East India Commerclal Co., Ltd. vs The Collector Of Customs, Calcutta

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 383 of 1960

Decision Date: 4 May 1962

Coram: A.K. Sarkar, Subba Rao, J.R. Mudholkar

The matter before the Supreme Court of India involved the East India Commercial Company Limited, Calcutta, together with another party, as petitioners, and the Collector of Customs, Calcutta, as respondent. The judgment was delivered on the fourth day of May 1962. The case was authored by Justice A. K. Sarkar, who constituted the bench along with Justice J. R. Mudholkar and Justice K. M. Subbarao. The official citation of the decision is reported in the 1962 All India Reporter at page 1893 and in the 1963 Supreme Court Reports (Third Series) at page 338. Additional citator references include entries D 1963 SC1470 (12,14), RF 1966 SC1586 (9), R 1969 SC 110 (8), R 1971 SC 170 (1893), RF 1972 SC2466 (15,16), RF 1973 SC 106 (145,146), RF 1991 SC 647 (5,6), R 1992 SC1417 (20). The statutory framework relevant to the dispute comprised the Sea Customs Act of 1878, specifically sections 19 and 167(8), as well as the Imports and Export (Control) Act of 1947, sections 3 and 5, and the constitutional provisions of Articles 226 and 227.

According to the headnote, on the eighth day of October 1948 the petitioner company obtained a licence permitting it to import a substantial quantity of electrical instruments from the United States of America. The licence was issued subject to a condition that the imported goods be used exclusively as raw material or accessories in the licence holder’s own factory and that no part of the goods be sold to any third party. The imported consignment arrived in India during February and March of 1949, and the company took delivery of the goods after paying the applicable customs duty. Subsequently, authorities received information alleging that the company was selling the goods in the open market, thereby violating the licence condition. Acting on that information, the police obtained a search warrant from a magistrate and seized a large stock of the instruments from the company’s warehouse. On the twelfth day of January 1951, the customs authorities lodged a complaint before the magistrate under section 5 of the Imports and Exports (Control) Act, 1947, charging the second appellant, who was a director of the company, and other individuals with disposing of portions of the licensed goods in contravention of the licence conditions. The magistrate discharged the accused, and the High Court affirmed that order on the third day of March 1955, holding that section 5 of the Act penalised only a breach of an order made or deemed to have been made under the Act, and not a breach of the conditions attached to a licence issued under the Act or a statutory order made under the Act. On the sixteenth day of January 1953, the High Court ordered that the seized goods be sold and that the proceeds be kept with the Chief Presidency Magistrate. Later, on the twenty‑eighth day of August 1955, the Collector of Customs served a notice on the appellants under section 167(8) of the Sea Customs Act, 1878, read with section 3 of the Imports and Exports (Control) Act, 1947, requiring them to show cause why the monies held by the Chief Presidency Magistrate representing the imported goods should not be confiscated and why penalty should not be imposed, on the ground that they had violated the licence condition by selling a portion of the imported goods.

In this case the Collector of Customs issued a notice under section 167(8) of the Sea Customs Act, 1873, read with section 3(2) of the Imports and Exports (Control) Act, 1947, requiring the appellants to show cause why the money lying with the Chief Presidency Magistrate on account of the imported goods should not be confiscated and why no penalty should be imposed, on the ground that the appellants had violated the conditions of the licence by selling part of the imported goods to others. The appellants responded by filing an application under article 226 of the Constitution of India before the High Court of Calcutta, seeking a write of prohibition that would restrain the respondent from proceeding with the enquiry on the basis that the authority lacked jurisdiction to do so. The Court, by a majority judgment of Justices Subba Rao and Mudholkar, held that the article 226 application was maintainable because, if a true construction of the statutes under which the notice was issued showed that the respondent had no jurisdiction to institute proceedings for the acts alleged against the appellants, then the respondent could be lawfully barred from continuing the enquiry. The majority further explained that section 167(8) of the Sea Customs Act, 1878, when read together with section 3(2) of the Imports and Exports (Control) Act, 1947, authorises confiscation only of goods imported in contravention of an order made under the latter Act. The provision does not expressly, nor does it necessarily imply, authority to confiscate goods that were imported under a valid licence merely because a condition of that licence, which was not imposed by an order, was breached. Consequently, the infringement of a licence condition does not constitute an infringement of an order and therefore does not attract the operation of section 167(8). The Court also observed that public notices issued by the Government of India governing the issue of import licences are not orders made under section 3 of the Imports and Exports (Control) Act. In the present matter, because the goods had been imported under a valid licence, they could not be treated as prohibited or restricted goods within the meaning of section 167(8) of the Sea Customs Act, and accordingly the Collector of Customs lacked jurisdiction to proceed with the enquiry under that section. The majority further stressed that the law declared by the highest court of the State binds all subordinate authorities and tribunals and that they cannot disregard it either in commencing a proceeding or in determining the rights involved. Accordingly, the High Court of Calcutta, by its order dated 3 March 1955, had held that a breach of a licence condition issued under the Act did not constitute an offence under section 5 of the Imports and Exports (Control) Act, making the notice dated 28 August 1955, which sought to launch proceedings contrary to that legal pronouncement, invalid. Justice Sarkar, dissenting, held that the article 226 application was not maintainable because the Collector possessed jurisdiction to decide what constituted a breach of an order and, therefore, could determine whether the breach of a licence condition amounted to a breach of an order.

The Court considered whether a violation of a condition attached to a licence could be treated as a breach of an order. It observed that even if the High Court’s decision dated 3 March 1955 were deemed binding on the Collector, such binding authority would not remove the Collector’s power to decide in the present matter whether the goods should be confiscated. The Court further noted that an order issued under the Imports and Exports (Control) Act 1947, when contravened, constituted a breach of that order itself. Moreover, the Court held that where goods have been lawfully cleared across the customs frontier but are subsequently dealt with in a manner that violates a duly imposed restriction, those goods must be regarded as having been imported in contravention of the restriction.

In this appeal, Civil Appeal No. 383 of 1960, the petitioners challenged the Collector of Customs, Calcutta, who had commenced confiscation proceedings under section 167(8) of the Sea Customs Act, 1878, against a large shipment of electrical instruments imported from the United States under a licence. The petitioners argued that the Collector possessed jurisdiction to confiscate only where an import violated an order that prohibited or restricted it, and that the present proceedings were based merely on a breach of a licence condition. Consequently, they sought a writ of prohibition to restrain the Collector. The Court identified the pivotal question as whether the Collector had the authority to determine the confiscability of the goods. To resolve this, the Court turned to the relevant statutory framework. Section 3(1) of the Import and Exports (Control) Act, 1947, empowers the Government by order to prohibit, restrict, or otherwise control imports. Under Notification No. 23‑ITC/43, issued pursuant to Rule 84 of the Defence of India Rules and deemed an order under the Act by virtue of section 4, electrical instruments were permitted to be imported only under a licence. A subsequent order, Notification No. 2‑ITC/48 dated 6 March 1948, stipulated that such licences could be granted only if the imported goods would not be disposed of or dealt with without written permission from the licensing authority. The first petitioner was a company, and the second petitioner was one of its directors.

On 8 October 1948 the appellant received a licence authorising the importation from the United States of a substantial quantity of electrical instruments, specifically fluorescent tubes and fluorescent fixtures. In the licence application the appellant declared that the imported items were not intended for sale but were required to modernise the lighting system of its factory located at Ellore in Madras. The licence was conditioned on the requirement that the goods be used solely as raw material or accessories within the licence holder’s factory and that no portion of the goods be sold to any third party. The imported items arrived in India and were cleared through customs at the end of February 1949. Shortly thereafter the relevant authorities obtained information suggesting that the goods were being offered for sale in the market, thereby breaching the licence condition. In response, the police initiated investigative actions and, after securing a search warrant from a Magistrate in Calcutta on 12 August 1949, seized a large stock of the electrical instruments from the appellants’ warehouse.

Following the seizure, two separate criminal proceedings were instituted on 12 January 1951. The first proceeding involved the prosecution of several officers of the appellant company, including the second appellant, under sections 420 and 120 of the Indian Penal Code on the allegation that the licence had been obtained through false and fraudulent representations because there was never any intention to use the goods in the factory. After a series of procedural steps that are not detailed here, a Presidency Magistrate of Calcutta discharged the accused on 27 July 1953 under section 253 of the Code of Criminal Procedure, thereby terminating the prosecution under sections 420 and 120B of the Penal Code. In the magistrate’s reasoning it was held that the prosecution had failed to demonstrate that the licensing authority had been deceived by any representation made by the company officers, nor that from the moment the licence was applied for there had been an intention to sell the goods or any part thereof. The second proceeding concerned the prosecution of the second appellant and another individual under section 5 of the 1947 Act, which provides that any person who contravenes an order made under that Act shall be punishable with imprisonment. It was alleged that the accused had violated the licence conditions by disposing of portions of the goods covered by the licence, thereby committing an offence under section 5 of the Act. The trial court acquitted the accused in this matter, and the High Court of Calcutta confirmed the acquittal on 3 March 1955. Justice Sen, delivering the High Court judgment, observed that it was difficult to treat a licence condition as an order made under the Act, and that unless the penal provision expressly included breach of the condition as an offence, such a breach could not be considered an offence under section 5.

Thus, the violation could not be deemed an offence under the section. While the criminal and civil proceedings were still pending, the High Court issued an order dated 16 January 1953 directing that the goods which had been seized be sold and that the proceeds of such sale be placed with the Chief Presidency Magistrate of Calcutta. In accordance with that order, the seized merchandise was sold for the amount of Rs. 4,15,000 and the money obtained from the sale has remained in the custody of the Chief Presidency Magistrate ever since. After the aforementioned proceedings had concluded, the Collector of Customs at Calcutta, on 28 August 1955, served a notice on the appellant. The notice required the appellant to show cause why the monies that were lying with the Chief Presidency Magistrate, representing the imported goods, should not be confiscated under section 167(8) of the Sea Customs Act read with section 3(2) of the 1947 Act, and why no further penalty should be imposed on those monies pursuant to the same provisions. The issuance of this notice constituted the genesis of the present proceedings before this Court. The notice alleged that a prohibition on the import of the goods, except under a special licence and subject to the conditions laid down in that licence, was imposed by virtue of section 3(1) of the 1947 Act. Accordingly, the importation of the goods would be deemed illegal unless (i) at the time of importation the goods were covered by a valid special licence that had not been obtained through fraudulent misrepresentation, and (ii) after importation the goods or any part thereof were not sold or permitted to be used by any other party, except that the importers themselves could consume the goods as raw material. The notice further stated that an investigation had discovered that the appellants had sold portions of the goods to other persons. In response to the notice, the appellants filed a petition in the Calcutta High Court under article 226 of the Constitution, seeking a writ of prohibition to restrain the Collector of Customs, Calcutta, from instituting any proceeding under sections 167 and 182 of the Sea Customs Act against them. The petition was first heard by Justice Sinha, who dismissed it. The appellants subsequently appealed the dismissal to an appellate bench of the High Court, but that appeal was also dismissed. Consequently, the appellants have now approached this Court by way of a special leave petition. Sub‑section (2) of section 3 of the 1947 Act provides that all goods to which any order made under sub‑section (1) applies shall be deemed to be goods whose import or export has been prohibited or restricted under section 19 of the Sea Customs Act, 1878, and that all the provisions of that Act shall consequently apply. Section 19 of the Sea Customs Act forms part of Chapter IV of that Act. Section 167(8) of the Sea Customs Act provides that if any goods, the importation or exportation of which is at the present time prohibited or restricted by or under Chapter IV of this Act, are imported into or exported from India in contravention of such prohibition or restriction, then those goods shall be liable to confiscation, and any person concerned in such offence shall be liable to a penalty.

Section 182 of the Sea Customs Act empowers various customs officers, including the Customs Collector, to determine matters of confiscation and penalty under section 167(8). The central issue in this appeal was jurisdiction. Counsel for the appellant argued that, when read together, section 167(8) and section 182 give the Collector authority only to decide whether goods have been imported in violation of a prohibition or restriction that arises from an order made under section 3(1) of the 1947 Act. According to this argument, the Collector does not possess jurisdiction to address any question of confiscation that stems from a breach of a licence condition issued under such an order. The appellant contended that the notice issued by the Collector indicated an intention to decide that the goods should be confiscated because they had been disposed of in breach of a licence condition, a step that, in his view, lay beyond the Collector’s jurisdiction. Consequently, the appellant sought a writ of prohibition. For the sake of argument, the appellant assumed that a breach of the licence condition had occurred, although they did not concede this fact. Their underlying proposition was that a violation of licence conditions does not constitute a breach of the order that granted the licence, and therefore no offence under section 167(8) arises from contravening a licence condition. The Court found this proposition to be poorly founded, but even if it were accepted, the Court saw no lack of jurisdiction on the part of the Collector.

The Court observed that the Collector unquestionably possessed jurisdiction to determine whether an order had been breached. From this authority, it logically followed that the Collector could also determine what constitutes a breach of an order, including whether a breach of a licence condition amounts to such a breach. To argue that a licence‑condition breach is not an order breach merely serves as a defence against confiscation, but it does not remove the Collector’s power to decide the matter. Even if the Collector were to erroneously conclude that the breach of a condition is a breach of an order, that decision would still be made within his jurisdiction, albeit incorrectly. This reasoning aligns with the view adopted by all the learned judges of the High Court, a view the Court considered correct. The Court therefore concluded that the Collector’s jurisdiction was not ousted by the appellant’s arguments, and the writ of prohibition sought by the appellant was not warranted.

In the case before the Court, one of the allegations set out in the notice was that the imported goods had been brought into the country without a licence and therefore constituted a direct breach of an order made under section 3(1) of the Customs Act of 1947. The Court observed that the Collector possessed the authority to determine the issue raised by that allegation. The notice issued by the Collector to the appellants stated that an importation of goods would be illegal unless it was covered by a licence obtained without fraudulent misrepresentation, and that, in the present circumstances, the licence had been procured by fraudulent misrepresentation. Accordingly, the notice alleged that the goods had been imported without a licence, which amounted to a breach of an order.

The appellants argued that an importation made under a licence that was fraudulently procured should not be characterised as an importation without a licence. The Court noted that even if that contention were accepted, it would merely demonstrate that there had been no importation without a licence, and thus no breach of an order in that narrow sense, but it would not strip the Collector of his jurisdiction to decide the question. The Court further considered the fact that a Magistrate had held that the licensing authority had not been deceived by the appellants in the issuance of the licence. The Court held that, even if such a finding were binding on the Collector, it would only indicate that the licence had not been obtained by fraud and would not affect the Collector’s jurisdiction in any way.

The appellants also relied on the principle that a decision of a High Court on a point of law was binding on all subordinate tribunals within the High Court’s territorial jurisdiction. They therefore contended that the Collector was bound by the decision of Justice Sen, which had been previously referenced, that a breach of a condition of a licence did not amount to a breach of the order under which the licence was issued. The Court expressed that it was not prepared to accept the proposition that a High Court decision was absolutely binding on the Collector. Nevertheless, the Court observed that even if the High Court’s decision were binding, it would not diminish the Collector’s jurisdiction. At most, the decision would require the Collector, while exercising his jurisdiction, to accept that a breach of a licence condition was not a breach of the order. The effect would be that the appellants would not need to establish independently, as a matter of law, that a breach of a condition was not a breach of the order; they could instead rely upon Justice Sen’s judgment for that purpose.

Consequently, the Court concluded that the Collector had jurisdiction in the present matter to decide whether the goods were liable to confiscation. The Court further held that, having that jurisdiction, the Collector also possessed the clear authority to determine whether the appellants should be subject to an additional pecuniary penalty under section 167(8) of the Customs Act.

In the event that the view assigning jurisdiction to the Collector under the Sea Customs Act was correct, the Court held that the appellants were not entitled to the writ that they had sought. The Court, however, considered an alternative possibility. It imagined that its earlier conclusion about the Collector’s jurisdiction might be mistaken. Under that hypothetical error, the appellants’ contention would be that the Collector possessed no authority to determine whether the goods were subject to confiscation. The appellants argued that such lack of authority stemmed from the proposition that a violation of a licence condition did not amount to a breach of the order under which the licence had been issued, and therefore the Collector could not pass judgment on the existence of such a breach. The Court noted that it had never been argued, nor could it be sensibly argued, that if a breach of a licence condition were deemed a breach of the originating order, then the Collector would automatically acquire jurisdiction to decide on confiscation in the present case. The Court expressed its inability to accept the position that a breach of a condition imposed by a licence issued pursuant to an order made under the 1947 Act was not a breach of that order. In the Court’s view, such a breach was indeed a breach of the order itself.

Section 3(1) of the 1947 Act authorised the Government to issue orders that prohibited, restricted, or otherwise controlled the import of goods into India. The Court explained that one legitimate means of exercising such control was to regulate how the imported goods could be used or disposed of after they entered the country. Consequently, the statute permitted the Government to prescribe, by way of an order, that imported goods should not be dealt with in a particular manner after their arrival. The Court concluded that Notification No 2‑ITC/48 fell squarely within the authority granted by the Act and was therefore intra vires. The condition in the licence at issue – that the goods could not be sold after being brought into India – was thus a lawful and valid restriction imposed under that notification. The opposite view had not been seriously advanced by the parties.

The Court reasoned that whenever such a condition was violated, it was essentially the order that authorised the condition which was being contravened. This interpretation aligned with the clear intention of the legislature, because to read the breach differently would undermine the effectiveness of the 1947 Act. The Act was enacted to safeguard and promote the State’s economy, which was essential for the welfare of its people. Accordingly, the statute conferred substantial powers on the Government, and those powers were unmistakably exercised in the present circumstances. The Court held that the legislation should be read to allow the government to employ those powers effectively. Therefore, a breach of a licence condition that had been legitimately imposed as part of the exercise of that power must be treated as a breach of the order that created the power and imposed the condition. On that basis, the Court concluded that the Collector possessed the necessary jurisdiction to determine whether a breach of the licence condition had occurred.

The question before the Court was whether a licence had been breached and consequently whether confiscation should be ordered under section 167 eight of the Sea Customs Act together with an additional penalty. The Court noted that Justice Son, while addressing the argument presented by the customs authorities, observed that a breach of a licence condition imposed pursuant to an order made under the Act might constitute a breach of that very order. Justice Son added that this reasoning could have merit only if Notification number twenty‑three ITC forty‑three, which barred import of electrical instruments without a licence, had also stipulated that the licence could impose conditions on how the goods were handled after entering India. The Court found this argument unconvincing because the notification in question did not contain such a provision and therefore could not support the contention. The Court explained that Notification twenty‑three ITC forty‑three must be read together with Notification two ITC forty‑eight, which expressly allowed that an import licence might be issued subject to a condition similar to the one at issue in the present case. Since the licence issued in this matter was granted under both notifications, the effect was equivalent to a single order that permitted the imposition of a condition on the imported goods. Consequently, the situation was the same as if one order had stated that the goods could be imported only under a licence that could impose the condition now being contested. The Court expressed disagreement with the opinions of Justices Sen and Sinha, who had adopted the same view as Justice Son without providing any supporting reasoning.

The Court observed that its own position was backed by established authority, referring specifically to the case of Willingale v. Norris. That case concerned a prosecution under section nineteen of the London Hackney Carriages Act eighteen fifty‑three, which provided that for every offence against the provisions of the Act for which no special penalty was prescribed, the offender was liable to a penalty not exceeding forty shillings. In Willingale, a cab driver was charged with breaching a regulation made under section four of the Hackney Carriages Act eighteen fifty‑zero, and the courts had to determine whether the breach attracted the penalty provision of the later Act. Section twenty‑one of the Hackney Carriages Act eighteen fifty‑three declared that the Acts of eighteen fifty‑zero and eighteen fifty‑three were to be read as a single enactment. The Court in Willingale held that the driver was liable to be penalised under section nineteen of the 1853 Act, reasoning that breaking a regulation made under the authority of a statute amounted to breaking the statute itself. The judgment quoted the passage at page sixty‑six, stating that the words “against the provisions of the Act” should be interpreted to mean that the two statutes form one, and that a breach of the regulations promulgated under them is punishable as an offence against the combined Act. The Court noted that this principle received full endorsement from the House of Lords in Wicks v. Director of Public Prosecutions, where Viscount Simon affirmed the reasoning.

There was no doubt that when a statute such as the Emergency Powers (Defence) Act, 1939, gave an authority the power to make regulations, any regulation that was validly made under that statute and was within the authority’s power had to be treated as if it were itself an enactment. The Court considered that this principle applied equally to the Imports and Exports (Control) Act. The Court also noted that Indian jurisprudence had adopted the same view. In the case of Emperor v. Abdul Hamid Mullick, the Court observed that when an executive authority issues a notification in the exercise of a power granted by a statute, that notification becomes part of the law in the same way as if it had been incorporated into the statute at the time of its enactment. Consequently, the Court held that where an order made under the Act authorises the imposition of a condition, a breach of that condition must be punishable as a breach of the order issued under the Act. The Court then turned to another argument raised by the parties. The argument concerned section 167(8) of the Sea Customs Act, which made it an offence to import goods in contravention of a restriction. The respondents contended that once goods had been lawfully imported—that is, once they had been permitted to cross the customs barrier under a valid licence—no further import could be deemed to occur in violation of any prohibition or restriction. The Court found this interpretation to be overly narrow. For example, if an order under section 3(1) of the Imports and Exports (Control) Act stipulated that imported goods could not be sold in the market without the permission of a specified authority, and the goods were nevertheless sold without such permission, the Court reasoned that it would be nonsensical to say that the goods had not been imported in contravention of a valid restriction. The Court reiterated that the conditions attached to a licence should be regarded as conditions contained in an order issued under the 1947 Act, and that breach of those conditions amounted to a contravention of an order restricting the import of goods. Such a contravention was clearly punishable under section 167(8). The Court also observed that the term “import” was not defined in the Sea Customs Act. To prevent the 1947 Act from becoming ineffective—a result the legislature could not have intended—the Court held that where goods, having lawfully crossed the customs barrier, are subsequently disposed of in violation of a duly imposed restriction, those goods are to be considered imported contrary to the restriction. The Court noted that the remaining issue was the contention that, under the Sea Customs Act, only goods that are imported may be confiscated, and indicated that this point would be examined further.

Consequently, the sum of money that is presently in the possession of the Presidency Magistrate cannot be subject to confiscation. The Court regarded this argument as completely untenable. It observed that the money is a direct representation of the goods themselves. The High Court had issued an order for the sale of the goods, and both parties had consented to that order, the reason being that the goods were deteriorating. Accordingly, there can be no doubt that the proceeds obtained from the sale of those goods, which were subject to confiscation, are themselves subject to confiscation. The Court concluded that the appeal fails and should be dismissed. Justice Subba Rao noted that the appeal, taken by special leave, was filed against the judgment of a division bench of the Calcutta High Court dated 5 January 1957, which had confirmed the order of a single judge of that court that dismissed the petition presented by the appellants under Article 226 of the Constitution. The dispute that ultimately gave rise to this appeal had followed a circuitous course and originated in the year 1948. In order to understand the parties’ contentions, it is necessary to review broadly the series of events that extended over a considerable period. The appellants consist of the firm East India Commercial Co., Ltd., a company whose registered office is located in Calcutta, together with the director of that company.

On 27 September 1948, the appellant‑company submitted an application to the Chief Controller of Imports in New Delhi seeking a licence to import twenty thousand fluorescent tubes and two thousand fluorescent fixtures from the United States of America. The application was accompanied by a covering letter. Within the application it was asserted that the goods were needed for the company’s own use as industrial raw material or accessories; however, the covering letter indicated that the goods were primarily required for the company’s mills at Ellore in the Madras Presidency, where it was planning to install an up‑to‑date lighting system. The Chief Controller of Imports issued a special licence to the appellants on 8 October 1948. The licence authorised the import of fluorescent tubes and fixtures having an approximate cost, insurance and freight (CIF) value of Rs. 3,33,333, which was equivalent to US$100,000, and required that the shipment be made within one year from the date of issuance of the licence. The licence bore a rubber stamp containing the following condition: “This licence is issued subject to the condition that the goods will be utilised only for consumption as raw material or accessories in the licence holder’s factory and that no portion thereof will be sold to any party.” The licence did not limit the number of tubes and fixtures that could be imported, but it did impose a ceiling on the total value of the goods, as stated above. Between 21 March 1949 and 26 March 1949, the appellants took delivery of the aforementioned tubes and fixtures, whose value fell within the specified limit, and cleared them by paying the applicable customs duty. Although the number of tubes and fixtures imported exceeded the quantity mentioned in the original application, it was a common situation that the total value did not exceed the ceiling fixed by the licence. On information alleged to have been received by the

Chief Controller of Imports reported that the appellant‑Company was selling the imported fluorescent tubes and fixtures to various parties. Consequently, the matter was referred to the Special Police Establishment of the Government of India, located in New Delhi. On 31 August 1949, that police establishment obtained a search warrant from the Chief Presidency Magistrate of Calcutta and executed it at the appellants’ godown, where it seized a large stock of fluorescent tubes and fixtures. The seized items were released back to the appellants after they executed a bond. For the record, the imported stock was valued at approximately Rs 4,66,000, which comprised the purchase price of Rs 3,33,333 together with the customs duty paid on the goods. The High Court later ordered the sale of the seized stock, and the sale fetched Rs 4,15,000. On 9 December 1950, the appellants applied before the Chief Presidency Magistrate of Calcutta for the return of the seized goods; the magistrate consequently sought a report from the Special Police Establishment of New Delhi. On 12 January 1951, the police establishment submitted a challan against appellant No. 2 and other respondents, alleging offences under section 4201120B of the Indian Penal Code; the matter was entered as Case No. C. 121 of 1951. On the same day, the Assistant Collector of Customs lodged a complaint before the magistrate against appellant No. 2 and others for contravening section 5 of the Imports and Exports (Control) Act, 1947 by selling a portion of the fluorescent tubes and fixtures in violation of the licence conditions; this complaint was recorded as Case No. C. 120 of 1951. On 28 June 1951, the learned Presidency Magistrate discharged all the accused in both cases under section 253 of the Code of Criminal Procedure, holding that no prima facie case existed against any of them.

Two revisions were subsequently filed in the High Court—one by the State and the other by the Customs authorities—challenging the magistrate’s order of discharge. Justice Chunder, hearing the revisions, set aside the discharge orders and remanded the matters for fresh disposal. On 8 June 1952, the appellants again approached the Chief Presidency Magistrate requesting the release of the seized goods on the ground that they were deteriorating; the magistrate dismissed this application. The appellants then sought revision of that dismissal, and on 16 January 1953 the High Court directed that the goods be sold by the Presidency Magistrate, with the proceeds to be kept in his custody. Accordingly, the goods were sold and again fetched Rs 4,15,000, which has remained in the court’s custody. After the remand, the Presidency Magistrate recorded extensive testimony from a large number of prosecution and defence witnesses and examined numerous documents. He thereafter discharged appellant No. 2 in both cases, concluding that appellant No. 2 was not guilty of the offences alleged.

The Magistrate concluded that appellant No 2 had not committed the offence under section 420 of the Indian Penal Code because, in his opinion, there was no fraudulent or dishonest inducement at the time the licence application was made and there was no breach of the provisions of the Act. Accordingly, the Magistrate discharged appellant No 2 of that charge. However, the Magistrate did not release the proceeds of the sale of the seized goods to the appellant. When the appellant subsequently filed an application seeking payment of those proceeds, the learned Magistrate deferred consideration of the application until 29 August 1953.

The Assistant Collector of Customs then filed a revision before the Calcutta High Court challenging the discharge order issued in case No C‑120 of 1951. That revision was entered as Criminal Revision No 1124 of 1953, and the Assistant Collector also obtained an interim stay preventing the money from being returned to appellant No 2. No revision was filed against the Presidency Magistrate’s order specifically discharging appellant No 2 of the section 420 offence. The revision was heard by a division bench comprising Judges Mitter and Sen, who delivered a judgment on 3 March 1955 dismissing the revision. The bench held that there had been no breach of any order made or deemed to have been made under the Act. Interpreting section 5 of the Act, the judges explained that the provision penalises only a contravention of an order made or deemed made under the Act and does not punish a breach of the conditions attached to a licence issued under the Act or under a statutory order made pursuant to the Act. Consequently, the revision was dismissed.

On 24 March 1955, the appellants filed another application before the Chief Presidency Magistrate requesting that the sale proceeds be released to them. The Magistrate issued notices to the Assistant Collector of Customs and to the Delhi Special Police Establishment directing them to show cause by 19 April 1955. The Superintendent of the Special Police Establishment did not respond, while the Assistant Collector sought an adjournment, which was granted until 7 May 1955. On 7 May 1955 the Assistant Collector obtained a further adjournment on the ground that departmental proceedings against the appellants were pending. On 9 May 1955 the appellants filed a revision in the High Court, numbered Revision Case No 582 of 1955, challenging the order of adjournment; this revision was repeatedly adjourned at the respondent’s request. Subsequently, on 28 May 1955 the respondent initiated proceedings purportedly under section 167(8) of the Sea Customs Act read with section 3(2) of the Act, issuing a notice to the appellants to show cause within seven days why the proceeds of Rs 4,15,000 should not be confiscated and why any penal action should not be taken against them.

The notice issued to the appellants explained that the special licence had been granted on the strict condition that the imported goods covered by the licence were to be used only as raw material or accessories in the licence holder’s own factory and that no part of those goods could be sold or allowed to be used by any other party. The notice further alleged that the appellants had sold a portion of the imported goods to third parties, thereby breaching the condition imposed by the licence. Because of that breach, the notice claimed that either the goods themselves or the money received in place of the goods were subject to confiscation. In response to the notice, the appellants filed, on 3 June 1955, an application before the Calcutta High Court under Article 226 of the Constitution seeking an appropriate writ, including a writ of prohibition, to prevent the Collector of Customs from continuing the proceedings that had been initiated against them. The application was first heard by Justice Sinha, who, by his order dated 18 March 1957, dismissed the petition on the ground that it was premature. While doing so, Justice Sinha agreed with an earlier division bench that had dismissed a revision against a discharge order, holding that a mere breach of a licence condition did not, by itself, amount to a violation of an order issued by the Central Government. However, Justice Sinha observed that the earlier judges had not answered the question of what kinds of goods were permitted to be imported. He therefore distinguished between a licensee who had honestly imported goods for his own consumption but later changed his mind, and a licensee who, from the beginning, knew that the goods were not needed for his own use and deliberately engaged in a fraudulent transaction. In the latter case, Justice Sinha noted, the imported goods had never been required by the petitioner’s company for its own use.

The appellants subsequently appealed to a division bench of the High Court composed of Chief Justice Das Gupta and Justice Bachhawat. That bench dismissed the appeal on the sole ground that the Collector of Customs possessed the authority to determine whether any provision of the Act had been contravened in a manner that would justify an order of confiscation, and therefore Justice Sinha’s refusal to grant a writ was correct. Nevertheless, the division bench expressly stated that all the legal questions raised by the case remained open and were to be decided by the Chief Controller of Imports. Accordingly, the present appeal was filed. Counsel for the appellants, identified only as the learned counsel, submitted several arguments before the Court. The first point advanced was that the Assistant Collector of Customs lacked jurisdiction to commence proceedings under section 167(8) of the Sea Customs Act, 1878, read with section 3(2) of the Imports and Exports (Control) Act, 1947, in the facts of this case, and that, consequently, the High Court should have issued an order of prohibition restraining the Assistant Collector from proceeding with the inquiry.

The appellants sought a writ of prohibition to prevent the Assistant Collector of Customs from continuing the inquiry that had been launched against them. The petitioners argued that the Assistant Collector lacked authority to commence proceedings under section 167(8) of the Sea Customs Act, read with section 3(2) of the Imports and Exports (Control) Act, in the circumstances of the present case, and therefore the High Court should have granted the writ. The petitioners further relied on a decision of a division Bench of the Calcutta High Court in Criminal Revision No. 1124 of 1953, in which the respondent had been a party. That judgment declared the correct construction of section 5 of the Act read together with section 3(2), holding that the penal provision applied only to a breach of an order that had been made or deemed to have been made under the Act, and not to a breach of a condition that was imposed by a licence issued under the Act or by a statutory order made under the Act. The division Bench emphasized that its declaration was binding on every authority and tribunal within the territorial jurisdiction of that court. Consequently, the petitioners maintained that the respondent, the Collector of Customs, could not ignore the High Court’s declaration and could not embark on a fresh inquiry that would contravene the law as interpreted by that decision. The petitioners also pointed out that, assuming the division Bench’s proposition was sound, the respondent could not initiate proceedings under section 167(8) of the Sea Customs Act for a breach of a licence condition, because such a breach was neither part of an order nor a condition laid down by the order within the meaning of section 3 of the Act. In addition, the petitioners argued that the Chief Controller of Imports possessed no jurisdiction to act under section 167(8) of the Sea Customs Act on the ground that an importer had subsequently violated a condition inserted in a licence. They contended that the rule under section 167(8) was intended solely to enable Customs authorities to confiscate goods imported without any licence, whereas in the present case the goods had been imported under a valid, subsisting licence. The petitioners further submitted that clause (8) of section 167 of the Sea Customs Act authorized only the confiscation of the goods themselves and did not extend to the proceeds of sale of those goods, because the money in question could not be regarded as “goods” within any ordinary meaning of the term. The respondent’s counsel, Mr Prem, advanced a contrary position. He summarized his arguments as follows: first, that the Collector of Customs had jurisdiction under section 167(8) of the Sea Customs Act to consider whether the goods had been imported in contravention of the restrictions imposed by the Act, and therefore a writ of prohibition could not be issued to restrain the authority from proceeding with the inquiry; second, that the notice issued by the Collector was not a statutory notice but merely an intimation of the commencement of proceedings, and that the question of jurisdiction could not be decided on the basis of the contents of that notice; third, that the Customs authorities possessed concurrent jurisdiction with the criminal courts to deal with matters entrusted to them under the relevant statutes, and consequently the findings of a criminal court or even of a High Court on the same or similar matters could not bind the Customs authorities, which were free to arrive at a different conclusion of their own both on points of law and on factual issues.

The learned counsel for the respondent contended that the conditions imposed in a licence were issued by the Central Government under section 3 of the relevant Act, and that because the appellants violated those conditions, the imported goods were subject to confiscation under section 167(8) of the Sea Customs Act read with section 3(2) of the Act. He further argued that the appellants had imported the goods by making a misrepresentation, and therefore the import had to be treated as one made without a licence; consequently the goods fell within the definition of prohibited or restricted goods in section 167(8). The respondent also maintained that the Customs Collector possessed the authority to confiscate goods even after they had passed the customs barrier, and that the sum of money deposited in the court represented the proceeds of the sale of those goods, which the High Court had ordered to be held for the benefit of both parties. Accordingly, the respondent asserted that the High Court’s order was binding on the appellants and that they could not claim that the deposited money did not correspond to the goods. The Court first examined whether the petition filed under article 226 of the Constitution, seeking a writ of prohibition, was maintainable. A writ of prohibition was described as an order directing an inferior tribunal to refrain from continuing a proceeding that is beyond its jurisdiction or contrary to law, citing the authorities Mackonochie v. Lord Penzance and Halsbury’s Laws of England. The appellants argued that the notice dated 28 May 1955, issued by the respondent, did not confer jurisdiction to commence proceedings under section 167(8) read with section 3(2). The respondent countered that the notice was merely a memorandum informing the appellants of the initiation of proceedings and that it was not a full statutory notice; he further claimed that jurisdictional facts could be ascertained only by the Customs Collector during the inquiry. The Court found no merit in that contention. It held that the respondent had indeed proposed action under the two statutory provisions, and that such proceedings were quasi‑judicial. Regardless of whether the statute prescribes a specific notice, the respondent was obligated to issue a notice disclosing the grounds for the proceedings. Any action taken without such notice would contravene the principles of natural justice.

The Court observed that the respondent had issued a notice that specifically identified the acts alleged to contravene the provisions of the Acts, thereby constituting a speaking notice. The Court noted that if, upon reading the notice, it appears that the alleged facts are assumed to be true and nevertheless none of the conditions laid down in the relevant sections are breached, the respondent would lack jurisdiction to proceed under that notice. Conversely, if a proper construction of the two sections shows that the respondent has no jurisdiction to initiate proceedings or conduct an inquiry concerning the alleged acts of the appellants, then the respondent could be lawfully prohibited from continuing those proceedings. Thus, the Court concluded that the validity of the notice and the existence of jurisdiction were decisive factors in determining whether the writ of prohibition should be granted.

The Court observed that proceeding without a proper notice would violate the principles of natural justice, and therefore any notice must disclose the grounds on which action is sought. In the case at bar, the Court held that the respondent had correctly issued a notice that expressly identified the acts alleged to contravene the relevant statutory provisions. The Court noted that while a notice could be brief, the notice in this instance was detailed and specifically set out the alleged contraventions. The Court further explained that if, after reading the notice, one assumed that the facts alleged in it were true and found that none of the conditions prescribed in the cited sections were satisfied, then the respondent would lack jurisdiction to commence proceedings based on that notice. In other words, a true construction of the two sections in question would show that the respondent has no authority to initiate an inquiry or proceedings concerning the acts attributed to the appellants, and consequently the respondent would be barred from proceeding. Accordingly, the Court rejected the preliminary contention that the notice was defective.

The next issue before the Court was to determine the proper construction of the provisions of the relevant statutes. The Court found it helpful to examine the material portions of Sections 3 and 5 of the Imports and Exports (Control) Act, 1947, together with Sections 19 and 167(8) of the Sea Customs Act. Section 3 states that the Central Government may, by order published in the Official Gazette, make provisions for prohibiting, restricting or otherwise controlling, in all cases or in specified classes of cases, and subject to any exceptions, the following: (a) the import, export, coastwise carriage or shipment as ship stores of goods of any specified description; and (b) the bringing into any port or place in India of goods of any specified description intended to be taken out of India without being removed from the ship or conveyance in which they are being carried. Sub‑section 2 of Section 3 adds that all goods to which any order under sub‑section (1) applies shall be deemed to be goods whose import or export has been prohibited or restricted under Section 19 of the Sea Customs Act, 1878, and that all provisions of that Act shall apply accordingly, except that the word “shall” in Section 183 of that Act shall be read as “may”. Section 5 provides the penalty regime, stating that any person who contravenes, attempts to contravene, or abets a contravention of any order made or deemed to have been made under the Act shall, without prejudice to any confiscation or penalty under the Sea Customs Act as applied by sub‑section (2) of Section 3, be punishable with imprisonment for a term that may extend to one year, a fine, or both. The Court then turned to the relevant provisions of the Sea Customs Act, 1878, for further guidance.

In this case the Court explained that the Central Government was authorised, from time to time, to publish in the Official Gazette a notice that prohibited or restricted the import or export of goods of any described type by sea or by land across any customs frontier that the Government defined. The Court then referred to Section 167, stating that the offences listed in the first column of the schedule were punishable as set out in the third column, with reference to the specific sections of the Offences Act to which the penalties related. The Court noted that where any such goods were brought into India or taken out of India contrary to the prohibition or restriction, the person concerned became liable to a penalty not exceeding three thousand rupees. The Court described the essence of the offence as a contravention of any order that had been made or deemed to have been made under the Act. It further observed that all orders under the Act could be made only by the Central Government exercising the power granted by subsection 3 of the Act, and that every order made under rule 84 of the Defence of India Rules, or that rule as continued by the Emergency Provisions (Continuance) Ordinance, 1946, and which was in force immediately before the Act commenced, would continue to be in force and would be deemed to have been made under the Act. The Court pointed out that a breach of either of these two categories of orders attracted the provisions of section 19 of the Sea Customs Act. By virtue of subsection 3(2) of the Act, the Court held that all goods to which any order made under subsection 1 of section 3 applied were to be treated as goods whose import or export was prohibited under section 19 of the Sea Customs Act, and that all the provisions of that Act, subject to certain modifications, would then apply. The Court explained that this provision, together with other provisions, brought section 167(8) of the Sea Customs Acts into play; read with section 3(2) of the Act, it meant that goods imported in violation of an order made under the Act were liable to be confiscated. However, the Court cautioned that the section did not expressly, nor by necessary implication, give the authority power to confiscate goods that had been imported under a valid licence simply because a condition of the licence, which was not imposed by the order, had been breached. Accepting that interpretation, the Court posed the question of whether, in the present matter, the allegations contained in the notice brought the imported goods within the scope of section 167(8) of the Sea Customs Act. The Court then indicated that it would proceed to consider that question.

In the earlier part of the judgment the Court observed that the notice issued by the respondent alleged that the appellants had violated a condition attached to their special licence. The condition required that the imported goods be used only as raw material or accessories within the licence‑holder’s factory and that no portion of the goods be sold to third parties. According to the notice, the appellants had sold part of the imported goods to a third party, thereby breaching the licence condition. The notice further claimed that the goods had been obtained through fraudulent misrepresentation and, on that basis, the goods ought to be confiscated under section 167(8) of the Sea Customs Act. The Court explained that section 167(8) could be invoked only when an order made under section 3 of the Act was infringed during the import or export process. The division Bench of the High Court had held that breaching a condition imposed by a licence issued under the Act did not constitute an offence under section 5 of the Act. This holding gave rise to the question of whether an administrative tribunal could disregard a law declared by the highest court of the State and proceed in direct contravention of that law.

The Court then referred to the constitutional provisions governing the High Court’s powers. Article 215 declares every High Court to be a court of record and endows it with all the powers of such a court, including the power to punish for contempt of itself. Article 226 confers on the High Court a plenary power to issue orders or writs for enforcing fundamental rights and for any other purpose against any person or authority, including the Government, within its territorial jurisdiction. Article 227 provides the High Court with jurisdiction over all courts and tribunals throughout the territories over which it exercises jurisdiction. The Court reasoned that it would be anomalous for a tribunal that falls under the supervisory jurisdiction of the High Court to ignore a law declared by that Court and to commence proceedings that violate the declared law. If a tribunal were permitted to do so, the same would apply to all subordinate courts, for there is no specific provision, unlike the case of the Supreme Court, that makes a High Court’s law binding on subordinate courts. Nonetheless, the power of supervision conferred on a superior tribunal implicitly requires all tribunals subject to that supervision to adhere to the law laid down by the superior tribunal. Such adherence promotes orderly functioning and prevents confusion in the administration of law, preserving respect for the law. Consequently, the Court held that the law declared by the highest court of the State is binding on authorities and tribunals under its supervision, and that they cannot ignore it when initiating or deciding on any proceeding. In light of this principle, the Court concluded that the notice issued by the authority, which signified the commencement of proceedings contrary to the law articulated by the High Court, was invalid and that the proceedings themselves lacked jurisdiction.

Having concluded that the notice initiating the proceedings was invalid, the Court turned to the substantive issues. Section 3(2) of the Act provides that every article to which an order issued under subsection (1) applies shall be treated as an article whose export or import has been prohibited or restricted by section 19 of the Sea Customs Act. Consequently, section 167(8) of the Sea Customs Act can be invoked only when there has been a breach of an order made under section 3 of the Act. The question therefore arose whether any order issued by the Government itself imposed a condition of that nature.

The Import Trade Control Notification dated 1 July 1943, issued by the Government of India through the Department of Commerce (No 23 ITC/43) and incorporating all amendments up to 25 November 1951, exercised the powers conferred by sub‑rule (3) of rule 84 of the Defence of India Rules. That notification declared that the Central Government was pleased to prohibit the bringing into British India, by sea, land or air, of any goods described in the annexed Schedule, except for those goods covered by a special licence issued by an officer specially authorised for that purpose by the Central Government. It was not contested that the goods imported in the present case fell within the described schedule. On its face, the 1943 order did not impose any condition concerning the issuance of a licence for the specified goods.

Subsequently, on 6 March 1948, the Ministry of Commerce issued Notification No 2‑ITC/48. The relevant portion of that notification stated that, in exercise of the powers conferred by subsection (1) and subsection (3) of section 3 of the Imports and Exports (Control) Act, 1947 (XVIII of 1947), the Central Government was pleased to make the following order: (a) any officer issuing a licence under clauses (viii) to (xiv) of the 1 July 1943 notification may do so subject to one or more of the conditions specified below: (i) that goods covered by the licence shall not be disposed of or otherwise dealt with without the written permission of the licensing authority or any person duly authorised by it; (v) that such other conditions may be imposed which the licensing authority considers expedient from the administrative point of view and which are not inconsistent with the provisions of the said Act. (b) Where a licencee is found to have contravened the order or the terms and conditions embodied in or accompanying a licence, the appropriate licensing authority or the Chief Controller of Imports may notify him that, without prejudice to any penalty to which he may be liable under the Imports and Exports (Control) Act, 1947 (XVIII of

The order provided that a person who violated the provisions of the Imports and Exports (Control) Act, 1947, or any other law then in force, could be refused any further licence for the import of goods, either permanently or for a specified period. It was observed that the order did not contain any clause obligating the licence holder, after the import had been made, not to sell the imported goods. Clause (y) of sub‑paragraph (a) was described as giving the licensing authority the power to impose a condition for administrative purposes only. The Court noted that the condition in dispute could not be characterized as an administrative condition, because it operated on the substantive rights of the parties rather than merely on procedural matters. Counsel for the respondent contended that a public notice issued by the Government on 26 July 1948 amounted to an order made under the power conferred on the Central Government by section 3 of the Act, and that this notice directed importers not to sell the imported goods to a third party, a requirement that had allegedly been breached. The notice in question, dated 26 July 1948, had been published in the Gazette on 29 July 1948. The notice, issued by the Ministry of Commerce, was headed “Public Notices” and identified its subject as “Principles governing the issue of import licences for the period July‑December, 1948,” bearing the reference No. 1 (13)‑1.T.C./47 (i). It set out decisions of the Government concerning the issuance of import licences for goods classified under Parts II to V of the Import Trade Control Schedule for the licence period July‑December 1948, and it clarified that these decisions did not apply to goods falling under Capital Goods and H.E.P., which were governed by a separate public notice dated 10 April 1948. The notice instructed importers, under paragraph 5, to examine the Appendix carefully and refrain from applying for licences for articles that would not be licensed. Paragraph 7 prescribed the form of the application, while paragraph 8 explained that, for articles subject to overall monetary limits and constituting raw materials or accessories for industrial concerns, applications from actual consumers would be considered, provided that such consumers clearly set out their past and projected consumption as required in paragraph 6 of the application form. Paragraphs 6 to 10 dealt with prospective applicants, and paragraph 11 stated that no fixed time limit was imposed for receiving applications from actual consumers of industrial raw material and accessories who had imported the relevant commodities during any financial year from 1938‑39 to 1947‑48 inclusive; the notice expressed a hope to process these applications chronologically as they were received. Paragraph 13 identified the authorities to which applications should be addressed. A careful reading of the notice revealed that its purpose was to inform the public about the procedural steps to be followed in applying for import licences, rather than to impose a binding statutory condition prohibiting the sale of imported goods to third parties.

The Court observed that the document dealing with the filing of applications by various categories of applicants did not, on its face, present itself as a statutory order issued under section 3 of the Act. Moreover, the internal evidence attached to that document clearly demonstrated that it could not have been issued under that provision. Beyond that, the Court noted that the document in question made no amendment to any of the earlier orders, nor did it impose a condition on an importer prohibiting the sale of goods to a third party, nor did it provide for any penalty for such a sale. Counsel for the respondent argued that the public notice constituted an order made pursuant to the power conferred on the Central Government by clause 3 (1) of the Act. In contrast, counsel for the appellants maintained that public notices are not orders in the legal sense but merely informational guidance intended for the public.

The Court first pointed out that the notice did not claim to have been issued under section 3 (1) of the Act, whereas the earlier orders—specifically notifications numbered 23‑ITC/43 and 2‑ITC/48 and similar instruments—were issued by the Central Government in the exercise of the power granted to it by sub‑rule (3) of rule 84 of the Defence of India Rules or by section 3 (3) of the Act, as the situation required. The Central Government itself distinguishes the format employed in issuing an order from that used for a public notice. Secondly, while the notifications issued under section 3 of the Act are expressly described as “orders,” the notices are labelled “public notices.” The notifications under section 3 of the Act regulate the rights of the parties concerned, whereas the public notices merely convey information to the public about the principles governing the issue of import licences for defined periods. The Court further explained that orders made under section 3 of the Act possess statutory force and must be repealed if a new order modifies or supersedes the provisions of an earlier one. By contrast, public notices are issued from time to time without repealing or altering any prior notices or notifications. As an illustration, the Court referred to the order dated 7 December 1955, made by the Central Government under sections 3 and 4‑A of the Act, which reiterated the orders contained in Schedule IV. Schedule IV listed only five notifications issued under section 3 of the Act and did not include any public notice. In other words, orders made under clause 3 of the Act carry statutory weight, whereas public notices are policy statements administered by the Government for the purpose of public information. The foreword to the Import Trade Control Handbook of Rules and Procedure, 1952, signed by the Secretary to the Government of India in the Ministry of Commerce and Industry, makes this distinction explicit, observing that the former “Red Book” previously contained both a statement of policy for the upcoming six months and a reproduction of various notifications relating to import control together with detailed procedural information.”

The Court observed that the quoted passage described the reproduction of various notifications concerning Import Control together with detailed procedural information. It acknowledged that the Chief Controller had sworn in the High Court that the policy statements were issued under section 3 of the Act; however, the Court found that this claim lacked support in the form, the practice, or the substance of the notifications themselves. Consequently, the Court held without hesitation that public notices do not constitute orders issued under section 3 of the Act. From this conclusion, the Court reasoned that a breach of a licence condition prohibiting the sale of imported goods to third parties does not amount to a breach of an order, and therefore such a breach does not invoke section 167(8) of the Sea Customs Act. The Court further rejected the argument that a licence obtained by misrepresentation should be treated as void ab initio, which would render the goods as imported without a licence and thereby bring the matter within clause (8) of section 167 of the Sea Customs Act.

Assuming that the principles of contract law apply to licences issued under the Act, the Court explained that a licence obtained by fraud is merely voidable—it remains valid until it is set aside in the manner prescribed by law. The Court then turned to an order dated 1 May 1948, issued by the Central Government under the authority of section 3 of the Act, which addressed licences obtained by misrepresentation among other matters. The order provided that the authorities listed in the annexed Schedule could, under certain circumstances, cancel licences issued by any officer authorised under clauses (viii) to (xiv) of the Government of India notification No. 23‑ITC/43 dated 1 July 1943, or otherwise render them ineffective. The order specified two particular situations: (i) when, after issuance, a licence is found to have been granted inadvertently, irregularly, contrary to rules, fraudulently, or through a misleading statement by the importer; and (iii) when the licencee fails to comply with any of the conditions attached to the licence.

The Schedule attached to the order identified the cancelling authority as any officer authorised by the Central Government, namely the Chief Controller of Imports or the Government of India, under clause (xiii). Accordingly, the order authorised either the Government of India or the Chief Controller of Imports to cancel such licences and to make them ineffective. The Court noted that the specified authority had not cancelled the licence in the present case on the ground that the condition had been breached. Accordingly, the Court held that it was unnecessary to consider whether the Chief Controller of Imports or the Government of India, as appropriate, could cancel a

The Court observed that no cancellation of the licence was effected after the licence term had expired, and therefore the goods had been imported while the licence remained valid. Consequently, the Court held that it could not be said that the imported goods fell within the prohibited or restricted categories defined in Chapter IV of the Act for the purposes of clause (8) of section 167 of the Sea Customs Act. On the basis of that finding, even if the allegations contained in the notice were assumed to be true, the tribunal lacked jurisdiction to continue the inquiry under section 167(8) of the Sea Customs Act. Counsel for the appellants argued that section 167(8) applied only to conduct occurring before or during an import or export that violated the prohibition or restrictions imposed by section 3 of the Act, and that because the breach of the licence condition occurred after the importation, the goods could not be confiscated under that provision. The Court declined to express an opinion on that argument, noting that it was unnecessary in view of its earlier determinations on the other issues raised. The appellants also contended that, since the imported goods had been converted into money, the Customs Collector had no authority to confiscate the proceeds and could merely trace the goods wherever they might be found. The Court rejected this contention, explaining that the goods had been sold by order of the court because they were deteriorating, that the sale order was binding on the parties, and that the proceeds of the sale were to be held for the benefit of the party ultimately successful in the litigation. Accordingly, the Court held that the appellants could not claim that money deposited in the court did not represent the goods. In the result, the Court set aside the order of the High Court, allowed the appeal with costs, and issued a prohibition restraining the Customs Authority from proceeding with any inquiry under section 167(8) of the Sea Customs Act. The appeal was allowed and costs were awarded.