IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 22/12/2003 Coram The Honourable Mr. Justice V.S. SIRPURKAR and The Honourable Mr. Justice M. THANIKACHALAM W.A. No.1884 of 2003 and W.A.Nos., 1890, 1892 & 1893 of 2003 and W.A.M.P. Nos.2613, 2621, 2623 & 2624 of 2003 M/s. South India Exports rep. by its Partner Mr. Indermal Ramani ... Appellants -Vs- 1. The Joint Director of Foreign Trade O/o Joint Director of Foreign Trade 38-39 Whites Road Chennai 600 014 2. The Senior Intelligence Officer Director of Revenue Intelligence 25 Gopalakrishna Iyer Road Chennai 600 017 ... Respondents Appeals under Cl.15 of the Letters Patent against the order dated 30-4-2003 in W.P. No.4695 of 2003, etc. !For Appellants :: M/s. Habibullah Basha & K.M. Vijayan, Senior Counsel for Mr. M. Lakshmipathy and M/s. McGan Law Firm ^For Respondents :: Mr. Arvind P. Datar, Senior Counsel for Mr. K. Veeraraghavan, SCGSC :JUDGMENT V.S. SIRPURKAR, J. Being aggrieved by the judgment of the learned single Judge of this Court, dismissing the five writ petitions and the writ miscellaneous petitions therein, the petitioners have come up before us in these writ appeals. 2. All the petitioners are the export-oriented units. The Government of India has formulated an Export-Import Policy under Sec.3 of the Foreign Trade (Development and Reguation) Act, 1992 (hereinafter referred to as the 'Foreign Trade Act'). Under the said policy, concessions were given for imports as well as exports. On the basis of such concessions, the petitioners could import raw materials without payment of duty with the obligation to export the 'manufactured goods' from that imported raw material. The petitioners are manufacturing exporters in the sense, that they are expected to have their factories for the manufacturing of some export-material, the raw material for which is imported. This is called 'Advance Licence'. The advance licences are issued by the Joint Director of Foreign Trade, who is essentially an officer under the Ministry of Commerce, Govenrment of India and more particularly an officer working under the Central Excise Department. On the basis of that licence, the imports are permitted to be made by the manufacturing units, who hold the advance licences and after using that raw material which is imported the matching exports are expected to be made by these advance licence holders. There is a power under the Foreign Trade Act via Sec.10 in the Union Government to appoint any person, vesting him the powers such as searching, inspecting and seizing of goods, etc. and in case of the contravention of the provisions of the Act or, as the case may be, the conditions of licence, which has been dealt with under Sec.11 of the Foreign Trade Act. It is, therefore, the case of the petitioners that they can be dealt with in respect of any breach committed by them (if at all) in respect of their advance licence conditions only by the authority under the Foreign Trade Act, which authority is their licensing authority. While so, all the petitioners received the notices in the nature of a notice under Sec.108 of the Indian Customs Act issued by the second respondent, Senior Intelligence Officer, Directorate of Revenue Intelligence, who is an officer under the Customs Act in Finance Ministry. The petitioners, by this notice, were called upon to face an enquiry. 3. The petitioners challenged these notices and their case before the learned single Judge was that firstly, they could be dealt with only under the Foreign Trade Act and that too, by their Licensing Officer. They pointed out that the said notice under Sec.108 was an unnecessary harassment to the petitioners as it entailed the personal appearance of the petitioners before the concerned officer. They further plead that the concerned officer had no powers to interfere in the imports and exports made by the licence-holder since the entire exports and imports of the petitioners on the basis of the advance licence is governed under the duty-free scheme, which is monitored and governed only by the first respondent. Lastly it was contended that the notice was not issued by the Gazetted officer and hence was a nonest notice. 4. As against this, the contentions raised by the Department was that there was nothing wrong in the second respondent issuing the notice was purely for the purposes of investigation and that such a hue and cry could not be made about the notice. It is pointed out by the second respondent that on a tip off, the second respondent came to know about the grave irregularities by these manufacturing importers. It is pointed out that these manufacturing importers had made misrepresentations regarding the fact that they owned a factory whereas, some of the petitioners had even given the fake addresses of their factory while the others did not have any machinery in that factory and their contentions that they conducted the manufacturing activity in respect of the imported raw materials was per se false. It was further suggested that merely because the licences were given under the Foreign Trade Act, it did not divest the officers of the Customs Department to make investigation and for that purpose making the efforts via Sec.108 of the Customs Act. 5. Learned single Judge held that firstly, it could not be said that the officer giving the notice was not a Gazetted officer. The learned Judge secondly found that merely because there were powers in the first respondent or as the case may be, the licensing authority to monitor the said licences, it could not be said that the second respondent was divested of his powers to investigate. In short, the contention raised was that there could not be a parallel enquiry also. Relying on the judgment of the Supreme Court, the learned Judge came to be conclusion that if there was any activity of smuggling as understood in the Customs Act, there could be no impediment in the way of the officers of the Customs Department to initiate an investigation for which purpose, a notice could always be given under Sec.108 of the Act. Holding so, the learned Judge dismissed the writ petitions, necessitating the present batch of writ appeals. 6. Arguments for the appellants were laid by Shri Habibullah Basha, learned senior counsel as also Shri K.M. Vijayan, learned senior counsel, who pointed out that there were intervening circumstances after the judgment of the learned single Judge, which made the whole enquiry as a meaningless and a fortuitous enquiry. Learned senior counsel took this stand that even if the customs authorities could be said to have jurisdiction to issue a notice under Sec.108 of the Customs Act, the whole exercise was a meaningless exercise because the authorities under the Foreign Trade Act had also issued a show cause notice to the petitioners alleging therein certain irregularities and during the pendency of these appeals, the said proceedings came to be closed holding that there was nothing wrong with the dealings of the petitioners. In fact, we were taken through the said adjudication order passed by Joint Director General of Foreign Trade, Enforcement -cum- Adjudication. It is argued that this would clinch the issue and there would be no necessity even to investigate any matter as, in fact, everything stood closed by this adjudication. Learned counsel also urged that it was a settled law by the celebrated decision of the Supreme Court in East India Commercial Company case (AIR 1962 SC 1893), which was followed later on right up to the case of UNION OF INDIVA v. SAMPAT RAJ DUGAR (1992 (58) ELT 163) and TITAN MEDICAL SYSTEMS PVT. LTD. v. COLLECTOR OF CUSTOMS, NEW DELHI (2003 (151) ELT 254) that there could be no parallel proceedings and, therefore, there would be no necessity of proceeding even with the investigation and the whole exercise wold not even be a bona fide exercise of investigating alone. We were taken through the various investigations as also through the conditions of licence by the learned counsel, who, on that basis, contended that there was in fact no jurisdiction in the concerned officer to issue a notice under Sec.108 of the Customs Act. 7. As against this, Shri Arvind Datar, learned senior counsel appearing on behalf of the second respondent urged that what was being done was merely the investigation of certain irregularities which are suspected to have taken place. He pointed out that the department had a definite information that the information, on the basis of which the advance licence, was obtained was false in almost all the cases. He pointed out that there was no question of lack of bona fides on the part of the Department because this exercise was taken in respect of practically all the persons having the advance licence and it is only these present petitioners, who are refusing to co-operate with the department by complying with the said notice. Learned counsel argued that there was a definite information that there were no manufacturing units available which had the capacity of manufacturing the exported goods which these exporters had exported allegedly utilising the imported raw materials. He points out that there is every possibility of the imported material being siphoned off in the market and some other inferior material is being used only to complete the export obligation. He points out that there was nothing wrong in investigating the matter because after the investigation, the concerned authorities under the Customs Act could also come to the conclusion that there was nothing wrong with the dealings of the petitioners. Learned senior counsel heavily relies on the reported decision of the Supreme Court in SHESHANK SEA FOODS PVT. LTD., KARNATAKA v. UNION OF INDIA AND OTHERS (1996 (11) SCC 755) points out that this case will clinch the issue. As regards the contention of the adjudication proceedings, the learned counsel has to say that he would have nothing against that order but, in spite of that order there would still be areas left to investigate. 8. On these rival submissions, we have to see as to whether the learned Judge was right in dismissing the writ petitions. 9. We will not deal with the question as to whether the officer, who sent the notice under Sec.108 of the Customs Act, could not have sent the same owing to his not being a Gazetted officer. A statement is made on behalf of the respondents that the concerned officer is a Gazetted officer under the notification and that statement is not seriously disputed by the other side. Even otherwise, there is no reason for us not to accept the statement made by the learned senior counsel at the Bar that all such officers, holding the post of Senior Intelligent Officer, have been given the status of the Gazetted officer. Hence that question is concluded against the appellants. 10. A glance at Sec.108 of the Customs Act, under which the summons is given, would suggest that it is a power given to any Gazetted officer of the Customs Department to summon any person during any enquiry which the officer would make in connection with the smuggling of any goods. A summons can be for the production of the documents or those in possession or under the control of the persons summoned and such a summoned person is bound to attend and to state the truth upon any subject respecting which he is examined by the summoning officer. These powers are given obviously with an idea to check the smuggling. The definition of 'smuggling' is to be found in Sec.2(39) of the Act, which is as under: "smuggling in relation to any goods, means any act or omission which will render such goods liable to confiscation under Sec.111 or section 113" When Sec.111 is seen, it is clear that any goods brought from a place outside India would be liable for confiscation provided under any of the eventualities described in clause (a) to (p). It will be enough for us to quote sub-section (o), which reads as under: "Sec.111. Confiscation of improperly imported goods, etc.- The following goods brought from a place outside India shall be liable to confiscation:- ... ... ... (o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer;" It is therefore clear that a Customs Officer would have all the possible power and more particularly described under Sec.108 of the Act to summon any person obviously to enquire as to whether any goods have been smuggled or not. If, therefore, any goods are brought in India, which enjoy the exemption from the payment of customs duty on certain conditions then, the Customs Officer will have all the powers to enquire as to whether the conditions, subject to which the said duty is exempted, have been followed or not and it is obvious that, in case of the breach of those conditions, those goods will be smuggled goods. We, therefore, do not see as to how a simple summons issued under Sec.108 of the Act could be termed to be a proceeding without jurisdiction, when it is the inherent power of the every Gazetted officer of the Customs Department to enquire into the matter of smuggling. 11. It is tried to be suggested, more particularly from the accompanying documents of the adjudication order dated 10-10-2003, that atleast in case of the licence obtained by M/s. Varadhariya Exporters in Chennai, who are the appellants in W.A. No.1890 of 2003, in fifteen licences the export obligations had been made and the licences were also redeemed. It is urged that it is only in respect of the sixteenth licence wherein, the import values are Rs.24,47,46,004/- and Rs.26,4 3,25,684/- and that 75% of the export obligation is also over. Learned counsel for the appellants suggest that if the goods were imported and the matching exports were done under the very supervision of the Customs Officers, there will be no question of re-opening these transactions and finding out as to what really was the irregularities committed. Learned counsel also points out that show cause notices were given to all the appellants and one such show cause notices is relied upon, which is dated 13-12-2002. It is then pointed out that in that show cause notice it was alleged that the noticee diverted the duty-free imported raw material instead of utilising the same for " manufacturing" the export-product as required under the Actual User Advance Licence and no proper accounts were maintained for consumption and utilisation of the imported raw materials as prescribed in the EXIM policy and, therefore, the noticee was not eligible for Actual Users Advance Licence and misdeclared the facts and obtained the licence in a fraudulent manner, causing loss to the tune of crores of rupees to the exchequer and, therefore, this would attract the provisions of Sec.11(1) and Sec.11(2) of the Foreign Trade Regulations Act and, therefore, the noticee was directed to show cause as to why the said licence should not be cancelled and penalties imposed. It is then pointed out that the same Joint Director General of Foreign Trade, after holding the enquiry, has exonerated the noticee-appellant and has not chosen to invoke Sec.9(4) and/or Rule 10 for cancellation of the licence. 12. We have gone through the said order very carefully. We were also taken through the relevant paragraphs wherein, it has been held that under the Foreign Trade Regulations Act and the Rules framed thereunder, the licensing authority has got ample powers to deal with the holders of the licence by bringing them to books of law (see internal page 15 para 2 therein). In that order, after quoting various paragraphs from the EXIM policy, the concerned officer has culled out seven points on which the examination would have to be made: 1. Power under the Handbook. 2. Whether it is a bonafide default?; or 3. Whether it is a malafide default? 4. Whether demand notice is issued? 5. Whether the firm is placed under Denied Entities List/ Defaulters List? 6. Whether their IEC has been suspended? 7. Concerned provisions of Foreign Trade Act, 1992 can be applied in the case, i.e. for penal case. The officer then has given a finding that the orders redeeming fifteen licences were in order as the matching exports were done and the foreign exchange was also earned for the country. The order quotes: "In the absence of conclusive evidence against the noticee firm for having violated the conditions stipulated in either Clause 9(4) or Clause 10 above, I would be doing a great injustice to the noticee firm in ordering the cancellation of the licence ab-initio. Even the DRI, Chennai in their letter dated 18-10-2002 have only informed that the noticee firm "appears" to have diverted the duty-free imported raw materials instead of utilising the same for the export products ... ... ... Although the noticee firm declared their factory address in their SSI certificate produced along with the application, one should appreciate the entire stainless steel industry and the type of machinaries they use in manufacturing the stainless steel utensils. The learned advocate had explained that the industry should not be compared with the other units having fully automated and highly complicated machines. Their industry needs a mould, a die and a pressing machine and a host of semiskilled labour force to polish and pack the goods manufactured and therefore, the manufacturing activity can be done either in a factory or in a shed for that purpose as per the capacity and the duration of the manufacturing process. During the relevant period in question the noticee firm was in possession of the SSI certificate issued by the concerned authority and no authority including the Director of Industries and Commerce questioned about the bona fide of their factory. The issue has now been highlighted by the DRI on a mere assumption that the noticee firm "appears" to have not used those imported materials in the manufacturing process of the final product. " These observations would suggest as if everything was alright with the manufacturing industry of the appellants. However, the learned counsel for the respondents points out that the factory, where crores of rupees worth of imported stainless steel was used for manufacturing the utensils, was, on inspection by the customs officer, found to be of having an area of 600 sq.ft. Learned counsel further pointed out that there was material on record of the customs authorities that the so-called landlord of that factory completely disowned any knowledge about the appellants or their carrying on the manufacturing activities therein. Learned counsel further suggests that in one of the appellants' case, there was no factory at all as the door number of the factory was 10-A, while there was no house bearing that door number on that street. He submits that in the wake of this, the customs authorities felt that what was being done was importing the costly stainless steels from foreign countries and disposing them of in the local market and honouring the export obligations, perhaps, with inferior quality of goods again, perhaps, without using the imported stainless steel sheets. Learned counsel suggested that with this evidence, it was necessary for the Customs Department to enquire into the matter and it was only with an objective of the enquiry that the summos was issued. Learned counsel further urges that it was fully open for all the appellants to convince the Customs authorities of their innocence and further convince them that there has been no violation of the export obligation or as the case may be the conditions of the Advance Licence. Learned counsel wonders as to how a fault can be found in the matter of jurisdiction of the officer to issue a summons and, according to the learned counsel, the whole issue was being pre-judged. 13. The contention is undoubtedly correct. The concerned officer, who passed the order in adjudication proceeding, did not have the evidence before him nor was such evidence ever referred to in the said adjudication order. We do not mean to sit in an appeal over the said adjudication order because that is not our jurisdiction. However, we must say and express that there is hardly any reference to the evidence in that order, which evidence is undoubtedly presently available with the customs authorities as per their own claim. We fail to follow that merely because of this adjudication order, how is it that the customs authorities would be divested of any jurisdiction even to enquire into the matter. Learned counsel took us to the Foreign Trade Act and more particularly Sec.12 therein, which reads as under: "12. Penalty or confiscation not to interfere with other punishments. -- No penalty imposed or confiscation made under this Act shall prevent the imposition of any other punishment to which the person affected thereby is liable under any other law for the time being in force." This provision would knock out all the basis of the claim made by the appellants. All the while, the appellants have been harping that even if the customs authorities have the jurisdiction to enquire into the matter, there would be no question of any further enquiry in view of the adjudication order passed by the Zonal Joint Director General of Foreign Trade. If the appellants have smuggled the goods or have engaged themselves in smuggling of the goods in importing the goods without paying the proper customs duty, or if they have brought exempted goods and have not complied with the conditions of which the exemption was granted, that would certainly be an act of smuggling, in which event, any concerned Customs Officer empowered under the Act would have jurisdiction to enquire. It cannot be a defence, to nip such an enquiry in the bud, that there has already been an adjudication regarding the advance licence on the basis of which the imports have been made and that such adjudication has been closed in favour of the appellants. That may be so. However, the jurisdiction of the Customs Officer to enquire into the matter would not stand concluded merely because of that. It was tried to be urged that this is the law laid down by the Supreme Court in East India Commercial Company case, cited supra, which has been followed in UNION OF INDIA v. SAMPAT RAJ DUGAR (1992 (58) ELT 163) and further in TITAN MEDICAL SYSTEMS PVT. LTD. v. COLLECTOR OF CUSTOMS, NEW DELHI (2003 (151) ELT 254. 14. On the other hand, learned counsel for the respondents urged that this question stood concluded in Sheshank Sea Foods case, cited supra. It is seen from Sheshank Sea Foods case, that it is against the judgment of the Karnataka High Court in KAMATH PACKAGING LIMITED v. UNION OF INDIA 1992 (61) ELT 548. Learned counsel for the Department took us through the said judgment of the Karnataka High Court to appraise us of the facts involved therein. That was also a case where the petitioner had the manufacturing advance licence under the Foreign Trade Regulation Act and EXIM Policy and there also, the customs authorities had issued the summons to the petitioner to furnish the details about the transactions. The learned Judge has tabulated the contentions in the following words: "(i) that the Customs Department had no right or authority to call upon the petitioners to furnish details of the import of the raw materials and the utilisation thereof. The petitioners imported the raw materials under an advance licence granted by the Controller of Imports and Exports subject to the conditions attached to the said licence/licencees; (ii) Any breach of the conditions should attract the jurisdiction of the concerned authority, namely the Enforcement Wing of the licensing authority and it is not for the Customs Department to exercise powers of search, seizure and confiscation. For