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Bimex International Maha Singh Gate Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtPunjab and Haryana High Court
Decided On
Case NumberCivil Writ Petition No. 5735 of 1976
Judge
Reported in1991(34)ECC128; 1984(16)ELT212(P& H)
ActsImports and Exports (Control) Act, 1947; Customs Act, 1962 - Sections 3, 11, 108, 111 and 112; Constitution of India - Article 226; Import Control Order, 1965
AppellantBimex International Maha Singh Gate
RespondentUnion of India (Uoi) and ors.
Appellant Advocate J.I. Gupta, Sr. Adv.,; Subhash Ahuja,; Rajiv A. Ram
Respondent Advocate Ashok Aggarwal, Adv.
DispositionPetition allowed
Cases ReferredNagesh Hosiery Mills v. M.R. Ramchandran and Anr.
Excerpt:
.....of messrs happy textile mills which is also functioning in the same premises as a sister concern. 3. on 2nd september, 1972, a party of the central excise & customs officer visited the premises of happy textile mills and took into possession 10 bags of rags mentioned above. the petitioner had clearly established that it had imported woollen rags. rags by their very nature must include different kinds of clothes which would mean some of which may be serviceable, some of which may be unserviceable, some of which may contain large percentage of wool or no percentage of wool but known in the trade as 'woollen rags' which would have to be taken into consideration and the 1st respondent has failed to approach the question in that light......seizure memo, prepared at the time of taking to possession of the goods, they were described as woollen rags (used). the superintendent of central excise visited the petitioner's premises a few days after this seizure, shri s.d. mahajan, one of the partners explained the petitioner's position to him. the statement of one of the partners was recorded by the superintendent of customs (preventive), amritsar on 24th january, 1973, under section 108 of the customs act, 1962. the petitioner received a show cause notice dated 6th february, 1973, calling upon it to show cause why 10 bags containing woollen garments of foreign origin be not confiscated under section 111 read with section 11 of the customs act, 1962 and penal action be not taken against it under section 112, ibid. the.....
Judgment:

Sukhdev Singh Rang, J.

1. Messrs Bimex International-petitioner has filed this writ petition under Article 226 of the Constitution of India for issuance of a writ of certiorari quashing order dated 23rd November 1973, passed by the Assistant Collector of Customs (Annexure P-5), order dated 25th March, 1975, passed by the Appellate Collector, Customs (Annexure P-7) and order dated 25th November, 1975, passed by Joint Secretary to the Government of India (Annexure P-9).

2. Briefly stated the facts of the case that the petitioner is a partnership concern and is engaged in the manufacture of woollen/terriwool textiles, which are sold within the country and are exported to various countries in the Middle East. From 1970 to 1976 the petitioner earned foreign exchange to the tune of about Rs. 83 lakhs by exporting goods manufactured by it. Under the import and export policy of the Government of India, the Small Scale Industries are entitled to import foreign goods to the extent of 70% of the F.O.B. value of the goods exported by them as determined by the Joint Chief Controller of Imports. On that premises the petitioner was granted import entitlement to the tune of Rs. 45 lakhs. In exercise of the powers conferred on it by the Imports and Exports (Control) Act, 1947, the Government of India decided in 1967 to canalise import of various goods through the State Trading Corporation. Ever-since 1969-70, the petitioner has been importing goods of various descriptions like greasy wool, wool tops, rags and polyester fibre etc. through the State Trading Corporation. The petitioner imported various consignments of rags which have been utilized for the manufacture of different articles of wool and terrywool textiles. Over a period of time certain quantity of rags got accumulated in the factory premises. Because of paucity of space in the petitioner' factory, 10 bags weighing 339.500 kgs. of rags were placed by the petitioner in the factory premises of Messrs Happy Textile Mills which is also functioning in the same premises as a sister concern. Some of the partners of the two firms are common.

3. On 2nd September, 1972, a party of the Central Excise & Customs Officer visited the premises of Happy Textile Mills and took into possession 10 bags of rags mentioned above. Even in the seizure memo, prepared at the time of taking to possession of the goods, they were described as woollen rags (used). The Superintendent of Central Excise visited the petitioner's premises a few days after this seizure, Shri S.D. Mahajan, one of the partners explained the petitioner's position to him. The statement of one of the partners was recorded by the Superintendent of Customs (Preventive), Amritsar on 24th January, 1973, under Section 108 of the Customs Act, 1962. The petitioner received a show cause notice dated 6th February, 1973, calling upon it to show cause why 10 bags containing woollen garments of foreign origin be not confiscated under Section 111 read with Section 11 of the Customs Act, 1962 and penal action be not taken against it under Section 112, ibid. The petitioner submitted that it stuck to the statement made by Shri Mahajan on 24th January, 1973. This should be treated as its reply to the show cause notice. The petitioner received a communication dated 27th February, 1973, in which an additional allegation was made to the effect that the second hand clothing recovered by the officials of the Customs could not have been legally imported into India. Therefore the Assistant Collector (Customs), Amritsar passed orders confiscating the goods under Section 111 of the Customs Act. The petitioner went up in appeal and the same was dismissed by the Appellate Collector of Customs. The revision filed by the petitioner also met the same fate and was dismissed by the Government of India on 25th November, 1975. Aggrieved, the petitioner field this writ petition.

4. The respondents have not filed any written statement to the writ petition.

5. No statutory definition of the rags had been provided in 1972-73 when the goods were seized from the petitioner. In the absence of any statutory definition the meanings assigned to the term 'woollen rags' in the trade have to be accepted. The Appellate Collector held that the articles seized were woollen garments which is not the same thing as rags. However, as noticed earlier even in the seizure memo, the goods were described as woollen rags (used). It is not denied that the petitioner had been legally importing woollen rags through the State Trading Corporation. There was no time-limit for using these rags for the manufacture of shoddy yarn and textiles. The petitioner had clearly established that it had imported woollen rags. Surely, woollen rags will be second hand woollen garments. Since they were imported through the State Trading Corporation, they would be of foreign origin also. If the articles seized can reasonably be termed to be woollen rags then they cannot be confiscated. A similar case arose in the Bombay High Court. Delivering judgment in that case (Misc. Petition No. 92 of 1974) Nagesh Hosiery Mills v. M.R. Ramchandran and Anr. decided on 15th January, 1975, Mr. Justice R.P. Bhatt observed as under :-

'This, to my mind, is besides the point, because an item cannot be classified on the basis of what will be done to the goods so imported, either before its importation, or after its importation. What has to be seen is the construction put upon the item by the persons in the trade and if 'woollen rags' found in a serviceable condition comply with the attribute as known in the trade then it must be treated as 'woollen rags'. No further elucidation was made on behalf of the Respondents in regard to the query as to why the S.T.C. should include under the item 'woollen rags' items such as Nylon Producer Drawn Waste Sparkling Waste or Birght (Bright) Nylon waste 'or woollen knitwear hosiery. Rags by their very nature must include different kinds of clothes which would mean some of which may be serviceable, some of which may be unserviceable, some of which may contain large percentage of wool or no percentage of wool but known in the trade as 'woollen rags' which would have to be taken into consideration and the 1st respondent has failed to approach the question in that light. No answer was given by Mr. C. J. Shah on behalf of the respondent in connection with this important piece of evidence which admittedly the 1st respondent has not even discussed in his order. The right conferred upon a person to import is under the Import Control Order, 1965, and under Section 3 thereof save as otherwise provided in that order no person is entitled to import any goods-of the description specified in Schedule I, except under and in accordance with the licence or a Customs Clearance permit granted by the Central Government or by any officer specified in Schedule II. Therefore, the question is, whether what has been imported by the petitioner under the Import Licence granted to the S.T.C. is 'woollen rags''. This is independent of consideration of items mentioned in the Customs Act, 1962, because, in so far as the Customs Act, 1962, is concerned, the Government is concerned with the question of what is the duty payable upon such items. In the present case, the entire basis of the order dated 22nd June, 1973, is that the petitioner had contravened the provisions of Rule 3 of this order and has imported, what is termed 'Second hand clothing in the garb of woollen rags'. Having considered the question, I am of the opinion in the present case that it cannot be said that what the petitioners have imported is 'second hand clothing', as the true scope of the item 'woollen rags' has not been properly considered by the 1st Respondent. The expression, 'second hand clothing' has a different connotation altogether. That article which has once been used and is yet in a new condition can be treated as 'second hand' if placed in the market for resale. The argument of Mr. C. J. Shah on behalf of the respondents that the grammatical construction is the only code of interpretation, is in my opinion, not correct. It is contrary to the authorities cited before me. The meaning which must be given is the meaning necessarily known in the trade. It was then urged on behalf of the 'Respondents that in the present case there has been no mutilation of the consignment and hence the petitioners were not entitled to import the same. This to my mind does not affect in any way the right to import. In fact, the 1st Respondent himself had in his letter dt. 2nd May, 1973 addressed to the petitioner, intimated to the petitioners that as the goods had been imported for the purpose of conversion into shoddy yarn, the petitioners were advised to get them mutilated in the presence of Customs Officer in order to establish the petitioners' bona fides This advice of the 1st Respondents was accepted by the petitioners by their reply to the 1st Respondent dated 7th May, 1973. If this be the position, then I do not think it worthwhile considering that merely because the goods were not in a mutilated condition, which was not a condition precedent to the importation of the goods, it would in any way affect the validity of the import of this consignment by the petitioners. In my opinion, therefore, the 1st Respondent was in error in holding that the imported goods were not covered by the licence for 'woollen rags' and the impugned order dated 22nd June, 1973, is liable to be quashed and set aside.'

I am in respectful agreement with the views expressed in this case.

6. In the result, the writ petition is allowed and impugned orders (Annexures P-5, P-7 and P-9) are quashed.


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