Case: M/S. French India Importing Corporation, Delhi Vs. The Chief Controller Of Imports &amp; Exports And Others

The petitioners who are citizens of India placed an order on August 6, 1954, with certain firms in the United Kingdom for the despatch of cycles and cycle parts to Pondicherry - Which was at that date the principal French establishment in India. According to the law which then obtained in Pondicherry territory, merchants desiring to do business there had to have "a patent" or licence from the authorities for carrying on such business. The petitioners applied for such a "patent" to the authorities on August 14, 1954, and they were granted one on August 18, which was to be effective from August 1, 1954. The order placed with U. K. firms was accepted and the goods covered by the indents were shipped form the U. K. ports on October 11, 1954. The foreign exchange needed for effecting this import could under the French Law have been obtained either from or on the authorization of the Head of the Department of Economic Affairs at Pondicherry or by what has been termed purchase in the open market. In pursuance of these facilities the moneys required were transmitted through bankers who made payments on behalf of the petitioners in the United Kingdom and the goods arrived in Pondicherry on December 4, 1954, the Bill of Entry being presented to the Customs Authorities for clearance on the 17th of that month.4. Meanwhile political changes took place in the governance of Pondicherry and other French settlements. An agreement was entered into between the Governments of the Union of India and of France under which the administration of the French Settlements, including Pondicherry was ceded to the Union Government. This agreement which was signed on behalf of the two Governments on October 21, 1954 was to be effective from November 1, 1954. On October 30, 1954 two notifications were issued by the Ministry of External Affairs in pursuance of the agreement dated October 21, 1954, between the two Governments. They were respectively S. R. O. 3314 and S. R. O. 3315. As the questions arising for decision in the petition turn on the proper construction and legal effect of these two notifications, it would be necessary to deal with them in some detail but for the purpose of the narration of facts, it would be sufficient to say that while S. R. O. 3314 saved the operation of the pre-existing French Law except in so far as it had been affected by S.R.O. 3315 the latter repealed such laws to the extent they were inconsistent with the Indian enactments set out in the Schedule whose operation was extended to Pondicherry and the French settlements. Among the Indian enactments so applied to Pondicherry were the Foreign Exchange Regulation Act 1947 the Imports and Exports (Control) Act. 1947, the Sea Customs Act. 1878 and the Tariff act. 1934.5. The Bill of Entry was as stated earlier presented to the Customs Authorities at Pondicherry on December 17, 1954 and it would be seen that by that date Pondicherry was being administered as part of the Union territory with the Indian laws referred to operating in the area. The customs authorities at Pondicherry took the view that as the consignment imported by the petitioners did not reach the port of Pondicherry before November 1, 1954 when the Union Government took over the territory the importation was without authorization of the Indian law and therefore in contravention of the Import and Export Control Act and the Orders issued therein the Sea Customs Act the Tariff Act and the provisions of other relevant enactments. After a notice to the petitioners to show cause why the goods should not be treated as having been imported without a licence granted under the Imports and Exports (Control) Act the Customs authorities at Pondicherry after considering their explanation decided against the petitioners ad directed them to clear the goods on payment of duty and of a penalty which was levied under S. 167(8) of the Sea Customs Act. this order was passed on March 3, 1955. The petitioners thereupon preferred an appeal to the Central Board of Revenue who dismissed it by their order dated July 31, 1957 and thereafter the petitioners filed a revision to the Central Government who dismissed it by their order dated January 8, 1957 but reduced the penalty imposed. It is in these circumstances that the petitioners have approached this Court for therreliefs set out at the beginning of this judgment.

Court's reasoning:
In our opinion, these are wholly immaterial. Learned Counsel had to admit that there was no legal requirement to have a Letter of Credit and also that it was not inn contravention of French law which prevailed before November 1, 1954, to obtain foreign exchange requirements by what are termed "open market purchases". In fact, in the case of the Universal Imports Agency AIR 1961 SC 41  the orders impugned were passed and were sought to be supported before this Court on the ground that the foreign exchange requirements were met by "open market purchases" and that in consequence the importation was not authorized by the French law, and this contention was expressly negatived. We therefore hold that the petitioners are entitled to relief so far as the petition relates to the quashing of the order imposing the penalty and for a direction to refund the same.We find ourselves unable to accept this argument. The expression "free port" in the case of Pondicherry merely meant freedom from restriction as to importation in the shape of licence, etc., and not a complete absence of duties leviable on importation. But that apart, if the submission of the learned counsel amounted to saying that the point about the exemption of the petitioner from payment of customs duty is also covered by the decision of this Court in Universal Imports Agencys case AIR 1961 SC 41  we consider it wholly unjustified. As we have already shown, the liability to pay customs duty was admitted by the petitioner and the reasoning by which he sought relief in this Court proceeded on the basis that such duties were exigible. Besides, the entire reasoning of Subba Rao, J., was directed to show that the authorisation under the French law to effect the import should be held to protect the petitioners then before the Court from being treated as having imported goods without a licence under the Imports and Exports (Control)for instance, if S.R.O. 3315 contained a specific proviso excepting from the saving as regards "things done" the obligation, say, to pay duties of customs, it could hardly be contended that as the imports under pre-transfer contracts should be deemed to be authorised even if the goods arrive subsequent thereto, they should be exempt from the payment of duty. No doubt there is no such express provision but such a situation can also arise by necessarywe have already pointed out, this is exactly what is sought to be achieved by the conjoint operation of para. 6 of S.R.O. 3314 and the extension of fiscal laws to Pondicherry effected by paragraph 3 of S.R.O. 3315. It is precisely this that is also brought out by paragarph 4 of the notification dated November 1, 1954, extracted earlier. In the circumstances it looks somewhat curious that the petitioners now before us, who as interveners in the petitions by the Universal Imports Agency etc., supported the invoking of para. 6 of S.R.O. 3314, or Art. 17 of the Articles of Agreement and para 4 of the notification dated November 1, 1954, as an aid to the construction of the words "things done" in para. 6 of S.R.O. 3315 - the Government resisting their use as an aid, should now take up the position that these materials are irrelevant for determining the scope of those crucial words.In our opinion the petitioners are not entitled to have their goods imported into Pondicherry after November 1, 1954, without payment of customs duty notwithstanding that the contracts by reason of which the goods were imported, were entered into or the shipment took place before that date.17. The result is that the petition is allowed and the orders of the Government, of the Central Board of Revenue and the Collector of Customs are quashed only in so far as they impose a penalty on the petitioner for importing goods without a licence under the Imports and Exports (Control) Act, 1947, and the Import Control Order. The respondents were entitled to demand and to enforce the payment of customs duty and the relief prayed in the petition in so far as it relates to the quashing of the order in that respect and the refund of the duty collected, fails and isare unable to persuade ourselves that there is any justification in reading into the order S. R. O. 3315 anything to the contrary that might have been expressed in the Indo-French Agreement. It is true that the provisions of this para, of the Indo-French Agreement were referred to in the majority judgment in the Universal Imports Agency case, AIR 1961 SC 41  and it was said that the conclusion already reached was reinforced by what appeared in para 17. It is one thing however for a court to consider that conclusion reached on legal principles is in keeping, with the intention expressed in a document between high contracting parties, it is quite another thing to say that the conclusion reached on legal principles should be departed from because it seems to be at variance with what has been said in such a document. In view of what was agreed to in para 17 of the Indo-French Agreement there would have been no difficulty for the Government of India to make provision when providing for the saving of the operation of certain laws to be applied to the French Establishments in respect of "things done" before the commencement of the order to exempt the levy of customs duty from such saving. That was not done. There is nothing in law that we are aware of which would compel the Government of India because of the above Agreement, in para 17 to extend the provisions of levy of customs duty in the Sea Customs Act in respect of things done before the commencement of the order. Though the Government of India could have well made the exception when inserting the saving clause in the order S. R. O. 3315 in respect of levy of customs duty they did not do so. It will be improper in our opinion to hold that even though the Government of India did not expect it we should do so to give effect to what is considered to be the Government of Indias intention as expressed in the Indo-French Agreement. Reference has also been made to another order made by the Government of India. i.e. S.R.O. 3314 which saved the operation of the pre-existing French law except in so far as it had been affected by S.R.O. 3315.