Case: N K Bapna Vs. U.O.I

The petitioner is the managing director of M/s. E.A.P. Industries Ltd., engaged in the business of manufacture and production of plastic compounds, plastic films and sheets and plastic chemicals. The petitioner says that it came to his knowledge that an order has been passed on 1st January, 1992, directing his detention under section 3(1) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (hereinafter referred to as the Act) - with a view to preventing him from abetting the smuggling of goods. A copy, purporting to be a copy of the said order, has been placed on record, though it is not quite clear how the petitioner came by it. Thereupon, he filed a writ petition in the Calcutta High Court for an injunction restraining the concerned authorities from detaining him in pursuance of the above order. This writ petition as well as an appeal therefrom have been dismissed; hence the present special leave petition.2. According to the petitioner, the detention order has been issued in consequence of certain proceedings which had been initiated against him by the customs officials. He says that the company imported 267.782 metric tons of Ethyl Hexanol (EHA). This consignment was unloaded at Kandla Port and 24 tankers thereof were transported to bounded warehouses after assessment to duty in October-November, 1989. Out of the chemicals thus kept in the bounded warehouse, the company cleared 175 metric tons between December, 1989, and October, 1990, on payment of duty. The company also imported 204 M.T. of P.V.C. resin from France on May 2, 1990. This consignment was unloaded at Calcutta port and was cleared for bonded warehousing. Out of this, 75 metric tons of P.V.C. resin were cleared by the company after payment of duty on September 7, 1990, September 17, 1990, and November 8, 1990, under the supervision of the customs officials. According to the petitioner, the warehouses were kept under lock and key and the key was in the custody of the Customs officials.3. Sometime in September, 1991, the Customs officials discovered a shortage of 93.975 metric tons of P.V.C. resin and a similar shortage also in the stock of EHA kept in the warehouse. Certain enquiries and proceedings ensued and the petitioner says that in the course of these enquiries, he came to know that an order of detention had been passed against him under the Act. Without waiting for the order and the grounds of detention being served on him, the petitioner filed a writ petition challenging the order of detention.In the present case, the authorities did not file any counter-affidavit affirming or denying the facts mentioned in the writ petition nor did they come forward to disclose or even indicate the grounds of the proposed detention, if any. The learned single judge in the High Court dismissed the writ petition on the short ground that, on the facts disclosed in the petition, the present case prima facie fell within the scope of the expression smuggling as defined in the Act. The Division Bench came to the conclusion that the circumstances referred to in the petition were not sufficient to constitute smuggling. Nevertheless, the court took the view that, without the grounds of detention, it ill not be proper for courts to go into the validity or otherwise of the order of detention or make any pronouncement that the impugned order has not been passed under the Act under which it is proposed to have been passed or that it was passed with a wrong purpose or was passed on vague, extraneous or irrelevant grounds.

Court's reasoning:
4. It is now well settled that, even in a case of preventive detention, it is not necessary for the proposed detenu to wait till a detention order is served upon him before challenging the detention order. It is true that the Constitution of India which permits preventive detention requires the detaining authorities to serve the grounds of detention within a prescribed period after the detention order is served on the detenu. It does not envisage any disclosure of the grounds of the detention prior to the service of the detention order on the detenu. To apprise the detenu in advance of the grounds on which he is proposed to be detained may well frustrate the very purpose of the law. On the other hand, to insist that no order of detention can be challenged until actual detention in pursuance thereof takes place might irretrievably prejudice the rights of the proposed detenu in certain situations. Thus, the conflicting claims of the State and the fundamental right of a citizen need to be reconciled and the limitations, if any, precisely enunciated.It is clear even from the facts disclosed in the petition that the case of the authorities may be that the petitioner has abetted the removal of the imported goods from the bonded warehouse without the permission of the proper officer. Of course, there can be no smuggling if the goods had been removed from the warehouse not by the petitioner but by the customs authorities or somebody else as suggested by the petitioner. But that will be a question of fact and one has to assume, for the purposes of the present argument, that the goods are alleged to have been removed by the petitioner or the company from the warehouse without the permission of the proper officer. In such a situation, a simple reading of the relevant sections is sufficient to say prima facie that, in the present case, there has smuggling by the company, and an abetment of smuggling by the petitioner. It is difficult to say on the broad conspectus of facts and the special definition clauses in the relevant statutes that the proposed detention in this case is totally outside the provisions of the statute. If there is, prima facie, smuggling or abetment of smuggling, it is open to the competent authorities to issue a detention order which may be challenged later on the merits on any grounds that may be available but it cannot be said that the action is flagrantly in violation of the statute or that the order is one not made under the provision of the statute under which it has been purportedly issued.We are of the opinion that, interesting as these arguments are, they cannot be accepted. The interpretation sought to be placed by counsel on the provision contained in Section 111(i) is unduly narrow and imports, into the clear language, thereof, words that are not there. There is no justification to restrict "dutiable goods" to "dutiable goods not yet assessed to duty". The suggestion that "warehouse" referred to in the clause should be understood to mean a warehouse to which goods are removed under section 49 but not one to which goods are taken in pursuance of section 59 is without basis and ignores the wide definition of that expression set out in section 2(43) of the Customs Act.This is not quite correct. Even the general concept of smuggling contains two elements : one, the bringing into India of goods the import of which is prohibited; and two, the bringing, into the countrys trade stream, of goods the import of which is permitted without paying the customs duties with which they are chargeable. In our view, the second eventuality can occur not only where there is a clandestine import evading the assessment of duty but also where there is a clandestine removal without payment of the assessed duty. In a case where the goods are warehoused under section 49 and they are clandestinely removed, there would be smuggling as the duties payable thereon have been evaded altogether. But even in a case where the goods are assessed to duty and allowed to be warehoused under section 59, clandestine removal can result in loss of duty. No doubt, there is a provision in section 72 for collection of the duty and forfeiture of the bond furnished to secure due payment of duty but these may not always be an adequate over to the Revenue if the goods are spirited away without permission. The mere fact that the goods have been ostensibly cleared, after assessment of duty, to a warehouse does not preclude the applicability of the concept of smuggling even in such a case. In a sense, import may be said to be complete for certain purposes say, sales tax purposes as in Dy. C. C. T. v. Caltex (India) Ltd., 1962 AIR(MAD) 298; 1962 (13) STC 163 : 75 MLW 115) on their clearance after assessment of duties at the customs barrier but it is not complete in a real sense. Even the warehouse to which the goods are permitted to be removed under section 59 is a premises under the lock and key of the customs authorities and is, in a sense, an extension of the customs area. Goods can be cleared therefrom for home consumption or exportation only after payment of duties. Till that is done, there is always the risk of loss to the State of the duties payable. So, import cannot be said to be complete till then from the point of view with which we are concerned. There is no reason why we should read down section 111(i) which only recognises thisare unable to see any force in this contention. The consequences which follow on a particular act or omission will depend on the statutory provisions in question. It may be that the petitioners act in the present can may not have attracted section 125 as it stood earlier but will now attract a penalty in view of section 125(2) inserted w.e.f. December 27, 1985. It may also attract section 72 but this cannot, however, be decisive of the interpretation of section 111(i). In the decision referred to by counsel which arose under the Sea Customs Act, 1878, smuggled goods were confiscated and, in addition, the smuggler was called upon to pay the duties on the goods. The court held that the question of a levy of import duties did not arise as there was no statutory provision covering the facts of that case enabling such levy. This decision is no authority for the proposition that section 111(i) is inapplicable to a case to which section 72 is applicable. Even if one assumes that section 72 will not applicable where the goods are confiscated, the position only comes to this, that the authorities have to choose, having regard to all the circumstances, between confiscating the goods on the one hand or collecting the duties payable thereon on the other. Having regard to the language of section 111(i), it is not possible to agree with counsel that, in such a case, the goods are not liable to confiscation merely because an alternative recourse to section 72 is available to them.There was some discussion before us on whether this court has confirmed the decision of the High Court on the above point or left it open in para 4 of the judgment. We do not think that it is necessary for us to enter into this controversy. That was a case where the goods had been completely cleared accepting the plea of the importer that their import was not prohibited. The High Court held that so long as this acceptance stood, the goods were not liable to confiscation. We are here concerned with the question whetherthe goods are liable to confiscation under section 111(i)and this question has to be answered in the affirmative in view of the language of the section. The conclusion here that the goods are liable to confiscation does not go behind or ignore the effect of the order of clearance as in that case. It accepts the fact of clearance and proceeds on the footing that the goods, rightly cleared under section 59, have been clandestinely removed from the warehouse within the meaning of section 59. The decision cited by learned counsel is, therefore, of no assistance to him.13. The upshot of the above discussion is that, on the conspectus of facts placed before the court and referred to earlier, the activity of the company would amount to smuggling and that of the petitioner to abetment of smuggling, if they had removed, or caused or abetted the removal of the goods from the bonded warehouse without the permission of the concerned authorities. The order of detention proposed cannot be said to proceed on a basis totally extraneous to the provisions of the Act and cannot be described as an order not made under the Act under which it is purportedly made nor can it be said that the grounds of detention are vague, irrelevant or extraneous to the purpose or provisions of thea facie, one would agree that there is considerable force in this contention of learned counsel for the petitioner that there cannot be any smuggling of goods which have been openly imported, declared to the customs authorities and cleared by them, after being assessed to duty.However, we cannot go by the dictionary meaning of the world as the Act has a definition clause which adopts, for the word, the same meaning which it has in section 2(39) of the Customs Act.