1. This is an appeal filed against the decision made in Order No.S/6-146/90.Exp (NSCH)/S-10-27/AB/91-SIIB (Main)/SG/Misc-8/AB/91, dated 30-8-1991 whereunder the Collector Nhava Sheva Port had held that respondent had fulfilled the conditions under Notification No.116/88-Cus., dated 30-3-1988. He also held that distribution panels were not liable for confiscation under Section 113(b) of the Customs Act.
2. Facts of the case are that the respondents entered into a contract with the Russian purchasers for the supply of "distribution panels" under a contract dated 26-1-1990. For executing their contract they were granted an advance. They exported 9 distribution panels. For the last consignment when the respondents filed a shipping bill dated 26-8-1991, Examining Officer objected to this as it was not a distribution panel. Show cause notice dated 14-2-1991 was issued for confiscation of goods under Sections 113(d) and (i) of the Customs Act and why penal action cannot be taken under Section 112(1) of the said Act. Notice was also given for taking action to levy duty on the P.C.B.imported duty free under DEEC Scheme. Respondents filed a reply on 9-5-1991. After hearing the parties on the basis of the evidence given by one Shri Kaul and another Shri Vishwanathan it was held that the goods were distribution panels in an incomplete state. He also relied on the interpretative rules of the Customs Tariff for his decision. He held that the goods were not liable for confiscation and therefore did not levy for any penalty, hence the appeal by the department.
3. It is argued by Ms. Lakhani, ld. D.R. that the goods were not distribution panels. And they did not conform to the description declared in the shipping bill. The goods were reported to be each panel blocks made of metal box of size 53 cms. x 23 cms. x 8 cm. with opening one side by using 6 screws. It was specifically argued by Ms. Lakhani that examination report showed that they did not have any input or output wires, no internal wiring and there was no manufacturing done.
It is argued, therefore, that it could not be treated as distribution panels towards discharge of their export obligation.
4. Ms. Lakhani, ld. DR further stated that the reliance of the evidence of A.C., Electrical Engineer and another officer of the Nhava Sheva Port Trust is wrong. She also stated that only after modification the goods could come into being. She also stated that there is no earthing done. She cited Para 22 of the Import-Export Policy. She also stated by reading the Advance Licence would thus show that the exported goods would be distribution panel with 15 number miniature circuit brakers K-32N. When there is no input or output wires the goods could not be treated as distribution panels. She also read Para 221(1) of Policy which contemplated that licence may be issued under the scheme only if or in addition the conversion of raw materials into the resultant intermediary product must involve substantial manufacturing activities.
She also invited our attention to the statement given by Tushar Vora of the Aptek Electronics an associate of the respondent to show that distribution panels supplied by them to the respondent did not have only outlet provided on all four sides on the box placing insulation paper/bakelite. The conversion of raw material into resultant product must involve substantial manufacturing activity in terms of Para 221 (1) of the 1998-91 Policy. Therefore, there has been violation of the I.T.C. The DGTD who have given their views have stated inter alia in their letter dated 5-2-1991 that there is no place for neutral link if the panel is meant for single phase. The certificate of DGTD also states no earthing terminal was provided. As against these she also stated that interpretation rules could not be relied upon for the purpose of exports. She also further stated that details of the contract could not be fulfilled by the respondents.
5. It was argued by the ld. Counsel that the Chartered Engineers has given a certificate that the goods were distribution panels. Where the buyers had accepted the DGTD officer refusing for cross examination is detrimental to the department's case. The DGTD has given certificate without being available for cross examination. The Collector passed the impugned order on the basis of the other experts which he himself had appointed. As far as the point regarding outer cover first point viz.
outer cover is plain without slots/opening to operate switches is concerned he held after recording the defence plea that this was a minor operation which could be conducted by the buyers after necessary adjustment of the MCB inside the panel. In fact it was claimed by the defence before the Collector as follows :- "It was claimed that the MCBs at present were merely joined together and put in series. The writing would be done in the buyers premises and only thereafter the exact positioning of the MCBs would be known, and windows cut for operation of these switches. As regards the lack of holes on the box for the input and output cables it was claimed that this could be done only by the users at the site because the positioning of the boxes would be known only at the site. It was urged that putting holes on all four sides would be entirely counter productive." "The plea made by the defence is acceptable. There would indeed be no purpose in not treating the impugned goods as distribution panels merely because some holes which are better drilled later and some windows, the exact position of which is not known now are not made at present." We have considered the direct impact of this. The examining officer has observed as follows :- "The goods are not distribution panels as declared by party. Every item of this consignment found to be a metal box of size 53 cms. x 23 cms. x 8 cms. opening on one side by using 6 screws. Each box consists of 50 miniature C/breakers loosly fixed on rows of 10 each.
Between each CB on the same row a small piece of copper wire fitted in series. The item is not distribution panel for electrical use as it does not have any input wires no internal wiring. The metal box seems to be a packing case, for 50 MCBs rather than a distribution panel. As there is no processing manufacturing done on the main exponent of circuit breakers to make a distribution panel as a export product in EDDC scheme. The export may be allowed only after scrutiny of this spl. forwarded to EXPT/ DEPTT. This may better it case to be investigated for violation of policy and misuse of DEEC provision. Net weight of the copper is admitted after weigh-ment.
However, no drawback can be allowed as per Import Export Policy 1990-1993 Para 25(i) on all industry basis. The S/Bill is forwarded to export Deptt. for necessary action along with sealed sample for inspection. The 20 pallets stuffed in the empty container MMMU 138736-9 and sealed under my supervision." The observation of the examining officer it is specifically stated that there was no input wires nor any internal wiring. It is stated by the defence as extracted above that the wiring could be done in the buyers premises. There was no holes done if there are no holes then how could wiring could be done. How there can be input output if wires there.
Without this an input out how can any circuit be made. Nor from gigantic electrical operation unless, a positive negative circuit is generated in machine cannot work more so an electrical circuit breaker.
Therefore the action of having said to be exported certain items which are incomplete itself does not merit export.
6. It was argued by the ld. Counsel Shri M.V. Doiphode that the decision of Deccan Industries Products P. Ltd. v. C.C.E., Hyderabad - 1996 (81) E.L.T. 361 helps him viz. that once the goods have been exported by the remittance of foreign exchange no adverse finding can be made against the customer respondent. It is to be mentioned here that the goods were not at all tested in that case whereas the goods are tested in this case. Reference may be made to page 365 of the reports for that purpose where it has been held that the goods were exported and the same were not tested for verification as to whether these conformed to the characteristics as ordered by customers. In this case there has been live demonstration. As far as ground No. 2 viz.
there is no provision (in terms of adequate space) for connecting the incoming and outgoing cables and for incoming wires are concerned it was explained that some tests were conducted by Shri Vishwanathan. He reported that as a modified form the above panel have an appearance of a distribution panel. But the question still arises whether the modification was effected before the goods could be treated as a distribution panel.
7. As far as third objection viz. box contains 50 MCBs of total rating 1250 Ampares (25A x 50) and the enclosure in which these are placed to the best of our knowledge, is not capable of taking the short circuit load, the Collector agrees that technically speaking it was absolutely correct that the full load was passed through all the MCB on the system there would be considerable heat generated. But it was agree by the experts that normally only range of MCB only 5 when there is a range capacity of 25. Therefore, probability of MCB encounter maximum designated ampare range was virtually not existed. Collector on the basis of the agreement of Assistant Collector with the electrical background came to the conclusion that the goods could be passed.
8. In this connection reference may be made to Para 221 of the Policy it has been specifically stated as follows :- "221(1) Licences may be issued under this scheme only if (i) the Registered exporters hold valid export orders in their own names; and (ii) are able to realise foreign exchange in their own names for the products proposed to be exported. In addition, the conversion of raw materials etc. into the resultant intermediate product must involve substantial manufacturing activities." 9. It is the evidence of Tushar Vora's statement and the statement of Veerappan as reflected in the show cause notice is clear they did not have any manufacturing capacity. If they did not have any manufacturing capacity how they could satisfy the conditions mentioned in above para 221(1) of 1988-1991 Imports and Exports Policy. Moreover, Interpretative Rules would clearly show that it is meant for purpose of classification and designed for the purpose of importation of goods and not for export purpose. That argument is accepted. Ld. D.R. during the course of argument relied on the provisions of Section 138 of the Customs Act to state that these are acceptable. We do not propose to deal with it inasmuch as we find the examination report as well as the evidence of Tushar Vora and Veerappan as reflected in the show cause notice would show that they did not have any manufacturing capacity.
The respondent did not have any manufacturing capacity. If they had no manufacturing capacity how they attempted to export the materials especially which did not have any outlet holes. It may be a small operation required to be done on the product sought to be exported but unless such holes are there wires could not be inserted inside the terminal. Without the gap the wires could not be fixed with the MCBs there. But the purpose for which the panels are required could not have been used without such operation even though small operation may be. On the whole we feel therefore factually that the respondents did not make out any casein their favour. No doubt, some arguments were made regarding cross examination of DGTD officials and Customs Officers. The proceedings under authority are quasi judicial in nature and the decisions are made on the basis of preponderence and probabilities and cross examination of witnesses could not be demanded as a matter of right. On the whole we, therefore, accept the appeal levying a fine of Rs. 5 lakhs on the respondents.
9. Appeal allowed, imposing a penalty of Rs. 5 lakhs as the acts of the respondents had rendered the goods liable for confiscation under Section 113(d) and (i) of the Customs Act.