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DIFFERENCE BETWEEN PROHIBITED AND RESTRICTED GOODS IN LIGHT OF THE CUSTOMS ACT, 1962

INTRODUCTION

The exponential rise witnessed in the Export and Import sector in the last decade has necessitated the requirement for robust laws governing the emerging sector. The sudden proliferation observed in the export and import sector is predominantly owed to the free-market mechanism (open market) adopted by most states to boost their industrial and commercial markets. General Agreement on Trade and Tariffs, 1994 (GATT), formulated by the World Trade Organization (WTO), regulates such affairs at the international level.[1] Whereas, in India, the Customs Act, 1962[2] and the Foreign Trade Policy, 2015[3] regulate the affairs of export and imports.

In order to maintain and uphold the security of India, norms of public policy, to conserve the Foreign Exchange and to safeguard the balance of payments, it became imperative on the part of the legislation to differentiate between the categories of the goods eligible to be exported and imported. Section 2 (33) of the Customs Act, 1962 defines “prohibited goods”, while sections 3 and 5 of the Foreign Trade (Development and Regulation) Act, 1992[4]confers power to the Central Government to issue Notifications under which export or import of any goods can be declared prohibited or restricted. In light of the article, we would try to classify and crystalise the differences between the meaning and the scope of prohibited and restricted goods with the help of various legal precedents and pronouncements.

IMPORT EXPORT RESTRICTION AND PROHIBITION UNDER THE CUSTOMS LAW

In order to understand the legal veracity of the terms ‘Restriction’ and ‘Prohibition’, it becomes essential on our part to the first try and understands the literal meanings of the same. The Cambridge Dictionary[5]defines prohibition as “law or rule that officially stops something from being done, or the fact of not being allowed by official rules or laws” similarly, it defines restriction as “an official limit set by law on something”. Understandably, the peripheral understanding after reading the above definitions shows that the definition for the prohibition is strongly worded with no scope for an exception. In contrast, the definition for restriction is not strongly worded compared to prohibition and carries a scope for the exception.

Similarly, under the Customs Act, 1962, the definition for “prohibited goods” is strongly drafted with no scope of exception and carries a penalty in the form of confiscation of goods as per sections 111, 113, 112 & 124 of the act[6]. However, on the other hand, sections 3 to 5 of the Foreign Trade (Development and Regulation) Act, 1992 are not so strongly worded and carry the scope of an exception in issuing a license for import and export of the restricted commodity. For example, the export of human skeletons is prohibited as per section 2 (33). In contrast, export of cattle which is restricted suitable as per the ‘ITC- HC’ list, is allowed against an export licence obtained under schedule II ITC(HS) Classification of Export and Import Items, 2018.

Moreover, the restriction and prohibition of goods are not just limited to the Customs act, 1962 and Notifications of DGFT. Import and export of some specified goods will also be restricted/prohibited under other laws such as Environment Protection Act[7], Wild Life Act[8], Indian Trade and Merchandise Marks Act[9], Arms Act[10], etc. The prohibition under these acts will also apply to the penal provisions of the Customs Act, rendering such goods liable for confiscation under section 111(d) of the Customs Act (for import) and 113 (d) of the Customs Act (for export)[11]. The relief for the distinction and differentiation in treating restricted and prohibited goods lies in lieu of section 125 of the Customs Act, 1962. Section 125 of the act makes a clear distinction between prohibited goods and other goods and obligates the release of other goods on payment of redemption of a fee.

LEGAL PRECEDENTS AND PRONOUNCEMENTS

In order to comprehensively understand the difference between the nature of restricted and prohibited goods as per the customs act, 1962, it is essential to comprehend the observations made by the courts in the same context. Following are some case laws about the legal issue in contention of difference between restricted and prohibited goods: –

  1. Shaik Md. Omer v. The Collector of Customs and Ors

It is the most highlighted case, which elaborates the meaning and the scope of the word ‘prohibition’ as per section 2 (33) of the act. In this case, the Hon’ble High Court of Calcutta observed that prohibition means every prohibition: and restriction is also a type of prohibition. The Court further explained that whenever there is a condition attached with the import or export of the good, then such goods are labelled as ‘restricted goods’ and import or export of such goods can be permitted on account of the fulfilment of the necessary condition.[12]

In this case, a particular mare was found to be not a ‘pet animal’ and, therefore, its import was found to be violative of the Imports Control Order. It was, however, an admitted position that the import of horses or mares was not prohibited as such. The question was whether, by making such import, the Appellant contravened Section 111(d) read with Section 125 of the Customs Act. While answering the question, this Court held that any restriction on import or export is to an extent a prohibition; and the expression “any prohibition” in Section 111(d) of the Customs Act includes restrictions. This Court further underscored that “any prohibition” means every prohibition; the restriction is also a type of prohibition. A similar understanding was observed in the case of Commissioner of Customs, New Delhi v. Brooks International & Ors.[13]It was held that if the conditions for import are not complied with, it would be considered the case of prohibited goods.

  1. Commissioner of Customs v. Atul Automation Pvt. Ltd

The Hon’ble Supreme Court, in this case, has underscored the difference between what is prohibited and what is restricted. The goods imported or exported without authorisation were found to be restricted goods. Restricted goods have the option of being redeemed and do not deserve the treatment of absolute confiscation, which could be applied only to prohibited goods.[14]

  1. Horizon Ferro Alloys Pvt. Ltd. and Ors v. Union of India and Ors.

In this case, the difference between prohibited and restricted goods was made considering the tainted characteristics they hold.[15] It was observed that goods like fake currency, pornographic material, dead animal skin or body etc., are prohibited goods as per section 2 (33) of the act. Moreover, in this case, it was also observed that merely exceeding the quantity restriction over restricted goods will not make them fall under the category of prohibited goods. The Adjudication Authority can use its discretion according to section 125 to declare such goods as restricted goods.

CONCLUSION

It is submitted with reference to the connotations of the terms prohibited and restricted, particularly with reference to section 2 (33) of the Customs Act, 1962 and Clause 9.47 of the Trade Policy that those goods which are only permitted with an authorisation/license/permission or under procedure notified in the Notifications are ‘Restricted goods.’ Whereas prohibited goods are those goods that are banned and are confiscated as per section 11 of the act. Understandably, we can confer that the law is settled on these grounds as enunciated in the case of M/S Africa LLP & Ors[16]The Court took the same view and underscored the difference between the two. Though, as per section 125 of the act, the Adjudicating Authority has the discretionary power to redeem the prohibited goods and not confiscate them as per section 11 of the act, but the discretion of the authority should entirely be based upon the rules and reason and not merely upon the private opinion.[17]

Author(s) Name: Mahimna Dave (Nirma University Ahmedabad)

References:

[1]33 ILM 1153 (1994)

[2]The Customs Act, 1962, No. 52, Acts of Parliament, 1962 (India)

[3]The Foreign Trade Policy, 2015-2020, DGFT

[4]The Foreign Trade Act, No. 22, Acts of Parliament, 1992 (India)

[5]Cambridge University Press. (n.d.). Prohibit. Cambridge Dictionary. Retrieved February 2, 2022, from https://dictionary.cambridge.org/dictionary/english/prohibit

[6]Supra note. 2

[7]The Environment Protection Act, No. 29, Acts of Parliament, 1986 (India)

[8]The Wild Life Act, No. 53 Acts of Parliament, 1972 (India)

[9]The Indian Trade and Merchandise Marks Act, No. 48, Acts of Parliament, 1958 (India)

[10]The Arms Act, No. 54, Acts of Parliament, 1959 (India)

[11]Supra note 2.

[12]AIR 1967 Cal 16

[13](2007) 10 SCC 396

[14](2019) 3 SCC 539

[15]2016 (340) ELT 27 (P& H)

[16]2020 SCC OnLine SC 675

[17] 1987 2 SCC 230