M.J. Exports Ltd. Vs. Cc - Court Judgment

SooperKanoon Citationsooperkanoon.com/15884
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided OnMay-20-1999
JudgeS Peeran, K D Shiben, S T Gowri
Reported in(1999)(85)LC683Tri(Mum.)bai
AppellantM.J. Exports Ltd.
RespondentCc
Excerpt:
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1. this appeal is directed against the order-in-original dt. 28.1.1994 passed by the collector of customs, bombay, in order no. cac/no. 25/94 cac. by this order, the learned collector held that the 'haemodialysers' (hereinafter referred to as goods) imported under bill of entry no. 6078 dt. 9.10.1988 are not entitled to the benefit of notification no. 208/81-cus. dt. 22.9.1981. he held the goods to be prohibited goods within the meaning of section 2(33) and their export out of india, as not permissible. since the goods had been exported out of india and not used for home consumption, they had become liable for confiscation under section 111(o) of the customs act, 1962. he held that by their actions, the goods are liable for confiscation and also they are liable for penalty under section.....
Judgment:
1. This appeal is directed against the order-in-original dt. 28.1.1994 passed by the Collector of Customs, Bombay, in order No. CAC/No. 25/94 CAC. By this order, the Learned Collector held that the 'Haemodialysers' (hereinafter referred to as goods) imported under Bill of Entry No. 6078 dt. 9.10.1988 are not entitled to the benefit of Notification No. 208/81-Cus. dt. 22.9.1981. He held the goods to be prohibited goods within the meaning of Section 2(33) and their export out of India, as not permissible. Since the goods had been exported out of India and not used for home consumption, they had become liable for confiscation under Section 111(o) of the Customs Act, 1962. He held that by their actions, the goods are liable for confiscation and also they are liable for penalty under Section 112(a) of the Customs Act, 1962. The Learned Collector passed the final orders in these terms.

(a) Benefit of exemption Notification No. 208/81-Cus. dt. 22.9.1981 shall be denied. The goods shall be assesseed on merits and the duty of customs amounting to Rs. 2,94,42,867/- shall be recovered from them under Section 28(1) of the Customs Act, 1962.

(b) The Haemodialysers are liable for confiscation under Section 111(o) of the Customs Act, 1962. But the goods have already been exported and are not available for confiscation.

(c) Imposed a penalty of Rs. 1,00,00,000/- (Rupees one Crore only) under Section 112(a) of the Customs Act, 1962.

2. Before the commencement of the proceedings in the present impugned order which was initiated by issue of the order dt. 6.4.1993, the department had proceeded against the importer in respect of the same import against the same Bill of Entry by issue of show cause notice dt.

25.3.1989 issued under Section 124 of the Customs Act, 1962 by the Deputy Collector of Customs, Kandla. The allegations in that show cause notice were that the appellants had presented for export 53 sets of Haemodialysis Machines with spare parts and accessories to USSR vide S/Bills No. F-7832 to 7839 and F-7843 to 7845 all dt. 2.12.1988 and along with the S/Bills produced documents like Contract, GR Forms, Invoices etc. Total FOB value of the goods being Rs. 3,31,21,600/-. The goods were examined and on such examination it was found that the goods were packed in wooden crates and inside the crates the machines were in polythene packing bearing import marks and nos., make and manufacture, so much so that the spare parts are also in their original packing without further processing/ manufacturing and presented for export in the same condition in which these were imported except that few wooden stands were found in containers for keeping these machines on them.

These sets were found to be of West German origin. On the basis of the examination, the concerned Appraising Officer had definite doubts regarding the validity of the export to USSR. Accordingly, he called for the original import documents. The party presented the import documents and submitted a letter dt. 25.12.1988 giving the details of the consignment. From the details of the consignment, the department gathered that the appellants had cleared a consignment declared as 56 units of 'Haemafiltration Instrument/Haemodialysers (Life Saving equipments) and Accessories and Spares for above and Acetate Concentrate and Others' of West German make contained in 6 containers vide Home Consumption B/E. No. 6078/19.10.1988 imported "MV Kathrin SIF (Marine Trans) at Bombay Port. The value of the goods declared in B/E is as follows: (1) Hemafiltration Instrument/ Rs. 1,17,97,075/- Hemodialysers (2) Accessories and Spares Rs. 1,09,49,048/- (3) Acetate Concentrate & Rs. 40,746/- Others 3. The clearance was effected under OGL 15/88, Appendix 6, Item No. 36, List 2 which provides for importation under OGL by any person for 'Stock and Sale'. Further, the consignments of Hemafiltration Instrument/Haemodialysers were cleared free of duty in terms of Notification No. 208/81. Spares for the above consignments were also cleared free of duty under Notification No. 208/81. The Acetate Concentrate and others were cleared on payment of duty at 30% Basic duty + 45% Auxiliary duty and C.V.D. 15%. After this consignment was cleared for home consumption, the party stated vide their letter dt.

25.12.1988 that they took these goods to their unit at Ankleshwar for moisture proof packing, palletisation, fabrication of necessary/stand etc. Thereafter, the goods were brought to Kandla Port stuffed in 19 containers to be exported to USSR per Vessel V.V. A/Ognivtsev vide 13 S/bills at dt. 2.12.1988. Therefore, the department alleged that the party had attempted to re-export the consignments without any processing/manufacturing or assembling. Though they cleared the goods for home consumption under Home Consumption B/E after availing themselves of duty exemption benefits and the provisions of 'Stock and Sale' under OGL without declaring at the time of clearance that the imported goods are meant for re-export, they presented the same for re-export. Such type of re-export is not covered under the provisions of Saving Clause 15(g) of the Export Control Order, 1988. Except for the imported ship stores, no re-export of imported goods are covered under the provisions of Saving Clause 11(d) of the Import Trade Control Order, 1955 meaning thereby that such re-export would require the specific approval of the Import Trade Control Authorities. The party, however, insisted for re-export of the goods and the Trade Commissioner of USSR also sent one telex stating that these goods were required for the Armenia earthquake victims and accordingly the re-export should be allowed. Keeping in view the urgency of the situation and on account of humanitarian grounds, the re-export of the consignment was allowed on execution of a Bond covering the value of the goods and cash deposit of Rs. 6,00,000/- and Bank Guarantee of Rs. 10,00,000/- safeguarding the Revenue interests.

4 Thereafter, a reference was made to the RBI Ahmedabad and to the C.C.I & E. New Delhi, to ascertain the legality of the re-export. A reply received from the Jt. C.C.I & E, New Delhi confirmed the stand taken by this Customs House that any re-export of goods imported under OGL/AU Licence/REP Licence/Addl. Licence are entirely meant for use within India and therefore, cannot be allowed for re-export. If any import is made for 'Stock and Sale', it means that it is for home consumption and not for export purposes. Noting all these details the department in the show cause notice alleged that the importer had contravened the provisions of Saving Clause 15(g) of the Export Trade Control Order, 1988 and Saving Clause 11(d) of the Import Trade Control Order, 1955 and the conditions of OGL 15/88 of AM 1988-91 read with Import & Export Control Act, 1947 and Section 11 of the Customs Act, 1962 and accordingly these goods are liable to confiscation under Section 113(d) of the Customs Act, 1962. Since the goods were cleared for home consumption under NIL rate of duty under Custom Notification No. 208/81 but later on re-exported, the customs duty was payable on these goods at the appropriate rate. By suppressing the fact of re-export of the imported goods, the party was wrongly availed themselves of the benefit of Notification No. 208/81. with mala fide intention for the sake of getting windfall benefit. Therefore, the importers were called upon to show cause as to why the short charged customs duty of Rs. 2,94,42,867/- (Basic at 60% + Aux. duty at 40% + CVD at 15%) should not be recovered from them on these 53 sets of Haemodialysis Machines with spare which were cleared by them at nil rate of duty by wrongfully claiming the benefit of Notification No.208/81.

5. The appellants filed a detailed reply. After hearing the appellants the Collector of Customs, Kandla by his order dt. 22.10.1990 in order-in-original No. KCH/COLLR/10/90 held that the goods under export were liable to confiscation under Section 113(d) of the Customs Act.

Since the goods had already been exported they were not available for confiscation. By rendering the goods liable to confiscation, the importer had rendered themselves liable to a penalty under Section 114 of the Customs Act. Therefore, considering the fact that the goods had already been exported, he proceeded to taken action in terms of the bond, Bank Guarantee and cash deposit furnished by the exporter. He imposed a penalty of Rs. 50 lakhs. In the said impugned order, as regards the duty, the Collector agreed with the importer that the Notification No. 208/81 exempted the goods unconditionally from the import duty. Therefore, he held that the goods were not liable to import duty. Therefore, he dropped the demand for duty. He also held that the importer imported the goods in question at the CIF value of Rs. 2.28 crores and exported them at FOB value of Rs. 3.31 crores.

While the import price was paid in hard currency, the export realisation was in Indian Rupees. Thus they had made a profit of more than Rs. one crores in this transaction although it caused considerable loss of hard currency to the country. He also held that the transaction was more motivated by the huge profit rather than the desire to held the Armenian earthquake victims which was the ostensible reason given by the exporters. On the other aspect of the allegation pertaining to the ITC value, the Collector upheld the department's allegation and therefore, proceeded to impose the penalty of Rs. 50 lakhs.

6. The appellants agitated the matter before the Tribunal. Before the Tribunal, the matter was heard in great length and thereafter the Tribunal rejected the importer's plea and upheld the imposition of penalty of Rs. 50 lakhs and the said judgment has since been . While the importer had appealed before the Tribunal, the Revenue did not file any appeal with regard to dropping of demands for duty. After the matter was decided by the Tribunal in favour of the Revenue, the appellants took the matter to Hon'ble Supreme Court of India. The Bench of three judges heard the matter in great length and a landmark judgment was ordered in the facts and circumstances of the case as . The Supreme Court after upholding the charges of the Revenue with regard to the violation of ITC value inasmuch as that the goods imported had not been utilised for home consumption but had diverted to Russia and hence upheld the imposition of fin of Rs. 50 lakhs. While determining the case, the Hon'ble Supreme Court in para 25 incidentally also noted that the Hon'ble Supreme Court was not concerned with the questions of whether the attempt of the assessee to export the goods (which has, in the event, been successful) would amount to an infringement of the conditions permitting the import so as to render either the import itself vide Section 111(o) of the Act, or the exemption from the import duty or both illegal and invalid and, if so, the consequences thereof.

This was said, when the Counsel for the Revenue emphasised on the circumstances that the importer had obtained the import of the goods free of duty relying on the Notification granting exemption from customs duty. The Hon'ble Supreme Court also stated that it is obvious that it could not have been the intention of the legislature to grant exemption from customs duty in respect of vital goods of the nature in question in order that an importer may make profit by selling them abroad. The Hon'ble Supreme Court has gone into great details on other aspects of the matter and upheld the order of the Tribunal. This judgment of the Supreme Court was rendered on 14.5.1992. When this was the position on facts, the Revenue suddenly woke up and realised that they ought to have proceeded for recovery of duty and hence issued a belated show cause notice almost after one year of the Supreme Court's judgment on 6.4.1993, which is subject matter of the present proceedings. In the show cause notice dt. 6.4.1993 issued again under Section 124 of the Customs Act, 1962, the Collector of Customs, Bombay has narrated the facts but unfortunately without bringing in the facts of the previous proceedings, which culminated in the judgments of the Supreme Court. After recording the statement of the party in the matter, which had all been recorded at the initial stage, the show cause notice demanded from the importers the duty of Rs. 2,94,42,867/- in terms of proviso to Section 28(1) of the Customs Act, 1962 and also demanded as to why the goods concerned should not be held liable to confiscation under Section 111(o) of the Customs Act, 1962 and why a penalty should not be imposed under Section 112(a) of the Customs Act, 1962. The Managing Directors and the Executives of the importers were also called upon to show cause as to why penal action should not be initiated against them.

7. The appellants by their reply dt. Nov. 19, 1993 replied to the show cause notice and spelt out in their reply various extracts of the judgments in support of their various contentions and ultimately stated that the show cause notice is based on serious misconception of law and prayed for withdrawal and dropping of the proceedings initiated against them.

8. The Learned Collector adjudicated the issue and passed the impugned order. The Learned Collector after dealing with the matter on the liability to pay the duty under Notification somehow has dealt with time bar aspect, without keeping in view the previous proceedings and dropping of duty demand by the Collector, Kandla. He has only dealt with the matter that the Collector of Customs demanding duty again is not barred by res judicata. The Learned Collector has proceeded very strongly against the importers. He has held that the demands are not time barred in view of the fact that the statements recorded by the Customs Officials make it clear that the exports were made by clearing the imported goods to USSR and had at no stage, the importers had produced any evidence of selling these goods to hospital etc. in India.

Therefore, he has held that wilful suppression of facts and misstatement invoking proviso to Section 28(1) of the Customs Act, 1962 to the extent of 5 years is legal, valid and justified.

9. We have heard the Learned Advocate, Shri R.K. Habbu for the appellants and the Learned DR, Shri S.N. Ojha for the Revenue.

10. We have considered the various pleas raised by the Learned Advocate in this matter both on merits as well as on time bar. The said contentions would be dealt in the finding portion of our order, so as to avoid the repetition.

11. The first important aspect of the matter is as to whether the Revenue can initiate the proceedings by issue of fresh show cause notice dt. 6.4.1993, months after the earlier proceedings having culminated by the judgment of the Supreme Court rendered on 14.5.1992? As can be seen from the judgment of the Hon'ble Supreme Court, the Revenue had raised the arguments before the Supreme Court that the importer had obtained import of the goods free of duty by relying on the Notification granting exemption from the customs duty. It was also pleaded that it could not have been the intention of the legislature to grant ex -emption from customs duty in respect of vital goods of the nature in question in order that an importer may make profit by selling them abroad. The Hon'ble Supreme Court after noting such arguments of the Revenue proceeded to say that the intention is therefore, relevant for the issue before the court to the limited extent that it lends support to the construction of List 2 of Appendix 6 in the manner the court interpreted it. Further the Hon'ble Supreme Court proceeded to say that they were not concerned with the question whether the attempt of the assessee to export the goods (which is, in the event, been successful) would amount to infringement of the conditions permitting the import so as to render either import itself vide Section 111(o) of the Act, or the exemption from import duty or both illegal and invalid and, if so, the consequences thereof. Therefore, it is seen that the Revenue did not make any attempt to initiate proceedings forthwith.

Even if the Revenue had to initiate within 6 months of the date of the judgment, even then the matter would have been clearly time barred. It can be very clearly noticed that in the previous proceedings, the Collector dropped the demands for duty both on the ground that he did not have jurisdiction and also that the duty is not demandable as the goods were exempted under the Notification. The Revenue accepted the Collector's order to this extent and did not file any appeal before the Tribunal and therefore, the Revenue's contention before the Supreme Court were negatived. In the facts and circumstances, is the Collector of Customs, Bombay justified in initiating the fresh proceedings by issue of show cause notice dt. 6.4.1993 by invoking proviso to Section 28(1) of the Act? The proviso to Section 28(1) provides for initiating proceedings for recovery of duty nor levied or having been short levied or had been erroneously refunded by reason of collusion or any misstatement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, and that the proper officer namely, the Collector of Customs can initiate the proceedings within 5 years, from the relevant date. The relevant has also been defined in Sub-section 3 of Section 28 means: (a) in a case where duty is not levied, the date on which the proper officer makes an order for the clearance of the goods; (b) in a case where duty is provisionally assessed under Section 18, the date of adjustment of duty after the final assessment thereof; (c) in a case where duty has been erroneously refunded, the date of refund; 12. In the present case, the show cause notice dt. 25.3.1989 clearly demanded duty and also indicated as to why the goods should not be confiscated under Section 111(o) of the Customs Act, and penalty should not be imposed under Section 112 of the Act. The show cause notice clearly indicated the violation under Notification No. 208/81. As the demands had been dropped by the Collector and the matter had culminated by the judgment of the Hon'ble Supreme Court vide order dt. 14.5.1992, therefore, commencing fresh proceedigns by issue of show cause notice dt. 6.4.1993 does not arise and such proceedings are totally unsustainable in the eye of the law. As observed by us the remedy available for the Revenue was to file an appeal against the earlier Collector's order or a Cross Appeal in the importer's appeal before the Tribunal. The Revenue instead had initiated fresh proceedings through the Jurisdictional Collector. Such proceedings are clearly barred by time as the Revenue had all the information to initiate proceedings for recovery of duty. However, this question was not dealt by the Learned Collector in his order but merely held that doctrine of res judicata would not apply. The Collector Kandla had given a findings that duty cannot be recovered as the goods were exempted under Notification.

Therefore, the contention of the Learned DR that earlier proceedings had no relevance does not stand to reason. The Collector's finding that there is no res judicata is totally erroneous and unsustainable. The Revenue in the show cause notice invoked larger period and narrated the facts and circumstances of the case for justifying such invokation but being oblivious of the fact that the department had initiated the proceedings for the recovery of duty and had dropped the same.

Therefore, from the facts and circumstances of the case, it appears that on a different opinion being taken by Collector, Bombay in the matter, other than that expressed by the Revenue, Tribunal and the Hon'ble Supreme Court in the matter. Therefore, the basis of the proceedings is unsustainable and requires to be quashed.

13. In view of the findings given on the time bar and the unsustainability of the proceedings, the question of entering into the merits would not arise in the present case. However, the counsel had also argued on this aspect and had relied on several rulings and had also pointed out that the customs House had been granting benefit of the Notification, similar circumstances, when goods were exported, without any manufacturing process carried out and the goods having been utilised for home consumption. We notice that on this aspect of the matter, the Hon'ble Supreme Court has very clearly held in para 22 that although there is no express prohibition, the re-export as such of items of goods specified in List 2 and imported into India is prohibited by necessary implication by the language of, and the scheme underlying, the grant of OGL in regard to them. The court has further held that it is difficult to agree that the import-export policy envisages the re-export of goods belonging to this category. The opinion of the CCIE is also to the same effect. After analysis the various aspects the Hon'ble Supreme Court held that the goods in question were prohibited goods within the meaning of Section 2(33) and that their confiscation under Section 113(d) and the penalty under Section 114 were fully justified. The Hon'ble Supreme Court has held that it is obvious that it could not have been the intention of the legislature to grant exemption from customs duty in respect of vital goods of the nature in question in order that an importer may make profit by selling them abroad.

14. The Learned DR submitted that there is mis-declaration and that the appellants were required to have declared in the Bill of Entry, the purpose for which the imported goods are required, that they would be used in India only or would be sold in India or would be exported outside India without any process of manufacture being carried out. On this point the Hon'ble Supreme Court in para 16 of the judgment has clearly held that the form of the Bill of Entry prescribed under the Act does not require any declaration from the importer as to the purpose for which the imported goods are required or that they will be used or sold only in India. The expression "home consumption" has also, in the context, no clear or definite meaning and raised a lot of conundrums if literally interpreted to mean that imported goods should always be consumed in India. The court raised question that is it home consumption if the importer does not use the goods himself but sells them? At what point of time should the importer make up his mind whether he proposes to sell the imported goods in India or wishes to export them outside. The Court again raised the question that is the condition infringed if a purchaser of goods from the importer sells it to buyer in a foreign country? Will it be permissible for the importer to use the imported goods in the manufacture of other goods which he proposes to export? The Hon'ble Supreme Court answered that all these uncertainties in the connotation of the expression 'home consumption' preclude one from giving an interpretation to this expression that the imported goods cannot be at all exported and incline one to hold that, in the context, it is only used in contrast to the expression for warehousing'. The Hon'ble Supreme Court in para 17 precisely answered that the charges raised in the present show cause notice about the importer making capital of the export and did not accept the Revenue's interpretation and also held that it is possible to think of cases where, though economically unremunerative, the re-exports can be justified on considerations of international amity and goodwill such as for example, where the goods are exported to a country which is in dire need of help and assistance. The Hon'ble Supreme Court also held that the principle is also non-acceptable on the ground of vagueness as to the extent of its application to exports made after an interval or after changing several hands inside the country by way of sale.

Therefore, the Hon'ble Supreme Court did not accept the Revenue's contention on this aspect. The findings given in para 17 is relevant for our purposes and the same is noted herein.

17. The above general consideration apart, there are other indications in the statute which show that the Act does not prohibit the export of imported goods. The Act provides that goods which are cleared from the customs area for warehousing can be cleared from the warehouse for home consumption (S. 68) or exportation (S. 69).

At first blush, this may seem to support the Revenue's interpretation that clearance for exportation and clearance for home consumption are two different things. It is indeed suggested by State counsel that, if an importer intends to export the imported goods, he should clear them for warehousing and then proceed in terms of Section 69. But a little thought would show this interpretation cannot be correct. In the first place, where an importer, even at the time of the import purchase has decided to sell the goods in another country (as in the present case), he may, as pointed out earlier, easily ask the goods to be transitted or transhipped to the country of sale and thus avoid any necessity for their being at all cleared in India. But where, for one reason or other, he wants to import the goods into India and then sell them to the foreign country or where the importer decides on an export sale only after he has arranged for the import of the goods into India, the Act prescribes no form of a Bill of Entry under which he can clear such goods intended for re-export. It would not be correct to insist that he must clear them for warehousing and then export them by clearing from the warehouse. Whether to deposit the goods in warehouse or not is an option given to the importer. If he is able to pay the import duties and has his own place to stock the goods, he is entitled to take them away. But, where he has either some difficulty in payment of the duties or where he has no ready place to stock the goods before use or sale, he cannot clear the goods from the customs area. The warehouse is only a place which the importer, on payment of prescribed charges, is permitted to utilise for keeping the goods where he is not able to take the goods straightaway outside the customs area. There is nothing in the provisions of the Act to compel an importer even before or when importing the goods, to make up his mind whether he is going to use or sell them in India or whether he proposes to re-export them.

Again, there may be cases where he has imported the goods for use or sale in India but subsequently receives an attractive offer which necessitates an export. It would make export trade difficult to say that he cannot accept the export offer as the goods, when imported, had been cleared for home consumption. Section 69, therefore, should be only read as a provision setting out the procedure for export of warehoused goods and not as a provision which makes warehousing an imperative pre-condition for exporting the imported goods. The second reason for not reading Sections 68 and 69 as supporting the Revenue's interpretation is even more weighty. That interpretation would mean that imported goods can be re-exported after being warehoused for sometime (even a day or a few hours) but that they cannot be exported otherwise. Such an interpretation has no basis in logic or sense and makes mincemeat of the broader principle contended for by the Revenue that imports are intended for use in the country and not for export. Incidentally, we may observe that even this principle contended for by Revenue may itself be of doubtful validity as it is based on an erroneous assumption that a re-export of imported goods will always be detrimental to the country. It is true that, in the present case, the appellant has been criticised for having utilised valuable hard currency for the purchases and reselling the goods only for rupee consideration. But, conceivably, there may be cases where an importer is able to import goods from soft-currency area and sell them in a hard-currency area earning foreign exchange for the country. It is also possible to think of cases where, though economically unremunerative, the re-exports can be justified on considerations of international amity and goodwill such as for example, where the goods are exported to a country which is in a dire need of help and assistance. The principle is also non-acceptable on the ground of vagueness as to the extent of its application to exports made after an interval or after changing several hands inside the country by way of sale. We are, therefore, unable to read Sections 68 and 69 as supporting the Revenue's contention.

15. The question raised by the Revenue in the present case, are also answered by the Hon'ble Supreme Court as can be clearly noted. It follows that the charges raised with regard to misdeclaration on the basis of not furnishing the details in the B/E is not sustainable.

Therefore, the proceedings is totally unsustainable. The Collector of Customs, Bombay ought to have gone through these proceedings carefully before embarking on a fresh proceedings, which does not meet the eye of the law.Concord International Pvt. Ltd. v. Collector of Customs importer was that they had not carried out necessary manufacturing processes before re-exporting the goods and in that context it was alleged that they were not entitled to the benefit of Notification No.339/85-Cus. dt. 21.11.1985 and that they were also liable for recovery of duty and penalty under Sections 28,74, 111(d) and 112 of the Customs Act, 1962. The Tribunal upheld all the allegations. However, on the plea that since the goods were exported, the importer were entitled to duty draw-back under Section 74 of the Customs Act, 1962 was upheld by the Tribunal. Therefore, it follows that where in similar circumstances when all the allegations against the importer have been held to be proved yet the Tribunal upheld the importers' contention that when the goods were exported they were entitled to the benefit of drawback. In that view of the matter, it is difficult to even accept the Collector's plea that the duty amount in the present case would be recoverable.

Therefore, the contention raised by the Learned DR on this aspect and the findings given by the Collector is required to be set aside and which we do so. The appeal is therefore, allowed.

Separate Order Sd/- (Shiben K. Dhar) (S.L. Peeran) Member (T) Member (J) 17. With respect to Ld. Member (), I am writing my separate order as under: 17.1. Proviso to Section 28 of the Customs Act provides that where any duty has not been levied or has not been short levied or erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts by the importer or the exporter, the provisions of Sub-section (1) will have the effect as if for the words 'Proper Officer' the words "Collector of Customs" and for the words 'One Year' and "Six Months" the words 'Five Years" were substituted.

17.2. Proper officer is defined under Section 2(34) as "Proper Officer in relation to any functions to be performed under this Act, means the officer of Customs who is assigned those functions by the Board or Collector of Customs".

18.1. Government have defined the jurisdiction of various Customs Officers in the different regions in the country. It is only a few officers like Director General of Revenue Intelligence, Director General of Anti-evasion, etc., who have All India Jurisdiction.

Collector of Customs, Kandla, has jurisdiction only in regard to Port at Kandla and such other areas as are specified in the Notification issued by the Government. Likewise, Collector of Customs, Bombay, has jurisdiction in regard to matters pertaining to specified Bombay region. The jurisdictions are sharply demarcated.

18.2. The question whether Collector of Customs, Cochin, had jurisdiction in regard to import made at Madras, came up for consideration before Tribunal in case of Metro Exports v. Collector of Customs, Cochin The Central Government has issued notifications under Section 4 of the Customs Act appointing Collectors of Customs and lower officers for different jurisdictions. In terms of these notifications, the respective jurisdictions of the Collectors have been clearly spelt out (see, for example, Notification No. 36-Cus. dated 1.2.1963, as amended). Notification No. 37 dated 1.2.1963, as amended, appoints the Collector of Customs and Central Excise, Cochin, as the Collector of Customs in his jurisdiction. Evidently, it does not extend to Madras Port for which the Collector is the Collector of Customs, Madras, vide Notification No. 36 dated 1.2.1963. There are, of course, a few officers appointed as Collectors with all-India jurisdiction such as the Director of Revenue Intelligence but the Collector of Customs, Cochin is not one among them. In these circumstances, we hold that the Collector of Customs, Cochin had no jurisdiction to demand duty in the present case and, consequently, we set aside the demand.

It is therefore clear that Proper Officer for the purpose of import in this case was the Collector of Customs, Bombay, and he alone was competent to issue a show cause notice demanding duty.

18.3. For instance, under Notification 251/93-Cus. dated 27.8.1993 as amended the Central Government in exercise of powers conferred by Sub-section (1) of Section 4 of Customs Act, 1962, have appointed officers mentioned in Column 2 of the Table appended to the Notification to be Collectors of Customs. For the areas of Port of Bombay, Bombay Airport, it is the Collector of Customs, Bombay, and, for the Port and Airport of Kandla and the area under the jurisdiction of Gandhi Dam Municipality, it is Collector of Customs, Kandla. As against this, under Notification 252/93 dated 2.7.1993 as amended, the Central Government have appointed Director General of Revenue Intelligence, New Delhi, and Director General of Inspections, Customs and Excise, New Delhi, to be Collectors of the Customs within their respective jurisdictions. The Notification also provides that jurisdiction of these officers shall extend to the whole of India.

18.4. It will be clear therefore that jurisdiction of proper officer is clearly well-defined, and therefore, for the purpose of import through Bombay only Collector of Customs, Bombay, was the proper officer to initiate proceedings under Section 28 of Customs Act. It may not therefore be possible to hold that proceedings had already been initiated and therefore fresh proceedings could not be initiated.

18.5. It can therefore be seen that it was not fresh proceeding initiated by the proper officer after he had initially initiated the proceedings and dropped the demand of duty. In fact, Collector of Customs, Kandla, while dropping the demand himself admitted that he had no jurisdiction in relation to the matter pertaining to duty. Goods were imported at Bombay and cleared duty free under exemption notification and therefore demand of duty could be issued only by the proper officer, i.e., Collector of Customs, Bombay. In this view of the matter, therefore, we cannot say that it was a fresh proceeding initiated by the proper officer after having already dealth with the matter. It is not the case of the appellants that as soon as they were penalised at Kandla or they were issued a Show Cause Notice by Kandla Customs, they made disclosure of these facts to the proper officer in relation to the imports, i.e., Collector of Customs, Bombay. Collector of Customs, Bombay, therefore, was competent to initiate proceedings against the appellants as soon as he came to know that a short-levy had indeed taken place since goods had been exported and this fact had not been disclosed to the proper officer.

19.1. Hon'ble Supreme Court in the case of appellants themselves in the case of M.J. Exports v. CEGAT held that the equipment permitted to be imported is only for the purpose of use in the country.

The Hon'ble Apex Court held that the circumstances that these items are also exempt from customs duty at the time of import also lends support to the conclusion that the goods so permitted are not meant for re-export. The Hon'ble Apex Court, therefore, held: We, are, therefore, of the opinion that, although there is no express prohibition, the re-export as such of items of goods specified in List-2 and imported -into India is prohibited by necessary implication by the language of, and the scheme underlying, the grant of OGL in regard to them. It is difficult to agree that the Import-Export Policy envisages the re-export of the goods belonging to this category. The opinion of CCIE is also to the same effect. This opinion also derives some binding effect from Para 24(1) of the Import Policy read with Paras 22 and 23 of the Export Policy.

19.2. Taking into account all the considerations, the Hon'ble Apex Court held that "the goods in question were "prohibited" goods within the meaning of Section 2(33) and their confiscation under Section 113(d) and penalty under Section 114 were fully justified".

20. Here we have a situation where goods have been contracted for re-export even prior to their import. In the statement dated 20.2.1992 of Shri Ashok Chhabil Das Shah, it is indicated that they had prior orders for exporting these items and they had to check the feasibility of import of these commodities taking into consideration the duty free import under Notification No. 208/81. In the statement of Shri Jasvant Munsukh Lal Shah, M.D. of M/s. M.J. Exports, he has admitted that they had imported haemeodialysers from West Germany and the purpose of import of these was to meet the export order for export to Russia. It is also admitted by him that they made a gross profit of approximately Rs. 1 Crore. He also admitted to have availed benefit of notification to import goods with no import duty and that the interest was purely business interest. It has also been admitted by him that the goods were imported and cleared form the Bombay Customs with the sole purpose of exporting these to Russia with a business intention and to earn adequate profits.

21. It is, therefore, clear that even prior to import of goods cleared under duty exemption, the appellants had entered into Contract for re-export of these goods as such to earn profits.

22. Hon'ble Apex Court in Para 25(2) of the judgment in case of Mis.

M.J. Exports Supra held "the goods were for use in this country, not in another".

In the light of this, it is obvious that the appellants when they imported goods and claimed duty free exemption already knew that they would be exporting the goods and they knew also that they could not export these goods without subjecting them to certain processes and, therefore, as was contended by the Revenue before the Hon'ble Apex Court, they put up a facade of taking the goods to Ankleshwar after their import allegedly for being subjected to some processes.

23. In these circumstances, therefore, considering the intent of the appellants, extended period as provided under Proviso 2 to Section 28(i) of the Customs Act, 1962, is sustainable. The Hon'ble Apex Court in case of Jackson Thavera 1991 (33) ECR 225 (SC) held that extended period is applicable where there was wilful mis-statement and suppression of facts by the importer. That was a case where goods imported claiming benefit of Project Import were transferred to another company instead of being used for the purpose for which the import was authorised as Project Import. Hon'ble Apex Court held: 9. In the instant case, the appellant had obtained the import licence dated February 14, 1979 for expansion of its business on the recommendation of the Director of Industries, Kerala State and the said import licence contained specific endorsement of "Project Import", When the goods arrived at the port in India the appellant filed a Bill of Entry on November 12, 1979, with the customs authorities which contained a declaration signal by a partner of the appellant. In addition, the appellant submitted an application form dated November, 21, 1979, before the customs authorities for Registration under Project Import (Registration of Contracts) Regulations, 1965 wherein it was stated that the goods to be imported were for substantial expansion of an existing plant and that the existing installed capacity of the plant of the appellant was 25,000 sq. mtr. per annum and that the capacity after expansion would be 10,98,000 sq. mtr. decorative Veeners per annum. In the said application form, it was also stated that no industrial licence for installation or substantial expansion was required by the appellant, since it is a Small Scale Unit. There is nothing on the record to show that the appellant had informed the customs authorities that the machinery to be imported would be transferred by the appellant to the Company and the Company would install the same. On the other hand, the endorsement on the import licence submitted with the Bill of Entry which contained a declaration by a partner of the appellant and the statements contained in the application from for Registration dated November 21, 1979, indicated that the appellant would be using the imported machinery for substantial expansion of its existing unit and on that basis the appellant was assessed for duty at a concessional rate under Head -ing No. 84.66 of the Customs Tariff. Since the appellant did not install the said machinery for the expansion of its existing unit, but transferred it to the Company after it had been cleared from the customs, the appellant cannot claim the benefit of the concessional rate of duty under Heading No. 84.66 of the Customs Tariff and is liable to pay such duty at the normal rates prescribed in the Customs Tariff. This was, therefore, a case of short levy of customs duty which is dealt with the Section 28 of the Act. In Sub-section (1) of Section 28 it is prescribed that a notice shall be served on the person chargeable with the duty requiring him to show cause why he should not pay the amount specified in the notice. The said notice has to be served within one year of the relevant date in cases when import is made by an individual for his personal use or by Government or by an educational, research or charitable institution or hospital and the period for service of such notice is six months in other cases. The proviso to Sub-section (1) of Section 28 enhances the aforementioned periods for service of the notice to five years in cases where any duty has not been levied or has been short-levied or erroneously refunded by reasons of collusion or any wilful misstatement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter. Here the relevant date was December 7, 1979, the date on which the duty was paid and the enhanced period of five years prescribed under the proviso to Sub-section (1) of Section 28 was invoked by the customs authorities to issue the show cause notice dated June 4, 1982, to the appellant. The present case falls within the ambit of the said proviso because the appellant had cleared the goods from the customs on payment of concessional rate of duty under Heading No. 84.66 of the Customs Tariff by making a misstatement in the application form dated November 21,1979, for registration under the Project Import (Registration of Contracts) Regulations, 1965, that the machinery that had been imported was for substantial expansion of the existing industrial unit of the appellant and by suppressing the fact that under Agreement dated July 31, 1979, the appellant had agreed to transfer the said machinery to the Company. In the circumstances the Collector was justified in directing that the goods in question should be re-assessed to duty on merits under the appropriate heading of the Customs Tariff without giving the benefit of the assessment under Heading 84.66 and to collect the short levy from the appellant. The demand for the additional amount of Rs. 1,26,163.45 paise made on the basis of such re-assessment in pursuance of the aforesaid direction given by the Collector, does not, therefore, suffer from any legal infirmity.

24. Considering goods had been contracted for export even prior to import and yet they claimed exemption when they knew such exemption could not be availed of in case goods were for re-export as such, extended period for demanding duty was sustainable.

26. In view of difference of opinion between the Members, the following question arises for determination by Third Member on reference of the matter by Hon'ble President.

Whether the appeal is required to be allowed in terms of findings given by Member (Judicial) in his order.

The appeal is required to be rejected in terms of the order recorded by Member (Technical) in his order.

Sd/- Sd/- (Shiben K. Dhar) (S.L. Peeran) Member (T) Member J) Dt. 26.12.1997 27.I have heard both sides on difference of opinion. The facts are set out in the first eight paragraphs of the order of the judicial member's order and therefore I do not propose to repeat them.

28. It is first contended by the advocate for the appellant that the demand is barred by limitation. The notice issued in April, 1993 for goods imported in 1988, invokes the extended period provided in Section 28 of the Act on the ground that the importer did not declare on the bill of entry, till investigation commenced that the goods were intended to be exported to the USSR. Advocate for the appellant contends that there has been no wilful misstatement, wilful suppression of facts, fraud or collusion so as to justify invocation of Section 28 of the Act. The Collector, he says, while recording the arguments on limitation, has not dealt with them. He points out that the Member Judicial has clearly held that the demand is barred by limitation.

29. On merits he contends that when the goods were imported in 1988, the appellant was under the bonafide impression that notification 201/88 would apply and the goods were for stock and sale. Going by the plain meaning of the policy and the notification, the appellant had every reason to believe that the goods were intended to be imported under OGL and were exempt from duty when they were imported. Even if the intention was to export them subsequently, it is only after the Supreme Court's judgment that it has been held that was not permissible. Prior to this, the subsisting law was in the Delhi High Court's judgment in Janak Photo Enterprises (I) Ltd. v. Union of India reported in 1990 (40) ELT 339 and Hansraj v. CCE 1978 (2) ELT 350 : ECR C 274 SC. This view was confirmed by the appellant have not earlier imported the goods under notification exported without their being any objection from the Customs.

30. He further contends that once the Collector of Customs at Kandla had dropped the proceedings, the only course open to the department was to get his order reviewed. Since this has not been done, the matter has become final and the Collector of Customs could not reopen the proceedings once again.

31. It is next contended that the Collector's order denies the exemption benefit only on the ground that the goods had been exported.

The appellant's act of export had been found by the Collector in Kandla to be illegal and the appellant has been imposed a penalty. The point if any in export has been wiped out and there is no reason to deny the importation. To do so is to penalise the appellant twice.

32. The departmental representative contends that the appellant did not disclose to the department that the goods could not be used in any hospital in India which is contrary to the terms of the notification.

In fact a claim was made to the contrary. There has been a clear misdeclaration. It is not correct to say that the Collector of Customs, Bombay came to know about the import from the order of the Collector of Customs, Kandla. There is no material to show this and the order itself says that he came to know from intelligence. He contends that Member (Technical) rightly relied upon the Supreme Court's judgment in Jackson and Tavera 1991 (33) ECR 225 that in the absence of a declaration that the goods were to be exported, the extended period could be rightly invoked. He says that it is not possible to say whether the earlier exports were of goods disclosed to be imported goods and they may have been declared as goods manufactured in India. He contends that, in addition to the goods described in Lists A and B to the table to the notification, List C extends the exemption to goods that may be certified by the Director General Health Services in each individual case to the life saving drugs, medicines or equipments. This emphasis on certification in each individual case" is clearly to establish the use of the goods by the importer and this requirement applies for all goods covered by the notification. The Supreme Court in the judgment says that the goods are not entitled to be exported and confirmed the penalty imposed for such export. It had also observed in para 25(1) that it would not have been the intention of the legislature to grant exemption from Customs duty in respect of vital goods and in order that the importer may make profit by selling them abroad. Reliance by the appellant on the Madras High Court judgment in Gambro Hoxis (India) Medical Ltd. v. Union of India is therefore 33. The reason advanced by the Collector for invoking the extended period is that by not indicating in the bill of entry that the goods were not meant for use in India but were imported for export to Russia, the appellant had contravened the conditions of the notification. In that the notification was issued in the public interest, which means the interest of the public in India. Member (Judicial) has found that the proceedings were barred by limitation, because the full facts were known to the Collector of Customs, Kandla when he issued the demand for duty and subsequently dropped it. Therefore, he says, "the revenue had all the information to initiate proceedings for recovery of duty." The view of the Member Technical is that there are clear territorial division with which each Collector exercise his jurisdiction and it does not follow that merely because the Collector of Customs, Kandla initiated and dropped the proceedings for duty, the Collector of Customs at Mumbai was aware of the imported goods sought to be re-exported.

34. The import took place in October, 1988 and the notice was issued in April, 1993 i.e. four years and six months after the importation. The extended period had been invoked on the ground that there has been wilful suppression of facts and mis-statement. The reason for this, the Collector says, is that the importer did not indicate during the importation that the goods were not meant for use in India but for export to Russia. The Collector also says that the appellant took the goods to Ankleshwar ostensibly for processing, although no such processing has been carried out. However, taking the goods to Ankleshwar would have been done after they were cleared from Customs charge and the Custom House could not have been influenced in coming to the decision by acts subsequent to the clearance of the goods. What we have to see is whether the failure to declare that the goods were meant to be re-exported amounts to suppression. For that to be held, we would have to see whether the situation required the appellant to specifically declare, while claiming the notification that the goods were to be exported.

35. The notification itself contains no express requirement that the goods imported must be used in India; nor does it require that any importer claiming its benefit must declare that the goods are intended to be used in India.

36. The departmental representative's argument relating to the List C to the table of the notification is not convincing. List A contains a list of life saving drugs or medicine, List B contains a list of life saving equipments and List C the residuary list covers drug, medicine or equipment including accessories or spares of such equipment certified by the specified officials of the Director General Health Services in each individual case to be a life saving drug, medicine, equipment, accessories or spare part. The words "in each individual case" refers, in my opinion, to life saving drug, medicine or equipment which is to be imported. List C obviously has been incorporated so as to provide for exemption to goods which may have been omitted in the Lists A and B and which may be developed or available for use or for sale subsequent to the notification. To prevent duty free import of such goods it is obvious that an expert body certify that the goods are in fact a life saving drug, medicine or equipment. The words of List C do not postulate directly, or by implication, that the goods must be used only in India any more than the goods in Lists A or B. The form in which the certificate by the authority of the Director General Health Services is to be given only requires it to certify that the goods are a life saving drug, medicine or equipment and to recommend grant of exemption from duty. The attribute of the goods being a life saving drug, medicine or equipment would continue, whether the goods are utilised for that purpose in India or elsewhere.

37. The Supreme Court in its judgment in the proceedings arising out of the order of the Collector of Customs, Kandla said that it could not have been the intention of the legislature to grant exemption from Customs duty in respect of vital goods in order that the importer may make a profit by selling them abroad. However, this judgment was passed in 1992, after the import. Prior to that the judgment of the Supreme Court in Hansraj Gordhardas v. HH Dave, Assistant Collector 1978 (2) ELT (350) (SC) : ECR C 274 SC and Union of India v. Deplo Mamdam Aggarwa the Court itself held in the MJ Exports v.CEGAT that the principle enunciated in these decisions is that the Court should construe the terms of statutory provision or instrument before it and should not supply or introduce words which are not found therein to give effect to possible intention behind the provision or instrument which is not borne out by the language used. It relied on its judgment in Surjit Singh Kalra v. Union of India to construe the provision of the OGL.

38. The importer, going by the judgments then prevailing could not be in a position to conclude that the public interest leading to issue of notification require that a life saving drug, medicine or equipment etc. must be used in India and that if so not exemption would not be available. The judgment cited above, show that the importer could bonafide take such a view.

39. Going by the plain reading of Section 28 and the notification thereof, it is not possible for me to agree that when the goods were imported, the importer knew or could reasonably be expected to know that the exemption would not be available for the goods, they were to be re-exported.

40. The members of the bench also decided the matter have approached the question of limitation from a different perspective. Member Judicial finds the notice was barred by limitation "as the revenue had all the information to initiate proceedings for recovery of duty." Member Technical says (in para 8) that extended period is applicable because the goods have been contracted for export and the appellant knew that exemption could not be availed in case of goods were to be re-exported.

41. The Supreme Court in MJ Exports v. CEGAT (in para 17) itself noted that there nothing in the provisions of the Customs Act to compel an importer even before or when importing the goods, to make up his mind whether he is going to use or sell them in India or whether he proposes to re-export them. Again, there may be cases where he has imported the goods for use or sale in India but subsequently receives an attractive offer which impels prior to export them. It would make export trade difficult to say that he cannot accept such an offer as the goods, when imported, had been cleared for home consumption. The Court, in making its observation, was interpreting the provisions of Sections 68 and 69 of the Act and answering the contention of the revenue before it that the goods cleared for home consumption are prohibited for export.

However, this observation does suggest that it is possible for an importer to import the goods and thereafter export them without contravening the provisions. It could be possible for the appellant to cause genuinely import the goods for stock and sale in India but subsequently on clearance from Customs choose to export them. In that situation, obviously the extended period could not be invoked on the ground that there was suppression of facts or mis-statement. The converse is also possible. Even if the appellant knew, when goods, imported were imported, they were to be exported to Russia. It is however possible that he may have changed his mind, and decided to keep the goods in India say, that if the deal with Russia fell through or was cancelled because of it is more profitable to sell the goods in India. These observations indicate that it may not always be possible for an importer to say while importing the goods, whether they will be used in India or exported. It is also to be noted that the Madras High Court in Gembro Hoxis (India) Medical Ltd. v. Union of India , specifically held that there was no bar to export of goods imported under OGL with the benefit of exemption under notification 208/81. This would also lend support to the plea that there was no bar to export of such goods.

42. For the extended period provided in the proviso to Section 28(1) to apply in the facts of this case, it must be shown that the appellant, while being aware that the benefit of the notification would not be available for the reason that export of goods subsequent to import under and clearance under the notification was not permissible suppressed from the department the fact that the goods were to be exported. The facts, as I have discussed above, do not establish this state of affairs. It cannot be said that, given the state of law at the relevant time the appellant ought to have known that import under OGL and clearance under notification was not permissible for goods which were to be subsequently exported. In any event it has not been shown that the appellant being aware of the illegality of its action suppressed the facts from the department, thus leading to extend the provisions of the notification which it otherwise would not have done.

The judgment of the Supreme Court in Pushpam Pharmaceuticals Co. v. CCE (SO and Cosmic Dye Chemical (SO to the effect that it must be shown, before the extended period under the proviso to Section 11 Ad) of the Central Excises and Salt Act, 1944 to apply that there was wilful suppression or mis-statement, would equally apply to the extended period under Section 28(1) of the Customs Act, 1962. The words of both the provisos relating to suppression, mis-statement, collusion in both are identical. I therefore agree with the Member (Judicial) that the demand is barred by limitation as the extended period will not apply.

43. Both the members also disagreed on whether the proceedings are barred by res judicata, Member Judicial holding that they are and the Member Technical that they are not. Although notice had been issued by the Kandal Customs demanding duty, Collector of Customs, Kandla declined to confirm the demand for duty. He agreed with the submission that he had no jurisdiction to demand on the goods imported through Bombay. He added that even otherwise notification 208/81 exempts the goods unconditionally from import duty. When once the Collector of Customs, Kandla admits that he has no jurisdiction and says so, his subsequent observation that the demand for duty is unsustainable cannot be binding. It would therefore be incorrect to say that the Collector of Customs, Bombay was estopped from demanding duty. On this point I agree with the views expressed by the Member Technical.

44. The third reason given by the Judicial Member is that the goods having been exported, the benefit of drawback would be available. The order of Member Technical does not discuss this at all. There is therefore no difference of opinion on this aspect.

45. On the specific question posed therefore I hold that the appeal is to be allowed as found by Member Judicial.