Customs, Excise and Gold Tribunal - Delhi
Silver Enterprises vs Collector Of Customs And C. Ex. on 6 September, 1989
Equivalent citations: 1990ECR377(TRI.-DELHI), 1989(44)ELT770(TRI-DEL)
ORDER K.S. Venkataramani, Member (T)
1. These two appeals arise out of two orders of the Collector of Customs & Central Excise, Rajkot dated 2-6-1989, in order-in-original No. 17/Collr/1989 and No. 25/Collr/1989. The appeals involve common issues and have been filed by the same appellants. In appeal No. C/2082/89-A, the facts are that the appellants, claiming to be agents of M/s. Elecon Engineering Co. Ltd., Gujarat filed 4 Bills of Entry all dated 15-3-1985, seeking clearance of 1513 cases of ball bearings with declared C.I.F. value of Rs. 8,90,026.10. They produced an Import Licence dated 30-9-1983 issued in favour of M/s. Elecon Engineering Co. Ltd. for the clearance .of the goods. The licence had an endorsement "Spares needed for the purpose of providing warranty coverage of after sales service, whether free of cost or at a price for their customers which shall be permitted as were/are used by them as components of the said items at the time of manufacture as per para 60 of April-March 1984 Policy, subject to condition as per para 44(2) of April-March 1984 Hand Book". The licence also contained condition "End product wagon tripplers and dust trapping equipment" and the licence is 'automatic licence A.U. Industrial DGTD, existing Unit'. The licence was non-transferable. The Deputy Collector, Kandla issued a show cause notice to M/s. Elecon Engineering Co. Ltd. and the appellants holding that the goods were not permissible for import in view of the provisions under the Import Policy, 1983-84 and as per the conditions endorsed on the licence and that the goods were under-valued. M/s. Elecon Engineering Co. denied ever having obtained and given Letter of Authority for the import licence produced in favour of the appellants. The case was adjudicated by the Collector of Customs & Central Excise, Rajkot in his order dated 15-11-1985. He ordered absolute confiscation of the goods under Section 111(d) and 111(m) of the Customs Act, 1962. The question of imposition of penalty on the importers was left for further adjudication. The appellants and Shri H.D'Silva, proprietor of the firm filed appeal before the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi against the Collector's adjudication order and the C.E.G.A.T. in its order dated 20-7-1988 set aside the order and remanded the matter for re-adjudication with a direction that the Collector should re-examine the issue of absolute confiscation and also with the direction to consider the question of valuation of the goods afresh on merits. The department also filed a reference application dated 25-10-1988 to the Tribunal arising out of the same order, on a question of law, which was also rejected by the Tribunal on the ground that in matters relating to valuation, there was only a statutory provided under the Act and no reference would lie. The appellants also, in the meantime, filed a Special Leave Petition with Hon'ble Supreme Court on which an order was passed by the Hon'ble Supreme Court on 12-4-1989 arising out of the C.E.G.A.T's Appellate order in the appellant's case dated 20-7-1988, directing re-adjudication by the Collector on the question of option to redeem the goods within a period of two months from 12-4-1989. Accordingly, the Collector of Customs and Central Excise, Rajkot passed the impugned order after hearing the appellants in the matter. The Collector held that the Supreme Court's direction was confined to re-adjudication in respect of the option to redeem the goods and he went on to conclude that the power to give option to redeem the goods under Section 125(1) of the Customs Act, 1962 was a discretionary power given to the adjudicating authority and he held that the gravity of the offence committed by the appellants was so serious in his view as not to justify exercising the discretion of giving them option to redeem the goods. He did not go into the question of valuation in view of his finding that the direction from the Hon'ble Supreme Court was only in respect of the issue relating to the option to redeem the goods.
2. In the other appeal (Appeal No. C/2083/89-A), the facts are that the appellants, claiming to be the agents of M/s. Pratibha Industries of Gulbarga, Karnataka sought clearance of 636 cases of ball bearings of total value of Rs. 3,33,716.89 and claimed clearance against an Import Licence dated 16-1-1985 issued in favour of M/s. Pratibha Industries with an endorsement "Spares needed for the purpose of providing warranty coverage of the above end products. The goods imported against this licence shall be used only for servicing and maintenance whether free of cost or at a price of the itern/machinery/equipment manufactured by the licensee...". The licence also contained the condition "end products - machine tools". The licence was not transferrable. A show cause notice dated 8-8-1985 was issued by the Deputy Collector of Customs, Kandla to M/s. Pratibha Industries and to the appellants, since the goods were not permissible for import in view of the provisions of the Import Policy, 1984-85 and also that the goods were under-valued and the case was adjudicated by the Collector of Customs & Central Excise, Rajkot vide his order dated 15-11-1985, who ordered absolute confiscation of the goods and imposed a personal penalty of Rs. 15,00,000/- on Shri Satich B. Shan, Manager of the appellant firm. No penalty was imposed on M/s. Pratibha Industries as it was found to be non-existent. Here also, as already stated in other appeal above, the Collector's order was challenged in appeal before the Tribunal, which remanded this case also in a common order to the Collector directing that the Collector should go into the issue regarding valuation afresh on merits and he should also re-examine the question of giving the appellants option to redeem the goods on payment of fine in lieu of confiscation under Section 125 of the Customs Act, 1962. In its order, the Tribunal categorically held that the import was unauthorised and upheld the order of confiscation of the goods on this ground. Here also, there was a Special Leave Petition filed before the Hon'ble Supreme Court by the appellants on 3-4-1989. The Hon'ble Supreme Court directed the Collector to re-adjudicate the question of option to redeem the goods within a period of two months from 3-4-1989 and the Collector, accordingly, passed the impugned order on re-adjudication and again ordered the absolute confiscation on the goods. The present appeals are against this order. The appellants, meanwhile, filed another Petition before the Supreme Court against these orders of the Collector and the Hon'ble Supreme Court disposed of the SLP on 12-7-1989 observing that the appellants will have the liberty to prefer an appeal from the impugned order of the Collector before the Tribunal within a period of two weeks from 12-7-1989 and that the appeal will be disposed of expeditiously, preferably within a period of 4 weeks by its further order dated 17-7-1989.
3. Shri. M. Chandrasekharan, the learned Counsel appearing for the appellants submitted that the Collector was in error in not allowing the option to redeem the goods which are now under absolute confiscation. He referred to the well settled principle that the discretion given to the adjudicating authority under Section 125 has to be exercised in a fair and a reasonable manner. The mere fact that an intern which is banned would not necessarily mean, according to the learned Counsel, that it should not be permitted to be redeemed and he referred to several instances where even prohibited goods were allowed clearance referring to the case reported in - Solder Industries, Bombay v. C.C., Bombay -1988 (38) E.L.T. 529 as one such instance. Even as regards the prohibition in the Policy, the learned Counsel pointed out that though in the Import Policy of 1983-84, the ball bearings were banned items, yet in the next Policy of 1984-85, they were not banned but were included in the restricted list of items. Therefore, in the 1984-85 Policy, the goods seized were to be banned. The learned Counsel also referred to a clarification given by the Import Licensing Authority regarding the scope of Para 60 of the Import Policy, which is in favour of the appellants. The learned Counsel further contended that the Collector was bound to give a finding on the question of valuation also, which he had not choosen to do in the present case. The Tribunal had given a clear direction in its order dated 20-7-1988 in this regard and this direction of the Tribunal still holds good. Therefore, the learned Counsel submitted that there was sufficient mitigating circumstances for the Collector to have considered giving the appellants the opportunity to redeem the goods. It was also pointed out that the goods having been in storage since their import were also liable for deterioration, which would also be a factor for considering such a release on redemption fine.
4. Shri V.K. Sharma, the learned SDR appearing for the department submitted that there was a request from the respondent Collector for an adjustment. He, however, pointed out that the order of the Tribunal was clear. It has held the import to be an unauthorised and the licences produced not valid to cover the goods imported. The discretion given under Section 125 is not mandatory but is only directory in relation to the adjudicating authority. He also rebutted the argument that restricted items are not prohibited by submitting that every restriction amounts to prohibition. The Collector's order further clearly gives reasons why he had considered the cases as not fit for giving the option to redeem the goods for which he had also placed reliance upon a Supreme Court judgment in the case of F.N. Roy v. Collector of Customs, Calcutta - 1983 (13) E.L.T. 12%. Therefore, on the question of absolute confiscation, no modification was called for in respect of the Collector's order. On valuation also, the Collector has not gone into it because of the finding that the direction from the Hon'ble Supreme Court was only in respect of re-adjudication regarding redemption fine.
5. The submissions made by the learned Counsel and the learned SDR have been carefully considered. The two issues arising for decision in these appeals are firstly whether the appellants should be given the option to clear the consignments of ball bearing now under absolute confiscation on payment of fine in lieu of confiscation in terms of Section 125 of the Customs Act, 1962; secondly whether the goods have been under-valued as alleged by the department.
6. On the question of valuation, we find that this Tribunal had set aside the earlier adjudication order of the Collector and remanded the matter to the Collector in its order No. 409/88-A, dated 20-7-1988. In that order, the Cegat had referred inter alia, to the appellant's contentions that in terms of Section 14(l)(a) of the Customs Act, 1962, the port of shipment is not to be taken into consideration and that prices to be taken should be the international prices at which goods were sold at arms length and that the revenue had not produced any evidence that the goods were not offered to any other buyer and that there is also no evidence to prove that similar goods were imported at higher prices from Hungary, Bulgaria and Rotterdam and that, therefore, Rule 3 of Valuation Rules was not applicable to the case. Thereafter, the Cegat had observed, after perusing an adjudication order of Collector of Customs, Bombay dated 20-5-1987 in the case of M/s. Nippon Bearings accepting the value declared for ball bearings of Hungarian origin, "In revenue matters, valuation adopted in one case does not having binding effect of adopting the value in the other case.-Each and every case has to be seen on its own merits and demerits. Accordingly, we are of the view that the adjudicating authority should re-examine the appellants case on its own merits". The department had preferred a Reference Application against this order of the Tribunal which was also dismissed by the Tribunal's order No. 57/89-A, dated 11-5-1989. We further find that an SLR filed by the appellants against the Cegat order has also been disposed of by the Hon'ble Supreme Court in its order dated 12-7-1989 in SLP (Civil) No. 11925 of 1988 & 11884 of 1984. Therefore, the position is that Tribunal's order of remand in respect of valuation has become final. But we find that the Collector in the impugned order had refrained from going into that issue because he was of the view that the Hon'ble Supreme Court's order dated 3-4-1989 was limited to re-adjudication on the question of option to redeem the goods only. However, as we have found, the SLP against the Cegat order itself having been disposed of by the Supreme Court, the Tribunal's order of remand on the valuation issue remains valid and undisturbed. Therefore, we hold that the learned Collector will have to implement that order and hence we direct that the issue of valuation of ball bearings imported will have to be gone into afresh and a finding given thereon in the light of the observations of the Cegat in this regard in its Order No. 409-410/88, dated 20-7-1988, in accordance with law and after hearing the appellants in the matter.
7. The next issue is whether the appellants should be given the option to clear the good on payment of fine in lieu of confiscation under Section 125 of Customs Act, 1962. The appellant's argument in this behalf is that under Section 125 of the Customs Act, only prohibited goods are to be absolutely confiscated; that ball bearings though were banned items in 1983-84 Import Policy were not banned but only restricted items in 1984-85 Policy and hence there is a case for release on fine. We, however, do not find any force in this argument because it is now well settled that any form of restriction would amount to prohibition and hence giving the option to redeem is discretionary with Collector. The Collector had not considered it a fit case for exercising his discretion in the matter because in his view, the gravity of the offence in this case was such as to make the exercise such discretion unjustified in the facts of the case. However, we observe that while passing the earlier order dated 20-7-1988, the Tribunal had considered the facts and circumstances of the case and had upheld the Collector's finding that the import was unauthorised and personal penalty justified. The Tribunal had duly considered the orders of the predecessor Collector dated 15-11-1985 in which that officer had held that it was not a fit case for allowing clearance on fine in lieu of confiscation. Yet the Tribunal had remanded the matter observing, "since we are remanding the matter on the issue of valuation, the learned Collector of Customs will also re-examine the issue of absolute confiscation and whether an option to redeem the same should be given to the appellants or not on merits in accordance with law". Therefore, it has to be held that the implications of Section 125 of the Customs Act, 1962, relating to the discretionary powers of the adjudicating authority in the matter of allowing redemption in the case of prohibited goods were not totally un-noticed by the Tribunal when it issued the order directing the Collector to re-examine the issue of absolute confiscation. We also note in this connection that in the appellant's SLP, the Hon'ble Supreme Court had also passed an order on 12-4-1989 directing the Collector to re-adjudicate on the question of option to redeem the goods. Therefore, there is sufficient grounds to conclude that the Collector should have in the circumstances considered exercing his discretion under Section 125 of the Customs Act, 1962 in respect of the goods under confiscation.
8. Another aspect which we note in this regard is the plea put-forth by the appellants herein that it is not uncommon for the Customs authorities to allow redemption under Sec. 125 of the Customs Act, 1962 of prohibited goods. Also of relevance in this regard in our view is the fact that the goods had been imported in 1985, about four years ago, and there is the possibility of deterioration due to long storage. According to the appellants, the goods had already become rusty and were getting deteriorated. Such a situation would also have an adverse effect on revenue. We further note that the Tribunal in its order of 20-7-88 had upheld the quantum of personal penalty on the appellants.
9. Therefore, we are of the view that in the facts and circumstances, the Collector should consider in the light of the above observations allowing the goods to be cleared on payment of a suitable fine in lieu of confiscation under Section 125 of the Customs Act, 1962. However, the criteria in fixing the quantum of such fine laid down by the Hon'ble Delhi H.C. in Jain Exports v. Union of India -1987 (29) E.L.T. 753 may be usefully borne in mind by the authorities wherein the Hon'ble High Court observed," ... the resort to Section 125 of Customs Act, 1962 to impose fine in lieu of confiscation cannot be so exercised as to give a bonanza or profits for an illegal transaction of import".
10. In the result, we remand the case to the Collector for considering afresh the valuation issue as already directed in this Tribunal's order dated 20-7-1988 in accordance with law, and also to consider clearance of the goods now under absolute confiscation on a suitable fine in lieu of confiscation under Section 125 of the Customs Act, 1962. The appellants may also be heard in the matter.