Ranadip Shipping and Transport Vs. Collr. of Cus. - Court Judgment

Excerpt:
1. order dated 3-5-1988 passed by the collector of customs, bombay is challenged in these appeals. appeal no. c/654/88 has been filed by m/s.ranadip shipping and transport company private limited (for short rstc). appeal no. c/655/88 has been filed by m/s. sea land service incorporated, usa (for short, sls).2. the proceeding relates to import of a large number of chassis (trailers) by rstc who had been appointed as contractors by sls to provide various services as per agreement dated 1-1-1987. sls operate in the field of ocean transportation and commenced operations at bombay and cochin ports with their container shipping service and accepted cargo in marine containers from usa, europe and middle-east. sls opened a liaison office and posted their representative in india with the permission of reserve bank of india and also started containerised service at the two ports in january, 1979. they required top chassis (trailers) of 35' x 40' size to operate on wheels for their shore based operations. their application for customs clearance permit for import of 256 pieces of chassis having been rejected, rstc, at their request, applied for and obtained in may, 1980 ccp for import of 256 pieces of second hand chassis valued at us $ 481000 with condition of re-export within two years from the date of import. in 1980,115 pieces of chassis were imported and cleared at cochin port and the adjudication thereof led to an appeal being filed in the tribunal which has been disposed of as per order no. 1524-a, dated 2-5-1996. 193 pieces of second hand chassis were imported and off-loaded at bombay without declaration in the relevant import general manifests and without bills of entry being submitted to customs authorities and without clearance on payment of duty and were used in the port area by and on behalf of sls. 9 pieces were sent back sometime prior to 1983. in august and september, 1980, rstc submitted four bills of entry for clearance of 84 pieces of chassis and also got additional entires made in import general manifest to the effect that the goods had been imported on four voyages of the vessel s.s. boxer captain cook in august and september, 1980. along with bills of entry was filed an invoice dated 18-12-1978 of sls for 256 pieces of second hand chassis. the invoice showed the value as us $ 1000 fob per piece and cost of refurbishing or overhaul as us $ 700 per piece and freight as us $ 300 for bundle of three pieces. the declaration was accepted and duty levied on that basis. import documents had not been presented regarding balance pieces and no duty had been paid on the same.3. investigation by the central intelligence unit of the bombay custom house into import of certain other goods, namely, belloto cranes by rstc pointed to the suppression of import of 193 pieces of chassis in bombay. investigation also disclosed misdeclaration of value of 84 pieces for which bills of entry had been filed and duty paid. after detailed and protracted investigation, the assistant collector c.i.u.issued notice dated 13-5-1985 under section 28(1) of the customs act, 1962 (for short, the act) to sls and rstc to show cause against demand of duty on the value of us $ 2535 per piece on 109 pieces and differential duty on 84 pieces. the assistant collector issued another notice, also dated 13-5-1985, under section 124 of the act, to show cause against confiscation of 193 pieces of chassis (out of which only 26 pieces were then available in the docks) under clauses (d), (f), (g), (j), (i) and (m) of the act, against confiscation of the 26 pieces and against penal action under section 112 of the act. rstc as well as sls filed replies and submissions and were given personal hearing.thereafter the impugned adjudication order was passed.4. by the impugned order, the collector of customs recorded the following findings :- (a) 193 pieces of chassis were imported without being manifested in the respective igm during the period 4-1-1979 to 11-12-1979 and without c.c.p. and cleared in clandestine manner and of them 9 pieces were imported and re-exported twice. total number of pieces imported may be taken as 184. (b) the contention that these chassis were not commercial cargo but the vessels' shipment has to be rejected as they were imported for use in the docks. (c) the contention that rstc or their principals, sls did so in ignorance of the correct procedure and under the impression that no duty was payable or that no licence or permit was necessary or that no clearance was necessary has to be rejected. (d) since 115 pieces were imported at cochin, only 141 pieces and not 193 pieces could be imported at bombay. the excess import was unauthorised. (e) the contention that no duty liability was incurred for 100 pieces (184-4) as no bill of entry was filed has to be rejected. (h) the alternate claim for drawback under section 74 of the act has to be rejected. (i) rstc and their principals sls are liable to pay the duty on these chassis, (paragraph 19 of the order), (k) there is evidence of the deliberate involvement of sls and rstc in unauthorised imports of chassis, non-inclusion of the same in respective igm, the unauthorised use of the chassis for container movements without payment of customs duty and without being cleared by the customs and misdeclaration of value. the chassis are liable for confiscation under clauses (d), (f) and (m) of section 111 of the act and they are liable for penalty under section 112 of the act (para 20 of the order). (1) the rate of duty and the exchange rate should be calculated at the rates prevailing on the date of filing of the bills of entry for 84 pieces of chassis. (m) customs duty should be recovered from rstc in respect of 184 pieces under section 28 of the act, deducting duty already paid.5. shri f. sorabjee, learned counsel for sls submitted that slc being ignorant of indian customs law and procedure had appointed rstc as contractor to attend to every aspect of the job and are not liable for penalty. he also submitted that the correct value of chassis is us $ 1800 per piece (1000 + 700 + 100) and hence differential duty cannot be demanded in regard to 84 chassis. he further submitted that the collector has not confirmed the demand of duty or differential duty against sls but has directed recovery of duty amount only from rstc. in the absence of any appeal filed by rstc against sls and in view of the appeal filed by rstc against the collector and without impleading sls, duty liability cannot be fixed against sls at this stage. however, learned counsel assured the tribunal, duty in regard to 100 pieces on the value of us $ 1800 cif per piece will be paid by sls as part of its liability under the agreement entered into with rstc. learned counsel also pleaded for lenient view in the matter of quantum of penalty.regarding valuation, learned counsel submitted that value of the chassis imported at cochin, could be adopted. it is also contested that show cause notice is barred by time.6. shri joseph vellapally, learned senior counsel for rstc submitted that the collector has found that the actual import of all the pieces was by sls and the duty liability is with rstc and slc. in fact the collector's direction for duty amount to be recovered from rstc was erroneously issued under the proviso to section 28 of the customs act.this did not amount to exoneration of slc from duty liability. he supported the submissions made on behalf of sls regarding valuation. he further submitted that rstc had nothing to do with any chassis other than the 84 pieces for which they filed bill of entry on the request of sls and under the terms of the agreement and hence rstc cannot be saddled with liability for duty on 100 pieces. in any event, it is submitted, since there is no difficulty for recovery of duty or differential duty from sls, the direction for recovery from rstc was unjustified in terms of the proviso to section 28 of the act. rstc was not guilty of any action contemplated by the proviso. rstc acted, if at all, only as agents of sls under the terms of the agreement and cannot have any liability higher than that of sls. learned counsel also pointed out that the two have fallen out and there are litigations between them. learned counsel pleaded that there was no justification to levy penalty on rstc, which, in any event, is excessive.7. shri k.k. jha, sdr rebutted the aforesaid contentions and submitted that value adopted in the impugned order is correct, that the collector held both the parties liable for duty and did not exonerate sls and that both the parties were guilty of wilful suppression of facts and misrepresentation and hence the larger period of limitation was available and penalty leviable. he also submitted rstc was involved in the import and use of all the pieces and also penalty. there was a concerted attempt to import and use chassis without authorisation and to evade duty. there was a deliberate attempt to flout the customs law of the country. the impugned order, according to him, is correct.8. mr. ashok desai, learned counsel, gave a brief rejoinder on behalf of sls that for the amount to be recovered from them, there must be levy or assessment holding them liable to pay the duty. they must be given the opportunity to contest the demand.9. the following points arise for consideration, on the basis of the submissions made on behalf of the appellants and the department - (b) whether duty cannot be imposed in respect of 100 pieces of chassis? (c) whether rstc is liable for duty in respect of 100 pieces of chassis (184-84)? (d) what relief, if any, rstc is entitled to in respect of duty demand and whether the valuation adopted by the collector is erroneous. (g) whether rstc is liable for penalty? if so, whether the amount of penalty is excessive? 10. though, in paragraph 19 of his order, the collector had observed that rstc and their principals sls are liable to pay the duty on the chassis in question, duty demand has been raised only on rstc vide paragraph 21(2) of the order. there is no demand of duty from sls. it was contended by the learned counsel for rstc that they are only agents of sls and duty, if any, should have been demanded only from sls and not from them. in this connection, he referred to the provisions of sub-section (3) of section 147 of customs act and cited the decision of the tribunal in indian potash limited v. collector of customs 1991 (55) e.l.t. 236 wherein it had been held that the appellants therein were not the actual importers but m.m.t.c., the canalising agency was the actual importer. we find that the present case is different on facts.rstc had filed the bills of entry for 84 chassis in their own name and cleared the goods on payment of duty. they had not filed the bills of entry as agents of slc. there is no indication in the documents that they were only acting as the agents of slc. accordingly, the protection applicable to an agent under section 147(3) of customs act is not available to them. they had, as early as 1979, applied to the chief controller of imports and exports for customs clearance permit for 256 chassis. they had received the chassis and used them for handling the containers in the docks area. such work was carried out by them as per the agreement with sls and they were getting paid for it. the fact that they were doing so for sls did not, however, absolve them of their responsibility before the customs authorities. they did come forward in regard to the 84 chassis but they should have done so for all the chassis cleared and used by them for the purpose of handling the containers in bombay docks. we do not accept the plea taken by them that they were not aware of the requirement that the chassis had to be cleared on payment of duty and that they were guided by sls who in turn, had a bonafide belief that the chassis which were for use and ultimate re-export were not liable to duty. this plea is not acceptable as sls had imported 115 chassis through cochin port and had them cleared on payment of duty which were being used there. duty has correctly been demanded from rstc under the impugned order. if the agreement between the two companies provides for sls to compensate rstc for the payment of any duties or charges it is for them to take up the matter with sls for such appropriate compensation.11. the next contention is whether duty cannot be imposed in respect of 100 chassis representing the difference between 184 numbers, admittedly imported at bombay, and 84 which were retained and for which bills of entry were filed. since it is the admitted position between the parties that 184 were imported, duty is payable and has to be paid. the claim of rstc is that barring the retained numbers the others were re-exported. rstc had pleaded before the collector in the course of adjudication proceedings that they may be permitted to pay the difference between duty payable on the imported chassis and the drawback of duty admissible on their re-export. collector had not accepted the plea and held that payment of duty on the imported chassis and grant of drawback on export are to be dealt with separately and that the liability to pay the duty cannot be compromised with any assurance of payment of drawback. as far as import of chassis is concerned, the same stands admitted by rstc. the documents available with bombay port trust and documents regarding repair also have been referred to bear it out. duty is due thereon and rstc is liable to pay the same. they had removed and used them. it is, however, their contention that these 100 chassis had been re-exported. we are of the view that this plea that these had been re-exported needs to be considered. as drawback is dependent upon the fact of re-export and the period of use in india, the dates of import and re-export of the chassis claimed to have been re-exported has to be determined by the adjudicating authority with reference to the available documents. when drawback is sanctioned that will reduce the duty burden to be incurred.12. another factor that would afford relief in respect of the duty burden on rstc relates to valuation of the chassis. this will relate to the chassis cleared on payment of duty on declared value as well as the other chassis on which no duty has been paid. as regards the former category, these 84 chassis had been cleared assessing the duty on a price of $ 1000 + $ 700 refurbishing charges + $ 100 for freight per chassis. this was interfered by the collector in his order by taking the price per chassis to be $ 2535. this has been arrived at on the basis of the price $ 2790.37 for a new chassis as per invoice dated 4-4-1986 and allowing 46% depreciation. the depreciation allowed has been referred to as the maximum. on the depreciated value, the refurbishing charge of $ 700 has been added as also freight of $ 300.00 and insurance of 1 1 /8% adding to a sum of $ 2535.00. the collector has referred to the letter dated 6-1-1982 to mr. v.a. vanna stating the value of 199 chassis as $ 30,00,00. this works out to a price of $ 1507.50 per chassis which the collector has observed to be close to the depreciated value. the addition of refurbishing cost and the freight has increased the value. as regards the depreciation allowed by the collector, we find that 46% has been allowed stating it to be the maximum. we find that the age of the xxx chassis and the 1966 invoice call for a higher deduction for depreciation. on that basis the declared unit price of $ 1000 should be held to be in order. there is, however, difference in the freight amount. originally $ 100 was declared. collector has taken the freight to be $ 300 per chassis.during the arguments, it was submitted that the question of valuation of the chassis imported at cochin has been considered by the tribunal and a copy of order dated 2-5-1996 tendered. we find that the element of freight was also considered therein and the addition of 20-1/8% to the invoice value was held to be not justified. the invoice contained an entry showing the freight as $ 300 per bundle of three chassis. mr.blackman of sls, had mentioned in his statement before the customs officers that the freight from europe to india was $ 500 to $ 1000 per bundle of 3 chassis. the collector has applied $ 300 per chassis indicating that he has taken the freight as $ 900 per 3 bundle of 3 chassis, nearer the maximum of the rate indicated by mr. blackman. we are of the opinion that it will be more appropriate to take the freight amount as $ 200 per chassis. as the rate originally applied as $ 100 there was short assessment to the extent of $ 100 per chassis on account of the freight element.13. in addition to the short levy pointed out above in respect of the 84 chassis, there is the question of non levy of duty on other chassis which were not declared at all and which were cleared without payment of duty. though this liability has been admitted by both the appellants, plea of limitation has been taken. to consider this plea it is necessary to take note of the correspondence addressed by mr.roberts the bombay based officer of sls to his colleague in dubai.in his report dated 7-8-1989. mr. roberts stated, inter alia, as follows : "we have applied for a customs clearance permit (ccp) to legalised the import all 256 units. the indian government has indicated that the ccp will be granted for a period of two years from the date of entry. after that time they must be taken out of india. an extension is possible but chances of obtaining one is unpredictable. the chassis will not be allowed to leave port premises. the chassis are subject to import duty even though they are to be re-exported." (3) delay paying any duty on the chassis now in bombay in the hope that most or all of them can be re-exported before duty is paid. this amount, $ 2840 x 141 = 400,040, would clearly cover the cost of one of the two pieces of stacking equipment needed." mr. i.d. blackman of sls of sls appeared before the customs officers and his statement was recorded on 26-9-1983 and 27-9-1983. his attention was invited to this letter dated 7-8-1979 of mr. roberts wherein he had referred to the import of chassis at bombay and the non-payment of duty thereon and the saving of $ 400,040 if the chassis are re-exported before duty was paid. commenting on this letter, mr.blackman stated that it was his supposition that mr. roberts was under the mistaken impression that if the chassis were not physically present in india at the time ccp was issued then duty would only be due on those still remaining in india and not prior to issue of ccp. he then stated that it was most unfortunate that this mistaken impression of mr. roberts had created the problem. he stated that it is sls's corporate policy never to avoid or evade their regulatory responsibilities in any country in which it operates. the deficiency having been made known to the management, they found themselves in a position of acute embarrassment and they would earnestly desire to correct and regularise the situation as soon as possible.13. in the communication "inter office correspondence" dated 20-2-1980 addressed by mr. l.h. roberts to mr. z.v. mcmillan, jr. dubai on the subject "india service expansion/chassis options", it has been mentioned as follows :- "although duty has not yet been paid on the 141 bombay chassis, the estimated duty amount of $ 2850 per chassis should be considered already incurred, in spite of the two-year import limit because the amount of duty refundable after two years is negligible. there is an opportunity, however, for this amount, $ 401,850 to be reduced. any chassis re-exported before the customs clearance permit is finalized will escape duty. that provides the incentive for quick action." 14. the trend of the communications by mr. roberts of sls, bombay referred to above clearly indicates the company's awareness of the duty liability on the imported chassis. the plea that they were under a bona fide impression that there was no duty liability if the chassis were re-exported is untenable and had been rightly rejected by the collector in his adjudication order. mr. roberts had clearly indicated in his letter that duty was payable even if the chassis are re-exported. he had indicated the need to save the amount by delaying the payment of duty till the time of re-export. these letters throw light on the approach adopted by sls in regard to the chassis imported and cleared at bombay. in this background the plea of time bar lacks conviction.section 28 of the customs act provides for the issue of notice within six months of the relevant date for recovering short levied or non-levied duty. the said period of six months is extendable to five years where the short levy or non-levy is due to collusion, wilful misstatement or suppression of facts by the importer or his agent or employee. in the facts of the case as discussed above, the longer time limit is attracted. the next question is what will be the starting point of limitation. explanation (3) under the said section provides that the relevant date from which the period of limitation starts will be the date from which the period of limitation starts will be the date on which the proper officer makes an order for the clearance of the goods where duty is not levied or the date of payment of duty where duty is short paid. in the present case, duty had been paid on 84 chassis for which bills of entry had been filed and assessment was done by the customs officer. hence for the short levy alleged and confirmed in respect of these 84 chassis, the relevant date for reckoning time limit will be the date of payment of duty. misdeclaration of value has been established. hence the longer time limit has been correctly applied.15. as regards the chassis not declared at all and not covered by any bill of entry, we take note of the submissions on behalf of sls in the hearing as well as the statement of mr. blackman before the customs officer accepting the fact of non payment of duty. where no bill of entry was filed and no assessment made and the goods had been removed without payment of duty, the starting point of limitation in terms of relevant date is not referred to in section 28 of the act. it does not mean that in such cases there is no provision for recovering the duty not paid. the supreme court had held in government of india v. citadel fine pharmaceuticals ltd. 1989 (42) e.l.t. 515 that in the absence of any period of limitation it is settled that every authority is to exercise the power within a reasonable period. what would be reasonable period would depend upon the facts of each case. whenever a question regarding the inordinate delay in issuance of notice of demand is raised, it would be open to the assessee to contend that it is bad on the ground of delay and it will be for the relevant officer to consider the question whether in the facts and circumstances of the case notice or demand for recovery was made within reasonable period. no hard and fast rules can be laid down in this regard as the determination of the question will depend upon the facts of each case. in this case, the fact of import of the chassis and their removal and use without declaration and payment of duty has been established. the non payment of duty was planned and deliberate. there was wilful misstatement and suppression of facts. hence we hold that the plea of limitation fails.the duty should be limited to differential duty after adding $ 100 per chassis towards freight and 1-1/8% towards insurance for the 84 chassis for which bills of entry had been filed and duty paid on declared value. full duty is, however, leviable on 100 chassis which had been imported and removed without payment of duty on a value per chassis of $ 1000 + $ 700 refurbishing + $ 200 freight + 1-1/8% insurance.depending upon the period of use and the fact of their re-export being established by the appellants, the collector should allow the drawback condoning the non filing of drawback shipping bills at the appropriate time and following the required procedure.16. we now turn to the question of penalty. the involvement of sls is because of the fact that the chassis were their property and they had engaged rstc for handling the work in bombay docks. the letters referred to earlier disclose their mens rea and their awareness that duty was leviable even if the intention was to ultimately re-export the chassis. duty had not been paid on a minimum quantity of 100 chassis.the intention not to pay the duty has come out in the letters. in the circumstances penalty of rs. 6 lakhs imposed on sls is justified and we confirm the same. as regards rstc their plea is that they were advised by sls in this regard and they believed that no duty was payable. there is nothing to indicate that they had such a bonafide belief. they handled the removal of the chassis and used them in the docks for handling the containers. they had filed the bills of entry for 84 chassis but deliberately refrained from doing so for the 100 chassis.we find that a separate show cause notice was issued to the two appellants calling upon them to, inter alia, show cause why penal action should not be taken against them under section 112 of the customs act, 1962. this was a detailed and lengthy show cause notice wherein the full details of the acts of omission and commission in regard to the import of the chassis and the short payment and non-payment of duty thereon had been stated. rstc had filed the bills of entry for 84 chassis in 1980 and filed amendment applications in respect of four import general manifests to make it appear that these 84 chassis were imported only at that time. corresponding entries were not there in the port trust copies of the manifests. they did not disclose the fact of importation of other chassis over and above the 84 numbers for which alone they filed bills of entry. they were aware of the import of these chassis also as they had cleared them and used them in the bombay docks. such action on their part had led to evasion of customs duty. their plea that they were only acting as agents of sls and any liability in this regard is only to be met by the latter is not acceptable. they had handled the imports and obtained ccp and filed bills of entry. they did so for only part of the quantity and withheld action for the others. this was a deliberate action on their part which led to the proceedings. as far as sls is concerned, the chassis were their property and they had entrusted the work relating to their import and use in bombay to rstc but they were fully involved in the matter.the correspondence from mr. roberts to his colleague in dubai regarding the import of the chassis has been referred to earlier. these were fully reflected in the show cause notice. the letter in question was also seen by mr. blackman and his statement recorded. the duty liability has been accepted by them. the letter refers to the import of the chassis and the idea of non-payment of duty thereon till the time of their re-export to escape the duty liability. such non-payment of duty was deliberate. they were aware of duty liability even if the chassis were ultimately re-exported. hence the plea of any bonafide belief of non-dutiability does not ring true.17. it was contended on behalf of the appellants that the show cause notice as well as the adjudication order only referred to section 112 of customs act, 1962 and not the sub-section thereof. we have considered the submission. the said section reads as follows :- "section 112. penalty for improper importation of goods, etc. - any person,- (a) who, in relation to any goods, does or omits to do any action which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, or (b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111, shall be liable - (i) in the case of goods in respect of which any production is in force under this act or any other law for the time being in force, to a penalty not exceeding five times the value of the goods or one thousand rupees, whichever is greater; (ii) in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding five times the duty sought to be evaded on such goods or one thousand rupees, whichever is the greater; (iii) in the case of goods in respect of which the value stated in the entry made under this act or in the case of baggage, in the declaration made under section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty not exceeding five times the difference between the declared value and the value thereof or one thousand rupees, whichever is greater; (iv) in the case of goods falling both under clauses (i) and (ii), to a penalty not exceeding five time's the value of the goods or five times the difference between the declared value and the value thereof or one thousand rupees, whichever is the highest; (v) in the case of goods falling both under clauses (ii) and (iii), to a penalty not exceeding five times the duty sought to be evaded on such goods or five times the difference between the declared value and the value thereof or one thousand rupees, whichever is the highest." as discussed earlier both the show cause notice and the order have brought in detail the role of both the appellants. by their action customs duty had been evaded in respect of the chassis. the chassis were thus liable for confiscation. the show cause notice proposed confiscation of the goods. penal action against the appellants was attracted in view of their role in regard to the importation and removal of the goods which were liable to confiscation. the penalty amounts imposed on the two appellants is appropriate and commensurate with the quantum of duty involved even if some relief is held to be admissible by way of drawback.18. the learned counsel, cited judgments of the supreme court and the madras high court in cases reported in 1990 (47) e.l.t. 161 and 1983 (12) e.l.t. 322 respectively. these do not support the appellants' case as the intention not to pay the duty was there behind the non-payment of duty. as regards the plea that the notice as well as the order refer to only section 112 of the customs act, without citing sub-section (a) or (b) thereof, this question was considered in the latter judgment by the madras high court. the ingredients had not been specifically set out in the show cause notice in the said case. such is not the position in the present case. the nature of offence had been spelt out in the show cause notice and the appellants were under no disability to make their defence submissions because of the show cause notice. we, therefore, reject the plea.19. to sum up we pass the following orders partially allowing the appeal on the aspect of valuation and drawback :- (1) differential duty is payable on 84 chassis, as indicated in paragraph 15 above. (2) duty on 100 chassis to be paid on the value indicated in paragraph 15 above. (3) drawback to be paid on the chassis, export of which is established by the appellants as indicated in paragraph 15 above.

Judgment:
1. Order dated 3-5-1988 passed by the Collector of Customs, Bombay is challenged in these appeals. Appeal No. C/654/88 has been filed by M/s.

Ranadip Shipping and Transport Company Private Limited (for short RSTC). Appeal No. C/655/88 has been filed by M/s. Sea Land Service Incorporated, USA (for short, SLS).

2. The proceeding relates to import of a large number of Chassis (Trailers) by RSTC who had been appointed as contractors by SLS to provide various services as per agreement dated 1-1-1987. SLS operate in the field of Ocean transportation and commenced operations at Bombay and Cochin Ports with their container shipping service and accepted cargo in marine containers from USA, Europe and Middle-East. SLS opened a liaison office and posted their representative in India with the permission of Reserve Bank of India and also started containerised service at the two Ports in January, 1979. They required top chassis (trailers) of 35' x 40' size to operate on wheels for their shore based operations. Their application for Customs Clearance Permit for import of 256 pieces of Chassis having been rejected, RSTC, at their request, applied for and obtained in May, 1980 CCP for import of 256 pieces of second hand chassis valued at US $ 481000 with condition of re-export within two years from the date of import. In 1980,115 pieces of Chassis were imported and cleared at Cochin Port and the adjudication thereof led to an appeal being filed in the Tribunal which has been disposed of as per Order No. 1524-A, dated 2-5-1996. 193 pieces of second hand chassis were imported and off-loaded at Bombay without declaration in the relevant Import General Manifests and without Bills of Entry being submitted to Customs authorities and without clearance on payment of duty and were used in the Port area by and on behalf of SLS. 9 pieces were sent back sometime prior to 1983. In August and September, 1980, RSTC submitted four Bills of Entry for clearance of 84 pieces of Chassis and also got additional entires made in Import General Manifest to the effect that the goods had been imported on four voyages of the vessel S.S. Boxer Captain Cook in August and September, 1980. Along with Bills of Entry was filed an invoice dated 18-12-1978 of SLS for 256 pieces of second hand chassis. The invoice showed the value as US $ 1000 FOB per piece and cost of refurbishing or overhaul as US $ 700 per piece and freight as US $ 300 for bundle of three pieces. The declaration was accepted and duty levied on that basis. Import documents had not been presented regarding balance pieces and no duty had been paid on the same.

3. Investigation by the Central Intelligence Unit of the Bombay Custom House into import of certain other goods, namely, Belloto Cranes by RSTC pointed to the suppression of import of 193 pieces of Chassis in Bombay. Investigation also disclosed misdeclaration of value of 84 pieces for which Bills of Entry had been filed and duty paid. After detailed and protracted investigation, the Assistant Collector C.I.U.issued notice dated 13-5-1985 under Section 28(1) of the Customs Act, 1962 (for short, the Act) to SLS and RSTC to show cause against demand of duty on the value of US $ 2535 per piece on 109 pieces and differential duty on 84 pieces. The Assistant Collector issued another notice, also dated 13-5-1985, under Section 124 of the Act, to show cause against confiscation of 193 pieces of Chassis (out of which only 26 pieces were then available in the Docks) under Clauses (d), (f), (g), (j), (i) and (m) of the Act, against confiscation of the 26 pieces and against penal action under Section 112 of the Act. RSTC as well as SLS filed replies and submissions and were given personal hearing.

Thereafter the impugned adjudication order was passed.

4. By the impugned order, the Collector of Customs recorded the following findings :- (a) 193 pieces of Chassis were imported without being manifested in the respective IGM during the period 4-1-1979 to 11-12-1979 and without C.C.P. and cleared in clandestine manner and of them 9 pieces were imported and re-exported twice. Total number of pieces imported may be taken as 184.

(b) The contention that these Chassis were not commercial cargo but the vessels' shipment has to be rejected as they were imported for use in the docks.

(c) The contention that RSTC or their principals, SLS did so in ignorance of the correct procedure and under the impression that no duty was payable or that no licence or permit was necessary or that no clearance was necessary has to be rejected.

(d) Since 115 pieces were imported at Cochin, only 141 pieces and not 193 pieces could be imported at Bombay. The excess import was unauthorised.

(e) The contention that no duty liability was incurred for 100 pieces (184-4) as no Bill of Entry was filed has to be rejected.

(h) The alternate claim for drawback under Section 74 of the Act has to be rejected.

(i) RSTC and their principals SLS are liable to pay the duty on these Chassis, (paragraph 19 of the order), (k) There is evidence of the deliberate involvement of SLS and RSTC in unauthorised imports of Chassis, non-inclusion of the same in respective IGM, the unauthorised use of the Chassis for container movements without payment of customs duty and without being cleared by the Customs and misdeclaration of value. The Chassis are liable for confiscation under Clauses (d), (f) and (m) of Section 111 of the Act and they are liable for penalty under Section 112 of the Act (para 20 of the order).

(1) The rate of duty and the exchange rate should be calculated at the rates prevailing on the date of filing of the Bills of Entry for 84 pieces of Chassis.

(m) Customs duty should be recovered from RSTC in respect of 184 pieces under Section 28 of the Act, deducting duty already paid.

5. Shri F. Sorabjee, learned Counsel for SLS submitted that SLC being ignorant of Indian Customs Law and Procedure had appointed RSTC as contractor to attend to every aspect of the job and are not liable for penalty. He also submitted that the correct value of Chassis is US $ 1800 per piece (1000 + 700 + 100) and hence differential duty cannot be demanded in regard to 84 Chassis. He further submitted that the Collector has not confirmed the demand of duty or differential duty against SLS but has directed recovery of duty amount only from RSTC. In the absence of any appeal filed by RSTC against SLS and in view of the appeal filed by RSTC against the Collector and without impleading SLS, duty liability cannot be fixed against SLS at this stage. However, learned Counsel assured the Tribunal, duty in regard to 100 pieces on the value of US $ 1800 CIF per piece will be paid by SLS as part of its liability under the agreement entered into with RSTC. Learned Counsel also pleaded for lenient view in the matter of quantum of penalty.

Regarding valuation, learned Counsel submitted that value of the Chassis imported at Cochin, could be adopted. It is also contested that show cause notice is barred by time.

6. Shri Joseph Vellapally, learned Senior Counsel for RSTC submitted that the Collector has found that the actual import of all the pieces was by SLS and the duty liability is with RSTC and SLC. In fact the Collector's direction for duty amount to be recovered from RSTC was erroneously issued under the proviso to Section 28 of the Customs Act.

This did not amount to exoneration of SLC from duty liability. He supported the submissions made on behalf of SLS regarding valuation. He further submitted that RSTC had nothing to do with any Chassis other than the 84 pieces for which they filed Bill of Entry on the request of SLS and under the terms of the agreement and hence RSTC cannot be saddled with liability for duty on 100 pieces. In any event, it is submitted, since there is no difficulty for recovery of duty or differential duty from SLS, the direction for recovery from RSTC was unjustified in terms of the proviso to Section 28 of the Act. RSTC was not guilty of any action contemplated by the proviso. RSTC acted, if at all, only as agents of SLS under the terms of the agreement and cannot have any liability higher than that of SLS. Learned Counsel also pointed out that the two have fallen out and there are litigations between them. Learned Counsel pleaded that there was no justification to levy penalty on RSTC, which, in any event, is excessive.

7. Shri K.K. Jha, SDR rebutted the aforesaid contentions and submitted that value adopted in the impugned order is correct, that the Collector held both the parties liable for duty and did not exonerate SLS and that both the parties were guilty of wilful suppression of facts and misrepresentation and hence the larger period of limitation was available and penalty leviable. He also submitted RSTC was involved in the import and use of all the pieces and also penalty. There was a concerted attempt to import and use Chassis without authorisation and to evade duty. There was a deliberate attempt to flout the Customs law of the country. The impugned order, according to him, is correct.

8. Mr. Ashok Desai, learned Counsel, gave a brief rejoinder on behalf of SLS that for the amount to be recovered from them, there must be levy or assessment holding them liable to pay the duty. They must be given the opportunity to contest the demand.

9. The following points arise for consideration, on the basis of the submissions made on behalf of the appellants and the department - (b) Whether duty cannot be imposed in respect of 100 pieces of Chassis? (c) Whether RSTC is liable for duty in respect of 100 pieces of Chassis (184-84)? (d) What relief, if any, RSTC is entitled to in respect of duty demand and whether the valuation adopted by the Collector is erroneous.

(g) Whether RSTC is liable for penalty? If so, whether the amount of penalty is excessive? 10. Though, in paragraph 19 of his order, the Collector had observed that RSTC and their principals SLS are liable to pay the duty on the Chassis in question, duty demand has been raised only on RSTC vide paragraph 21(2) of the order. There is no demand of duty from SLS. It was contended by the learned Counsel for RSTC that they are only agents of SLS and duty, if any, should have been demanded only from SLS and not from them. In this connection, he referred to the provisions of Sub-section (3) of Section 147 of Customs Act and cited the decision of the Tribunal in Indian Potash Limited v. Collector of Customs 1991 (55) E.L.T. 236 wherein it had been held that the appellants therein were not the actual importers but M.M.T.C., the canalising agency was the actual importer. We find that the present case is different on facts.

RSTC had filed the Bills of Entry for 84 Chassis in their own name and cleared the goods on payment of duty. They had not filed the Bills of Entry as agents of SLC. There is no indication in the documents that they were only acting as the agents of SLC. Accordingly, the protection applicable to an agent under Section 147(3) of Customs Act is not available to them. They had, as early as 1979, applied to the Chief Controller of Imports and Exports for Customs Clearance Permit for 256 Chassis. They had received the chassis and used them for handling the containers in the docks area. Such work was carried out by them as per the agreement with SLS and they were getting paid for it. The fact that they were doing so for SLS did not, however, absolve them of their responsibility before the Customs authorities. They did come forward in regard to the 84 Chassis but they should have done so for all the Chassis cleared and used by them for the purpose of handling the containers in Bombay Docks. We do not accept the plea taken by them that they were not aware of the requirement that the Chassis had to be cleared on payment of duty and that they were guided by SLS who in turn, had a bonafide belief that the Chassis which were for use and ultimate re-export were not liable to duty. This plea is not acceptable as SLS had imported 115 Chassis through Cochin Port and had them cleared on payment of duty which were being used there. Duty has correctly been demanded from RSTC under the impugned order. If the agreement between the two companies provides for SLS to compensate RSTC for the payment of any duties or charges it is for them to take up the matter with SLS for such appropriate compensation.

11. The next contention is whether duty cannot be imposed in respect of 100 chassis representing the difference between 184 numbers, admittedly imported at Bombay, and 84 which were retained and for which Bills of Entry were filed. Since it is the admitted position between the parties that 184 were imported, duty is payable and has to be paid. The claim of RSTC is that barring the retained numbers the others were re-exported. RSTC had pleaded before the Collector in the course of adjudication proceedings that they may be permitted to pay the difference between duty payable on the imported Chassis and the drawback of duty admissible on their re-export. Collector had not accepted the plea and held that payment of duty on the imported Chassis and grant of drawback on export are to be dealt with separately and that the liability to pay the duty cannot be compromised with any assurance of payment of drawback. As far as import of Chassis is concerned, the same stands admitted by RSTC. The documents available with Bombay Port Trust and documents regarding repair also have been referred to bear it out. Duty is due thereon and RSTC is liable to pay the same. They had removed and used them. It is, however, their contention that these 100 chassis had been re-exported. We are of the view that this plea that these had been re-exported needs to be considered. As drawback is dependent upon the fact of re-export and the period of use in India, the dates of import and re-export of the Chassis claimed to have been re-exported has to be determined by the adjudicating authority with reference to the available documents. When drawback is sanctioned that will reduce the duty burden to be incurred.

12. Another factor that would afford relief in respect of the duty burden on RSTC relates to valuation of the chassis. This will relate to the chassis cleared on payment of duty on declared value as well as the other chassis on which no duty has been paid. As regards the former category, these 84 chassis had been cleared assessing the duty on a price of $ 1000 + $ 700 refurbishing charges + $ 100 for freight per chassis. This was interfered by the Collector in his order by taking the price per chassis to be $ 2535. This has been arrived at on the basis of the price $ 2790.37 for a new chassis as per invoice dated 4-4-1986 and allowing 46% depreciation. The depreciation allowed has been referred to as the maximum. On the depreciated value, the refurbishing charge of $ 700 has been added as also Freight of $ 300.00 and insurance of 1 1 /8% adding to a sum of $ 2535.00. The Collector has referred to the letter dated 6-1-1982 to Mr. V.A. Vanna stating the value of 199 chassis as $ 30,00,00. This works out to a price of $ 1507.50 per chassis which the Collector has observed to be close to the depreciated value. The addition of refurbishing cost and the freight has increased the value. As regards the depreciation allowed by the Collector, we find that 46% has been allowed stating it to be the maximum. We find that the age of the xxx chassis and the 1966 invoice call for a higher deduction for depreciation. On that basis the declared unit price of $ 1000 should be held to be in order. There is, however, difference in the freight amount. Originally $ 100 was declared. Collector has taken the freight to be $ 300 per chassis.

During the arguments, it was submitted that the question of valuation of the chassis imported at Cochin has been considered by the Tribunal and a copy of order dated 2-5-1996 tendered. We find that the element of freight was also considered therein and the addition of 20-1/8% to the invoice value was held to be not justified. The invoice contained an entry showing the freight as $ 300 per bundle of three chassis. Mr.

Blackman of SLS, had mentioned in his statement before the Customs Officers that the freight from Europe to India was $ 500 to $ 1000 per bundle of 3 chassis. The Collector has applied $ 300 per chassis indicating that he has taken the freight as $ 900 per 3 bundle of 3 chassis, nearer the maximum of the rate indicated by Mr. Blackman. We are of the opinion that it will be more appropriate to take the freight amount as $ 200 per chassis. As the rate originally applied as $ 100 there was short assessment to the extent of $ 100 per chassis on account of the freight element.

13. In addition to the short levy pointed out above in respect of the 84 chassis, there is the question of non levy of duty on other chassis which were not declared at all and which were cleared without payment of duty. Though this liability has been admitted by both the appellants, plea of limitation has been taken. To consider this plea it is necessary to take note of the correspondence addressed by Mr.

Roberts the Bombay based officer of SLS to his colleague in Dubai.

In his report dated 7-8-1989. Mr. Roberts stated, inter alia, as follows : "We have applied for a Customs Clearance Permit (CCP) to legalised the import all 256 units. The Indian Government has indicated that the CCP will be granted for a period of two years from the date of entry. After that time they must be taken out of India. An extension is possible but chances of obtaining one is unpredictable. The chassis will not be allowed to leave port premises. The chassis are subject to import duty even though they are to be re-exported." (3) Delay paying any duty on the chassis now in Bombay in the hope that most or all of them can be re-exported before duty is paid.

This amount, $ 2840 x 141 = 400,040, would clearly cover the cost of one of the two pieces of stacking equipment needed." Mr. I.D. Blackman of SLS of SLS appeared before the Customs Officers and his statement was recorded on 26-9-1983 and 27-9-1983. His attention was invited to this letter dated 7-8-1979 of Mr. Roberts wherein he had referred to the import of chassis at Bombay and the non-payment of duty thereon and the saving of $ 400,040 if the chassis are re-exported before duty was paid. Commenting on this letter, Mr.

Blackman stated that it was his supposition that Mr. Roberts was under the mistaken impression that if the chassis were not physically present in India at the time CCP was issued then duty would only be due on those still remaining in India and not prior to issue of CCP. He then stated that it was most unfortunate that this mistaken impression of Mr. Roberts had created the problem. He stated that it is SLS's Corporate Policy never to avoid or evade their regulatory responsibilities in any country in which it operates. The deficiency having been made known to the management, they found themselves in a position of acute embarrassment and they would earnestly desire to correct and regularise the situation as soon as possible.

13. In the communication "Inter Office Correspondence" dated 20-2-1980 addressed by Mr. L.H. Roberts to Mr. Z.V. McMillan, Jr. Dubai on the subject "India Service Expansion/Chassis Options", it has been mentioned as follows :- "Although duty has not yet been paid on the 141 Bombay chassis, the estimated duty amount of $ 2850 per chassis should be considered already incurred, in spite of the two-year import limit because the amount of duty refundable after two years is negligible. There is an opportunity, however, for this amount, $ 401,850 to be reduced. Any chassis re-exported before the Customs clearance permit is finalized will escape duty. That provides the incentive for quick action." 14. The trend of the communications by Mr. Roberts of SLS, Bombay referred to above clearly indicates the company's awareness of the duty liability on the imported chassis. The plea that they were under a bona fide impression that there was no duty liability if the chassis were re-exported is untenable and had been rightly rejected by the Collector in his adjudication order. Mr. Roberts had clearly indicated in his letter that duty was payable even if the chassis are re-exported. He had indicated the need to save the amount by delaying the payment of duty till the time of re-export. These letters throw light on the approach adopted by SLS in regard to the chassis imported and cleared at Bombay. In this background the plea of time bar lacks conviction.

Section 28 of the Customs Act provides for the issue of notice within six months of the relevant date for recovering short levied or non-levied duty. The said period of six months is extendable to five years where the short levy or non-levy is due to collusion, wilful misstatement or suppression of facts by the importer or his agent or employee. In the facts of the case as discussed above, the longer time limit is attracted. The next question is what will be the starting point of limitation. Explanation (3) under the said Section provides that the relevant date from which the period of limitation starts will be the date from which the period of limitation starts will be the date on which the proper officer makes an order for the clearance of the goods where duty is not levied or the date of payment of duty where duty is short paid. In the present case, duty had been paid on 84 chassis for which Bills of Entry had been filed and assessment was done by the Customs Officer. Hence for the short levy alleged and confirmed in respect of these 84 chassis, the relevant date for reckoning time limit will be the date of payment of duty. Misdeclaration of value has been established. Hence the longer time limit has been correctly applied.

15. As regards the chassis not declared at all and not covered by any Bill of Entry, we take note of the submissions on behalf of SLS in the hearing as well as the statement of Mr. Blackman before the Customs Officer accepting the fact of non payment of duty. Where no Bill of Entry was filed and no assessment made and the goods had been removed without payment of duty, the starting point of limitation in terms of relevant date is not referred to in Section 28 of the Act. It does not mean that in such cases there is no provision for recovering the duty not paid. The Supreme Court had held in Government of India v. Citadel Fine Pharmaceuticals Ltd. 1989 (42) E.L.T. 515 that in the absence of any period of limitation it is settled that every authority is to exercise the power within a reasonable period. What would be reasonable period would depend upon the facts of each case. Whenever a question regarding the inordinate delay in issuance of notice of demand is raised, it would be open to the assessee to contend that it is bad on the ground of delay and it will be for the relevant officer to consider the question whether in the facts and circumstances of the case notice or demand for recovery was made within reasonable period. No hard and fast rules can be laid down in this regard as the determination of the question will depend upon the facts of each case. In this case, the fact of import of the chassis and their removal and use without declaration and payment of duty has been established. The non payment of duty was planned and deliberate. There was wilful misstatement and suppression of facts. Hence we hold that the plea of limitation fails.

The duty should be limited to differential duty after adding $ 100 per chassis towards freight and 1-1/8% towards insurance for the 84 chassis for which Bills of Entry had been filed and duty paid on declared value. Full duty is, however, leviable on 100 chassis which had been imported and removed without payment of duty on a value per chassis of $ 1000 + $ 700 refurbishing + $ 200 freight + 1-1/8% insurance.

Depending upon the period of use and the fact of their re-export being established by the appellants, the Collector should allow the drawback condoning the non filing of drawback Shipping Bills at the appropriate time and following the required procedure.

16. We now turn to the question of penalty. The involvement of SLS is because of the fact that the chassis were their property and they had engaged RSTC for handling the work in Bombay docks. The letters referred to earlier disclose their mens rea and their awareness that duty was leviable even if the intention was to ultimately re-export the chassis. Duty had not been paid on a minimum quantity of 100 chassis.

The intention not to pay the duty has come out in the letters. In the circumstances penalty of Rs. 6 lakhs imposed on SLS is justified and we confirm the same. As regards RSTC their plea is that they were advised by SLS in this regard and they believed that no duty was payable. There is nothing to indicate that they had such a bonafide belief. They handled the removal of the chassis and used them in the docks for handling the containers. They had filed the Bills of Entry for 84 chassis but deliberately refrained from doing so for the 100 chassis.

We find that a separate show cause notice was issued to the two appellants calling upon them to, inter alia, show cause why penal action should not be taken against them under Section 112 of the Customs Act, 1962. This was a detailed and lengthy show cause notice wherein the full details of the acts of omission and commission in regard to the import of the chassis and the short payment and non-payment of duty thereon had been stated. RSTC had filed the Bills of Entry for 84 chassis in 1980 and filed amendment applications in respect of four Import General Manifests to make it appear that these 84 chassis were imported only at that time. Corresponding entries were not there in the Port Trust copies of the manifests. They did not disclose the fact of importation of other chassis over and above the 84 numbers for which alone they filed Bills of Entry. They were aware of the import of these chassis also as they had cleared them and used them in the Bombay docks. Such action on their part had led to evasion of Customs duty. Their plea that they were only acting as agents of SLS and any liability in this regard is only to be met by the latter is not acceptable. They had handled the imports and obtained CCP and filed Bills of Entry. They did so for only part of the quantity and withheld action for the others. This was a deliberate action on their part which led to the proceedings. As far as SLS is concerned, the chassis were their property and they had entrusted the work relating to their import and use in Bombay to RSTC but they were fully involved in the matter.

The correspondence from Mr. Roberts to his colleague in Dubai regarding the import of the chassis has been referred to earlier. These were fully reflected in the show cause notice. The letter in question was also seen by Mr. Blackman and his statement recorded. The duty liability has been accepted by them. The letter refers to the import of the chassis and the idea of non-payment of duty thereon till the time of their re-export to escape the duty liability. Such non-payment of duty was deliberate. They were aware of duty liability even if the chassis were ultimately re-exported. Hence the plea of any bonafide belief of non-dutiability does not ring true.

17. It was contended on behalf of the appellants that the show cause notice as well as the adjudication order only referred to Section 112 of Customs Act, 1962 and not the sub-section thereof. We have considered the submission. The said Section reads as follows :- "SECTION 112. Penalty for improper importation of goods, etc. - Any person,- (a) who, in relation to any goods, does or omits to do any action which act or omission would render such goods liable to confiscation under Section 111, or abets the doing or omission of such an act, or (b) Who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under Section 111, shall be liable - (i) in the case of goods in respect of which any production is in force under this Act or any other law for the time being in force, to a penalty not exceeding five times the value of the goods or one thousand rupees, whichever is greater; (ii) in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding five times the duty sought to be evaded on such goods or one thousand rupees, whichever is the greater; (iii) in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under Section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty not exceeding five times the difference between the declared value and the value thereof or one thousand rupees, whichever is greater; (iv) in the case of goods falling both under clauses (i) and (ii), to a penalty not exceeding five time's the value of the goods or five times the difference between the declared value and the value thereof or one thousand rupees, whichever is the highest; (v) in the case of goods falling both under clauses (ii) and (iii), to a penalty not exceeding five times the duty sought to be evaded on such goods or five times the difference between the declared value and the value thereof or one thousand rupees, whichever is the highest." As discussed earlier both the show cause notice and the order have brought in detail the role of both the appellants. By their action Customs duty had been evaded in respect of the chassis. The chassis were thus liable for confiscation. The show cause notice proposed confiscation of the goods. Penal action against the appellants was attracted in view of their role in regard to the importation and removal of the goods which were liable to confiscation. The penalty amounts imposed on the two appellants is appropriate and commensurate with the quantum of duty involved even if some relief is held to be admissible by way of drawback.

18. The learned Counsel, cited judgments of the Supreme Court and the Madras High Court in cases reported in 1990 (47) E.L.T. 161 and 1983 (12) E.L.T. 322 respectively. These do not support the appellants' case as the intention not to pay the duty was there behind the non-payment of duty. As regards the plea that the notice as well as the order refer to only Section 112 of the Customs Act, without citing Sub-section (a) or (b) thereof, this question was considered in the latter judgment by the Madras High Court. The ingredients had not been specifically set out in the show cause notice in the said case. Such is not the position in the present case. The nature of offence had been spelt out in the show cause notice and the appellants were under no disability to make their defence submissions because of the show cause notice. We, therefore, reject the plea.

19. To sum up we pass the following orders partially allowing the appeal on the aspect of valuation and drawback :- (1) Differential duty is payable on 84 chassis, as indicated in paragraph 15 above.

(2) Duty on 100 Chassis to be paid on the value indicated in paragraph 15 above.

(3) Drawback to be paid on the Chassis, export of which is established by the appellants as indicated in paragraph 15 above.