1. This appeal is directed against the orders of the Deputy Collector of Customs, (Group E), Customs House, Bombay ordering confiscation of 54 bales synthetic rags (weight 24524 kgs.) valued at Rs. 1,07,146.26 for mis-declaration of contents under Sections 111(d) and lll(m) of the Customs Act, 1962 (the 'Act' for short) and giving the option to the appellants to pay in lieu of confiscation a fine of Rs. 20,000/- (Rupees Twenty thousand only). Penalty of Rs. 50,000/ (Rupees Fifty thousand only) was also imposed on the appellants under Section 112 of the Act. On appeal, the Collector of Customs (Appeals), Bombay upheld the order on the ground that the appellants had not disputed that the goods were mis-declared.
2. Briefly stated, the facts are that a consignment declared to be synthetic rags was imported from Germany in August, 1985 and its clearance was allowed under O.G.L. - Appendix 6 (Item No. 1 List No. 3) Part II of the import policy for 1984-85. The goods were cleared after the usual examination in the docks and the following certificate is recorded on the reverse of bill of entry:- "Inspected lot of 54 bales = 131 boras under AC (Docks) supervision with reference to mutilation weighment certificate No. 1139 dated 3-10-1985 and 11-11-1985. Examined 20% thoroughly checked - description verified. They are properly mutilated woollen rags other than synthetic rags, hosiery rags. Verified that they do not contain any serviceable garments. They cannot be economically re-stitched.
Declaration verified with reference to Invoice No. 9535 dated 10-6-1985. Released.
3. On receipt of information, the Central Intelligence Unit of the Customs House detained the two lorries carrying these goods after their clearance and, on examination of the goods found that more than 90% of the goods were synthetic rags. Shri M.K. Jain, the Managing Director of the appellant firm, in his statement admitted that it was his deliberate act to take away synthetic rags instead of woollen rags. He had also agreed to pay Rs. 65,000/- as duty on synthetic rags. He did not produce Registration Contract for synthetic rags as per conditions of O.G.L. in the Import Policy. According to the order-in-original, the importer in his written reply was ready to accept all the goods as synthetic rags and was willing to pay duty as on synthetic rags.
Accordingly, the goods were confiscated on the ground that this was a deliberate act of taking synthetic rags which attract higher rate of duty in the guise of woollen rags.
4. The orders of the lower authorities are being contested on the ground that the entire finding of the Deputy Collector was based upon the visual test and not analytical test and analytical test should have been resorted to; that only a part of the consignment weighing 12,500 kgs. was detained on the ground that it contained synthetic rags; that it was for the Department to prove the charge levelled against the importers by definite proof and action could not have been taken by saying that the importer (the appellants) had accepted that the entire consignment was synthetic rags and not woollen rags; that the consignment was mutilated and certified by the mutilating team which is a Government oriented and appointed team. A legal plea has also been taken that the Deputy Collector had no authority to recover additional duty difference between duty on woollen rags and synthetic rags on the goods which were allowed to be cleared as woollen rags and which were not the subject-matter of dispute. It has also been stated in the appeal that the appellants had no knowledge about the goods shipped till they are examined by him and, therefore, the declaration in the bill of entry filed on the basis of documents is not a misdeclaration.
5. The records of this case were produced by the SDR and it appears that two statements were recorded from Shri M.K. Jain, Managing Director of the appellant firm on 4-12-1985 and 5-12-1985 under Section 108 of Customs Act. The relevant portions of his statements are reproduced below:- "I am Managing Director of Rajiv Woollen Mills (Pvt.) Ltd., having our factory at 36 KM GT Road, Ghaziabad. We are manufacturing shoddy yarn in our factory and are holding valid Registration No. . . .
(number not stated).
"This unit is in existence since 1973. Our average turnover per year is about 50 lac of shoddy yarn and blankets. We import our raw material mainly woollen rags. However, a few consignments of synthetic rags are imported for the purpose of blending.
"We have received our consignment of 54 bales of about 25 tons of rags per S.S. "Altavia" in August, 1985. We filed Bill of Entry No. 1987/24 dated 21-8-1985 as Self. This Bill of Entry was handled by our employee Mr. I.U. Sheikh who is holding Customs Pass.
"These goods were not premutilated and therefore, mutilation team ordered the goods to be mutilated. Accordingly, all the goods were mutilated and mutilation Committee has given us the certificate.
Duty on goods were paid on 4-10-1985. The goods were examined today.
I was not present at the time of examination. I went to shed at about 3.30 PM. I am told by my employee that 54 bales were repacked in 131 boras and delivery was taken by him. By that time our lorry with about 50 boras was already left for factory. Two lorry with total bora 67 were about to leave. At that time Custom Officers came there and inspected the boras on the lorry. It was found to contain synthetic rags against woollen rags. I co-operated with the Department and came to Custom House on instruction alongwith both the lorry. As it is late today I request you to permit me to arrange the examination of these goods loaded on these two lorries tomorrow morning.
"In this connection, I may state that majority of the goods are synthetic rags. Though these are synthetic rags, I may state that these are proper mutilated, though my contract is for woollen rags, since a consignment has already come and taken delivery by me I accept the goods and we are ready to pay extra duty leviable on synthetic rags. As I have no intention to evade payment of duty, I request a lenient view be taken. Though Bill of Entry shows full delivery yet I have taken delivery of only 117 boras as remaining 14 boras are not traceable at the moment.
Q. 1. Since your B/E is for woollen rags, how the goods were got examined and passed by the Mutilation team and Customs Officers? A. They have verified whether the goods are properly mutilated and it seems that they did not identify synthetic and woollen rags and may due to lack of knowledge.
Q. 2. Did you make any arrangement with Customs Staff or Mutilation team to get the synthetic rags passed as woollen rags? If so what was the consideration? A. There was no arrangement with any Custom Officer or mutilation team. They passed by mistake.
Q. 3. You have stated that one lorry with 50 boras which is part of this consignment has already left for Bombay. Is it not correct that the boras loaded in that lorry was also containing synthetic rags? A. I am sure that lorry which has left was carrying only woollen rags. (emphasis supplied) Q. 4. Did you issue delivery challans in respect of these three lorries If so where are the same A. Since the delivery is shown complete, my man must have handed over the photocopy of B/E and Invoice and N-form to the lorry driver. We don't issue a delivery challan which is normal practice.
I shall appear before you tomorrow - 5-12-1985 at 11.00 AM with all papers. The mutilation certificate is with my employee. I shall produce the same tomorrow and I shall bring it along with me.
The above statement is given voluntarily without force and the same is true." 6. Since the goods could not be examined on that day the lorries were taken to the Customs House and detained. On the next day i.e., 5-12-1985, the goods were examined in the presence of panch witnesses after being unloaded from the two lorries which were detained. The Panchnama shows that the goods packed in 14 boras out of 67 which were found on the two lorries were examined in the presence of Sh. M.K. Jain and the panch witnesses and were found to contain synthetic rags in mutilated condition.
7. Another statement was recorded from Shri M.K. Jain, the Managing Director of the appellant firm, the relevant portions of which are reproduced below :- "2. The goods pertaining to Bill of Entry 1987/24 dated 21-8-1985 stuffed in Lorry No. MHL 3147 and Lorry No. RMM 788 were examined by the Custom Officer under Panchnama. During the course of examination, I was present throughout the day. The customs officers examined 20% of the boras stuffed in both the lorries. The goods were also shown to me and I confirm that 90% of the goods stuffed in both the boras are of synthetic rags as against the declared woollen rags cleared vide Bill of Entry No. 1987/24.I also confirm that I have taken delivery of one lorry on 4-12-1985 which was also containing woollen rags. Since the goods are mixed, it is very difficult to segregate exact percentage of wool and synthetic.
However, I am ready to pay the difference in rate of customs duty i.e., on synthetic rags Rs. 65,000/-.
"3. The difference in rate of customs duty Rs. 65,000/- will be paid by me on 6th December, 1985. I don't want any personal hearing or show cause notice.
"4. The above statement is true and correct and given by me voluntarily." 8. The first plea which has been taken before us is that the finding of the Deputy Collector about the nature of the goods is based on visual test and not on analytical test and action would not have been taken on the basis that the appellant had accepted that the entire consignment was synthetic rags and not woollen rags. We find from the Panchnama that the Customs Authorities had detained the consignment at the time of delivery of the goods from H-Sned, Cotton Green Depot, BPT (Bombay Port Trust) on receipt of information that they were suspected to contain synthetic rags instead of woollen rags. Thereafter, two of the three lorries which were available at that time were taken to the Customs House and the goods were examined the next day, when labour was arranged. Shri M.K. Jain, the Managing Director of the Company, was present during the examination of the goods. He gave two statements under Section 108 of the Customs Act, in which he admitted that majority of the goods were synthetic rags and not only came forward to pay the extra duty leviable on synthetic rags, but also pleaded that a lenient view may be taken by the authorities. The following extract from the Panchnama would make the position clear:- "During the course of examination, it was found that all boras were containing synthetic rags in mutilated condition. The goods were also shown to Shri M.K. Jain, the Managing Director of M/s. Rajiv Woollen Mills, UP. He had also confirmed that the goods are of synthetic nature as against woollen rags, declared in Bill of Entry.
AH the examined boras were marked net weight. The Customs Officers also checked the marked weight with reference to the weight shown in the Mutilation Certificate found correct. Shri M.K. Jain had accepted in our presence that all other boras stuffed in Lorry No.MHL 3147 and Lorry No. RMM 788 containing 'synthetic rags' as against woollen rags declared in the Bill of Entry No. 1987/24.
Therefore, Customs Officers felt it not necessary to examine all the boras stuffed in Lorry No. MHL 3147 and Lorry No. RMM 788. All the boras were thereafter repacked." 9. In view of the fact that the Managing Director of the Company, who was present on the spot had admitted that the correct description of the goods had not been declared and had admitted his liability and had volunteered to pay duty and solicited lenient action, it would indeed be difficult for us to accept a plea which amounts to a total reversal of a stand in the proceedings under the law beginning with the recording of the Managing Director's statement. He had liberty to insist on chemical test and centpercent examination of the goods at a time when the goods were still available for examination and testing.
He not only chose not to exercise this right, but also waived the issue of the Show Cause Notice and even personal hearing before the adjudicating authorities. We cannot, countenance such a situation otherwise it would be making a mockery of the proceedings before quasi-judicial authorities. Further, he cannot also be permitted to take the legal plea that the Deputy Collector had no authority to recover extra duty because the goods had been allowed to be cleared on his declaration as woollen rags. From the very circumstances in which two of the three lorries were detained, while they were still in the premises of the Bombay Port Trust, it cannot be said that the Customs Authorities had allowed the clearance of the goods under Section 47 and the only way of instituting a proceeding in the matter would be by first reviewing the order of clearance. It is true that the Customs Authorities had passed the usual order permitting clearance of the goods from the docks, but this order could not be given effort to and, before the lorries could move out of the Port Trust premises, a team of the Central Intelligence Unit, on receipt of information about evasion of duty in a case of rags rushed to the spot, identified the consignment and succeeded in intercepting two of the three lorries. The information about the fraud being played on revenue was received by a wing of the Customs House specially charged with the responsibility of checking such frauds and they were able to stop the clearance of part of the consignment. That the information was found to be correct on examination of the goods in the presence of the Managing Director of the Company is a matter of record. During the hearing of the appeal before us, Shri M.K. Jain referred to the decision of the Delhi High Court in the case of Jain Shudh Vanaspati Ltd. v. Union of India [1982 (10) ELT 43] as well as the decision of the Tribunal in the case of Decor India v. Collector of Customs, New Delhi [1987 (31) ELT 400] in support of his plea. We observe that the High Court had decided in the Jain Sudh Vanaspati case that finality in an order for clearance of goods made under Section 47 cannot be disturbed, unless the Department successfully shows that there was fraud or deliberate suppression. The Tribunal had followed this ratio in Decor's case. Shri G. Bhushan, learned SDR submitted that the present case was one of fraud on revenue and was an exception to the general principle of law. We observe that in both the cases, cited by Shri Jain, proceedings were instituted long after the clearance of the goods and there was no evidence of fraud or suppression, whereas the present case is one in which part of the goods were still available in the Port Trust premises and subsequent examination in the appellant's own presence confirmed the information about fraud on revenue as a result of mis-declaration of the description of the goods in the bill of entry. Therefore, the plea taken by the appellants on this count fails.
10. The other plea taken is that the appellants had no knowledge about the goods shipped till they were examined and therefore, the declaration in the Bill of Entry filed on the basis of documents is not a mis-declaration. We observe that the procedure for assessment of duty as prescribed in Section 17 of the Act and the same is reproduced below for the sake of convenience:- "17. ASSESSMENT OF DUTY. - (1) After an importer has entered any imported goods under Section 46 or an exporter has entered any export goods under Section 50 the imported goods or the export goods, as the case may be, or such part thereof as may be necessary may, without undue delay, be examined and tested by the proper officer.
"(2) After such examination and testing, the duty, if any leviable on such goods shall, save as otherwise provided in Section 85, be assessed.
"(3) For the purpose of assessing duty under Sub-section (2), the proper officer may require the importer, exporter or any other person to produce any contract, broker's note, policy of insurance, catalogue or other document whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained, and to furnish any information required for such ascertainment which it is in his power to produce or furnish, and thereupon the importer, exporter or such other person shall produce such document and furnish such information.
"(4) Notwithstanding anything contained in this section, imported goods or export goods may, prior to the examination or testing thereof, be permitted by the proper officer to be assessed to duty on the basis of the statements made in the entry relating thereto and the documents produced and the information furnished under Sub-section (3); but if it is found subsequently on examination or testing of the goods or otherwise that any statement in such entry or document or any information so furnished is not true in respect of any matter relevant to the assessment, the goods may, without prejudice to any other action which may be taken under this Act, be re-assessed to duty." 11. It will be noticed that after an importer has made an entry of the goods under Section 46, the imported goods or such part thereof, as may be necessary, may be examined and tested by the proper officer. The importer is also given the liberty of assessing the goods to duty prior to their examination and testing, on the basis of the statement made in the Bill of Entry and the documents produced and information furnished.
Sub-section (4) specifically provides that if it is found subsequently on examination or testing of the goods or otherwise (emphasis added) that any statement in the Bill of Entry or document or any information so furnished is not true in respect of any matter relevant to the assessment, the goods may be re-assessed to duty without prejudice to any other action which may be taken under the Act. In these circumstances, when the Customs Authorities received information that the goods had not been correctly declared, and were therefore, not correctly assessed to duty, they took the earliest opportunity of inspecting the goods in the docks and were successful in stopping two out of the three lorries from moving out. Since the importer had accepted that the goods had been mis-declared, the authorities proceeded further in the matter in accordance with law. Sub-section (4) of Section 17 provides for dealing with the situation in which the declaration of the goods in the Bill of Entry is found, on examination, to be different from what it is stated in the documents. Under Sub-section (4) of Section 46, the importer, while presenting a Bill of Entry is required to make and subscribe to a declaration as to the truth of the contents of the Bill of Entry and to produce, in support of such declaration the invoice relating to the goods. Thus, the two provisions read together cast a duty on the importer to make a true declaration of his goods. The Proviso to Sub-section (1) of Section 46 also stipulates a situation in which an importer finding himself unable, for want of full information, to furnish all the particulars of the goods, may request for examination of the goods pending production of such information. If the appellants had any difficulty in making a proper declaration of their goods because of any doubt or otherwise, they could have availed of the facility stipulated in this Proviso.
Since the appellants chose to make a declaration based on the documents and their knowledge, it is not open to them subsequently to take the plea that the declaration on the basis of the documents is not a mis-declaration.
12. So far as the goods carried in the two lorries are concerned, we are satisfied that the lower authorities have come to the proper conclusion. However, we notice that there is no admission by Shri M.K.Jain, with regard to the goods which had moved out on the third lorry, which the authorities were unable to intercept. In the absence of any other evidence to establish that the goods carried in the third lorry were also synthetic rags, the order treating these goods also to be synthetic rags and demanding duty on them is not sustainable. It has been claimed in the appeal that the goods which were intercepted in the two lorries weighed 12,500 kgs. packed in 67 boras. The total weight of the consignment is shown as 24,524 kgs. which, according to the Mutilation Certificate, was packed in 132 boras. On this basis, approximately half the goods which were transported in the third lorry could be given the benefit of doubt and half the extra duty realised would become refundable. We also reduce the fine and penalty proportionately. Thus, the fine is reduced from Rs. 20,000/- to Rs. 10,000/- (Rupees Ten Thousand only) and penalty from Rs. 50,000/- to Rs. 25,000/- (Rupees Twenty-five Thousand only). Subject to this modification, the appeal is otherwise rejected.
13. Before we part, we must record that Shri M.K. Jain had submitted during the hearing that no action was taken against the officers who were responsible for examination and mutilation of the goods in the docks. We also find from the case records (File No. S/10-275/85 Eg./CIV - Genl. 98/85 of the Bombay Customs House which has been placed before us by the learned SDR, that even though action was taken against the goods, no action appears to have been taken against the officers who had passed the consignment after examination and mutilation. We direct that a copy of this order be sent to the Collector of Customs, Customs House, Bombay (by name) for examining the matter for deciding what action should be taken against the officers concerned who had allowed clearance of the goods on the declaration of the appellants in the bill of entry and who recorded an examination report which, as subsequent events indicate, was not found to be correct.