# UNION OF INDIA & ORS v. SECURITY AND FINANCE (P) LTD

- **Citation:** [1976] 2 S.C.R. 87
- **Court:** Supreme Court of India
- **Decided:** 1975-10-06
- **Bench:** V. R. Krishna Iyer, A. C. Gupta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-ors-v-security-and-finance-p-ltd-6568
- **Pages:** 6

## Headnote

Import controls-Power to determine the head or Entry under wlzich any
particular commodity falls under sections 3 (2) and 4 of the Import and Export
B
(Control) Act (1947) read with section 167 (entry 8) of the Sea Customs Act
(Act Vlf[) 1878.
Sea Customs Act (Act Vlll)-Sections 20, 167, 183 & 184-Whether an
appropriate orde.r under section 183 precludes the authorities from levying duty
under section 20-----lnterpretation of two penal provisions of the import laws and
powers of the nut/writies.
The respondent company imported au.to cycle parts under the guise of motor
vehicle parts, for which only he had a valid licence under the Import laws.
In respect of certain consignments of imports from U.K .. the customs authorities
by a single order dt. 14-11-1955 passed the following:
(i) act;ng under. section 167(8) of the Customs Act it gave an option to
the respondent to pay fine in lieu of confiscation of the goods under section 182
and (ii) acting under se:tions 183 and 20 of the Customs Act to pay the
differential duty between auto parts and the motor parts.
T,he respondent· chaJlenged this order before the High Court on the ground
that once the power under section 183 has been exercised the authorities had
no further power to levy the differential duty.
The High Court while quashing
the order imposing penalty in lieu of confiscation directed payment of the impcrt
duty ordinarily leviable for the auto cycle pedals imported. Against this view
of the limitation on the powers of the Collector, the Union came by way of
special leave, while allowing the appeal the Court,
HELD : (i) It is primarily for the Import Control Authority to determine
the liead or entry under which any particular commodity falls.
Of course if a
construction adopted by the authority regarding the concerned entry were perverse, or grossly irratior.al, then the Court could or would undoubtedly interfere.
[88 C-D].
"Ganga Setty's case. A.LR. 1963 S.C. 1319. followed".
(ii) The scheme of the Sea Customs Act reveals that Import/export duty is
an obliga,tion/ cast by section 20 of the Act. It is a tax. not a penalty; it is an
innocent levy once the exigible event 'Occurs; it is not a punitive import for a
contravention of the law.
Confiscation, penalty and fine provided for under
ss. 167 (Item 8) and 183 are of the species of punishment for violation of the
scheme of prohibition and control. [89 GJ.
(iii) Two legal consequences followed the importation of pedals, uncovei-ed
by a!lY licence viz. (1) the importation attracted duty which any importer. li:it
or illicit, had to pay the moment cus•.:ims barrier was crossed and (ii'> the
commission of the offence of importing pedals without a licence trapping the
respondent in the coils of S. 167, entry 8 inviting the jurisdiction of the authorities to exercise their powers under ss. 182 or 183. [89 H, 90 A].
(iv) The order dual in character, although clubbed t;>gether in a single
document is valid and it does not preclude the au.thorities levying duty under
section 20, since obligation under section 20 is independent of the liability u/s
183.
Non-felicitous and inept expressions used in the order are perhaps apt
to mislead, but the intendment is clear that what was done, was not confiscation
but giving an option to pay a quantified fine in place of confiscation.
Th~
order was a composite one, and is quite legal. [90 D, 91 B-DJ.
7-L1276SCI/75
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SUPREME COURT REPORTS
[1976] 2 S.C.R.
Collector of customs v. H. S. Mehra A).R. 1964 Mad. 504; Shewpujanrai
111drasanrai Ltd. v. The Collector of Customs, [1959] S.C.R. 821 referred to.
CIVIL APPELLATE JuR1so1cnoN: Civil Appeal No. 897 of 1968.
Appeal by Special Leave from the Judgment & Order dated the
24th July, 1967 of the Delhi High Court in LP.A. No. 54 of 1967.
G. L. Sanghi and Girish Chandra for the Appellants.
S. S. Javali (Amiras Cariae) for the Respondent.

## Text

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87
UNION OF INDIA & ORS,
A
v.
SECURITY AND FINANCE (P) LTD.
.
October 6, 1975
[V. R. KRISHNA IYER AND A. C. GUPTA, JJ.)
Import controls-Power to determine the head or Entry under wlzich any
particular commodity falls under sections 3 (2) and 4 of the Import and Export
B
(Control) Act (1947) read with section 167 (entry 8) of the Sea Customs Act
(Act Vlf[) 1878.
Sea Customs Act (Act Vlll)-Sections 20, 167, 183 & 184-Whether an
appropriate orde.r under section 183 precludes the authorities from levying duty
under section 20-----lnterpretation of two penal provisions of the import laws and
powers of the nut/writies.
The respondent company imported au.to cycle parts under the guise of motor
vehicle parts, for which only he had a valid licence under the Import laws.
In respect of certain consignments of imports from U.K .. the customs authorities
by a single order dt. 14-11-1955 passed the following:
(i) act;ng under. section 167(8) of the Customs Act it gave an option to
the respondent to pay fine in lieu of confiscation of the goods under section 182
and (ii) acting under se:tions 183 and 20 of the Customs Act to pay the
differential duty between auto parts and the motor parts.
T,he respondent· chaJlenged this order before the High Court on the ground
that once the power under section 183 has been exercised the authorities had
no further power to levy the differential duty.
The High Court while quashing
the order imposing penalty in lieu of confiscation directed payment of the impcrt
duty ordinarily leviable for the auto cycle pedals imported. Against this view
of the limitation on the powers of the Collector, the Union came by way of
special leave, while allowing the appeal the Court,
HELD : (i) It is primarily for the Import Control Authority to determine
the liead or entry under which any particular commodity falls.
Of course if a
construction adopted by the authority regarding the concerned entry were perverse, or grossly irratior.al, then the Court could or would undoubtedly interfere.
[88 C-D].
"Ganga Setty's case. A.LR. 1963 S.C. 1319. followed".
(ii) The scheme of the Sea Customs Act reveals that Import/export duty is
an obliga,tion/ cast by section 20 of the Act. It is a tax. not a penalty; it is an
innocent levy once the exigible event 'Occurs; it is not a punitive import for a
contravention of the law.
Confiscation, penalty and fine provided for under
ss. 167 (Item 8) and 183 are of the species of punishment for violation of the
scheme of prohibition and control. [89 GJ.
(iii) Two legal consequences followed the importation of pedals, uncovei-ed
by a!lY licence viz. (1) the importation attracted duty which any importer. li:it
or illicit, had to pay the moment cus•.:ims barrier was crossed and (ii'> the
commission of the offence of importing pedals without a licence trapping the
respondent in the coils of S. 167, entry 8 inviting the jurisdiction of the authorities to exercise their powers under ss. 182 or 183. [89 H, 90 A].
(iv) The order dual in character, although clubbed t;>gether in a single
document is valid and it does not preclude the au.thorities levying duty under
section 20, since obligation under section 20 is independent of the liability u/s
183.
Non-felicitous and inept expressions used in the order are perhaps apt
to mislead, but the intendment is clear that what was done, was not confiscation
but giving an option to pay a quantified fine in place of confiscation.
Th~
order was a composite one, and is quite legal. [90 D, 91 B-DJ.
7-L1276SCI/75
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SUPREME COURT REPORTS
[1976] 2 S.C.R.
Collector of customs v. H. S. Mehra A).R. 1964 Mad. 504; Shewpujanrai
111drasanrai Ltd. v. The Collector of Customs, [1959] S.C.R. 821 referred to.
CIVIL APPELLATE JuR1so1cnoN: Civil Appeal No. 897 of 1968.
Appeal by Special Leave from the Judgment & Order dated the
24th July, 1967 of the Delhi High Court in LP.A. No. 54 of 1967.
G. L. Sanghi and Girish Chandra for the Appellants.
S. S. Javali (Amiras Cariae) for the Respondent.
The Judgment of the Court was delivered by
KRISHKA ]YER, J. The respondent imported Auto ·cycle Pedals
under the guise of motor vehicle parts for which he had secured the
relevant licence.
These two articles are different from the point of
view of the law controlling imports.
As laid down in Ganga Setty's
case( 1) by the Court, it is primarily for the Import Control Authority
lo determine the head or entry under which any particular commodity
falls.
Of course, if a construction adopted by the authority regarding the concerned entry were perverse, or grossly irrational, then the
court could and would undoubtedly interfere. In the present case
the High Court has held that the view of the Customs Officials could
not be considered perverse and has declined to set aside the impugned
order on that score.
Even at this stage it is appropriate to quote the order under challenge which runs :
"M/s. The Security and Finance Ltd., Delhi imported
from U.K. the above-mentioned goods for which they did
not possess a valid lmport licence issued under Serial No.
301 /Pt.IV of Import Trade Control
Schedule.
The importation was therefore considered as unauthorised. The
importers were therefore in this Custom Memo No. S24C1276/55A dated 30-9-55 called upon to show cause: why
the goods should not be confiscated and penal action taken
under s. 167(8) Sea Customs Act read with Section 3(2)
of the Import & Exports (Control) Act. In reply to the
said show cause Memo, the Clearing Agents of the importers produced a licence for Motor Vehicles parts, and claimed rdease of the goods against the said licence.
They further stated that similar consignment has been rekased in
the past against similar licence. Furthermore, no public
Notice has been issued to the effect that Auto Cycle Pedals
will not be allowed clearance against Motor Vehicle Parts
licence.
The
arguments
so advanced
are not acceptable.
The importers did not avail of the personal hearing
offered to them in the said show cause memo.
ORDER
The importation of the above goods
without
proper
licence is prohibited under sections 3(2) and 4 of the ImH
port & Export (Control) Act of 1947
and
Notification
issued thereunder.
I
accordingly
confiscate
the
goods
(I) A.LR. 1863 S.C. 1319
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UNION v. SECURITY & FINANCE LTD. (Krishna Iyer, J.)
89
under section 167(8) Sea Customs Act.
In lieu of confiscation I gave an option under section 183 ibid to the importers to clear the goods on payment of a fine of Rs.
22,600/-
(rupees twentytwo thousand six hundred only).
Customs duty and other charges as leviable on the goods will
have to be paid in addition before these could be cleared
out of customs control.
Dated 14-11-55.
Sd/-
Dy. Collector of Customs"
.Even so, the Court quashed the latter limit of the order under chalknge which had imposed penalty in lieu of confiscation and, on top
of it, directed payment. of the import duty ordinarily leviable for the
.auto cycle pedals imported.
The only ground which led to this fatal consequence was that .the
.authorities, acting under s. 183 of the Sea Customs Act, 1878 (Act
VIIJ of 1878) (for short, the Act), had no further power to direct
the importer-petitioner i.e., the respondent, to pay excess duty which
represents the difference between what is leviable for motor vehicles
spares and auto cycle pedals.· Aggrieved by this view of the limitation on the powers of the Collector of Customs the
appellant, i.e.,
the Union of India, has come up this Court, after securing special
leave to appeal.
The respondent was not represented by counsel and
since the point involved was one of law and the amount involved not
jnconsiderable, we requested Shri Javali, Advocate,
to
serve
as
.amicus curiae. He has argued the case with ability and we record our
appreciation of his services to the Court.
Indeed, but for his close
scrutiny of the order of the Deputy Collector of Customs we would
not have perceived the mix-up and other defects he highlighted in his
submissions.
We have already stated that a fine, in lieu of confiscation,
lrnd
been imposed by the Collector of Customs.
This
he did,
under
s. 183 of the Act, but not content with that imposition he also directed the payment of the full duty on the goods imported as condition
precedent to the clearing of the goods out of the 'customs control'.
Does the order under s. 183 preclude him from levying duty under
s. 20? This is the short issue before us.
A close
studv of the
scheme of the relevant provisions, powers and levies discloses a clear
dichotomy which has escaped the attention of the High Court. Import/
export duty is an obligation cast by s. 20 of the Act.
It is a tax, not
a penalty; it is an innocent levy once the exigible event occurs; it is
not a punitive impost for a contravention of the law.
Confiscation.
penalty and fine provided for under ss. 167 (item 8) and 183 are of
the species of punishment for violation of the scheme of prohibition
and· control.
Once this distinction and duality are remembered, the
interpretative process simplifies itself.
Admittedly, the respondent imported pedals uncovered
by
any
licence.
Two legal consequences followed.
The importation attract•
ed duty which any importer, licit or illicit, had t? pay the moment
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customs barrier was crossed.
Secondly, the commission of the offence
of importing pedals without a licence caught the offender in the coils
of s. 167, entry 8, inviting the jurisdiction of the authority prescribed
~nd~r s. 182 to co~scate the ~oods or, alternatively, to impose a fine
m lieu of confiscation, under s. 183,
Of course, if confiscation is
resorted to, the title vests in the State, as provided in s. 184.
.
Import duty has to be paid inevitably in these cases,
by the
importer.
Confiscation or fine in lieu thereof is an infliction on the
offender or circle of offenders falling within s. 167, Entry 8.
Sometimes, the burden in both the cases, falls on the same person.
At
other times, they may fall on different persons.
In some cases the
importer as well as the confiscatee may be identified and so the duty
and the penalty may be imposed validly.
In other cases it may be
difficult to get at the actual person who imported or was concerned in
the offence of importation contrary to the prohibition or restriction
clamped down by the law.
In that event, only confiscation and, alternatively, fine, may be imposed.
Viewed in this perspective, the answer to the question that arises
for decision is simple. In the present 1case, as held by the High Court,
the respondent did import auto cycle pedals outside the permit or
licence.
He is therefore liable to pay import duty normally leviable
from pedal importers.
He has admittedly transgressed the provisions
of Entry 8 of s. 167 by importing goods not covered by the licence
and therefore comes within the penal complex set out in ss. 182, 183
and 184. In the present case, the Deputy Collector, the competent
authority, has chosen to give the owner of the goods, the respondent,
option to pay, in lieu of confiscation, a fine.
He has not confiscated
the goods and, therefore, s. 184 is not operational in this context.
In
short, the obligation under s. 20 is independent of the liability under
s. 183. The order, dual in character, although clubbed together in a
single document, is therefore valid in entirety.
Even so, the confusion
has been caused by the Deputy Collector failing to keep distinct the
two powers and the two liabilities and thereby leading to avoidable
jumbling.
Shri Javali rightly exposed the order impugned to the actinic light
of criticism by pointing out that this rolled up order suffers from
several infirmities, apart from its unspeaking brevity.
The Deputy
Collector does not state that he is levying duty on the importer qua importer under s. 20:
He. does grievou~ly err in _the first breath confiscating the goods (m which case the title vests m Govermnent under
s. 184) and in the very next directing payment :of fine in lieu of confiscation.
Both cannot co-exist.
Moreover, lie forgets that
s.
167.
entry 8, empowers, apart from confiscation .of the off~nd!ng goods. a
penalty also which is independent ~f the fine m s. 18~. I1;1 lieu of confiscation.
This confused and lacomc order only highlights the need
for some orientation course in law for officers who are called upon to
exercise judicial powers and write reasoned orders.
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UNION v. SECURITY & FINANCE LTD. (Krishna Iyer, J.)
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However, we are prepared to gather from the order under attack
two levies imposed in exercise of two distinct powers, as earlier explained.
The import duty has been J!lade a condition for the clearance
of the goods.
This is right and it is impossible to say that the said
payment is not justified by s. 20.
Likewise, the authority, when it
imposed a fine, was exercising it~ J~_9wer under s. 183.
We can readily
see that he did not mean to confiscate the goods.
He only proposed
to confiscate and proceeded to fix a fine in lieu thereof.
No111-felicitous and inept expressions used in the order are perhaps apt to mislead, but the intendment is clear that what was done was not coniiscation but giving an option to pay a quantified fine in place of coniiscation.
The order was a composite one, when read in the sense we
have explained, and is quite legal.
Th!_!refore wr; reach the conclusion
that the appellant is entitled to win and the High Court was in error.
The line of reasoning which has appealed to us is echoed in a decision of the Madras High Court report~ as Collector of Customs v.
H. S. Mehra(1).
Ramachandra Iyer, C.J., speaking for the Bench,
has explained the legal position clearly and we agree with it.
Two
decisions of this Court were referred to before the High Court and,
indeed, the decision of the High Court proceeded on the footing that
those two decisions concluded the matter.
The Madras decision distinguishes-and for right reasons, if we may say so with respect-.
those two rulings of this Court.
They do not apply to the facts of the
situation before us.
On the other hand, both those cases deal with
quantities of gold seized from persons as smuggled goods.
How they
were imported, who were involved in the import, and who could, therefore, be made liable for import duty, were left blank in those two
cases.
Therefore, the conditions imposed by the customs authorities
for payment of import duty could not be supported. We will go into
a little more detail to explain those two decisions and their non-applicability to the point we are discussing.
We may state tbat neither of
them decides that once a fine in lieu of confiscation is imposed, the
power to levy duty under s. 20 is deprived if. It is not as if the authorities could not exercise both' the \powers, where the facts attracted both
s. 20 and ss. 182 to 184.
In Shewpujanrai Indrasanrai Ltd. v. The Collector of Customs(2 )
this Court had to consider an order passed by the Collector under the
Sea Customs Act in respect of smuggled gold.
An option to pay a
fine of Rs. 10,00,000I- was ordered but the Collector tied it up with
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two conditions for the release of the 'confiscated gold'.
One was the
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production of a permit from the Reserve Bank of India in respect of
the gold and the other was the payment of proper customs duties in
respect of the gold.
Both the conditions were held to be illegal by this
Court. It was conceded in that case by the learned Solicitor General
that there was no. provision in the Foreign Exchange Regulation Act
or the Sea Customs Act under which the Reserve Bank ·could give permission in respect of smuggled gold with retrospective effect.
What
H
(1) A.LR. 1964 Mad, 504.
(2) [1959] S.C.R. 821.
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is more, if it could, there would be no offence under s. 16 7, entry 8,
and the order of confiscation itself would be bad.
As to the second
condition of payment of customs duty, there was no finding by what
means the gold was smuggled-by sea or by land-and therefore it
was difficult to see how s. 88 which was sought to be pressed into
service could be of any help. Indeed, the decision of the Bombay High
Cour in Hormasji Elavia v. The Union of lndia( 1) had been brought
to the notice of the learned Judges, where customs duty was held payable under s. 88 of the Sea Cu~toms Act, but it was distinguished on
the score that in that case the goods had_
been tracked down as
smuggled through the port of Kantiajal without payment of any duty
and, in th.ose circumstances, it was held that s. 88 applied.
The manner of import, once identified the power to levy duty could be exercised
under the appropriate Act. Therefore, Shewpujanrai (supra) is
no
authority for the propositioa that import duty cannot be levied once
fine in lieu of confiscation is imposed.
The later decision in Amba Lal v. Union of India(") also is of no
assistance.
That also related to smuggled gold.
The Collector of
Customs imposed conditions for the release, iQ that case, of the confiscated gold.
Though the order was struck down on a concession by
the learned Additional Solicitor General, on the facts as disclosed in
that case, the contraband goods were recovered by search from the
appellant's house, but the authorities could not establish by any evidcn.ce that the seized articles were imported into India after the customs
barrier was put up for the first time between India and Pakistan. It is
obvious, therefore, that import duty could 11ot be leyied from the person from whom the seizure was effe"cted.
The case before us stands clearly on a different footing and the
order imposing fine in lieu of confiscation and also levying import duty
is good.
We allow the appeal but, in the circumstances of the case,
there will be no order as to costs.
.
S.R.
(1) Cr. Appl. 1296 of 1953 decided on 18-8-1953.
(2) (1961] 1 s. c. R. 933.
Appeal allowed.
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