Customs, Excise and Gold Tribunal - Mumbai
La Grande Projects Limited vs Commissioner Of Customs on 4 September, 2006
ORDER
Jyoti Balasundaram, Vice President
1. M/s. La Grande Projects Limited of Tikamgarh, Madhya Pradesh (herein after referred to as "the importer") imported 1669 used Diesel Car Engines from Singapore declaring them as Capital Goods for Granite Processing Plant. On enquiries made by the Customs Authorities from the Secretariat of Industrial Approvals (SIA), it was clarified that used Diesel Car Engines were not permitted to be imported under the licence granted to the Importer. Show cause notice proposing confiscation of the imported goods and proposing imposition of penalty was therefore issued to the Importer. The notice also proposed penal action against Shri Natwar Dalmia, authorized signatory and Shri Aditya Kumar Dalmia and Ms Ritu Dalmia, the Directors of the Importer Company. The notice was adjudicated by the Commissioner of Customs, who ordered confiscation of the goods under the provisions of Section 111(d), (f) and (n) of the Customs Act, 1962 with option to redeem the same on payment of fine of Rs. 125 lakhs, and also imposed penalty of Rs. 5 lakhs on the importer. He dropped the proceedings against co- noticees. The importer is in appeal against the confiscation and penalty, while the Revenue in its appeal seeks enhancement of fine and penalty on the importer and imposition of penalty on its Directors, of the Importer company.
2. The Tribunal had earlier disposed of these appeals by Final Order No. A/850 to 853/WZB/05/CI dated 18/7/05, wherein, following the orders passed by the Northern Zonal Bench of the Tribunal in the case of the same importer covering import of identical goods, the redemption fine was reduced to 30% and the penalty was enhanced to 5% of the cif value of the goods. Aggrieved by this order, the Revenue preferred Customs appeal No. 13 of 2006 before the Hon'ble Mumbai High Court which by its Order dated 21/3/2006 remitted the matter back to the Tribunal for fresh decision as under:
We considered the submissions of the learned senior counsel and the counsel. We also considered the order dated 18th July, 2005 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench (for short, the Tribunals). In our view, the order of the Tribunal is unsustainable since it does not disclose any reason much less justifiable reason for reducing the redemption fine to 30% and penalty to 5% of the value of the goods. It is true that the order dated 2nd May, 2005 passed by the Tribunal in Appeal No. C-276/97-C was not challenged by the Department wherein redemption fine and penalty were reduced to 30% and 5% of the cif value of the goods respectively but the said order, surely, could not have been relied upon as a precedent binding in the facts and circumstances of the present case as the said order did not disclose any reason for reduction in the redemption fine and the penalty to 30% and 3% of the CIF value respectively. It needs no emphasis that upon the order of confiscation of the goods having been passed under Section 111(d), (f) and (n) of the Customs Act, 1962, if an option is given to redeem confiscated goods, the question of redemption fine and penalty shall depend on the facts and circumstances of each case. Isolated or repeated conduct of the petitioner is an important aspect that needs to be taken into consideration along with all other relevant factors justifying redemption of confiscated goods on payment of particular fine and penalty. No hard and fast rule can be applied. Each case has to be seen, examined and considered on its own facts. Each case of redemption fine and imposition of penalty, in our opinion, has to be independently examined; other cases cannot be binding as a precedent but at best give some guidance to enable the authority to reach the conclusion as to on what payment of fine and penalty, redemption of the confiscated goods must be permitted. In our considered view, the order passed by the Tribunal interfering with the order of the Commissioner does not meet the test of reason and, therefore, deserves to be set aside. The aforesaid questions stand answered accordingly.
3. We have heard Shri K.K. Anand, counsel for the importers and Shri R.B. Pardesi, D.R. for the Revenue. The importers have filed an application for permission to raise additional grounds and bring on record additional evidence, which we shall consider first. The applicants submit that the import of second hand diesel engines was a bonafide import which was duly covered by SIA approval and that capital goods import list was attested by SIA, that no redemption fine can be imposed by the present proceedings as no margin of profit accrued to the importers. They also submit that the Customs authorities have already auctioned 248 diesel engines even during the pendency of Writ Petition No. 1127 of 1997 before the Bombay High Court challenging the auction. They therefore, seek direction from the Tribunal for receipt of the auction proceeds together with interest. They further submit that the clarification given by the SIA on 6.11.96 is against the expressed language of the licence granted to them permitting import of diesel engines of 1000 - 2500 CC capacity. Lastly, they raise the ground that no penalty can be imposed upon them in the light of the fact that their import was bonafide and on the strength of the permit granted by the SIA.
4. Ld. D.R. does not raise any objection to the admission of the Misc. application. The additional grounds are either in furtherance on the grounds already raised in the importers' appeal or are points of law essential for disposal of the appeals. The additional evidence comprises documents which were either existing when the impugned order of the Commissioner was passed and are in the nature of representations to the custom authorities or are in the nature of correspondence with the department in respect of the auctioned goods and the additional evidence is also being filed to arrive at the quantum of margin of profit or loss which would be available to the importers only when the goods in dispute are sold by the importers and would not be known to them at the time of clearance of the goods. Moreover, ascertainment of actual margin of profit is absolutely essential in this case. Since the additional grounds and evidence are vital for the purpose of disposal of the present appeals, the Misc. application is allowed, in the interests of justice, to the extent that it relates to determination of quantum of fine and penalty since the Hon'ble Bombay High Court has remitted the case only for determination of quantum of fine and penalty.
5. Now we take up the appeals for hearing. We have heard both sides and perused the records of the case and the written submissions filed by both sides under our direction.
6. The confiscation of 1669 numbers of used Diesel Car Engines is challenged in the appeal on the ground that these imports are bonafide being covered by the capital goods list duty approved by the SIA, as one import licence for 4000 pc. of second hand diesel was issued by the DGFT to M/s. Metchem Impex, Bangalore, who were permitted to clear used car diesel engines against the said licence. The imports were effected only against import licence covering goods approved by SIA. As regards the quantum of redemption fine and personal penalty, the certificate dated 3.4.06 of the Chartered Accountant, demurrage receipts, container detention charges etc. are relied upon to show that considerable amounts were spent by the appellants to put the imported goods in the market. We have seen the above certificate. It shows that in fact a loss of Rs. 3,77,235.59 has been incurred by the appellants. The appellants had sold diesel engines at the rate of Rs. 22,715 per piece; during the pendency of the appeal, the department had auctioned 248 pcs of used diesel engines at the rate of Rs. 22,367 per pc. The objective of imposing redemption fine is to wipe out the importer's margin of profit and since in the present case, the certificate of Chartered Accountant shows that the appellants actually suffered a loss, ordinarily, no redemption fine is called for Chartered Accountant's Certificate is reproduced below:
We audited the accounts for year ending 31st March, 1996& onwards of M/s. La Grande Projects Ltd. having its Registered Office at 8, Camac Street, Kolkata and Corporate Office at New Delhi, as an statutory auditors of the company and certify that the Annual Return required under the provisions of the Companies Act, 1956 to be filed with the Registrar of Companies were filled with the Registrar of Company, West Bengal at Kolkata alongwith Balance Sheet and Profit & Loss Account for respective years.
The company sold 1421 units of imported used Diesel Engine which have been account for in the above annual accounts. The cost of import including various charges and expenses of the same has been given in the annexed statement, based on the accounts of the company and Balance Sheets & Annual Return filled with the Registrar of Company and the informations and explanations given to us and records produced (which are also enclosed herewith) subject to the note that original demurrage receipts for consignment cleared in August 1997 could not be produced before us, however, the demurrage accordingly has been worked out on the basis of rates per ton/day in previous consignment. For Chaturvedi Manohar & Associates, Chartered Accounts. Sd/- (M.L. Chaturvedi) Partner.
Statement of Margin of Profit in respect of 1421 pcs. Used Diesel Engine imported by La-Grande Projects Ltd.
S.No. Particulars Amount (Rs)
(i) CIF Value of goods on the basis of Bank
Bank Payment 1,43,67,2988.00
(ii) Interest paid to Bank for delayed payment 8, 30,108.59
142 days @ 12% per annum on Rs. 1,77,81,082.00
(iii) Import duty paid 57,91,952.00
(iv) Clearing expenses viz. CHA, Local Transport
Landing charges, Labour charges(Loading&
Unloading stacking) 11,16,530.00
(v) BPT demurrage charges 37,60,150.00
(Details & Receipts enclosed)
(vi) Container Detention charges 5,08,787.00 23,54,737.00
(Details & Receipts enclosed 9,50,000.00
8,95,950.00
(vii) Cost for Broken moving parts, missing 34,66,508.00
Self, dianmo, Pumps etc. Labour charges
(Details enclosed)
(viii) Cash Discount@ 3% on Sale Price of 9,68,352.00
Rs. 3,22,78,400.00
Total cost for 3,26,55,635.59
1421 Pcs (A)
Sales (B) 3,22,78,400.00
Net Loss 3,77,235.59
As per certificate dated 3rd April, 2006
Sd/- Chartered Accountant
7. However, in the light of the Bombay High Court remand order, we are required to determine the appropriate quantum of fine to be imposed upon the appellants. The submission of the appellants that they were under a bonafide belief that the imports were covered by SIA approval and therefore, they were not liable to penalty, cannot be accepted for the reason that the Hon'ble Bombay High Court has directed us to determine what would be the appropriate amount of penalty. We proceed to do so. As regards the plea for receipt of auction proceeds of 248 used diesel car engines, this not being covered by the High Court order of remand, is not an issue before us.
8. The ld.D.R. does not dispute the contents of the Chartered Accountant's certificate but only contends that local market value of the confiscated goods was Rs. 7.93 crores and as per the market survey, the margin of profit was 169% whereas, the redemption fine imposed was only 71% and the auction sale could not provide the correct criterion as the price fetched therein does not represent standard market price. The ld.D.R., relied upon the earlier order of the Tribunal dated 5.8.02, wherein the penalty was increased from Rs. 5 lakhs to Rs. One crore to support his plea for enhancement of the penalty. However, we are unable to accept the contention of the D.R. that LMV was not challenged as we note from para 32(1) of page 36 of the Adjudication order that the importers have challenged the LMV by submitting as "In the Panchanama the value is Rs. 5,84,15,000/- and market value is Rs. 11,68,900/-, whereas in this show cause notice the CIF value is admitted to be Rs. 1,73,47,655/-. Therefore, the market value has to be in the same proportion and it should work out to Rs. 3,46,95,310/-".
9. As regards the contention of the ld.D.R. that the department had conducted market enquiry before arriving at the local market value, no such enquiry report has been brought on record. There is no mention of any such report being relied upon in the list of relied upon documents and there is only a reference to Annexure IIB enclosed alongwith the show cause notice which gives the details of valuation of used diesel engines vide para 27 of the show cause notice. This annexure is only in a tabulated form giving LMV per engine - there are no details of any market enquiry report. Further, there is nothing on record to show that market enquiry was conducted in respect of seized second hand diesel engines. For these reasons, we hold that it is not possible to accept that LMV of the seized goods was Rs. 7.93 crores. We further find that during the course of investigation the department had relied upon the statements of Shri Aditya Kumar Dalmia recorded on 18.9.96, 31.10.96 and 1.11.96, wherein, he has stated that depending upon their condition, the engines last for two or three months. Some of the engines were obsolete at the time of import itself; selling price of smaller capacity engines varied from Rs. 15,000 to Rs. 20,000/-; when asked what he meant by obsolete diesel engine, he stated that it means engines which need major overhauling and which cannot be repaired etc. These averments had not been controverted by the department. Since it is a matter of common knowledge that the price of second hand goods depends upon several factors such as its extent of use, present condition, year of manufacture etc., no strait jacket method can be adopted to arrive at the market value of second hand goods unless the same are physically shown to the experts for the purpose of determining the value. In the present case, there is evidence in the form of auction price and also sale price realized by the appellants which are more or less comparable. Although, we agree with the ld.D.R. that the auction price cannot form the sole basis for arriving at the local market price, since auction price and actual price realized is comparable, they indicate the correct sale price of the goods in question. The objection raised by the ld.D.R. to the claim for various deductions as per the Chartered Accountant's certificate is over-ruled for the reason that no objection was raised to the admission of the additional evidence showing the expenses incurred by the importers. Tribunal's order dated 5.8.02 relied upon by the ld.D.R. was an ex-parte order and the Hon'ble Bombay High Court vide its order dated 13.6.05 set aside both the orders viz. the orders dated 5.8.02 and 11.3.2005 and directed the Tribunal to decide the case on merits and pursuant to such direction, the Tribunal has disposed of the appeals of importers by order dated 18.7.05 which has now been remanded by Hon'ble Bombay High Court order dated 21.3.06 and no reliance can be placed on an order which is no longer in existence.
10. We also note that the importers are not repeated offenders. 4000 diesel engines had been imported on the basis of capital goods list permitting import of used small diesel engines with accessories at three different places i.e. Goa (20 containers) ICD, Pitampur (5 containers) and Mumbai (15 containers) forming the subject matter of the present appeals. In other words, the imports are under a single capital goods list. Keeping in view the totality of circumstances particularly the fact that the importers have suffered a loss and also the fact that there is nothing on record to discredit the Chartered Accountant's certificate, we reduce the redemption fine to 10% of the cif value, as we hold that this is sufficient to meet the ends of justice and it is appropriate in the present case in the light of the Tribunal's earlier orders in the case of CC, Calcutta v. Star Enterprises , Texnomac Traders v. CC, Kandla , CC, Nava Sheva v. Marmo Classic and Opus Asia Technologies Pvt. Ltd v. CC, Chennai . As regards penalty, we accept the importers' contention that there was reasonable doubt regarding coverage of second hand car diesel engines under the SI Approval (it is only subsequent to the import that the SIA clarified vide its letter dated 6.11.96 that used diesel car engines were neither capital goods nor were they approved by SIA as such for 100% granite industry.) We have already found that the importers have suffered loss. Therefore, we are of the view that penalty of 5% of the cif value would be sufficient to meet the ends of justice and also note that in the cases of imports by Sunshine Automobiles v. CC , Shree Balaji Automobiles v. CC and Sagar Auto Works v. CC on import of identical goods, the Tribunal has reduced penalties to the above extent and none of these orders have been challenged by the Revenue and have thus attained finality. Thus the redemption fine and penalty are reduced to 10% and 5% respectively of the admitted CIF value of the goods i.e. of Rs. 1,73,47,655.
11. In the result, appeal No. C/330/97 of the importer is partly allowed to the above extent while appeal No. C/9/98 of the Revenue is rejected.