D.M. Woollen Mills Pvt. Ltd. Vs. Collector of Customs - Court Judgment

Excerpt:
1. this appeal is directed against order-in-orignal no.s/10-46/91-gr-3, dated 15-5-1991 of the additional collector of customs, bombay imposing personal penalty of rs. 11,000/- on the appellant vide section 112 of the customs act, 1962.2. the appellants imported consignment of 56 bales containing 15,746 kgs declared to be woollen rags completely pre-mutilated and claimed clearance under ogl vide appx. 6, list 8, part i, entry no. 590 of the policy book am 1990-93. the goods, on examination, were found to be ranging from 1 foot to 18 feet in length and 2 to 4 inches in width and were therefore not considered as completely pre-mutilated as required vide public notice 60/88. the goods were therefore felt to be liable to confiscation vide sections 111(d) and (m) of the customs act and appellants as liable to penalty vide section 112(a) of the said act.the appellants waived the show cause notice, and at the personal hearing expressed willingness to further mutilate them. the adjudicating authority, thereupon ordered release of goods after further mutilation to the satisfaction of the officers, but imposed personal penalty as indicated above.3. mr. madhu patel, the ld. advocate for the appellants has submitted that, there was absolutely no scope for detention of goods on the ground that the items were not properly mutilated, and there was no misdeclaration at all. he pleads that thus, there is no scope for imposition of penalty. the ld. advocate further pleads that, issue as to proper classification was also raised by the department, and testing of the goods was also done, and thereafter, it was realised that classification as woollen rags was proper. as is submitted by the ld.advocate, the objection raised which ultimately stood resolved in favour of the appellants took unduly long time, resulting in appellants' liability to pay heavy demurrage without any fault on their part, and hence, while ordering release, the order for issue of detention certificate ought to have been passed. as however, that was not passed, the appellants vide their letter dated 22-7-1991, wrote to the collector to order issue of detention certificate but vide letter dated 13-9-1991 the said request was turned down. the ld. advocate submits that detention/demurrage charges have come to rs. 2,35,000/- and hence, in the interest of justice and fairness, the tribunal ought to direct the respondents to issue detention certificate. the ld.advocate has referred to the decisions (i) of calcutta high court in suresh kumar v. board of trustees for the port of calcutta, 1989 (37) e.l.t. 248 (cal.), (ii) of karnataka high court in equipment sales corporation v. asstt. collector, 1989 (43) e.l.t. 256 (kar.), (iii) bombay high court in metal distributors ltd. v. union of india, 1988 (37) e.l.t. 512 and union of india v. sampat raj dugar, 1991 (56) e.l.t. 739 (bom.).4. mr. krishnamurthy, the ld. jdr, has, however, pleaded that the appellants who are the regular importers, ought to have known of the requirement of the indian customs, as to the standard of pre-mutilation already made public vide public notice no. 60/88, issued much prior to the subject import. he has also pleaded that the prayer regarding detention certificate is misconceived and the tribunal is not invested with jurisdiction.5. considering the submissions made and going through the records, when the goods have been ordered release with further mutilation, without any order for confiscation and/or fine, the said aspect need not be examined. the appeal is also not directed on that issues. it may however be observed that order of confiscation is rightly not passed, as the judicial pronouncements have laid down that when release on further mutilation is ordered, the requirement for permissible import is deemed to have been complied with. the gujarat high court have, in rupani spinning mills v. union of india, 1992 (60) e.l.t. 77 (guj.) however held that penalty could, in such cases, be imposed.6. the first question that requires to be considered is whether in the instant case, penalty under section 112(a) of the customs act is called for and if yes, whether the quantum of penalty is disproportionate to the contravention alleged.7. the appellants themselves plead that they are the regular importers of woollen rags and it is duly established that woollen rags imported were such, which required further mutilation before clearance. the subject import is in the year 1990. it cannot be denied that the indian importer has to comply with the directions issued by the indian customs, and cannot plead, for the purpose of exonerating their liability, that the meaning given by the indian customs is more stringent as compared to the meaning given in the other countries.under the import policies, declared from time to time, import of woollen rags has been made permissible, and the customs authorities, whose duty it is to see that imports are as per the policy provisions, have laid down guidelines as to what would tantamount to "rags". the bombay customs have issued public notice no. 173/85, dated 13-12-1985 laying down guidelines as to what could be described as rags.subsequent public notice no. 60/88 also has laid down certain guidelines. the appellants being regular importers, cannot be taken to have not known this. therefore, while ordering for supply of rags to a foreign suppliers, it would be incumbent upon them to clearly and unequivocally instruct them to supply only such item which passes the standard laid down by the indian customs and if they even then, cause the import to be made of the items which could not meet with the prescribed standards not only the items became liable to confiscation both under sections 111(d) and (m) of the act, but make them liable to imposition of penalty vide section 112(a) of the customs act.8. here, however, it appears that items imported are not the garments or pieces of garments which could be assembled or re-stitched to make a garment. the only difficulty in meeting with the required standard of rags as laid down by the indian customs, is that they were of 1 to 8 ft in length, whereas, the length ought not to have exceeded 1 ft to 11 /2 ft. the width is only about 4 inches.9. the circumstances, thus indicate that, taken penalty of rs. 5000/-could meet the ends of justice. the penalty is therefore reduced from rs.11,000/- to rs. 5000/- (rupees five thousand only).10. as regards the second contention namely a plea for ordering issuance of detention certificate, the judicial pronouncements referred to by the ld. advocate do lay down the criteria for issuance of such certificate but the question here is, whether the tribunal, exercising powers under section 129a of the customs act, can direct issuance of such a certificate. the judicial decisions cited are all relating to the writ petitions filed directly before the high court. though the judgment of karnataka high court in re : equipment sales corporation (supra) is after the order passed by the tribunal, and cause for issuance of detention certificate has also arisen on the decision given by the tribunal, the hon'ble high court has not made any observation that the tribunal ought to have ordered issuance of such a certificate.11. the issuance of detention certificate has its nexus to the provisions of section 17 of the customs act, 1962, which provides that assessment ought to be done without undue delay and a corresponding duty is imposed on the customs authorities to issue detention certificate, if the assessment procedure is unduly delayed. that however, is purely an executive function, section 129a of the customs act, on the other hand, invests the tribunal with the powers to hear appeal against the decision or order passed by the collector of customs as "adjudicating authority". the word "adjudicating authority" is defined in section 2(1) to mean "any authority competent to pass any order or decision under this act...". the definition so given has to be read in conjunction with the provision of section 122 of the act, which provides for "adjudication of confiscation and penalties". this does not and cannot include the liability for assessment without delay and consequential issuance of detention certificate, and when the order is not taken as passed under any adjudication proceedings, the same cannot be deemed to have been passed by an adjudicating authority and thus, it cannot fall within the purview of the jurisdiction of the tribunal whose jurisdiction is statutorily prescribed under section 129a of the customs act.12. the collector, as the executive head of the customs house, is supposed to pass several types of orders, and interpreting the word "order" as included in the definition given at section 2(i) of the customs act, 1962, to mean any order that he passes under the act, may not only lead to hazardous results but would tantamount to enlarging the scope of the provisions of section 129a of the act, and invest the .appellate powers in the tribunal which are not statutorily invested.the "orders" therefore, mean only those passed during adjudication, and not in the executive functioning, and any order passed in relation to the provisions of section 17 of the customs act, cannot be taken as an order under any adjudication proceedings.13. in the result, the prayer of the ld. advocate for the appellants that the direction be given to issue a detention certificate cannot be entertained. the remedy, if any, would lie elsewhere.14. the order of the authority is therefore confirmed with the modification that personal penalty is reduced to rs. 5000/- (rupees five thousand only). appeal is accordingly disposed of. consequential relief, if any, to follow.

Judgment:
1. This appeal is directed against order-in-orignal No.S/10-46/91-Gr-3, dated 15-5-1991 of the Additional Collector of Customs, Bombay imposing personal penalty of Rs. 11,000/- on the appellant vide Section 112 of the Customs Act, 1962.

2. The appellants imported consignment of 56 bales containing 15,746 kgs declared to be woollen rags completely pre-mutilated and claimed clearance under OGL vide Appx. 6, List 8, Part I, Entry No. 590 of the Policy Book AM 1990-93. The goods, on examination, were found to be ranging from 1 foot to 18 feet in length and 2 to 4 inches in width and were therefore not considered as completely pre-mutilated as required vide Public Notice 60/88. The goods were therefore felt to be liable to confiscation vide Sections 111(d) and (m) of the Customs Act and appellants as liable to penalty vide Section 112(a) of the said Act.

The appellants waived the Show Cause Notice, and at the personal hearing expressed willingness to further mutilate them. The adjudicating authority, thereupon ordered release of goods after further mutilation to the satisfaction of the officers, but imposed personal penalty as indicated above.

3. Mr. Madhu Patel, the Ld. Advocate for the appellants has submitted that, there was absolutely no scope for detention of goods on the ground that the items were not properly mutilated, and there was no misdeclaration at all. He pleads that thus, there is no scope for imposition of penalty. The Ld. Advocate further pleads that, issue as to proper classification was also raised by the department, and testing of the goods was also done, and thereafter, it was realised that classification as woollen rags was proper. As is submitted by the Ld.

Advocate, the objection raised which ultimately stood resolved in favour of the appellants took unduly long time, resulting in appellants' liability to pay heavy demurrage without any fault on their part, and hence, while ordering release, the order for issue of detention certificate ought to have been passed. As however, that was not passed, the appellants vide their letter dated 22-7-1991, wrote to the Collector to order issue of detention certificate but vide letter dated 13-9-1991 the said request was turned down. The ld. advocate submits that detention/demurrage charges have come to Rs. 2,35,000/- and hence, in the interest of justice and fairness, the Tribunal ought to direct the Respondents to issue detention certificate. The Ld.

Advocate has referred to the decisions (i) of Calcutta High Court in Suresh Kumar v. Board of Trustees for the Port of Calcutta, 1989 (37) E.L.T. 248 (Cal.), (ii) of Karnataka High Court in Equipment Sales Corporation v. Asstt. Collector, 1989 (43) E.L.T. 256 (Kar.), (iii) Bombay High Court in Metal Distributors Ltd. v. Union of India, 1988 (37) E.L.T. 512 and Union of India v. Sampat Raj Dugar, 1991 (56) E.L.T. 739 (Bom.).

4. Mr. Krishnamurthy, the Ld. JDR, has, however, pleaded that the appellants who are the regular importers, ought to have known of the requirement of the Indian customs, as to the standard of pre-mutilation already made public vide Public Notice No. 60/88, issued much prior to the subject import. He has also pleaded that the prayer regarding detention certificate is misconceived and the Tribunal is not invested with jurisdiction.

5. Considering the submissions made and going through the records, when the goods have been ordered release with further mutilation, without any order for confiscation and/or fine, the said aspect need not be examined. The appeal is also not directed on that issues. It may however be observed that order of confiscation is rightly not passed, as the judicial pronouncements have laid down that when release on further mutilation is ordered, the requirement for permissible import is deemed to have been complied with. The Gujarat High Court have, in Rupani Spinning Mills v. Union of India, 1992 (60) E.L.T. 77 (Guj.) however held that penalty could, in such cases, be imposed.

6. The first question that requires to be considered is whether in the instant case, penalty under Section 112(a) of the Customs Act is called for and if yes, whether the quantum of penalty is disproportionate to the contravention alleged.

7. The appellants themselves plead that they are the regular importers of woollen rags and it is duly established that woollen rags imported were such, which required further mutilation before clearance. The subject import is in the year 1990. It cannot be denied that the Indian Importer has to comply with the directions issued by the Indian Customs, and cannot plead, for the purpose of exonerating their liability, that the meaning given by the Indian Customs is more stringent as compared to the meaning given in the other countries.

Under the Import policies, declared from time to time, import of woollen rags has been made permissible, and the Customs authorities, whose duty it is to see that imports are as per the policy provisions, have laid down guidelines as to what would tantamount to "rags". The Bombay Customs have issued Public Notice No. 173/85, dated 13-12-1985 laying down guidelines as to what could be described as rags.

Subsequent Public Notice No. 60/88 also has laid down certain guidelines. The appellants being regular importers, cannot be taken to have not known this. Therefore, while ordering for supply of rags to a foreign suppliers, it would be incumbent upon them to clearly and unequivocally instruct them to supply only such item which passes the standard laid down by the Indian Customs and if they even then, cause the import to be made of the items which could not meet with the prescribed standards not only the items became liable to confiscation both under Sections 111(d) and (m) of the Act, but make them liable to imposition of penalty vide Section 112(a) of the Customs Act.

8. Here, however, it appears that items imported are not the garments or pieces of garments which could be assembled or re-stitched to make a garment. The only difficulty in meeting with the required standard of rags as laid down by the Indian Customs, is that they were of 1 to 8 ft in length, whereas, the length ought not to have exceeded 1 ft to 11 /2 ft. The width is only about 4 inches.

9. The circumstances, thus indicate that, taken penalty of Rs. 5000/-could meet the ends of justice. The penalty is therefore reduced from Rs.11,000/- to Rs. 5000/- (Rupees five thousand only).

10. As regards the second contention namely a plea for ordering issuance of detention certificate, the judicial pronouncements referred to by the Ld. Advocate do lay down the criteria for issuance of such certificate but the question here is, whether the Tribunal, exercising powers under Section 129A of the Customs Act, can direct issuance of such a certificate. The judicial decisions cited are all relating to the Writ Petitions filed directly before the High Court. Though the judgment of Karnataka High Court in Re : Equipment Sales Corporation (supra) is after the order passed by the Tribunal, and cause for issuance of detention certificate has also arisen on the decision given by the Tribunal, the Hon'ble High Court has not made any observation that the Tribunal ought to have ordered issuance of such a certificate.

11. The issuance of detention certificate has its nexus to the provisions of Section 17 of the Customs Act, 1962, which provides that assessment ought to be done without undue delay and a corresponding duty is imposed on the Customs authorities to issue detention certificate, if the assessment procedure is unduly delayed. That however, is purely an executive function, Section 129A of the Customs Act, on the other hand, invests the Tribunal with the powers to hear appeal against the decision or order passed by the Collector of Customs as "adjudicating authority". The word "adjudicating authority" is defined in Section 2(1) to mean "any authority competent to pass any order or decision under this Act...". The definition so given has to be read in conjunction with the provision of Section 122 of the Act, which provides for "Adjudication of confiscation and penalties". This does not and cannot include the liability for assessment without delay and consequential issuance of detention certificate, and when the order is not taken as passed under any adjudication proceedings, the same cannot be deemed to have been passed by an adjudicating authority and thus, it cannot fall within the purview of the jurisdiction of the Tribunal whose jurisdiction is statutorily prescribed under Section 129A of the Customs Act.

12. The Collector, as the executive head of the Customs House, is supposed to pass several types of orders, and interpreting the word "order" as included in the definition given at Section 2(i) of the Customs Act, 1962, to mean any order that he passes under the Act, may not only lead to hazardous results but would tantamount to enlarging the scope of the provisions of Section 129A of the Act, and invest the .appellate powers in the Tribunal which are not statutorily invested.

The "orders" therefore, mean only those passed during adjudication, and not in the executive functioning, and any order passed in relation to the provisions of Section 17 of the Customs Act, cannot be taken as an order under any adjudication proceedings.

13. In the result, the prayer of the Ld. advocate for the appellants that the direction be given to issue a detention certificate cannot be entertained. The remedy, if any, would lie elsewhere.

14. The order of the authority is therefore confirmed with the modification that personal penalty is reduced to Rs. 5000/- (Rupees Five thousand only). Appeal is accordingly disposed of. Consequential relief, if any, to follow.