Customs, Excise and Gold Tribunal - Delhi
Bin Sabt Jewellery vs Commissioner Of Customs on 24 March, 2000
Equivalent citations: 2000(120)ELT169(TRI-DEL)
ORDER A.C.C. Unni, Member (J)
1. By Order-in-Original dated 16-8-1999, Commissioner of Customs (Air Cargo Unit), New Delhi ordered confiscation of 200 T.T. Gold Bars under Section 111(d) of the Customs Act, 1962 with a redemption fine of Rs. 1 crore. A penalty of Rs. 5 lakhs was also imposed on the appellants under Section 112(a) of the Act. A penalty of Rs. 25 lakhs was also imposed on M/s. Shri Ganesh Exports, A-33, Okhla Phase-1, New Delhi under Section 112(a) of the Customs Act.
2. The present Appeal filed by M/s. Bin Sabt Jewellery challenges the said Order insofar as it relates to them.
3. We have heard Shri L.P. Asthana, ld. Advocate for the appellants and Shri R.D. Negi, ld. SDR for the Respondent Collector.
4. The appellants are dealers in bullion in Dubai and are said to be one of the major exporters of gold bullion to India. The appellants claim that on the receipt of a FAX message from M/s. Shri Ganesh Exports, A-33, Okhla Phase-1, New Delhi for supply of 200 T.T. gold bars, the appellants despatched a consignment of 200 T.T. gold bars under Air Way Bill No. NBR 09873101044 by Flight No. AI 726 dated 23-7-1998, which arrived at New Delhi Airport on 24-7-1998. The deal was to be completed on the basis of relevant documents issued through the appellants' Bankers viz., Bank of Baroda, Dubai and the Punjab National Bank (PNB), Okhla Industrial Branch, New Delhi, the Bank indicated by M/s. Shri Ganesh Exports. On receipt of the documents by PNB on 28-7-1998, PNB was unable to trace M/s. Shri Ganesh Exports at the address given. PNB thereupon informed Air India, Carriers of the goods, not to release the goods and also informed the Customs Air Cargo on 29-7-1998. On the same day Manager, PNB informed Bank of Baroda, Dubai by FAX stating that they could not find anyone with the name of M/s. Ganesh Exports at the address given and the documents were lying at the risk and cost of the consignor and immediate action be taken. Bank of Baroda, Dubai in turn informed the appellants and whereupon, appellants contacted one of their regular importers of gold in India, namely, M/s. M.D. Overseas Ltd., who agreed to arrange clearance of the consignment on production of the required licence. Accordingly, the documents were transferred in favour of M/s. M.D. Overseas Ltd., on 30-7-1998. M/s. M.D. Overseas Ltd., thereafter filed Bill of Entry No. 679828 dated 31-7-1998 for clearances of the gold consignment against Duty Free Replenishment Licence. However, on 4-8-1998 M/s. M.D. Overseas Ltd., withdrew their Bill of Entry. On 7-8-1998, appellants made a request to the Commissioner of Customs to allow re-export of the gold, since they continued to be the owners of the gold. Alternatively they also requested for permission to sell the goods to some other buyer in India. Since the appellants could not obtain any favourable response from the Commissioner of Customs, they approached the Hon'ble Delhi High Court praying for a Writ of Mandamus to permit clearance of the goods or alternatively, for permission to re-export the same. While disposing of the Petition, the Hon'ble High Court by order dated 9-10-1998 allowed re-export of the gold subject to appellants furnishing a Bank Guarantee equal to the value of the gold and on giving an undertaking to pay the amount in the event of the gold being held liable to confiscation. The Hon'ble High Court also made certain observations about the appellants' title to the goods as well as to the applicability of the provisions of Section 111(d) and 111(m) of the Customs Act.
5. By a further order dated 9-11-1998 the Bank Guarantee furnished by the appellants was directed not to be encashed for a period of four weeks from the date of passing of the order of adjudication. Accordingly, appellants furnished a Bank Guarantee for a sum of Rs. 94 lakhs on 2-12-1998 and subsequently, the amount of bank guarantee was also increased to Rs. 1 crore.
6. Thereafter on 2-2-1999 appellants were called upon by the Department to show cause why the 200 T.T. gold bars should not be confiscated under Section 111(d) read with Section 111(m) and why penalty should not be imposed under Section 112(a). The notice also proposed disposal of the gold under Section 48 of the Customs Act, 1962. In the meantime, the Commissioner of Customs also obtained an Interim Stay on the order of the High Court from the Hon'ble Supreme Court on an SLP filed by the Department. On 5-4-1998, the Commissioner of Customs passed the impugned order absolutely confiscating the gold bars under Section 111(d). No penalty was however, imposed on the appellants for want of jurisdiction. On 12-4-1999, the Hon'ble Supreme Court took note of the fact that an order of confiscation of the goods of the gold had already been passed by the competent authority. The SLP was dismissed as infructuous on that count, after noting the statement of the present appellants that they would take appropriate proceedings in the proper forum against the order of confiscation. The appellants thereafter filed an Appeal before the Tribunal against the order of confiscation which was disposed of by the Tribunal on 13-7-1999 directing the Commissioner to re-adjudicate the case in accordance with the principles of natural justice and under Section 124. The presently impugned order is the order passed by the Commissioner pursuant to the remand order passed by the Tribunal.
7. In the impugned order dated 16-8-1999, the Commissioner observed that the title of the goods is vested in the appellants. He however, held that the consignee in India having been shown to be bogus, the foreign supplier cannot divert the goods to another importer in India. It was held that since 'bringing into' India of goods constituted 'import', Section 111(d) was attracted and since the import of gold was 'restricted' inasmuch as gold could be imported only under 'Special Import License' (SIL) and since in the instant case there was no importer, the Commissioner came to the conclusion that the provisions of Section 111(d) was attracted. As regards penalty the Commissioner found that the appellants had failed to exercise due care and prudence in the matter and since the gold was to be delivered on cash, had the intelligence reports not been available with the Department, the transaction would have gone unnoticed. It was therefore held that penalty was imposable on the appellants.
8. Ld. Counsel for appellants took us through the impugned order as well as the observations made in the Delhi High Court's Order disposing of the Writ Petition filed by the present appellants. It was his contention that having accepted the position that the appellants are the owners of the gold, the Commissioner could not have rejected the appellants' claim for permission to sell the goods to another buyer in India or alternatively, to allow their reexport. The Commissioner had, in turning down the prayers of the appellants acted contrary to the law laid down by the Hon'ble Supreme Court in the case of Union of India v. Sampat Raj Dugar 1992 (58) E.L.T. 163 (S.C). Ld. Counsel emphasised the fact that the said decision had been followed by the Hon'ble Delhi High Court in its order while disposing of the Writ Petition referred to above. On the question as to the stage when 'import' can be said to have been completed, Ld. Counsel has relied on the Supreme Court decision in Garden Silk Mills Ltd. v. UO1 reported in 1999 (113) E.L.T. 358 (S.C.), in which the Apex Court had over-ruled the decision of the Bombay High Court in Apar (P) Ltd. v. UOI 1985 (6) ECC 241 (Bom.). He submitted that the Apex Court has held that the import of goods into India, though it commences from the point of time when the goods cross into the territorial waters of India, it continued till the goods crossed the customs barrier and became part of the mass of goods within the country. He submits that the taxable event being the crossing of the customs barrier for which a Bill of Entry for home consumption is required to be filed, there cannot be any assumption that the mere fact of crossing of the goods into territorial waters of India would complete 'import'. Ld. Counsel further contends that on the basis of the Apex Court observations in Garden Silk Mills case (supra), it would follow that till the time the goods are cleared through the customs barrier after due compliance of all the procedures for home consumption, the process of import is not complete and therefore till those procedures had been duly complied with no 'import' can be said to have taken place. Since the goods in the instant case had not crossed the customs barrier, import had not been completed. It cannot therefore be alleged that there was an 'import' or "an attempt to import for the purpose of import, contrary to any prohibition imposed by or under the Customs Act or any other law for the time being in force" attracting liability to confiscation under Section 111(d) in the facts of the case. Even in terms of Para 4.5 of the Export and Import Policy (1997-2002), the goods which are restricted for import or allowed to be imported on the basis of a licence issued in that behalf, the prohibition/restriction referred to in Section 111(d) would be attracted only in a case where the import is completed, i.e., when the goods are cleared for home consumption in India under a proper licence covering such goods. In the facts of the case, the import was yet to be completed as the goods had not crossed the customs barrier. The appellant or any other importer was therefore entitled to produce a proper licence and obtain clearance of the goods and thereby complete the process of import. Since the stage of production of a licence for obtaining clearance of the goods had not been reached in the instant case, the order of confiscation of the goods under Section 111(d) was wholly unauthorised, illegal and contrary to law. In support of his contention that gold was not a prohibited item, he referred to the provisions of Para 4.5 of the Export and Import Policy (1997-2002) providing for import of gold under licence. Such licence was also freely transferable. The appellants had requested another Indian Importer, namely, M/s. M.D. Overseas Ltd. to file a Bill of Entry along with Special Import Licence (SIL) which had been initially accepted by the Department and debited. The fact that M/s. M.D. Overseas Ltd. withdrew their Bill of Entry subsequently on 4-8-1998 did not in any way detract the legal position that the goods in dispute were only a restricted item and not a prohibited item. He also drew attention to the statement given by Shri Satish Bansal of M/s. M.D. Overseas Ltd. dated. 17-8-1998 to the effect that they had disassociated themselves from the import only when they came to know about certain difficulties in connection with the consignment. He also emphasised the fact that M/s. M.D. Overseas Ltd. were still willing to take clearance of the goods as per law. It was therefore incorrect on the part of the Commissioner to observe that M/s. M.D. Overseas Ltd. had withdrawn the Bill of Entry on their own. On the other hand M/s. M.D. Overseas Ltd. had withdrawn their Bill of Entry only because of pressure from the Department.
9. It was further contended that in terms of the law laid down by the Hon'ble Supreme Court in M/s. Sampat Raj Dugar case (supra), an unpaid foreign supplier of goods imported into India would continue to hold his title over the imported goods irrespective of any dispute relating to duty liability for such import and he still had the right to find an Indian Importer for the goods, or to re-export the goods. The case of the Department which had been upheld by the Commissioner, in Para 10 of the impugned order was that the conditions of the Exemption Notification had been violated. However, in view of the Apex Court decision in Garden Silk Mills case (supra), an importer still had an option of filing the Bill of Entry along with the necessary licence before getting the goods clear--; ior home consumption. The question of violation of any condition for import under an Exemption Notification cannot therefore arise before the goods were actually cleared for home consumption. In any case, in the instant case, no benefit of any Exemption Notification had been claimed and therefore the violation of any Exemption Notification did not arise.
10. As regards the penalty imposed under Section 112(a) of the Customs Act, it is contended by appellants that the Commissioner had imposed the said penalty on the ground that the appellants had failed to exercise due care and caution and therefore they had become liable for penalty. Ld. Counsel in this connection drew attention to the observations of the Delhi High Court in Para 11 of its Order dated 9-10-1998 wherein it had been held that no fault can be found with the appellants for having exported the consignment of gold to India. In any case, failure on the part of the appellants to verify the antecedents of the Indian importer cannot be equated with malafides on their part. No penalty could therefore be imposed on the grounds mentioned in the Commissioner's order. Ld. Counsel also emphasised the fact that the impugned order, being an order passed by the Commissioner on a Remand Order passed by the Tribunal setting aside an earlier order could not impose a penalty when the Original Order set aside by the Tribunal did not impose any penalty on the appellants.
11. Further, the appellants also contend that in the facts of the case, no act of commission or omission attracting liability to confiscation under Section 111 (d) or for imposing penalty under Section 112(a) of the Act had been established.
12. Ld. Counsel therefore pleaded for setting aside the order of confiscation of the goods and the penalty imposed on them. It is also prayed on behalf of the appellants that an order be passed allowing the appellants to sell the goods to another buyer for clearance in India or alternatively, for re-export of the goods without any fine or penalty.
13. In support of his contentions, ld. Counsel has also relied on the following decisions:
(a) Siemens Ltd. v. CCE 1999 (113) E.L.T. 776 (S.C),
(b) Easter Industries Ltd. v. Collector of Customs [(1995 (75) E.L.T. 656 (Tribunal)],
(c) Gita Times v. CC Kandla 1999 (108) E.L.T. 598 (Tribunal).
14. Defending the impugned order, ld. JDR submitted that Section 111(d) was attracted when goods were imported or attempted to be imported or brought within the Indian Customs Water for purposes of being imported, contrary to any prohibitions imposed by or under the Customs Act or any other law for the time being in force. He contended that it was not in dispute that the item in dispute was a restricted item under the Export and Import Policy and there was a pre-requisite of a valid import licence to cover the import. In the instant case, the goods in dispute had been brought within the Indian Customs Water and there was no valid licence covering the import. He relied on the Tribunal decision in Hasmukh Dalpatrai Ganatra v. C.C. Bombay 1987 (29) E.L.T. 81 (Tribunal) to contend that restrictions also amount to prohibition. Further, it was also not in dispute that the goods had been brought within the Indian Customs Water for purposes of being imported. Such goods were clearly liable to confiscation under Section 111(d). He relied on the Supreme Court decision in Shaik Mohd. Omar v. C.C. and Ors. reported in 1983 (13) E.L.T. 1439 (S.C). He referred to the Show Cause Notice where the Department had alleged of an attempt to remove the goods illegally after import. As regards the reliance placed on the Sampat Raj Dugar's case by the appellants, ld. JDR referred to Para 19 of the said judgement wherein the Apex Court had observed that they were talking of an import which was legal. In the instant case, the import was not legal since there was no licence covering the import. The ratio of the Sampat Raj Dugar's case will not therefore apply to the facts of the present case.
14. We have considered the submissions of both sides. We find from the impugned order that the Commissioner has referred to the Supreme Court decision in Sampat Raj Dugar's case and the observations of the Delhi High Court in the Writ Petition filed by the appellants giving a finding [(vide Para 7.3(i)] that the foreign supplier is still the owner of the goods as he has not received the payment for the same and the goods were not banned and was only restricted and against special import licence they could be imported and the licences were freely transferable. He had also observed that the foreign supplier has no legal obligation to verify the antecedents of a buyer before sending the goods. However, according to the Commissioner, the appellant as a businessman was supposed to verify the antecedents and to protect his interest either by way of insisting for irrevocable letter of credit or otherwise. Commissioner has distinguished the decision in Sampat Raj Dugar's case on the ground that the imports in Sampat Raj Dugar's case was not contrary to any law and on the date of import, the goods were covered by a valid import licence which was only subsequently cancelled. In the instant case, the importer had turned out to be a fictitious person. Further, since there was no valid licence to cover the impugned goods, ld. Commissioner had held that it was tantamount to import without a valid licence and therefore, liable to confiscation under Section 111(d). We find that the decision of Kerala High Court in Shri Ramakrishna Mills and Ors. v. A.C.C. 1988 (18) ECC 75 (Kerala) holding that importation took place when the vessel crossed the territorial waters has been over-ruled by the Supreme Court in Garden Silk Mills case holding that the process of importation continued till the goods were cleared from the customs barrier for home consumption. We therefore, find force in the contention of the ld. Counsel for the appellants that as the import can be said to be completed only when the goods have crossed the customs barrier for home consumption, the import is not complete. Even going by the wording of Section 111(d) making an 'attempt' to import or bringing to the Indian customs waters for purpose of being 'imported' an act making the goods liable to confiscation will not permit an interpretation that the mere arrival of the goods within the territorial waters and before clearance beyond the customs barrier for home consumption would make it an 'import' or even an 'attempt' to import, in view of the Apex Court decision in Garden Silk 'Mills case (supra). Since import can be said to have been completed only when the goods have reached the stage of clearance through customs barrier for home consumption after production of a valid Bill of Entry and a licence (wherever required), we are unable to hold that liability to confiscation under Section 111 (d) has arisen in the case of the present appellants, as the goods are still within the customs barrier. It is difficult to accept the proposition that a foreign supplier exporting goods to India pursuant to an order placed on him by an Indian buyer is "bringing into India", the goods. Bringing into India of goods requires a person who is generally an importer who brings the goods for home consumption. He is different from the person who is 'sending' the goods from a place outside India. Unless it is shown that the Indian importer and the foreign supplier were in fact one and the same person, which has not been established, the foreign supplier has to be given the rights of an unpaid seller whose right and title over the goods remain protected and his right to dispose of the goods in a manner taking care of his interest and in accordance with law, sustained. In other words, the mere fact that the Indian importer at whose instance the foreign supplier had sent the goods to India from a place outside India had turned out to be a fictitious person does not convert the foreign supplier into an 'importer' and make his goods liable to confiscation for not producing a valid licence for such 'import'. In Para 19 of the Supreme Court decision in Sampat Raj Dugar's case the rights of the unpaid foreign supplier of goods has been clearly recognised and it has been clearly held that the conditions of the Imports (Control) Order would not deprive the exporter of his title to the said goods. We find that the ratio of the said decision is applicable to the facts of the present case since the foreign supplier of the goods (the appellant before us) is still the owner of the goods and his right as such owner of the goods cannot be interfered with by way of confiscation of the goods or by way of imposing a penalty on him.
15. We therefore hold that the confiscation of the impugned goods for the alleged contravention of Section 111(d) of the Customs Act is not sustainable in law for the reason that the import of the goods is still not complete (since the goods are still within the customs barrier). Since we are of the view that the confiscation itself is not sustainable, penalty under Section 112(a) does not survive.
16. The impugned order is accordingly set aside for the reasons given above.
17. As regards the prayer of the appellants for a direction to permit sale of goods to another buyer for clearance for home consumption in accordance with law, we direct the Commissioner concerned to allow the appellants to find an Indian buyer who would be willing to clear the goods for home consumption on payment of appropriate duty and on the basis of a valid licence to cover the goods and after completing the other necessary formalities and procedures under the law. A time of three months from the date of receipt of this order may be given to the appellants for the purpose.
18. In case the appellants are not able to find another buyer for clearance of the goods in India in accordance with law within the aforesaid period of three months they may be allowed to re-export the goods thereafter, after completion of the procedure, if any, for such re-export. No fine or penalty shall be imposed on them for allowing such re-export.
19. The Appeal is disposed of in the above terms.