Judgment:
1.1 The appellants herein imported a consignment of 46875 metres of polyester bonded waddings valued at Rs. 4,77,780.30p. They filed a bill of entry registered on 15-7-1985. The appellants produced an advance licence and sought clearance of the said goods duty free under the duty exemption certificate (DEC). The description of the goods in the advance licence was 'polyester bonded waddings having width of 110 cms.' On examination the goods were, however, found to be polyester bonded waddings having width of 112 cms. instead of 110 cms. as mentioned in the invoice attached with the bill of entry and as mentioned in the advance ITC licence and DEC. Each roll had a printed chit containing roll number, length, weight and width; the width mentioned in the chit was 112 cms. in respect of each roll.
Since the width of the polyester bonded waddings did not conform to that described in the ITC licence and the DEC and the invoice, they were asked to produce a valid import licence to cover import of goods and to explain for the mis-declaration regarding the width of the goods. The appellants in their latter dt. 18-7-1985 addressed to the Asstt. Collector of Customs, New Delhi, while admitting the width of the polyester bonded waddings at 112 cms. i.e. 2 cms. more than described in the foregoing documents namely ITC licence, DEC and invoice etc., they explained that the material being non-woven polyester bonded wadding was flexible/expandable; that the weight of the material was found to be same as given in the invoice/packing list and that the difference in width is only 2 cms. which is less than 2% and is very negligible. The appellants also stated that there was no loss of revenue since the material is to be re-exported against DEEC book in the shape of finished garments i.e. quilted jackets/long coats. Therefore, they requested that the slight discrepancy in the imported goods, as above, may be condoned and the goods be released against the advance licence produced by them.
1.2 The case was adjudicated by the Deputy Collector of Customs who confiscated the goods under Section 111(d) of the Customs Act, 1962 and allowed the appllants to get the goods redeemed on payment of a fine of Rs. 50,000/- in lieu of confiscation in addition to Customs duty leviable thereon. At this stage it may be mentioned that this adjudication was made by the Deputy Collector without issuing any show cause notice or without getting any consent of the appellants for waiver of the show cause notice.
1.3 On an application filed by the department (to be treated as an appeal) with the Collector of Custms (Appeals), New Delhi, the said Collector set aside the order of the Deputy Collector of Customs, New Delhi on the ground that the Deputy Collector was not competent to decide the said case having regard to the value of the goods and he, therefore, ordered de novo adjudication proceedings to the adjudicating authority i.e. Collector of Customs, New Delhi.
1.4 A show cause notice was issued to the appellants asking them to show cause to the Addl. Collector of Customs as to why the goods be not confiscated, why difference of Customs duty amounting to Rs. 857,589.40p (Rs. 858,093.40 - 504.00) leviable there-on should not be realised from them and why penal action under Section 112 of the Customs, Act, 1962 should not be taken against them on the ground that the goods were not covered by any valid import licence and as such they were liable to be confiscated under Section 111(d) and that there was mis-declaration about the description of the goods.
After due adjudication, the Addl. Collector of Customs has held in the impugned order that the offending goods valued at Rs. 4,72,586/- CIF were liable to confiscation under Section 111(d) of the Customs Act, 1962. Since, however, the goods have already been cleared and were not available for confiscation, he imposed a penalty of Rs. 50,000/- on the appellants under Section 112 of the Act. Considering that the excess width of the wadding is nominal and there is no mala fide on the part of the importers, the Collector felt that the above penalty would meet the ends of justice.
2. Learned advocate for the appellants, Shri J.S. Kapil has now urged that the impugned order is bad in law and erroneous in its findings on questions of fact. It has been urged that the adjudicating authority has gone wrong that there could be no expansion during the course of vacuum packing of the goods; even though the certificate of the suppliers clearly says that during vacuum packing the goods expanded.
Attention of the fact was drawn to a certificate dated 16-9-1985 from the suppliers. Relevant extracts from the said certificate are as follows:- Import license No.: P/K3041048/C/XX/94/D/84 DT. 85/01/07 Letter of credit No.: L.c.179/636/85 dated 13th March 1985 1.500 rolls-3 x 40 feet container rolled on tubes - width 110 cms. vacuum packets into polybag - through packing width 112 cms.
It was urged that in view of the evidence supplied by the appellants and in the absence of any contrary evidence from the department, the Collector ought not to have relied merely on his own opinion. He ought to have consulted some expert's opinion before arriving at conclusions deterimental to the interest of the appellants especially when he was sitting in judgment in a remanded case and having in view more stringent demands than were there in the earliest order passed by the Deputy Collector. They have further added that the contention of the appellants has substantial force that the excess width was due to expansion in view of the fact that the weight of the material was found to be the same as per the various documents.
2.1 It has also been urged that the demand of duty on the entire consignment of polyester bonded wadding is incorrect in law in view of the exemption in Notification No. 117-Cus./78 dated 9-6-1978 which does not specify any width of the wadding but gives blanket cover for import against advance licences if the imported goods are eventually used in the manufacture of goods which are to be exported. It is submitted that the exemption cannot be denied as long as the imported goods have been used for manufacturing goods exported out of India. In support of his proposition that the imported goods were used in manufacturing goods and exported out of India, the learned advocate has drawn attention to the DEEC Book, Part A & B. The entries therein, he submits, indicate that the imported goods were duly utilised in the manufacture of goods (readymade garments) exported outside India and entries have been duly audited and authenticated by the officers of the Customs department.
2.2 In view of the foregoing submissions, there is no case for confiscation of goods and demanding duty on the merits of the technical questions involved herein.
2.3 Apart from the foregoing, the learned advocate has also taken a legal objection to the demand of duty on the ground that the goods have been cleared on payment of redemption fine and on payment of Rs. 504/- as duty on 24-7-1985. The show cause notice demanding differential amount of duty has been issued by the Additonal Collector on 3-3-1986 i.e. more than six months after the time limit stipulated in Section 28 of the Customs Act. In this view, he, therefore, submitted that the demand of duty in any case is also time barred.
3. Opposing the aforesaid contention, the learned DR has stated that the question of limitation does not arise inasmuch as the impugned order is a result of de novo proceedings in remand. The time limit should be deemed to have started from the earliest when the case was taken up for adjudication by the Deputy Collector whose order was ultimately set aside by the Collector of Customs (Appeals) and the matter was remanded to the Collector (Addl. Collector). As regards the controversy in width whether it was on account of expansion or not, the learned DR has drawn attention to the findings of the adjudicating authority which are as follows :- "There is no denying the fact that the width of the polyester (bonded) wadding as imported has been found to be 112 cms. as against 110 cms. specified in the Advance Licence. This has also been admitted by the importers. It is also true that this difference is nominal - less than 2% of the declared width. However, I am unable to accept the contention of the importers that due to vacuum packing, the width of wadding has automatically expanded. Accepting that because of fluffy-nature the wadding is expandable, this expansion would take place only when it is placed constantly under pressure. But from the sample of the roll of polyester wadding produced before me, it is clear that the wadding in running length has been wound round a tubular reel and then packed inside a polythene envelop. There could be no hard pressure inside the envolop. There could be no hard pressure inside the envelop to affect the width of the wadding. I was also not convinced with the demonstration given by the importers during the personal hearing to show any increase in the width of the wadding. Further, the sample produced during the personal hearing was not in its original shape and in any case the tag attached to it by the supplier clearly indicated the width as 112 cms. It is plausible to hold that this tag was attached to each roll at the time of packing and this clearly indicates that the wadding had the width of 112 cms. at manufacturing stage itself. The supplier could not presumably have measured the width of the wadding after packing and then attached the tag to the rolls showing 112 cms. width. Accordingly, it can not be argued that expansion in the width took place after packing or due to vacuum packing or containerisation. For the said reason, the analogy of the actual width of the sample fabric produced before me, which had a stamp of 140 cms. width, cannot be applied to the present case, where the tag attached to the roll clearly mentions the width of the wadding as 112 cms. and not 110 cms. as declared in the invoice." 4. We have carefully considered the pleas advanced on both sides. We find sufficient force in the plea of the learned advocate for the appellants that the excess width is very nominal in character and it is plausible that the width increased in the process of packing. This plea, we notice, has been undertaken by the appellants right from the beginning from their first letter dated 18th July, 1985 addressed to the Asstt. Collector of Customs, New Delhi. This plea is further supported by the certificate dated 16-9-1985 of the supplier which has already been set out above. This plea of the appellants gets further support from the facts that the weight of the consignment remains the same as per the documents and there is no discrepancy whatsoever in that respect. We also notice that there is not magic or sanctity in the cut off figure 110 cms. width. It is not the allegation of the department that polyester bonded wadding of more than 110 cms. width could not be utilised in the manufacture of goods for which they were imported, or no advance licence could be issued for width exceeding 110 cms. On the other hand, we find that the goods which have been imported were actually utilised in the readymade garments which have been finally exported as is apparent from the entries in the DEEC book.
Therefore, we are of the view that the goods imported are not against the description given in the advance licence for the goods or against the description given in the DEEC book. The discrepancy pointed out by the department, even if it be taken on its face value is of a very minor character and of a technical nature. The goods are substantially of the same description as were allowed to be imported to be used in the manufacture of goods to be exported.
4.1 Keeping the aforesaid facts and circumstances in view, we hold that there was no justification for confiscating the goods and demanding duty as if they are goods other than what the appellants were allowed to import and to use for manufacture of export goods. We, therefore, set aside the order and allow the appeal with consequential relief, if any, to the appellants.
4.2 In view of our findings above, it is not necessary to go into the other plea of the appellants regarding the demand of duty being time-barred.