Customs, Excise and Gold Tribunal - Mumbai
Marmo Classic vs Commissioner Of Customs (Ep), Mumbai on 29 April, 2002
Equivalent citations: 2002ECR205(TRI.-MUMBAI), 2002(143)ELT153(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1. The appellants are a registered SSI unit, engaged in the processing of marble blocks into slabs. They sought clearances of consignments of rough marble blocks and filed bills of entry's. The declared value of the same was accepted. The clearance was sought at nil rate of duty against DEEC advance licence dated 19-7-1995 issued in the name of M/s. Fortune Exports, Ahmedabad and transferred in favour of the appellants by the DGFT, competent authority. Pursuant to public notice dated 31-3-2001 this licence was also re-validated, as per the letter dated 20-4-2001 by M/s. Fortune Exports made to the DGFT authorities. They made the request for endorsement of the transferability to the appellants. The licence was made valid for a period of 6 months from the date of endorsement dated 26-6-2001. Release advises were issued by the Jawahar Customs House to Mumbai Custom House. Enquiries were made by the Custom House at Mumbai Port with the DGFT authorities concerned who informed the customs that the re-validation and transferability was in accordance with the Public Notice dated 31-3-2001. The licence was not suspended and/or cancelled till date and was valid for covering the imports. The goods, pending the dispute raised by the customs authorities in Bombay, were permitted to be removed under the provisions of Section 49 of the Customs Act on revenue deposit of equivalent to the duty thereon amounting to Rs. 18,59,945/-. Commissioner issued letter dated 5-2-2002 seeking effective representation on the following points :
(i) The Advance Licence No. 3494809, dated 19-7-95 and respective DEEC Book No. 172721 dated 21-7-95 was issued to M/s. Fortuna Exports. The scrutiny of the licence appear to reveal that while discharging the export obligation under the said licence the goods exported are not as per requirement of the licence. As per the licences they were required to export polished marble slabs (manufactured out of imported marble blocks), while goods exported as declared and mentioned in the Export Promotion copy of the S/Bill was of normal marble slabs. It is endorsed that the DEEC copy of the S/Bill (in absence of DEEC S/Bills) further indicates that the said S/Bills were converted from 'DEEC' to 'FREE' S/Bills' implying thereby that the exports made under the said S/Bills were not to be reckoned for the purpose of advance licence/DEEC Book.
(ii) The S/Bills which are reconstructed by ICD, Ahmedabad have only A.O.'s endorsement of reconstruction. The detail of any file nos. under which such reconstruction was allowed has not been mentioned. Hence exports made under these S/Bills cannot be taken toward the discharge of export obligation. Moreover, the export goods are declared as 'Normal Marble Slabs'. Thus the facts as stated at 2(i) above would be equally applicable in this case.
(iii) The verification of two S/Bills of JCH viz. S/Bill No. 532612, dated 10-10-94 and S/Bill No. 535534 dated 27-10-94 have endorsement of provisional assessment by Shri H. Shrivastava, Appraising Officer. They do not have endorsement of finalisation, hence the said S/Bills cannot be reckoned for DEEC logging. Moreover the export goods were Normal Marble Slabs "28 mm thickness" similar to the goods exported under other S/Bills which were converted into free S/Bill (DEEC benefit denied).
3. Further, para 7.27 of Hand Book of Procedures VOL-1 for the year 1997-2002 provides that upon endorsement of transferability, a duty free licence would be valid for the balance period of its validity or for a period of six months from the date of endorsement, whichever is later. However, licence submitted for the endorsement of transferability after 30 months of the issuance shall have a validity upto maximum period of 36 months from the date of issuance. The said advance licence is re-validated by the office of the Jt. Director General of Foreign Trade, Ahmedabad in terms of Public Notice No. 2/(PN) 1997-2002 dated 31-3-2001 for the period of six months. The said Public Notice authorising re-validation is subject to the conditions mentioned therein as under:
(i) This facility will be available where export has already been completed but the licence could not be utilised on account of expiry of advance licence.
(ii) No re-validation will be allowed in licence where misrepresentation has come to the notice of any authority. Therefore, for the reason stated in para 1 above and in view of the conditions of the P.N. No. 2/(PN) 1997-2002, dated 31-3-2001, the collective effect could be there has been mis-representation of the facts with intention to secure logging in the export DEEC Book from JNPT Customs and Ahmedabad Customs. Therefore the said re-validation is not correct and the subject advance transferable licence is expired in terms of the para 7.27 of the Hand Book. Consequently no import under such advance licence appears permissible."
2. The matter was heard and thereafter the Commissioner passed the impugned order F. No. S/16-DEEC-7204/2001-Gr. 7//S/10-96/2002-VII, dated 27-3-2002 imposing redemption fine of Rs. 58.15 lakhs after ordering confiscation of the goods under Sections 111(d) and 111(o) and penalty of Rs. 15 lakhs under Section 112(a) of the Customs Act, 1962. Duty free clearance of the goods was denied against the DEEC licence produced.
3. We have heard the learned advocate for the appellant and considered the material as none appeared for the Revenue and find :-
(a) The Commissioner, as it appears from Para 16 of the impugned order, after taking cognizance of the correspondence exchanged with the DGFT and the copies of the shipping bills logged, came to the following conclusions :
"16. ............. The Jt. DGFT Office, Ahmedabad was required to examine these documents to ascertain whether the exports under the DEEC and the description of the goods under import and under export (under DEEC) were as per the terms of the advance licence. As already discussed in para above it is already been brought out that out of the 9 S/Bills on the basis of which the Jt. DGFT has allowed re-validation and transferability of the licence, 4 were Free S/Bills and not DEEC S/Bills, on 2 S/Bills the export was allowed provisionally and in regard to the 3 S/Bills the party produced 'Reconstructed' typed copy of S/Bills, which had deficiencies as discussed in paras above viz. these copies neither contained the ICD, Ahmedabad's File Number from the authority who has permitted the reconstruction of the S/Bills. Moreover, the scrutiny of the photocopy of the S/Bill No. 532612, dated 10-10-1994 of Nhava Sheva Customs further reveals that it was said to be registered, processed on 10-10 1994. The goods were examined and loaded on the vessel on 10-10-1994. The scrutiny of the reverse of the photocopy of the S/Bill further reveals that -
"(i) the Mate Receipt mentioned is 4926, dated 8-10-1994 viz. two days prior to registration and processing of S/Bill. The Mate Receipt is given only after the receipt of the goods on the ship, after Let Export order is given by the Customs. Thus the S/Bill itself is not proper and is fraudulent.
"(ii) Against the column 'which sailed on' (viz. the date on which the vessel sailed for outward journey), the date mentioned is "10-10-94". However, the first digit '10' is made by changing '9' into '0' and prefixing 1, before such zero. It also reveals manipulation in the S/Bill to show that the ship sailed on 10-10-1994.
"17. The fact that M/s. Fortuna Exports did not submit the original DEEC S/Bills and the documents integrated parts of the said S/Bills either to the DGFT or to the Customs further corroborates that they have more to conceal as they were fully aware of the facts.
"18. The above facts, therefore, reveals, that the logging of the DEEC Book by the Customs Officers at Nhava Sheva as well as ICD, Ahmedabad was not proper and correct. The logging was made in regard to the facts and without appreciating and evaluating the documents. However, there is equal failure on the part of the office of the Jt. Director, Directorate General of Foreign Trade, Ahmedabad, who did not do second check on the export documents like S/Bills, export invoices, etc. in detecting the discrepancies, deficiencies etc. as discussed in paras above. The Jt. DGFT, was, therefore not to permit the re-validation and transferability of the said licence, as the conditions of P.N. No. 2/2002, dated 13-3-2001 were not fulfilled in the case.
"19. However, once the Customs at the time of verification of the licence has detected the facts as discussed in paras 7 and 10 above, there cannot be any other conclusion but to hold that the re-validation and the transferability had been obtained through wilful and deliberate mis-representation, suppression of facts and by submitting misleading information and through fraudulence. It is, therefore, held that the Advance Licence No. P/K/3494809 dated 19-7-95 issued to M/s. Fortuna Exports, Ahmedabad by Jt. DGFT, Ahmedabad's Sheet No 1, dated 26-6-2001 and produced by M/s. Marmo Classic, Silvassa to cover the import of the Rough Marble Blocks pertaining to 8 B/Es as mentioned at para 1 of this order are neither valid nor proper........."
and based on the above conclusions, held the liability of the confiscation under Section 111(d) and Section 111(o), for importing the said Block, unauthorisedly. The appellant company was held liable for personal penalty under Section 112.
(b) Thereafter the Commissioner in para 21, came to the conclusion that the nature and variety of marble blocks have not been properly declared in precise name, nature and variety as he found from the scrutiny of the import invoices to be mentioning the description as rough marble blocks "Origin Italy". Thus he found the appellant did not declare the exact variety of the said block such as 'Carrara Satuario' or like, which was found by him to be not in conformity with the international trade practice, which mentioned in the packing list and elsewhere, specific description, nature and other details. This omission was considered by him to be intent to suppress the exact quality of goods. Thereafter he referred to market enquiry conducted, as recorded in para 14 of his order, to reveal that the wholesale price of such "rough marble slab" of an average quality obtained from marble blocks to be at Rs. 280/- per sq. ft. and did not consider the evidence produced by the appellant. Thereafter he rejected the pro-forma invoice produced by the importer and concluded that the importer had obtained the advance licence from M/s. Fortuna Exports and as it had already been held by him that the said advance licence was not valid and legal to cover the import of rough marble blocks and therefore the monetary consideration paid by M/s. Marmo Classic, the importers herein to M/s. Fortuna Exports and Falguni Exports was a commercial transaction and thereafter ordered that M/s. Marmo Classic the importer herein can pursue the matter of recovery of the sum paid as purchase consideration to M/s. Falguni Exports and others in terms of normal trade agreement and by taking appropriate legal recourse. He thereafter held that the expenses incurred for procuring such invalid licences cannot be a factor to offset MOP. Thus the expenses incurred for procuring such invalid licence, cannot be factored to off set the MOP. Similarly, he held that the other expenses relatable to and as a consequence of the fact of the import not being proper and permissible cannot to be taken into account for giving abatement from MOP for determining the quantum of redemption fine. He found that while implementing any fiscal law and while seeking compliance to such law, any penalty fine or sum spent in regard to any act of omission or commission leading to contravention of a fiscal law is not given deduction or abatement. It is in this context to be held that the expenditures incurred by the importer did not fall within the legal parameters for grant of any abatement from the MOP for arriving at the quantum of redemption fine and he determined the MOP.
(c) From a reading of the extracts of the Commissioner's finding, as extracted in sub-para (a) herein above, it is apparent that the Commissioner has sat in judgment over the re-validation and transferability of the licence in question in this case. This decision of the Commissioner and reasons thereof have effectively rendered the licence issued by the competent authority invalid and amounts to cancellation of the same, if not, rendering it ineffective without complying with the procedure prescribed by law for cancellation/revocation of licences under the Import Trade Control enactments applicable. The Bombay High Court, relying upon the decisions of the Supreme Court reported in 1983 (13) E.L.T. 1456 (S.C.) = AIR 1971 SC 1558 (UOI v. Tarachnad Gupta and Ors.) and after discussing the principles laid down by their lordship of the Supreme Court has held, regarding the power of the Collector to draw conclusion not by reference to the licence given to the petitioners, but by the contents of the Import Policy, as reported in 1981 (8) E.L.T. 235 M/s. Lokesh Chemicals Works, held as follows:
"For coming to this conclusion, the Collector must necessarily come to a conclusion that the licensing authority had issued a licence without performing a function and without ascertaining whether the goods were banned by wrongly interpreting the policy. This is not and cannot be the function of the Collector of Customs. He cannot sit in appeals over the licensing authority and he cannot have any right to go beyond the licence. His action virtually amounts to cancellation of licence or to make it ineffective without complying with Clause 10 of the Import (Control) Order. He must assume the licence to be effective unless and until cancelled by the proper authorities.
(d) We find that the DGFT authorities have not taken cognisance of the matters referred to them by the Customs authorities at Bombay and have not found the documents produced for the appreciation and questioning the validity of the said licence in this case to be questionable or/and non permissible. In 1990 (49) E.L.T. 190 in the case of Bombay Chemicals Pvt. Ltd. the Hon'ble High Court had held "customs authorities have no jurisdiction whatsoever to sit in appeal over the certificate which been granted by DGFT or Director of Industries as the case may be and come to their own conclusion".
(e) In view of the above and in the facts of the Case, it is evident that for the logging of the shipping bills evidencing export which has been done by the proper officer at Jawahar Custom House/ Nhava Sheva and Ahmedabad Customs and who are not subject to the jurisdiction of Commissioner of Customs, Mumbai, the adjudicator herein. Commissioner has no jurisdiction to come to conclusion that advance licence No. D/K/3494809, dated 19-7-1995 issued to M/s. Fortuna Export, Ahmedabad by Jt. DGFT No. 08921/AM95/AL which was re-validated and transferred by amendment sheet No. 1, dated 26-6-2001 and produced by M/s. Marmo Classic, Silvassa is invalid or not proper to cover the import of rough marble blocks as mentioned by him in para (1) of the impugned order.
(f) The Bombay Custom House has issued a Public Notice as far back in 24-6-1996 which clarifies that the satisfaction of the Assistant Commissioner regarding discharge of export obligation has to be arrived at by the customs authorities at the port of export by logging into the copy of shipping bills and relevant bills of lading. The salient feature of the procedure stipulated revolves around "the monitoring of export obligation by customs shall be a one point exercise". This public notice, as also other public notices, are based on the understanding of the Revenue based on the instructions from CBEC. Therefore once the logging has been accepted by the proper officers at Ports of Ahmedabad and Nhava Sheva which are beyond the jurisdiction of the Bombay Customs, the Bombay Customs authorities have no jurisdiction to come to other conclusions, without getting these orders, of logging of the said exports by the proper officers, set aside. We also find that the same licence has been admitted and clearance has been allowed by the customs authorities. Therefore we find no reason not to order the acceptance of the said licence.
4. The learned advocate for the appellants at length submitted a catena of decisions beginning from East India Commercial Company Ltd. v. Collector - 1983 (13) E.L.T. 1342 of the Supreme Court and other decisions which laid down that a licence issued is valid till it is cancelled; in the case of K. Uttamlal (Exports) Pvt. Ltd. v. UOI - 1990 (46) E.L.T. 527, Bharucha J., as he was then, has held that fraud would have to be established, and, even if established, the principle that would apply is laid down in the judgment of the S.C. in East India Commercial Co. Ltd. v. Collector of Customs, Calcutta -1983 (13) E.L.T. 1342 (S.C.), namely that a licence obtained by fraud is voidable and is good till avoided. Therefore following the same we would find no reason to uphold the findings of the learned Commissioner regarding the liability for confiscation of the goods under Section 111(d) of the Customs Act. 1962.
5. As regards the confiscation of the goods arrived at under Section 111(o) we would rely upon the decision in the case of Union of India v. Sampat Raj Dugar - 1992 (58) E.L.T. 163 wherein the Apex Court held that if on the date of import the goods were covered by valid import licence then subsequent cancellation of the same is not relevant and does not render retrospectively the import illegal and to call for confiscation under Section 111(d). In this judgment it was also held that Clause (o) of Section 111 contemplates confiscation of goods which are exempted from duty subject to a condition, which condition is not observed by the importer. Occasion for taking action under this clause arises only when the condition is not observed within the period prescribed, if any, or where the period is not so prescribed, within a reasonable period, it, therefore cannot be said that the said goods were liable to confiscation on the date of their import under Clause (o). In this view of this law, laid down by the Apex Court, in this case we find no reason to order the confiscation of the goods under Section 111(o). When we find that there is no liability for confiscation of the goods under Section 111(d) and/or 111(o) arrived at by the Commissioner we cannot uphold the redemption fine and penalties determined by the Commissioner.
6. Before parting with this case we would like to observe that the finding of the Commissioner in para 21 of the impugned order to the effect:
"While implementing any fiscal law and while seeking compliance to such law, any penalty fine or sum spent in regard to any act of omission or commission leading to contravention of a fiscal law is not given deduction or abatement. It is in this context held that the expenditures incurred by the importer do not fall within the legal parameters for grant of any abatement from the MOP for arriving at the quantum of redemption fine".
also not meeting our approval since it is well settled law as held in the case of Commissioner of Income-tax, Patiala v. Piara Singh 1980 (124) ITR 40 (SC) by the Apex Court that losses from illegal activity can be offset against gains from same or other activities. We are aware that this decision was in the context of Income Tax, but this would apply, also, to the decision to be arrived at for determining MOP which is nothing but margin of profit required to be worked out on commercial basis. In this view of the matter we do not uphold the calculations on MOP as arrived at in the impugned order by the learned Commissioner.
7. In view of our findings the order is set aside and the appeal is allowed.