Judgment:
1. These six appeals arise from three orders in original passed by the Additional Collector of Customs, New Delhi involving a common issue viz. confiscation of perforating machines under Section 111 of the Customs Act and imposing penalties on the three companies concerned and the Director of each firm, besides recovering customs duty on the perforating machines in question. The cases were argued together by Shri L.P. Asthana, learned advocate who appeared on behalf of the appellants while Shri M.M. Mathur, learned Joint Chief Departmental Representative appeared for the respondent Collector. In view of the commonness of the issues involved and the common arguments by the respective sides, we are passing this common order.
2. Explaining the facts of the case in the appeal relating to M/s.
Northern Plastics Limited, Shri Asthana stated that they have been charged with having unlawfully acquired 25 perforating machines which were confiscated. Option was, however, given for their redemption subject to payment of fine in lieu of confiscation of Rs. 2,50,000/-.
Penalty of Rs. 5 lakhs was imposed on the company M/s. Northern Plastics Ltd. A like sum was imposed as penalty on Shri Vimal Khemka, Director of the said company also. This finding is totally unjustified as they had acquired the goods in question in a bonafide manner by purchasing them from M/s. Bright Engineering Works, Ghaziabad and M/s.
Precision Engineering Works, Ghaziabad. Payment had been made for them through normal banking channel. The adjudicating authority has drawn a wrong conclusion from the statement of Shri Vimal Khemka, Director of the company that he had admitted his offence of acquiring unlawfully 25 perforating machines. No such admission had been made by him. Shri Asthana read out portions from their letter dated 14-10-1989 in reply to the letter of 28-9-1989 issued to them by the Central Economic Intelligence Bureau and contended that from the tone of the letter of the Bureau it will be clear that the appellants gave their said letter under pressure. Even then, there is nothing in their reply or in the Director's statement to indicate that they had admitted any illegal acquisition of the machines in question. Their bona fides in the matter may be gathered from the fact that even though they had been asked about only 14 machines which were found in their premises, they themselves declared that they had purchased 25 machines. The department has then proceeded against them for the said quantity of 25 machines.
Shri Asthana then proceeded to point out that the adjudicating authority had come to the conclusion that perforating machines are not manufactured in the country only on the basis of a letter from the DGTD (Directorate General of Technical Development). He pointed out that this is an unsigned letter as can be seen from the copy thereof which has been submitted by them in the appeal. Moreover, what has been stated in this letter would not really amount to a statement that perforating machines are not manufactured in the country. They have only stated that there is no unit in their list for the manufacture of perforators. Perforators are not costly or sophisticated machines. They could be, and, in fact, are manufactured by small units which are not required to be registered with the DGTD. No enquiry has been made with the Director of Industries of any State as to whether any unit registered with them manufacture perforators. The learned counsel then submitted that perforators are neither notified goods under Chapter IVA of Customs Act, 1962 nor specified items under Section 123 thereof.
Hence, the burden to prove that the machines seized from them were smuggled goods rested on the department and they had not discharged the same. It has been wrongly shifted to them to establish that the machines in question are not smuggled. They had purchased the machines locally in normal course of business and payments had been made through cheques/drafts. If the department had found that the firms from whom they had purchased the goods were not in their address as shown in the bills, the appellants are not to be taken as having smuggled foreign goods or purchased such goods, knowing them to be smuggled. In the circumstances, demand of duty and confiscation of the goods and imposition of penalty were not called for. Penalty had been imposed not only on the company but also on the Director Shri Vimal Khemka. The role of the Director in the alleged offence had not been spelt out.
Shri Asthana pleaded that the order deserves to be set aside.
3. Taking up the appeal filed by M/s. Jindal Photo Films Ltd., the learned counsel stated that his arguments already advanced would be equally applicable for this case also. In addition in this case, the firm, Precision Engineering from whom Jindal had purchased the goods had admitted having sold them. They had not been proceeded against by the department. There was no case at all against the appellants, Jindal and the Director, Shri Shugla.
4. Shri Asthana submitted that the next set of appeals relating to M/s.
Indian Thermoplastics Pvt. Ltd., and Shri Sunil Agarwal would be covered by his arguments in respect of Northern Plastics Ltd. He reiterated his plea for the appeals to be allowed. He stated in reply to a query from the Bench that he is not pressing the point urged in the appeal that the appellants were heard by one officer while the orders were passed by another.
5. Shri MM. Mathur, learned Joint Chief Departmental Representative replied to the arguments of Shri Asthana. He stated that he would support the findings reached by the Additional Collector in his three impugned orders.
5A. We have considered the submissions of both the sides. We have gone through the record. The contention raised by Shri Asthana, learned counsel for the appellants that the Additional Collector had drawn a wrong conclusion that the appellants had, on their own, admitted their offence of acquiring unlawfully 25 perforating machines and had paid voluntarily a sum of Rs. 5,06,250/- on account of customs duty evaded by them, is valid. As pointed out by Shri Asthana what they had stated in their letters dated 1-9-1989 and 14-10-1989 addressed to the Economic Intelligence Bureau was only that they had not paid any duty on the perforators as they had acquired them locally and that their offer to pay duty was voluntary. They undertook that they will not claim refund of duty or such a speaking order in respect of the said payment to seek any benefit at a later stage. Relevant portion of their letter dated 1-9-1989 is extracted below :- "The petitioner, most respectfully submits that since it is a commercial enterprise and wishes for peaceful existence to pursue its commercial and industrial enterprise with the goodwill and patronage of the Authorities and with due compliance of law at all stages, the petitioner can ill afford its involvement in long drawn and protracted litigation with the Government. Since because of acts of commission and omission on the part of the parties who had supplied these machines to the petitioner, and other unfortunate reasons over which the petitioner does not have any control, the petitioner would wish to buy peace of mind and avoid litigation with the Government. Without in any way admitting any of the allegations or the correctness of the finding of the Senior Technical Officer as a result of his investigation, as alleged, the petitioner most respectfully submits that if the perforating machines, could not have been indigenously made in whole without use of certain imported components/parts, then to buy peace of mind and to avoid protracted litigation, the petitioner would agree to pay duty on all of such perforating machines which it had acquired indigenously, provided the price of each of such perforating machine is taken at Rs. 20,000/- (Market price on the date of purchase) for the purposes of assessment of duty and the petitioners are not subjected to any other penal consequences.
The petitioner further submits that it had acquired 25 perforating machines from indigenous source, locally, though only 14 of such perforating machines were seized. The petitioner is ready and willing to pay duty on all the 25 perforating machines @ Rs. 20,000/- per perforator for the purpose of assessment only to get the matters settled so that the petitioner has peaceful existence, rather than, an existence of involvement in litigation with full of tension and anxiety.
However, this offer to pay the duty must not be construed in any manner as amounting to any admission on the part of the petitioner about the correctness of the facts alleged by the Investigating Officer, the learned Senior Technical Officer." The statements in this letter do not amount to an admission on their part of the offence which the adjudicating authority had held them to have been guilty of. In this connection, the decision of the Honourable Madras High Court in Shah Rikhabdas Ghaganraj v. Collector of Central Excise, Madras reported in AIR 1963 Madras 337 cited by Shri Asthana has to be taken note of. It was held therein that "where the goods are not of the prohibited variety, but only restricted for the purpose of import, and goods lawfully imported into the country are available in the open market, it is not justifiable on the part of the Customs authorities, acting under Section 167(8) to demand proof of licit origin from a person in possession of the goods, and on his failure to establish it, to draw the inference that the goods must have been illicitly imported. It is not open to the Collector to presume that any goods, the entry of which into India is not wholly prohibited, should be deemed to have been illicitly imported only for the reason that the person in possession of such goods was not able to establish how he came to possess them." That the burden that was to be discharged by the department had been shifted to them also becomes evident from the letter dated 28-9-1989 issued to them by the Central Economic Intelligence Bureau wherein they were asked to give a categorical declaration to the effect that :- (i) that no customs duty was paid on these perforaters at the time of clearance for home consumption; (iii) that no claims of any kind issued be raised by way of claiming refund or seeking any speaking order for payment of such duty to seek any benefit at a later date.
Any finding against the appellants holding them to be guilty of irregularities which they have been asked to admit as above is of doubtful legal authority and support. If the charge is that the goods have been smuggled it should have been established by the department and the duty demand and confiscation and penalty should not be sought to be propped up on a dictated admission that no duty was paid at the time of clearance for home consumption. Again, the direction to them to state that they would not seek any speaking order for payment of duty to seek benefit at a later date smacks of arbitrariness in an attempt to cover up a deficiency in investigation to establish the alleged offence. The letter from the Directorate General of Technical Development relied upon for coming to the conclusion that the perforating machines are not made in India is also not conclusive of the matter. The contention in this regard raised by Shri Asthana is valid and acceptable. The department has failed to establish that the machines in question were of foreign origin and had been smuggled into this country. In the circumstances, the conclusion drawn by the adjudicating authority in confiscating the goods in question and fixing fine in lieu of confiscation and imposition of penalty on the appellant companies and their Directors cannot be supported. As regards duty the appellants had, according to the impugned order, admitted their offence of acquiring unlawfully the goods' in question and paid various sums on account of customs duty. In the appeals, they have agitated the question of duty paid and sought relief by way of an order for refund of the amount deposited by them with the customs authorities. No doubt, the appellant companies had deposited these sums demanded as customs duty by the department and had also given a letter that they would not claim refund of duty or seek a speaking order in respect of its payment to seek any benefit at a later date. The levy of customs duty would be justified only if it is established that the goods in question are foreign goods smuggled into the country without payment of duty. In the absence of evidence to that effect in the order passed, the demand of duty cannot be sustained only on the ground that the appellants had deposited the same and had agreed to give in writing that they would not claim refund of duty. They cannot be estopped from pursuing legal remedies open to them and they have filed these appeals in exercise of their legitimate right wherein they had inter alia claimed refund of the amounts deposited by them. We have seen from their letter the circumstances under which they had made such payments. In such circumstances, the liability of the goods to customs duty cannot be justified where the foreign origin and smuggled nature of the goods has not been established. We accordingly set aside the impugned orders and allow the appeals. The appellants would be entitled to consequential reliefs in respect of the amounts paid by them as customs duty.
The operative part of the order was announced in the court at the end of the hearing on 29-11-1994.