, 1972, inter alia, claiming that the goods imported by them are new goods and they have not contravened any of the provisions of the Import (Control) Order. The respondent No. 2, after hearing the petitioners passed the order on October 3, 1972 confiscating the imported goods and allowing the option in lieu of such confiscation to pay a fine of Rs. 40,000/-. The appeal preferred by the petitioners before the Appellate Collector of Customs ended in dismissal by an order dated February 27, 1976 and the revision carried by the petitioners before the Government of India met with the same fate by an order dated September 5, 1977. These orders are under challenge in this petition filed under Article 226 of the Constitution of India.
4. The short question which requires answer is whether the petitioners have contravened clause 5(3)(iii) of the Imports (Control) Order, 1955. Clause 5 of the order sets out conditions of licences and sub-clause (3) of Clause 5 provides that in addition to the conditions mentioned in sub-clause (1), every licence shall be deemed to include the conditions mentioned in clause 3. Condition under sub-clause (3)(iii) is that 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. The show cause notice served by the respondents, inter alia, states that the petitioners have contravened the condition in sub-clause 3(iii) of clause 5 as the goods imported are not new goods but the disposal goods. The show cause notice states that the goods purchased by the petitioners are stock lot goods and the price paid by the petitioners in Bombay works out to be Rs. 10,550/- per metric tonne, whereas the minimum recorded C.I.F. value of seamless S.S. tubes from Japan is Rs. 12,800/- per metric tonne, while in U.K. and U.S.A. it is over Rs. 20,000/- per metric tonne. From these circumstances, the respondents felt that the goods are stock lot goods sold at disposal prices.
5. Shri Hidayatullah, the learned counsel appearing in support of the petition, complaints that all the three authorities below have overlooked that the goods imported by the petitioners are new goods and they cannot be termed as disposal goods merely because the goods are of a mixed variety and purchased in a lot. I find considerable merit in the submission of the learned counsel. It is undoubtedly true that the goods have been purchased as an asserted lot and, therefore, a lower price has been paid. It is obvious that the price paid by the petitioners could not be compared with the price of a lot consisting of uniform size and type of goods. In case, the respondents have found that the price paid by the petitioners was less than the price for the lot of consisting of variety type of goods, then it may have been possible to claim that the goods imported are not new goods. In the present case, none of the three authorities below have proceeded on the basis that the goods imported are second-hand goods or goods which are used one. The conclusion is recorded that the goods are disposal goods merely from the fact that the lot purchased by the petitioners contained goods which are of varying size. In my judgment, the inference drawn by the three authorities below is totally unsustainable. The expression 'disposal goods' occurring in sub-clause (3)(iii) of Clause 5 of Import (Control) Order must be read in the context of expression 'new goods' used in the same clause. The expression 'disposal goods' is used as 'contradistinction to new goods'. Once it is found that the goods imported are new, then the mere fact that they are not of uniform type and size is not sufficient to warrant the conclusion that they are disposal goods. Shri Hidayatullah is right in his submission that the three authorities did not even challenge the fact that every item imported was new and unused. The authorities below proceeded on a wrong assumption that as the petitioners have purchased the goods in lot and goods are not of uniform type and size, they are to be treated as disposal goods. The assumption is unwarranted and contrary to the plain reading of sub-clause (3)(iii) of Clause 5 of the Import (Control) Order. The orders under challenge in these circumstances cannot be sustained and the order of confiscation requires to be set aside.
6. Accordingly, the petition succeeds and the rule is made absolute in terms of prayers (a) and (b) (iii) of the petition as the petitioners have already paid the amount of fine to remove the goods. The respondents shall refund the amount of fine within a period of two weeks from today. In the circumstances of the case, there will be no order as to costs.