Custom, Excise & Service Tax Tribunal
Mitsui O.S.K. Lines (India) P. Ltd vs Commissioner Of Customs (Export), ... on 17 April, 2008
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. II Appeal No. C/825/07 & C/838/07 (Arising out Order-in-Original No. S/10-16/07-08 Adj (x) dated 7.6.2007 passed by the Commissioner of Customs (Exports), Nhava Sheva) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr.K.K.Agarwal, Member (Technical) ====================================================
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy of the Order?
4. Whether Order is to be circulated to the Departmental authorities?
1. Mitsui O.S.K. Lines (India) P. Ltd.
2. Orient Ship Agency P. Ltd. Appellant Vs. Commissioner of Customs (Export), Nhava Sheva Respondent Appearance:
Shri K.S. Setalwad, Advocate for the appellant no. 1 Shri A.Z. Mookhtiar, Advocate for appellant no. 2 Shri S.G. Dewalwar, SDR for the respondent CORAM:
Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr.K.K.Agarwal, Member (Technical) Date of hearing : 18.3.2008 Date of decision : 17.4.2008 O R D E R No:..
Per: Mr.K.K.Agarwal, Member (Technical) The appellant M/s Mitsu OSK Line India P. Ltd. is a steamer agent of the principal Mitsu OSK Lines Ltd., Tokyo, Japan. The facts concerning this appeal are that one Orient Shipping Agency was the erstwhile steamer agent of the Mitsui OSK Lines Ltd., Tokyo, Japan. During the period from 26.11.1999 to 26.11.2001 M/s. Orient Shipping Agency imported certain container on behalf of Mitsui OSK Lines Ltd. without payment of duty by availing benefit of notification 104/94-Cus dated 16.3.94. Under notification 104/94 containers when imported into India are exempt from whole of customs and whole of additional duty leviable thereon provided that the importer, by execution of a bond, binds himself to re-export the said containers within 6 months from the date of their importation and to furnish documentary evidence thereof to the satisfaction of the said Asst. Commissioner and to pay the duty leviable thereon in the event of the importers failure to do so. The aforesaid period of 6 months could on sufficient cause being shown, be extended by the said Asst. Commissioner for such further period, as he may deem fit. M/s Orient shipping accordingly executed a bond for the year 1999-2001 for Rs. 9,25,00,000/- for import of containers and submitted another bond in July 2000 for additional Rs. 32 crores. The bond was applicable in respect of containers imported during the period from 26.11.1999 to 26.11.2001. They imported containers during this period temporarily duty free on various vessels from time to time and declared them in different IGMs filed by them. The bond was like a running bond, whose value was arrived at on the basis of the average number of containers, frequency of shipment, notional value of cargo etc. When the containers are imported into India each container number is entered into a register known as the key register by the customs department. This register is maintained for each mother bond executed with the department. When the containers are re-exported the port clearance numbers and the dates are entered in the key register against the container numbers and the same is verified by the customs officers and after verification the bond is cancelled.
2. The present appellant M/s. Mitsui OSK Lines (India) P. Ltd. was appointed as steamer agents with effect from 1.6.2002 to look into the Indian shipping activities of the principal. They took over from the Orient Shipping Agency, who was the previous agent and whose agency was terminated on 16.6.2002. It is the appellants say that Orient Shipping Agency did not hand over any of the documents that were in their possession including in connection with the re-export of the container covered by the said bond. On being appointed as the agent for Mitsu OSK they had executed an indemnity bond dated 1.6.2002 with Customs. Under the terms of the said indemnity bond, the appellant took over the responsibility of re-exporting of container in respect of bond which had been executed by Orient Shipping Agency. According to the appellant when they took over the agency from Orient Shipping Agency, 11 bonds had not been cancelled by them, out of which 10 bonds were got cancelled by them and only one bond remained to be cancelled which was executed for the period November 1999 to November 2001. It was in the year 2005 that they found that the key register in which the entries regarding re-export of the containers are made was missing in the customs department and they accordingly wrote to the customs vide letter dated 7.2.2005 intimating that M/s Orient Shipping Agency had executed a bond no. S/43/CON(B)NS/169/99-00 with Customs under which containers were imported during the period November 1999 to November 2001 and these containers had all been re-exported but for want of key register they could not enter the details of the port clearance numbers and dates and requested that as and when the key register is found any time in future, they would make all efforts to update the key register by furnishing the port clearance number and dates and regularize the issue. Reminders were issued to the above letter on 4.4.2005, 31.5.2005, and 15.9.2005. However, on the failure of the customs department to respond to their letters, they filed a writ petition in the Bombay High Court seeking appropriate orders with respect to the missing key register. In the writ petition they among other things prayed the Honble Court to issue an order or direction to Customs to 1) forthwith produce the key register in respect of bond no. 169/99 and cancel the said bond 2) alternatively to cancel the bond in the absence of key register, and 3) the petitioners bond be discharged on the undertaking of the petitioner to the Court that petitioner will duly fill in all the port clearance numbers and dates in the key register upon its production.
3. Subsequent to filing of the above writ petition, the key register was traced by the department and a statement to this effect was made before the Court who disposed of the petition by observing It will be open for the petitioners to take further steps after the inspection of the register. The key register was thereafter made available to the appellant and on inspection it was found that a number of entries were still open. The Asst. Commissioner of Customs therefore issued a letter dated 2.1.2006 enclosing thereof a list of 67 containers (which according to appellant container details of 72 containers) requesting them to furnish re-export details of the same. In reply to this the appellant produced a copy of the letter written to JNPT on 14.3.2006 with endorsement thereon by the Manager, JNPT that all 64 containers were re-exported and another letter from Nhava Sheva International container terminal was enclosed in which the details of export of six containers were given. However, port clearance number, vessel number, EGM no. were not mentioned in these letters and therefore the Asst. Commissioner vide his letter dated 8.5.2006 called upon the appellant to furnish the details of the re-export of the containers covered by the said bond. The appellant vide their letter dated 16.6.2006 stated that all containers have been re-exported and that their principal had managed to track down from its computer system the latest position and status of the said containers imported under the said bond. As per the status report these containers were found lying either abroad or were presumed to have been sold/discarded elsewhere in the world and that some of them had been hired to leasing company and some of the containers were shipped own containers and should not have been included in by the previous agent Orient Shipping. They also submitted that life span of the container in the fleet of the appellants was about 30 years after which the same was permanently out of service. They stated that since six to seven years have elapsed since the said bond was executed in 1999, most of the containers would have passed their life span. All the containers were outside India and/or discarded by the owner after their export from India and as such no container remained in India. As the above status report did not give the details like port clearance no., EGM no., name of vessel etc. the explanation given by the appellants was not found satisfactory and accordingly a show cause notice was issued on 19.7.2006 to them as well as Orient Shipping Agency asking them to account for 72 containers as per the enclosed list and on their failure to do so to pay duty within 30 days and to explain as to why the container should not be confiscated and penalty be imposed. The appellants in their reply furnished the same evidence and pleaded that the show cause notice was time barred as the demand was beyond the period of 5 years. The demand was however confirmed by the Commissioner and he rejected the plea of time bar as the obligation under the notification was a continuing obligation for which no time limit is set.
4. The learned advocate for the appellant submitted that the Commissioner failed to appreciate that notification nowhere specified the documents which were required to be submitted for satisfying him that the container has been re-exported. The secondary evidence produced by them has not been discussed by him in the order at all. They have submitted all the necessary documents and the customs department had failed to make necessary entries in the key register entered by them. On failure on the part of the customs department, liability cannot be cast upon the appellant. The details of re-export could not be entered in the key register in view of the fact that the said key register was not traceable. Had the same been made available, the necessary entries would have been made. He should have accepted the data sheets and other evidence produced which conclusively showed that the containers had been re-exported as evidence of re-export. The object of the notification was to facilitate the movement of containers. Thousands of containers come into and go out from the major ports all over the world including India and it is inevitable that some difficulty is experienced by the carriers and their agents in accounting for all of them. The adjudicating authority failed to appreciate the ratio of the Tribunals decision in the case of Damani Shipping P. Ltd. 2001 (128) ELT 219 by refusing to take the secondary evidence produced by them. The fact that all the containers were outside India in itself prove that the post importation condition of the notification had been complied with. Since they were not the steamer agent of the principal, when the said bond was executed and the said containers under the bond were re-exported by M/s. Orient Shipping it is they who were privy to the documents which could be used as proof of export such as vessel name, port clearance no. and date etc. These documents were not submitted to them by previous agent Orient and therefore they are unable to produce the same. The said bond was executed on 26.11.99 and was valid for the period of 24 months from 24.11.1999 to 24.11.2001 and the containers imported under the said bond were required to be re-exported within a period of six months i.e. by 25.5.2002. However, the show cause notice was issued on 19.6.2006 and had been issued beyond the period of limitation under Section 28 of the Customs Act, 1962. They referred to the decision of the Tribunal in Asian Exports vs. CC 2002( 145) ELT 702 in this regard and to the Bombay High Court decision in the case of Parekh Shipping Corporation vs. CC 1995 (80) ELT 781 wherein a show cause notice issued beyond the period of 5 years from the date of execution of bond was found arbitrary and unreasonable. The period of five years cannot be considered as unreasonable. In view of this the demand was clearly time barred. As per the decision of Parekh Shipping, the bond executed by the agents should also be taken within a period of 5 years and action, if any, should be taken before the expiry of the period and the bond should not be kept open for all times to come and should be limited for a duration of 5 years from the date of execution, which expires on 25.11.2004.
5. As regards confiscation, it was submitted that no order of confiscation of goods or redemption fine could have been passed unless the terms of the bond envisage imposition of penalty even without production of goods. This finding is contrary to the decision of the Tribunal in the case of CCE vs. Rainbow Ink & Varnish Manufacturing Co. Ltd. 1998 (98) ELT 675.
6. It may be stated that the show cause notice in the present case has been issued both to Orient Shipping Agency, the previous agent and Mitsui OSK Lines India P. Ltd., the present agent and has been confirmed against both without naming any one company in the order portion. Penalty of Rs. 1 lakh has been imposed on both Mitsui OSK Lines India P. Ltd. and Orient Shipping Agency.
7. In respect of Orient Shipping Agency the learned advocate submitted that he is contesting only the penalty as according to him no duty has been demanded from them and since in this case all the containers were exported and all documents were handed over to M/s. Mitsui OSK Lines India P. Ltd. it is they who are responsible for the non-submission of any documents and accordingly penalty cannot be imposed on them. It was submitted that Mitsui OSK Lines India P. Ltd. have filed an indemnity bond with the customs discharging them from all liabilities and taking upon them the responsibility to furnish the re-export details and since they ceased to be agents after June 2002 it was not possible for them to submit documents regarding re-export which was the function of the successor. For all omissions, duty liability and penalty if any, is to be imposed on the successor and they have nothing to do with it. In writ petition filed by their principal an undertaking was given by Mitsui OSK Lines Ltd., Japan that they will reimburse Orient Shipping Agency in respect of any duty demand and penalty imposed by the customs and therefore nothing can be recovered from them.
8. The learned DR submitted that in terms of notification 104/94 it was the appellant who was required to furnish proof of export by submitting documentary evidence to the satisfaction of the Asst. Commissioner and on their failure to do so it is they who are responsible to pay the duty on the containers for which they were unable to submit proof of re-export. It was incorrect to say that bond has validity period of two years as it is the container which could have been imported for two years against the bond but enforcement of the bond for non-submission for proof of export is a different issue and no time period has been prescribed for the same. He invited attention to the para 2 of the bond which reads as follows:-
2. This bond shall remain in force for a period of 24 months from the date hereof on till the demands, if any, are paid or withdrawn and obligation and respective liability of the importer shall be continued in respect of all the containers imported, cleared out of docks from time to time by the importers/exporters between the period of 24 months from 26.11.1999 to 26.11.2001. Further, para 4 states that the Asst. Commissioner of Nhava Sheva or other officers of the Government of India shall have the full liberty to postpone for any time or from time to time in exercise of any of the powers or rights conferred on them for this bond or either to enforce or forbear such powers or rights or any remedy on the importer/exporter and the importer/exporter shall not be released by any such exercise or non-exercise by the Asst. Commissioner of Customs, Nhava Sheva or other officer of the Government of India.
9. In view of this condition, it was submitted that the liability in the bond continued till the proof of export was furnished or till the duty which became leviable on account of non-furnishing of proof of export was paid. When a bond is executed and the condition of the notification are not fulfilled, the time limitation is not applicable as has been held in the case of Goldn Sand 1999 (107) ELT 697 wherein the Honble Tribunal observed that notification 77/80 being self contained scheme limitation under Section 28 of the Customs Act does not operate in respect of demand of duty in terms of notification so long as the demand is made in terms of condition 7 of para 1 of the notification. Sustainability of the demand to be examined strictly in terms of condition no. 7 of the notification. Attention was invited to the terms of 1st proviso to notification 104/94 dated 16.3.94 which read as provided that the importer by execution of a bond in such form and for such sum as may be specified by the Asst. Commissioner of Customs binds himself to re-export the said container within six months from the date of their importation and to furnish documentary evidence to the satisfaction of the said Asst. Commissioner and to pay the duty leviable on the failure of the importer to do so. It was submitted that in terms of notification the importer is bound to re-export the goods within six months and to produce documentary evidence to the Asst. Commissioner, or else pay the duty leviable, in case the documentary evidence is not furnished to the satisfaction of the Asst. Commissioner. The notification being self contained, limitation of time will not apply as it itself provide for recovery of duty from the importer in case of failure to re-export. The responsibility to re-export rests solely on the importer and no one else and therefore just giving secondary evidence to prove that the containers are lying outside India is far from sufficient to prove re-export as the containers might have been illicitly used or even might have been smuggled outside India. Therefore necessary documents like port clearance, EGM, vessel name on which the container was exported need to be produced to prove re-export. In the present case, even after the key register was found and supplied to the appellants they could not provide re-export details. The appellants have themselves undertaken before the Honble High Court that they will submit the necessary port clearance documents which they have failed to do so. The Tribunal decision in the case of Daman Shipping 2001 (128) ELT 219 is not relevant as in that case Multi nodal documents were available to establish re-export which is not so in the present case, and secondly, in that case only a single container could not be accounted for but in this case entire proof regarding all containers is missing. Reliance on Parekh Shipping is also not relevant as in that case there was an exorbitant delay of 12 years from the date of vessel leaving the port which was considered to be unreasonable and an observation was made that the period of five years is more than reasonable. In the present case, the shipment relate to the year 2000 and the bond has validity for shipment made up to November 2001 for which the period of re-export was six months which could be extended and therefore, issue of show cause notice in November 2007 is well within the reasonable time. The Tribunals decision in Asian Export is also not applicable as the bond itself is a continuous one. As regards the appellants plea that since the goods were not available for confiscation the same could not have been confiscated. In the absence of any clause to that effect in that bond and Tribunals decision in the case of CCE vs. Rainbow Ink 1998 (98) ELT 675 (T) it was submitted this was a single member decision where it has been observed that the Commissioner should first have asked the appellants to produce the goods and on their failure to do so could have proceeded with confiscation. In the present case, the bond required the appellants to furnish documentary evidence regarding re-export and on their failure to do so the department has asked them to submit such proof and its only when they expressed their inability to do so that the containers were confiscated. The terms of the bond also indicated that besides action under the bond, action can be taken under the provisions of the Customs Act or any other statute. Reference was also invited to the decision of the Tribunal in the case of Venus Enterprises vs. CC 2006 (199) ELT 661 where it was held that redemption fine and penalty are imposable even if goods are not available for confiscation as the provisions of Section 110 and 111 of the Customs Act speak of liability to confiscation and not actual confiscation. These two sections if read with section 125 would logically mean even if the goods are not available for confiscation fine can be imposed in lieu of confiscation. A similar view was taken by the Tribunal in Agro Impex vs. CC 2003 (158) ELT 705. Attention was also invited to the case of Dadha Pharma Pvt. Ltd. 2000 (126) ELT 535 (Madras) wherein it was held that action can be taken under 112 of the Act even if the goods are not available for confiscation as section 110 as well as 111 speaks of liability to confiscation and not actual confiscation. In view of this redemption fine and penalty has been rightly imposed.
10. As regards M/s Orient Shipping Agency it was submitted that since Orient are the one who have executed the bond, duty is recoverable from them also, in case the same cannot be recovered from Mitsui OSK Lines India P. Ltd.. It is they who have imported the goods and on their failure to submit the re-export details penalty is imposable on them.
11. We have considered the submissions. We find that it is an admitted fact that both the appellants have been unable to produce documentary evidence to the satisfaction of the Asst. Commissioner regarding re-export of the containers imported by Orient Shipping Agency. As regards the appellants plea that notification does not specify the documents necessary for establishing that the goods have been exported we notice that they have themselves considered them to be port clearance, EGM, the name of the vessel, the date of re-export as necessary details and in fact they have all along in their communication to the customs department through various letters maintained that they shall be furnishing the port clearance no. and details and regularize the issue. This undertaking was also given by them in the writ petition filed by them in the High Court. These are the only documents through which re-export can be established. Strangely though M/s Mitsui OSK Lines India P. Ltd. kept on promising to furnish the port clearance no. etc. in all the communications and to the High Court, when it came to actual furnishing when the key register was found, they took a u-turn and said that the port clearance numbers are not available and instead gave some letters from the port authorities that the containers have been re-exported without any documentary evidence, which obviously cannot be accepted. The liability under the bond was a continuing liability, which they have undertaken to fulfill and the terms of the bond as stated by the learned DR clearly brings out that the bond shall become void only when they furnish the proof of re-export or pay the duty. Even otherwise, as rightly observed by the learned DR, when the containers were imported upto the year 2001 having a re-export period of six months which could be further extended in the terms of notification and in actual practice is invariably extended, the five years period shall continue upto May 2008 as the bond was for the period November 1999 to November 2001, and as show cause notice was issued in 2006 the same was very well within time, and the applicability of time bar does not arise. The question of having intention to evade or suppress is not involved in this case as once the proof of re-export is not submitted, duty automatically becomes payable whether there is an intention to evade or not, as such intention is very much implicit once export is not made. We further notice that thought M/s Mitsui OSK Lines India P. Ltd. became the agent in 2002, it was in the year 2005 only that they first wrote to the customs regarding the cancellation of the bonds in question. Since it was their primary obligation to furnish documentary evidence without being asked for by the customs they are themselves guilty for the delay as they took up the issue after three years. It is not their contention that they were not allowed to submit proof of export with details of port clearance, EGM, vessel name etc. as the key register was missing but they are only contending that they could not make the necessary entries in the key register. It is not understood that why they did not submit any details in writing to Customs. They have miserably failed to bring any evidence to show that they or M/s Orient Shipping had at any time furnished documentary evidence. Key register is customs own register for monitoring. Even if it is missing details of Port clearance, vessel name, date of export, etc. could have been furnished in writing for all containers covered by the bond and proper acknowledgement could have been obtained and it was then only that they could have blamed the department. The fact that there was some variation in container number in letters issued by customs and those maintained in the show cause notice is of no relevance, once they have been given full opportunity to submit details of re-export of containers. The decisions cited by the appellants are not relevant as per the reasoning given by the learned DR with which we are in agreement with. The goods are clearly liable for confiscation even if they were not available for confiscation as has been held by the Tribunal in Venus Enterprises cited supra and Madras High Court decision in Dada Pharma cited supra.
12. However, having upheld the liability to confiscation in the absence of documentary evidence, we feel that that in view of the special circumstances of the case where the liabilities were taken over by one agent from other and in view of the counter allegations between the two agents that the necessary documents were not furnished to them, the secondary evidence submitted by the appellant regarding proof of export of containers outside India cannot be completely discarded. Now that the appellants are able to produce evidence that the container is lying outside India as per the computer data regarding status of container furnished by the appellant it should be accepted as proof of export subject to verification that such container is lying outside India. There cannot be an illicit removal of container outside India as need for the same would not arise because on re-export there is no duty and in fact the re-export will save the appellant from consequence of paying duty. Even if it is presumed that the container has been sold to some other person, a re-export by him will also be valid as in the present case customs has recognised Mitsui OSK India as a person taking over the responsibility of export even though the exports have been made by Orient Shipping. Therefore, such secondary evidence should be considered. The same will not be so in cases where there is no evidence to show that the container is either lying outside India or has been scrapped by leasing agency. Thus, where the data sheet shows that they did not have any data to show regarding any transaction or disposal by the leasing company, then such containers cannot be considered as having been exported outside India and such containers for which there is no evidence shall be liable for confiscation and duty will be demandable.
13. For the above purpose, we remand the matter to the Commissioner with a direction that the secondary evidence should be considered by him in the peculiar circumstances of the case and where there is evidence to the effect that the container is lying outside India or has been disposed of by the leasing agency outside India after its import in India, such evidence should be accepted but where no further details are available or presumption has been made that the container might have been discarded or not available then they have to be treated as having not been exported outside India. It is made clear that the duty shall be demandable both from OSK and Orient Shipping, though first attempt should be made to demand from M/s Mitsui OSK India and on their failure from Orient Shipping as in any case, Orient Shipping in terms of arbitration spelt out by them can recover the same from their principal. Liability to penalty is also upheld on both the appellants for having dealt with the goods which have been held liable for confiscation. However, the quantum of redemption fine and penalty shall be redetermined in the remand proceedings taking into consideration the ultimate duty liability upheld and the number of containers held as being liable to confiscation. Appeal is partly allowed by way of remand.
M.V. Ravindran K.K.Agarwal Member (Judicial) Member (Technical) sr 2