Girdharilal Bansidhar vs Union of India

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 318 of 1962

Decision Date: 6 March 1964

Coram: N. Rajagopala Ayyangar, P.B. Gajendragadkar, K.N. Wanchoo, J.C. Shah, S.M. Sikri

In this case the Court recorded that the petitioner, Girdharilal Bansidhar, had obtained a licence authorising him to import “iron and steel bolts, nuts, set screws, machine screws and machine studs, excluding bolts, nuts and screws adopted for use on cycles.” He subsequently imported nuts and bolts that were the component parts of “Jackson Type Single bolt oval plate belts fasteners,” and he described these items in the bill of entry as “Stove Bolts and Nuts.” The importation of the Jackson type fasteners had been prohibited under the Sea Customs Act, 1878. When the goods were presented for clearance, the Collector of Customs issued a notice requiring the petitioner to show cause why penalties should not be imposed for (a) mis‑describing the goods and (b) attempting to import the goods without a proper licence. After receiving the petitioner’s explanation, the Collector imposed the penalties. One of the facts relied upon by the Collector in concluding that the imported nuts and bolts were in fact components of the prohibited fasteners was that washers – the third component of the prohibited article – had been imported by a firm owned or controlled by close relatives of the petitioner. An appeal against the Collector’s order to the Central Board of Revenue was dismissed. The petitioner then filed a writ petition under Article 226 of the Constitution in the High Court, which was dismissed at the threshold. On special leave, the matter reached this Court.

The Court held that (i) a component part that has no practical use except as a component of an article whose importation is prohibited is itself covered by the prohibition, citing the earlier decision of D P Anand v. M/s T M Thakore and Co. (ii) The contention that the Collector’s decision was affected by a patent error because he had allegedly mis‑interpreted the scope of Entry 22 of Part 1 of the Import Trade Control Handbook bore no merit; a petition under Article 226 is not an appellate review of the customs authority’s decision, and the correctness of the Collector’s conclusion based on the Handbook and the Indian Tariff Act does not fall within the writ jurisdiction of the High Court. (iii) The fact that washers were imported by another firm was merely corroborative evidence that the nuts and bolts were indeed components of the prohibited fasteners. The charge against the petitioner specifically identified the alleged offence, and the evidence, which could have been contested, was placed on record and considered in his presence; having conclusively demonstrated the true nature of the imported articles, there was no breach of the principles of natural justice.

The Court held that determining whether the conclusions reached by customs authorities from the Hand‑book entries or the Indian Tariff Act fell within the High Court’s writ jurisdiction was not permissible. It cited the decision in A. V. Venkateswaran, Collector of Customs, Bombay v. Ramchand Sobhraj Wadhiwani, [1962] 1 S.C.R. 753, as authority for that proposition. The Court observed that the importation of washers by another firm served only as evidence supporting the Collector’s finding that the nuts and bolts were components of a prohibited article. The charge framed against the importer specifically identified the alleged offence, and the record showed that the appellant could have contested the evidence presented. Because the evidence, examined in the appellant’s presence, conclusively demonstrated the true nature of the imported articles, the Court found no violation of natural‑justice principles. Consequently, the appellant could not plausibly claim that the procedural safeguards of natural justice had been ignored in the proceedings. The Court therefore concluded that the High Court lacked authority to revisit the customs authority’s technical assessment of the goods.

The appeal, numbered Civil Appeal No. 318 of 1962, was filed by special leave against the Punjab High Court’s order dated 27 November 1959 in Civil Writ Petition No. 545‑D of 1959. Counsel for the appellant consisted of three advocates, while counsel for the respondent comprised two advocates. The judgment was delivered on 6 March 1964 by Justice Ayyangar, who concluded that the appeal lacked merit and should be dismissed. In November 1951 the appellant secured an import licence from the Joint Chief Controller of Imports at Calcutta authorising iron and steel bolts, nuts, set screws, machine screws and machine studs, excluding cycle‑adapted items. Relying on that licence, the appellant imported from Japan through the Bedi port a total of 221 cases of bolts and nuts between 4 April 1952 and 14 July 1952. The Bills of Entry filed by the appellant described the consignments as “Stove Bolts and Nuts,” and the licence was produced to justify clearance of the goods. Customs cleared 192 of those cases, but before the remaining 89 cases could be released, officials grew suspicious of the description. Inspection of the samples showed that, although labeled “Stove Bolts and Nuts,” the items were identifiable components of the “Jackson Type single bolt oval plate‑belt fasteners.” These fasteners had been prohibited from import by a Ministry of Trade notification dated January 1952. Customs then issued a notice directing the appellant to show cause why he should not be proceeded against for mis‑describing the goods. The notice also alleged that the appellant attempted to import prohibited articles without a valid licence, constituting an offence under the Sea Customs Act.

In this matter the appellant was charged with committing an offence under section 167(8) of the Sea Customs Act for importing goods without a proper import licence. The appellant responded to the notice by filing written pleas in which he advanced two principal defences. The first defence argued that the term “stove bolts and nuts” was a description that appeared in the manufacturers’ invoices and, because the appellant was not acquainted with the technical specifications, he could not be held liable for a description that was merely reproduced in the Bill of Entry and was not precise or exact. The second defence contended that even if the imported bolts and nuts were indeed identifiable components of the “single bolt belt fasteners” whose importation was prohibited, a proper construction of the import licence, read together with the Import Trade Regulations under which the licence was issued, showed that the prohibition contemplated by the January 1952 notification applied only to a complete “Jackson type single bolt belt fastener” and did not extend to the separate component parts of such a fastener.

The Collector of Central Excise examined both of these defences. With respect to the first defence, the Collector relied upon the correspondence that the appellant himself produced during the hearing, showing exchanges with his foreign suppliers. The documents demonstrated that the appellants had selected the description “stove bolts and nuts” after receiving and personally inspecting samples of the nuts and bolts he intended to import. Consequently, during the hearing the appellant effectively conceded that the description used in the Bill of Entry was a misdescription of the actual articles imported. The Collector then turned to the question of whether the appellant was guilty of an offence under section 167(8), whose provision states: “If any goods, the importation or exportation of which is for the time being prohibited or restricted by or under Chapter IV of this Act, be imported into or exported from India contrary to such prohibition or restriction, or if any attempt be made so to import or export any such goods…”. The Collector found that the appellant was indeed in contravention of this provision.

In reaching this conclusion, the Collector was satisfied by the samples that had been forwarded to the appellant and that he had approved before finalising the indent. The Collector determined that the appellant was ordering and importing nuts and bolts that were identifiable components of “single bolt belt fasteners,” a class of goods whose importation was prohibited. The Collector’s reasoning was twofold: first, the bolts and screws imported by the appellant were specially adapted, by virtue of their structure and details, for use as single‑bolt belt fasteners; second, those nuts and bolts could not be employed for any purpose other than as components of a belt fastener of the prohibited type. Supporting this finding, the Collector noted that a single‑bolt belt fastener is composed of three parts—a bolt, a nut and washers. The washers required to fit the imported bolts and nuts were found to have been imported separately by a firm called Nawanagar Industries Ltd., which was owned or controlled by close relatives of the appellant. This circumstance reinforced the Collector’s view that the appellant intended to evade the prohibition contained in the January 1952 notification.

Having established the appellant’s intention to contravene the prohibition under section 167(8), the Collector imposed the penalty of confiscation of the goods. Under section 183 of the Sea Customs Act, the owner of the seized goods was given the option to pay a fine of Rs 5,000 to have the goods redeemed. In addition, the Collector levied a personal penalty of Rs 1,000 on the appellant under section 167(37)(c) for misdescribing the goods in the Bills of Entry.

In this case the Collector explained that the prohibition contained in the January 1952 Notification barred the importation of “single bolt belt fasteners.” He noted that such belt fasteners are made up of three separate parts: a bolt, a nut and washers. Investigation showed that the washers intended to fit with the bolts and nuts purchased by the appellant had been imported separately by a firm named Nawanagar Industries Ltd., which was owned or controlled by persons closely related to the appellant. This circumstance led the Collector to conclude that the appellant intended to circumvent the prohibition in the Notification and thereby violated section 167(8) of the Sea Customs Act. Consequently the Collector ordered the confiscation of the goods and, under section 183 of the Sea Customs Act, gave the owner the option to pay a fine of Rs 5,000 to recover the seized merchandise. In addition, the Collector imposed a personal penalty of Rs 1,000 on the appellant under section 167(37)(c) of the Sea Customs Act for misdescribing the goods in the Bills of Entry that had been filed. The appellant challenged this order before the Central Board of Revenue, but the Board dismissed the appeal. Before the Board the appellant argued that the prohibition applied only to the assembled “Jackson Type single belt oval plate belt fasteners.” He further submitted that the Notification could not be read as banning the import of the individual components, even though those components were identifiable and had no use except as parts of the prohibited article. The Board rejected that contention and dismissed the appeal. The appellant then sought a writ of certiorari from the High Court of Punjab under article 226 of the Constitution; that petition was dismissed at the threshold. Thereafter the appellant applied to this Court for special leave to appeal, and special leave was granted, bringing the present appeal before the Court. Counsel for the appellant raised two arguments. The first argument was that the appellant held a licence authorising the import of “nuts and bolts” under item 22 of Part 1 of the Import Trade Control Handbook for the relevant year, and that the licence permitted the import of iron‑and‑steel bolts and nuts for any purpose. The licence, however, contained a single restriction that prohibited the import of bolts and nuts adapted for use on cycles. Counsel submitted that because the licence only barred cycle‑adapted items, the appellant could lawfully import bolts and nuts intended for other articles unless the import of those other articles or their components was separately prohibited or restricted. To support that submission counsel directed the Court’s attention to item 28 of Part II of the same Handbook, which describes “Belting for machinery, all sorts, including belt laces and belt fasteners.”

In this matter the Court noted that a Notification dated 12 January 1952 served as a clarification of the licensing policy applicable for the period from January to June 1952. The Notification dealt with serial number 28 of Part II of the Import Trade Control Hand‑book, which records the description “Jackson type oval plate belt fasteners (other than single bolt)”. The same Notification explained that general licences would be granted freely for Jackson type oval plate belt fasteners that are not single‑bolt, subject to the provisions of Public Notice No 189‑ITC(PN)/51 dated 28 December 1951. Conversely, the Notification expressly prohibited the import of any Jackson type oval plate single‑bolt belt fasteners from any source. The parties did not dispute that, given the terms of the import licence granted to the appellant, the prohibition contained in the Notification regarding “Jackson Oval Plate Single Bolt belt fasteners” applied to the appellant’s licence and consequently those belt fasteners could not be imported after January 1952.

The import licence itself was issued under Government of India, Ministry of Commerce, Notification No 23‑ITC/43 dated 1 July 1943 and carried a clause stating that the licence was “without prejudice to the application of any other prohibition or regulation affecting the importation of the goods which may be in force at the time of their arrival”. The appellant argued that, notwithstanding this clause, the component parts of a Jackson type oval plate single‑bolt belt fastener could still be imported. The argument relied on the scheme of the Import Trade Control Hand‑book, which in certain entries lists “component parts” together with the finished article when a restriction or prohibition is intended to cover both. The Court accepted that in some instances component parts are indeed listed separately, perhaps as a precaution or because those parts may have an independent use apart from the finished article.

However, the Court found that it was unreasonable to assume that a component part having no use except as a part of an article whose importation is prohibited would be exempt from the ban. In other words, the Court could not accept a construction of the rule that would allow importers to achieve indirectly what they were expressly forbidden to do directly, by importing components that have no independent purpose and then assembling the prohibited article within India. Such an interpretation would defeat the purpose of the prohibition on the completed article.

Counsel for the appellant relied on an unreported judgment of the Bombay High Court delivered by Justice Mudholkar in Appeal No 4 of 1959 (D. P. Anand v. M/s. T. M. Thakore & Co.), contending that a ban on a completed article, based on the language of the Hand‑book, should not be read as a restriction on the separate importation of component parts that, when assembled, would form the prohibited article. The Court rejected that reading. The Bombay High Court judge, as cited, had recorded that the imported components of a motor‑bicycle would not, when assembled, constitute a complete cycle because essential parts were lacking in India and could not be imported. The present Court therefore did not adopt the position advocated by counsel and held that the prohibition on the Jackson type oval plate single‑bolt belt fasteners extended to their component parts as well.

In the matter concerning M/s. T. M. Thakore & Co., counsel supported his claim by relying on a decision of the Bombay High Court. He argued that the language used in the Import Trade Control Hand‑book did not permit the restriction of separate imports of component parts, even though assembling those parts would produce a finished article whose importation was prohibited. The Court rejected this interpretation. It observed that the High Court judge had acknowledged that the imported items were components of a motor‑bicycle but, because essential parts were missing, the assembled product would not constitute a complete cycle—the very article that the import rules sought to ban. The missing essential parts were not available in India and could not be brought in, so the import of the components did not amount to importation of the prohibited complete article.

The next argument raised by counsel was that the Customs Collector’s decision suffered from a patent error because the Collector had allegedly misread Entry 22 of Part 1 of the Hand‑book. To bolster this contention, counsel cited the Supreme Court’s earlier ruling in A. V. Venkateswaran Collector of Customs, Bombay v. Ramchand Sobhraj Wadhwani and Anr. The Court examined that precedent and found it inapplicable. The cited decision concerned a question of tariff duty under item 45(3) of the Schedule to the Tariff Act, and the Supreme Court’s discussion there did not address the interpretation of the Hand‑book or the prohibition under section 167(8) of the Sea Customs Act. Consequently, counsel could not draw any support from that judgment. The Court reiterated that its earlier observations were sufficient to demonstrate that the authority’s conclusion that an offence under section 167(8) had been established was correct. Moreover, the Court emphasized that a petition filed under article 226 of the Constitution does not constitute an appeal against the Customs authority’s findings; therefore, the correctness of the authority’s interpretation of the Hand‑book and the Indian Tariff Act lies beyond the writ jurisdiction of the High Court. The Court also noted that no procedural irregularity capable of invalidating the Collector’s order was alleged. The order itself disclosed that a thorough investigation had been conducted and that the appellant had been given a personal hearing before the impugned order was issued. Finally, counsel contended that the Collector had factored in the separate importation of washers by Nawanagar Industries Ltd. in determining that the appellant had violated section 167(8) of the Sea Customs Act, as reflected in the notice served on the appellant.

The petitioners argued that the notice requiring them to show cause did not adequately address the issue raised. Consequently, they contended that the order of confiscation was illegal and void because it breached the principles of natural justice and involved procedural irregularity during the hearing. The Court expressed that it was not persuaded by the argument advanced by the petitioners concerning the alleged procedural defect. The submission was based on a fundamental misapprehension regarding the relevance of the separate import of washers by the sister concern. That particular import could not form the basis of any charge against the appellants, nor were the appellants punished for that importation. Instead, the import of the washers served only as evidence supporting the Collector’s conclusion that the nuts and bolts imported were actually components of a Jackson type belt fastener, the import of which was prohibited. The charge framed against the appellant specifically described the nature of the offence alleged to have been committed. If evidence that the appellant could have contested was placed on record and considered in his presence, that evidence would have been examined before him. Because that evidence conclusively proved the real nature of the imported articles, there could be no legitimate claim that the principles of natural justice were breached. The misdescription of the imported article in the Bill of Entry was essentially admitted, and there was little dispute that the goods were indeed components of Jackson type single belt fasteners. Consequently, the Court held that no additional proof was required to establish that the appellant had contravened section 167(8) of the Sea Customs Act. The reference to Nawanagar Industries Ltd., which had imported the washers, merely reinforced the Court’s finding that a violation of the statutory provision had occurred. In these circumstances, the Court concluded that there was no merit in the objection raised by the appellants regarding procedural fairness. Accordingly, the Court dismissed the appeal and ordered the appellants to bear the costs of the proceedings incurred. The order of dismissal was formally pronounced by the Court at the conclusion of its judgment in this case.