Full Judgment
3. The appellants claimed that the goods were imported and cleared through the Bombay Port and, as such, their seizure was illegal and/or in excess of the powers conferred on the authorities at Jamnagar.
Various other pleas were also taken in the proceedings before the Collector who, after consideration of all matters, finally ordered confiscation of the goods under Section 11 l(o) Customs Act and imposed penalty of Rs. 1 lakh under Section 112 ibid. The goods were allowed to be cleared on payment of a fine of Rs. 1.25 lakhs in lieu of confiscation. Although the Collector held that the appellants had not followed the Duty Exemption Scheme as laid down in Notification No.117/78-Customs dt. 9-6-1978 as amended, with intention to avoid payment of duty amounting to Rs. 1,52,967.03, no order demanding the duty was passed by the Collector.
4. This appeal was first filed before the West Regional Bench of the Tribunal at Bombay. Subsequently, an application for early hearing of the appeal was moved at Bombay on the ground that the goods (raw materials) in question were confiscated as far back as 30-5-1985 and were prone to deterioration. During the hearing at Bombay, the learned advocate of the appellants had stated before the WRB that the issue involved arguments over the interpretation of the Exemption Notification 117/78 and the jurisdiction of the Collector in passing the order. He had contended that the Collector of Central Excise, Rajkot did not have the jurisdiction to order confiscation of the goods imported under the DEEC and also demand duty in view of the settled law by the Special Bench in Bliss Impex Corporation as reported in 1988 (37) ELT 272. The WRB had decided to transfer the appeal to the Special Bench. That is how the matter has come before us.
5. During the hearing before us Shri Lakshmi Kumaran, learned Counsel for the appellants, stated that although he did not question the legality of the seizure, he submitted that the Collector of Central Excise, Rajkot did not have the jurisdiction to order confiscation of the goods and demand duty. This being a matter involving interpretation of Notification 117/78 regulating the DEEC Scheme, it was well within the jurisdiction of the Special Bench to hear the appeal. In support of his arguments he placed reliance on the judgment of the Tribunal in the case of Metro Export as reported in 1988 (14) ECR 169 as also the judgment in Bliss Impex Corporation as reported in ELT 1988 (37) 272.
The question that has arisen is whether the matter at all falls within the jurisdiction of the Special Bench.
6. Shri M. Jayaraman, learned SDR invited our attention to the impugned order and submitted that no demand for duty had been made in it. He also submitted that this was in accordance with the provisions of Section 125 of the Customs Act, 1962. He finally submitted that this was not a matter to be placed before the Special Bench.
7. While replying to the arguments Shri Lakshmi Kumaran, submitted that the question of jurisdiction could first be decided, after which the matter could be listed for regular hearing when he would submit arguments on merits.
8. We have considered the matter carefully. It is necessary to first decide the question of jurisdiction of the Special Bench. We find from the impugned Order that the Collector has ordered confiscation of the goods under Section 111(o) of the Customs Act on the ground that the goods where exempt from duty having been imported under the DEEC Scheme to which Notification 117/78 is applicable.
9. There is no doubt that the Collector has referred to the DEEC Scheme while passing the order but he has not demanded any duty; nor was there any demand for duty in the show cause notice. The order relates only to confiscation of goods and imposition of penalty. In the adjudication order, there is no determination of any question having relation to the rate of duty or to the value of goods for purposes of assessment. In this view of the matter, the appeal does not fall within the jurisdiction of the Special Bench. It should, therefore, be dealt with in West Regional Bench.
10. As regards cases of Metro Export and Bliss Impex Export Corporation relied upon by the learned counsel for the appellants during the arguments, the decisions in these cases are clearly distinguishable in as much as demand for duty was made in both these cases whereas in the present case no duty has been demanded. It is for this reason that the ratio of those decisions is not available for reliance in the present appeal.
11. We are of the view that the appeal should be dealt with by the WRB since it does not involve questions about rate of duty or value of goods for assessment.
12. By the impugned order, the Collector found inter alia that M/s.
K.C.A. Ltd., the appellants, had not followed the conditions laid down in the duty exemption scheme contained in Notification No. 117/78-Cus., dated 9-6-1978 with intent to avoid payment of import duty amounting to Rs. 1,52,967.03. It is no doubt true that in the operative part of the order there is no specific demand for any duty. However, this would appear to be because of the provisions contained in Sub-section (2) of Section 125 of the Customs Act which provides that where any fine in lieu of confiscation of goods is imposed under Sub-section (1), the owner of such goods or the person referred to in Sub-section (1), shall, in addition, be liable to any duty and charges payable in respect of such goods. It would, therefore, appear that the aforesaid amount of duty will be payable, in terms of the impugned order, in the event of the appellants choosing to exercise the option of redeeming the goods. In the circumstances, I am of the view that the impugned order is an "order relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment" and the instant appear is to be heard, therefore, by a Special Bench in terms of Section 129(C)(3) of the Customs Act.
13. I have gone through the orders prepared by my learned brothers Shri N.K. Bajpai (Member, Technical) and Hon'ble President. I agree with the reasoning of my brother Shri N.K. Bajpai, Member (Technical) for the following reasons :- (a) The allegation made in the Show Cause Notice dated nil/5/1984 in short is that the appellant had issued proforma invoices dated 18-11-1983 to M/s. Vibhav Dye Chemicals, Bombay in respect of MPDSA and PNA, which are fictitious and were meant only to cover the transport of offending goods upto Bombay (b) A shortage entry of 2150 Kgs. of MPDSA appearing on page No. 125 of the raw material account (Imported) of M/s. K.C.A. Limited, is also fictitious and the slip No. 458 prepared on 12-11-1983 in support of so called shortage is an apparent after-thought to cover up the excess obtained for removal of the materials (c) The DEEC Scheme is so devised that there cannot be excess or shortage, the import quantum of the input is commensurate with the export obligation. In view of this the excess of 2420 Kgs. of MPDSA appears to have been obtained by manipulation of manufacturing ratio in relation to the consumption of imported input. Similarly, 238 Kgs. of PWA also represents the excess quantity (d) On verification of the physical balance in the premises of M/s.
K.C.A. Ltd. of the MPDSA and PNA immediately after the seizure of the goods, it is observed that the stock tallied with the book balance of 20-11-1983 and 21-11-1983. This would mean that the MPDSA and PNA under seizure were actually excesses obtained from manipulation of the manufacturing ratio. M/s. K.C.A. Ltd. clearly admitted of the unaccounted excess which is under seizure (e) The goods under seizure though despatched by M/s. K.C.A. Ltd. in favour of M/s. Dip Jyot Chemicals, Bombay as reported by the former, are not covered by any documents of M/s. K.C.A. Ltd., Jamnagar. The usual procedure of preparation of weight notes on the Printed forms of M/s. K.C.A. Ltd., Jamnagar has also not been followed.
(f) It appears that M/s. K.C.A. Ltd., Jamnagar have removed THE IMPORTED goods viz. 37 drums of MPDSA weighing 2420 Kgs. valued at Rs. 1,15,924.50 ps. and 6 drums of PNS weighing 238 Kgs. valued at Rs. 5961.90 ps. received by them under the Duty Entitlement Exemption Certificate Scheme and the import Licence unauthorisedly and thereby, they have contravened provisions of clause 5 of Import (Control) Order, 1955 issued under Section 3 of the Imports and Exports (Control) Act, 1947 and is deemed to be prohibited under Section 11 of the Customs Act 1947 by virtue of Section 3(2) of the said Act of 1947. They have also abused the concession of duty exemption scheme covered by Notification No. 117/78, dated 9-6-1978 as amended with the intention to avoid payment of import duty worth Rs. 1,52,967.03 ps.
(g) From the above facts and circumstances and documents treated in Annexure 'A' to the Show Cause Notice it appears that the said goods 37 drums weighing 2420 Kgs. of MPDSA and 6 drums weighing 2420 kgs.
of PNA seized are liable to confiscation under Section 111(d) and Section 111(o) of the Customs Act, 1962 on the grounds, reasons and evidences stated above and M/s. K.C.A. Ltd., Jamnagar are liable to penalty under Section 112 of the Customs Act, 1962 for their sets/omissions appear to have been committed by them with respect to the said goods. The said truck No. GTZ 9413 engaged in transportation of unauthorised removal of the said goods is also liable to confiscation under Section 115(2) of the Customs Act, 1962.
(h) In the last para they have called upon to show cause for the following :- (a) the goods under seizure i.e. 37 drums of MPDSA of imported origin and 6 drums of PNA of imported origin should not be confiscated under Section 111(d) and 111(o) of Customs Act, 1962, and the said Truck No. GTZ 9413 would not be confiscated under Section 115(2) ibid; (b) a penalty should not be imposed on M/s. K.S.A Ltd., Jamnagar and Shri Jasbir Singh Sain Singh, owner of M/s. Punjab Transport Co., Jamnagar on the ground stated under Section 112 of the Customs Act, 1962.
(a) that the goods were cleared through New Customs House, Bombay and as such seizure was illegal and/or in excess of power conferred on authorities at Jamnagar; (b) That the goods were cleared for home consumption and as such ceased to be imported goods and as such were not hit by the provisions of Section 111(d) and 111(o) of the Customs Act, 1962.
(c) That the said goods were imported against three valid DEEC Import Licences which were allowed clearance by the Customs Authorities after verification of all the Import Documents and as such were not hit by Section 111(d) or 111(o) of the Customs Act, 1962.
(d) The Customs authorities at Bombay had endorsed and accepted the quantity of raw materials imported and the quantity of finished products exported after verifying the quality of the exported goods.
Since the quality of export goods was never questioned by the Customs Authorities nor were the goods subjected to test at the time of export, the authorities at Jamnagar had no power or jurisdiction to raise the issue of quality or allege manipulation of the quality of the exported goods.
(e) The goods did not belong to the category of notified goods and as such were not prima facie liable to seizure.
(f) The attention of the Adjudicating Authority was invited to the provisions of Notification No. 117/78, dated 9th June, 1978 which provided for replenishment of indigenous/imported duty paid goods by duty exempted goods.
(g) Once the duty exempted goods were considered as replenished goods they fell outside the purview of provision of Notification No. 117/78, dated 9th June, 1978.
(h) That on the date of seizure viz. 21st November, 1983 the stock records of the appellants clearly showed that they had duty paid replenished stock of 1997 Kgs. of MPDSA and 1134 Kgs. of PNA. There was, therefore, sufficient quantity of replenished duty paid stock of PNA and objection regarding 238 Kgs. of PNA did not stand.
(i) As regards the quantity of 2420 Kgs. seized MPDSA 1997 Kgs. of replenished material was already in stock while 423 Kgs. were actually only to be brought on record out of 3477 Kgs. MPDSA which was due and available for replenishment over and above the existing 1997 kgs. The details of imports, exports and replenished stocks were submitted to the concerned authorities at the relevant time, (j) The department has not taken note of Appellant's letter dated 13th January 1984 enclosing therewith the date of consumption and replenished stock of MPDSA and PNA. The contention of the department that the proforma dated 18th November, 1983 was fictitious was denied as the same was not supported by any concrete evidence.
15. The adjudicating authority in the impugned order confiscated the goods and imposed a fine of Rs 1,25,000/- in lieu of confiscation and under the provision of Section 111(o) of the Customs Act, 1962 and also imposed a penalty of Rs. 1 lakh on the appellants under Section 112 of the Customs Act, 1962 and has held as follows :- "(a) The material under seizure i.e. 37 drums of MPDSA and 6 drums of PNA as per the details in the panchnama are of imported origin.
The weight and purity are as per the relevant documents.
(b) The proforma invoices recovered from the driver of the truck are prepared only to cover the transport of the goods.
(c) The goods under seizure were under disposal by M/s. K.C.A. Ltd. in favour of M/s. Dip Jyot Chemicals, Bombay. No documents were produced by M/s. K.C.A. Ltd. to substantiate that the goods were under loan to M/s. Dip Jyot Chemicals, Bombay.
(d) The slip No. 458 dated 12-11-1983 showing a shortage of 2150 Kgs. of MPDSA is an after thought to cover the excess for disposal.
(e) It is established that unaccounted goods are from exempt materials imported under DEEC Scheme.
(f) Since the goods under seizure are unaccounted for goods, it is reasonably concluded that this material has not gone into the consignment of the goods as was required under the Notification No. 117/78 and the conditions of the licence and the scheme.
(g) The party's plea that they have discharged export obligation and their accountability has ceased had no relevance. It remains unexplained as to how the party could discharge the export obligation without full utilisation of the import material under the scheme which has to be placed under seizure being sound as unaccounted goods.
The owner of the truck Shri Jasbir Singh Ramsingh of M/s. Punjab Transport Co., Jamnagar has explained that they have a transport contract with M/s. K.C.A. Ltd., Jamnagar and accordingly they are transporting the goods of M/s. K.C.A. Ltd. as per the advice and instructions, 43 drums under seizure were transported on 21-11-1983 in normal course of transport contract. The documents had been given to the driver of the truck by the store keeper of M/s. K.C.A. Ltd. in respect of these 43 drums.
They pleaded that the truck is not liable to confiscation nor they are liable to penalty because they simply transported the goods in the course of normal transport business. They pleaded that they have not transported any smuggled goods nor the truck was used in the smuggling of goods.
I am inclined to accept the contentions of the transporter. They undertake transport under a bona fide belief that the goods were in the ordinary course of business. The transporter had no means or an access to determine the origin or legality of the goods. Therefore, I hold that M/s. Punjab Transport are not in breach of the provisions of the Customs Act, 1962 and consequently the truck under seizure is also not liable to confiscation.
(2) M/s. K.C.A. Ltd., Jamnagar have not followed duty exemption scheme as laid down in Notification No. 117/78-Customs dated 9-6-1978 as amended with intention to avoid payment of import duty amounting to Rs. 1,52,967.03.
(3) 37 drums of MPDSA weighing 2420 Kgs. and six drums of PNA weighing 238 kgs. under seizure are liable to confiscation under Section 111(o) of the Customs Act, 1962.
(4) On the grounds, reasons and evidence discussed in this order, M/s. K.C.A. Ltd., Jamnagar are liable to a penalty under Section 112 of the Customs Act, 1962 for their acts, committed by them in respect of the goods under seizure." 16. From the context of the above noted allegations in Show Cause Notice, reply and order passed by the adjudicating authorities and in the light of the rulings of M/s. Metro Export and M/s. Bliss Impex Corporation (supra) it has to be determined the jurisdiction to take up the appeal for the hearing and disposal as per law.
17 ...the jurisdiction of Special Bench and Regional Bench. The matters pertaining to determination of any question having a relation to the rate of duty of Customs or to the value of goods for purposes of assessment are to be heard by special benches.
18. In M/s. Metro Exports case (supra) the Show Cause Notice (as was issued by Assistant Collector of Customs SI Branch, Cochin allegaing contravention of Advance Licence and the DEEC book and Customs Notification No. 117/78...as the appellants therein had purchased locally made corrugated Master Cartons and Duplex Cartons and used them for packing frozen shrimps and falsely claimed discharge of export obligation and that the imported material was not utilised for the purpose for which it was imported. It was further alleged that the appellants therein had deliberately misdeclared the description of the packing materials in the shipping bills with a view to get the export obligation fulfilled and thereby to evade customs duty on the imported white card board amounting to Rs. 5,53,971.81 after the adjudication, the Collector of Customs held the appellants to have failed to comply with the conditions specified in Notification No. 717/78 and ordered them to pay customs duty of Rs. 5,53,971.51 and also imposed penalty of Rs. 50,000/-.
(b) (i) In that case, the appellant contended before the Tribunal that (a) the Assistant Collector had no powers to issue the Show Cause Notice as longer period had been invoked; (ii) There was no allegation of suppression of facts or mis-statement or collusion on the part of the appellants and hence it was urged that it was barred by time the import having been effected on 19-1-1984 and the last shipment having been effected on 13-4-1984; (iii) The second preliminary objection raised was that the import having been effected at Madras Port, the Collector of Customs, Cochin had no jurisdiction to demand duty on the goods.
(c) The Tribunal noted that under the said Notification, the Importer had executed a Bond/Undertaking to comply with the conditions specified in the Notification and had undertaken to pay the duty on demand in case of breach of the terms of the Bond/Undertaking. Therefore, the Tribunal upheld the contention of the Importer that the demand of duty can only be made under the Bond by the Officer, who had taken the Bond.
(d) Paras 10 and 11 of the citation are noted below for easy reference :- "Para 10. Since the two preliminary submissions of Shri Jain are fundamental to the validity of the impugned order, we propose to deal with them first. Taking first the question of the Cochin Collector's jurisdiction to demand duty in the present case, we have to note that the import of the goods took place at Madras. Their clearance duty free in terms of Customs notification was granted at Madras. In terms of the said notification, a claim was required to be made to the Collector of Customs, Madras for exemption from duty.
A bond/legal undertaking for complying with the conditions specified in the notification was to be executed before such authority as may be approved by the Central Government. A declaration was to be filed by the appellants before the Assistant Collector binding themselves to pay on demand an amount equal to the duty leviable but for the exemption, on the imported materials in respect of which the conditions laid down in the notification had not been complied with (this declaration was filed before the Assistant Collector of Customs, Madras). There is, therefore, no manner of doubt that the Assistant Collector of Customs or the Collector of Customs, Madras was the proper authority who was to return a finding of non-compliance with the conditions laid down in the notification and to demand customs duty in respect of quantity of goods in respect of which the conditions were not complied with. It is, of course, true that the use or utilisation of the imported materials in the present case was not in the Madras Collector's jurisdiction. If the Cochin Collector had reason to believe that the conditions laid down in the notification had been violated necessitating proceedings against the appellants which could have led to demand of duty, penalty etc., the proper course would have been for him to report the matter to the Collector of Customs, Madras to enable the latter to proceed against the appellants in accordance with law. The Cochin Collector, however, seems to have assumed jurisdiction to deal with the matter himself. The analogy with Central Excise Rule 196 as sought to be drawn by Shri Naik is inapplicable. The rule itself provides for demand of duty by the proper officer having jurisdiction over the applicant-user who may have got his requirement of materials, cleared duty-free or at concessional duty in terms of Rule 192 from a manufacturer situated in another officer's jurisdiction. Such is not the case here. The two decisions cited in this context are of no help to the Revenue. Shri Naik has sought to justify the demand on the plea that what was demanded by the Cochin Collector was not really duty but only an amount equal to the duty leviable. This contention is, on the face of it, untenable. For one thing, what the notification makes the importer liable to pay on demand is an amount equal to the duty leviable but for the exemption. No doubt the duty has to be quantified in an amount but, for that reason, it does not cease to be duty. For another, the Collector himself has no such illusion. He has quite clearly and categorically asked the appellants to pay the customs duty demanded in the show cause notice. If indeed the amount in question was not duty it could not have been demanded in terms of an adjudication order under the Customs Act but only in enforcement of the bond or legal undertaking executed by the appellants, if necessary through appropriate proceedings in a Civil Court. Shri Naik's contention has, therefore, to be, and is, rejected.
Para 11. The department has not produced any notification or other legal provision (none has been placed before us) under which the Cochin Collector was conferred jurisdiction to demand duty in respect of goods imported at Madras and cleared by the Madras customs either generally or in this particular case. The Central Government has issued notifications under Section 4 of the Customs Act appointing Collectors of Customs and lower officers for different jurisdictions. In terms of these notifications, the respective jurisdictions of the Collectors have been clearly spelt out (see, for example, Notification No. 36-Cus, dated 1-2-1963, as amended), appoints the Collector of Customs. Evidently, it does not extend to Madras Port for which the Collector is the Collector of Customs, Madras, vide Notification No. 36 dated 1-2-1963. There are, of course, few officers appointed as Collectors with all-India jurisdiction such as the Director of Revenue Intelligence but the Collector of Customs, Cochin is not one among them. In these circumstances, we hold that the Collector of Customs, Cochin had no jurisdiction to demand duty in the present case and, consequently, we set aside the demand".
19. The facts of the case in M/s. Bliss Impex Corp. (supra) has been more or less similar and hence the citation of M/s. Metro Exports (supra) was made applicable to the facts of this case.
20. As has been noted in the Show Cause Notice and in the impugned order, the whole thrust of the allegation is the violation of Customs Act. These intentions of Importer to evade duty by violating the DEEC scheme, Notification No. 117/78 and the Customs Act has been brought out but alternatively no demand of duty has been made nor adjudicated nor a final demand for duty has been confirmed. It has to be noted that the Bond/Undertaking executed by the Importer has been cancelled and the question of its invoking by the Customs' Collector, Bombay no longer subsists. The case in hand is pure and simple violation of the various provisions of DEEC Scheme, Notification No. 117/78 and the Customs Act. The allegation in Show Cause Notice is contravention of provisions of clause 5 of Import (Control) Order 1955 issued under Section 3 of the Import and Exports (Control) Act, 1947, which has been considered as "deemed to be prohibited under Section 11 of the Customs Act, 1962 by virtue of Section 3(2) of the said Act, of 1947. Hence, Section 111(d), 111(o), 112 and Section 115(2) of the Customs Act, 1962 were invoked to initiate the proceedings. The relevant provisions are noted below :- Section 11 deals with power to prohibit importation and exportation of goods.
Section 111 deals with confiscation of improperly imported goods, etc. The following goods brought from a place outside India shall be liable to confiscation :- "(d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force;" "(o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the conditions was sanctioned by the proper officer;" Section 112 deals with Penalty for improper importation of goods etc.; "Section 125 option to pay fine in lieu of confiscation-(1) Whenever confiscation of any goods is authorized by this Act, the Officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods or, where such owner is not known, the person from whose possession or custody such goods have been seized an option to pay in lieu of confiscation such fine as the said officer thinks fit: Provided that, without prejudice to the provisions of the proviso to Sub-section (2) of Section 115, such fine shall not exceed the market price of the goods confiscation, less in the case of imported goods the duty chargeable thereon".
"Where any fine in lieu of confiscation of goods is imposed under Sub-section (1), the owner of such goods or the person referred to in Sub-section (1), shall, in addition, be liable to any duty and charges payable in respect of such goods".
21. The Officer appointed under Section 4 of the Act has power to exercise the powers of officers of customs under Section 5 of the Act.
The entire Act does not prohibit or restrict the powers of officer appointed under Section 4 of the Act. The Collector of Customs, Kandla has exercised his lawful function as empowered to him under the Act.
The importer had executed the bond/Undertaking to the Collector of Customs, Bombay. That bond has been cancelled and discharged and not in force at the time of the seizure and adjudication of the proceedings in this case. The Bond executed under the Notification No. 117/78 has not been invoked. The general provisions of Imports and Exports (Control) Act, 1947, and the various provisions of the Customs Act has been invoked to note the violation committed therein by the Importer. The Adjudging Officer while adjudicating the case and imposing the confiscation under Section 125 of the Act has not demanded duty.
Sub-section (1) clearly states that the officer adjudging the case has to impose the fine and as a consequence of imposition of fine under Sub-section (1), the duty and charges payable also become liable under Sub-section (2) of the Section 125 of the Act. As noted above, the Adjudging Officer has neither demanded duty nor confirmed it in his order and as such Sub-section (2) cannot be invoked after the adjudging the case to demand duty on the basis of imposition of fine under Sub-section (1) of Section 125 of the Act. Therefore, there is no demand of duty and the Importer, while choosing to exercise the option of redeeming the goods is required to pay the fine as levied under Sub-section (1) of Section 125 of the Act alone.
22. In view of this position, the ruling of M/s. Metro Export and M/s.
Bliss Impex (supra) are not applicable to the facts and circumstances of this case and as there is no question of determination of rate of duty in this appeal but question of contravention of provisions of the Import and Export (Control) Act, 1947 and Customs Act, the Special Bench has no jurisdiction to decide the case as per the provisions of Sub-section (3) of Section 129 C of the Customs Act.