Gujarat High Court
Commissioner Of ... vs M/S Marvel Fashions on 30 July, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 1638 of 2007
With
R/TAX APPEAL NO. 1639 of 2007
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
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Approved for Reporting Yes No
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COMMISSIONER OF CUSTOMS(PREVENTIVE)(Amended as per Order
dated 01.07.2024 in CA 1 OF 2024)
Versus
M/S MARVEL FASHIONS
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Appearance:
MR CB GUPTA(1685) for the Appellant(s) No. 1
RULE SERVED for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
Date : 30/07/2025
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned Senior Standing Counsel Mr. C.B.Gupta for the appellant.
2. These appeals were admitted for consideration of the following substantial Page 1 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025 NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined questions of law by order dated 04.02.2008:
"a) Whether in the facts and in the circumstances of the case, the Tribunal is justified in holding that the goods were not liable for confiscation under Section 111(d) of the Customs Act, 1962 on the ground that they are not prohibited goods?
b) Whether in the facts and in the circumstances of the case, the Tribunal was justified in setting aside the order of confiscation of goods as well as in setting aside the order imposing penalty under Section 112(a) of the Customs Act, 1962?
c) Whether in the facts and in the circumstances of the case, the Tribunal is justified in holding that the goods did not become prohibited goods in terms of Section 111(a) of the Customs Act, 1962 and whether these goods were sought to be cleared claiming exemption under Notification No.53/07 Cus dated 6.3.1997 (as amended)?"Page 2 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025
NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined
3. Brief facts of the case are as under:
3.1 The respondent-M/s. Marvel Fashions was a 100% Export-Oriented Undertakings ['EOU' for short] having requisite license to import any material for the manufacture of the goods to be imported.
3.2 One M/s. Avlon Syntex Pvt. Ltd intended to import 100% Polyester Dyed Piled Fabrics which was sold to M/s.
Marvel Fashions on High Sea Sales basis by entering into an agreement. Thereafter, M/s. Marvel Fashions filed 04 Bills of Entry claiming exemption under Notification No. 53/1997-CUA as under: Page 3 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025
NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined Sr. Bill of Entry for High Sale Invoice No and Bill of Lading Noand No Warehousing No and Agreement Date dates Date Date Changshu Winwell Import and Export Co.
Ltd. Changshu City, China 1 2184 dated 14.09.2001 01WWV50510 PSHBOM01 E5371 30.10.2001 dt 05.09.2001 dt 10.09.2001 2 2516 dt 26.09.2001 07.09.2001 01WWV535"17 PSHBOM01 E5357 dt 30.08.2001 dt 03.09.2001 3 2509 dt 26.09.2001 07.09.2001 01WWV535'16 PSHBOM01 E5356 dt 30.08.2001 dt 03.09.2001 4 2186 dtd 30.10.2001 14.09.2001 01WWV50509 PSHBOM01 E5370 dt 05.09.2001 dt 10.09.2001 3.3 Thereafter, separate letters from M/s. Marvel Fashions duly signed by its signatory and letter from M/s. Avlon Syntex Pvt Ltd were submitted to the Assistant Commissioner of Customs, Import Department confirming High Sea Sale under Para 5.0 of the EXIM Policy 1997-2002 with a request to grant permission for noting of Bills of Entry as well as completion of all formalities for clearance of the goods.Page 4 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025
NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined 3.4 Thereafter, acting upon intelligence DRI, Mumbai, made investigation, by conducting examination of the goods in question on 02.12.2002 under a panchnama and the goods in the consignments were found to be scarves and not dupattas, as declared. A search at the factory premises of M/s. Marvel Fashions was conducted on 22.02.2002 and representative samples from the raw material which was indigenous as well as imported found lying in the factory premises were also drawn under panchnama dated 26.02.2002 and it was reported that transport documents of the imported raw material were not available in the factory premises.
3.5 On scrutiny of the documents seized during the search at the factory Page 5 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025 NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined premises of the M/s. Marvel Fashions which included Letter of Permission dated 12.06.2001, Import Export Code dated 19.06.2001 etc., it was found by the DRI after conducting preliminary investigation that, four consignments, which were ready for export were placed under seizure, were manufactured form indigenous 100% Polyster Dyed Piled Fabrics acquired locally and on evaluation of the import of various raw materials by M/s. Marvel Fashions it was found that it cleared large number of consignments on the Bill of Entry for re- warehousing comprising of fabrics and chemical i.e. 100% Polyester Fabrics and other types of chemicals and all consignments were imported by companies like M/s. Avlon Syntex Pvt. Ltd, Page 6 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025 NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined M/s. A.I. Feshani Trading Co, Surat etc. and these consignments were sold on High sea sales basis to M/s. Marvel Fashions and Bills of Entry for warehousing were filed by it for clearance of the goods under Para 9.2 of the Export and Import (Exim) Policy 1997-2002 through only one clearing agent M/s. Salasar Shipping Services at Mumbai and M/s. Shakti Enterprise at Kandla Port. It was also found during scrutiny that all the 74 consignments, which were acquired under Bill of Entry for re-warehousing, were disposed of as cleared under DTA sales by claiming such material as misprints, rejects and wastage mainly to 29 parties at Surat and 04 parties at Hyderabad. 3.6 A show-cause notice was therefore, issued after recording of statements of Page 7 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025 NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined the concerned persons who were partners of M/s. Marvel Fashions including statement of Mr. Mohsin Akukara, statement of Shri Vivek Gohil-Director at M/s. Avlon Syntex Pvt. Ltd as to why the goods imported through 04 Bills of Entry should not be confiscated.
3.7 During the adjudication process, a defence was raised on behalf of M/s. Marvel Fashions contending that the show- cause notice was time barred since the goods were seized on 12.06.2003 by the officers of DRI, Mumbai and a show-cause notice was issued on 10.12.2003. It was also contended that the contract for purchase of 100% Polyester Dyed Piled Fabrics was made on High Sea Sales basis from M/s. Avlon Syntex Pvt. Ltd. and as the contract did not materialize, Page 8 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025 NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined negotiations were going on and goods were not claimed and therefore, the High Sea Sales did not materialize and letter dated 10.05.2002 was written by M/s. Avlon Syntex Pvt. Ltd to UTI Bank Ltd to return the documents. Thus, the transaction of High Sea Sale was denied by M/s. Marvel Fashions in its defence. 3.8 The adjudicating authority, after considering the facts and the evidence on record, ordered to confiscate the goods imported by M/s. Marvel Fashions through 04 Bills of Entry being 97583.40 sq.mtrs 100% Polyester Dyed Piled Fabrics valued at Rs. 26,50,819.42 covered under the 04 Bills of Entry and also imposed penalty of Rs. 1 Lakh on Shri Rafik Ghaniwala and Shri Mohsin Akukara separately and penalty of Rs. 5 Lakh on M/s. Avlon Page 9 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025 NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined Syntex Pvt. Ltd, Rs. 1 Lakh on Shri Vivek Gohil and Rs. 5 Lakh on M/s. Marvel Fashions was imposed.
3.9 Being aggrieved, the appeal was preferred by the respondent before the Customs and Excise Service Tax Appellate Tribunal, Ahmedabad [for short 'the Tribunal'] challenging the Order-in- Original dated 29.04.2005. 3.10 The Tribunal, after considering the submissions made by both the sides, by the impugned order held that the confiscation of the goods in question made by invoking section 111(d) of the Customs Act,1962 [for short 'the Act'] is not tenable as there is no finding as to whether the goods were Page 10 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025 NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined prohibited under the Customs Act or any other law more particularly, when the adjudicating authority has accepted that the goods were not prohibited to be imported into India but the same were held to be prohibited in view of the misdeclaration made in the Bills of Entry including the Rules 11, 14(1), 14(2) of the Foreign Trade (Regulations)Rules, 1993 ['the Rules' for short] on the ground that when the goods were sought to be cleared claiming exemption under Notification No. 53/1997-CUS by misdelcaring that the goods are required for manufacture of export products in 100% EOU by M/s. Marvel Fashions when there was no export order available with M/s. Marvel Fashions and therefore, the same are liable to be considered as Page 11 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025 NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined prohibited goods in terms of section 111(d) of the Act.
3.11 The Tribunal therefore, considering provision of section 111(d) of the Act held that M/s. Marvel Fashions being 100% EOU was working under the permission granted by the Development Commissioner and the Board of Approval and there was nothing on record to indicate that such permission was sought to be revoked by the Customs Department and therefore, it was eligible to import goods without payment of duty and admittedly, when the goods were not prohibited under the Customs Act or any other law, the same could not have been confiscated by invoking section 111(d) of the Act.
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NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined 3.12 The Tribunal therefore, set aside the impugned Order-in-Original and resultantly, the order imposing penalty was also set aside.
4. Learned advocate Mr. C.B.Gupta reiterated submissions made before the Tribunal and relied upon the observations made in the Order-in-Original for confiscation of the goods and levy of the penalty.
5. Section 111(d) of the Act reads as under:
"111. Confiscation of improperly imported goods, etc.
- The following goods brought from a place outside India shall be liable to confiscation:-
(d) any goods which are
imported or attempted to be
imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or Page 13 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025 NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined under this Act or any other law for the time being in force;"
6. On perusal of the above provision, it is clear that the same would be applicable for confiscation of the goods when goods which are imported or attempted to be imported or are brought within the Indian Customs Waters for the purpose of being imported are prohibited by Customs Act or any other law for the time being in force. Admittedly, the goods in question are not prohibited either under the Customs Act or any other law. The reasoning given in the Order-in-Original for the purpose of goods would be a prohibited goods under section 111(d) of the Act read with Rules 11, 14(1) and 14(2) of the Rules cannot be accepted as such goods are not prohibited goods. It would be germane to refer to the Page 14 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025 NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined reasoning assigned by the adjudicating authority for passing order of confiscation as under:
"22.2. I find that M/s Avlon has placed order on foreign supplier for import of the impugned goods, the goods were shipped to India at their behest. The import is defined to mean bringing into India from a place outside India. The import of goods starts when the goods leave the supplier country for shipment to India. Hence, it is clear that they are the importer. Though these goods are not prohibited for import into India,the impugned goods became prohibited in terms of sections 111(d) of the Customs Act, read with rule 11(a), 14(a1) and 14(20 of the foreign Trade (Regulations) Rules, 1993 when these were sought to be cleared claiming exemption under notification no. 53/97-Cus. By mis-declaring that the impugned goods are required for manufacture of export product in the 100% EOU by M/s. Marvel Fashions. It is the case of the department that M/s. Avlon has played an active role in their fraudulent attempt to clar the impugned goods by mis- delcaring that these goods were required for manufacture of export Page 15 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025 NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined goods namely garments. It is on record that M/s. Marvel Fashion was engaged in the maufacure of Scarves and dupattas and no other garments. M/s. Avlon has filed the delcarations with custom to the effect that they have sold the impugned goods to M/s. Marvel Fashions. They have also declared to Customs on 07.09.2001 that the title of the goods is unconditionally transferred to M/s. Marvel Fashions, though they retained the ownership of the goods and even has written to their Banker UTI Bank on 10.5.2002 to return the documents to the foreign supplier. Thus, it is clear that the transaction of sale was made only on paper to hoodwink the Customs and to facilitate the fraudulent duty free clearance of the impugned goods in the name of Marvel Fashion claiming exemption under notification No 53/97 Cus. This mis-delcaration made by them to the Customs showing that the goods have been sold to M/s. Marvel Fashions on High Sea Sale basis was not factually correct and this was done with fraudulent intention to evade Customs duty. Thus they are guilty of violation of rule 14(1) and 14(2) of the Foreign Trade (Regulations) Rules, 1993. In view of the above, I hold that M/s. Avlon and Shri Vivek O. Goel, Director of the Company are Page 16 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025 NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined liable for penalty under section 112(a) of the Customs Act."
7. It appears that the adjudicating authority has invoked section 111(d) of the Act on misconception that misdeclaration was made by M/s. Marvel Fashions to the Customs Department showing that the goods were purchased on a High Sea Sales basis and with a fraudulent intent to evade custom duty resulting into violation of Rules 14(1) and 14(2) of the Rules. Rules 11, 14(1) and 14(2) of the Rules, as it existed at the relevant time, read as under:
"11. Declaration as to value and quality of imported goods:- On the importation into or exportation out of, any customs port of any goods, whether liable to duty or not, the owner of such goods shall, in the bill of entry or the Page 17 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025 NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined shipping bill or any other documents prescribed under the Customs Act, 1962, state the value, quality and description of such goods to the best of his knowledge and belief and in case of exportation of goods,certify that the quality and specification of the goods as stated in those documents are in accordance with the terms of the export contract entered into with the buyer or consignee in pursuance of which the goods are being exported and shall subscribe to a declaration of the truth of such statement at the foot of such bill of entry or shipping bill or any other documents."
"14. Prohibition regarding making, signing of any declaration, statement or documents.-
(1) No person shall make, sign or use or cause to be made, signed or used any declaration, statement or document for the purposes of obtaining a licenc or importing any goods knowing or having reason reason to believe that such declaration, statement or document is false in any material particular.Page 18 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025
NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined (2) No person shall employ any corrupt or fraudulent practice for the purposes of obtaining any licence of importing or exporting any goods."
8. Section 111(d) of the Act is applicable for confiscation of the goods when the goods are prohibited goods either under the Customs Act or under any other law.
9. In the facts of the case, the adjudicating authority has invoked section 111(d) of the Act to hold that the goods in question are prohibited goods in view of violation of Rules 14(1) and 14(2) of the Rules. However, there is no finding recorded by the Tribunal to hold that section 111(d) would be applicable for alleged violation of Rules 14(1) and 14(2) of the Rules. Page 19 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025
NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined
10. On perusal of the said Rules, it appears that the same are applicable only for violation of the license issued under the Foreign Trade (Development and Regulations) Act, 1992. Therefore, it cannot be said that the Tribunal has committed any error in holding that the goods were not liable for confiscation under section 111(d) of the Customs Act, 1962 on the ground that they are not prohibited goods and such goods did not become prohibited goods in terms of section 111(d) of the Act. Only because such goods were sought to be cleared claiming exemption under Notification No. 53/1997 dated 06.03.1997 as amended, it also cannot be said that the Tribunal has erred in law in setting aside the order of Page 20 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025 NEUTRAL CITATION C/TAXAP/1638/2007 JUDGMENT DATED: 30/07/2025 undefined confiscation as well as imposition of penalty under section 112(A) of the Act.
11. We therefore, answer the questions in favour of the assessee and against the Revenue.
12. The appeals are accordingly dismissed.
Rule is discharged.
(BHARGAV D. KARIA, J) (PRANAV TRIVEDI,J) JYOTI V. JANI Page 21 of 21 Uploaded by JYOTI V. JANI(HC00213) on Tue Aug 05 2025 Downloaded on : Tue Aug 05 21:43:17 IST 2025