Full Judgment
3. Arguing for the appellants, ld. Advocate submits that this matter was initially examined by SIB and all technical details including literature was submitted to them and therefore, SIB being satisfied about the eligibility to exemption vide letter dated 22-6-1983 wrote to Asstt. Collector of Customs that the appellants were eligible to exemption. The goods were accordingly cleared. On 24-12-1983, however, a show cause notice was served on them demanding differential duty.
Duty was actually paid on 24-6-1983. The demand was, V therefore, barred by one day. In this case, however, he submits on merits the matter is covered against them. He however specifically argued on the limited question of jurisdiction. In this case the licence holder was Passive Components Pvt. Ltd. They had given them Letter of Authority for the limited purpose of placing orders for arranging imports and clearing goods from the Customs. In fact it is on the basis of Letter of Authority read with para 383 of the Handbook 1982-83 AM of Export Import Procedure that they could clear the goods. In this case therefore once the goods were cleared from Customs, their liability ceased. He cites following cases in support of the contention:Krisons Electronics Systems Ltd. v. Collector of Customs, CalcuttaPaharpur Cooling Towers v. Collector of Customs 3. KM. Mohamed Ghouse & Co. v. Asstt. Collector of Central Excise IDO Nagapattinam -1979 (4) E.L.T. (J 683)Indian Potash Ltd. v. Collector of Customs 5. We have heard both sides. We find that Passive Components Pvt. Ltd. vide letter at page 24 of the appeal papers addressed to Asstt.
Collector of Customs, New Delhi on 11-6-1983 intimated the original authority that the bill of entry were filed by Usha Rectifier on their behalf as per their letter of authority dated 10-4-1982. They also authorised Usha Rectifier Corpn. in terms of para 383 of Handbook of Import Export Procedures, 1982-83 to make payment, arrange shipment and clearance from Customs and to complete all the formalities in accordance with provisions of Import Control Order, 1965 on their behalf.
6. The relevant para 383 of Handbook of Import Export Procedures gives authority to Licence Holder to appoint a person as agent for arranging the imports permitted by the licence. The licence would continue in the name of licence holder. The relevant para is reproduced below for the sake of clarify: "383. (1) In the Import Policy, in force since 1978-79 no special provision has been made for the licensing authority to issue a letter of Authority, authorising another person to import goods against a licence on behalf of the licence holder. The licence holder is hereby given the authority to appoint person as his Agent for arranging the imports permitted by the licence. The licence should, however, continue to be in the name of the licence-holder and the other provisions of the Imports (Control) Order, 1955, in regard to the duties and obligations of the licence-holder or Letter of Authority holder will continue to apply respectively to the persons concerned. Subject to these conditions and legal requirements, it will be open to the licence holder to decide upon his own form of Letter of Authority. But the functions of the holder of such Letter of Authority shall be limited to place orders to open Letter of credit, to make remittance of payment for importing the goods, to arrange movement and to clear the same through the Customs having regard to Section 147 of the Customs Act, 1962. On behalf of the licensee, and any other related matters connected with the operation of the licence in question, but not its ownership".
It will, therefore, be clear that the appellants were acting as Letter of Authority holder within the parameters of authority given to them in para 383 subject to their liability under Section 147 of the Customs Act. It was pleaded by the ld. Advocate that the Letter of Authority was submitted to Customs alongwith Bill of Entry and it was against this Letter of Authority, even though the licence remained in the name of Passive Components Ltd. that they were allowed to clear the goods.
We find considerable merit in the argument of the ld. Advocate that their liability ceased the moment the goods were cleared by the Customs and that duty could be demanded only from Passive Components Pvt. Ltd. From Sub-section 3 of Section 147 of Customs Act, it is clear that even though the agent is deemed to be the owner of such goods, the short levy can be recovered from him only if, in the opinion of Asstt.
Collector of Customs, the same cannot be recovered from the owner or importer or exporter. The scope of this provision was clarified by Madras High Court in the case of KM. Mohamed Ghouse & Co. v. Asstt.
Collector of Central Excise (Supra) where the High Court expressed the opinion that proviso to Section 147 of the Customs Act seems to suggest that the liability of the importer can be passed on to the agent only if the same cannot be recovered from the owner. The expression cannot be recovered from the owner "mentioned in the proviso would indicate the all steps for realization of the differential duty should have been taken against the importer but it could not be recovered from him". The relevant portion of para 7 is reproduced below : "Admittedly the primary liability to pay the differential duty is on the importer under S. 28. But that liability can be fastened on the clearing agent as a result of the special provision contained in Section 147. Therefore, unless the condition in Section 147 is satisfied, the clearing agent will not be liable for the duty. The proviso to Section 147(3) which has been extracted above says that the differential duty payable by the importer shall not be recovered from the agent unless in the opinion of the Asstt. Collector the same cannot be recovered from the owner, importer or exporter. In this case the demand made on the petitioner on 30-5-1977 indicates that as the amount has not been collected from the importer the same is sought to be recovered from the agent. This stand has however been given up when we came to the stage of the counter affidavit. In the counter affidavit the respondent has stated that as the importer could not be served by post the demand is made as against the petitioners. Even assuming that the amount has not been factually collected from the importer or that the importer cannot be contacted by post, those circumstances will not be sufficient to attract the proviso to Section 147(3). The proviso seems to suggest that the liability of the importer can be passed on to his agent only if in the opinion of the Asstt. Collector of Customs the same cannot be recovered from the owner. The expression "cannot be recovered from the owner" would indicate that all steps for realisation of the differential duty should have been taken against the importer but it could not be recovered for some reason or other. It is clear from the expression used in the proviso that all possible steps for recovery of the differential duty have to be taken as against the importer and only when it is not possible to realise any amount from the importer the same cannot be recovered from the agent. But in this case the respondent has not averred that all steps to recover the amount from the importer had failed and they are left with only the agent. The fact that there is some difficulty in contacting the importer by post will not, in any sense, mean that the amount could not be realised from him." 7. Asstt. Collector in his order has recorded that demands should have been addressed to M/s. Passive Components Pvt. Ltd. is not correct as Bill of Entry is filed by Usha Rectifier. It was conceded by the ld. DR that the Letter of Authority was presented along with the Bill of Entry and we also find at page 24 the letter dated 11-6-1983 from Passive Components Pvt. Ltd. to Asstt. Collector that the Bill of Entry was filed by M/s. Usha Rectifier on their behalf as per their letter of authority dated 12-4-1982. It is, therefore, clear that information about the actual owner was available to Customs. Section 147(3) requires that all steps to recover duty short levy ought to have been taken against Passive Components Pvt. Ltd. and in case Customs failed to recover such duty, steps could have been initiated to recover duty from the agent i.e. the appellants. The department could be free to issue notice to both the agents and recover this from the agent only if principal failed to pay. Since no such efforts have been made to recover duty from the principals, we hold that duty is not payable by Letter of Authority holder acting as an agent in terms of Section 147(3) of the Customs Act, 1962.
8. In the result, we set aside the impugned order and allow the appeal on limited question of jurisdiction.