Case: Pioneer Traders And Others Vs. Chief Controller Of Imports Andexports Pondicherry

2. The administration of Pondicherry was taken over by the Union of India from November 1, 1954. Before that Pondicherry was under the administration of the Government of France and was a free port. Import into Pondicherry was thus not subject to any restriction, except with regard to certain goods with which we are not concerned in the present petitions. Any merchant desiring to carry on business in the territory of Pondicherry had however to obtain a patente before he could do so. These patentes were of five kinds one of which was a patente authorising the trader to carry on the business of import of goods other than those which were under restriction. Though the importers were entitled by virtue of the patente to import goods subject to certain restrictions, this right could only be exercised by securing foreign exchange which was subject to certain limitations and was controlled by the Department of Economic Affairs at Pondicherry. There were two ways in which foreign exchange could be acquired, namely, (i) at the official rate through the Department of Economic Affairs, or (ii) in the open market at such rate as might be available; and both these ways were considered valid before November 1, 1954. Further there used to be authorisations for the purpose of import and the authorisations indicated the limit within which foreign exchange could be acquired either at the official rate or through the open market3. The petitioners case is that though the patentes were secured in September 1954, orders for import were placed before August 15, 1954. Thereafter after authorisations had been obtained from the French authorities, foreign exchange was acquired in the open market for the purpose of financing the import. There were in all twenty-nine transactions by the two firms, which are the subject-matter of these petitions, and in certain cases advances were paid, the balance being payable by means of bills of exchange drawn on "documents against payment" basis. But though the orders were placed before August 15, 1954 and necessary foreign exchange had also been secured in the open market later, shipments could not be made because of an unexpected dock strike in England and on the Continent and also for want of shipping space, and therefore most of the consignments on the basis of the twenty-nine orders were shipped after November 1, 1954, and only three consignments out of twenty-nine could be shipped in October 1954, that is before the administration of Pondicherry was taken over by the Government of India. The goods in all these cases arrived at Pondicherry after November 1, 1954. In the meantime the administration of Pondicherry was taken over by the Government of India from November 1, 1954 in pursuance of an agreement between the Government of India and the Government of France, and two notifications were issued by the Government of India, namely S.R.O. Nos. 3314 and 3315. By S.R.O. 3315, which was made under S. 4 of the Foreign Jurisdiction Act, No. XLVII of 1947, the Sea Customs Act, 1878, the Reserve Bank of India Act, 1934, the Imports and Exports (Control) Act, 1947, the Foreign Exchange Regulation Act, 1947 and the Indian Tariff Act, 1934 were extended to Pondicherry. This S.R.O. contained a saving clause which laid down that :-"Unless otherwise specially provided in the Schedule, all laws in force in the French Establishments immediately before the commencement of this order, which correspond to the enactments specified in the Schedule, shall cease to have effect, save as respects things done or omitted to be done before such commencement."As a consequence of these two S.R.Os. a press communique was issued by the Government of India on November 1, 1954, explaining the effect of these notifications, in which it was stated that imports into and exports from the French Establishments would be regulated in accordance with the provisions of the Imports and Exports (Control) Act, 1947. It was further stated that as regards orders placed outside the Establishments and finalised through grant of a licence by competent French authorities in accordance with the laws and regulations in force prior to November 1, 1954, licence-holders were advised to apply to the Controller of Imports and Exports for validation of licences held by them. Licence-holders were further advised not to arrange for shipment of goods until the licences laid by them had been validated by the Controller of Imports and Exports. In view of this press communique the petitioners tried to stop shipment until the authorisations held by them were validated by the Chief Controller of Imports and Exports, Pondicherry. But their suppliers told them that this could not be done, as the goods were in the course of shipment and it was too late to stop the shipment. The petitioners then applied for validation of the authorisations, but the Chief Controller of Imports and Exports, Pondicherry refused to validate them. The petitioners case is that this refusal was arbitrary. Eventually, when the goods arrived at Pondicherry after November 1, 1954 the petitioners approached the Collector of Customs at Pondicherry to permit clearance of the goods. They were not however allowed to clear them, and notices were issued to them to show cause why the goods should not be forfeited on the ground that the import had been made in contravention of the Imports and Exports (Control) Act, 1947 and the Sea Customs Act, 1878. The petitioners thereupon showed cause and their case was that orders had been placed before August 15, 1954 and the imports had been made strictly in accordance with the law in force in Pondicherry before November 1, 1954 and therefore could not be said to be unauthorised. The Collector of Customs however refused to accept this explanation and ordered confiscation of the goods, and in the alternative imposed penalties for clearing them. These penalties amounted to over Rs. 64, 000 in the case of one of the firms and over Rs. 96, 000 in the case of the other firm. There were then appeals by the petitioners before the Central Board of Revenue against the orders imposing penalties. These appeals were dismissed, though the penalty was reduced to over Rs. 35, 000 in the case of one firm and Rs.60, 000 in the case of the other firm. The petitioners then went in revision to the Government of India but their revisions were rejected on January 23, 1957. It appears that the petitioners paid the penalty though the date is not clear from the petitions and cleared the goods. The petitioners were apparently satisfied with the orders passed against them for they took no steps to go to Court after the revisions had been dismissed by the Government of India in January 1957, though they say that they have been making representations to the Government of India in that behalf without any effect and that the last communication from the Government of India was received by them in this connection in August 19614. In the meantime certain importers of Pondicherry filed petitions in this Court in 1959 challenging the order of confiscation and the alternative order imposing penalties on them by the Collector of Customs, Pondicherry in somewhat similar circumstances [see Universal Imports Agency v. Chief Controller of Imports and Exports, (1961) 1 SCR 305  ]. Those petitions were decided on August 23, 1960 and this Court held that in view of para 6 of S.R.O. 3315, already referred to, which saved the effect of all laws in force in the French Establishments immediately before the commencement of the Order, even though those laws were repealed by the order, with respect to things done or omitted to be done before such commencement, the authorisations granted by the French authorities before November 1, 1954 for import were sufficient to protect the goods imported on the basis of those authorisations whether the exchange was secured officially or from the open market, from the operation of the Imports and Exports (Control) Act, 1947, and other provisions to the same effect. This view was taken on the ground that para 6 saved "things done" before November 1, 1954 and as firm contracts had been entered into and authorisations granted before November 1, 1954, the subsequent arrival of goods in Pondicherry after November 1, 1954, as the consequence of the contracts and the authorisations was a "thing done" under para 6 of S.R.O. 3315. It was held that the words "things done" must be reasonably interpreted and if so interpreted they not only meant things done but also the legal consequence flowing therefrom. Consequently, it was held that the imported goods in those cases were not liable to confiscations under the Imports and Exports (Control) Act and similar provisions of any other law, as firm contracts had been made before November 1, 1954, and exchange had been arranged either officially or through the open market in full or in part under authorisations granted by the French Government and the subsequent import after November 1, 1954, was a consequence of these things which had been done before November 1, 1954 and was therefore protected by para 6. In the result the penalty collected was ordered to be refunded7. The Unions case is that the talks for the de facto transfer of the French-Indian Establishments to the Government of India were resumed in August 1954, and that as a result of these talks, an agreement dated October 20, 1954 between the Government of India and the Government of France for the settlement of the question of the future of the French Establishments in India was arrived at. Pursuant to this agreement, the administration of the French Establishments (including Pondicherry) was transferred to the Government of India from November 1, 1954. In consequence, the Government of India promulgated two orders, namely, S.R.Os. 3314 and 3315 of October 30, 1954, to come into force from November 1, 1954. The first of these orders was known as the French Establishments (Administration) Order while the second order was known as the French Establishments (Applications of Laws) Order, 1954, by which the Sea Customs Act, 1878 and the Imports and Exports (Control) Act, 1947 and certain other Acts were made applicable to the said settlements. Some persons, including the petitioners, who had no business in Pondicherry from before mala fide with intent to defeat the laws in force in the Indian Union which were legally to be extended to the French Establishments when their administration was taken over by the Government of India, managed to procure some colourable documents on the strength of which they claimed that they had placed firm orders with foreign firms for import of goods which were restricted under the Indian Import Control Regulations. After the Government of India had applied S.R.Os. 3314 and 3315 to the French Establishments and taken over their administration from November 1, 1954, a press communique was issued on November 1, 1954 that orders placed outside the French Establishments and finalised through a grant of licence by the competent French authorities in accordance with the laws and regulations in force prior to November 1, 1954, should be got validated by the Controller of Imports and Exports appointed for Pondicherry. Further, the licence-holders were advised not to arrange for shipments of goods until the licences held by them were validated. Later on January 5, 1955 the Union of India issued another press communique in view of certain representations received on the basis of Art. 17 of the Indo-French Agreement and the public was informed that imports of goods against open market transactions after November 1, 1954 would be treated as unauthorised. But having regard to the hardship likely to be caused to genuine importers who had placed orders in pursuance of their normal trading operations against which goods were in the normal course shipped by the suppliers prior to the date of merger, the Collector of Customs, Pondicherry was being authorised to accord certain concessions to genuine importers. One of these concessions was that goods shipped before November 1, 1954, but ordered before August 15, 1954 would be cleared without penalty irrespective of origin and value. The petitioners tried to take advantage of this concession and therefore tried to show before the Collector of Customs, Pondicherry that they had placed firm orders before August 15, 1954, though shipments could only be made in three cases before November 1, 1954 and were delayed in others because of dock strike in England and in Continental countries. This case was scrutinised by that Collector of Customs and he pointed out in his order that though the orders for these goods are said to have been placed before August 15, 1954, the two firms could only start functioning in Pondicherry from the month of September in which month they had obtained patente for conducting business there legally. The Collector also pointed out that in the ordinary course of business, commitments were not made without entering into correspondence with the suppliers regarding the prices, terms of payment etc., but in these cases, the petitioners produced no such correspondence. It was also found that the petitioners had not done any business of this kind even in the Indian Union before this. The Collector therefore held that it had not been proved that the goods had in fact been ordered before August 15, 1954 and therefore ordered their confiscation and imposed penalty in lies thereof. The appeals of the petitioners to the Central Board of Revenue failed except to the extent that the penalty was reduced. The Boards order was silent on the point whether the goods had in fact been ordered before August 15, 1954. But the Board held that as the goods were imported without licence at a time when a licence was required for their imports, the appeal must fail. The petitioners then went in revision to the Government of India but failed there also.

Reasoning: 12. It will be seen from the above summary of the views of the learned Judges who constituted the majority that, though the reasons given for coming to their conclusion were slightly different they were all agreed that where an order of assessment is made by an authority with jurisdiction under a taxing statute which is intra vires, it is not open to challenge as repugnant to Art. 19(1)(g) on the sole ground that it is based on a misconstruction of a provision of the Act or of a notification issued thereunder and the validity of such an order cannot be questioned in a petition under Art. 32 of the Constitution, though it may be open to question such an order on appeal or in revision in case the statute provides for that remedy or by a petition under Arts. 226 and 227 in appropriate cases12. It will be seen from the above summary of the views of the learned Judges who constituted the majority that, though the reasons given for coming to their conclusion were slightly different they were all agreed that where an order of assessment is made by an authority with jurisdiction under a taxing statute which is intra vires, it is not open to challenge as repugnant to Art. 19(1)(g) on the sole ground that it is based on a misconstruction of a provision of the Act or of a notification issued thereunder and the validity of such an order cannot be questioned in a petition under Art. 32 of the Constitution, though it may be open to question such an order on appeal or in revision in case the statute provides for that remedy or by a petition under Arts. 226 and 227 in appropriate casesThe majority judgment on which the petitioners rely has nowhere considered the question whether the authority in that case suffered from inherent lack of jurisdiction when it decided to confiscate the goods imported and levy penalties in the alternative. All that the learned counsel for the petitioners could draw our attention to was a sentence in the majority judgment to the following effect15. As we have just indicated, the decision of this Court in the case of Universal Imports Agency, (1961) 1 SCR 305  , was not based on the ground that appropriate authority who confiscated the goods lacked inherent jurisdiction to do so. The decision, in substance, proceeded on the ground that in exercising the said jurisdiction, the authority had misconstrued S.R.O. 3315. The question, as to whether a writ petition under Art. 32 can lie on that ground was not raised before the Court and has not been considered. Therefore, it seems to us, with respect, that the observation made by Kapur J. in the case of Ujjambai (AIR 1962 SC 1621  ) that the decision-in the case of Universal Imports Agency, (1961) 1 SCR 305 affords an instance of want of jurisdiction to tax transactions which the law excludes from taxing powers of the authority levying the tax, is not very accurate. Similarly, it may be added that the inclusion of the said decision in the list of judgments cited by Das J. which, in his opinion, illustrated categories of cases where executive authorities have acted without jurisdiction, is also not justified. Since the point about the competence of the writ petition was not raised or considered in the case of Universal Imports Agency, (1961) 1 SCR 305  , it would not be accurate or correct to hold that that decision turned on the absence of jurisdiction of the appropriate authority. It is well known that after the decision of the Court in the case of Kailash Nath v. State of U.P., AIR 1957 SC 790  , some writ petitions were entertained on the ground that the jurisdiction of the Court under Art. 32 could be invoked even if a tribunal exercising quasi-judicial authority had misconstrued the law under which it purported to act. Having regard to the decision of the Special Bench in the case Ujjambai, (AIR 1962 SC 1621  ) these precedents have now lost their validityThis in our opinion is not correct. The Sea Customs Act was applied to Pondicherry by S.R.O. 3315. This S.R.O. has six paragraphs. The first paragraph gives the name of the S.R.O. and the date from which it will come into force. The second paragraph defines what are "French Establishments" to which the S.R.O. was applicable. The third paragraph lays down that certain Acts mentioned in the Schedule which are twenty-two in number would apply to the French Establishments subject to certain conditions which are not material. Sub-paragraph (2) of para 3 applies all rules under the various enactments in the Schedule to the French Establishments. Paragraph 4 lays down how references in any enactment, notification, rule, order or regulation applied to the French Establishments have to be construed. Paragraph 5 gives power to any Court, tribunal or authority required or empowered to enforce in the French Establishments any enactment specified in the Schedule to construe the enactment with such alterations, not affecting the substance, as may be necessary or proper. Then comes para 6 which we have already set out. It will be seen therefore the S.R.O. 3315 applied the Sea Customs Act and certain other Acts to the French Establishments, including Pondicherry, and para 6 in particular is similar to a repealing and saving provision to be found in an Act which repeals and re-enacts an earlier enactment. It would therefore be not improper to read para 6, as if it was incorporated in each one of the twenty-two Acts which were extended to the French Establishments by S.R.O. 3315. The construction therefore of para 6 of the S.R.O. which must be deemed to have been inserted in each one of Acts mentioned in Schedule would be a construction of the Sea Customs Act itself. Original S. 2 in the Customs Act provided for repeal of earlier enactments and for saving (though it no longer exists in the Acts as it was repealed by the Repealing Act No. 1 of 1938). In effect, therefore, para 6 of the S.R.O. would take the place of original S. 2 of the Sea Customs Act. Therefore, an interpretation of para 6 of the S.R.O. which must be deemed to have been inserted in the Sea Customs Act in place of original S. 2 would be an interpretation of the Sea Customs Act. So the contention that Ujjambais case (AIR 1962 SC 1621  ) does not apply, for there has been no misconstruction of any of the provisions of the Sea Customs Act has no force. It may be added that it is not disputed in this case that the Collector of Customs had inherent jurisdiction to deal with this matter and the only attack on his order and on the subsequent orders passed in appeal and revision is that they misconstrue the provision of para 6 of the S.R.O19. This matter can therefore be looked at in two ways. If it is held that the petitioners rested their case on only the ground that they had placed the orders for import before August 15, 1954 and were thus entitled to the benefit of the press communique the finding of the Collector to the effect that he was not prepared to believe that case for three reasons given by him cannot be said to justify a prayer for a writ because it is a finding of fact; and a writ cannot issue even if the said finding is erroneous. If, therefore, that was all that was raised by the petitioners before the authorities concerned, and the authorities concerned have found against the petitioners on the main question of fact involved in their contentions before them, it cannot be said that the authorities were wrong in the view they took for the reasons given by them and there would therefore be no question of any interference under Art. 32. Further, if a petition under Art. 32 is not maintainable when a provision of law is misconstrued, it could be much less maintainable when there is a mistake of fact though as we have indicated already, it cannot be said in this case that the Collector was wrong in his conclusion on the facts20. The petitioners case, as put forward in this Court, is that even if firm orders were not placed before August 15, 1954, they were entitled to take advantage of the judgment of this Court in Universal Imports Agencys case - (1961) 1 SCR 305  , if they had placed orders after obtaining the patentes in September and had received authorisations and had arranged for foreign exchange to the extent necessary before November 1, 1954. If this is the case of the petitioners, now, and they want to succeed on it, it must be held that the Board by implication negatived it in appeal. This could only be done by a misconstruction of para 6 of S.R.O. 3315, for if that paragraph had been rightly construed, as held by this court in Universal Imports Agencys case, (1961) 1 SCR 305     the goods would not have been confiscated21. Therefore, the position in this. If the petitioners only raise the claim based on the press communique that they had placed firm orders before August 15, 1954, their claim has been negatived on facts and we see no reason to differ from the conclusion of the Collector on the facts. On the other hand, if the petitioners seem to have raised the case which they are now raising before us on the basis of Universal Imports Agencys case - (1961) 1 SCR 305     before the Board, the Board must be deemed to have turned down that claim and that could only be on the basis of the misconstruction of para 6 of S.R.O. 3315. The case therefore that is now put forward on behalf of the petitioners before us would be absolutely analogous to the position in Ujjambais case (AIR 1962 SC 1621  ). In that case the assessing authority acting with jurisdiction upon a misconstruction of a statute which was intra views or a notification properly issued thereunder assessed the tax and it was held that such an assessment cannot be impugned as repugnant to Art. 19(1)(f) and (g) on the sole ground that it was based on a misconstruction of a provision of the Act and the validity of such an order cannot be questioned in a petition under Art. 32. In the present case, a similar quasi-judicial authority i.e. the Board acting judicially with its jurisdiction must be deemed to have turned down by implication the contention raised on the basis of para 6 of S.R.O. 3315 by the petitioners before it and this could only be done on the misconstruction of that paragraph in view of the decision in Universal imports Agencys case, (1961) 1 SCR 305.   The petitioners however cannot question the validity of those orders by petition under Art. 32 of the Constitution, for the Act under which the orders were passed read with S.R.O. 3315 is not assailed as ultra views and the only ground on which it is said that a fundamental right has been violated is that there has been by implication a misconstruction of para 6 of S.R.O. 3315 by the Board. In that view the decision in Ujjambais case, (AIR 1962 SC 1921) will apply with full force to the present petitions.