Lavanya Exports Vs. Collector of Customs and C. Ex. - Court Judgment

Excerpt:
1. this appeal is directed against the order of the collector of customs and central excise, visakhapatnam, dated 2-4-1993 absolutely confiscating sandalwood pieces weighing 19.696 mt packed in 380 gunny bags valued at rs. 45,00,559 fob under section 113(d) & (e) of the customs act, 1962 read with section ll(2)(u) of the said act and section 11(1) of foreign trade (development & regulation) act, 1992 and section 18(l)(a) and section 67 of the foreign exchange regulation act, 1973.2. the appellant filed shipping bill no. 1382, dated 12-3-1993 for export of certain goods said to be sandalwood to m/s. china joss stick factory co. ltd., taiwan, and had given the following description in the shipping bill:si. no. description no. of bags weight fob value export of the g/n rs. licence no. goods1. sandal 400 20.720 mt 28,22,027/- 0034037 wood 20.000 mt 12-11-1992 flakes issued by controller when the customs authorities inspected and examined the goods on 14-3-1993 they effected seizure of the same on 16-3-1993 under a mahazar as per law on the ground that the goods that were sought to be exported did not conform to the statutory requirements in terms of the licence and the value of the goods was also misdeclared. on examination of the goods, the department found the details in regard to the various lots as under :si.description of the marks/ no. of total approximateno.goods grade bags weight weight of each mt piece1. sandal wood flakes sb b 20 1.024 less than 50 gms. thin flat pieces/2. sandal wood split sb m 80 4.096 less than 50 gms. pieces of irregular3. sandal wood sb r 300 15.600 weight ranging pieces roughly of from 30 gms to 300 rectangular shape gms. with thickness on 19-3-1993 show cause notice was issued to the appellant by the department alleging inter alia that out of the total quantity of the goods only 20 bags weighing 1.024 mt were sandal wood pieces permissible for export and covered by licence and 80 bags weighing 4.096 mt were less than 50 gms and the sandal wood split pieces were of irregular sizes of varying length from 3" to 8" in diameter. the department further alleged that the balance 300 bags weighing 15.600 mt comprised sandal wood pieces of weight ranging from 30 gms to 300 gms.the department further alleged in the show cause notice that the value of the goods would be 8500 us $ per mt and subsequently under the impugned order it was reduced to rs. 7500 us $ per mt. the appellant gave reply to the show cause notice contending that the appellant had exported only sandal wood flakes permissible for export and were fully covered by the licence in question and that the appellant was fully prepared to reduce the weight to less than 50 gms by cutting the bigger flakes into smaller flakes as desired by the department. it was further urged that there was no duty at all involved in the export and there was also no revenue loss to the government and the appellant would be earning valuable foreign exchange by exporting the goods to a foreign country. it was further urged that there was no mis-declaration with reference to the value which had been declared by the buyer as per the contract entered into and the licensing authorities were also satisfied with the contract, which the appellant had entered into with the foreign buyer, in regard to the value of the goods and it is only on being satisfied with the value of the goods the licensing authorities after accepting the value, issued the licence in question and as such in the absence of any duty or revenue implication it is not open to the customs authorities to question the correctness of the grant of licence issued after acceptance of the value of the goods in question. it was further urged that the appellant himself had exported similar goods of irregular size at price of 4500 us $ per mt under bill no. 1070 dated 24-2-1983 and also another consignment of similar goods had also been exported by some party for similar value through another export.3. during the pendency of the adjudication the appellant filed a writ petition before the high court of andhra pradesh in wp no. 6288/93 and the high court by its order dated 18-5-1993 directed the appellant to deposit rs. 5 lakhs towards penalty and rs. 25 lakhs as bank guarantee and also directed the appellant to furnish a security for rs. 20,00,000/- for release of the goods. the appellant thereafter moved the high court seeking a clarification of this order and the high court by its order dated 19-5-1993 clarified that instead of the appellant furnishing a security, appellant should give a bank guarantee for rs. 45 lakhs and permitted the appellant to export the goods to taiwan. sub sequent to this order of the high court the central govt. standing counsel moved the high court on 12-6-1993 stating that the central government objected to the export and prayed for stay of the operation of that part of the order of the high court permitting the appellant to export the goods to taiwan. the appellant also by application dated 4-6-1993 prayed that the case may be posted before the division bench which passed the earlier order and accordingly the earlier bench which initially heard the matter, had passed an order dated 19-7-1993 permitting the appellant to export the goods in question. aggrieved by the order of the high court, the department moved the supreme court by way of a special leave petition and the supreme court by order dated 27-8-1993 [since reported in 1993 (68) e.l.t. 513 (sc)] permitted the appellant to export 100 bags of sandal wood pieces out of the total 400 bags which according to the department contained sandal wood pieces of less than 50 gms in weight and directed the high court of andhra pradesh to dispose of the writ petition not later than 8 weeks from the date of the order of the supreme court and further directed this tribunal to dispose of the appeal within 2 months from the date of order i.e. 27-8-1993. the proceedings instituted by the department eventually culminated in the impugned order appealed against.4. as directed by the supreme court by its order dated 27-8-1993 cited supra directing this tribunal to dispose of the appeal within 2 months from 27-8-1993 this bench fixed this appeal for disposal today after due notice and with the consent of the parties.5. the learned counsel for the appellant reiterated the pleas canvassed in the reply to the show cause notice and contended that the goods are not dutiable and there is no revenue implication and the licence has been granted to the appellant for export of the goods viz. sandal wood flakes. so far as the export licence is concerned it merely mentions sandal wood flakes and saw dust. the appellant also entered into the contract on 11-9-1991 with the buyer m/s. china joss stick factory company ltd., taiwan and only to export sandal wood flakes and saw dust and as per the contract dated 11-9-1991 the appellant would send sandal wood flakes and saw dust of best quality and the buyer was not "particular about the shape, size or weight of the sandal wood pieces as we are going to make into powder for our end use". it was further urged that there is no definition as to what constitutes or connotes sandal wood flakes and the adjudicating authority has merely borrowed the dictionary meaning which is also not against the appellant. the department itself before the supreme court, as seen from the order of the supreme court dated 27-8-1993, stated that the department had no objection to export sandal wood flakes of the weight of 50 gms and less and it is on the basis of this plea of the department that the supreme court directed export of sandal wood flakes of 100 bags. it was urged that the appellant has absolutely no objection, as reiterated in the reply to the show cause notice, to have the pieces reduced to weight of 50 gms and less and, therefore, the appellant may be permitted to export the goods in terms of the order of the supreme court cited supra. it was further urged that the goods do not involve any duty or have any revenue implication and it is not the case of the department that the appellant stands to gain by not mutilating the goods. it was further submitted that the appellant was not actuated by any mala fides and was not to gain monetarily by exporting bigger size. the learned counsel in this context submitted that the department also has not alleged in any way that the appellant stood to gain by exporting bigger pieces. so far as the charge relating to misdeclaration in regard to the value is concerned, the learned counsel contended that the department had not conducted any investigation with reference the value of similar goods and indeed did not have to say anything against the appellant particularly in respect of the past instances where similar goods were exported for similar value or lesser value. the learned counsel further submitted that the appellant may be permitted to export the goods by mutilating the bigger sizes into smaller ones of 50 gms or less in weight, in the interests of justice.6. shri j.p. gregory, the learned sdr submitted that on the findings of the collector, the goods which do not conform to flakes have been ordered to be confiscated and this exercise of discretion by the learned collector may not call for interference. the learned sdr further submitted that the department had not objected to the export of 100 bags, before the supreme court, where the weight of the goods was less than 50 gms per piece. the learned sdr did not dispute the fact that the appellant had export licence permitting export of sandal wood flakes and saw dust. regarding the value of the goods the learned sdr submitted that if the goods are mutilated into 50 gms or less in weight, the value would come down as contended by the learned counsel for the appellant rendering the goods permissible for export and covered by the licence in question.7. we have carefully considered the submissions made before us. the question that would arise for our consideration in the appeal is whether the goods in question are covered by the licence coming within the mischief of the expression "sandal wood and saw dust". secondly, whether there is evidence to hold that the appellant was guilty of misdeclaration in regard to the value of the goods in question. we have gone through the entire records and heard both parties extensively and considered the submissions. the appellant has entered into a contract for export of sandal wood flakes and saw dust. the department also, it is seen that out of 400 bags that were sought to be exported, permitted the appellant to export 100 bags of sandal wood flakes of 50 gms in weight or less. this is evidenced by the order of the supreme court dated 27-8-1993 the relevant portion of which reads as under : "learned additional solicitor general rightly submits that the authorities have no objection to the export of 100 bags out of the 400 bags sought to be exported which contain sandal wood "flakes and chips" of a weight of less than 50 gms per piece for which petitioners have a valid export licence. this is indicated in para 4 page 40 of the paper-book. the rest of the 300 bags which contain solid pieces of heartwood of weight very much higher than 50 grams per piece (says learned addl. solicitor general) cannot be permitted to be exported" therefore the department has no objection to permit export of sandal wood pieces of 50 gms in weight or less which according to the department would be "sandal wood flakes" permissible for export and covered by licence in question. it is not disputed that there is no definition of sandal wood flakes either in the customs act, 1962 or in the andhra pradesh forest rules. we feel that the department before taking the stand that part of the goods were not sandal wood flakes; in the absence of any definition in regard to the sandal wood flakes in any act or rules, should have chosen to invite the opinion of the competent authority like the conservator of forest or should have done some market enquiries in this regard. unfortunately nothing had been done. we also take note of the fact that the goods in question are not dutiable and does not have any revenue implication so far as the department is concerned. therefore, in the facts and circumstances of the case, in our view, the whole controversy seems to be academic since even according to department sandal wood flakes of 50 gms per piece or less are permissible for export under the licence. the learned adjudicating authority should have directed mutilation of the goods to the size of 50 gms or less when the appellant undertook to do the same as clearly set out in the reply to the show cause notice and permitted export of the goods to earn valuable foreign exchange by reserving the right of the department to proceed against the appellant for penal consequences regarding mis-declaration of value etc. keeping in mind the fact that the appellant has been permitted to export the goods where the weight of the sandal wood flakes was 50 gms or less and also keeping in mind the fact that the department had no objection for export of such goods as per the order of the supreme court dated 27-8-1993 in such a situation, and also keeping in mind the fact that the goods do not involve any duty or revenue implication, we are inclined to think that absolute confiscation of the goods is not called for. therefore, for the reasons stated above, we modify the order of absolute confiscation and permit the appellant to redeem the goods for export after reducing the size of the sandal wood flakes to 50 gms or less in weight to the satisfaction of the authorities and the exporter shall bear the cost in this regard. since the adjudicating authority had found substantial portion of the goods over 50 gms in weight not coming within the mischief of the expression "sandal wood flakes and saw dust" we hold that technically the goods as presented for export as above had become liable for confiscation and in this view of the matter we uphold the confis-cability of the same. so far as the value of the goods is concerned, we agree with the submission of the learned sdr that if the size of the goods is reduced to 50 gms per piece or less the value would come down to rs. 4500 us $ per mt. since we note that no market enquiry with reference to value has been done by the adjudicating authority and the value as given by the appellant had been accepted by the adjudicating authority in regard to 100 pieces where the weight was 50 gms per piece or less, consistent with the same stand, while modifying the absolute confiscation, we permit the appellant to redeem the goods on payment of rs. 3,00,000/- (rupees three lakhs) in conformity with the stand taken by the department in regard to value of the goods permitted for export. the appellant shall exercise the option of redemption within 15 days from the date of receipt of this order. in this context we also take note of the order of addl. collector of customs, calcutta dated 18-7-1991 in order no.5/92 levyng a fine of rs. 10,000/- in lieu of confiscation in respect of similar goods valued at rs. 10,00,000/-. in the facts and circumstances of the case, we reduce the penalty on the appellant to rs. 25,000/- (rupees twenty-five thousand). the appeal is disposed of in the above terms.

Judgment:
1. This appeal is directed against the order of the Collector of Customs and Central Excise, Visakhapatnam, dated 2-4-1993 absolutely confiscating sandalwood pieces weighing 19.696 MT packed in 380 gunny bags valued at Rs. 45,00,559 FOB under Section 113(d) & (e) of the Customs Act, 1962 read with Section ll(2)(u) of the said Act and Section 11(1) of Foreign Trade (Development & Regulation) Act, 1992 and Section 18(l)(a) and Section 67 of the Foreign Exchange Regulation Act, 1973.

2. The appellant filed Shipping Bill No. 1382, dated 12-3-1993 for export of certain goods said to be sandalwood to M/s. China Joss Stick Factory Co. Ltd., Taiwan, and had given the following description in the shipping bill:SI. No. Description No. of bags Weight FOB value Export of the G/N Rs. Licence No. goods1.

Sandal 400 20.720 MT 28,22,027/- 0034037 wood 20.000 MT 12-11-1992 flakes issued by Controller When the Customs authorities inspected and examined the goods on 14-3-1993 they effected seizure of the same on 16-3-1993 under a mahazar as per law on the ground that the goods that were sought to be exported did not conform to the statutory requirements in terms of the licence and the value of the goods was also misdeclared. On examination of the goods, the Department found the details in regard to the various lots as under :SI.Description of the Marks/ No. of Total ApproximateNo.goods Grade bags weight weight of each MT piece1.

Sandal wood flakes SB B 20 1.024 less than 50 gms.

thin flat pieces/2.

Sandal wood split SB M 80 4.096 less than 50 gms.

pieces of irregular3.

Sandal wood SB R 300 15.600 Weight ranging pieces roughly of from 30 gms to 300 rectangular shape gms.

with thickness On 19-3-1993 show cause notice was issued to the appellant by the Department alleging inter alia that out of the total quantity of the goods only 20 bags weighing 1.024 MT were sandal wood pieces permissible for export and covered by licence and 80 bags weighing 4.096 MT were less than 50 gms and the sandal wood split pieces were of irregular sizes of varying length from 3" to 8" in diameter. The Department further alleged that the balance 300 bags weighing 15.600 MT comprised sandal wood pieces of weight ranging from 30 gms to 300 gms.

The Department further alleged in the show cause notice that the value of the goods would be 8500 US $ per MT and subsequently under the impugned order it was reduced to Rs. 7500 US $ per MT. The appellant gave reply to the show cause notice contending that the appellant had exported only sandal wood flakes permissible for export and were fully covered by the licence in question and that the appellant was fully prepared to reduce the weight to less than 50 gms by cutting the bigger flakes into smaller flakes as desired by the Department. It was further urged that there was no duty at all involved in the export and there was also no revenue loss to the Government and the appellant would be earning valuable foreign exchange by exporting the goods to a foreign country. It was further urged that there was no mis-declaration with reference to the value which had been declared by the buyer as per the contract entered into and the licensing authorities were also satisfied with the contract, which the appellant had entered into with the foreign buyer, in regard to the value of the goods and it is only on being satisfied with the value of the goods the licensing authorities after accepting the value, issued the licence in question and as such in the absence of any duty or revenue implication it is not open to the Customs authorities to question the correctness of the grant of licence issued after acceptance of the value of the goods in question. It was further urged that the appellant himself had exported similar goods of irregular size at price of 4500 US $ per MT under Bill No. 1070 dated 24-2-1983 and also another consignment of similar goods had also been exported by some party for similar value through another export.

3. During the pendency of the adjudication the appellant filed a Writ petition before the High Court of Andhra Pradesh in WP No. 6288/93 and the High Court by its order dated 18-5-1993 directed the appellant to deposit Rs. 5 lakhs towards penalty and Rs. 25 lakhs as Bank guarantee and also directed the appellant to furnish a security for Rs. 20,00,000/- for release of the goods. The appellant thereafter moved the High Court seeking a clarification of this order and the High Court by its order dated 19-5-1993 clarified that instead of the appellant furnishing a security, appellant should give a bank guarantee for Rs. 45 lakhs and permitted the appellant to export the goods to Taiwan. Sub sequent to this order of the High Court the Central Govt. Standing Counsel moved the High Court on 12-6-1993 stating that the Central Government objected to the export and prayed for stay of the operation of that part of the order of the High Court permitting the appellant to export the goods to Taiwan. The appellant also by application dated 4-6-1993 prayed that the case may be posted before the Division Bench which passed the earlier order and accordingly the earlier Bench which initially heard the matter, had passed an order dated 19-7-1993 permitting the appellant to export the goods in question. Aggrieved by the Order of the High Court, the Department moved the Supreme Court by way of a Special Leave Petition and the Supreme Court by order dated 27-8-1993 [since reported in 1993 (68) E.L.T. 513 (SC)] permitted the appellant to export 100 bags of sandal wood pieces out of the total 400 bags which according to the Department contained sandal wood pieces of less than 50 gms in weight and directed the High Court of Andhra Pradesh to dispose of the Writ petition not later than 8 weeks from the date of the order of the Supreme Court and further directed this Tribunal to dispose of the appeal within 2 months from the date of order i.e. 27-8-1993. The proceedings instituted by the Department eventually culminated in the impugned order appealed against.

4. As directed by the Supreme Court by its order dated 27-8-1993 cited supra directing this Tribunal to dispose of the appeal within 2 months from 27-8-1993 this Bench fixed this appeal for disposal today after due notice and with the consent of the parties.

5. The learned Counsel for the appellant reiterated the pleas canvassed in the reply to the show cause notice and contended that the goods are not dutiable and there is no revenue implication and the licence has been granted to the appellant for export of the goods viz. sandal wood flakes. So far as the export licence is concerned it merely mentions sandal wood flakes and saw dust. The appellant also entered into the contract on 11-9-1991 with the Buyer M/s. China Joss Stick Factory Company Ltd., Taiwan and only to export sandal wood flakes and saw dust and as per the contract dated 11-9-1991 the appellant would send sandal wood flakes and saw dust of best quality and the buyer was not "particular about the shape, size or weight of the sandal wood pieces as we are going to make into powder for our end use". It was further urged that there is no definition as to what constitutes or connotes sandal wood flakes and the adjudicating authority has merely borrowed the dictionary meaning which is also not against the appellant. The Department itself before the Supreme Court, as seen from the order of the Supreme Court dated 27-8-1993, stated that the Department had no objection to export sandal wood flakes of the weight of 50 gms and less and it is on the basis of this plea of the Department that the Supreme Court directed export of sandal wood flakes of 100 bags. It was urged that the appellant has absolutely no objection, as reiterated in the reply to the show cause notice, to have the pieces reduced to weight of 50 gms and less and, therefore, the appellant may be permitted to export the goods in terms of the order of the Supreme Court cited supra. It was further urged that the goods do not involve any duty or have any revenue implication and it is not the case of the Department that the appellant stands to gain by not mutilating the goods. It was further submitted that the appellant was not actuated by any mala fides and was not to gain monetarily by exporting bigger size. The learned Counsel in this context submitted that the Department also has not alleged in any way that the appellant stood to gain by exporting bigger pieces. So far as the charge relating to misdeclaration in regard to the value is concerned, the learned Counsel contended that the Department had not conducted any investigation with reference the value of similar goods and indeed did not have to say anything against the appellant particularly in respect of the past instances where similar goods were exported for similar value or lesser value. The learned Counsel further submitted that the appellant may be permitted to export the goods by mutilating the bigger sizes into smaller ones of 50 gms or less in weight, in the interests of justice.

6. Shri J.P. Gregory, the learned SDR submitted that on the findings of the Collector, the goods which do not conform to flakes have been ordered to be confiscated and this exercise of discretion by the learned Collector may not call for interference. The learned SDR further submitted that the Department had not objected to the export of 100 bags, before the Supreme Court, where the weight of the goods was less than 50 gms per piece. The learned SDR did not dispute the fact that the appellant had export licence permitting export of sandal wood flakes and saw dust. Regarding the value of the goods the learned SDR submitted that if the goods are mutilated into 50 gms or less in weight, the value would come down as contended by the learned Counsel for the appellant rendering the goods permissible for export and covered by the licence in question.

7. We have carefully considered the submissions made before us. The question that would arise for our consideration in the appeal is whether the goods in question are covered by the licence coming within the mischief of the expression "sandal wood and saw dust". Secondly, whether there is evidence to hold that the appellant was guilty of misdeclaration in regard to the value of the goods in question. We have gone through the entire records and heard both parties extensively and considered the submissions. The appellant has entered into a contract for export of sandal wood flakes and saw dust. The department also, it is seen that out of 400 bags that were sought to be exported, permitted the appellant to export 100 bags of sandal wood flakes of 50 gms in weight or less. This is evidenced by the order of the Supreme Court dated 27-8-1993 the relevant portion of which reads as under : "Learned Additional Solicitor General rightly submits that the authorities have no objection to the export of 100 bags out of the 400 bags sought to be exported which contain sandal wood "flakes and chips" of a weight of less than 50 gms per piece for which petitioners have a valid export licence. This is indicated in para 4 page 40 of the paper-book. The rest of the 300 bags which contain solid pieces of heartwood of weight very much higher than 50 grams per piece (says learned Addl. Solicitor General) cannot be permitted to be exported" Therefore the Department has no objection to permit export of sandal wood pieces of 50 gms in weight or less which according to the Department would be "sandal wood flakes" permissible for export and covered by licence in question. It is not disputed that there is no definition of sandal wood flakes either in the Customs Act, 1962 or in the Andhra Pradesh Forest Rules. We feel that the Department before taking the stand that part of the goods were not sandal wood flakes; in the absence of any definition in regard to the sandal wood flakes in any Act or Rules, should have chosen to invite the opinion of the competent authority like the Conservator of Forest or should have done some market enquiries in this regard. Unfortunately nothing had been done. We also take note of the fact that the goods in question are not dutiable and does not have any revenue implication so far as the department is concerned. Therefore, in the facts and circumstances of the case, in our view, the whole controversy seems to be academic since even according to Department sandal wood flakes of 50 gms per piece or less are permissible for export under the licence. The learned adjudicating authority should have directed mutilation of the goods to the size of 50 gms or less when the appellant undertook to do the same as clearly set out in the reply to the show cause notice and permitted export of the goods to earn valuable foreign exchange by reserving the right of the Department to proceed against the appellant for penal consequences regarding mis-declaration of value etc. Keeping in mind the fact that the appellant has been permitted to export the goods where the weight of the sandal wood flakes was 50 gms or less and also keeping in mind the fact that the Department had no objection for export of such goods as per the order of the Supreme Court dated 27-8-1993 in such a situation, and also keeping in mind the fact that the goods do not involve any duty or revenue implication, we are inclined to think that absolute confiscation of the goods is not called for. Therefore, for the reasons stated above, we modify the order of absolute confiscation and permit the appellant to redeem the goods for export after reducing the size of the sandal wood flakes to 50 gms or less in weight to the satisfaction of the authorities and the exporter shall bear the cost in this regard. Since the adjudicating authority had found substantial portion of the goods over 50 gms in weight not coming within the mischief of the expression "sandal wood flakes and saw dust" we hold that technically the goods as presented for export as above had become liable for confiscation and in this view of the matter we uphold the confis-cability of the same. So far as the value of the goods is concerned, we agree with the submission of the learned SDR that if the size of the goods is reduced to 50 gms per piece or less the value would come down to Rs. 4500 US $ per MT. Since we note that no market enquiry with reference to value has been done by the adjudicating authority and the value as given by the appellant had been accepted by the adjudicating authority in regard to 100 pieces where the weight was 50 gms per piece or less, consistent with the same stand, while modifying the absolute confiscation, we permit the appellant to redeem the goods on payment of Rs. 3,00,000/- (Rupees Three Lakhs) in conformity with the stand taken by the Department in regard to value of the goods permitted for export. The appellant shall exercise the option of redemption within 15 days from the date of receipt of this order. In this context we also take note of the order of Addl. Collector of Customs, Calcutta dated 18-7-1991 in Order No.5/92 levyng a fine of Rs. 10,000/- in lieu of confiscation in respect of similar goods valued at Rs. 10,00,000/-. In the facts and circumstances of the case, we reduce the penalty on the appellant to Rs. 25,000/- (Rupees Twenty-five thousand). The appeal is disposed of in the above terms.