Full Judgment
valued at US $ 129330 equivalent to Rs. 57,68,118/-. They submitted the documents along with Export Licence dated 9.3.2004 issued by DGFT, Hyderabad for export of Joint Shamsan Musical Instrument parts made out of Red Sanders Wood; certificate of origin vide certificate No. 01/2003 dated 25.11.2003 issued by the Principal Chief Conservator of Forests, Hyderabad, indicating the origin of goods, quantity and value as above and permitting them to export; stock possession certificate dated 17.7.2003 issued by the Divisional Forest Officer, Nalgonda, proceedings dated 8.4.2004 of DFO, Nalgonda; transit permit Nos. 766609 and 766610 dated 16.4.2004 issued by the Forest Range Officer, Choutuppal for transporting the goods from exporter's warehouse at Nalgonda to ICD, Hyderabad; purchase contract dated 10.4.2003 entered into between M/s. Walter Traders and Radeep Services, Singapore; invoice No. EXP/SIN/001 and packing list dated 9.4.2004 along with the shipping bill. The officers of Customs, ICD on verification observed that the description of goods mentioned in the shipping bill did not tally with that in the transit permit and found some other discrepancy.
Hence, the Dy. Commissioner of Customs, ICD addressed a letter dated 21.4.2004 to DFO, Nalgonda requesting him to inspect the goods at the customs premises, i.e., ICD, Sanathnagar, Hyderabad and certify the description mentioned in the shipping bill. The FRO, Choutuppal inspected the goods presented by the exporter for export on 23.4.2004 and certified on the shipping bill as "inspected the material in container bearing Nos. PCIU 9955053 and PCIU 9954458 in the premises of ICD, Sanathnagar and found them to be rough squared trimmed, logs of Red Sanders and the same covered with transit permits bearing numbers already noted above issued by FRO, Choutuppal". Further enquiries by the Department and Special Investigation and Intelligence Branch (SIIB) revealed that Samisen instrument is a traditional Japanese instrument played by traditional music players. The Britannica Encyclopedia describes the same, as instrument with long necked fretless Japanese lute with three strings, a small square body with cat skin front and back and a curved-back peg-box with side pegs and it is not in the shape of a long. An extract from Music instruments of the world shows that Shamesin is a musical instrument with three strings and blade. The examination of the goods show that they are presented for export in irregular shapes, sizes and not properly worked on them, many of them with holes and cracks and do not appear to be as a part of the Shamesin instrument. The transit permit issued by the Forest Department described the same as "dressed material of red sanders for shamesin musical parts". The Forest officer also on the back of the shipping bill certified that the goods are rough squared and trimmed longs of red sanders. On examination by SIIB, they had a reasonable belief that roughly trimmed logs of red sanders were being attempted for export in the guise of parts of musical instruments in violation of the provisions of Customs Act, 1962 read with EXIM policy 2002 - 2007 and which is liable for confiscation. Hence they seized the goods under panchanama dated 27.4.2004 and proceeded with the case by issue of show cause notice after due recording of the statements from the Managing Partner of the appellant and from the CHA.2. The appellant's contention was that they had specific orders for supply of parts of shamesin instruments. The rough logs were dressed and brought to a particular shape. These dressed logs were nothing but parts of joint shamesin musical instruments in terms of the EXIM Policy, They had no intention to smuggle out red sanders wood. They have carried out the activity in the presence of the Forest Officers and they had clearly certified the same as parts of the said instruments. The activity of manufacture of polishing the logs to bring it to a particular shape was well known to the Forest Officers and they have certified the same. They contended that the description of the logs, quantities in the transit permit tallied with the descriptions in the shipping bill. They contended that there was no malafide on their part to export prohibited items. The items had assumed the nature of a part of the said musical instrument and hence, it was in terms of the Licence. It is contended that only after the examination of the SSIB officers, the Forest Officers have changed their opinion that logs as rough squared and trimmed longs of red sanders, even though the item does not loose the characteristics of parts of the instrument. They denied that the item to be a prohibited item and hence, they contend that absolute confiscation and imposition of penalty is not justified.
It is contended that the Managing Partner and the exporter had no intention to export a prohibited item but they had converted the items into the requirements of the purchaser from Japan. The purchaser from Japan is a manufacturer of the said musical instruments. The musical instruments required red sanders wood and the logs were procured by them and hence, there was no violation under Section 114 for imposition of penalty or for absolute confiscation of the goods under Section 113(d) of the Customs Act 1962.
3. The Commissioner has not agreed with their contentions. He has noted that the item has not acquired the nature of musical parts made out of red sander wood and hence, they are in the nature of rough squared and trimmed logs of red sanders wood and they are liable for absolute confiscation. He has held that K. Ravinder, Managing Partner of the exporter had actively managed the affairs of the said firm as far as the export is concerned. His involvement is also evident from the fact that he was present at the time of examination of the goods. Therefore, he was liable for penalty.
4. The learned Counsel submits that there was no intention to export the item which was not in terms of the Licence. They had carried out certified activities on the rough logs and the item had acquired the characteristics of a part in the form in which it was described in the shipping bill. The learned Counsel relied on the certificates issued by the Divisional Forest Officer, they have examined the goods and have clearly certified by their letter dated 17.7.2003 that permission for conversion of the said quantity of red sanders wood into furniture and musical parts was granted under the provisions of 12(3) of A.P. Red Sanders Wood Possession Rules 1989. The Forest Officers had examined and given stock possession certificate and have clearly noted in the said certificate that the item has acquired the characteristic of musical parts. It is contended that there is no collusion between the appellants and the Forest Officers. Therefore, it is not a case where raw blocks were sent and were attempted to the shipped but the logs had acquired the characteristics of a part of musical instruments after undergoing several processes. It is to be treated as joint shamesin musical instrument parts made out of red sanders wood in terms of the export Licence granted to them. He submitted that the Principal Chief Conservator of Forest vide his certificate of origin dated 25.11.2003 certified that joint shamesin musical instrument parts weighing 56,279.55 kg were allowed to be exported as value added products of "Red Sanders (Pterocarpus santalinus) wood" as per GOI, Ministry of Commerce, Director General, Foreign Trade, New Delhi: Notification No.13 (RE-96)/92-97 dated 01.10.1996. The learned Counsel also referred to the letter of Foreign Trade Development Officer granting them permission to export based on Original Certificate dated 25.11.2003 issued by Principal Chief Conservator of Forest, AP and physical verification certificate of TAK of SRW/stock possession certificate. He submitted in terms of this notification, physical verification was done and it was certified as joint shamesin musical instrumental parts made out of red sanders wood. He contended that it is only a difference of opinion between the Customs and the Forest Department, which has resulted in the seizure of the goods. He contends that mere difference of opinion cannot be considered as a case for absolute confiscation and for imposition of penalty as there is nothing on record to show that the appellants had attempted to ship prohibited goods in the guise of musical instrument parts. He submits that redemption of the goods be granted on payment of normal fine and he submits that there is no attempt or abatement off offence under Section 114 and imposition of penalty should be set aside.
5. The learned DR contended that the order passed by the authorities is correct and the item has not attained the stage of a part of musical instrument. It is only a dressed logs, the parts are made from these logs and it has to be considered as prohibited item. He prays for upholding the order of confiscation and imposition of penalty.
6. On a careful consideration, we notice that the appellants had obtained Licence in terms of the EXIM Policy 2002-2007 for export of joint shamesin musical instrument parts. A cumbersome procedure for taking Licence from the Forest Department was strictly followed. The Principal Chief Conservator of Forest granted the Licence and permission to export the item. He permitted the appellants to procure red sanders wood Licence in terms of the proceedings dated 29.5.2003.
The Licence for dealers/stockists was issued by the Divisional Forest Officer under APRSW 1989 on 29.5.2003. Permission was granted by Divisional Forest Officer, Nalgonda dated 17.7.2003 for converting red sanders wood into furniture and musical parts in terms of the said Rules after due verification of the Licence granted to the appellants for exporting the item. Possession certificate was also issued after Forest Officer on 17.7.2003 in terms of the said Rule. Stock possession certificate was also issued by Divisional Forest Officer for converting the red sanders wood into parts of the musical instruments. Several procedures were followed and the Forest Officers have examined the activity carried out on red sanders wood. The Dy. Inspector General of Forest vide his letter dated 11/27 February 2004 wrote to DGFT, New Delhi for granting Licence and granting no objection to grant export Licence for export of 2874 joint shamesin musical instrumental parts (weighing 562155 kg) to the appellants on reference made by DGFT vide their letter dated 8.12.2003. The DGFT granted the Licence for export of the said instruments. The appellants carried out the activity and after the said activity the Principal Chief Conservator of Forest issued certificate of origin in terms of Import-Export (Control) Policy 1992-97. After due examination of the entire goods and certified the same as joint shamesin musical instrumental parts. The appellants only thereafter proceeded to file the shipping bills. The Custom Officers conducted an enquiry and in terms of the material found in the Britannica Encyclopedia and extracts from Music Instruments of the World, they came to a conclusion that the item has not acquired the shape of a part. The photographs of the shapes of the logs were shown to us.
7. On a careful consideration, we are of the considered opinion that the item has not yet acquired the shape of a musical part. A part is complete by itself and it is not in the nature of the irregular shaped logs. The appellants have also exhibited the sketch of a joint shamesin musical instrumental part. This sketch clearly shows that the part has assumed the nature of an instrument without the strings, which is not so in the present case. We reject the contention that the item in question has acquired the characteristic of part of the said musical instrument.
8. It is also noticed that subsequent examination by the Forest Officers on the request of the Customs Officer have retracted their earlier certificate and have held that the items to be rough squared and trimmed logs of red sanders wood. At the same time, they have certified that they are covered under transit permit bearing No. 76609 and 76610 issued by the Forest Range Officer. In the facts and circumstances of the case, the issue that arises for consideration is as to whether the appellants have attempted to ship prohibited red sanders wood in the guise of parts of shamesin musical instruments. On a detailed consideration, it is seen that the appellants have procured the logs from the PCCF and the possession was granted to them by the said Forest Officers in terms of Export Licence, which was also granted after undergoing tedious procedure. Thereafter, the appellants carried out various activities on the red sanders wood and the logs acquired certain shape. After due examination, they issued a certificate that it had acquired the shape of shamesin musical instrument made out of red sanders wood. In these circumstances, we have to hold that the Revenue has not established that the appellants have attempted to ship prohibited red sanders wood against the provisions of policy although the item has not acquired the shape of parts. In the circumstances, we hold that the allegation that they attempted to violate the EXIM policy and Licence has not been established by the Revenue. We hold that there was no attempt made by the exporter or the Managing Partner to abet or commit any offence and hence, absolute confiscation cannot be done in the matter. The changed opinion of the Customs may be sustainable and the goods may be confiscated but not absolutely. As the facts and circumstances clearly shows that the Forest Officers after due examination of the activity certified the item to be shamesin musical parts. The authorities may not consider the same as shamesin musical parts as the logs have to undergone several more process to bring into existence the exact part. However, there is no charge that exporter attempted to export these logs for different use than for use as parts of musical instrument, which was being shipped with an intention to export prohibited goods. In these circumstances, the benefit has to be given to the assessee to redeem the goods on payment of redemption fine while setting aside the penalty on exporter. The matter is therefore remanded to the Commissioner to grant redemption of the absolutely seized goods on payment of fine. The redemption fine shall be fixed after taking into consideration the margin of profit that would have been earned by the customer in terms of relevant section of Customs Act. The impugned order is set aside and matter remanded for granting redemption of the seized goods on appropriate fine to be determined by the Commissioner within three months from the receipt of this order with an opportunity of hearing shall be granted to the appellants. The penalties are set aside. Ordered accordingly.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)