1. All these appeals preferred by the Revenue are directed against the captioned order-in-appeal passed by the Commissioner of Customs (Appeals), Mumbai disposing off seven appeals filed by the Department invoking the provisions of Section 129D of the Customs Act, 1962 against seven order-in-originals.
2. As the issue involved in all the matters is the same, the ld.Commissioner of Customs (Appeals) has dealt with all the appeals together and under the same circumstances, all the appeals are heard together and are being disposed off by this common order.
3. Except in Appeal No. C/145/96, none of the respondents has appeared and they have sent intimation that the appeals may be heard in their absence. None of the respondents in the entire group of appeals, has filed any cross-objection.
4. On various dates between 7-9-1993 and 4-7-1994, the respondents caused import of Poppy Seeds (Khas Khas) declared to be of Pakistani origin, at the declared price of Rs. 10/- per kg. Since khas khas is considered to be a consumer good of Agriculture origin and the same falls within the negative list of the policy and specific licence is required to cause the import, they were not cleared. It also appears that the goods imported were undervalued and hence market enquiries were conducted. The records show that the importers in all the matters chose to waive issuance of show cause notice and during the personal hearings which were given on initiation of the adjudicating proceedings, they pleaded to have caused the import bonafide as import of the said item was permissible under Open General Licence during the earlier policy period. The importers also are said to have pleaded that the khas khas imported were of Pakistani origin which were of much inferior quality-viz-a-viz Indian khas khas and the correct price quoted for khas khas of Indian origin can not be applied as the standard for the purpose of valuation. It was also pleaded by them that they have suffered heavy demurrage etc.
5. The matters were adjudicated and the imports were held unauthorised and the consignments were ordered confiscation under Section 111(d) of the Customs Act, 1962, but in each cases, the importers were granted option to pay fine in lieu of confiscation and were also imposed penalty under Section 112 of the Customs Act, 1962. Though no express finding is given in any of the Orders-in-Original, it appears that the valuation as put up by the importer was accepted.
6. As the issue raised in the present set of appeals is the quantum of fine in lieu of confiscation, the quantity imported, the total CIF value, quantum of fine in lieu of confiscation (Redemption fine), penalty imposed on each of the importers, are tabularised as under:Appeal No. Quantity CIF value Redemption Penalty imported MT Rs. fine Rs. Rs.C/141/96 48.3 4,83,000 4,50,000 0,60,000C/142/96 80.5 8,05,000 8,00,000 1,25,000C/143/96 48.3 4,83,000 4,50,000 0,75,000C/144/96 80.5 8,05,000 5,00,000 1,00,000C/145/96 30.8 3,08,000 3,00,000 0,50,000C/146/96 48.3 4,83,000 4,50,000 0,75,000C/147/96 11.25 1,46,250 0,40,000 0,10,000 7. The said orders of the Additional Collector were reviewed vide Section 129D of the Customs Act, 1962 by the Collector of Customs and accordingly applications were filed before the Collector of Customs (Appeals) which have been disposed of by the impugned order. In the applications so filed, the valuation does not appear to have been raised as a ground and the main thrust was on quantum of redemption fine on the ground that in fixing the redemption fine, the criteria should be the Margin of. Profit and in respect of the price of the inferior quality of khas khas prevailing at Rs. 74/- per kg., the profit earned by the importer could be about 570% and further in some other proceedings, the redemption fine was assessed at 500%, the redemption fine at around 100% or less fixed for the subject imports was too low. The prayer made was that the quantum of redemption fine be appropriately refixed and hence the penalty imposed should also be refixed on the higher side.
8. The Commissioner of Customs (Appeals) has, in the impugned order, concluded that: (i) No documentary evidence by way of detailed worksheet showing the working out of the M.O.P. is produced; He has observed that the adjudicating authority has satisfied himself as to the inferior quality. He has also considered the fact that some consignments of similar goods which the importer did not get released, were put to auction, where the price realised was only Rs. 21.38 and Rs. 40.58 per kg. and hence assessing the M.O.P at the price of Rs. 74/- per kg. was not justified. Feeling the Orders-in-Original passed by the adjudicating authority to be fair and reasonable, the Commissioner of Customs(Appeals) has held that no modification in these orders is called for. He has thus rejected all the appeals filed by the Department. Aggrieved by the same, the present set of appeals have been filed where also, the issues raised are the same as those raised before the Commissioner of Customs (Appeals). With no cross-objection filed, the aspect as to the validity of confiscation does not arise.
9.1 Shri K.M. Mondal, the ld. SDR has submitted that provisions have been made in Section 125 of the Customs Act, 1962 to permit the importers to pay fine in lieu of confiscation, where the goods imported are not absolutely prohibited and proviso to Sub-section (1) of the same section provides that the fine so imposable shall not exceed the market price of the goods ordered for confiscation, less the duty chargeable. In his submissions, the criteria adopted is generally to wipe out the M.O.P. Referring to the decision of the Tribunal in Jain Exports Pvt. Ltd. v. Collector of Customs -1988 (33) E.L.T. 199 (Tribunal), the ld. SDR has pleaded that the commonly adopted formula for ascertaining the M.O.P. is 100 x Selling Price - Landing Cost (CIF + 5% + duty)MOP = ----------------------------------------------------------- CIF 9.2 In the submissions of the ld. SDR, though the Department does not accept the sale price as given by the importers and he would endeavour to establish that the sale price is much higher, even assuming the same to be the correct price, if the sale price is taken, i.e. Rs. 45/- per kg. as is represented by the importers before the adjudicating authority and applying the formula indicated earlier, with the selling price taken as Rs. 45/- per kg. and CIF value being Rs, 10/- per kg.
and duty payable being Rs. 6.50 per kg. the calculation brings out the figure of 280 indicating that the M.O.P. would be 280%. In the submissions of the ld. SDR, applying the criteria of wiping out the M.O.P. in fixing the redemption fine, the redemption fine is, per se, inadequate.
9.3 The ld. SDR has then pleaded that the formula approved does not provide for considering other circumstances or extra expenses incurred, but even accepting the proposition that such extra expenses like demurrage would curtail down the M.O.P., such deduction should be allowed only on correct data furnished. Referring to the Tribunal's decision in Jain Exports Pvt. Ltd. v. Collector of Customs -1991 (51) E.L.T. 579 (Tribunal) - the ld. SDR has pleaded that here, none of the importers has given the amount of extra expenditure incurred by them and giving deduction on some hypothetical figure which also does not seem to have been given in fixing the redemption fine at the rate lower than 280% in any case, is not justified.
9.4 Referring to the documentary evidence, the ld. SDR has pleaded that Gujarati Daily "Vyapar" is specifically dealing with all the news relating to commercial and economic aspects and the prices quoted therein are accepted as the standard price in the commercial [field] and according to them even the lowest variety khas khas in the relevant period is quoted at Rs. 74/- per kg. and even assuming that khas khas imported are inferior quality that can be sold at Rs. 74/- per kg. The price quoted in the same paper does not differentiate between Indian and imported quality and there could not be any justification in overlooking the same. He pleads that in addition to that, prices are also quoted in Spices Market Weekly published by the Spices Board of India, a Government sponsored body. There also, during the relevant period, the prices of khas khas are shown at Rs. 100/- per kg. and the ld. SDR has pleaded that even taking the prices of inferior quality of khas khas in Indian Market, which is Rs. 74/- per kg. the M.O.P. would be 570% which is much above 100% arrived at by the appellate authority.
9.5 Submitting on the approach adopted by the appellate authority, the ld. SDR has pleaded that the evidence from the market enquiry is available in record and the same have been overlooked. He has referred to the appeals filed by the Department before the Collector of Customs (Appeals) and has stated that the grounds were specifically raised and in spite of that, the same have not been considered by the appellate authority on the grounds that cannot be justified, as the said authority could have called for the files for detailed verification.
Commenting upon the approach adopted by the authority, he has pleaded that the said authority being not an expert, ought not to have drawn any conclusion about the quality on mere visual examination and there does not exist any report from any expert on the subject. He has then referred to an announcement from the Government of Pakistan that they do not grow poppy seeds and there are no exports of the same commodity and has submitted that thus the question arises whether the poppy seeds imported are really of Pakistani origin or not. He has, however, not elaborated, as misdeclaration is not raised as an issue.
9.6 As regards the observations of the Collector of Customs (Appeals) that similar items were put in auction by the Department and the price realised is Rs. 21.32 and Rs. 40.58 per kg. the ld. SDR has pleaded that auction price can not be taken as the standard price as there are several obvious extraneous circumstances, which play an important role.
9.7 In the submissions of the ld. SDR, in an indentical case, another Collector of Customs (Appeals) has assessed the redemption fine at 500% and it was, therefore, incumbent upon the appellate authority to take that into consideration and he should not have taken a different view.
To substantiate the same, the ld. SDR has referred to Tribunal's decision in Indian Explosives Ltd. v. Collector - 1996 (82) E.L.T. 270 (Tribunal).
9.8 During the course of submissions, the ld. SDR has also referred to some more Tribunal decisions which highlight the points pleaded by him.
10.1 Shri C.S. Lodha, the ld. Advocate, for the respondents in Appeal No. C/145/96, has pleaded that as per the proviso to Section 125 of the Customs Act, 1962, subject to the maximum limit prescribed for, it is left to the discretion of the adjudicating authority to fix the quantum of fine and in ordinary circumstances, the discretion so exercised should not be interfered with, even if the appellate authority feels that sitting as the adjudicating authority, it would have assessed the quantum of fine in a different way, unless it is found that the discretion so exercised by the adjudicating authority is palpably false and the redemption fine is widely disproportionate in the context of events under consideration. To substantiate the same, the ld. advocate has referred to the decision of this Bench in Collector of Customs v.K. Hargovind Das 10.2 On the merits, the ld. advocate has referred to the Orders-in-Original and has pleaded that the adjudicating authority has himself made a visual inspection and has opined that the khas khas imported by the respondents had lot of black particles indicating that it required lot of cleaning and removal of its black particles and obviously the value can not be equated with the quality hot having any such impurities.
10.3 The ld. advocate has further pleaded that the department has not taken samples of the imported khas khas so as to compare them with even the lowest variety of Indian khas khas and abstract comparison can not provide any basis for comparison. Further, as is pleaded by the ld.advocate, the price quotations relied upon by the Department are for 50 kg. whereas the imported quantity is about [30.8] Mts. and obviously when such a bulk quantity is offered sale, there would be a tendency towards lower price.
10.4 Referring to the subject import, the ld. advocate has pleaded that the respondents have been able to sell the quantity at the rate of Rs. 32.50 or Rs. 32.75 per kg. and have actually incurred loss of Rs. 50,361 /-. To substantiate the same, he has produced the copies of the bills/invoices drawn on various traders and has prepared the statement in that regard. In his submissions, there is thus no scope to interfere with the quantum of redemption fine which actually ought to be reduced.
He, however, concedes that because no cross objections have been filed, that can not be done.
10.5 Commenting on the approach adopted by the adjudicating and the appellate authorities, he has pleaded that with no proper data furnished to show the contrary, the detailed reasonings adopted by the Collector of Customs (Appeals) need not be interfered with and the well reasoned order ought to be confirmed.
11. Considering the submissions and going through the records made available, with no challenge to the other part of the order, the only issue for consideration is whether there is any scope to interfere with the quantum of redemption fine imposed and whether the penalties are to be enhanced.
12. The table ldentifying the quantum of redemption fine in each of the seven appeals given earlier indicates that the ld. adjudicating authority has, except in Appeal No. C/147/96, imposed a redemption fine ranging between 63% to 99% of CIF value whereas in the said appeal it is about 27% and the cause for low redemption fine is shown as 21 bags were wet and 11 others Were in torn condition and M.O.P. is assessed at Rs. 5/- per kg.
13. Provisions for release of goods imported but held liable to confiscation under any of the proviso contained in Section 111 of the Customs Act, 1962 on payment of appropriate fine in lieu of actual confiscation (commonly known as redemption fine), have been made in Section 125 of the Customs Act, 1962 and ceiling is laid as to the quantum of fine imposable in proviso to said section by providing that the fine shall not exceed the market value less the duty chargeable on such goods. Ex facie, the same does not provide for considering other expenditures incurred. However, conventionally, the criteria adopted is to wipe out the M.O.P. on the basis that none should be permitted to gain out of their own fraud (the word is loosely used) and though the formula as given by the ld. SDR could provide some guideline to work out the M.O.P., it is feared that blind adoptation thereof may at times, lead to unjust calculation. The universally accepted concept of profit is the one that results in actual net earnings to the importer.
This can be arrived at on deduction on all actual expenditure whether or not, they fall within the generalised formula given. This miscellaneous expenditure germane to the imported items, have to be excluded from the price actually realised or is expected to be realised, to come to the actual profit margin. The correct criteria thus appears to be the one where all legitimate expenditure and the duty element as also the CIF value becomes deductable from the local market price or the price realised, to arive at the profit derived.
14. There exists a debate as to whether the market price prevailing on the date of import or on the date of order releasing the goods, ought to be considered. If the criteria is to deprive the importer from the profit that he could derive, the price prevailing on the date of release can be the relevant price. However, some contrary views also exist and this being not the material issue for consideration here, there is no need for deliberation here.
15. With the ceiling provided for fixing the redemption fine vide proviso to Section 125 of the Customs Act, 1962 the actual fixation of the quantum of fine is left to the discretion of the authority adjudicating and as is elaborately discussed in the order of this Bench in Collector of Customs v. K. Hargovind Das (Supra), the appellate authority should not ordinarily interfere with the finding based on exercise of such discretionary power, unless it is evident form the evidence that the discretionary powers are improperly exercised.
16. In the present case, the adjudicating authority has exercised his discretion in imposing the redemption fine ranging between 63% to 99% and same has been approved by the Commissioner of Customs (Appeals) and scrutiny is called for to examine whether the discretion exercised calls for interference keeping in view the limited scope available to the appellate authority.
17. Viewing the conclusions adjectivally, with the authorities below having examined the goods and having kept in view the plea of the importers about inferior quality and realisation of the price much below the normal market price of the goods of Indian Origin have assessed the redemption fine at 63% to 99% of CIF value and they could be said to have exercised their discretion properly as they have also considered the extra expenditure to be incurred by them. The subjective examination thereof, however, indicates that the order, as also the reasoning adopted by them, suffer from certain lacunae which gives grounds to the probability of their having missed examining the issue from another probable angle which might have led them to assess the quantum of redemption fine different from what they have done.
(a) The adjudicating authority has while accepting the market price to be around Rs. 45/- per kg. for the imported material ought to have seen that even by that calculation, applying the accepted formula indicated above and reportedly accepted by the Customs authority for assessing the M.O.P. for the purpose of quantifying the redemption fine, M.O.P. would come to 280%. Even accepting the data now supplied by one of the respondents, of their having sold the imported khas khas at Rs. 32.50 and Rs. 32.75 per kg, the profit margin would be 150%.
(b) What seems to have weighed with the authorities below is that the importers had to incur some additional expenditure. Though, as held earlier, this aspect can not be overlooked and is rightly not overlooked by the authority below, there is no data available to show what exact amount is spent or extra expenditure incurred in this regard and as has been held by the Tribunal in Jain Exports Pvt. Ltd. v. Collector of Customs -1991 (51) E.L.T. 579 (Tribunal) for claiming such extra deduction, adequate data ought to have been provided. The importers do not seem to have provided such data, making it rather difficult to ascertain whether the conclusion to fix the redemption fine at the lower rate than the one which could be worked out on the probable price realisation, as given by the importers themselves, is justified and the discretion used is judicious.
(c) Having challenged the said aspect initially by alleging undervaluation and at the first appeal stage by pleading that the entire M.O.P. is not covered up in the quantum of redemption fine, the Department has brought on record, that the local market price is much higher than what has been pleaded by the importers. Pleading that khas khas in the Indian market is classified under three different varieties, it is brought on record that the cheapest variety was sold at Rs. 74/- per kg. The authorities below have not considered the same as the standard price by holding that the imported quality is much inferior as compared to the inferior quality sold in the market. What appears to have been left unanswered are : (i) Whether the prices quoted in the newspapers are prices of only Indian origin khas khas and do not cover the imported variety; (ii) Whether quality wise there is any difference. This could have been ascertained by obtaining opinion from the expert.
(d) The ld. adjudicating authority has, on visual examination, found presence of black particles in the imported khas khas which in his opinion, results in realisation of lower price. The criteria adopted does appear to be correct one. What, however, remains missing, for the purpose of endorsing the same to be proper one, is as to what was the percentage of black particle or foreign particle and no data in that regard is available; (e) Further, the Department having made market enquiries and procured evidence in relation to the market prices by bringing on record the evidence in the form of quotation from commercial newspapers and also from publications of Spices Board which could lead to the M.O.P. to be around 500% or above and when now even the country of origin has become doubtful in view of the declaration by the Government of Pakistan that their country does not grow poppy seeds, it was essential even for the purpose of non acceptance to convincingly conclude the inferiority quality wise of the imported item than the chalu quality khas khas of India origin, to examine this aspect. The submission of the ld. advocate appearing for one of the respondents that the quotations relied upon by the Department are of 50 kg. whereas the quantity imported was much more and obviously when bulk sale is offered there will be tendency towards lower price, can not be accepted, as the price quotation is for wholesale, same price can be presumed for the wholesale goods and even if some price variation can be presumed, larger variations call for explanation. The importer seems to have provided no such explanation.
(f) Reference is made to the auction of similar quality and realisation therefrom to substantiate lower redemption fine. The criteria for M.O.P. is the normal market price. Further, the basic concept in the auction sale and normal market sale are different.
The auctions are held at places other than at regular commercial places, and have so many conditions attached, that the same would generally not attract a normal buyer and with "normal buyer" not participating the concept of "higher bidder" creeps in; such auction sales therefore, could not provide the correct criteria. That apart, even accepting the same on the standard, the price realised ranges from Rs. 21.35 to 40.58 and with realisation of Rs. 40.58 per kg, the margin of profit would be around 230% and vide ranging difference will exist.
19. Unless and until these aspects are properly examined, it appears difficult to conclude as to whether the discretion exercised is just and does not want any interference.
20. There is a vide ranging variations and differences in the redemption fine imposed and what the Department claims to have been imposable. There is also an order from another competent authority confirming the redemption fine of about 500%.
21. Because the re-examination of the aspect in the light of observations made above, may call for further scrutiny of the evidence indicating the actual price, we feel that the entire issue may be re-examined by the adjudicating authority by giving opportunity to both the side to adduce evidence if they so desire. The adjudicating authority may now, also have the benefit to ascertain the actual profit earned as the goods have been released and presumably have also been sold by the importer.
22. In the result, we deem it necessary and proper to remand the matters by setting aside the order of Collector of Customs (Appeals), limited to the quantum of redemption fine and penalty, which has to be in conformity with the quantum of redemption fine and we would not like to segregate the same, though technically, it may be possible.
23. Accordingly, by setting aside the order on the grounds raised in the appeals, the matter is remanded back to the adjudicating authority for re-examination of the issue, by permitting both the sides to procure and produce such evidences as they desire and after granting personal hearing, come to the conclusion according to law.