Judgment:
1. These two appeals, filed by the Department as well as the importer against the orders passed by the Commissioner in Order No 1/95 dt.
15.2.95. In terms of that order, he confiscated the goods under import holding them liable for confiscation under Section 111(1) & 111(m) of the Customs Act 1962, he allowed the same to be redeemed on payment of redemption fine of Rs 5 lacs and penalty of Rs 1 lakh under section 112(a) on the importer. He also demanded appropriate Customs duty on the misdeclared goods sought to be evaded amounting to Rs 19,84,514/- 2. The appeals are being decided by this common order, after hearing both sides and considering the submissions made and the application filed on behalf of the importers Advocate Shri R. Raghavan on 20-2-2001 in the Court.
(a) Briefly stated, the matter is an import made in this case of watch parts by the appellant, a well known manufacturer of watches in India in the course of regular trade, for actual use. The Bill of Entry was filed on 28.12.94 and was assessed on the same date and duty was paid on 29.12.94 as per the assessment. The importer vide their letter dated 16.1.95 (submitted to the Customs on 23.1.95) informed the Customs that there was some error made and there was a second invoice which included the excess items, as found on the date of detection, when the gods were examined for Customs purpose on 23.1.95. The request on 16.1.95 (presented on 23.1.95) was for permission to amend the Bill of Entry, to include the quantity as per the second invoice No E. 12055 dated 21.12.94 since the goods actually found valued at Rs. 27,37,262/- (FOB) which was not declared. Watch parts ie. 14300 pieces of Crystal instead of 752 declared; 215 Gold Gaskets instead of 200 declared; 22700 white Gaskets instead of 1270 declared were found on examination. It was taken to be a mis-declaration, of value and quantity and liable for confiscation under section 111 (1) & (m) of the Custom Act, 1962 and penalty under Section 112 (a) of the Customs Act 1962 was called for. The fax message from the suppliers were produced indicating that the consolidation agent had inadvertently omitted to enclose the second invoice though the entries of that invoice were made in the Airway Bill. This was considered to be second thoughts and not acceptable.
"On careful examination of their pleas, I find that they are all nothing but an after thought. Their supplier's fax message dt.6.2.1995 addressed to the importer, directs them to conduct deep enquiry from their side concerning the missing PLI gaskets and PHD 5 crystals; both gaskets and crystals FHD 5 were duly packed by them and in respect of 5150 gaskets; they shipped 5150 only and the number 5510 is a mistake in the invoice. From this, it is evident that the supplier has not accepted the discrepancy entirely due to their purchase order, it has not been explained how they have not initiated suo-moto action to rectify the defect in supply, whereas they have chosed to wait for the customs examination to be completed before taking any further action. If there had been any mistake in the supply, the supplier would have immediately clarified, whereas in the supplier's letter dt. 10.1.95 wherein a reference has been made to their conversation with one Mr. Sudhindra of the importer's company merely shows that they are supplying the copies of the packing list and two invoices. The position has changed only in February 95 apparently when the importer persisted with the supplier/half-hearted attempt has been made vide fax message dt 6.2.95 to come to the rescue of the importer, which shows that the importer's attempt to shift the blame on the supplier and also reliance on the second invoice is only an after thought to save themselves from the law. The excess noticed cannot be considered as simple negligence, as the value comes to about Rs 27 lakhs. In any case, being an importer belonging to organised sector, they should have ensured that the import takes place according to requirement of law, and having failed to comply with the same, it is clear that they had every intention to evade duty. The duty sought to be evaded comes to Rs 19,84,514/-(FOB)." (i) Amount of redemption fine of Rs 5 lakhs is very low compared to the value of goods at Rs 27,37,262 found in excess and not declared and sought to be cleared without payment of duty.
(ii) The amount of penalty of Rs 1 lakh under Section 112 (2) is very low compared to the amount of duty Rs 19,84,514 sought to be evaded.
(iii) The importer being in organised sector should have taken all care. instead he tried to evade duty by misdeclaring the quantity.
It was clear that the Airway Bill enclosed to BE mentioned two purchase order No 16751 & 18460, instead of verifying the same, the clearance was sought. Therefore the direction exercised by the adjudicating authority should be interfered with and the fine and penalty should be enhanced.
(d) Considering the appeal of Revenue we find that neither the order in original, nor the appeal paper book has relied upon and or indicated any material as to what should be or could be the 'Market Price' of the goods under import. In absence of this vital material we cannot measure the adequacy or otherwise of the Redemption fine.
Section 125 of the Customs Act 1962 provides the formula to determine the quantum of fine and that is based on Market Price less the duty chargeable therein, facts and circumstances of each case are thereafter to be considered along with bona fides of the import (M/s Jain Exports Pvt Ltd 1990 (47) ELT 213 SC relying upon D. Navinchandra & Co. 1987 (29) ELT 492 SC and B. Vijay Kumar AIR 1987 SC 1794), however no hard and fast rule could be laid down. There is however no warrant for he proposition that the maximum penalty as per Market Price less duty chargeable therein as prescribed under section 125 as maximum is required to be imposed (Pradeep Vs Addl Collector 1993 (68) ELT 525 Cal(DB). We could therefore in the facts of this case, find the imposition of fine not in order. When the Adjudicator has not determined any 'Market Price' nor any evidence has been relied upon by the Revenue in appeal. We follow the catena of decision of the Tribunal. In Commissioner of Customs Bombay Vs Kamani Oil Industries 2001 (94) ECR 744 (Tribunal, the latest, wherein the Tribunal has not uphold the plea for enhancement of the Redemption fine. We find that no fine can be imposed without declaring the "Market Price" by the adjudicator. Fine imposed is therefore not upheld. (e) As regards enhancement of penalty imposed under Section 112 (a) of the Customs Act 1962 on the importers, we find that admittedly the importers are a well known Actual user of the watch parts, under imports, are regular importers of the same. We do not find any reason to increase the penalty on the grounds made out. We would instead follow the decision in the case of Indian Sugar & Egg Co.
1995 (77) ELT 907 (Tribunal where in considering the importers to be Actual Users the penalty of Rs 1 lakh imposed was set aside even though a licence offence was established by the Tribunal. However, the order of confiscation on merits, of goods valued at 15.77 lacs was sustained. We find that in this case there are no reason for ordering a penalty under section 112 (a) on the importers, keeping mind the Actual User Status and the fact that there was no Licence involved for imports made in this case.
(f) We have considered the submissions made by the learned Advocate Shri R. Raghavan that no Show Cause Notice was issued as regards the demand of duty of Rs 19,84,514 as ordered by the Commissioner, which they have since paid. He relied upon Tribunal's decisions in the case of Saphai Saw Mills & Veneer Unit (1999 (109) ELT 1097 TRIB Visu Pipes & Fittings (P) Ltd 1998 (074) ELR 230 TRIB both cases under the Central Excise Law and the case of M/s Satzar Spinners (C/423/96 of SRB- Chennai decided on 11.10.2000) under section 124, wherein it has been held that waiver of show casue notice under section 124 of the Customs Act 1962, is for adjudicating confiscation and penalty and no waiver of demands of Duty required to be issued under section 28 (ii) could be made. We agree with this proposition. A demand under Section 28 (i) of the Customs Act can only be determined and made only after service of a notice on the person chargeable to duty, it cannot be waived. Therefore, the duty demands as made have been determined in violation of this requirement of service of notice and the demands of duty as made in the impugned order could not be made.
(g) We find, that in the case of M/s Bakeman's Home Products Pvt Ltd. Vs Collector of Customs (1997) (95) ELT 278 TRIB) the tribunal relying up on Tribunal decision and the Supreme Courts decisions in the case of H.M.M. Ltd 1995 (76) ELT 497 came to a conclusion in para 13 of that decision as - ".....Consequently since the demand of duty fails, action for confiscation on penalty cannot survive. We hold so on the weight of authority referred to alive." We therefore, find no reason for the Confiscation and penalty in this case to revive, since the duty demands could not be made.
(h) We have considered the application filed by the learned Advocate Shri Raghavan in the Court on 20-2-2001, submitting that the duty already paid by them is not being contested. We therefore find, no reason to set aside the order as regards duty and remand the same back for denovo determination of the demands of duty as prescribed under Section 28 (i).
(i) We find that the importers had given a letter for amendment of the Bills of Entry. We do not find any decision on this amendment, therefore we do not uphold the findings of misdeclaration as arrived at by the adjudicator. The very fact that two purchase orders are mentioned in the Air way Bill, the officers should have questioned and called for the same. There is no finding why this was not done.
The goods were stated by the Advocate, to be not on letter of Credit basis but on Sight Draft basis and even though the BE was assessed and duties as assessed were paid on 29.12.94, the importers did not seek clearance of the goods for almost a month thereafter and presented the same for examination only on 23.1.95 when the shortage and excess were determined. They were as it appears from the record determining the reasons for the same. If the reconcillation statement prepared by the importer is looked at the difference is excess over shortage would be Rs 10,261.61 in value terms which would be 0.3% of the total assessable value of the goods under import. It is a fact that shortages of certain goods were also noticed. No findings are arrived at by the adjudicator on these vital aspects and of the importers conduct in not clearing the goods itself; goods being small watch parts, which were relevant to arrive at determining the conduct of the importers and their bonafides.
Confiscation arrived at and penalties imposed, without considering these vital acts cannot be upheld.4. In view of our findings, we reject the appeal of Revenue. The appeal of the importer is allowed only as regards redemption of fine and penalty which are set aside. Appeals disposed off in these terms.