Customs, Excise and Gold Tribunal - Delhi
M/S. Nirmal Surekha, M/S. Prashant ... vs Cc, Amritsar on 25 May, 2001
Equivalent citations: 2001(132)ELT597(TRI-DEL)
ORDER
LAJJA RAM
1. These are 16 appeals filed by different appellants in which the import and transfer of second hand knitting machines (hereinafter referred to as the 'machines') in involved. They arise out of a common order-in-original No. 2/2000 dated 1.2.2000 passed by the Commissioner of Customs, Amritsar. They were heard together and are being disposed of by this common order.
2. It was alleged in the show cause notice dated 30.7.1999 that Shri Prashant Mohan, Proprietor, M/s. Prashant Knitting Mills had imported the machines falling under Heading No. 84.47 of the Customs Tariff. The said machines were imported under para-5.4 of the Export and Import Policy Part-I 1997-2002 (hereinafter referred to as the 'Policy'), with actual user condition during the period 1997-98 and 1998-99. It was mentioned in the show cause notice dated 30.07.99 that Prashant Knitting Mills was a fictitious firm and that Shri Prashant Mohan had transferred the said imported second hand knitting machines in violation of the provisions as contained in the above mentioned para-5.4 of the Policy. It was also noted in the said show cause notice that the machines had been imported for and on account of Shri Ramesh Salvani. In addition, Shri Ramesh Salvani had also imported some of the second hand knitting machines and had installed them in his concerns. Some of the machines so imported by Shri Ramesh Salvani had also been disposed of to different parties on different terms and conditions. Charges were also framed against the buyers of the said machines on the ground that they had reason to believe that the same were liable for confiscation being disposed of in contravention of the provisions of the said Policy. Redemption fines were also imposed with regard to the various machines seized from different premises.
The matter was adjudicated by the Commissioner of Customs, Amritsar, who under his order-in-original dated 1.2.2000 noted the submissions of the noticees that on import of the said machines, appropriate customs duty had been paid; no provisions of the Customs Act, 1962 (hereinafter referred to as the 'Act') were violated; the transactions were in regular course of business; payments in most cases were made by cheques and at best the violation could be one of not obtaining prior permission of the Director General of Foreign Trade (DGFT). The jurisdiction of the Customs Authorities in initiating the present proceedings had been challenged and it was pleaded that the customs authorities had no jurisdiction under the provisions of Foreign Trade (Development and Regulation) Act, 1992. It was also argued that the show cause notices were issued without making reference to the violation of any of the provisions of the law.
The adjudicating authority held that the customs authorities had jurisdiction to initiate proceedings when the post importation conditions had been violated. He held that the machines had been imported in contravention of the provisions of para-5.4 of the Policy read with para-5.4 of the Hand Book of Procedures Vol.I 1997-2002 (hereinafter referred to as the 'Hand Book'). He held the goods liable to confiscation under Section 111(d) and 111(o) of the Act and the noticees liable for penal action under Section 112 of the Act. He imposed varying amounts of redemption fine and penalties.
3. All the matters were heard on 10.05.2001. Shri J.P. Kaushik, Advocate appearing for Shri Ramesh Salvani, M/s. Tirupati Enterprises, M/s. Ganga Fashion and M/s. Balaji Industries pleaded that the customs authorities had no jurisdiction for any violation of the Import Policy, and the power to investigate the violation of the Import Policy and to seize the goods in respect of the violation of the said Policy vested in the proper officers under the provisions of the Foreign Trade (Development & Regulation) Act, 1992. Under-5.4 of the Policy, the restrictions imposed were to be monitored by the officers of Directorate General of Foreign Trade. There was no notification under the Customs Act and no provisions of the said Act had been violated. In spite of this, the machines had been confiscated under the provisions of the Customs Act. In so far as the machines imported by M/s. Prashant Knitting Mills were concerned, the ld. Advocate submitted that those machines had not been imported by Shri Ramesh Salvani, no bill of entry was filed by him. Even where Shri Ramesh Salvani had been charged with the transfer of machines, no import had been made by Shri Ramesh Salvani and no bill of entry had been filed by him. The imports were in the name of the various firms and no show cause notice had been issued to such importing firms. The importing firms were separate legal entities. The machines were freely importable by the actual users and the noticees were all actual users. Their disposal was also not prohibited and the only condition was that the prior permission of the DGFT was to be obtained. He submitted that at best it could be considered as a technical offence.
Shri K.K. Anand, Advocate appearing for Shri Prashant Mohan, M/s. Prashant Knitting Mills, M/s. Bharbhutta Weaving Factory, M/s. Pretty Nets & Laces, Shri Iqbal Singh, Shri Subhash Malhotra, M/s. Gurpreet Knitters, M/s. Sachin Textiles and M/s. M.M. Knitters, adopted the arguments of Shri J.P. Kaushik, Advocate in so far as the jurisdiction of the customs authorities was concerned. He further submitted that the machines were not transferred by M/s. Prashant Knitting Mills and they were only kept with his other clients for want of adequate space with M/s. Prashant knitting Mills, who had claimed the ownership of the machines. M/s. Prashant Knitting Mills was very much in existence and was an actual user for the purposes of import of the second hand knitting machines.
Shri V.R. Sethi, Advocate appearing for Shri Nirmal Surekha, M/s. Surekha Nets adopted the arguments of the earlier counsels and submitted that the machines were with his clients on trial and there was no justification for imposition of penalty under Section 112 (b) of the Act.
Shri A.C. Jain, Advocate had earlier stated that he was representing Shri G. Vineet and M/s. G.K. Fabrics and the arguments as advanced by other counsels, be applied to his case also.
In reply, Shri M.M. Dubey, JDR submitted that the Customs had jurisdiction to deal with the matter. The conditions subject to which the imports were made had been violated. As the various firms were controlled by Shri Ramesh Salvani, no separate notice was required to be issued to the firms controlled by him. He reiterated the grounds taken by the adjudicating authority in impositing penalties and redemption fines.
4. We have carefully considered the matter.
In these common proceedings, the matter relates to the import of second hand knitting machines and their alleged transfer by the importers to other persons without prior permission of DGFT. It was in violation of the provisions of para-5.4 of the 'Hand Book'.
The knitting machines in question were classifiable under Heading No. 84.47 of the Customs Tarriff, and on import, applicable rate of customs duty was paid. The goods were cleared on payment of appropriate rate of customs duty, and no exemption/concessional rate of duty was available. There was no post-importation condition attached with regard to the applicable rate of customs duty.
With regard to Import Policy, however, the import of second hand capital goods was subject to certain specified conditions.
Para-5.4 of the Policy provided that all second hand capital goods having a minimum residual life of 5 years may be imported by actual users without a licence subject to actual user condition and in accordance with the procedure given in 'Hand Book'. In para-5.4 of the Hand Book, it was provided that the actual user shall furnish to the Customs at the time of clearance of goods -
(i) a self-declaration to the effect that the second hand capital goods being imported has minimum residual life of 5 years, and
(ii) a declaration to the effect that he is an actual user in the form given in Appendix-9.
In Addition to the above, a certificate certifying the residual life of the capital goods and reasonability of the purchase price from any of the Inspection and Certification agencies including their branches as given in Appendix-32 A where the CIF value of the capital goods being imported was Rs. 1,00,00,000/- and above, was to be furnished.
It was also provided in the said para-5.4 of the 'Hand Book' that the second hand capital goods shall not be transferred, sold or otherwise disposed of within a period of 5 years from the date of import except with the prior permission of the DGFT.
5. From the facts on record, it is seen that at the time of the imports of the second hand knitting machines in question during 1996-99, the requisite declarations were filed with the Customs and other prescribed formalities had been complied with. No discrepancy was found at the time of import, and the goods were released out of Customs' charge to the importers, (i) M/s. Prashant Knitting Mills, (ii) M/s. Tirupati Enterprises, (iii) M/s. Ganga Fashions, (iv) M/s. Kishan Chand & Company & (v) M/s. Balaji Industries.
6. The main allegation in the show cause notice dated 30.07.99 was that the second hand knitting machines had been transferred to other persons within a period of 5 years from the date of import without the prior permission of the DGFT. This was in violation of the conditions as stipulated in para-5.4 of the 'Hand Book'. For different machines, different explanations had been given by the noticees. For some, it was explained that there was no transfer. The machines were with the units of the same importer. In some case, it was explained that the machines were kept in premises from where they were recovered for want of space, for job work, etc. In some cases, it was submitted that the machines were with the actual users and the only charge could be that of not obtaining the prior permission of DGFT for the transfer which in any case were to the actual users.
7. From the Import Policy, it appears that a liberal approach had been adopted in so far as the import of second hand capital goods was concerned. No licence was required for the import of such second hand capital goods. A self-declaration alone was needed for certification towards the actual users' character of the importer as well as the residual life of the said second hand capital goods imported. Even transfer, sale of disposal was not prohibited after the imports, and the only condition for such transfer, etc. was that the prior permission from the DGFT should be obtained.
8. Second hand knitting machines imported were of industrial application and were in the hands of the actual users. Any of these actual users could import such second hand knitting machines without a licence. There was no exemption from the payment of customs duty. There was no exemption notification or notification prescribing the concessional rate of duty and no post-importation condition of any kind was applicable with regard to the levy of applicable rate of customs duty. We find that importing firms were identifiable and were available for investigations.
9. In the case of M/s. Prashant Knitting Mills, it has been alleged that it was a fictitious firm. Its importer, Shri Prashant Mohan had submitted that his firm was very much in existence. We find that Shri Prashant Mohan, Proprietor was available for inquiries and investigations. If an actual user, then Shri Prashant Mohan could import such second hand knitting machines even in his own name. We do not find any evidence to establish that Shri Prashant Mohan was no an actual user for the import of these machines.
Shri Prashant Mohan, Proprietor, M/s. Prashant Knitting Mills in his statement recorded under the provisions of the law submitted that his firm was very much in existence and there was documentary evidence to that effect. The machines had been imported and cleared after the requisite formalities by the Customs. The machines were either transferred to the actual users or were lying in other premises or had been given on job work. It was submitted that the only violation was that M/s. Prashant Knitting Mills had not sought permission from the DGFT before transferring the machines, which it was submitted was a technical violation not warranting any imposition of penalty.
10. With regard to noticee, Shri Ramesh Savlani, imports had been made in the name of Tirupati Enterprises, Ganga Fashions, Kishan Chand and Balaji Industries. Shri Ramesh Savlani was the sole proprietor of M/s. Tirupati Enterprises, M/s. Ganga Fashion and M/s. Kishan Chand & Company. He was partner in M/s. Balaji Industries, other partner being his wife.
From the order passed by the Commissioner, Customs, it is seen that seven machines in all - machines worth Rs. 8,92,120/- were found in the premises of M/s. Balaji Industries, machines worth Rs. 8,00,000/- were found in M/s. Ganga Fashion and machines worth Rs. 12,63,746/- were found in the premises of M/s. Tirupati Enterprises. As these firms were run and controlled by the same persons, the submissions made that there was no transfer of these machines, appears acceptable. Rest of the four machines were found lying with M/s. Surekha Nets and M/s. Pretty Nets & Laces in un-installed condition. With regard to these four machines, it was pleaded that they were also neither sold nor transferred and they had been only un-loaded at the premises of M/s. Surekha Nets and Pretty Nets for want of space at the importer's premises.
On behalf of Shri Nirmal Surekha of M/s. Surekha Nets, Shri Subhash Malhotra of M/s. M.M. Knitters and Shri Iqbal Singh of M/s. Pretty Nets and Laces, it was argued that they had neither purchased the said machines nor they had any knowledge about the date of their importation. As the machines were supplied to them on trial basis and the details of sale of machines were not discussed/finalised, they were not liable for penal action under Section 112 (b) of the Act.
11. The buyers of the machines had pleaded that there was no evidence to show that they were aware that the machines were liable to confiscation. The machines had either been given to them for job work/trial basis and the title remained with the importers, or they were bonafide purchasers and had paid the due price. Payment by account payee's cheque against regular commercial invoices in the regular course of business had been made. The payments were reflected in their books of accounts. They were actual users and could import such second hand knitting machines even on their own.
In the discussion and findings, the adjudicating authority had noted at page 9 of his order that the facts of the case and the statements of various persons recorded at the time of seizure of goods reveal that the machines were purchased by the persons concerned during the normal course of business and the transactions were made through statutory channels. The show cause notice did not specify that these persons were aware that the machines purchased by them had been sold after their clearance for home consumption. The adjudicating authority had recorded that there was nothing to doubt the bonafide of the persons, who have purchased the goods in the normal course of business. He had held that such persons was neither aware nor had any reasons to believe that the goods were liable to confiscation and were thus not liable to penal action under Section 112(b) of the Act.
12. The appellants have pleaded that no offence has been committed by them under any provisions of the Customs Act and that Policy requirements have also been met by them. It has been further pleaded that at best a technical infringement could be said to be have committed for not obtaining the prior permission of the DGFT. The noticees from where the machines were seized were also actual users. At the time of the imports, the requisite formalities have been fulfilled. In these circumstances, we feel inclined to agree with the submissions that the infringement in these cases was not of any of the provisions of the Customs Act but was of post-importation condition specified in the Import Policy. This aspect will have a bearing on the question of penalty, redemption fine, etc.
13. At this stage, we may take-up the issue regarding the jurisdiction of Customs Authorities. The import of second hand capital goods was permissible in the Policy in accordance with the procedure as given in the Hand Book. It was provided in para-5.4 of the said Hand Book that the importers sell furnish the customs at the time of clearance of goods -
(i) a self-declaration to the effect that the second hand capital goods being imported has a minimum residual life of 5 years and
(ii) a declaration to the effect that he is an actual user in the form given in Appendix 9.
When the Customs clearance was subject to such requirements on the part of the importers and the declarations were required to be furnished to the Customs, it could not be argued that the customs authorities could not go into the question of any infringement with regard to such declarations and requirements. The importers were required to file declarations with the customs and they had filed such declarations. In these circumstances, challenge to the jurisdiction of the customs is without any basis.
In this regard, we agree with the view taken by the adjudicating authority.
The case law cited by the appellants on the question of jurisdiction is not applicable to the facts as in the present case where the Import Policy itself mandates that the importers shall furnish to the customs at the time of clearance the prescribed declarations and it was a condition of release from customs that the importers abide by the condition that the second hand capital goods shall not be transferred, sold or otherwise disposed off within a period of 5 years from the date of import. In such a situation, when specific role has been given to the customs, it could not be said that for any violation of such condition, the jurisdiction of customs was ousted.
14. While taking a view with regard to penalties and fines levied in these proceedings, we not that goods could be imported by an actual user without any import licence. The nature of the goods in the present case was such that it could be used only by the actual users. The transferees were the actual users and there was nothing in the Import Policy that they could not import these machines on their own account. The goods were second hand. The appropriate customs duty had been paid.
15. Keeping in view the nature of the infringement and the facts and circumstances of the case, we reduce the amount of penalty imposed on Shri Prashant Mohan to Rs. 2,00,000/- (Rupees Two Lakhs Only). Similarly, the amount of penalty imposed on Shri Ramesh Salvani is reduced to Rs. 2,00,000/- (Rupees Two Lakh Only). Penalties imposed on Shri Nirmal Surekha, Shri Iqbal Singh and Shri Subhash Malhotra are set aside. The redemption fines imposed on different firms are also set aside. The appeals are disposed of in the above terms.