Hitkraft India Vs. Collector of Central Excise - Court Judgment

Excerpt:
1. the appeal arises out of an order of the addl. collector confiscating the goods of the value of rs. 2,34,680/- under section 113 of the customs act subject to payment of redemption fine of rs. 30,000/- and imposing a personal penalty of rs. 5,000/- under section 114 of the customs act, 1962. the appellants presented on 23-11-1987, 35 bails containing 1800 pieces of woollen garments (1600 gents shawls and 200 ladies shawls) valued at rs. 1,20,400/- for inspection by the customs' staff before they are exported to dubai. the customs, on examination, found 2623 pieces of woollen garments (1622 pieces of gents shawls and 531 pieces of ladies shawls and 472 pieces of rumals) as against 1800 pieces mentioned in the shipping bill. the customs authorities also did not agree with the declaration of price made by the appellants and therefore, sought opinion of the two expert firms. the appellants declared the price at rs. 66 per piece of gents' shawls whereas experts' firms gave the opinion that the price of gents' shawls is rs. 100/- to 103/- per piece. on the ground that the appellants misdeclared the value and also the quantity, customs authorities seized the goods. after hearing the appellants, the collector passed the impugned order against which the appeal is filed. the explanation of the appellants was that the quantity of woollen shawls and rumals was got misdeclared because of negligence on the part of the employees. they have also explained that they mixed up the bails meant for export with the ones which were meant for sale in the domestic market. they also submitted that for this negligence of the employees, they have terminated the services of those who were responsible. as regards under valuation, the explanation is in view of great competition in the trade, they were exporting the goods without making any profits.3. the collector rejected the explanation of the appellants and found that 22 pieces of gents' shawls, 331 pieces of ladies shawls and 472 pieces of rumals were not declared in the export documents and there was under invoicing to the extent of rs. 61,466/- and rs. 24,494/- and rs. 28,320/- in respect of gents' shawls, ladies shawls and rumals respectively. he further found that goods meant for export were under-invoiced to the extent of rs. 1,14,280/-.4. the counsel shri aggarwal, appearing for the appellants, submitted that there is no violation of section 113 of the customs act, and therefore the order is liable to be set aside.5. section 67 of the foreign exchange regulations act provides inter alia, that the restrictions imposed by or under section 13 clause (a) of sub-section (1) of section 18 and clause (a) of sub-section (1) of section 19 shall be deemed to have been imposed under section 11 of the customs act, 1962 (52 of 1962), and all the provisions of that act shall have effect accordingly. section 11 of the customs act empowers the central govt. to prohibit either absolutely or subject to such conditions as may be specified in a notification, the import or export of goods of any specified descriptions. section 113 of the customs act says the following export goods shall be liable to confiscation : (d) any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this act or any other law for the time being in force; 6. by virtue of section 67 of the foreign exchange regulations act, 1973, the prohibition imposed under section 18(1)(a) of that act becomes a prohibition imposed under section 11 of the customs act.therefore, if the goods were attempted to be exported contrary to the said prohibition, the goods became liable to confiscation under section 113(d) of the customs act. consequently, the person attempting to export the goods also became liable to pay penalty under section 114 of the customs act.7. section 18(1)(a) of the foreign exchange regulations act reads as follows :- payment for exported goods. - (1)(a) the central govt. may, by notification in the official gazette, prohibit the taking or sending out by land, sea or air (hereafter in this section referred to as export) of all goods or of any goods or class of goods specified in the notification from india directly or indirectly to any place so specified unless the exporter furnishes to the prescribed authority a declaration in the prescribed form supported by such evidence as may be prescribed or so specified and true in all material particulars which, among others, shall include the amount representing -- (ii) if the full export value of the goods is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in the overseas market, and affirms in the said declaration that the full export value of the goods (whether ascertainable at the time of export or not) has been, or will within the prescribed period be, paid in the prescribed manner; 8. therefore, it follows from section 18 that the exporter has to furnish to the prescribed authority a declaration in the prescribed form supported by such evidence or material which among others, shall include the amount representing the full export value of the goods.9. the findings of the collector discloses that there is a misdeclaration not only in the quantity of the goods to be exported but also in respect of the value of the goods. the explanation of the appellants that the misdeclaration and under-valuation is on account of the negligence of the employees and the competition in the trade, is not a valid explanation to condone the mis-declaration and under valuation. therefore, the findings of the collector is based on convincing reasons and thus, we do not see any reason to interfere with the same. therefore, there is a clear violation of section 18(1)(a) of the foreign exchange regulations act which in view of section 67 amounts to violation of section 11 of the customs act attracting the provisions of section 113(d) and section 114 of the customs act, 1962.therefore, the collector is justified in confiscating the goods and also in imposing the penalties.10. we are fortified in our view by the judgments of the supreme court in south india coir mills v. addl. collector of customs 1976 air 1527 sc where the supreme court under similar circumstances held that by virtue of section 23a of the foreign exchange regulations act, the prohibition imposed under section 12(1) of the act becomes a prohibition imposed under section 11 of the customs act and if the goods were attempted to be exported contrary to the said prohibition the goods became liable to confiscation under section 113(d) of the customs act. consequently, the person attempting to export the goods also became liable to pay penalty under section 114. no doubt this case arose under the foreign exchange regulations act, 1947 but there is no difference between section 12 and section 23a of the old act and section 18(1)(a) and section 67 of the new act.11. therefore, in view of the above there is no substance in the contention of shri aggarwal that sections 113 & 114 of the customs act are not applicable. we may also point out that the judgment relied upon by shri aggarwal viz., u.o.i. v. shree ram durga prasad (p) ltd. air 1970 1597 sc has been considered by the supreme court in south india coir mills (supra) and observed that hegde jj speaking for himself and bachawat jj gave a narrow interpretation of section 12(1) as it stood then. we may also point out that in shree ram durga prasad (p) ltd., shri hegde jj, shri bachawat jj expressed the majority view while shri sikri jj expressed the minority view. the minority view of shri sikri was approved by a three member bench of the supreme court consisting of shri y.v. chandrachud, shri v.r. krishna iyer and n.i. untwalia, jj in south india coir mills (supra). therefore, the reliance placed by shri aggarwal on shree ram durga prasad (p) ltd. is of no consequence. the judgment of the supreme court in beckar gray & co. v. u.o.i. 1971 air 116 sc is also of no assistance to the appellants as the judgment followed the earlier judgment of the supreme court in shree ram durga prasad (p) ltd. which was not agreed upon by the supreme court in south india coir mills. the judgments of the supreme court relied upon by shri aggarwal are no longer good law in view of later judgment of the supreme court in south india coir mills (supra).12. the contention of shri aggarwal that section 113 is not applicable is, therefore, rejected in the light of the above.

Judgment:
1. The appeal arises out of an order of the Addl. Collector confiscating the goods of the value of Rs. 2,34,680/- under Section 113 of the Customs Act subject to payment of redemption fine of Rs. 30,000/- and imposing a personal penalty of Rs. 5,000/- under Section 114 of the Customs Act, 1962.

The appellants presented on 23-11-1987, 35 bails containing 1800 pieces of woollen garments (1600 gents shawls and 200 ladies shawls) valued at Rs. 1,20,400/- for inspection by the Customs' Staff before they are exported to Dubai. The Customs, on examination, found 2623 pieces of woollen garments (1622 pieces of gents shawls and 531 pieces of ladies shawls and 472 pieces of rumals) as against 1800 pieces mentioned in the Shipping Bill. The Customs Authorities also did not agree with the declaration of price made by the appellants and therefore, sought opinion of the two expert firms. The appellants declared the price at Rs. 66 per piece of gents' shawls whereas experts' firms gave the opinion that the price of gents' shawls is Rs. 100/- to 103/- per piece. On the ground that the appellants misdeclared the value and also the quantity, Customs Authorities seized the goods. After hearing the appellants, the Collector passed the impugned order against which the appeal is filed. The explanation of the appellants was that the quantity of woollen shawls and rumals was got misdeclared because of negligence on the part of the employees. They have also explained that they mixed up the bails meant for export with the ones which were meant for sale in the domestic market. They also submitted that for this negligence of the employees, they have terminated the services of those who were responsible. As regards under valuation, the explanation is in view of great competition in the trade, they were exporting the goods without making any profits.

3. The Collector rejected the explanation of the appellants and found that 22 pieces of gents' shawls, 331 pieces of ladies shawls and 472 pieces of rumals were not declared in the Export Documents and there was under invoicing to the extent of Rs. 61,466/- and Rs. 24,494/- and Rs. 28,320/- in respect of gents' shawls, ladies shawls and rumals respectively. He further found that goods meant for export were under-invoiced to the extent of Rs. 1,14,280/-.

4. The counsel Shri Aggarwal, appearing for the appellants, submitted that there is no violation of Section 113 of the Customs Act, and therefore the order is liable to be set aside.

5. Section 67 of the Foreign Exchange Regulations Act provides inter alia, that the restrictions imposed by or under Section 13 clause (a) of Sub-section (1) of Section 18 and clause (a) of Sub-section (1) of Section 19 shall be deemed to have been imposed under Section 11 of the Customs Act, 1962 (52 of 1962), and all the provisions of that Act shall have effect accordingly. Section 11 of the Customs Act empowers the Central Govt. to prohibit either absolutely or subject to such conditions as may be specified in a Notification, the import or export of goods of any specified descriptions. Section 113 of the Customs Act says the following export goods shall be liable to confiscation : (d) Any goods attempted to be exported or brought within the limits of any Customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force; 6. By virtue of Section 67 of the Foreign Exchange Regulations Act, 1973, the prohibition imposed under Section 18(1)(a) of that Act becomes a prohibition imposed under Section 11 of the Customs Act.

Therefore, if the goods were attempted to be exported contrary to the said prohibition, the goods became liable to confiscation under Section 113(d) of the Customs Act. Consequently, the person attempting to export the goods also became liable to pay penalty under Section 114 of the Customs Act.

7. Section 18(1)(a) of the Foreign Exchange Regulations Act reads as follows :- Payment for exported goods. - (1)(a) The Central Govt. may, by notification in the Official Gazette, prohibit the taking or sending out by land, sea or air (hereafter in this section referred to as export) of all goods or of any goods or class of goods specified in the notification from India directly or indirectly to any place so specified unless the exporter furnishes to the prescribed authority a declaration in the prescribed form supported by such evidence as may be prescribed or so specified and true in all material particulars which, among others, shall include the amount representing -- (ii) if the full export value of the goods is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in the overseas market, and affirms in the said declaration that the full export value of the goods (whether ascertainable at the time of export or not) has been, or will within the prescribed period be, paid in the prescribed manner; 8. Therefore, it follows from Section 18 that the exporter has to furnish to the prescribed authority a declaration in the prescribed form supported by such evidence or material which among others, shall include the amount representing the full export value of the goods.

9. The findings of the Collector discloses that there is a misdeclaration not only in the quantity of the goods to be exported but also in respect of the value of the goods. The explanation of the appellants that the misdeclaration and under-valuation is on account of the negligence of the employees and the competition in the trade, is not a valid explanation to condone the mis-declaration and under valuation. Therefore, the findings of the Collector is based on convincing reasons and thus, we do not see any reason to interfere with the same. Therefore, there is a clear violation of Section 18(1)(a) of the Foreign Exchange Regulations Act which in view of Section 67 amounts to violation of Section 11 of the Customs Act attracting the provisions of Section 113(d) and Section 114 of the Customs Act, 1962.

Therefore, the Collector is justified in confiscating the goods and also in imposing the penalties.

10. We are fortified in our view by the judgments of the Supreme Court in South India Coir Mills v. Addl. Collector of Customs 1976 AIR 1527 SC where the Supreme Court under similar circumstances held that by virtue of Section 23A of the Foreign Exchange Regulations Act, the prohibition imposed under Section 12(1) of the Act becomes a prohibition imposed under Section 11 of the Customs Act and if the goods were attempted to be exported contrary to the said prohibition the goods became liable to confiscation under Section 113(d) of the Customs Act. Consequently, the person attempting to export the goods also became liable to pay penalty under Section 114. No doubt this case arose under the Foreign Exchange Regulations Act, 1947 but there is no difference between Section 12 and Section 23A of the old Act and Section 18(1)(a) and Section 67 of the new Act.

11. Therefore, in view of the above there is no substance in the contention of Shri Aggarwal that Sections 113 & 114 of the Customs Act are not applicable. We may also point out that the judgment relied upon by Shri Aggarwal viz., U.O.I. v. Shree Ram Durga Prasad (P) Ltd. AIR 1970 1597 SC has been considered by the Supreme Court in South India Coir Mills (supra) and observed that Hegde JJ speaking for himself and Bachawat JJ gave a narrow interpretation of Section 12(1) as it stood then. We may also point out that in Shree Ram Durga Prasad (P) Ltd., Shri Hegde JJ, Shri Bachawat JJ expressed the majority view while Shri Sikri JJ expressed the minority view. The minority view of Shri Sikri was approved by a three Member Bench of the Supreme Court consisting of Shri Y.V. Chandrachud, Shri V.R. Krishna Iyer and N.I. Untwalia, JJ in South India Coir Mills (supra). Therefore, the reliance placed by Shri Aggarwal on Shree Ram Durga Prasad (P) Ltd. is of no consequence. The judgment of the Supreme Court in Beckar Gray & Co. v. U.O.I. 1971 AIR 116 SC is also of no assistance to the appellants as the judgment followed the earlier judgment of the Supreme Court in Shree Ram Durga Prasad (P) Ltd. which was not agreed upon by the Supreme Court in South India Coir Mills. The judgments of the Supreme Court relied upon by Shri Aggarwal are no longer good law in view of later judgment of the Supreme Court in South India Coir Mills (supra).

12. The contention of Shri Aggarwal that Section 113 is not applicable is, therefore, rejected in the light of the above.