1. This is an appeal against the order of the Collector of Customs, Calcutta dated 26-5-1986.
The appellants imported three consignments consisting of 532 Coils of Tin Imported Black Plate. The consignments were imported through the vessels s.s., Madhya Pradesh, s.s. Jalarashmi and s.s. Flaur.
The goods were assessed free of duty in terms of Notification No. 243-Cus., dated 13-11-1981 as amended by Notification No. 215-Cus., dated 29-9-1982 and Notification 126-Cus., dated 13-5-1983. It is common case that the Three bills of entry were presented on 28-12-1983, 19-12-1983 and. 29-12-1983 respectively on a prior entry basis. They were duly classified and released on 28-12-1983, 19-12-1983 and 29-12-1983 free of duty in terms of the Notification aforesaid. But the vessels entered inwards finally on 5-1-1984, 10-1-1984 and 24-1-1984 respectively. It must be mentioned that the three vessels entered territorial waters and arrived in Bombay on 10-11-1983, 19-11-1983 and 27-11-1983 respectively. From Bombay they touched other ports before reaching Calcutta. The vessel Jalarashmi touched Vizag and Madras, the vessel s.s. Flaur touched Mangalore, Madras and Vizag and the Vessel Madhya Pradesh touched Madras before arriving at Calcutta. The goods covered by the bills of entry were cleared on 10-1-1984, 12-1-1984 11-1-1984 and 24-1-1984 respectively. In terms of Sections 15 and 46 of the Customs Act, 1962 the relevant date for determination of rate of duty in the case of goods entered for home consumption, is the date on which the bill of entry is presented. The proviso to that Section specifies that if a bill of entry had been presented before the date of entry inwards of the vessel by which the goods are imported, the bill of entry shall be deemed to have been presented on the date of such entry inwards.
3. According to the department the bills of entry were presented on a prior entry basis and as all the vessels entered inwards finally on later dates, the bills of entry should be deemed to have been presented on 5-1-1984, 10-1-1984 and 24-1-1984 respectively. Notification 243/81-Cus., as amended was valid only upto 31-12-1983. So the subject goods were not entitled to exemption on the date of entry inwards.
4. The Assistant Collector of Customs, Calcutta issued two notices dated 27-12-1984 and 28-12-1984 requesting the appellants to pay the short levy amounting to Rs. 50,38,766.50 and Rs. 1,12,69,455.70. on 1-2-1985, the appellants wrote to the Collector of Customs, Calcutta stating that the bills of entry were duly submitted for home consumption before the expiry of the valid period of exemption notification. They also submitted that the two demands of huge sums would affect their business. Without prejudice to their contentions they submitted that the notices were ultra-vires of Section 28 of the Customs Act.
5. On 22-7-1985, the Deputy Collector of Customs, Calcutta referring to the above letter of the appellants stated that the benefit of the exemption was available upto 31-12-1983 and that it was not extended further. The vessels entered inwards finally on 5-1-1984, 10-1-1984 and 24-1-1984 respectively and the consignments were out passed on subsequent dates. The Deputy Collector has pointed out that the subject goods were not entitled to exemption from duty under the notification.
The letter reads that it was within the knowledge of the appellants, but that they did not submit the bills of entry to the Customs House for re-assessment at the appropriate rates of duty effective on the date of entry inwards of the subject vessels. It reads as follows:- "Thus it appears that you have suppressed the facts regarding the entry of the vessels and clearance of the goods after expiry of the notification and as a result the short levy has occurred.
Accordingly, under the proviso to Section 28(1) of the Customs Act, 1962, notices have been issued in time and not ultra-vires as stated by you." The appellants wrote to the Dy. Collector on 19-8-1985 reiterating that the demands without any show cause notice almost after a year of the clearances were not valid. The show cause notice was not issued by the Jurisdictional Proper Officer initiating the proceedings. Again it was contended that the reference to Section 28 proviso was an after-thought and was without jurisdiction.
6. The matter was adjudicated by the Collector of Customs and by the impugned order, he held that the dates for purpose of Import or Exports duties were the statutory dates mentioned in Section 15(1) or Section 16 and not the date of physical entry or exist. He held that the two demand notices dated 27-12-1984 and 28-12-1984 had been issued under the proviso to Section 28(1) of Customs Act, 1962. The appellants were fully aware of the fact that notification 243/81-Cus was not in existence on the date of the final entry inwards of the vessels. This fact was within the full knowledge of the importers and they did not submit the bills of entry to the Customs House for re-assessment nor did they inform the Customs House anything in this regard before taking clearances of the goods. He also did not agree that the vessels in question entered the territorial waters of India within 31-12-1983 before arriving at Calcutta. He confirmed the demand amounting totally to Rs. 1,67,99,260.78. Hence the present appeal.
7. Shri Roy Chowdhury, learned Counsel for the appellants stated that the demand is ultra vires of Section 28 of the Customs Act. He urged that the issue of a show cause notice was a must and that strict construction was necessary. A demand could be issued only after consideration of the representation, if any. The two notices of demand were received by the appellants on 4-1-1985. These demand notices were not valid because they were not preceded by any show cause notice. No grounds have been stated in the demand notices and the demands have been issued asking the appellants to pay the sums immediately. The order passed by the Adjudicating Authority was on a representation made by the appellants and hence could not be treated as in pursuance of the show cause notice issued for Adjudication purposes. He placed reliance on the decision reported in 1980 ELT 693 (Bom.) (Precision Steel Fastners and Ors. v. Union of India and Ors.). In the decision, it was observed that a demand whether made Under Rule 10 or Rule 10A in the absence of a show cause notice would be illegal and void.(CEGAT) (Steel Authority of India Ltd., Calcutta v.Collector of Central Excise, Calcutta), the Tribunal held that the Excise Authorities without following the required procedure could not have straightaway made the demand.
8. The next contention raised by Shri Roy Chowdhury was that there was no clandestine removal. The bills of entry were assessed to NIL duty as per the notification 243/81-Cus. The extension of the period from 6 months to 5 years is a drastic extension and should not be ordinarily allowed unless there is a fraud, cullion or any wilful mis-statement or suppression of facts. The effect of a notification is a question of law and there is no mis-statement of facts. It was further urged that Section 17(4) of the Customs permitted the Proper Officer to re-assess the goods to duty. There was no legal obligation cast on the importer to submit the bill of entry for re-assessment. In this case, the appellants have relied on the Full Bench judgment of the Bombay High Court reported in 1985 (22) ELT 644(Bom.) (Apar Private Ltd. and Ors.
v. Union of India and Ors.). The Tribunal has adverted to - the decision in 1986 (26) ELT 275 (Tribunal) (National Textile Corporation Ltd. v. Collector of Customs, Madras). The Full Bench of the Bombay High Court has held that "if the goods are wholly exempt Under Section 25(1) of the Customs Act or by virtue of the entry in the tariff schedule on the date they entered the territorial waters, any subsequent withdrawal of the exemption will not have the effect of making the goods liable to duty on the basis that the exemption is no longer in force on the date of presentation of the bill of entry for clearance of the goods." The learned Counsel, therefore, submitted that the subject vessels had entered the territorial waters before the crucial date and the decision reported in the judgment of the Bombay High Court would apply to the present facts.
9. The learned Counsel also urged that the concept of territorial waters has undergone substantial change in International Law. As per the territorial waters Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, No. 80 of 1976 the limit of territorial waters is stated to be the line every point of which is at a distance of 12 nautical miles from the nearest point of the appropriate base line. This Act also envisaged the concept of "Contiguous Zone of India" which extended to a distance of 24 Nautical Miles from the nearest point of the base line. The Central Government may exercise such powers and take such measures in or in relation to the contiguous zone in respect of among others immigration, Sanitation, customs and other fiscal matters. The learned Counsel submitted that there is no proof in this case that the vessels had gone beyond the limits of the territorial waters or the contiguous zone. There was no suppression of facts by the appellants and it is the duty of the Customs Authorities to re-assess if they found that such a course was warranted. Mere silence would not amount to suppression. The counsel placed reliance on the ruling reported in AIR 1931 Allahabad 154 (Niaz Ahmad Khan and Anr.
v. Parsottam Chandra and Anr.) wherein it has been held that the "mere silence of the mortgagee to disclose the fact that no application had been made within time allowed by law would not be sufficient to vitiate the contract on the ground of fraud or misrepresentation." It was further urged that the demand was barred by time as it was issued beyond the period of 6 months. Reliance was placed on the rulings reported in 1983 ELT 1994 (G.D. Industrial Engineers, Faridabad v. Collector of Customs and Central Excise, Chandigarh). 1985 (21) ELT 227 (Tribunal) (Integrated process Automation Pvt. Ltd., Bangalore v.Collector of Central Excise, Bangalore). 1985 (21) ELT 299 (Tribunal) (Jay Engineering Works Ltd., Calcutta v. Collector of Central Excise, Calcutta).
In the absence of any allegation of fraud, cullion, wilful mis-statement or suppression of facts, longer period of 5 years could not be invoked.
10. Shri J. Gopinath, SDR urged that the goods were imported on three different occasions. Notification 243/81-Cus. dated 13-11-1981 as amended, exempted basic Customs duty and additional duty while the subsequent notification No. 126, dated 13-5-1983 exempted auxiliary duty also. It was urged that there was a practice requesting the parties to pay the money short levied without recourse to other proceedings having regard to the status of the importer. The importers were well known in the field and the two notices were issued for the short levy. The same cannot be construed as demand notices. They were merely show cause notices. When the appellants sent a communication to the Deputy Collector, he inturn issued a detailed notice wherein there is an allegation of suppression. The Deputy Collector can issue a notice as he is a superior officer. This notice dated 27-7-1975 has been issued within a period of 5 years and the proviso to Section 28 could be invoked.
11. In order to establish suppression, the SDR urged that the notification was valid only upto 31-12-1983. The vessels finally entered Calcutta Port after that date. The decision in Apar's case would not apply because the vessel arrived at Bombay and entered into the territorial waters before the notification was rescinded. The vessel is normally intended to carry goods for several ports and it may touch several ports before unloading the cargo intended for a particular place. In 1983 ELT 65 (Ker.) (Shri Ramlinga Mills Private Ltd. and Ors. v. Assistant Collector of Customs and Ors.) the question for consideration was the meaning of 'import'. In that case, the vessel entered into the territorial waters of India around Bombay on or about 28-12-1978 and ultimately reached the port of destination after 31-12-1978 when the notification was not in force. While dealing with the concept of "import", it was held that the mere entry of the vessel with the goods into the territorial waters or even berthing in the port of Bombay will not vis-a-vis the importers of Cochin constitute complete import of the goods at Bombay. It was held to be a mere transit and that the importation took place only when the vessels crossed the Customs Barrier at the intended port of importation namely Cochin. The Kerala High Court has followed the decision of the Supreme Court in the case of Prakash Cotton Mills (1979 ELT 241). In 1985 (21) ELT 369 (Mad.) (M. Jamal Co. v. Union of India and Ors.), the Madras High Court considered the concept of taxable event. It was held that the chargebility took place at the time of unloading of the articles.
In 1986 (26) ELT 275 (Tribunal) (National Textile Corporation Ltd. v.Collector of Customs, Madras), the Tribunal held that, "the vessels, no doubt, entered the Calcutta Port on 31-12-1978, but the goods were not intended for and cleared at Calcutta. On the contrary, they were transhipped by another vessel to Madras Port where that vessel arrived after 1-1-1979 by which time the exemption had already been withdrawn." In 1987 (27) ELT 626 (Cal.) (Indian Rayon Corporation and Ors. v.Collector of Customs), the Calcutta High Court had an occasion to examine the concept of taxable event in regard to liability for Customs duty. In paragraph 28, it is observed that, "it is true that in view of the definition of 'India' as given in Section 2(27) of the Customs Act, importation takes place as soon as the goods enter the Indian Territorial Waters, but though the importation is complete at that point of time, the imported goods in view of the definition given in Section 2(25) retained their character as such till the date of their clearance for home consumption."(National Textile Corporation v.Collector of Customs, Madras) 13. The SDR argued that the appellants were aware when they cleared the goods that the notification was not in force. Though, the Customs Officers could have found out the mistake and collected the duty, there was an equal responsibility on the importers, which, as in this case, should be construed as suppression.
15. The admitted facts of the case prove that on the dates the vessels carrying the goods entered Bombay, the notification was in force.
Subsequently, the vessels touched other ports in India and reached Calcutta only in January, 1984. The bills of entry were filed prior to the withdrawal of the notification and were assessed to NIL duty. The orders of clearances were also given Under Section 47 of the Customs Act. But on the dates, the goods were out-passed the notification was not in force. In this connection one has to refer to Section 2(25) of the Customs Act which defines import goods as follows:- "Import goods" means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption." 16. The main contention of Shri Roy Chowdhury is that before the withdrawal of the notification, the goods had come into the territorial waters of India i.e. port of Bombay and that the Department has not adduced any evidence that thereafter the vessels had gone out of the territorial waters before they were berthed at Calcutta. The decision of the Calcutta High Court in (cited supra) applies to the facts of the present case. In that case, the appellants were the importers of Viscose Stelin Yarn. The ships carrying the commodity entered into the territorial waters long before 31-1-1979. The rate of additional duty was raised by an amending notification. It was contended that the ships carrying the consignments in question having entered the territorial waters of India when the previous notifications were in force, the additional duty should not be charged at the enhanced rate. The Calcutta High Court has referred to the decision of the Madras High Court in (Supra). It is observed from this judgment that even if the goods were totally exempted from duty at the time they entered the territorial waters, the rates of duty could still fasten on them Under Section 12 so long they retained the character of imported goods, if an appropriate notification is issued in the meanwhile. The Calcutta High Court has also pointed out that the Bombay High Court dealt with different facts. In paragraph 31, it is observed as follows:- "Thus, even if under an exemption notification any specified goods are not leviable to duty at the time of their entry into the Indian territorial waters or in other words, when they acquire the character of imported goods, they become so leviable with the withdrawal etc. of the said notification at any time before the actual clearance of the goods for home consumption." "Thus, for example, the mere fact that the goods crossed the customs frontiner in a Port in which the importer has no intention whatever to have the goods delivered over from the ship, will not amount to import for the simple reason that the importer had no intention whatever in relation to those goods to have access to the goods, except at the Port of destination which he has specified in the contract with the foreign seller." It is clear from this decision that the question of importation has to be determined in the light of the provisions of the Customs Act and the mere fact that the ship with the goods intended for other importers had called on other ports in India before it reaches its destination for discharging the cargo would not amount to "import" of the goods in question. Applying the ratio of that decision, it is seen that the subject goods were outpassed at Calcutta after the notification was withdrawn and even if the vessels had touched other ports before reaching Calcutta, it cannot be said that there was an import of the goods into territorial waters. As regards the subject goods, they become imported goods only when they were outpassed at Calcutta and were cleared for home consumption. Till that stage they were carried as imported goods and the mere fact that in transit the vessel had touched several other ports in India would not make any difference. The decision of the Bombay High Court has no application to the facts of the present case because the goods had entered into territorial waters and there was a subsequent withdrawal of the exemption. The goods were stored in the bonded Ware House at Bombay. The contention whether the vessels were within the territorial waters or in the contiguous zone is not a relevant factor in view of the fact that the Calcutta was the port of destination for the discharge of the subject goods. Moreover in Article 33 of the Third United Nations Conference on the Law of the Sea Zones the concept of contiguous zone was envisaged to prevent infringement of Customs, Fiscal, Immigration or Sanitary Laws. Since the Customs Act refers only to the Territorial Waters of India, the concept of contiguous zone will not assist the appellants. Hence on point (i), we hold that the Customs Duty would be attracted for the subject goods consequent on the withdrawal of the Notification.
17. The decision on point (i) would not be sufficient to dispose of the matter. The goods have been assessed to NIL duty and as they are liable to Customs duty, the department ought to have issued a notice Under Section 28 for short levy. Section 28 contemplates the issue of a show cause notice as to why the person should not pay the amount specified in the notice. This notice should ordinarily be issued within a period of 6 months. But the proviso enables the issue of a notice within a period of 5 years under specific circumstances.
18. In this case no show cause notice was issued within a period of 6 months. We will have to consider whether the two notices of demand dated 27-12-1984 and 28-12-1984 could be construed as show cause notices. We are unable to agree that they should be treated as show cause notices, because the same merely refer to the amount short levy and there was a request to pay the amount immediately. The appellants have not been given any opportunity to put forward their case. The notice also does not contain the reasons which prompted the department to issue the same. It may be that there is a convention in some Customs Houses and the importers may not insist on issue of a show cause notice. But those are instances of voluntary payments despite the bar of limitations. However, when a party insists that a show cause notice should have been issued, one has to assess the merits of the plea on the basis of the statutory requirements. We are not impressed with the contention that the demand notices dated 27-12-1984 and 28-12-1984 should be construed as show cause notices. The appellants had written to the Collector on 1-2-1985 referring to these notices and also setting out a plea that they were ultra vires Under Section 28. It is significant to note that only thereafter on 22-7-1985, the Deputy Collector issued another letter wherein he has set out That the appellants have suppressed the facts of the entry of vessels and the clearing of the goods after the expiry of the notification. These letters read as if the earlier notices have been issued Under Section 28(1). In other words, the letter dated 22-7-1985 does not purport to be a show cause notices. The two demand notices have been construed as show cause notices. Such a contention is not justified. The notices issued on 27-12-1984 and 28-12-1984 do not refer to any suppression of facts. No grounds have been set out in these notices as to how the proviso to Section 28(1) was applicable.
19. The term "suppression" Under Section 28(1) proviso is analogous to the term "fraud". Section 17 of the Contract Act defines "fraud". There is no proof that the appellants intended to deceive the Government or induced them to out pass the goods despite the withdrawal of the exemption. There was no active concealment. Suppression envisaged a deliberate or conscious omission to state a particular thing by one who is legally required to state the same. In this case, it cannot be said that there was any suppression because the department was aware that notification had been withdrawn. Under Section 47 of the Customs Act, the proper Officer may make an order directing the clearances if he is satisfied that the goods which had entered for home consumption are not prohibited goods and that the importer has paid the import duty and other charges payable under this Act. So it was the duty of the proper officer to have checked up whether the notification was in force and whether the appellants had failed to pay the duty. On the part of the appellants, they were under the impression that the decision in Apar Pvt. Ltd. case would apply. We do not accept the contention that there was a co-equal responsibility on the appellants to submit the bills of entry for re-assessment. Re-assessment is an official function to be discharged by the Assessing Authority within the ambit of Section 17(4) of the Customs Act. There is no reason why the goods were not re-assessed within a period of 6 months. In the absence of any allegation of suppression or wilful mis-statement, we are unable to agree that the longer period of limitation would apply to the facts of the present case.