S.B.WAD - (1.)The petitioner company imported 13.500 M.T. of RBD Palm Oil from foreign suppliers. The import of RBD Palm Oil was allowed under open general licence by Import Trade Control Public Notice No. 64 ITC (P&B)/78 issued by Ministry of Commerce, Civil Supplies E and Cooperation, Govt. of India on September 2, 1978. Bills of entry for the total quantity of Palm Oil were duly presented to the authorities after the ship entered Bombay Port. The oil in question was contained in stainless steel drums. The proper officer cleared the goods after physical checking and satisfying himself that the import of goods was not prohibited under section 47 of the Customs Act. There was no restriction, at the time of the import, that Edible Oil should be imported only in a particular type of drum or container. The drum or container could be of steel or iron as referred to inserial No. 73-23 of the First Schedule to the Import Control Order. "Stainless Steel" is included in the expression "Steel", in the said entry. The drums were brought at the Ghaziabad factory of the company and after unpacking the ,oil they were disposed of by the petitioner. company in the normal course of business. Acting on the belief that under Appendix 3 of the Import Policy A. M. 79, importation of stainless steel drums was- banned, the customs authorities effected searches and seized the drums (under Section 110 of the Customs Act) from various places. Respondent No. 2, thereafter, through the Asst. Collector of Revenue and Intelligence, New Delhi, issued summons to the petitioner No. 2 and to the General Manager of petitioner No. I, under Section 108 of the B Customs Act. The statements of petitioner No. 2 and the General Manager were recorded on September 1, 1979. A public notice was issued by the Custom Authorities on September 6, 1979 regarding, the declarations to be made inrespect of packages or containers. The said notification reads as follows : JUDGEMENT_222_ILR(DEL)1_1981Html1.htm
Sub. : Assessment of the packages or containers or the like

It is notified for the information of the Importers/Clearing Agents and others concerned, that the following procedure is introduced with immediate effect for the processing of B/E and S/Bills as the case may be.

The B/E or S/Bills, as the case may be, will contain an additional declaration of the importers indicating the nature of the packing. If the importers want to avail the benefit of exemption Notification No. 184/Cus..dated 2-8-1976 they mast clearly declare that

(a) The value of the packages or containers of the like in which the goods are packed is included in the value for which the goods contained therein have been invoiced;

(b) the goods are not packed in packages or containers or the like which are of a permanent character and accordingly strong enough to be suitable for repeated use; and

(c) the packages or containers or the like in which the goods are packed are such as are normally used in the trade for packing such goods.

Further, if the packing is of other than wood, paper and. paper bamboo, cane and cheap plastic material, the nature of material and the approximate cost per unit container or package should also be declared.

In case the drums and other containers of durable nature importers may claim benefit of Notification No. 260-Customs dated 11-10-1958 subject to satisfying-conditions prescribed therein.
JUDGEMENT_222_ILR(DEL)1_1981Html2.htm
Issued from file No. 5/26-94/79 III (C)

It may be seen that it was for the first time that the custom authorities required disclosure of "the nature of the material and the approximate cost of the unit container or package" by virtue of the said public notice of September 6, 1979.

(2.)In the months of October and November, 1979 the Assistant Collector, Bombay issued short levy notices under section 28 of the Customs Act to the petitioners. The notices stated that the fact that the drums were of stainless steel was suppressed by the petitioners. It was then stated :
"The stainless steel drums are subject to levy of customs duty which was not levied (amount of the duty shown in the annexure attached) as provided for under section 28 of the Customs Act, 1962. You are, therefore, requested to explain why the amount specified above should not be recovered from you."
These show-cause notices were replied to by the petitioners. Thereafter on June 21, 1980 the Collector of Bombay, respondent No. 5, issued show-cause notices to the petitioners under Section 124 of the Customs Act, calling upon them to explain why the stainless steel drums should not be confiscated. The allegations in the show-cause notice, in substance, were that the petitioners were engaged in (not only) acquiring storing, purchasing, harbouring and dealing with the smuggled stainless steel drums and that they were further engaged in destroying its identity to avoid their detection, by cutting and shearing thousands of such drums at the premises of the concerns connected with them. It was further alleged that drums were flattened and re-rolled in cut sheets for the purpose of undetected disposal. On January 22, 1980, the authorities issued supplementary short levy notices under Section 28 of the Customs Act alleging that the authorities had received additional particulars regarding higher price of stainless steel drums. On February 8, 1980 the petitioners filed the present writ petition challenging the show-cause notices under Section 28 and Section 124 of the Customs Act. They also prayed for an appro- priate writ or direction to set aside the seizure and confiscation.
(3.)There is no dispute that the importation of stainless steel as such, as a consumer item is banned and prohibited. It is also an admitted fact, that under the relevant rules and instructions, the goods which are permitted to be imported under Open General Licence are also permitted to be imported in containers. The question for determination is, whether the stainless; steel drums which were used- for importing the Palm Oil in this case, were imported as a separate item of stainless steel or were imported as mere containers for the Palm Oil. Palm Oil, according to the respondents is usually imported in India in mild steel containers. The respondents, therefore, suspected that the petitioners had used the containers of stainless steel, as an indirect rule to import stainless steel which is a banned item. This they found on inquiry from all traders importing in Palm Oil. According to the respondents this is the normal trade practice. The petitioners, on the other hand, contend that the present international trade practice is to import edible oil in stainless steel containers as stainless steel prevents deterioration and contamination. The petitioners have produced two letters (Annexure H) in support of this claim. The first letter is by the State Trading Corporation. In its letter S.T.C. has said :
"We have been importing edible oil both in crude and refined form. A copy of the letter is enclosed for your information which clearly stipulates on merit that refined oil shall be made only either in Stainless Steel tanks or epoxy-coated tanks. Some of the suppliers have been insisting upon making supplies of refined oils in mild steel tanks but we have not agreed to any such proposal and have insisted that supplies must be made either in stainless steel or epoxy-coated tanks as per our standard practice. To the best of our knowledge it is an internationally accepted trade practice to move refined oil only in stainless steel or epoxy-coated tanks as movement in mild steel tank involves the danger of contamination and deterioration in the quality of oil which is ultimately meant for human consumption."

This letter was sent by the State Trading Corporation in response to the specific querry made by the petitioners. Another letter is by SCS Control Service Line. New York U.S.A. This letter is worth noting. The letter reads :

"as confirmed to you today vide telex, the U. S. market practice for shipping refined edible oil is to use coated or stainless steel drums or tanks to prevent quality deterioration. In. addition, some vessel shipments are made employing a blanket or nitrogen over the surface of the oil in order to prevent oxidation."