Garg Steel Industries Vs. Collector of Customs - Court Judgment

Excerpt:
1. by this application, the appellant/applicant has prayed that the tribunal may take adequate steps and pass appropriate orders and save the applicant from unnecessary litigation and harassment. the application is opposed by shri m. ali, jdr.2. the appellant/applicant imported a consignment of high frequency induction furnaces from united kingdom. the invoice bears the date 15-11-1978. on 28-11-1979 the goods were bonded in the public bonded warehouse. on 10-4-1982, the appellant filed ex-bond bill of entry for clearance, visited the warehouse and found the goods damaged. on 15-4-1982, the appellant/applicant applied to the assistant collector for survey of the goods for the purpose of assessing the damage and the assistant collector on the very next day informed the appellant that the request is granted subject to the condition that no abatement of duty will be granted on damage or loss, if noticed during the survey.duty was paid on 22-4-1982. on 23-4-1982, the surveyor m/s. ravinder kumar and company surveyed the consignment under the supervision of customs staff. the report of the surveyor dated 23-4-1982 referred to the damage and the present value of the damaged equipment as rs. 3.5 lakhs. on the same day, the appraising officer made a note to the effect that the consignment was inspected and opened, the goods were rusted and some parts were badly damaged and were in deteriorated condition and that there was oil leaking from the transformer.immediately after payment of duty, the appellant filed an application before the assistant collector for refund of duty on the ground of damage while the goods were stored in the bonded warehouse. the application was dismissed on the ground that the goods did not qualify as "warehoused goods" and, therefore, the abatement was not allowable.he also relied on the condition put by the assistant collector while allowing survey to the effect that no abatement will be allowed. the collector (appeals) set aside this order on the ground that the assistant collector did not follow the procedure under section 22(2)(c)(b) (sic) of the customs act, 1962. after remand, the assistant collector again rejected the claim on the ground that the survey report did not indicate the value of the damaged goods, that the survey was not held under the assistant collector's supervision and the goods in question did not qualify as "warehoused goods" as no extension in the warehousing period was given and the appellant had not given valid reason to extend the period. this order was confirmed by the collector (appeals). thereupon the appellant filed appeal no. c/3603/87-a before the tribunal.3. the tribunal proceeded on the basis that the condition put by the assistant collector that the request seeking survey is allowed subject to the condition that no abatement will be granted, was illegal. the tribunal held against all the reasons given by the assistant collector in rejecting the request for refund. on the question whether the goods qualified as "warehoused goods", the tribunal held that when the goods were warehoused, the law prescribed period of three years for warehousing the goods, though it was cut down to one year subsequently and the goods qualified as "warehoused goods". in regard to the reason that the survey was not held under the supervision of the assistant collector, the tribunal referred to the communication dated 16-3-1982 which clearly indicated that survey will be conducted in the presence of the appraising officer and the fact that survey by the surveyor and the inspection by the appraising officer were conducted on the same day, namely, 23-4-1982. in regard to the third ground that the value of the damaged goods was not indicated in the survey report, the tribunal noted that the appraising officer who noted the damage did not value the goods, but the survey report clearly mentioned the value of the damaged goods as rs. 3.5 lakhs. thus all the reasons which weighed with the lower authorities to reject the refund claim were held against by the tribunal.4. the tribunal also noticed the decision of a three-member bench of the tribunal in the case of kasturi & sons ltd. - 1985 (22) e.l.t. 161 (tribunal) where it was held that the importer is not compelled to ask specifically for abatement and when he makes a report of damage to his goods to the customs, the obvious purpose of such a report is to claim duty assessment on the reduced value of the damaged goods and once such a report is made, section 22(1) of the act required that the damaged goods shall be chargeable to duty in accordance with the provisions of sub-section (2). the provision leaves no option to the customs except to assess the damaged goods on the basis of the reduced value and it is incumbent on the department to assess the value as per the provisions of sub-section (3) of section 22 and charge duty on such value. the tribunal also pointed out that if any survey is required to be conducted or examination report required to be recorded, it is the duty of the department to have these things done and the importer cannot be blamed for inaction on the part of the department. the tribunal also referred to the decision in the case of drillco metal carbides v.collector of customs, bombay 5. accordingly, the tribunal held that the department cannot escape its responsibility of fixing the value for the purpose of abatement and to grant abatement. in this view, the tribunal set aside the impugned orders and remanded the case to the jurisdictional assistant commissioner for passing an order regarding abatement in accordance with law and in the light of the observations contained in the order.he was given four months' time from the date of receipt of a copy of the order to pass a fresh order.6. dr. a.k. srivastava, assistant commissioner of customs, mumbai passed the fresh order dated 26-6-1997 without indicating when the copy of the remand order was received and whether the order was being passed within the period stipulated by the tribunal and without seeking extension of time. he examined the merits of the claim once again, referred to the findings of the tribunal, agreed that the bond period was three years as pointed out by the tribunal, held that survey was allowed subject to the condition that no abatement of duty will be granted and since this condition was agreed upon by the importer, deviation from the condition would amount to breach of the contract. he held that the value of the damaged equipment reported by the surveyor was rs. 3.5 lakhs did not bear any acceptance/endorsement of customs appraiser, assistant commissioner confirming the extent of damage. in these circumstances, he rejected the refund claim. we are told that the present applicant has filed an appeal before the collector (appeals) against this order and the same is pending.7. it is contended for the applicant that the proceedings and the order of the assistant commissioner after remand constituted a flagrant violation of the remand order of the tribunal, that in regard to the matters concluded by the findings of the tribunal the adjudicating authority had no right to conduct a fresh examination, nor could he urge fresh reasons for rejecting the refund claim and since there was gross and flagrant violation of the directions of the tribunal, the order has to be treated as illegal and nullity. shri m. ali, jdr pointed out that in regard to the condition originally put by the assistant collector to the effect that survey is allowed subject to the condition that no abatement of damage will be given, there was no specific finding by the tribunal. this does not appear to be correct since the tribunal did refer to this aspect and nevertheless proceeded to hold that it was the duty of the department to grant abatement, evidently proceeding on the basis that the condition put by the assistant collector originally was illegal and a nullity.8. according to rule 40 of the customs, excise and gold (control) appellate tribunal (procedure) rules, 1982 (for short, the rules), the tribunal shall exercise control over the departmental authorities in relation to all matters arising out of the exercise of the powers or of the discharge of the functions of the tribunal. rule 41 of the rules empowers the tribunal to make such orders or give such directions as may be necessary or expedient to give effect or in relation to its orders or to prevent abuse of its process or to secure the ends of justice. in the case of paras laminates pvt. ltd. - 1990 (49) e.l.t.322 (s.c.), the supreme court held as under :- "there is no doubt that the tribunal functions as a court within the limits of its jurisdiction. it has all the powers conferred expressly by the statute. furthermore, being a judicial body, it has all those incidental and ancillary powers which are necessary to make fully effective the express grant of statutory powers. certain powers are recognised as incidental and ancillary, not because they are inherent in the tribunal, nor because its jurisdiction is plenary, but because it is the legislative intent that the power which is expressly granted in the assigned field of jurisdiction is efficaciously and meaningful exercised. the powers of the tribunal are no doubt limited. its area of jurisdiction is clearly defined, but within the bounds of its jurisdiction, it has all the powers expressly and impliedly granted. the implied grant is of course, limited by the express grant and, therefore, it can only be such powers as are truly incidental and ancillary for doing all such acts or employing all such means as are reasonably necessary to make the grant effective." 9. it will be useful to refer to the following observations of the supreme court in the case of kamlakshi finance corporation ltd. - 1991 (55) e.l.t. 433 (s.c.):- "the order of the appellate collector is binding on the assistant collectors working within his jurisdiction and the order of the tribunal is binding upon the assistant collectors and the appellate collectors who function under the jurisdiction of the tribunal. the principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities.... if this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws." the supreme court was considering the contention of the state that certain strictures passed by the high court of bombay against two assistant collectors for flouting the orders of the collector (appeals) on classification based on the judgment of the tribunal. the above observations were made in that context. the court further indicated as follows :- "the observations of the high court should be kept in mind in future and utmost regard should be paid by the adjudicating authorities and the appellate authority to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities which are binding on them." see also the observations in the case of neo intex mills ltd. - 1996 (88) e.l.t. 343 (madras h.c.); caprihans india ltd. - 1991 (51) e.l.t.249 (bombay h.c.); garg furnace ltd. - 1993 (63) e.l.t. 116 (tribunal) and wazir steel industries - 1997 (21) rlt 654 (tribunal).9. there is no doubt that the assistant commissioner in passing the order dated 26-6-1997 has flouted the orders of the tribunal and deviated from the findings of the tribunal. in doing so, he has violated the norms of judicial discipline. his attempt was somehow to get over the orders of the tribunal. if it was felt that the remand order passed by the tribunal was not in accordance with law, the department could have sought appropriate remedy from the higher forum.instead of doing so, the adjudicating authority tried to short circuit the procedure by going against the findings and directions of the tribunal. this certainly cannot be countenanced. we find that in the case of wazir steel industries - 1997 (21) rlt 654 (tribunal) in a similar situation the tribunal set aside the de novo adjudication order by the adjudicating authority. we are satisfied that in the instant case a similar order should be passed.10. the question still remains as to the correct assessable value of the damaged goods, on which alone duty is required to be paid. under the provisions of section 22 of the act when the damage was reported, the department had the duty to determine the value of the damaged goods, but the duty was not discharged. when the survey report indicated that the value of the damaged goods was rs. 3.5 lakhs, the department had the duty to verify whether the value determined was correct, but this was not done. in the remand order the tribunal categorically stated that the department cannot escape its responsibility of fixing value of the damaged goods for the purpose of grant of abatement, but this was not done. in these circumstances, we do not think any purpose will be served by directing the statutory authority to determine the value and to grant abatement. hence, we set aside the order passed by dr. a.k. srivastava, assistant commissioner, mumbai dated 26-6-1997 and direct the jurisdictional adjudicating authority to accept the value as determined by the surveyor and pass consequential order of refund. the application is allowed.11. a copy of this order will be forwarded to the central board of excise and customs for such action as deemed fit.

Judgment:
1. By this application, the appellant/applicant has prayed that the Tribunal may take adequate steps and pass appropriate orders and save the applicant from unnecessary litigation and harassment. The application is opposed by Shri M. Ali, JDR.2. The appellant/applicant imported a consignment of high frequency induction furnaces from United Kingdom. The invoice bears the date 15-11-1978. On 28-11-1979 the goods were bonded in the public bonded warehouse. On 10-4-1982, the appellant filed ex-bond Bill of Entry for clearance, visited the warehouse and found the goods damaged. On 15-4-1982, the appellant/applicant applied to the Assistant Collector for survey of the goods for the purpose of assessing the damage and the Assistant Collector on the very next day informed the appellant that the request is granted subject to the condition that no abatement of duty will be granted on damage or loss, if noticed during the survey.

Duty was paid on 22-4-1982. On 23-4-1982, the surveyor M/s. Ravinder Kumar and Company surveyed the consignment under the supervision of Customs staff. The report of the surveyor dated 23-4-1982 referred to the damage and the present value of the damaged equipment as Rs. 3.5 lakhs. On the same day, the Appraising Officer made a note to the effect that the consignment was inspected and opened, the goods were rusted and some parts were badly damaged and were in deteriorated condition and that there was oil leaking from the transformer.

Immediately after payment of duty, the appellant filed an application before the Assistant Collector for refund of duty on the ground of damage while the goods were stored in the bonded warehouse. The application was dismissed on the ground that the goods did not qualify as "warehoused goods" and, therefore, the abatement was not allowable.

He also relied on the condition put by the Assistant Collector while allowing survey to the effect that no abatement will be allowed. The Collector (Appeals) set aside this order on the ground that the Assistant Collector did not follow the procedure under Section 22(2)(c)(b) (sic) of the Customs Act, 1962. After remand, the Assistant Collector again rejected the claim on the ground that the survey report did not indicate the value of the damaged goods, that the survey was not held under the Assistant Collector's supervision and the goods in question did not qualify as "warehoused goods" as no extension in the warehousing period was given and the appellant had not given valid reason to extend the period. This order was confirmed by the Collector (Appeals). Thereupon the appellant filed Appeal No. C/3603/87-A before the Tribunal.

3. The Tribunal proceeded on the basis that the condition put by the Assistant Collector that the request seeking survey is allowed subject to the condition that no abatement will be granted, was illegal. The Tribunal held against all the reasons given by the Assistant Collector in rejecting the request for refund. On the question whether the goods qualified as "warehoused goods", the Tribunal held that when the goods were warehoused, the law prescribed period of three years for warehousing the goods, though it was cut down to one year subsequently and the goods qualified as "warehoused goods". In regard to the reason that the survey was not held under the supervision of the Assistant Collector, the Tribunal referred to the communication dated 16-3-1982 which clearly indicated that survey will be conducted in the presence of the Appraising Officer and the fact that survey by the surveyor and the inspection by the Appraising Officer were conducted on the same day, namely, 23-4-1982. In regard to the third ground that the value of the damaged goods was not indicated in the survey report, the Tribunal noted that the Appraising Officer who noted the damage did not value the goods, but the survey report clearly mentioned the value of the damaged goods as Rs. 3.5 lakhs. Thus all the reasons which weighed with the lower authorities to reject the refund claim were held against by the Tribunal.

4. The Tribunal also noticed the decision of a three-Member Bench of the Tribunal in the case of Kasturi & Sons Ltd. - 1985 (22) E.L.T. 161 (Tribunal) where it was held that the importer is not compelled to ask specifically for abatement and when he makes a report of damage to his goods to the Customs, the obvious purpose of such a report is to claim duty assessment on the reduced value of the damaged goods and once such a report is made, Section 22(1) of the Act required that the damaged goods shall be chargeable to duty in accordance with the provisions of Sub-section (2). The provision leaves no option to the Customs except to assess the damaged goods on the basis of the reduced value and it is incumbent on the Department to assess the value as per the provisions of Sub-section (3) of Section 22 and charge duty on such value. The Tribunal also pointed out that if any survey is required to be conducted or examination report required to be recorded, it is the duty of the Department to have these things done and the importer cannot be blamed for inaction on the part of the Department. The Tribunal also referred to the decision in the case of Drillco Metal Carbides v.Collector of Customs, Bombay 5. Accordingly, the Tribunal held that the Department cannot escape its responsibility of fixing the value for the purpose of abatement and to grant abatement. In this view, the Tribunal set aside the impugned orders and remanded the case to the jurisdictional Assistant Commissioner for passing an order regarding abatement in accordance with law and in the light of the observations contained in the order.

He was given four months' time from the date of receipt of a copy of the order to pass a fresh order.

6. Dr. A.K. Srivastava, Assistant Commissioner of Customs, Mumbai passed the fresh order dated 26-6-1997 without indicating when the copy of the remand order was received and whether the order was being passed within the period stipulated by the Tribunal and without seeking extension of time. He examined the merits of the claim once again, referred to the findings of the Tribunal, agreed that the bond period was three years as pointed out by the Tribunal, held that survey was allowed subject to the condition that no abatement of duty will be granted and since this condition was agreed upon by the importer, deviation from the condition would amount to breach of the contract. He held that the value of the damaged equipment reported by the surveyor was Rs. 3.5 lakhs did not bear any acceptance/endorsement of Customs Appraiser, Assistant Commissioner confirming the extent of damage. In these circumstances, he rejected the refund claim. We are told that the present applicant has filed an appeal before the Collector (Appeals) against this order and the same is pending.

7. It is contended for the applicant that the proceedings and the order of the Assistant Commissioner after remand constituted a flagrant violation of the remand order of the Tribunal, that in regard to the matters concluded by the findings of the Tribunal the adjudicating authority had no right to conduct a fresh examination, nor could he urge fresh reasons for rejecting the refund claim and since there was gross and flagrant violation of the directions of the Tribunal, the order has to be treated as illegal and nullity. Shri M. Ali, JDR pointed out that in regard to the condition originally put by the Assistant Collector to the effect that survey is allowed subject to the condition that no abatement of damage will be given, there was no specific finding by the Tribunal. This does not appear to be correct since the Tribunal did refer to this aspect and nevertheless proceeded to hold that it was the duty of the Department to grant abatement, evidently proceeding on the basis that the condition put by the Assistant Collector originally was illegal and a nullity.

8. According to Rule 40 of the Customs, Excise and Gold (Control) Appellate Tribunal (Procedure) Rules, 1982 (for short, the Rules), the Tribunal shall exercise control over the departmental authorities in relation to all matters arising out of the exercise of the powers or of the discharge of the functions of the Tribunal. Rule 41 of the Rules empowers the Tribunal to make such orders or give such directions as may be necessary or expedient to give effect or in relation to its orders or to prevent abuse of its process or to secure the ends of justice. In the case of Paras Laminates Pvt. Ltd. - 1990 (49) E.L.T.322 (S.C.), the Supreme Court held as under :- "There is no doubt that the Tribunal functions as a Court within the limits of its jurisdiction. It has all the powers conferred expressly by the statute. Furthermore, being a judicial body, it has all those incidental and ancillary powers which are necessary to make fully effective the express grant of statutory powers. Certain powers are recognised as incidental and ancillary, not because they are inherent in the Tribunal, nor because its jurisdiction is plenary, but because it is the legislative intent that the power which is expressly granted in the assigned field of jurisdiction is efficaciously and meaningful exercised. The powers of the Tribunal are no doubt limited. Its area of jurisdiction is clearly defined, but within the bounds of its jurisdiction, it has all the powers expressly and impliedly granted. The implied grant is of course, limited by the express grant and, therefore, it can only be such powers as are truly incidental and ancillary for doing all such acts or employing all such means as are reasonably necessary to make the grant effective." 9. It will be useful to refer to the following observations of the Supreme Court in the case of Kamlakshi Finance Corporation Ltd. - 1991 (55) E.L.T. 433 (S.C.):- "The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities.... If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws." The Supreme Court was considering the contention of the State that certain strictures passed by the High Court of Bombay against two Assistant Collectors for flouting the orders of the Collector (Appeals) on classification based on the judgment of the Tribunal. The above observations were made in that context. The Court further indicated as follows :- "The observations of the High Court should be kept in mind in future and utmost regard should be paid by the adjudicating authorities and the appellate authority to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities which are binding on them." See also the observations in the case of Neo Intex Mills Ltd. - 1996 (88) E.L.T. 343 (Madras H.C.); Caprihans India Ltd. - 1991 (51) E.L.T.249 (Bombay H.C.); Garg Furnace Ltd. - 1993 (63) E.L.T. 116 (Tribunal) and Wazir Steel Industries - 1997 (21) RLT 654 (Tribunal).

9. There is no doubt that the Assistant Commissioner in passing the order dated 26-6-1997 has flouted the orders of the Tribunal and deviated from the findings of the Tribunal. In doing so, he has violated the norms of judicial discipline. His attempt was somehow to get over the orders of the Tribunal. If it was felt that the remand order passed by the Tribunal was not in accordance with law, the Department could have sought appropriate remedy from the higher forum.

Instead of doing so, the adjudicating authority tried to short circuit the procedure by going against the findings and directions of the Tribunal. This certainly cannot be countenanced. We find that in the case of Wazir Steel Industries - 1997 (21) RLT 654 (Tribunal) in a similar situation the Tribunal set aside the de novo adjudication order by the adjudicating authority. We are satisfied that in the instant case a similar order should be passed.

10. The question still remains as to the correct assessable value of the damaged goods, on which alone duty is required to be paid. Under the provisions of Section 22 of the Act when the damage was reported, the Department had the duty to determine the value of the damaged goods, but the duty was not discharged. When the survey report indicated that the value of the damaged goods was Rs. 3.5 lakhs, the Department had the duty to verify whether the value determined was correct, but this was not done. In the remand order the Tribunal categorically stated that the Department cannot escape its responsibility of fixing value of the damaged goods for the purpose of grant of abatement, but this was not done. In these circumstances, we do not think any purpose will be served by directing the statutory authority to determine the value and to grant abatement. Hence, we set aside the order passed by Dr. A.K. Srivastava, Assistant Commissioner, Mumbai dated 26-6-1997 and direct the jurisdictional adjudicating authority to accept the value as determined by the surveyor and pass consequential order of refund. The application is allowed.

11. A copy of this order will be forwarded to the Central Board of Excise and Customs for such action as deemed fit.