Judgment:
1. This appeal arises from Order-in-Original dt. 15,1,1997, passed by the Commissioner of Customs-II, New Delhi. By this order, the Commissioner has ordered for confiscation of Embroidery Machines covered under Bill of Entry No. 106797 dated 15.3.1993 and Bill of Entry No. 107131 dt, 26.3.1993 under Section 111(d) and 111(m) of Customs Act, 1962. However, he has granted redemption on fine of Rs. 50,000/- in lieu of confiscation. He has also imposed a penalty of Rs. 10,000/- under Section 112(a) of Customs Act, 1962.
2. The facts of the case are that the appellants imported some second-hand textiles embroidery machines declaring the goods as one Saurer IS-55, 10 yarder Embroidery Machines Model 1986 and one Punching Machine Model 1986 vide sales Invoices No. 9201512 dt. 15.12.1992 issue by one M/s. R. Cressy & Son Ltd. U.K. Bill of Entry No. 107131 dt.
26.3.1993 was filed through clearing Agent, M/s. Foreign Traders, Delhi at LCD., New Delhi for clearance under Open General Licence and CIF value was declared as UK 5500.00. This consignment was awaiting clearance from ICD Customs, New Delhi, as on 7.4.1993.
3. The importer company had imported and cleared through ICD, new Delhi, another shipment covered by Invoice No. 1212 dt. 2.11.1992 B/E No. 106979 dt. 15.3.1993 filed through above said CHA by declaring the goods as used Textiles Machinery which includes one Bobbin Winder (1987), two Punching Machines (1986), one Card Repeating Machine (1986), two Mending Machines (1990) and two Saurer IS-55 10 Yards Machines (1986), Embroidery Machines. These goods were cleared by ICD Customs after recovering customs duty amounting to Rs. 2,56,233/- on 20.3.1993. The value was declared as Swiss Franc 34,800,00 (CIF) 4. As per the Import Policy 1992-97 Chapter V para 25 read with para 28, second-hand capital goods may be imported without a licence in garment/Hosiery/made-ups sector and such second-hand machines shall not be more than 7 years old and shall have minimum residual life of 5 years and shall be subjected to actual users condition. Any other second-hand capital goods may be imported in accordance with a licence issued on this behalf in terms of para 26 Chapter V.5. Pursuant to a specific information that the importer company had mis-de-clared the correct year of manufacture of the above said machinery and also undervalued the same with a view to circumvent 1 TC provisions and to evade Customs duty, the Officers of DRI searched on 7.4.1993, the office premises of Importer company at A-91, Wazirpur Industrial Area, Delhi-52 and residence premises at A-16, Mahendra Enclave, Delhi - 110033. Nothing incriminating was found during the search. The office premises of the CHA in this case i.e. M/s. Foreign Traders was searched on the same date and certain incriminating documents were recovered.
6. The second-hand textiles machinery cleared under Bill of Entry No.10697" dt. 15.3.1993 from ICD New Delhi and found at factory premises of the importer company at 25, DSIDC, Scheme-II, Okhla, Phase-II, New Delhi was seized on 14.5.1993 under panchnama. The second-hand embroidery machines which were yet to be cleared from ICD New Delhi vide Bill of Entry No. 107131 dt. 26.3.1993 were seized on 19.5.1993 under another panchnama.
7. After carrying out the entire scrutiny of the documents pertaining to these goods and also after recording the statements of various persons including Shri Shyam Gupta, Managing Director of the importer company, they were charged as follows: (a) had imported the subject embroidery machines imported vide B.E. Mp-106979 dt. 15.3.1993 and had deliberately misdeclared the age of the machines and had not submitted the proper valid import licence required for clearance of such machines, thereby making the subject goods liable for confiscation under Section 111(d) of the Customs Act, 1962 read with Clause 3 of the Import (Control) Order, 1955, Section 3 of the Imports and Exports Act, 1947 read with Section 4 of The Foreign Trade (Regulation and Development) Act, 1992, as amended.
(b) had imported the subject embroidery machines imported vide B/E No. 106979 dt. 15.3.1993, which did not correspond with respect to the age of the machines with the declaration made in the Bill of Entry, filed under Section 46 of the Customs Act, 1962 thereby making the subject goods liable for confiscation under Section 111(m) of the Customs Act, 1962, read with Clause 3 of Import (Control) Order, 1955, Section 3 of Imports and Exports Act, 1947 read with Section 4 of Foreign Trade (Regulation and Development) Act, 1992 as amended: (c) had in relation to the import of subject embroidery machines, imported vide B/E No. 106979 dt. 15.3.1993 done or omitted to do acts, with acts or omissions had rendered the subject goods as per annexure, liable to confiscation under Section 111(d) and Section 111(m) of the Customs Act, 1962 and thereby have become liable to penal action under the provisions of Section 112 of the Customs Act, 1962.
(a) The subject goods valued at Rs. 6,47,338.00 imported vide B/E No. 106979 dt. 15.3.1993 imported and cleared under B/E No. 106979 dt. 15.3.1993 should not be confiscated under Section 111(d) of the Customs Act read with Clause 3 of the Import (Control) Order, 1955, Section 3 of Imports and Exports Act, 1947 read with Section 4 of Foreign Trade (Regulation & Development) Act, 1992; (b) The subject goods imported vide B/E No. 106979 dt. 15.3.1993 covered by Bill of Entry No. 106979 dt. 15.3.1993 should not be confiscated under Section 111(m) of the Customs Act, 1962, read with Clause 3 of Import (Control) Order, 1955, Section 3 of Imports and Exports Act, 1947 read with Section 4 of Foreign Trade (Regulation & Development) Act, 1992.
(c) Penal action should not be taken against each of them under provisions of Section 112(a) of the Customs Act, 1962.
9. Shri Shyam Gupta duly submitted in his written submissions to the notice dt. 16.11.1993 on 18.2.1994. He submitted as follows: (i) That it is a common known fact that Saurer machines never have the year of manufacture written on them.
(ii) That M/s. Eagle Shipping was appointed by M/s. R. Cressy & Sons to forward the machine to them and not by Mrs. Vedi who is not the supplier; that if anybody had said that Mrs. Vedi was the supplier then his statement may supplied to them.
(iii) That M/s. Saurer, Switzerland, are a group of eleven companies (they have also submitted a leaflet of M/s. Saurer to this effect) and that even when goods are manufactured by a different company, the name Saurer is given as manufacturer.
(iv) That their declaration on B/E that their relations with Mrs.
Vedi were "Business" is not wrong.
(v) That there was no proof of M/s. Eastern Engg. Co. Bombay, being an agent of M/s. Saurer of Switzerland; that M/s. Hernia, M/s. Ruby and others of Faridabad have Zeng Embroidery machine of Germany; that these Cos. are their business rivals and are implicating them for the fear of loss in business on account of the import of these better machines by the noticee Co.
(vi) That Mr. R.L. Dubey had confirmed that the machine's Model was IS 55; that the DRI had not enquired whether N.V. Schiffli Customs in connivance with some local manufacturers were deliberately framing them in this case.
(vii) That M/s. H.L. Mehra and Sons Kundli, have these machines in their factory; that its Director's statement was recorded by the DRI but the same has not been placed on record.
(viii) That Shri N.K. Sharma of M/s. Eagle Freight was examined by the H.M. Customs and his statement was recorded; that whether this statement mentions that Mrs. Vedi had paid the freight, if so, copy of the statement be supplied to them.
(ix) That the DRI has not proved that N.V. Schiffli was ever manufactured by M/s. Saurer; that DRI was trying to prove that IS 55 was manufactured much earlier than 1986 or was a non-existent Model; that their machine was IS 55 as confirmed by Mr. Dubey; that the value was 5500/- CIF and that correct invoice was the one dt.
15.12.1992 which was submitted along with the packing list signed by Mrs. C.L. Cressy, C.S.; that the DRI has not proved that CD. Cressy was not the C.S. of M/s. R. Cressy and Sons; that in fact invoice dt. 31.3.1993 forwarded by H.M. Customs was the genuine invoice.
(x) That the DRI had pressurised them to furnish Bank Guarantee for few crores of Rupees to get the machines released on provisional basis on the wrong belief that the machines were as costly as 1,00,000/-while now H.M. Customs has verified the actual price as 5500/-only; that his statement dt. 27.9.1993 was under threat and pressure.
(xii) That Mrs. Vedi is not yet a Director in this Co. but only a proposed Director pending approval of RBI. (xiii) That N.V. Schiffli is a non-existent Model; that regarding freight charges statement of Sh. N.K. Sharma recorded by H.M. Customs has not been placed on record; that regarding Chartered Engineer's certified statement of Sh. Bajaj has also been withheld by the DRI; that statement of M/s. R. Cressy was also withheld.10. The adjudicating authority after a detailed adjudication and granting the opportunity of cross-examination to the witnesses desired by the appellants, passed the impugned order. Inter alia, the Commissioner has raised two issues: i) Whether the Embroidery Machine imported by M/s. Volga Embroidery Pvt. Ltd., Delhi are less than 7 years old; and ii) Whether the value declared in respect of this machine is truthful or not? 11. He has observed that there is no allegation that the residual life of the said machine was less than 5 years old. There is also no allegation that actual users condition was likely to be violated. The allegation of the investigators is that the machines are more than 7 years old. He has observed that there is no doubt that even if these allegations be true, there was no absolute ban on the import of such machines. Such machines could have been imported under an import licence. In view of this, he held that there is no justification in the elaborate investigations that have been undertaken to establish an offence which is of very minor consequence, particularly when determination of the age of machine poses numerous problems. He has also held that this is not a case of smuggling of drugs or gold where the goods will be confiscated absolutely and would not be returned to the owner. He has also observed that this is the case of an import of a machine where goods are required to be allowed to be redeemed on payment of a redemption fine in proportion to the offence committed under the show cause notice dt. 16.11.1993, total assessable value arrived at by the investigation is Rs. 3,92,305/- as against the CIF value of Rs. 2,59,640/- declared by the importer and the total demand of differential duty, recoverable is Rs. 46,896/- in addition to the declared duty of Rs. 94,379/-. He has observed that though the allegation is that value in respect of these items also had been mis-declared, there is no amount mentioned as to how much value had been suppressed. There is no demand of differential duty in respect of the items mentioned in the order. The sole allegation is therefore, about the age of the machines in question, the allegation being that all of them are more than 7 years old. Noting these observations, the Commissioner has held that the basic allegation about the age of the machine is based on letter No. 1200/IMB/PS/AN/645 dt. 8.5.1993 from M/s. Eastern Engineering Co., Bombay through Vikram S. Uppal, Director of M/s. Hindustan Embroidery Mills Pvt. Ltd., Delhi, M/s. Eastern Engineering Co., Bombay claimed that they are the agents of M/s. Saurer Embroidery System, Switzerland and M/s. Hindustan Embroidery Mills Pvt.
Ltd. is obviously one of their customers. The whole allegation is, therefore, based on not a direct evidence by M/s. Saurer Embroidery System, Switzerland but a letter written by M/s. Eastern Engineering Co. Pvt. Bombay who claimed that M/s. Saurer Embroidery System, Switzerland are their principals. He has observed that this type of allegation suffers from an inherent weakness, i.e. the complaint has been generated out of trade rivalry. However, whatever be the worth of such an allegation, it needs to be decided. He has proceeded to observe that M/s. Eastern Engineering Co., Bombay claimed that production of Model IS 55 embroidery machine was stopped by M/s. Saurer Embroidery System, Switzerland in the year 1945. It is therefore, claimed that this model is not under production for more than 40 years. The Commissioner has observed that if this be true then the claim that Embroidery machine is less than 7 years is not sustainable. About the age of machine, he has noted that various arguments had been put up by the importer. It had been claimed that it is a known fact that M/s.
Saurer Machines never had a year of manufacture written on them. It was also argued before him that M/s. Saurer Embroidery System, Switzerland are a group of 11 companies and even when goods are manufactured by different companies, that name of Saurer is given as manufacturer. One of the evidence cited in support of the charges is that the statement dt. 30.6.1993 of Shri R. L. Dubey, Embroidery Master of M/s. H.M. Mehra and Co., Kundli, Haryana. He had stated in his statement when questioned about the correctness of the Chartered Engineers' Certificate dt. 15.12.1992 from Jr. Camphell which M/s. Volga Embroidery had given to Customs department that model No. IS 55 on the machine was O.K. but it was difficult to understand why SI. No. had also been given as IS 55. He had opined that chartered Engineers' certificate mentions the year of manufacture as 186 but the Model 2S-55 was in the production during the years 1965-68. According to him IS-55 was not manufactured before the manufacture of Model 2S-55. According to him IS-55 was not manufactured in 1986. He had also given his opinion that the value of machine should be approximately UK pounds 10,000 which evidence is irrelevant in the context of the investigations got done by DRI through HM Customs, UK who confirmed that the value of machine was actually UK pounds 5,500 FOB. Shri R.L.
Dubey was cross-examined on 16.7.1996 and he had stated that he had received training in Saurer machines. Embroidery machines imported by M/s. Volga Embroideries are the re-conditioned machines. Since they appear new in appearance they can give an impression that they are not very old. Therefore, on the basis of these evidence the Commissioner has held that the charge of falsification and manipulation would appear to be difficult to sustain as the age of machine is to be judged by its appearance and not necessarily on the basis of the year of manufacture inscribed on the machines. He has held that the age of the machine was deliberately mis-declared is not supported by any evidence. He has given a detailed finding on this aspect of the matter. He has also held that there is no evidence of under-invoice in the case. He has concluded that M/s. Volga Embroidery was not aware that whether value of the machine imported by them was of or FOB. Therefore, he has held that there was no deliberate attempt on their part to suppress the value particularly when they had declared the value of the machine correctly.
12. As regards the point of the Embroidery machine being less than 7 years old, he has held that there is overwhelming evidence that these machines are definitely more than 7 years old. He has noted that Shri R.L. Dubey during the course of his cross-examination has stated that these machines are re-conditioned machines. However, they looked new and give an impression that they are new. It would, therefore, appear that the Chartered Engineers' Certificate is not correct, even though the age of the machine cannot be judged very correctly by anyone. He has stated that as per his knowledge IS 55 machines had been imported into India during 1992-93. There is no manufacture of IS 55 other than Saurer. He had also stated that when he had inspected the machine at the time of import, he had found that it looked in quite good condition and the machine looked new. In view of this any person importing the machine can get confused about the age of the machine. Even though it appears beyond doubt that machines are more than 7 years old, the violation cannot be held to be very serious in view of the fact that in appearance the machines appeared new as they were reconditioned and the year of manufacture was not indicated, which fact could have misled the purchasers. He has observed that the condition that the machine should not be more than 7 years old, was only one of the conditions of the import. The other conditions that actual user should have residual life of 5 years, appears to have been complied with. Further he has also observed that whether a re-conditioned machine can be said to be an old machine or a new machine will remain a difficult question to answer. In view of these discussions, he has held that while holding that embroidery machines are more than 7 years old and violate the condition about the age of machines being less than 7 years old and attract liability to confiscate under Section 111(d) of Customs Act, 1962.
Further the Commissioner felt that a lenient view could be taken in the matter in view of the fact that no evidence had been brought forth against the role of any individual including Shri Shyam Gupta or Smt.
Sudershan Vedi, he also held that imposition of separate penalty on Smt. Sudershan Vedi or Shri Shyam Gupta is not justified.
13. As regards the suppression of value on account of non-inclusion of freight and insurance charges, he has held that freight and insurance should be included for the purpose of value even though there is no evidence to suggest that M/s. Volga Embroideries were aware of the fact of non-inclusion of this element in the value. Hence the order.
14. Arguing for the appellants, the Learned Advocate submits that there is no evidence in this matter to show that the age of the machine is more than 7 years old. He submits that the Chartered Engineers' certificate should not have been brushed aside. Now, the other evidence on record, which has been accepted by the Commissioner, the Learned Counsel also pointed out that the Commissioner himself had arrived at the conclusion that the charge of falsification and manipulation would appear to be difficult to sustain, as the age of the machine is to be judged by its appearance and not necessarily on the basis of order of the manufacture inscribed on the machine. He submits that there is no mens rea on the part of the appellants to evade duty and in view of the findings arrived at, the imposition of penalty is not justified. In this regard, he relied on the judgment rendered in the case of Akbar Badruddin Jiwani v. Collector of Customs,Sir Shadi Lal Sugar and General Mills Ltd. v. Commissioner of Income-TaxMerck Spares, Delhi v. Collector of Central Excise & Customs 1983 ELT 1261 : 1983 ECR 1473D (T)Collector of Customs v. Seth Enterprises Pvt. Ltd. 1990 (49) ELT 612Tata Engineering & Locomotive Co. Ltd. v. Collector of CustomsSatya Prakash Agnihotri v. Collector of Customs 1990 (40) ELT 641 : 1990 (29) ECR 22 (T) 15. He also relied on the following judgments to show that in the absence of any mens rea, no confiscation can be ordered by the Commissioner.Merck Spares, Delhi v. Collector of Central Excise & Customs 1983 ELT 1261 : 1983 ECR 1473D (T)Computer Krishma Pvt. Ltd. v. Collector of CustomsCalama Industries Pvt. Ltd. v. Collector of Customs 16. He also submits that in the absence of any mens rea, no fine can be imposed. In this regard, he relied on the following judgments:Ingersoll-Rand (India) Ltd. v. Collector of Customs 17. The Learned DR reiterated the findings arrived at by the Commissioner.
18. On a careful consideration of the submissions made and on perusal of the judgments, it is seen that the Commissioner has arrived at the correct conclusion in most of the aspects of the matter. However, on the question of age of the machine, he has rejected the Chartered Engineers' Certificate. This is a documentary evidence, which could not have been rejected. There is no other documentary evidence placed by the department with regard to the age of the machine or any opinion to support the contention with regard to the age of the machine. Having arrived at such a lengthy judgment in favour of the appellants with regard to the fact that there is no mis-declaration, the certificate of file Chartered Engineer could not have been brushed aside as being not correct. The Learned Commissioner has examined the age of the machine and has noted in para 51 that the Chartered Engineers' Certificate mentions the year of manufacture a; 1986, as not correct, as the said model IS 55 was not manufactured before the manufacture of model 2S 55 which was under production during the years 1965-68. In this regard, the evidence of one Shri R.L. Dubey and that of HM Customs was also noted. The Commissioner has also 'noted in para 50 of the order that the type of allegation suffers from an inherent weakness, i.e. the complaint has been generated out of trade rivalry. He has also noted that the age of the machine cannot be judged very correctly by its appearance and that the Chartered Engineers' Certificate is not correct. In view of his own finding that the age of the machine cannot be ascertained and also there is no deliberate attempt on the part of the importer to suppress the value or mis-declare and in view of the entire evidence and the conduct of the appellants, the age of the machine being less than 7 years old could have been accepted. This finding is arrived at by me on the basis of the Commissioner's own finding with regard to the varying evidence on the age of the machine.
The department has not brought any evidence with regard to the age of the machine being more than 7 yearns old and in the facts and circumstances of the case, it was but proper to have given the benefit of doubt to the appellants. The Counsel has relied on several judgments noted above, wherein it has been laid down that the confiscation, penalty cannot be imposed in the absence of mens rea. The Counsel has also relied on the judgment that in the absence of any mens rea no confiscation can be ordered and fine be imposed.
19. Taking into consideration, the judgments cited above and the law laid down by the Hon'ble Supreme Court, it is but proper to grant the benefit of doubt with regard to the age of the machine in the light of discussions of the Commissioner himself.
20. In that view of the matter, noting the judgments cited and the evidence on record, the order of confiscation and imposition of redemption fine of Rs. 50,000/-and penalty of Us. 10,000/- is set aside and appeal allowed.