Appeal No 1661 of 1990
From the Judgment and Order dated 2610
1989 of the Customs Excise and Gold Control Appellate Tribunal New Delhi in Appeal No
CDSBA No 424 of 1983A in Order No 72989 A HN Salve Ms Meenakshi Arora Ms Ayesha Khatri Ms Shirin Jain and Ms Indu Malhotra for the Appellant
KTS Tulsi Additional Solicitor General AS Rao and p Parmeshwaran for the Respondent
The Judgment of the Court was delivered by FATHIMA BEEVI J
The appellant is a federation of glass manufacturers in India
The Federation entered into a contract with Ms Magadi Soda Company Ltd Kenya for supply of 5000 metric  tomes of soda ash dense at the rate of US  155 per metric tome cif Bombay
The consignment arrived from Mombasa Kenya on 2312
198 1
The goods were cleared on payment of customs duty of 516 Rs32 1590421 from Bombay
The appellant on distribution of the goods to various members of the federation received complaints that the soda ash which had been supplied was of sub standard quality The sellers Ms Crescent Dyes  Chemicals as well as their agents were approached
They sent a team of experts to examine the goods
The inspection confirmed that the goods were defective
As per agreement dated 92
1982 Ms Crescent Dyes  Chemical sent a Credit note of US  240000 as compensation on account of the defective goods sent by Ms Magadi Soda Company Ltd The amount remitted on account of the import made was only US  535000 as against the earlier contracted amount of US  775000
In view of such reduction the appellant filed a refund application before the Customs Department to the tune of Rs99589265
The Assistant Collector was not satisfied as to the extent of deterioration of the goods before clearance as provided by Section 22 of the and rejected the refund application vide order dated 1971982
The appeal preferred against the order dated 1971982 was rejected by the Collector of Customs on 2312
1982 on the reasoning that the damage was discovered after the goods were out of customs control
The further appeal to the Tribunal was also unsuccessful
The Tribunal by the order dated 2610
1989 held that the alleged inferior nature of goods was discovered after clearance
This appeal is filed under Section 130E of the against the order of the Tribunal dated 2610
The question involved in the present appeal is whether the appellant is entitled to the refund of customs duty on account of the compensation given by the seller to the appellant on supply of goodsThe appellant who imported the goods detected defects and the foreign supplier accepted the defects and damages and agreed for payment of compensation
According to the appellant goods supplied were not in accordance with the contractual specification
The defects being inherent in nature resulted in diminution in the real value of the goods and what had been agreed upon by the foreign seller is reduction in price on account of these defects
The appellant claimed that it would be entitled to refund of customs duty under Section 22 of the Act for reasons set out thus
The value to be assessed under Section 14 of the Act is the real price at which goods imported are ordinarily sold at the time and place of importation and not the price erroneously indicated 517 by the seller at the time of filling the bill of entry
The buyer who successfully sets up diminution of price on ac count of breach of warranty which claim is accepted by the seller can seek refund or adjustment in the customs duty payable where the duty has been paid erroneously on the full price prior to such diminution
The claim under Section 22 of the Act would be maintainable where imported goods were defective and had deteriorated in quality even prior to the import when the assessment has to be on the basis of the real value of goods
The contract dated 3091981 is for the supply of 5000 metric tonnes of soda ash dense
The complaint was that the sodium carbonate content was less than the specified 97 that there was moisture in the soda ash dense supplied and hence it had turned lumpy
Ms Crescent Dyes  Chemicals Ltd was the agent of the seller Ms Magadi Soda Company Ltd The consignment
arrived in Bombay sometime in Decem ber 1981
The appellants filed their bill of entry with the customs and the goods were cleared on payment of customs duty of Rs321590421 on 2812
the complaint about damage and deterioration was made long after clearance
The team of experts examined the goods and confirmed the de fects
The customs authorities were not associated with such inspection
It is maintained by the appellant that the credit received was recorded in the letter dated 153
1982 and the letter indicated that the amount remitted on account of the import made was only US  535000
The reduction in the amount remitted was to the extent of US  240000
The appellant claimed that on account of the reduction in the value of the consignment the appellant is entitled to refund of customs duty proportionately
The Collector of Customs pointed out that The duty is leviable on the basis of the value of the such or like goods at the time of clearance
It has not been proved that the alleged defect on account of which the price has been reduced was present in the goods at the time 01 clearance
At least some of the defects of the type pointed out viz the lumpy character are such as could develop due to exposure to moisture etc
during the period the goods were out of customs
In any case the customs were not associated even with the post clearance examination
Any alleged reduc tion in value on the basis of a postclearance agreement between the buyer and the supplier or 518 some alleged grounds which the customs had no chance to verify  prior to clearance is fraught with great risks to Revenue
emphasis supplied According to the appellant this reasoning is wrong
The appellant stated that most of the defects were due to non adherence to specification provided under the contract
The defects being inherent in character the appellant could not have known about the same at the time of clearance of the consignment from customs
The ground of deterioration of goods was not relevant as the claim for refund was based on the ground of diminution in value of the goods as the same were not as per the standard contracted for
The assessable value of the goods under Section 14 of the Act is the price at which such goods were actually sold in the course of international trade
It is the real price of the goods actually imported which is ordinarily the basis for assessa ble value
Where goods do not conform to the description or stipulation as to quality or fitness it is open to the buyer to treat the defect as a breach of warranty
It is also open to the buyer to set up against the seller the breach of warranty in diminution of the price
It is the diminished price which will be the real price of the goods and not the price claimed by the buyer initially which is reflected as cif value on the invoice
Customs duty paid on the cif value is a duty paid under mistake of fact
At the time of clearance of goods the buyer did not have any knowledge of the defects in the goods
Where defect which constitutes a breach of warranty and which the buyer elects to treat as a breach of warranty became apparent and ulti mately culminated in diminution of price it would be open to the buyer to claim refund of the customs duty paid under mistake of fact
It is not relevant as to when the defect became apparent to the buyer
The fact that the documents proving the true and real value of the goods were not in existence at the time when the goods were cleared from the customes is wholly irrelevant This in short is the argu ment advanced on behalf of the appellant
Duties of customs shall be levied under Section 12 at such rate as may be specified under the Customs Tariff Act or any other law for the time being in force on goods im ported into or exported from India
Section 14 of the Cus toms Act provides that value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of importation in the course of international trade
Such price shall be calculated with reference to the rate of exchange as in force on the date on which 519 a bill of entry is presented under Section 46
The duty is ordinarily chargeable with reference to the tariff value in the case of goods entered for home consumption on the date on which the bill of entry in respect of such goods is presented
Section 22 provides for payment of duty on damaged or deteriorated goods
It reads thus 22
Abatement of duty on damaged or deterio rated goods
1 Where it is shown to the satisfaction of the Assistant Collector of Customs a that any imported goods had been damaged or had deteriorated at any time before or during the unloading of the goods in India or b that any imported goods other than ware housed goods had been damaged at any time after the unloading thereof in India but before their examination under Section 17 on account of any accident not due to any wilful act negligence or default of the importer his employee or agent or c that any warehoused goods had been damaged at any time before clearance for home consump tion on account of any accident not due to any wilful act negligence or default of the owner his employee or agent such goods shall be chargeable to duty in accordance with the provisions of sub section 2
2 The duty to be charged on the goods re ferred to in sub section 1 shall bear the same proportion to the duty chargeable on the goods before the damage or deterioration which the value of the damaged or deteriorated goods bears to the value of the goods before the damage or deterioration
 Where it is shown to the satisfaction of the Assistant Collector that any imported goods have been lost or de stroyed at any time before clearance for home consumption
the Assistant Collector of 520 Customs shall remit the duty on such goods
The period of six months has been prescribed under Section 27 to claim refund of duty paid with protest
Refund is allowed when the Assistant Collector of Customs is satisfied that the whole or any part of the duty paid should be refunded
No claim for refund of any duty shall be entertained except in ac cordance with the provisions of Section 27
Chapter VII of the deals with the clearance of imported goods
The imported goods unloaded in a customs area remain in the custody of the approved person until they are cleared for home consumption
Without permission in writing of the appropriate officer such goods are not removed or otherwise dealt with
The importer shall give a declaration as to the truth of the contents of the bill of entry supported by the invoice
The order permitting clear ance of the goods for home consumption is made on payment of the import duty if any assessed
Thus under the scheme of the Act the importer is entitled to clear the goods on payment of duty assessed and such assessment is to be made with reference to the tariff value of the goods where tariff values are fixed
In other cases the price at which the goods are ordinarily sold for delivery at the time and place of importation represents the tariff value for the purpose of the assessment
When the value is assessed on the basis of the invoice and the goods are cleared the implication is that no remission is allowed and no abatement has been occasioned
There is no express provision which enables the proper officer to make a re assessment for the purpose of remission on the ground that the goods at the time of their importation or at the time of the clearance was sub standard or damaged and the invoice price does not represent the real value
Even if it is assumed that in view of the provisions contained in Section 28a enabling the proper office to determine the amount of duty due in cases where duty has not been levied or has been short levied or erroneously refunded after issuing show cause notice there is a corresponding right on the importer to claim refund of the excess duty levied it is necessary for the importer to prove to the satisfaction of the proper officer that the goods at the time of the clearance was chargeable to a lesser or lower duty for anyone of the reasons contained in Section 22 which alone provides for abatement of duty
Any error in the assessment of the value by itself does not enable the importer to claim re assess ment or refund
It has necessarily to be shown that on account of the damaged or deteriorated condition of the imported goods before or during the unloading the goods in India the duty to be charged on the goods was propor 521 tionate to the value of the damaged or deteriorated goods
The question of redetermining the value of the imported goods can arise only in a case where such damage or deterio ration before the clearance is proved to the Satisfaction of the proper officer
When there had been no indication of any such condition and the duty has been assessed on the basis of the invoice value and duty is paid the assessment would be binding
The importer on finding the goods cleared and distributed not to his entire satisfaction may have a claim in contract against the seller for providing sub standard damaged or deteriorated goods for the value in the invoice and it may be open to the buyer to realize from the seller such damages as he would in law be entitled to
That claim for damages cannot have any bearing to the assessment at the time of the clearance
The price at which the goods had been sold is represented by the invoice price and whatever amount is realized on subsequent agreement is only by way of com pensation as damages
It cannot be said that the damages thus received represents the difference in price that had been paid and that ought to have been paid
When the seller had agreed to compensate the buyer for the quality of the goods imported the buyer does not get the right to claim abatement of duty on the assumption that the real price was some thing less than what has been indicated in the invoice
Learned counsel for the appellant referred para 574 at page 12 1 Vol
Halsbury s Laws of England 574
Goods not in accordance with contract
Where it is shown to the satisfaction of the Commissioners of Customs and Excise that goods were imported in pursuance of a contract of sale and that their description quality state or condition was not in accordance with the contract or that they were damaged in transit and also that the importer with the consent of the seller either returned the goods to him or destroyed them unused the importer is entitled to obtain from the Com missioners repayment of any customs duty paid on their importation
The foregoing however does not apply to the goods imported on ap proval or on sale or return or on other similar terms
 It deals with the returning of goods or destroying the goods unused without acceptance and not where the goods have been accepted and used and the importer had been compensated for the reduction in 522 standard
The learned counsel also referred to the decision in Biggin  Co Ltd vs Premanite LD Berry Wiggins  Co LD  Cehave NV vs Bremer  Ford Motor Company of India vs Secretary of State for India 1937 381 LR 65 IA 32 and vacuum Oil Co vs Secretary of State for India 1932 LR 59 IA258
On the basis of these decisions the learned counsel for the appellant contended that when the seller has allowed the reduction the real price of the goods is that which has been accepted by the seller and that the assessment made on a higher value on the basis of the invoice price is in excess and such excess is refundable to the appellant
It is not necessary to elaborate on the principle stated in the decisions on the facts of the present case
It is admitted case of the appellants that the alleged inferior nature of goods was discovered by the appellant after clearance
Until the refund application was made no requisition appears to have been made to the customs author ities to have the value of the goods determined for the purpose of Section 22
The correspondence between the appel lants and the sellers red their agents could only reveal that the appellant put forward a claim for compensation on the ground that the goods imported had become lumpy and was also of inferior standard
Ultimately the sellers agreed to reimburse the appellants and pay compensation to the tune of US  240000
What appellants have received from the sell ers is compensation for the damage for breach of warranty
It does not appear that the value was reduced or amount remitted by the appellant was the reduced value of tire goods
The amount was the total compensation extended by the sellers to the appellants
From that fact of payment of compensation or reimbursement by the sellers it cannot be taken that at the time and place of importation the goods imported was worth only the amount stated in the invoice less the compensation paid
In other words there is no proof that the real value of the goods at the time and place of importation was less than that what had been entered in the invoice and stated in the Bill of Entry
So long as examination of the goods had not been made or its value re assessed to the satisfaction of the assessing authorities it cannot be said that duty was charged not on the real value of the goods but on a higher amount
The contention that the inherent defect in the supply of goods resulted in the diminution of the value of the goods cannot be counte nanced when it is conceded that what had been paid by the seller is only compensation for the breach of war 523 ranty
Furthermore there is no material on record to show that even by the team of experts there had been a re assess ment of the value of the goods
What had been estimated is only quantum of damages sustained by the buyers and to that extent they had been compensated
That arrangement between the buyer and the seller cannot be linked with the assess ment of duty and no claim for abatement of duty under the provisions of Section 22 or a claim for refund under Section 27 could be legitimately entertained
For the reasons given above the appeal must fail
The appeal is dismissed with no order as to costs
VPR Appeal dismissed


Summary:
On March 25 1990 the officers of the Directorate of Revenue Intelligence intercepted a motor car driven by the appellant No 1 with the other appellant as his companion and recovered 1400 gold bars
The statements of the two appellants were recorded and they were formally arrested on March 28 1990 and produced before the Chief Metropolitan Magistrate who granted re mand
While the matter was under investigation a proposal was made to the first respondent Secretary Preventive Deten tion Government of Maharashtra for invoking the powers conferred on him by Section 3 of the 
On the very next day after the receipt of the proposal the first respondent passed the orders of detention against the two appellants under sub section 1 of section 3 of the Act
After these detention orders were passed on April 24 1990 they were served on the appellants along with the grounds of detention and basic documents on which reliance was placed
The appellants were informed that they had a right to make a representation to i the State 444 Government ii the Central Government and iii the Advisory Board against the detention order if they so desired
They were informed that to facilitate expeditious consideration thereof the Superintendent of Jails may be requested to forward the same to the detaining authority
The appellants preferred a representation addressed to the Detaining Authority and forwarded it through the Superin tendent of Jail
In the last paragraph of that representa tion a request was made that copies of the representation may be taken out and the same may be forwarded to the State Govt
and the Central Govt
The representation was considered and rejected by the State Government
It was however not forwarded to the Central Government and hence the Central Government had no occasion to consider the representation of the appellants for the revocation of the detention orders
As the detention orders were not revoked the appellants preferred separate habeas corpus writ petitions in the High Court which dismissed both the writ petitions answering in negative on the question whether the detention orders were vitiated as the Detaining Authority as well as the State Government had failed to forward their representations to the Central Government for the reason that the detenus who had failed to follow the clear and specific instructions given in the grounds of detention regarding the manner and mode of address to various authorities could not be allowed to reap the benefit of their own default
This view of the High Court was challenged before this Court by the appellants
The State Government as well as the Central Government supported the view taken by the High Court contending that the appellants cannot make a grievance if they have despite a clear direction in the grounds of detention chosen to deviate therefrom
Once the procedure established by law is followed by the respondents the failure on the part of the Detaining Authority or the State Government to accede to the request made by the appellants in the last paragraph of their representations to take out copies thereof and forward the same to the Central Government cannot vitiate the deten tion order
The Union of India contended that since no representa tion had reached the Central Government there was no ques tion of the Central Government applying its mind thereto and taking a decision thereon
445 On the question whether failure on the part of the Detaining Authority as well as the State Government to accede to the request of the appellants to take out copies of the representations and forward the same to the Central Government for consideration has resulted in violation of their considerationalstatutory right to have their repre sentation considered by the Central Government and if yes whether the detention orders are liable to be quashed on that ground allowing the appeals this Court HELD 1
The Detaining Authority as well as the State Government were not justified in taking a hypertechnical stand that they were under no obligation to take out copies of the representations and forward them to the Central Government
Such action of the Detaining Authority and the State Government was unreasonable and resulted in a denial of the appellants  constitutional right
The impugned deten tion orders are liable to be quashed and directed that the appellants who were in detention to be set free
459B E Per AM Ahmadi J on his behalf himself and V Ramas wami J 1
Article 223b 5 casts a dual obligation on the Detaining Authority namely i to communicate to the detenu the grounds on which the detention order has been made and ii to afford to the detenu the earliest opportu nity of making a representation against the detention order
Consequently the failure to communicate the grounds promptly or to afford the detenu an opportunity of making a represen tation against the order would clearly violate the constitu tional guarantee afforded to the detenu by clause 5 of Article 22 of the Constitution
It  is by virtue of this right conferred on the detenu that the Detaining Authority considers it a duty to inform the appellant detenu of his right to make a representation to the State Government the Central Government and the Advisory Board
The right to make a representation against the detention order thus flows from the constitutional guarantee enshrined in Article 225 which casts an obligation on the authority to ensure that the detenu is afforded an earliest opportunity to exercise that right if he so desires
450H 451C 2
The necessity of casting a dual obligation on the authority making the detention order is obviously to ac quaint the detenu of what had weighed with the Detaining Authority for exercising the extraordinary powers of deten tion without trial conferred by section 31 of the Act and to give the detenu an opportunity to point out any error in the exercise of that power so that the said authority gets an opportunity to undo the harm done by it if at all by correcting the error at the earliest point of time
451C D 446 3
Under section 11 an officer of the State Government or that of the Central Government specially empowered under section 31 of the Act to make a detention order is not conferred the power to revoke it that power for those officers has to be traced to section 21 of the General Clauses Act
Therefore where an officer of the State Gov ernment or the Central Government has passed any detention order and on receipt of a representation he is convinced that the detention order needs to be revoked he can do so by virtue of section 21 of the General Clauses Act since sec tion 11 of the Act does not entitle him to do so
454A C 4
If the State Government passes an order of detention and later desires to revoke it whether upon receipt of a representation from the detenu or otherwise it would be entitled to do so under section 21 of the General Clauses Act but if the Central Government desires to revoke any order passed by the State Government or its officer it can do so only under clause b of Section 111 of the Act and not under section 21 of the General Clauses Act
454C D 5
On a conjoint reading of section 21 of the General Clauses Act and section 11 of the Act it becomes clear that the power of revocation can be exercised by three authori ties namely the officer of the State Government or the Central Government the State Government as well as the Central Government
The power of revocation conferred by section 8f on the appropriate Government is clearly inde pendent of this power
It is thus clear that section 8f of the Act satisfies the requirement of Article 224 whereas section 11 of the Act satisfies the requirement of the latter part of Article 225 of the Constitution
The statu tory provisions therefore when read in the context of the relevant clauses of Article 22 make it clear that they are intended to satisfy the constitutional requirements and provide for enforcement of the right conferred on the detenu to represent against his detention order
Viewed in this perspective it cannot be said that the power conferred by section 11 of the Act has no relation whatsoever with the constitutional obligation cast by Article 225
454D G 6
It must be realised that when a person is placed under detention he has certain handicaps and if he makes a request that a representation prepared by him may be for warded to the Central Government as well as the State Gov ernment for consideration after taking out copies thereof it would be a denial of his right to represent to the Central Government if the Detaining Authority as well as the State Government refuse to accede to his request and omit to forward his 447 representation to the Central Government for consideration
In such circumstances refusal to accede to their request would be wholly unreasonable and in total disregard of the right conferred on the detenu by Article 225 of the Con stitution read with section 11 of the Act
458F G 459B Razia Umar Bakshi vs Union of India  Ors  Rattan Singh vs State of Punjab  Ors  Sat Pal vs State of Punjab  Ors and Smt
Gracy vs State of Kerala  Anr JT  Tara Chand vs State of Rajasthan  referred to
Per MM Punchhi J 1
Section 11 of the Act does not confer any constitutional right on the detenu to have his representation thereunder considered as if under Article 225 but merely a provision enabling the State Government or the Central Government as the case may be to revoke or modify detention orders
Have section 11 of the Act re pealed it causes no affectation to the constitutional guarantee under Article 225 of the Constitution
Corre spondingly section 11 of the Act derives no sustenance from the said Article
Both operate in mutually exclusive fields though not as combatants
459F G