Commissioner of Customs, Bombay vs Virgo Steels, Bombay and Another

Santosh Hegde, J.—M/s. Associated Cement Company Ltd. (for short ''ACC'')had embarked upon a project of substantial expansion andmodernisation of its cement factory at Shahabad in Karnataka.The ACC had floated a tender inviting supply of high standarddeformed steel bars. In that tender, ACC had claimed that theproject was aided by the International Bank for Reconstructionand Development (for short ''the IBRD''), which would give theimporter exemption from the import duty. In response to thesaid tender, M/s. Virgo Steels made an offer to supply 5,187MT of steel. The offer was accepted by the ACC and the saidVirgo Steels obtained an advance licence under the DeemedExport Scheme for duty-free import of the concerned steelunder Notification No. 210/82. This notification specificallyrequired that if the goods in question was not used for thepurpose for which importation was permitted then the importerwas liable on demand to pay a sum equivalent to the dutyleviable. Sometime in November, 1988, the ACC decided toabandon the work of expansion, hence, the licence obtainedunder the above said scheme for importation of duty-free steelbecame invalid. In spite of the same M/s. Virgo Steels importedcertain quantities of steel duty-free knowing very well that theexpansion project by the ACC had been abandoned. It is onrecord that M/s. Virgo Steels asked ACC to issue a signedexport certificate in regard to actual quantities of steel suppliedby it for the purpose of duty exemption, but the ACC pleadedtheir inability to provide such Deemed Export Certificate inview of the fact that it had abandoned its project.

In the above factual background and on the basis ofcertain information received by the Marine Preventive Wing ofBombay, Customs investigations were conducted in regard tothe import and illegal sale of steel by M/s. Virgo Steels. Basedon the said investigation, Commissioner of Customs, Bombaycame to the conclusion that the import made by M/s. VirgoSteels after the abandoned of the project by the ACC was incontravention of the provisions of the Customs Act, 1962 (''theAct''), hence, decided to initiate proceedings against M/s. VirgoSteels and ACC. Having come to know of this decision of theCommissioner of Customs, to pre-empt any penal proceedings,consequences of which could have been very serious, M/s.Virgo Steels wrote a letter dated 30.3.1991 to the AssistantCollector of Customs Marine Preventive Wing, Bombayadmitting in clear terms that the import of 24,326 MT of Billetsand 2300 MT of Lead Ingot by them, and cleared duty-freeunder the DFC Scheme was illegal. They also admitted that thesaid material was sold in the market contrary to the terms ofsaid Import Scheme and assured the former that they wereready to pay the duty chargeable under the said import as alsoany other penalty that may be imposed on them. The relevantpart of the said letter is as under:- "In this respect it is ourhumble submission that we are ready to pay the duty chargeableof 24,326 MT of Billets and 2300 MT of Lead Ingot along withany other penalty imposed on us. We do not want any showcause notice and personal hearing in the matter." (emphasissupplied). Along with the said letter they also enclosed acheque for a sum of Rs. 50 lacs though post dated as a token oftheir commitment made in the said letter.

Based on the said letter, the Collector of Customs videhis order dated 16.3.1993 held that duty amounting to Rs.1,50,11,858/- was leviable on the goods cleared by M/s. VirgoSteels and after giving deductions for such amounts alreadydeposited by them, a demand for the balance sum ofRs. 72,02,060/- was made on M/s. Virgo Steels along with apenalty of Rs. 5 lacs. In regard to ACC, the Collector imposed apenalty of Rs. 5 lacs for having abetted the illegal import of thesaid sale.

M/s. Virgo Steels and ACC preferred their respectiveappeals before the Customs, Excise & Gold (Control) AppellateTribunal (for short ''the Tribunal''). The Tribunal by theimpugned order though rejected the contention of M/s. VirgoSteels as to the genuineness of the imports, still allowed theirappeal holding that the non issuance of show cause notice asrequired u/s 28 of the Act had vitiated theproceedings initiated by the Collector of Customs, hence,partially allowed their appeal. The appeal of the ACC was alsoallowed holding that there was no intentional or otherwiseabetment by ACC because they had already informed M/s.Virgo Steels of their decision to abandon their expansionproject and had also refused to give M/s. Virgo Steels acertificate justifying to import made by them.

It is against this order of the Tribunal made in appealNo. C-1994/92-B2 of M/s. Virgo Steels and AppealNo. C/151/94.Bom. Filed by the ACC, the above noted fourappeals have been preferred before this Court, out of whichRevenue has filed two appeals out of which C.A. No. 3711 of2000 is against the order of the Tribunal allowing the appealsfiled by M/s. Virgo Steels, in part, and C.A. No. 3712 of 2000 isagainst the order of the Tribunal, allowing the appeal of ACC inits entirety, while M/s. Virgo Steels being aggrieved by thatpart of the order which has gone against has preferredC.A. Nos. 48-49 of 2001.

Learned Solicitor General appearing for the Revenue,contended before us that the tribunal has erred in coming to theconclusion that the principle of waiver did not apply to therequirement of notice u/s 28 of the Act. Hesubmitted that by the letter of 30.3.1991, the Manager Partnerof M/s. Virgo Steels had in specific terms admitted the violationof conditions of the licence granted to it under the DeemedExport Scheme as also the firm''s liability to pay duty andpenalty. He further submitted that the firm having expresslywaived its right to receive a show-cause notice as also personalhearing, it cannot be permitted to turn around any say that non-issuanceof notice u/s 28 of the Act is fatal to theRevenue. Mr. Rajiv Dutta, learned senior counsel appearing forM/s. Virgo Steels, while defending the order of the tribunal,submitted that a notice u/s 28 of the Act being acondition precedent to invoke the jurisdiction of the Officerconcerned, in the absence of such notice proceedings initiatedfor the recovery of duty became void. He also submitted thatthe principle of waiver does not apply to a mandatoryrequirement of law. He further contended that the letter of30.3.1991 was obtained by the Customs Authorities undercoercion and duress, therefore, there could be no waiver basedon such letter. He further assailed the finding of the Tribunalthat the import made by M/s. Virgo Steels not for thepurpose of a project aided by the IBRD.

We will first consider the argument of learned counsel forM/s. Virgo Steels that their letter of 30.3.1991 was written bythe firm because of coercion and duress, hence, cannot be reliedupon. This argument was raised for the first time before theCollector during the course of arguments of learned counselappearing for M/s. Virgo Steels in the adjudicatoryproceedings. It is to be seen that the said letter is dated30.3.1991 and the argument of learned counsel was addressedon 3.12.1992 -- i.e. more than one and a half years after the saidletter was sent to the Collector concerned. During that period ofover one and a half years, the Partner of the Company who hadsigned the letter or anybody else on behalf of the firm, made noattempt to resile from the contents of the said letter. They haveneither made any complaint nor taken any steps to get over thecontents of the letter written on behalf of the firm on 30.3.1991.It is relevant to note at this stage that along with the letter, apost-dated cheque was sent and no steps were taken to stoppayment against that cheque either. Before the Collector,though an oral submission was made by learned counsel thatthe letter in question was obtained by coercion not even anaffidavit was filed in support of that allegation. The Collectorby his order, had rejected the said contention holding that at nostage till the final submission of reply on 3.12.1992, M/s. VirgoSteels had made any grievance of coercion or any other undueinfluence in obtaining the letter of 30.3.1991. It is alsonecessary to note herein that this argument of coercion inobtaining the letter of 3.12.1992 seems not to have been pressedbefore the Tribunal. The Tribunal in its impugned order in paras8 and 9 has extracted the argument of learned counsel for M/s.Virgo Steels where we find no reference whatsoever as to thenon-voluntary nature of the letter of 30.3.1991. For all thesereasons, we have no hesitation in rejecting this contention ofM/s. Virgo Steels that the letter of 30.3.1991 was notvoluntarily submitted by them. This argument before us, in ouropinion, is totally baseless and an afterthought.

We will next consider the requirement of Section 28 ofthe Act and the applicability of the principle of waiver to thesaid requirement of that Section. While so doing, it is to benoted that our discussion of Section 28 of the Act is withreference to the Section as it stood at the relevant time and notwith reference to the existing Section 28 of the Act. TheTribunal by the impugned order has held that in the absence ofa notice u/s 28 of the Act, the recovery of duty whichhas escaped collection, is impermissible in law. Whileaccepting this argument, the Tribunal has placed reliance on ajudgment of this Court in Collector of Customs, Calcutta v. Tin Plate Co. of India Ltd. (1996 (87) ELT 589) . It is true that inthe course of the above-cited judgment, this Court had held thata notice u/s 28 is a condition precedent, but havingperused the said judgment carefully, we are of the opinion thatthis Court used the expression "condition precedent" withreference to issuance of notice u/s 28 and not withreference to the jurisdiction of the proper Officer under thatSection. While the absence of notice may invalidate theprocedure adopted by the proper Officer under the Act, it willnot take away the jurisdiction of the Officer to initiate action forthe purpose of recovery of duty escaped. This is because of thefact that the proper Officer does not derive his power to initiateproceedings for recovery of escaped duty from Section 28 ofthe Act. Such power is conferred on him by other provisions ofthe Act which mandate the proper Officer to collect the dutyleviable. By a perusal of Chapter V of the Act in which Section 28 is found, it is seen that the charging Section whichauthorises the levy of customs duty is found in Section 12 ofthe Act. Section 17 contemplates the procedure for making anassessment in regard to duty payable while Sub-section (4) ofSection 17 makes a provision to empower the proper Officer toreassess the imported goods for duty if it is found that theassessment made at the time of importation was based onincorrect or false information. Section 142 of the Act found inChapter XVIII provides for actual recovery of sums due to theGovernment. A cumulative reading of these provisions found inthe Act clearly shows that the jurisdiction of a proper Officer toinitiate proceedings for recovery of duty which has escapedcollection, is not traceable to Section 28. The power to recoverduty which has escaped collection is a concomitant powerarising out of the levy of customs duty u/s 12 of theAct, and the same does not emanate from Section 28 of the Act.In our opinion, Section 28 only provides, for the proceduralaspect for recovery of duty, hence, any irregularity committedby a proper Officer in following the procedure laid down inSection 28 would not denude that Officer of his jurisdiction toinitiate action for recovery of escaped duty but it may makesuch proceedings initiated by that Officer voidable. In that viewof the matter, in our opinion, the term "condition precedent"used in the case of Tin Plate Co. (supra) is referable to theprocedural requirement of Section 28 and not to thejurisdictional aspect of the proper Officer to recover theescaped duty. In the said view of the matter, we are of theopinion that the law laid down by this Court in Tin Plate Co.''scase (supra) is that issuance of a notice u/s 28 is amandatory requirement of that Section, with which we are inagreement. We also notice the very important fact that in thatcase the question of waiver did not arise and what wasconsidered by this Court was the contention of the Revenue thata subsequent letter written by the Revenue after the expiry ofthe period of limitation would cure the defect of non-issuanceof a notice.

The next question for our consideration is: can amandatory requirement of a statute be waived by the partyconcerned? In answering this question, we are aided by acatena of judgments of this Court as well as of the PrivyCouncil. We will first refer to the judgment of the PrivyCouncil which has been consistently followed by the SupremeCourt in a number of subsequent cases involving similar points.In Vellayan Chettiar v. Government of Province of Madras(AIR 1947 PC 197), the Privy Council held that even thoughSection 80 C.P.C. is mandatory, still non-issuance of suchnotice would not render the suit bad in the eye of law becausesuch non-issuance of notice can be waived by the partyconcerned. In the said judgment, the Privy Council held that theprotection provided u/s 80 is a protection given tothe person concerned and if in a particular case that person doesnot require the protection he can lawfully waive his right.

In the case of Dhirendra Nath Gorai and Subal Chandra Shaw and Ors. V. Sudhir Chandra Ghosh and Ors. (1964 (6) SCR 1001) , this Court followed the judgment of the PrivyCouncil in Vellayan Chettiar (supra) and held that even thoughthe requirement of Section 35 of the Bengal Money Lenders''Act is mandatory in nature, such mandatory requirement couldbe waived by the party concerned. On a true construction ofSection 35 of that Act, this Court held that the said Section isintended only for the benefit of the judgment-debtor and,therefore, he can waive the right conferred on him under thesaid Section.

In the case of S. Raghbir Singh Gill v. S. Gurcharan Singh Tohra & Ors. (1980 Supp SCC 53) , this Court negativedan argument that the requirement of Section 94 of the Representation of the People Act, 1951 cannot be waived. This argument was based on the principle that public policy cannotbe waived. Rejecting the said argument, this Court held that theprivilege conferred or a right created by a Statute, if it is solelyfor the benefit of an individual, he can waive it. It also held thatwhere a prohibition enacted is founded on public policy, courtsshould be slow to apply the doctrine of waiver but if suchprivilege granted under the Act is for the sole benefit of anindividual as is the case u/s 94 of the Representationof the People Act, the person in whose benefit the privilege wasenacted has a right to waive it because the very concept ofprivilege inheres a right to waiver.

In Krishan Lal v. State of J & K (1994 (4) SCC 422) , this Court while considering the requirement of furnishing copy ofinquiry proceedings u/s 17(5) of the J & K(Government Servants) Prevention of Corruption Act, 1962held following the judgment in V. Chettiar''s case (supra) andD.N. Gorai (supra) that though the requirement mentioned inSection 17(5) of the Act was mandatory, the same can bewaived because the requirement of giving a copy of theproceedings of the inquiry mandated by Section 17(5) of theAct is one which is for the benefit of the individual concerned.

In Martin & Harris Ltd. V. 6th Additional Distt. Judge & Ors. (1998 (1) SCC 732) , this Court while considering the provision of Section 12(1)(a) first proviso of the U.P. UrbanBuildings (Regulation of Letting, Rent and Eviction) Act, 1972negatived a contention advanced on behalf of the appellanttherein that the said provision was for public benefit and couldnot be waived. It held that it is true that such benefit enactedunder the said proviso covered a class of tenants, still the saidprotection would be available to a tenant only as an individual,hence, it gave the tenant concerned a locus poenitentiae to availthe benefit or not. It also held that the benefit given under thesaid section was purely personal to the tenant concerned, hence,such a statutory benefit though mandatory, can be waived bythe person concerned.

From the ratio laid down by the Privy Council andfollowed by this Court in the above-cited judgments, it is clearthat even though a provision of law is mandatory in itsoperation if such provision is one which deals with theindividual rights of person concerned and is for his benefit, thesaid person can always waive such a right.

Bearing a mind the above decided principle in law, if weconsider the mandatory requirement of issuance of notice underSection 28 of the Act, it will be seen that that requirement isprovided by the Statute solely for the benefit of the individualconcerned, therefore, he can waive that right. In other words,this Section casts a duty on the Officer to issue notice to theperson concerned of the proposed action to be taken. This is notin the nature of a public notice nor any person other than theperson against whom the proceedings are initiated has any rightfor such a notice. Thus, this right of notice being personal to theperson concerned, the same can be waived by that person.

If the above position in law is correct, which we think itis, M/s. Virgo Steels, having specifically waived its right for anotice, cannot now be permitted to turn around and contended thatthe proceedings initiated against them are void for want ofnotice u/s 28 of the Act, so as to frustrate thestatutory duty of the Revenue to demand and collect customsduty which M/s. Virgo Steels had intentionally evaded.

Since the sole ground on which the appeal of M/s. VirgoSteels was allowed by the Tribunal is based on non-issuance ofa notice u/s 28 and we having found such a noticewas not necessary in the facts and circumstances of the case, theappeal of the Revenue as against M/s. Virgo Steels has to beallowed.

In C.A. Nos. 48-49 of 2001, M/s. Virgo Steels have, interalia, questioned the correctness of the findings of the tribunal asto the illegality of the import of steel made by them, theTribunal after considering the material on record by theimpugned order, has agreed with the finding of the Collectorthat M/s. Virgo Steels had imported the steel in question, duty-freerepresenting that the same was being imported forutilisation in a project financed by the IBRD but was in factsold in the open market. This finding being one of facts andhaving been arrived at by the Collector and the Tribunal on thebasis of the material on record, we are not inclined to disturbthis finding, nor, indeed, do we find any good ground to do so.Hence, we find no merit in these appeals and these appeals fail.

C.A. No. 3712 of 2000 is filed by the Revenue against theorder of the Tribunal which has allowed the appeal filed byACC holding that there was no material to come to theconclusion that ACC had abetted the illegal import of steel byM/s. Virgo Steels. This finding also being a finding on aquestion of fact, we are not inclined to interfere with thisfinding. At this stage we must place on record the fact thatlearned Solicitor General has very fairly conceded that he is notin a position to perused us to take a contra view in this appeal,therefore, this appeal also fails.

For the reasons stated above, C.A. No. 3711 of 2000 isallowed, the impugned order of the Tribunal is set aside andthat of the Collector restored. The appellant shall be entitled tocosts payable by M/s. Virgo Steels, Bombay.

C.A. No. 3712 of 2000 is dismissed. No costs.

C.A. Nos. 48-49 of 2001 are dismissed with costs.