Customs, Excise and Gold Tribunal - Delhi
National Woollen Mills vs Collector Of Customs on 6 March, 1991
Equivalent citations: 1991(56)ELT613(TRI-DEL)
ORDER P.C. Jain, Member (T)
1. Brief facts of the subject case are as follows :-
1.1 A Bill of Entry No. 97 dated 8-8-1988 for the clearance of 167 bales declared to be old premutilated rags imported by the appellants was filed on behalf of the importers by their clearing agents. Out of 167 bales 122 bales were declared as old premutilated synthetic rags and the balance 45 bales were declared as old premutilated woollen rags. As per the invoice of the supplier the value declared for the goods was U.S. $ 0.35/kg. for synthetic rags and U.S. $ 0.77/kg. for woollen rags thereby declaring the total value at U.S. $ 34281.24 (Rs. 484540/-). The goods were shipped against purchase contract Nos. S.1/108/88 dated 10-2-1988 and S.1/109/88 dated 10.2.1988 with M/s. Sablok International, Bombay, who were the agents of the suppliers M/s. Fibre Products of Canada Company Ltd. The clearance of the goods was claimed under OGL 1/88-91 dated 30-3-1988 vide Appendix 6 List 8 Part II S.No. 626 of the ITC Policy AM 1988-91. The importers have declared themselves to be the actual users of the goods. On examination of the goods, it was noticed that the bales contained used synthetic skirts which were cut only once and in the opinion of the Customs authorities they could be used with minor repairs of one lengthwise stitching. It was also observed that many of the bales contained pieces of synthetic pants mutilated by a single cut and in the opinion of the authorities it was easy to form another pant with minor repairs after matching identical pieces. While most of the bales contained the above two items there were also other wearing apparel with mutilation considered to be minor by the authorities and the repairs could be carried out so as to make them reusable.
1.2 It was also alleged that the value of the goods was under-declared as compared to "the recent imports of similar goods through the Port of Bombay" where it was noticed that old synthetic rags were imported from U.S.A. at prices of U.S. $ 0.40/kg., 0.48/kg. and US $ 0.53/kg. It was also alleged that since the rags were not premutilated fully, the value of the same had to be naturally more than the value of the mutilated rags imported through the Port of Bombay. The show cause notice issued to the appellants herein, therefore, alleged that for the purposes of assessment of the goods fair value of the synthetic rags should be at U.S. $ 0.60/kg. and that of woollen rags at U.S. $ 1.05/kg.
1.3 The adjudicating authority on consideration of the evidence on valuation has fixed the price of synthetic rags at U.S. $ 0.40/kg. and at U.S. $ 0.95/kg. for woollen rags.
1.4 The Collector in the impugned order has held rags relying on the meaning of 'rags' in the Concise Oxford Dictionary, as "used clothes which are torn or worn out of context and in tattered form. Further, when the policy says that completely premutilated rags are permitted, what is obviously meant is something worse than rags, which should be permitted". On examining the samples the adjudicating authority has found that a few pieces are skirts with a vertical cut only. Without any difficulty observes the said authority, this can be joined as full skirt and it would certainly fulfil the requirement of poor and needy people. Similar was the position observed in respect of other garments. The adjudicating authority has further observed that "by no stretch of imagination these garments can be termed as rags. It not only does not fit into the meaning given in the dictionary but defy even the general understanding of any ordinary person about rags". Therefore, the adjudicating authority has held that the impugned consignment did not fell within the ambit of the term 'rags' and therefore, not eligible for availing the benefit of the Import-Export Policy.
1.5 The adjudicating authority has also observed that the appellants did not appear to be interested in only spinning yarn out of these rags. Had that been so, they could have as well asked for permission for further mutilation before clearing it from the Wharf but the appellants had categorically stated that they may be permitted to clear the consignment without any further mutilation. Such a request does not go well with the intention of the appellants for using these rags in manufacture of these shoddy yarn.
1.6 Accordingly, he has confiscated the goods imposing a fine of Rs. 10,00,000/-. He has also imposed a personal penalty of Rs. 1,00,000/-.
2. Learned consultant for the appellants has now urged against the aforesaid impugned order of the Collector that the goods were imported as per the contract dated 10-2-88 when the Import Policy, 1985-88 was in force. Letter of credit for the said goods was opened on 29-2-88 as per the telex from Oriental Bank of Commerce Port Bombay to Bank of Montreal, Canada. He, therefore, submits that a firm commitment had been made in terms of the previous ITC Policy, 1985-88 and therefore, the goods should be deemed to have been covered by the aforesaid Policy. For this proposition he relies on Tribunal's judgment in the case of Jain Shudh Vanaspati Ltd. v. CCE, Bombay 1990 (29) ECR 321. In terms of the said Policy, the goods are covered for importation under OGL in view of the Tribunal's judgment reported in 1988 (35) ELT 718 (Kakkar and Company and Ors. v. CC, New Delhi) which has been confirmed by Supreme Court as reported in 1989 (42) ELT A44 (SC). The department's review petition thereafter was also rejected as reported in 1989 (44) ELT A26 (SC).
2.1 As regards the importation under 1988-91 ITC Policy the learned consultant has urged that the Policy merely enables the Customs authorities to issue a notification laying down the norms for mutilation. The Public Notice No. 33/88 issued by the Collector of Customs, Cochin laying down the norms of mutilation is not dated at all and from this it can be inferred that at the time of importation of the goods no such norms had been laid down by the Collector of Customs, Cochin and in any case it could not apply to the said goods at all because the shipment had taken place on 19th May, 1988. He has also submitted that in any case the Collector has not based his decision on the said Public Notice No. 33/88 although the breach of the said Public Notice was alleged in the show cause notice issued to the appellants.
2.2 As regards the valuation, the learned consultant has pointed out that neither the show cause notice nor the impugned order points out the specific instance at which the goods were allegedly imported at higher value except saying that such goods were imported at higher value at the Port of Bombay. On the other hand, he points out that woollen/synthetic rags imported at Bombay Port were valued at US $ 0.40/kg. and 0.53/kg. and were allowed to be cleared accepting the prices as correct and proper. The appellants also enclosed three copies of bills of entry and the relevant invoice from the same supplier in their reply to the show cause notice before the adjudicating authority.
3. On the other hand, learned SDR Smt. S. Baliga has urged that the Public Notice No. 33/88 laying down the norms of mutilation was very much in existence at the time of import, as is apparent from the notings on the reverse of the Bill of Entry. The appellants were, therefore, aware of the norms of the mutilation. It is also worth noting, points out the learned SDR that the appellants did not want further mutilation of the goods to meet with the norms of the Public Notice. This clearly shows that their intention was not actually to use them for the manufacture of Shoddy yarn as was held out by the appellants but was required to be used for some other purposes.
4. We have carefully considered the pleas advanced on both sides. As regards the first submission of the appellants that in view of the contract for goods having been made before 31-3-88 and the letter of credit having been opened before the said date, the importation be deemed to have been covered by the ITC Policy, 1985-88, we observe that this plea was never taken before the adjudicating authority nor has been taken in the memorandum of appeal before the Tribunal. Since this plea would require an enquiry into facts which were not available before the adjudicating authority we do not allow this plea to be taken by the appellants at this stage. Accordingly, his reliance placed upon Tribunal's judgment in the case of Kakkar & Co., mentioned supra which has been given in the context of ITC Policy, 1985-88, and on Jain Shudh Vanaspati, mentioned above are of no relevance so far as this matter is concerned.
4.1 Goods have been imported under the ITC Policy, 1988-91 and the claim has been made by the appellants under OGL Order No. 1/88-91, dated 30-3-88 (S.No. 14). It allows import of woollen rags/shoddy woollen/synthetic rags to actual users (industrial) subject to certain conditions. The conditions in respect of the woollen rags as given in the said S.No. 14 and which is the subject matter of the controversy in this case are reproduced below :-
"14(i) Import of woollen rags/shoddy wool/synthetic rags will be allowed only when these are imported in completely premutilated condition.
(ii) Woollen rags for this purpose are defined as under :
(a) 'New-waste woollen cloth woven or knitted which is left after a garment had been cut out including genuine tailor cutting piece ends, discarded pattern bunches and sample bits,
(b) 'Old' - Rags of woollen textiles fabrics including knitted and crocheted fabrics which are required for manufacture of shoddy yarn and may consist of articles of furnishing or clothing or other clothing so worn out, soiled or torn as to be beyond cleaning or repair.
(c) The mutilation must conform to the requirements specified by Customs authorities in their Notifications.
(iii) This definition shall apply mutatis mutandis to synthetic rags."
4.2 The aforesaid condition in the statutory order OGL 1/88 is also reproduced in para 25 of Appendix 6 of the Policy.
4.3 It would be observed from the aforesaid condition in the OGL 1/88 that old woollen rags have been defined in a particular manner. According to this definition, woollen rags and synthetic rags may consist of articles of furnishing or clothing or other clothing so worn out, soiled or torn as to be beyond cleaning or repair. Further condition is that these rags have to be mutilated. Collector's reliance on the meaning of 'rags' given in the Concise Oxford Dictionary as against the definition given in the ITC Policy, as pointed out by the learned consultant is a mis-direction in law. It is well settled by a number of judgments of the Supreme Court that when a thing has been defined in a statute, it has to be understood only in that manner while constructing that Statute and the Collector's finding, therefore, on the basis of the Concise Dictionary that rags are "used clothes which are torn or worn out of context and in tattered form" would not be legal one as going beyond the scope of definition given in the ITC Policy, 1988-91 [Emphasis supplied]. Further the finding in the impugned order that the mutilated pieces of skirt could be joined as a complete garment for use by a poor and needy people is also giving to the term 'repair' of the rags a meaning wider than what appears to be contemplated in the definition of rags. The word 'repair' according to Chambers Twentieth Century Dictionary means (i) to mend (ii) to make amends for (iii) to make good (iv) to restore, refresh, revivify. As a noun the term "repair' means (i) restoration after injury or decay (ii) supply of loss (iii) sound condition (iv) condition in respect of soundness. From the aforesaid meanings, it is clear that the expression 'repair' in relation to rags, according to the definition given in the ITC Policy as reproduced above, would mean that the old clothing cannot be brought to its sound condition or restored to its original condition merely by repair. Mutilation of the rags is another condition for importation. Examination report in respect of the consignment is given below :-
" Q7 Opd. and inspd. 8/7 pkgs. under BR marks contents. Textile rags in each-
(1) These are not completely premutilated synthetic woollen rag as per the Norms laid down in P.N. No. 33/88, (2) Fumigation Certificate has not been produced. Samples for test of both the items of the invoice put up Vide T.M. No. S31/574/1988 Ap. Cus.
Pkgs. kept open for AC. inspection."
[emphasis supplied] It is, therefore, clear that the fact that the goods imported are textile rags i.e. woollen and synthetic rags, has not been questioned at all. The question mark only is about its complete mutilation in terms of the norms laid down in terms of P.N. No. 33/88. Collector's finding, therefore, that after repair the garment could be used by a poor and needy people is of no relevance. The definition in the ITC Policy for the rags does not indicate that the rags should be usable for poor and needy people. Poverty and need are related terms and no precise definition can be provided. What is the standard of poverty and need in the eyes of the adjudicating authority has not been spelt out in the impugned order. From the plain language of the definition of the "rags" no such inference can be read in respect of the use of rags after repair for poor and needy people as has been found by the Collector. Collector's finding that the goods imported, therefore, can be treated as rags is beyond the scope of the definition given in the ITC Policy. It is also seen that the show cause notice leading to the impugned order has also admitted that the imported goods are synthetic and woollen rags and the only controversy is regarding their incomplete premutilation. This is apparent from the following fact given in the show cause notice :-
"Import of synthetic rags and woollen rags is allowed by actual users under OGL Appendix 6, only if they are completely premutilated. As the goods have, on examination been found to be not in completely premutilated form, they are not covered by valid import licence.
We, therefore, hold that the Collector's finding that the goods imported are not rags is wrong.
4.4 Next question to be determined is, before the importers can get the benefit of OGL No. 1/88, dated 30-3-88, whether they are completely premutilated as per the other condition of importation. Sub-clause (c) of condition (ii) of S. No. 14 of the aforesaid order, as extracted above, lays down that the mutilation must conform to the requirement specified by the Customs authorities in their notifications. In respect of all importations, after 1-4-1988 the public became aware that the woollen and synthetic rags imported under the OGL must conform to any standard of mutilation laid down by the Customs authorities. It may be that the standard of mutilation might not have been publicised immediately before the goods were imported or shipped. This is purely a procedural condition; we are of the view that it can be imposed even at the time of clearance of the goods. It is a well known proposition of law that procedural amendments to a law in the absence of anything to the contrary, operate retrospectively, in the sense that they apply to all actions after the date they come into force. Even though the claim on which the action is based may be of an anterior date [AIR 1964 SC 1256 - Menon Abdul Karim Haji v. Dy. Custodian General, New Delhi and Ors.]. Therefore, the controversy raised by the appellants that the P.N. 33/88 is undated in the first instance and that it cannot be inferred therefrom that it is prevalent before the importation of consignment in question is of no consequence. It is admitted to the appellants that the P.N. 33/88 was available at the time of examination of the goods as is apparent from the examination report extracted above. The Customs authorities were, therefore, well within their rights to impose this condition on the rags which were yet to be cleared from the Customs. But it is seen from the records that the appellants shied away from the imposition of this condition and they actually stated in their reply to the show cause notice that the goods may be allowed to be cleared "without insisting on further mutilation". It is, therefore, apparent that in terms of the prevailing position of law and the standard of mutilation laid down by the Collector in terms of the enabling power in that law the goods were not completely premutilated. Hence they are liable to confiscation under Section 111(d) of the Customs Act and we hold accordingly. In order to determine the redemption fine we shall have to deal with the other aspect i.e. the value of the goods which is also in controversy here.
4.5 Value of the goods has been raised by the Collector from US $ 0.35/kg. to 0.40/kg. in respect of synthetic rags and from US $ 0.77/kg. to 0.95/kg. in respect of woollen rags. The appellants' learned consultant has urged that the department has raised this value on the basis of an information supplied by the Bombay Customs authorities without disclosing that basis. On the other hand, it is apparent from the reply to the show cause notice that the appellants produced before the adjudicating authority certain evidence showing that the value of the goods imported is not incorrect. This is clear from the following extract from their reply dated 29th Sept. 1988 to the Assistant Collector of Customs (Appraising) :-
"Both type of material that is woollen/synthetic rags imported at Bombay Port valuing at prices of US $ 0.40/kg. and 0.30/kg. were allowed to be cleared accepting the prices as correct and proper. For your ready reference we have enclosed herewith Bill of Entry along with the invoice of the consignment showing that the same supplier M/s. Fibre Products of Canada Company Limited shipped old synthetic rags valued at 0.30/kg. and subsequently document were passed by the Bombay Customs and duty chargeable was also recovered accordingly. We have also enclosed 3 Bills of Entries in which assessment is done accepting prices of US $ 0.40/kg. as proper for consignments of woollen rags".
The Collector in his impugned order has taken U.S. $ 0.40/kg. as the price of synthetic rags although it appears that in the 3 Bills of Entry produced before him price of both woollen rags and synthetic rags was U.S. $ 0.40/kg. If the Collector therefore, on this basis raised the price of synthetic rags from U.S. $ 0.35/kg. to U.S. $ 0.40/kg. in respect of some synthetic rags, on the parity of reasoning he ought to have reduced the value of woollen rags from U.S. $ 0.77/kg. to U.S. $ 0.40/kg. The adjudicating authority should not leave out what is bad and adverse to the department in a document and adopt only something which is in favour of the department in the same document. If something has to be discarded from an acceptable document, it must be done so with cogent reasons and on the basis of some other evidence. We, therefore, feel that the Collector's action in enhancing the value of the goods is not on any sustainable basis. Accordingly, we do not find any reason to hold that there has been under declaration of value of goods in the instant consignment which was originally declared by the appellants to be at Rs. 4,84,540.
4.6 Having regard to the aforesaid value of goods we reduce the fine in lieu of confiscation from Rs. 10,00,000/- to Rs. 5,00,000/- (Rupees five lakhs only.) 4.7 As regards the penalty of Rs. 1,00,000/- imposed on the appellants, we reduce it from Rs. 1,00,000/- to Rs. 50,000/- (Rupees fifty thousand only).
5. Appeal disposed of in the above terms.