The Collector Of Customs, Madras vs K. Ganga Setty

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 568 of 1960

Decision Date: 19 April 1962

Coram: N. Rajagopala Ayyangar, Bhuvneshwar P. Sinha, P.B. Gajendragadkar, K.N. Wanchoo

The case titled The Collector of Customs, Madras versus K. Ganga Setty was decided on 19 April 1962 by the Supreme Court of India. The opinion was authored by Justice N. Rajagopala Ayyangar, who sat with Justices Bhuvneshwar P. Sinha, P. B. Gajendragadkar, and K. N. Wanchoo. The citation for the judgment appears as 1963 AIR 1319 and 1963 SCR (2) 277, with further references including 1973 SC 194, 1975 SC 769, 1975 SC 2288, and 1977 SC 597. The matter concerned the construction of entries in the Import Trade Control Schedule, particularly items 32 and 42 of Part IV, and the extent of judicial jurisdiction to interfere with decisions of the customs authorities regarding classification of imported goods.

Item 42 of Part IV of the Import Trade Control Schedule allowed “fodder” to be imported from a soft‑currency area without a special licence, whereas Item 32 covered “grain…including oats” and required a licence for importation. The respondent had imported from Australia a quantity of “feed‑oats” intended for race‑horse feeding, describing the cargo as “standard feed‑oats” in the indent, contract, and shipping documents. The customs authorities classified the shipment under Item 32, treating the oats as grain, confiscated the goods, and imposed a penalty in lieu of confiscation. The respondent challenged this action by seeking a writ of mandamus under section 45 of the Specific Relief Act, 1877, before the Madras High Court. The High Court held that the goods fell within Item 42, consequently issuing a writ prohibiting the authorities from recovering the penalty. On appeal, the Supreme Court held that the High Court lacked jurisdiction to interfere with the customs authority’s classification when the decision was not perverse or unsupported by any reasonable basis. Citing Venkatesvaran v. Wadhwani, AIR 1961 SC 1506, the Court affirmed that the determination of the proper head of entry is primarily an administrative function, subject to judicial review only in cases of manifest absurdity. The Court further concluded that the imported oats were undeniably grain, falling within Item 32 and not Item 42, as the Schedule expressly categorises oats under the grain heading, and no provision allows exclusion of a grain species merely because it can serve as animal feed. The judgment therefore affirmed the customs authority’s classification and dismissed the petition for relief.

The appeal before the Supreme Court arose from a certificate of fitness issued under Article 133(1)(e) of the Constitution by the High Court of Madras. The matter was listed as Civil Appeal No. 568 of 1960, originating from a judgment and order of the Madras High Court dated 6 April 1956. The appellant was represented by senior counsel including the Additional Solicitor‑General of India, while the respondent was defended by a team of advocates. The judgment was pronounced on 19 April 1962 by Justice Ayyangar. The question that the Court was asked to consider was limited in scope and concerned the extent of the High Court’s authority to examine the validity of a decision taken by the Customs authorities in interpreting the tariff entries that determine the liability of import duties. Specifically, the dispute centered on whether the High Court was empowered to review the classification made by the Customs officials under the Import Trade Control Schedules that were in force during the period from July to December 1952, the time when the consignment in question reached Indian shores.

The respondent, operating a business in fodder under the name Balakrishna Flour Mills, had placed an order with an Australian supplier for a shipment of whole‑grain oats described in the indent, contract and shipping documents as “standard feed‑oats”. The goods arrived at the port of Madras on 1 August 1952. The import‑er attempted to clear the consignments without having obtained any licence from the Deputy Chief Controller of Imports & Exports, Madras. Upon presentation of the cargo to the Customs authorities, the Assistant Collector held that the oats fell within item 32 of the Circular, which required a specific licence for importation. Item 42, by contrast, covered “Fodder, bran and pollards‑O.G.L.‑Soft” and was subject to an open general licence, meaning that no special licence was needed for imports from a soft‑currency area. The entry for item 32 read: “Grain, not otherwise specified, including broken grain but excluding flour – (a) oats (b) others – Ports – Nil – A.V.”, indicating that a licence could be obtained from the Joint Chief Controller of Imports or Exports at Calcutta or Bombay, or from the Deputy Chief Controller at Madras, without any quota limitation, and that actual users could apply for it. Because the respondent had no such licence, the Assistant Collector concluded that the import contravened section 19 of the Sea Customs Act read together with section 3(2) of the Import & Export Control Act, 1947. Consequently, the Customs officer proceeded under section 167(8) of the Sea Customs Act, ordering confiscation of the goods and imposing a monetary penalty of Rs 5,000 in lieu of confiscation, should the respondent wish to have the goods released. The respondent’s subsequent appeal to the Collector of Customs was dismissed, prompting him to approach the High Court for a writ of mandamus under section 45 of the Specific Relief Act.

The Customs authority ordered that the imported oats be seized and imposed a monetary penalty of Rs 5,000 in place of confiscation, on the condition that the respondent could recover the goods by paying the fine. The respondent challenged this order by filing an appeal to the Collector of Customs, which was dismissed. Consequently, he approached the High Court seeking a writ of mandamus under section 45 of the Specific Relief Act. In the affidavit supporting his application, the respondent asserted that whole‑grain oats fell within the “fodder” category under item 42 because (i) he had imported them solely for feeding race‑horses in Bangalore, (ii) in South India oats were traditionally used only as animal feed and not as human food, and (iii) he had been misled by an answer received from the Deputy Chief Controller of Imports, Madras, who had replied affirmatively when the respondent inquired whether feed‑oats could be imported under an open general licence listed as serial No. 42. The single judge hearing the petition rejected it, holding that the Customs officials’ classification of uncrushed feed‑oats as “grain” rather than “fodder” was neither perverse nor made in bad faith, and therefore the court could not intervene in the authorities’ decision. The respondent then appealed this dismissal to a division bench. The division bench set aside the single judge’s order and directed that the Collector of Customs and his subordinates refrain from collecting or enforcing the fine and penalty against the respondent. The present appeal questioned the correctness of that division‑bench order. The division bench had based its decision on two principal grounds: first, that the Customs authorities’ determination of the tariff classification applicable to an imported commodity was not final and remained subject to judicial review; second, that within the tariff schedule, entry 32, described as “grain,” should be interpreted, in the absence of a specific entry for oats, to exclude grains ordinarily used as fodder, such as those intended for horse feed, thereby placing the imported oats under item 42 “Fodder.” In reaching this conclusion, the learned judges relied upon the reply given by the Deputy Chief Controller to the respondent’s query, viewing it as evidence that the departmental officials themselves harboured doubts regarding the proper classification. With due respect to the division bench, the Supreme Court disagreed with both the scope of judicial review it attributed to the court in such matters and the manner in which the judges construed the relevant entries of the Import Trade Circular.

Concerning the limits of the Court’s jurisdiction, the judgment referred to the earlier decision in Venkatesvaram v. Wadhwani. That case involved a party approaching the High Court under Article 226 of the Constitution, whereas the present matter arose under section 45 of the Specific Relief Act, a statutory provision that confers a considerably narrower power to interfere. The Court explained that the primary responsibility for determining the appropriate heading or entry under which a particular commodity falls rests with the Import Control authorities. However, the Court may intervene only when those authorities adopt a construction that no reasonable person could accept—that is, a construction that is perverse. In other words, if an entry can be reasonably interpreted in two ways and the revenue‑favoured interpretation is adopted, the Court does not have jurisdiction to intervene merely because the alternative interpretation, which may be more favourable to the importer, appears better. Applying this principle to the present case, it could not be sustained that uncrushed oats fail to meet the description of “grain.” Consequently, the decision of the Customs authorities that the imported oats fell within Item 32 could not be characterized as a view that no reasonable interpretation would support. The Court held that even though Entry 32 does not specifically mention “oats,” no particular species of grain may be excluded solely because it can be used as cattle or horse feed. The word “fodder,” as defined in the Oxford Dictionary, means “dried food, hay, straw etc. for stall‑feeding cattle.” Without resorting to the A.I.R. [1961] S.C. 1506 citation of Johnson’s dictionary definition of “oats,” it is sufficient to note that oats are also consumed by humans and are not by their nature exclusively animal feed. For example, coarse grains such as ragi and khambu serve both human and cattle diets. Thus, the mere capability of a grain to be used as animal feed does not transform it into “fodder” that would exclude it from the category of grain to which it belongs. Accordingly, the findings of the Assistant Collector and, on appeal, of the Collector that the imported oats constituted grain could not be described as perverse or malicious. In the circumstances, the learned judges of the High Court were considered to have erred in interfering with the order of the appellant. Nevertheless, the matter in the present case is rendered moot because Entry 32 specifically references “oats” within the description of “grain.”

The Court observed that the customs tariff entry 32 divides grain into two categories‑“oats” and “other grains”‑and that the judges of the High Court had apparently failed to consider the entry in its entirety. In their judgment the High Court judges remarked that the construction of entry 42 would differ if entry 32 had contained a specific reference to oats, indicating that they had not examined the full wording of entry 32. Counsel for the respondent emphasized that the respondent had been misled by a reply from the Deputy Chief Controller of Exports to an enquiry concerning the scope of entry 42. The reply, which the respondent claimed was misleading, stated: “Feed oats classifiable under serial 42 of Part IV can be imported under Open General License No. XXIII.” The Court noted that this statement was not clear. The letter containing that reply was dated 14 September 1951, and the respondent asserted that, because of that reply, he placed an order for the import of “feed‑oats” believing that no licence was required. The contract for the purchase of the oats for import was concluded in early June 1952. Subsequently, on 1 January 1952, the Deputy Chief Controller sent another letter to the respondent clarifying his earlier answer. In that later letter he explained that whole grain oats would fall under item 32, whereas crushed oats would be considered “fodder” and would fall under item 42. The respondent denied ever receiving this clarifying letter, and the High Court did not make a specific finding on that issue; the Supreme Court likewise refrained from making a finding. The Court merely pointed out that the authorities could, if they were satisfied that the respondent had indeed been misled, adjust the amount of the penalty imposed. Consequently, the appeal was allowed and the order of the Division Bench of the High Court was set aside. The respondent’s application under section 45 of the Specific Relief Act was dismissed, and each party was ordered to bear its own costs in this Court.