Judgment:
1. Most of these appeals are by importers of machines declared as "Computerised Embroidery Pattern-making Machine with Plotter", who are aggrieved by denial of the benefit of Customs Notification No. 21/2002 dated 01.03.2002 (S. No. 251 of the Table annexed to the Notification read with S. No. 7 of List No. 31 appended thereto) as also by confiscation of the goods (with redemption fine) and imposition of penalty. Some of the appeals are by indenting agents who are aggrieved either by imposition of penalty in connection with confiscation of some of the above machines or by demand of duty (along with confiscation and penalty) in relation to import of similar machines for which they were cited as importers in the relevant bills of entry. The Managing Partner of one of the indenting agencies is also in appeal against penalties imposed on him in relation to some of the imports. A few appeals are by a Customs House Agent who handled some of the imports and is aggrieved by imposition of penalty. All the imports, barring one, were made through Tuticorin Port. The remaining import vide Appeal No. C/29/2007 was made through Chennai Seaport. The imported machines were described in the relevant bills of entry and other import documents as "Computerised Embroidery Pattern- making Machine with Plotter" and exemption from payment of additional duty of Customs (Countervailing duty) was claimed in terms of S. No. 251 of the Table annexed to Customs Notification No. 21/2002 dated 01.03.2002. "Computerised Embroidery Pattern-making machine with Plotter" figured as Item No. 7 in List No. 31 appended to S. No. 251 ibid. This benefit was not available to Computerised Embroidery Machine "without Plotter". The Customs authorities gathered inspection reports from South India Textile Research Association (SITRA) and/or Technical Consultancy Services Organisation of Karnataka (TECSOK), which agencies reported that the embroidery machines were without plotter. In some cases, the Customs authorities themselves examined the machines and found no plotter in the machines. It appeared to the authorities that the goods had been misdeclared with intent to evade payment of CVD and, therefore, the goods were seized under mahazar. However, provisional release of the goods was allowed as requested by the importers on payment of CVD at normal rate and on Extra Duty Deposit. Show-cause notices were issued (a) to confiscate the goods under Section 111(m) of the Customs Act, (b) to impose penalties under Section 112 of the Act on the importers, indenting agents and/or CHAs and (c) to demand differential duty or appropriate the amounts of such duty already paid.
In a few cases, penalties were also proposed to be imposed on the importers under Section 114A of the Act. These proposals in the show-cause notices were contested. The adjudicating authorities confiscated the goods under Section 111(m) of the Customs Act on the ground of misdeclaration, with option for redemption of the goods against payment of fine. They also imposed penalties on the importers under Section 112(a) of the Act. In some cases, similar penalties were imposed on the indenting agents and/or the CHA also. The authorities also confirmed demands of CVD against the importers by denying the benefit of the above Notification to them in respect of the computerised embroidery machines which were found to be without plotter. Where the duty or any part thereof had already been paid by the importer, the same was appropriated towards the demand. Any extra deposit made by importer at the time of provisional release of the goods was adjusted against fine and penalty. In respect of most of the imports made through Tuticorin Port, the adjudication was done by the Joint Commissioner of Customs, Customs House, Tuticorin and the remaining cases adjudicated upon by the Commissioner himself. Where Orders-in-Original were passed by the Joint Commissioner, the same were taken in appeal by the aggrieved parties to the Commissioner of Customs (Appeals), Trichy. The appellate authority rejected all the appeals on merits and affirmed the decision of the lower authority. Most of the appeals now before us are against the orders passed by learned Commissioner (Appeals), Trichy. The orders of adjudication passed by the Commissioner of Customs, Tuticorin, were also in the same line as those passed by the Joint Commissioner. Some of the appeals before us are against such orders of the Commissioner. In respect of the import made through the Chennai Seaport, the Joint Commissioner of Customs (Group 5A), Customs House, Chennai denied the benefit of the Notification to one M/s. Vora Creations in respect of the machine imported by them and confirmed demand of CVD against them. He also imposed a penalty on them under Section 114A of the Customs Act. A separate penalty under Section 112(a) of the Act was imposed on M/s.Macro Agencies, indenting agent, in India, of the foreign manufacturer/supplier of the machine. The appeal filed by M/s.Macro Agencies against the penalty imposed on them by the Joint Commissioner was dismissed by the Commissioner of Customs (Appeals), Chennai, whose order is under challenge in one of the appeals before us (C/29/2007).
2. Two stay applications filed by the appellants in Appeal Nos.
C/549/2006 and C/550/2006 are also before us. As the issue involved in the two appeals is identical to the one involved in the remaining batch of appeals, we have granted waiver of predeposit to the said appellants for the purpose of disposing of their appeals along with the other appeals.
3. Examined the records including the written submissions filed by learned SDR. Heard both sides and considered their submissions.
4. The contentious issue to be dealt with in the first instance is whether the goods covered under the relevant bills of entry are "Computerised Embroidery Pattern-making Machines with Plotter" as claimed by the importers or only Computerised Embroidery Machines without Plotter as held by the lower authorities. It appears from the records that, in many of these cases, SITRA had inspected the machines at the instance of the department and reported that the machines were without plotter. However, later on, at the instance of the importers, the same agency inspected the machines once again and reported that the machines had inbuilt plotter. Learned Counsel/consultants have submitted that SITRA had inspected the machines in idle condition and not in running condition before they submitted reports to the Customs authorities. Whether the machines had plotter inbuilt therein was ascertainable only in running condition of the machines. When SITRA inspected the machines in running condition, they found them to be with inbuilt plotter. We are of the view that, when the same agency issued contradictory reports on the nature of a given machine, one in favour of the Revenue and the other in favour of the assessee, the latter (assessee) should have brought on record a clarification from the inspecting agency by cross-examining them before the adjudicating authority. This was not done in any of the cases before us. TECSOK (a Government of Karnataka Organisation) also inspected some of the machines apparently while in running condition, and reported that they were not "Computerised Embroidery Pattern-making Machines with Plotter". The Revenue has relied on this report for denying the benefit of the Notification to the importers. Thus there is an apparent conflict between SITRA's and TECSOK's reports of inspection of the machines in running condition.
5. Counsel/consultants displayed on a laptop computer screen before the Bench a machine (which was claimed to be one of the embroidery machines in question) stitching an embroidery pattern on a stretched piece of fabric placed in horizontal plane. Subsequently the same machine, shown on the computer screen, was also shown to be plotting the same design on a piece of paper similarly placed. When the machine worked with the fabric, the needle, fitted to a 'head', moved up and down vertically while the fabric placed in horizontal plane was found to be moving with a certain rhythm in that plane. It was explained by the demonstrator (deputed by one of the importers) and his counsel that these movements of the fabric in the 'X--Y' plane were made possible by a software incorporated in the system. It was stated that different softwares could generate different patterns of movements of the fabric in the X--Y plane, giving rise to different embroidery patterns on the fabric as end result. Where the machine was made to work with paper (instead of fabric), we were told, a pen of sorts was used in the place of the needle and the same remained stationary in vertical position but touching the paper placed in horizontal (X--Y) plane. Here, again, the paper moved rhythmically in a predetermined manner governed by software. At the end of this operation, a pattern for embroidery was seen to have been "plotted" on the paper. It was submitted by learned Counsel and consultants that a demonstration of actual working of the machines would clearly bring out the fact that they had plotter inbuilt therein. On this basis, they claimed that all the embroidery machines in question were with inbuilt plotter and hence the benefit of the Notification was available to them. There was no misdeclaration of the goods and hence there was no question of confiscation of the goods or imposition of penalty.
6. Learned SDR, on the other hand, submitted that some of the importers of identical machines had admitted that the machines imported by them were without plotter and hence not eligible for exemption from payment of CVD. She submitted that some of such importers had already settled their cases before the Settlement Commission. Relying on the Supreme Court's decision in the case of Natson Laminates v. Commissioner of Central Excise, Mumbai 2005 (181) E.L.T.382 (S.C.), learned SDR argued that the onus was on the assessees to prove that the goods imported by them fell within the scope of the relevant entry in the Notification.
None of the assessees could discharge this burden of proof convincingly and, therefore, according to learned SDR, the benefit of the Notification was not admissible to them. Learned SDR also defended the penalties imposed on the importers, indenting agents and CHAs by submitting that any element of mens rea was not required for such penalties under the Customs Act. In this connection, reliance was placed on the Hon'ble Madras High Court's judgment dated 13.09.2006 in CMA No. 430/2005 (Commissioner of Customs (Export), Chennai v. Bansal Industries).
7. Whether the imported machines had plotter inbuilt therein is a pure question of fact. Whether the importers are eligible for the benefit of exemption from payment of CVD on such machines under S. No. 251 of the Table annexed to Notification No. 21/2002-Cus. will squarely depend on a decision on the above question of fact. Issues relating to confiscation and penalties are all ancillary. In these cases, we have not found any indication of the aforesaid question of fact having been settled beyond the pale of doubt. There is nothing on record to show that any of the adjudicating or appellate authorities chose to inspect any of the machines in running condition. SITRA's reports gathered by the department and those obtained by the importers are contradictory and any expert from that agency who inspected the machines was not called upon to give oral evidence. The appellants have submitted that, when SITRA inspected a machine in running condition, they found the machine to be with inbuilt plotter. The appellants have also claimed that it was without inspection of the machines in running condition that SITRA reported to the Customs authorities that no plotter was found in any of the machines. This claim of the appellants has not been rebutted by the Revenue. For this reason as also for the further reason that no oral evidence of SITRA's experts was gathered, we are not in a position to give any credence to SITRA's certificates. It is also pertinent to note that, whereas M/s.SITRA, after inspection of the machines in running condition, reported that the machines had inbuilt plotter, M/s.TECSOK, after a similar inspection, reported to the contra. When two experts offer diametrically opposite findings or views on the same question of fact, neither can be accepted without taking oral evidence of both the experts. Thus the evidence on record, in our considered view, would not come anywhere near settling the question of fact whether the machines are with or without plotter. The adjudicating authorities will have to settle this question of fact.
8. For the reasons already noted, we would remand these cases to the adjudicating authorities for fresh decision on all issues. Those authorities have, apart from themselves inspecting the machines in operation (running condition), got to get the machines (in such condition) inspected by competent experts from the Central Machine Tools Institute, Bangalore or other competent Central Government agency and obtain their reports. Needless to say that copies of such reports shall be made available to the parties and that a reasonable opportunity of being heard be given to them.
9. We are, further, of the view that, in respect of imports made through Tuticorin, all the cases shall be taken up for adjudication by learned Commissioner of Customs himself with a view to avoiding multiplicity of proceedings and maintaining consistency of findings. In respect of the import made through Chennai, the Joint Commissioner shall undertake de novo adjudication of the case in terms of this order.
10. In the result, we set aside the impugned orders and allow these appeals by way of remand for de novo adjudication of the cases in the manner stated above.
Operative portion of the order was pronounced in open court on 30-04-2007)