Gujarat High Court
Cmr Chiho Industries India Pvt. Ltd vs Union Of India on 19 July, 2021
Author: Sonia Gokani
Bench: Sonia Gokani, Sangeeta K. Vishen
C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 673 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MS. JUSTICE SANGEETA K. VISHEN
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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CMR CHIHO INDUSTRIES INDIA PVT. LTD.
Versus
UNION OF INDIA
==========================================================
Appearance:
MR DEVAN PARIKH, SR. ADV.MR DHAVAL SHAH(2354) for the
Petitioner(s) No. 1
MR DEVANG VYAS(2794) for the Respondent(s) No. 1,2,3
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CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MS. JUSTICE SANGEETA K. VISHEN
Date : 19/07/2021
CAV JUDGMENT
(PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1 The petitioner challenges the enhanced rate of duty on Page 1 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 assessment of imported unserviceable and semi-broken electric motor scrap by changing the rate of duty applicable under serial No.368 of the Customs Exemption Notification No.50/2017-CUS dated 30.06.2017 to serial No.366. It is the grievance on the part of the petitioner that the respondent No.3 without following the principles of natural justice had ordered to reassess provisionally assessed Bills of Entry although the issue is pending at large before this Court in Special Civil Application No.10521 of 2020, and therefore, the action reassessment is illegal, untenable and required to be quashed and set aside.
2 Facts shorn off the details leading to the present petition are as follow:
2.1 Petitioner is a private limited company incorporated under the provisions of the Companies Act, 2013 and is engaged in recycling/dismantling of imported old unserviceable electric motor scrap. It is averred that this unserviceable electric motor scrap is not capable of any Page 2 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 use except for recycling of iron, aluminum and copper scrap attached to such unserviceable motor scrap. If without dismantling, the scrap is used then, the same would cause an environmental hazard, and according to the petitioner, no company/ person would import electric motor scrap simply for the purpose of dumping the same into the field.
Respondent No.2 is the jurisdictional head of the Customs Commissionerate and respondent No.3 is the jurisdictional incharge of the ICD, Sanand. The petitioner imported motor scrap from Chiho-TIANDE (HK) Limited, Hongkong. Once received in the factory, the scrap motors were segregated into large motors, medium motors, small motors, alternator motors, washing machine motors before being dismantled and after dismantling them, petitioner extracted the finished goods with machines installed in the factory i.e. Wet Shredder, Copper Puller, Copper Granulator, etc. 2.2 It is the say of the petitioner that it invested the Page 3 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 considerable amount of approximately Rs.15 Crore in plant and machinery and employed more than 250 skilled workers. The petitioner also paid rent of Rs.30 Lakh per month for the factory premises to the land and building owner. Any additional cost by enhancing the rate of duty from 2.5% to 5% would cause serious prejudice to the business of the company and would also affect the workers.
2.3 It is the say of the petitioner that its group company used to import the scrap motor declaring Copper scrap (HS Code-74040012), Aluminum scrap (HS Code-76020010) and Iron scrap (HS Code -72044900), separately paying basic duty at the rate of 5%, 2.5% and 2.5% respectively before March, 2020. The supplier of the scrap motors used to give bifurcation of the material specification in its documents, and therefore, the petitioner was in a position to know the specification of the material and could classify the goods separately.
2.4 However, the petitioners were advised subsequently that Page 4 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 since motor scrap is a composite item and not the three separate scrap items of Copper, Aluminum and Iron scraps, from March, 2020, it was advised to classify the goods as per the condition in which it is imported and under the classification heading of the pre-dominant material of the imported goods. This being pre-
dominantly Iron and Steel scrap constituting more than 80% of the weight thereof with the help of Note 7 of Section XV of Customs Tariff Act, 1975, the goods were classified accordingly.
2.5 According to the petitioner, the entire trade community takes an average percentage of the material included in the scrap motors and the petitioner accordingly had regarded percentage of different components where the content of Iron is 85%, Copper 10% and Aluminum 5% and classified the goods under CTA 72044900 as Iron Steel scrap. In other words, on the strength of predominant material constituting more than 85% of the weight of unserviceable and semi-broken electric motor Page 5 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 scrap being Iron Steel, the goods have been classified.
2.6 The supplier has mentioned the composite description as Discarded and non-serviceable Semi broken/broken motors in all its documents. The petitioner accordingly changed the description of the imported goods and classified under HS Code 7204 for the purpose of concessional rate of duty at the rate of 2.5% as provided under Notification No.50/2017 dated 30.06.2017. The petitioner availed the benefit of serial No.368 of the Notification No.50/2017-CUS dated 30.06.2017 and paid the duty classifying the goods under HS Code No.72044900. THE ICD, Sanand is under the Electronic Data Interchange ('the EDI' for short) system. The entire process of assessment is through the electronic platform and the software decides the classification of the goods as per the documents produced by the importer. The assessing officer also allowed to clear the goods and out of charge was granted without raising any objection to classification of the goods.
Page 6 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 2.7 The issue started in the month of July, 2020 when the office of Director of Revenue Intelligence ('the DRI' for short) called upon Shri Naveen Sharma, Operation Manager to appear before the DRI in connection with the alleged wrong availment of the concessional notification under the Customs Act, 1962 under the summons dated 28.07.2020. The summons was issued to the Customs House Agent ('the CHA' for short) to appear before the DRI and to give evidence in that case. The premise of M/a.Guru Prakash Enterprise (CHA) was searched by the DRI officers on 28.07.2020 and panchnama had been drawn. The details of imports made by the petitioner and its group company was collected under panchnama dated 28.07.2020. The premises of the petitioner had also been searched on 28/29.07.2020 and panchnama was drawn. It was recorded in the said panchnana that all the stocks were tallied with the documents and there were no discrepancies nor any incriminating documents found.
The raw materials and the finished goods lying in the Page 7 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 factory, duly recorded in the books and detained under the detention memo dated 29.07.2020 for inquiry and the goods were handed over to the Operation Manager under suparatnama dated 29.07.2020.
2.8 The office of the DRI issued summons to Shri Mohan Agarwal, Managing Director of the petitioner company to appear before him and also directed submission of various documents including books of accounts, ledger accounts of both the companies, Bank account details, payment details etc. and pursuant to such directions Shri Mohan Agarwal duly appeared before the DRI on the date fixed and his statement was recorded on 31.07.2020 and all the requested documents were also tendered before the DRI.
2.9 On 01.08.2020 a communication was sent to the DRI for release of the goods seized at the factory premises of the petitioner. The petitioner had shown readiness to pay the differential duty under protest to show its bonafide.
2.10 The respondent No.3 directed the petitioner to pay a Page 8 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 total differential duty of Rs.2,51,13,372/- on 03.08.2020 and interest as applicable on the ground that the benefit of Notification No.50/2017-CUS dated 30.06.2017 was not available in respect of Copper scrap, Barley/Birch and the duty required to be paid was at the rate of 5%, therefore, the assessable value needed to be re-assessed in view of different prices of respective types of scrap and subsequently, the differential duty was reduced to Rs.2 Crore.
2.11 The petitioner received seizure memo/no objection for provisional release order for the finished goods found in the factory premises of the petitioner, imported by its group of company weighing 78710.6 kgs in total with estimated value of Rs.1,72,25,108. This happened under the belief that the company had filed the Bill of Entry by declaring the description of their product as "Discarded and non-serviceable Semi broken/broken Motor" by mentioning CTH 72044900 under other Ferrous Waste and Scrap, under Section 111 of the Customs Act, 1962.
Page 9 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 According to the authority the benefit of concessional rate of duty of 2.5% is wrongly taken under the Notification No.50/2017-CUS dated 30.06.2017.
According to the petitioner, the goods in question are not amenable to any other classification of the goods since they cannot be put to any other use except for remelting of the base metal present in the old and un-serviceable motor scrap.
2.12 The seizure order dated 30.08.2020 reflects that the goods worth Rs.38,02,85,613/- imported at ICD, Sanand weighing 6884651 KG are the goods, according to the authority, are liable for confiscation under the provision of Customs Act, 1962.
2.13 Request was made on 04.08.2020 to respondent No.2 to release the goods seized under the order dated 03.08.2020 provisionally. It was also further requested that the entire business operation of the company came to a halt and it has resulted in the complete closure of the factory. The petitioner has also shown its anguish about Page 10 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 the difficulties faced by them in COVID-19 time and expressed their difficulties in paying the salaries to their employees.
2.14 On 05.08.2020, the DRI drew panchnama at Thar Dry Port, ICD Customs, Sanand in connection with the Bill of Entry No.8262901 dated 24.07.2020 loaded in a container No.TCLU3099019. While examining the goods, it was noticed that there were different types of old motors in scrap condition. The officer formed an opinion that the imported goods were not meant for melting of Iron and Steel, but also contained Copper and Aluminum scrap and hence, liable for confiscation. Request was made on the part of the petitioner of this raw material and it was directed to remain present for examination of the containers imported under the Bill of Entry dated 01.08.2020 at ICB, Sanand. The petitioner submitted all the documents to the authority concerned as directed by the Investigating Agency. The differential duty was recalculated and reduced from Rs.51,28,403/- to 76,509/-.
Page 11 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 2.15 The petitioner also requested to release the goods and submitted the calculation of the differential duty of Rs.1,23,40,268/-. There are two separate seizure cum no objection for provisional release order dated 11.08.2020 for the goods imported under the Bill of Entry No.8262901 dated 24.07.2020 and five other Bills of Entry Nos.8349172, 8349233, 8349179, 8349184 and 8349183 all dated 01.08.2020.The ground for seizure of this goods was the wrong availment of benefit of concessional rate of duty under Notification No.50/2017-CUS dated 30.07.2020.
2.16 The grievance on the part of the petitioner is that the DRI has issued the no objection certificate for provisional release and despite the continuous follow up with the customs authorities for provisional release of the goods, there is no response from the respondent Nos.2 and 3.
They are not considering the hard reality that the entire business operation of the petitioner has come to a grinding halt, and more than 250 workers were sitting Page 12 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 idle. A serious financial crunch is also noticed, therefore, the Special Civil Application No.10521 of 2020 has been preferred seeking to quash and set aside the order of detention and seizure dated 29.07.2020, 03.08.2020 and 11.08.2020.
In the alternative, the provisional release also has been sought. It is further urged to stay the implementation of the detention and seizure dated 29.07.2020, 03.08.2020 and 11.08.2020. The Court after directing the petitioner to furnish the running Bank Guarantee of Nationalised Bank to the tune of Rs.2 Crore, permitted DRI to retain the raw-goods/materials upto the value of Rs.10 Crore and directed the provisional release of the rest of the goods. The petitioner has submitted the Bank Guarantee and the goods worth Rs.10 Crore have been retained. It is the say of the petitioner that, the petitioner is in the regular business of import of goods in question, and therefore, it requested on 28.09.2020 to the respondent No.3 to allow them to clear the goods on a Page 13 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 provisional assessment basis. The respondents assessed the goods imported under 49 Bills of Entry provisionally between the period of 21.09.2020 to 08.12.2020 on a condition to furnish the bond for the full value of the goods and allowed to clear the goods on the payment of duty at 2.5% Basic Custom Duty ('the BCD' for short).
2.17 The petitioner was allowed to clear the goods on the above terms, but suddenly, 18 Bills of Entries had been recalled, which were provisionally assessed and once again it had been assessed provisionally at the rate of 5% of BCD. This action of recalling of Bills of Entry was without any change in circumstances, without any intimation and notice and without affording any opportunity of personal hearing is lamented.
2.18 The respondent took the stand and when the further consignments of 364.49 Mts. of goods arrived involving the value of Rs.2,18,40,750.88/-, a detailed chart was prepared. The petitioner was in a dire need of the goods, and to avoid the heavy charges of demurrage, detention, Page 14 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 interest, etc. paid the duty as directed by the respondent No.3 under protest and also wrote a letter for each Bill of Entry separately lodging its protest against the action of recalling of the Bills of Entries and direction to pay the duty in cash.
2.19 It is the grievance of the petitioner that the respondent No.3 acted arbitrarily and highhandedly and issued a letter on 31.12.2020, whereby it intimated the petitioner that they had recalled all the 49 Bills of Entry from the period 22.09.2020 to 08.12.2020 and provisional assessment was ordered to be made at 5% rate. As the petitioner failed to make the differential payment, the Bank Guarantee dated 18.12.2020 furnished for this purpose to be invoked without any further notice.
Aggrieved by this action on the part of the respondents, petitioner is before this Court, seeking following reliefs:
"08...
(A) YOUR LORDSHIPS may be pleased to issue a writ of Certiorari or writ in the nature of Certiorari quashing and setting aside the recalling of provisionally assessed Bills of Entry, and again assessed provisionally at the rate Page 15 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 of 5% BCD (Annexure-A colly);
(B) Your LORDSHIPS may be pleased to direct the Respondents their servants and agent to assess the goods lying at the port and a further import which would be made by the petitioner provisionally in terms of the provisional assessment originally made by the Respondents while assessing the 49 Bills of Entry originally;
(C) During the pendency and Final Disposal of the present petition YOUR LORDSHIPS may be pleased to stay the implementation of the assessment of Bills of Entry (Annexure - A colly.) and allow to clear all the importers on provisional assessment basis with the same condition on which earlier bills of entry assessed between 22.09.2020 to 8.12.2020 ;
(D) An ex-parte ad-interim relief in terms of Para 8 (C) above may kindly be granted on such terms and conditions deemed fit by this Hon'ble Court; (E) Any other further relief as may be deemed fit in the facts and circumstances of the case may also please be granted."
3 Affidavit-in-reply for and on behalf of respondent Nos.2 and 3 on issuance of the notice has been filed by the Customs Commissionerate, Ahmedabad, where the officer concerned is serving with the office of the Principal Commissioner of Customs, Ahmedabad and holding the post of Deputy Commissioner (Legal), who has contended Page 16 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 that on comprehensive reading of the contents of the memorandum, all averments are denied and refuted categorically. According to the respondents, during the course of investigation, the DRI Zonal Unit, Ahmedabad conducted a search at the warehouse/factory premises of M/s.CMR CHIHO Industries India Pvt.Ltd. (petitioner herein), which is situated at survey No.995, Old survey No.454/3, village Balasar, Taluka-Kadi, District Mehsana on 28/29.07.2020 along with the office premises of M/s.Guru Prakash Enterprise the Customs Broker firm under the panchnama.
3.1 It was informed during the panchnama drawn at the factory premises of the petitioner that on 28/29.07.2020 another company of the same group i.e. Century Metal Recycling (CMR) Group namely M/s.CMR Chiho Recycling Technologies Pvt.Ltd. was also operational from the same premises. In the panchnama of seizure itself shown that there is no melting machinery even in the factory of the petitioner. The main work of both these companies was Page 17 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 segregation of Copper, Aluminum and Iron/Steel scrap from imported motor scrap and segregation of Coppers from different types of motors i.e. large motors, medium motors small motors and done manually by the labours.
Moreover, all imported goods received were not meant for melting of Iron and Steel, but also consisted of Copper and Aluminum and after dismantling they sell these goods in different forms i.e. Cast Iron Scrap, Copper Scrap, Aluminum Scrap (US Tense H), MS Rotor, MS Stamping, Old bearing scrap, Wires etc. to different customers. Various machineries namely Wet Shredder, Copper Pullers, Copper Granulator, Press machines were found operating in the premise for segregation, extraction and dismantling of Copper from motor scrap.
Goods after dismantling namely cast Iron scrap, Iron scrap, Copper, MS Stamping, MS Rotter, PVC Wire scrap, Old Bearing scrap, US Tense (Aluminum scrap), Aluminum wire scrap, Stainless Steel scrap, Rubber Plastic were physically found in premise.
Page 18 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 3.2 The documents on record, according to the respondents, show that only machinery in the factory is Copper extruder and the same shows that the petitioners cannot be granted exemption benefit of Notification 50/2017- CUS dated 30.06.2017. It is the say of the respondents that the petitioners have taken undue benefit of the concessional rate of duty of 2.5% instead of effective rate of 5% on 'Discarded and Non--serviceable semi broker Motor Scrap' which they declare under CTH 72044900 under other Ferrous Waste and Scrap. Vide serial No.368 of Notification No.50/2017-CUS dated 30.06.2017 concessional rate of duty of 2.5% has been notified for melting scrap of Iron or Steel (rather than stainless Steel).
However, considering the process of dismantling and statements of various persons, it has been noticed that the goods are not the melting scrap of Iron and Steel (other than stainless Steel) as they have been imported with an objective of dismantle and procure high valued product Copper, which is an important Page 19 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 component of the same. The petitioners were well aware that the Copper is around 10% in these materials. This according to the respondent is a sufficient reason that the petitioners had improperly imported the goods as Discarded and Non-serviceable semi broken Motor Scrap"
by mis-declaring the same under Section 46 with an intent to avail undue benefit of concessional rate of duty at the rate of 2.5%.
3.3 According to the respondents, the primary issue raised against the petitioners is not wrong classification of the goods, but improper declaration of description of their imported goods and consequent claim and availment of undue benefit of concessional rate of Customs Duty at the rate of 2.5% instead of 5%. The grievance on the part of the respondent is that the certificate of analysis and Form 9 of Trans-boundary movement of goods also clearly indicated that the motor scrap contained Iron & Steel scrap, Aluminum scrap and Copper scrap and percentage of all these different scraps are different. However, the Page 20 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 petitioner at no point of time intentionally declared the same correctly to evade the BCD.
3.4 According to the respondents, Section 46 (4) of the Customs Act, 1962 insists on importer presenting a bill of entry to make and subscribe to a declaration as to the truth of the contents of such bill of entry and in support of such declaration produce the substantiating documents of the proper office invoice and any other documents relating to the invoice. The accuracy and completeness of the information is a must under Section 46(4A) (a) and declaration to be given in the Form of Bill of Entry needs to clearly state that the importer has not received nor is it knowing of any other documents or information showing a different price or value including local payments, whether as commission or otherwise, quality or description of the said goods and if anything else is discovered later on by the importer showing a different state of facts, the importer is obligated to disclose this to the Principal Commissioner of Customs or Page 21 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 Commissioner of Customs. It is also necessary that while entering the subject imported goods under Section 46, self assessed the duty leviable on these goods in terms of Section 17(1) of the Customs Act, 1962 is necessary. The main grievance is that the Notification 50/2017-CUS dated 30.06.2017 as amended for motor scrap is available for melting scrap of Iron and Steel (other than stainless Steel); however, the petitioners were aware about the contents of the Copper scrap and Aluminum scrap, as melting scrap of Iron and Steel is comparatively of lesser value. There was a variation to the tune of 18-20 times in the value of Iron/Steel scrap and Copper scrap. There is no melting facility at the factory of the petitioner and they were segregating and dismantling Copper scrap, Iron & Steel scrap and Aluminum scrap from their imported goods. Intentionally it did not disclose the information of the Copper and Aluminum scrap and take an undue benefit of concessional rate of duty of 2.5% of the entire value of the motor scrap.Page 22 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022
C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 3.5 It is emphatically contended by the respondent that the imported goods cannot be termed as melting scrap of Iron and Steel at the time of import and therefore, they are not entitled to any concessional rate on the import nor entitled to the Notification 50/2017-CUS dated 30.06.2017, this recourse was taken only to evade BCD.
This self assessment of the duty leviable on the imported goods also has not been done with the only intention of evading the same. This has caused the huge loss to the revenue.
3.6 According to the respondents, the matter is still under the investigation of the DRI. In Special Civil Application No.10521 of 2020 , this Court has examined the larger issues like legality and validity of the seizure. However, as there is no finality regarding the availability of concessional rate of duty to the importers for the import of Discarded and non-serviceable semi broken Motor Scrap. He has continued to take undue benefit of concessional rate of duty at the rate of 2.5% instead of Page 23 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 effective rate of 5% on the subject imported goods. The importer tendered necessary provisional assessment bond; however, no security was furnished by the importer against the bond, the mis-declaration and availing the wrong benefit would result into short payment of customs duty. Therefore, the Bills of Entry, which were assessed provisionally during the period 22.09.2020 to 08.12.2020 were re-assessed by considering the effective rate of duty at 5%. Accordingly, the respondents requested the Court to dismiss this petition.
4 This Court has heard extensively the learned senior advocate, Mr.Deven Parikh appearing with learned advocate, Mr.Dhaval Shah and learned Additional Solicitor General of India, Mr.Devang Vyas assisted by the learned Central Government Standing Counsel, Mr.Parth Divyeshwar. It will not be necessary for the Court to reproduce the elaborate submissions made by both the sides. However, the question is examined by this Court in Special Civil Application No.10521 of 2020, as there has Page 24 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 been already a direction issued in the said petition by this Court on 07.09.2020, where the question with regard to the goods worth Rs.10 Cr. detained by the DRI shall need to be considered. What is noticed is that for the subsequent import made, the insistence on the respondent is for the payment of duty at the rate of 5%, when that very issue still bags adjudication.
5 This Court in Special Civil Application No.10521 of 2020 has decided the main matter on 06.04.2021. Relevant paragraphs, deserve reproduction profitably :
"Appropriate it would be to firstly refer to the decision rendered in case of M/S.CANNON INDIA PRIVATE LIMITED V/S. COMMISSIONER OF CUSTOMS by the Apex Court recently in Civil Appeal No.182775 of 2018 and allied matters, where the Court has chosen to question the very action on the part of DRI of issuing the show cause notice for want of powers.
25.1. Before the Apex Court, statutory appeals were preferred under Section 130 E of the Act, which arose from the common final order of the Central Excise and Service Tax Appellate Tribunal ('the CESTAT' for short). Vide such order, an exemption of basic customs duty accorded to the Digital Still Image Video Cameras ('DSIC') imported by the Nikon India Pvt. Ltd., Canon India Pvt. Ltd and other importers in terms of exemption Notification NO.20/2005 dated 01.03.2005 as amended by Notification No.15/2012 dated 17.03.2012 came to be denied and the consequential confiscation of goods, Page 25 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 demand of interest and imposition of penalty as provided under the Customs Act, 1962 were upheld by the CESTAT.
25.2. The issue which had arisen for the Court's consideration was whether after clearance of the cameras on the basis that they were exempted from levy of basic Customs duty under Notification No.15/2012, the proceedings initiated by the DRI for recovery of duty not paid under Section 28 (4) of the Act was valid under the law.
25.3. The consignment of cameras arrived at Delhi, the importer submitted a Bill of entry covering letter and literature containing specification of the cameras and after verification of the Bill of Entry by the Inspector and the Superintendent, the importer requested the Deputy Commissioner of Customs to check the same. The compilation of the goods with the description given in the literature also was carried out and the goods had been cleared as being exempted from paying the duties in terms of Notification No.15/2012 issued on 17.03.2012.
25.4. A show cause notice was issued under Section 28(4) of the Act alleging that the Customs Authorities had been induced to clear the cameras by willful misstatement and suppression of the facts about the cameras. The decision of exemption was by the Deputy Commissioner, Air Cargo, the show cause notice was issued by the Additional Director General, DRI. The Apex Court addressed the issue as to whether the DRI had authority in law to issue a show cause notice under Section 28(4) of the Act for recovery of the duties not levied nor paid when the goods were cleared for import by a Deputy Commissioner of Customs, who decided that the goods were exempted. 25.5. The provision of the Customs Act,Section 28(4) empowers the recovery of the duty not paid, part paid or erroneously refunded by reason of collusion or any willful misstatement or suppression of facts and confers Page 26 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 the power of recovery on the proper officer. The Apex Court interpreted as to who could be called the proper officer. The Apex Court held that the proper officer must necessarily mean the proper officer, who in the first instance assessed and cleared the goods which in the matter before the Apex Court was the Deputy Commissioner Appraisal Group. Because no fiscal statue has shown the power to reopen the assessment or recover the duties which escaped the assessment could be conferred on an officer other than the one (of the rank of the officer) who initially took the decision to assess the goods. It also went to an extent of saying that statute when confers the same powers to perform an act on different officers, the two officers, especially when they belong to different departments, cannot exercise such powers in the same case. Where one officer has exercised his powers of assessment, the power to order reassessment must also be exercised by the same officer or his successor and not by another officer of another department though he is designated to be an officer of the same rank as otherwise, the same would result into "an anarchical and unruly operation of a statute which is not contemplated by any canon of construction of statute".
25.6 The Apex Court, while interpreting the notification dated 2.5.2012, has also held that the Notification purported to have been issued in exercise of the powers under sub-section (34) of section 2 of the Customs Act; the said section does not confer any power on any authority to entrust any functions to the officers for, the subsection is a part of the definition clause of the Act and merely defines a "proper officer". Section 6 is the only section which provides for entrustment of functions of Customs Officers on other officers of the Central or the State Government or local authority. In para 21, it is held that if it was intended that the officers of the Directorate of Revenue Intelligence who are officers of Central Government should be entrusted with functions of the customs Page 27 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 officers, it was imperative that the Central Government should have done so in exercise of its powers under section 6 of the Act. Moreover, the notification which purports to entrust functions as proper officer under the Customs Act has been issued by the Central Board of Excise & Customs in exercise of nonexisting power under sub-
section (34) of section 2 of the Customs Act. The Apex Court declared the notification as invalid, the same having been issued by an authority which had no power to do so, in purported exercise of powers under a section which does not confer any such power.
25.7 Relevant findings and observations of the M/S.CANNON INDIA PRIVATE LIMITED V/S. COMMISSIONER OF CUSTOMS are necessary to be reproduced at this juncture profitably hereinbelow:
"14. It is well known that when a statute directs that the things be done in a certain way, it must be done in that way alone. As in this case, when the statute directs that "the proper officer" can determine duty not levied/not paid, it does not mean any proper officer but that proper officer alone. We find it completely impermissible to allow an officer, who has not passed the original order of assessment, to reopen the assessment on the grounds that the duty was not paid/not levied, by the original officer who had decided to clear the goods and who was competent and authorised to make the assessment. The nature of the power conferred by Section 28 (4) to recover duties which have escaped assessment is in the nature of an administrative review of an act. The section must therefore be construed as conferring the power of such review on the same officer or his successor or any other officer who has been assigned the function of assessment. In other words, an officer who did the assessment, could only undertake reassessment [which is involved in Section 28 (4)].
15. It is obvious that the reassessment Page 28 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 and recovery of duties I.e. contemplated by Section 28(4) is by the same authority and not by any superior authority such as Appellate or Revisional Authority. It is, therefore, clear to us that the Additional Director General of DRI was not "the" proper officer to exercise the power under Section 28(4) and the initiation of the recovery proceedings in the present case is without any jurisdiction and liable to be set aside.
16. At this stage, we must also examine whether the Additional Director General of the DRI who issued the recovery notice under Section 28(4) was even a proper officer.
The Additional Director General can be considered to be a proper officer only if it is shown that he was a Customs officer under the Customs Act. In addition, that he was entrusted with the functions of the proper officer under Section 6 of the Customs Act. The Additional Director General of the DRI can be considered to be a Customs officer only if he is shown to have been appointed as Customs officer under the Customs Act.
17. Shri Sanjay Jain, learned Additional Solicitor General, relied on a Notification No.17/2002 Customs (NT) dated 7.3.2002 to show all Additional Directors General of the DRI have been appointed as Commissioners of Customs. At the relevant time, the Central Government was the appropriate authority to issue such a notification. This notification shows that all Additional Directors General, mentioned in Column (2), are appointed as Commissioners of Customs.
18. The next step is to see whether an Additional Director General of the DRI who has been appointed as an officer of Customs, under the notification dated 7.3.2002, has been entrusted with the functions under Section 28 as a proper officer under the Customs Act. In support of the contention that he has been so entrusted with the functions of a proper officer under Section 28 of Page 29 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 the Customs Act, Shri Sanjay Jain, learned Additional Solicitor General relied on a Notification No.40/2012 dated 2.5.2012 issued by the Central Board of Excise and Customs. The notification confers various functions referred to in Column (3) of the notification under the Customs Act on officers referred to in Column (2). The relevant part of the notification reads as follows:"[ To be published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection
(ii)] Government of India Ministry of Finance (Department of Revenue) Notification No.40/2012Customs (N.T.) New Delhi, dated the 2nd May, 2012 S.O. (E). In exercise of the powers conferred by subsection (34) of section 2 of the Customs Act, 1962 (52 of 1962), the Central Board of Excise and Customs, hereby assigns the officers and above the rank of officers mentioned in Column (2) of the Table below, the functions as the proper officers in relation to the various sections of the Customs Act, 1962, given in the corresponding entry in Column (3) of the said Table:
Sr.No. Designation of the Functions under Section Offcers of th customs Act,1962 (1) (2) (3)
1. Commissioner of (I) Section 33 Customs
2. Additional (I) Sub-section(5) of Commissioner of Section 46: and Customs (ii) Section 149
3. Deputy Commissioner or (i) .......
Assistant Commissioner (ii).......
of Customs and Central (iii).......
Excise. (iv).......
(v) .......
(vi) Section 28;
Page 30 of 52
Downloaded on : Sun Jan 16 01:17:44 IST 2022
C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021
.......
19. It appears that a Deputy Commissioner or Assistant Commissioner of Customs has been entrusted with the functions under Section 28, vide Sl. No.3 above.
By reason of the fact that the functions are assigned to officers referred to in Column (3) and those officers above the rank of officers mentioned in Column (2), the Commissioner of Customs would be included as an officer entitled to perform the function under Section 28 of the Act conferred on a Deputy Commissioner or Assistant Commissioner but the notification appears to be illfounded.
The notification is purported to have been issued in exercise of powers under subSection (34) of Section 2 of the Customs Act. This section does not confer any powers on any authority to entrust any functions to officers. The subSection is part of the definitions clause of the Act, it merely defines a proper officer, it reads as follows:
"2. Definitions - In this Act, unless the context otherwise requires, ...
(34) 'proper officer', in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the [Principal Commissioner of Customs or Commissioner of Customs]. "
20. Section 6 is the only Section which provides for entrustment of functions of Customs officer on other officers of the Central or the State Government or local authority, it reads as follows:"
6. Entrustment of functions of Board and customs Page 31 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 officers on certain other officers - The Central Government may, by notification in the Official Gazette, entrust either conditionally or unconditionally to any officer of the Central or the State Government or a local authority any functions of the Board or any officer of customs under this Act."
21. If it was intended that officers of the Directorate of Revenue Intelligence who are officers of Cenral Government should be entrusted with functions of the Customs officers, it was imperative that the Central Government should have done so in exercise of its power under Section 6 of the Act. The reason why such a power is conferred on the Central Government is obvious and that is because the Central Government is the authority which appoints both the officers of the Directorate of Revenue Intelligence which is set up under the Notification dated 04.12.1957 issued by the Ministry of Finance and Customs officers who, till 11.5.2002, were appointed by the Central Government. The notification which purports to entrust functions as proper officer under the Customs Act has been issued by the Central Board of Excise and Customs in exercise of nonexistingpower under Section 2(34)of the Customs Act. The notification is obviously invalid having been issued by an authority which had no power to do so in purported exercise of powers under a section which does not confer any such power.
22. In the above context, it would be useful to refer to the decision of this Court in the case of Commissioner of Customs vs. Sayed Ali and another wherein the proper officer in respect of the jurisdictional area was considered. The consideration made is as hereunder:"
16. It was submitted that in the instant case, the import manifest and the bill of entry were filed before the Additional Collector of Customs (Imports), Mumbai; the bill of entry was duly assessed, and the benefit of the exemption was extended, subject to execution of a bond by the importer which was duly executed undertaking the obligation of export. The learned counsel argued Page 32 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 that the function of the preventive staff is confined to goods which are not manifested as in respect of manifested goods, where the bills of entry are to be filed, the entire function of assessment, clearance, etc. is carried out by the appraising officers functioning under the Commissioner of Customs (Imports).
17. Before adverting to the rival submissions, it would be expedient to survey the relevant provisions of the Act. Section 28 of the Act, which is relevant for our purpose, provides for issue of notice for payment of duty that has not been paid, or has been shortlevied or erroneously refunded, and provides that:
"28. Notice for payment of duties, interest, etc. - (1) When any duty has not been levied or has been shortlevied orerroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may,(a) in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution hospital, within one year; or (b) in any other case, within six months, from the relevant date, serve notice on the person chargeable with the duty or interest which has not been levied or charged or which has been so shortlevied or part paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any duty has not been levied or has been shortlevied or the interest has not been charged or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful misstatement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this subsection Page 33 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 shall have effect as if for the words 'one year' and 'six months', the words 'five years' were substituted."
18. It is plain from the provision that the 'proper officer' being subjectively satisfied on the basis of the material that may be with him that customs duty has not been levied or short levied or erroneously refunded on an import made by any individual for his personal use or by the Government or by any educational, research or charitable institution or hospital, within one year and in all other cases within six months from the relevant date, may cause service of notice on the person chargeable, requiring him to show cause why he should not pay the amount specified in the notice. It is evident that the notice under the said provision has to be issued by the 'proper officer'.
19. Section 2(34) of the Act defines a 'proper officer', thus: '2. Definitions.
( 34) 'proper officer', in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the Commissioner of Customs;' It is clear from a mere look at the provision that only such officers of customs who have been assigned specific functions would be 'proper officers' in terms of Section 2(34) the Act.
Specific entrustment of function by either the Board or the Commissioner of Customs is therefore, the governing test to determine whether an 'officer of customs' is the 'proper officer'.
20. From a conjoint reading of Sections 2(34) and 28 of the Act, it is manifest that only such a Customs Officer who has been assigned the specific functions of assessment and reassessment of duty in the jurisdictional area where the import concerned has been affected, by either the Board or the Commissioner of Customs, in terms of Section 2(34) of the Act is competent to issue notice under section 28 of the Act. Any other reading of Section 28 would render the Page 34 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 provisions of Section 2(34) of the Act otiose inasmuch as the test contemplated under Section 2(34) of the Act is that of specific conferment of such functions."
23. We, therefore, hold that the entire proceeding in the present case initiated by the Additional Director General of the DRI by issuing show cause notices in all the matters before us are invalid without any authority of law and liable to be setaside and the ensuing demands are also setaside."
25.8. The Apex Court thus eventually allowed the appeals and the common order passed by the CESTAT was set aside and consequently, the demand notice issued also was set aside holding that entire proceeding initiated by the Additional Director General and DRI of issuance of show cause notice was invalid in absence of any authority under the law and consequently, had set aside the show cause notice.
26. Taking a que from this decision, it has been argued vehemently by the learned senior advocate, Mr.Deven Parikh that in the present case, the challenge is to the very action of the respondentauthority of seizure of the goods and once the seizure is set aside, the question of provisional release under Section 110A of the Act, which is by way of imposition of overtly harsh and burdensome condition of release of the goods by insisting upon the Bank Guarantee and other requirement, would automatically go away. He has also urged that the seizure of the goods can be by an appropriate officer, who under Section 110 of the Act has reason to believe that the goods in question were liable to be confiscated under Section 111 of the Act. He has further urged that if the assessee makes the fullest disclosure than the mere wrong claim of classification or wrong claim of the exemption, is not misdeclarationas contemplated under Section 111(M).
26.1 He has also relied on the judgement rendered in case of PSL Limited vs. Commissioner of Customs, Kandla, reported in 2015 (328) ELT 177 to contend that Page 35 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 it is not expected by the assessee to fill in the correct classification or exemption as held in 2011 (269) ELT 307 (SC). It is for the department to find the correct legal position as to the classification if, the department allows clearance, then the importer cannot be held responsible. He has therefore urged that subjective satisfaction must show that it is not a case of mere wrong case of exemption or wrong classification, but the assessee not having disclosed all relevant informations and having to defraud the department. A mere different view as to the classification and exemption, when otherwise all facts are known to the department beforehand cannot enable the department to seize the goods as the same surely would not amount to misdeclaration nor would it render the goods liable to be confiscation as per the settled position of law. 26.2 It is insisted that the subjective satisfaction is based on irrelevant material and not sustainable and is without jurisdiction.There is no rational nexus between the material and the subjective satisfaction and therefore, it needs to be set aside. The Court shall need to essentially examine as to whether the subjective satisfaction was not arbitrary or capricious or was sufficient or not as per the statute and whether the same was not that of a normal rational human being or was not germane to the issue or was not as per requirement of the concerned statute and was by way of mere conjecture or surmise. His grievance is that as per the settled law the imported product has to be assessed in the condition in which it is imported and be made available for assessment since what happens subsequently is not of much consequence. 26.3 He has further argued that post importation process from which different products can be made from the imported product are hopelessly irrelevant for classifying the product at the time of import. The EDI system allowed classification except Bill of Entry. Upon 100% examination and nontesting and after referring to the documentation and certification. It is urged that the Page 36 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 Custom Officer carried out the assessment and all goods were accordingly released after a fullfledged satisfaction and assessment with open eyes to all relevant facts and later on by some untold intelligence, the investigation was restarted within a few months and the seizure took place.
26.4. What all the DRI has done is to sit in appeal over what the Custom Officer did at the time of original assessment and for no fault of assessee, seized the goods. It is urged that once the out of charge has been granted as provided by the Bombay High Court in 2019 (3) 667 E.L.T. 897, the seizure cannot be effected. He has heavily relied on the decision of Cannon India Pvt. Ltd.(supra) and urged that here also, show cause notice is by the DRI and not by the officer who had assessed the petitioner initially.
26.5. He has also urged that the Gujarat High Court followed the Northern Plastic and held that mere claim for classification or exemption may not lead to the seizure of the goods in 2011 (27) E.L.T. 356.
27. Learned Additional Solicitor General of India, Shri Devang Vyas has strenuously urged this Court that the intelligence received made it abundantly clear as to how the petitioner attempted to mis declare the goods, leading to enormous loss to the revenue and such misstatement itself is a cause of issuance of show cause notice which would be aptly dealt with by the statutory authority and this Court need not regard the request of any interference.
27.1. Learned ASG has also further contended before this Court that petitioner was fully conscious that their imported product 'Discarded and nonserviceable semi broken motor cannot be termed as melting scrap of iron or steel. Their scrap consist of 85% iron scrap, 10% of copper and 5% of Aluminum scrap. However, to avoid payment of 5% rate of duty on assessable value, it has chosen not to declare correct details in the bills of entry from three separate headings, it chose to club under one tariff heading by deliberately changing description of Page 37 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 their imported goods so as to let it fall under classification CTH 7204 49 00 under the other Ferrous Waste and Scrap and thereby availed undue benefit of concessional rate of custom duty at the rate of 2.5% instead of 5% scrap what contended copper and aluminum and not only iron and steel, this intentional and deliberate nondeclaration needs stringent dealing. He also urged that Cannon India Pvt. Ltd. (supra) can also be urged before the statutory authority while arguing show cause notice.
28. As can be noticed from the detailed submissions and the ratio laid down in Cannon India Pvt. Ltd. (supra) in the instant case also, the importer has filed bills of Entry at Thar Dry Port, ICD Customs, Sanand and declared the description of the product as "Discarded and Non-- serviceable semi broken Motor Scrap" classifying the same under the Custom Tariff Act 7204 49 00 under the heading of other Ferrous Waste and Scrap. The benefit of concessional rate of 2.5% had been availed by the petitioner vide serial No.368 of Notification No.50/2017:CUS dated 30.06.2017. The said serial No.368 is notified for "melting scrap of iron or steel (other than stainless steel)" for chapter 7204 in the said Notification.
29. It is alleged in the show cause notice and in the affidavit in reply that, the importer was aware that the scrap contained 10% of Copper, which is evident from the certificate of analysis and Form 9 furnished by the petitioner to the authority. Therefore, it was the DRI, which formed the "reasonable belief" that the importer took undue benefit of concessional rate of duty of 2.5% instead of the paying the effective rate of 5%, resulting into short payment of custom duty to the Government. Therefore, the DRI placed under detention the imported motor scrap (raw material) of 59,45,032 kilo grams of imported motor scrap, nondismantled and 9,39,619 kgs of dismantled and segregated scrap of various types.
30. Thus, the estimated value of scrap of Page 38 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 Rs.5,83,62,131 were placed under detention by DRI on 29.07.2020 and the same had been handedover to Shri Naveen Sharma, Operation Manager, M/s.CMR Chiho Industries India Pvt. Ltd. petitioner herein, under proper Suparat Nama dated 29.07.2020 for safe custody. These goods were further placed under seizure on 03.08.2020 as they were liable for confiscation according to the authority under Section 111 of the Act. According to the respondents, the entire matter is currently under investigation of DRI, the Deputy Director, DRI Zonal Unit has given 'no objection' to the provisional release to the seized goods on 11.08.2020 since, the importerpetitioner requested for release of the seized goods vide letter dated 05.08.2020. It is quite obvious that at the time of import of the goods, the petitioner had declared the description of the product as "Discarded in nonserviceable motor scrap under Customs Tariff Heading 7204 49 00 under "other ferrous waste" and because of that 2.5% of rate of concessional duty had been made available under Notification 50/2017:CUS dated 30.06.2017. What is not being disputed is that the certificate of analysis and Form as also other relevant materials had been placed before the Custom Authority which examined the same and cleared the goods of import. It was later on that the DRI with a "reasonable belief" that there was an undue benefit of the concessional rate of duty taken which resulted into the short payment of custom duty, placed the goods under detention and they were subjected to confiscation. It is quite obvious that the officer, who had permitted the import of the goods is not the one who had formed a reasonable belief of the petitioner having taken undue benefit of the concessional rate of duty. It is the officer of the DRI, who was not anywhere in the picture when the import took place, had acted and detained the goods and later on also confiscated the same. A very serious challenge in the instant case is also to the action of the DRI officer of detention and seizure dated 29.07.2020 and 03.08.2020 so also of the confiscation dated 11.08.2020 along with the challenge to the very Page 39 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 action of show cause notice on the part of the respondent.
31. What is vital for the Court to regard is the factual details of the case on hand before applying the judgement of the Cannon India Pvt.Ltd. (supra) while exercising powers of detention, the DRI alleges that the custom authorities had been induced by the petitioner to clear the goods which had been imported by alleged willful misstatement and suppression of the facts and this action according to the DRI had led to the wrongful availment of the concessional rate of duty. This misdeclaration of the product along with the concessional rate of duty resulted into the short payment of custom duty and therefore, it chose to not only exercise the powers of detention, but also of seizure on 11.08.2020. The provisional release order was also passed on receipt of certain securities from the petitioner.
32. The relevant permissions in connection with the detention and seizure if are briefly noticed, Section 111 lays down that if the proper officer has a reason to believe that any goods are liable of confiscation under the customs act, he may seize such goods.
32.1. Section 110A of the Act is an attaching section where the provisional release of seized goods pending adjudication is contained, which says that any goods, documents or things seized or bank account provisionally attached under Section 110 of the Act, may, pending the order of the adjudicating officer, be released to the owner or the bank account holder on taking a bond from him in the proper form with such security and conditions as the adjudicating authority may require.
32.2. Section 110(2) of the Customs Act also provides that where any goods are seized under subsection (1) and no notice in respect of the same is given Page 40 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 within six months under clause (a) of section 124, the goods shall be returned to Page 66 of 79 the person from whose possession they were seized.
32.3. It is also further provided that not only the principles of natural justice shall have to be adhered to. It is obvious that there has to be a show cause notice before confiscation of the goods within six months after once the seizure of the goods takes place under Section 110 (1) of the Act.
32.4. Section 124 of the Act provides for issuance of show cause notice before the confiscation of the goods and states that no order of confiscation or imposing of any penalty on any person shall be made under this chapter unless the owner of the goods or such person (a) is given a notice in writing with the prior approval of the officer of Customs not below the rank of an Assistant Commissioner of Customs informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty; (b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and (c) is given a reasonable opportunity of being heard in the matter, Provided that the notice referred to in clause (a) and the representation referred to in clause
(b) may at the request of the person concerned be oral. Provided further that notwithstanding the issuance of notice under this section, the proper officer may issue a supplementary notice under such the circumstances and in such manner as may be prescribed.
32.5. It also appears that under Section 125 of the Customs Act, there is an option to pay the fine in lieu of confiscation as the said provision provides that "whenever confiscation of any goods is authorized by this Act, the officer adjudging it may, in case of any goods, the importation or exportation whereof is prohibited Page 68 of 79 under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods Page 41 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 or, where such owner is not known, the person from whose possession or custody such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit".
33. Thus, after once the officer concerned forms a reasonable belief in relation to the goods imported, firstly what happened was the detention and thereafter, the seizure of the goods.
33.1. Such goods had been periodically released but before undertaking the process of confiscation, opportunity of payment of fine also can be given and there is a detailed procedure mandated before actually confiscation takes place.
33.2. Since the availing of due opportunity for following of principles of natural justice is an integral part of the scheme of these provisions, issuance of show cause notice is by way of following the prescribed procedure.
33.3. And yet, what would be vital to examine is whether the exercise of forming reasonable belief in wake of noticeable material before the authority could be held justifiable and whether the issuance of notice by the officer concerned of DRI, in wake of the latest decision, would warrant interference on the ground of the same being non est without any authority.
34. The Deputy Director, DRI respondent No.3 herein in his affidavitinreply has alleged that there is already improper declaration of description of imported goods and consequential claim and thereby, availment of undue benefit of concessional rate of custom duty at the rate of 2.5% instead of 5%. The goods imported are not melting scrap of Iron and Steel, but also contained Copper scrap and Aluminum scrap.
According to the Department, the petitioners were aware that the imported products were labeled as "Discarded and nonserviceable semibroken motor scrap" and they simply cannot be termed as melting scrap of Iron or Steel (other than stainless steel) falling Page 42 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 under Customs Heading 72044900. They have admitted that they are importing the motor scrap consisting Iron Scrap 85%, Copper Scrap 10% and Aluminum Scrap 5% in approximate. They are alleged of intentionally not declaring their products properly in the bills of Entry at the time of import under Section 46 of the Act in terms of Section 17 of the Customs Act. Section 17 provides that an importer entering any imported goods under Section 46 or an exporter entering any export goods under Section 50 of the Act shall save as otherwise provided in Section 85, self assess the duty, if any, leviable on such goods.
35. Admittedly, the description in the Bill of Entry "Discarded and nonserviceable semi broken motor scrap" even on inspection of the goods were found exactly as entered into the Bill of Entry I.e. discarded and nonserviceable broken motor scrap. The only reason after having allowed the import for not allowing the benefit of reduced rate of duty is because the Copper scrap and the Aluminum scrap in the material imported to the extent of 10% and 5% respectively and approximately could be taken out eventually from these broken motors. That essentially appears to be the reason for disallowing of the exemption. As is apparent from the material in the certificate of analysis produced at the time of clearance of the goods itself, the existence of the Copper scrap is also disclosed. It is not disputed by the respondent No.3 that such certificate of analysis had been produced. The same has also finds a specific mention in the panchnama dated 03.08.2020 and in the letter dated 03.08.2020 addressed to the petitioner by the Assistant Commissioner, ICD, Sanand. 35.1. It is in the beginning of this communication referred to "during the course of post clearance audit of the Bills of Entry filed by you in respect of clearance of goods viz.,"Discarded and nonserviceable semibroken motor scrap". It has been noticed that the documents like bill of lading, PSIC and certificate of analysis indicate that the imported scrap consisted of (I) Copper Page 43 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 scrap, Barley/Birch (ii) Aluminum scrap (iii) Iron scrap (HMS).
35.2. The petitioner is absolutely right in pointing out that if the exemption was not available to the petitioner on the basis of the documents, which had been produced at the time of import, the Assessing Officer of the Customs could have denied the same and with the full knowledge, he had permitted assessment of the goods under the Customs Tariff Heading 7204 49 00 as Iron and Steel scrap and permitted the exemption available under Notification Page 73 of 79 50/2017:CUS dated 30.06.2017 under serial No.368.
36. It can be noticed that from the disclosure made by the petitioner that it had claimed the classification and exemption by bringing to the notice of the department all relevant details and therefore, to term this as a misdeclaration and to arrive at a subjective satisfaction for not allowing the benefit of Notification on the ground of existence of the Copper in the scrap motors, by the DRI Officer surely in wake of the decision of Canon India Pvt. Ltd (supra) shall need to be interfered with. The assessment once when is done by the concerned officer of the Custom Department, the reassessment by the DRI Officer, who invoked the powers, not being the proper officer as per the decision of Canon India Pvt. Ltd. (supra) would warrant indulgence. And, hence, his reasonable belief would also have no bearing when otherwise the authority concerned had allowed the import on the basis of the material which had been already made available by the petitioner. Thus, on the count of the DRI officer not being a proper officer under the law as the action on the part of the officer of DRI is not to be sustained. Again, assuming that he would have powers to reassess the very fact that entire material was with the assessing officer, it was for him to assess otherwise. Besides, vide notification issued by the Central Board of Excise & Customs, that is, notification no. 40/2012 - customs (NT) dated 2.5.2012 and more particularly, item no.6 Page 44 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 whereby, the Intelligence Officer in the Director General of Revenue Intelligence and Directorate General of Central Excise Intelligence, have been assigned the powers of various sections including the powers under subsection (1) and (2) of section 110 of the Act, which notification has been considered by the Apex Court with reference to assigning the powers of section 28 of the Act and has been held to be invalid. The learned counsel for the Union, could not dispute the said proposition as well as the applicability of the judgement to the facts of the present case, therefore, applying the principles enunciated in the case of Canon India Private Ltd (supra) the petition deserves to be allowed.
37. The decision of the Apex Court rendered in case of Commissioner of Customs, Calcutta vs. G.C.Jain, reported in 2011 (269) E.L.T. 307 shall also need to be referred to at this stage where dispute was whether Butyl Acrylate Monomer (BAM) can be said to be an adhesive for the purpose of allowing the duty free clearances against advance license issued under the DEEC scheme.
"24.It is also observed that the demand is hit by the bar of limitation inasmuch as the appellant had cleared the goods in question after declaring the same in the bills of entries and giving correct classification of the same. Availing of benefit of a notification, which the Revenue subsequently formed an opinion was not available, cannot lead to the charge of misdeclaration or misstatement, etc. and even if an importer has wrongly claimed his benefit of the exemption, it is for the department to find out the correct legal position and to allow or disallow the same.
In the instant case the appellant had declared the goods as Butyl Acrylate Monomer with correct classification of the same and the word 'adhesive' was added in the exbond bill as per the appellant's understanding that BAM is an adhesive. In these circumstances it was for the Revenue to check whether BAM was covered by the expression adhesive or not and if even after drawing of Page 45 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 samples they have allowed the clearances to be effective as an adhesives appellant cannot be held responsible for the same and subsequently, if the Revenue has changed their opinion as regards the adhesive character of BAM, extended period cannot be invoked against them. As such we are of the view that the demand of duty in respect of 14 consignments is also barred by limitation."
37.1. It is of course for the department to find out the correct legal position as to the classification and if the department has permitted the clearance, and subsequently changed its opinion, to hold the petitioner liable and responsible and alleged him of misdeclaration since is impermissible.
38. Here is the case where the petitioner has filed Electronic Bill of Entry in the EDI system, where it can claim a particular exemption or a particular classification. On subsequently having noticed that the Copper and Aluminum elements would not permit the exemption under the Notification at the rate of 2.5% by itself would not make the import of the goods as clandestinely having been done, the least that could have been done was to term the same as mala fide when otherwise the relevant material had been already placed with the department.
38.1. As mentioned hereinabove, the communication dated 03.08.2020 in post clearance audit of Bill of Entry was on the basis of various documents including the certificate of analysis, when it was realized by the department that the product consists of the Copper scrap also to the extent of around 10%. The DRI has firstly detained the goods, which later on had been seized. Assuming that the stage of adjudication of show cause notice is yet to come, this Court has no intent to go into the issue of classification at all as it would be for the proper officer to workout the same on following the due procedure and on requisite scrutiny however, noticing that the order of detention and seizure by the DRI itself is unsustainable, we allow the petition by quashing and setting aside the seizure Page 46 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 and the panchnama.
38.2 Resultantly, this Petition is allowed, quashing and setting aside the detention and seizure dated 29.07.2020 (AnnexureH ), dated 03.08.2020 (AnnexureL & M) & 11.08.2020 (Annexure-W).
38.3. Petitioner shall be returned the detained raw materials/goods in two weeks from the date of receipt of copy of the judgement.This would have no bearing on the aspect of classification pending before the proper officer and the same shall be determined on its own merit.
38.4. Petition is disposed of accordingly with no order as to cost."
4. Thus, as reflected above, the very aspect has been decided by this Court in the case of the very petitioner, as mentioned hereinabove, relying essentially on the decision of M/s.
Cannon India Private Ltd. vs. Commissioner of Customs (supra), so far as the present petition is concerned, grievances made are in respect of challenges made to the action of respondent No.3-Assistant Commissioner of Customs, ICB, Sanand. The action of recalling the provisional assessment bill of entry, which had been once assessed at the rate of 2.5%, had been assessed at the rate of 5% on the ground that the goods are correctly classifiable Page 47 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 under CTH-72044900 and, hence, the correct rate of duty applicable is not 2.5%, but 5%.
5. As mentioned hereinabove, according to the petitioner, there is no specific entry for the discarded and non-
serviceable semi-broken electric motor scrap under the Customs Tariff Act. It is also the firm stand of the petitioner that the goods were classifiable under CTH-72044900, as the goods imported consisted of iron scrap 85%, Copper scrap 10% and aluminum scrap 5% and this iron and steel being the predominant metal, the same would be classifiable under CTH-72044900. This classification was as per the legal advice of a legal expert and from the Customs authority, whereas the classification, which has been proposed by the respondent does not permit such interpretation, and according to the respondent, imported product of the petitioner discarded and "non-serviceable semi-broken electric motor scrap" cannot be termed as melting scrap of iron and steel falling under CTH-7204. When they are admittedly importing motor scrap, assessing of iron and Page 48 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 steel scrap at 85%, copper scrap at 10% and aluminum scrap at 5% in the bills of entry also at the time of import under section 46 of the Customs Act, the petitioner has not intentionally declared the product properly, since that would attract 5% of the assessable value.
6. It is required of an importer and exporter to self-assess the duty, if leviable on such goods for the subject of import or export. The petitioners since has mentioned Notification No.50 of 2017 CUS dated 30.06.2017 along with Survey No.368, as per the concessional rate of 2.5 % of the basic custom duty, it is applicable in respect of effective rate of 5%. The respondent seriously has questioned the intent on the part of the petitioner declaring the scrap as the melting scrap of iron and steel, since it actually contained valuable content of aluminum and copper scrap.
7. What we could notice is that iron and steel scrap has 85%, copper scrap has 10% and aluminum scrap has 5% approximately. It as melting scrap of iron and steel (other than stainless steel) falling under CTH-7404. However, Page 49 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 whether this can be for avoiding the payment of effective rate of duty, which is 5% of aluminum and copper scrap or whether the same was with a bona fide belief of falling under CTH-7404, as predominantly the scrap of iron and steel to the extent of 85% shall need to be examined by the concerned officer. Here, there is no element of DRI having stepped into examining this aspect and having initiated any actions overreaching the process of law. It is respondent No.3 the Assistant Commissioner of Customs, who himself had assessed at 2.5%, chose to recall his assessment and levied it at the rate of 5%. It has to be noted that in Special Civil Application No. 10521 of 2021, this Court while disposing of the matter, has permitted the Customs Authority to decide the aspect of classification by proper officer on its own merit without being influenced by any of the other aspects.
8. Resultantly, this petition is allowed quashing and setting aside the action of reassessment of 49 bills along the line of action quashed by this Court in Special Civil Application No. 10521 of 2020. This would not preclude the authority to Page 50 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022 C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 finally assess these bills on availing due opportunity of personal hearing to the parties on following the principles of natural justice as also the law.
9. It is also further being clarified at the instance of both the sides that the future consignments of the petitioner shall be released upon the petitioner furnishing the bond of 100% of the value of the goods and further furnishing 35% of the bank guarantee on the amount of financial duty payable thereon. Petitioner has ensured to cooperate with the due process of final adjudication. Cost to be the cost in cause.
(MS. SONIA GOKANI, J. ) (SANGEETA K. VISHEN,J) Further order Before this order was uploaded the review application preferred in Special Civil Application No. 10521 of 2020, which has been the basis for deciding this application came to be partly allowed, correcting the wordings which had been inadvertently found in the judgement. It is, therefore, necessary to reproduce the relevant paragraphs where changes have been made in the Review application:-
Page 51 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022C/SCA/673/2021 CAV JUDGMENT DATED: 19/07/2021 "25. Before This Court proceeds to consider whether at the stage of action of seizure, it needs to entertain this petition or whether the said action of seizure is non est totally in the eyesd of law for absolute want of jurisdiction of authority, would be considered a little later.
29. It is alleged in the seizure memo and in the affidavit in reply that, the importer was aware that the scrap contained 10% of Copper, which is evident from the certificate of analysis and Form 9 furnished by the petitioner to the authority. Therefore, it was the DRI, which formed the "reasonable belief" that the importer took undue benefit of concessional rate of duty of 2.5% instead of the paying the effective rate of 5%, resulting into short payment of custom duty to the Government.
Therefore, the DRI placed under detention the imported motor scrap (raw material) of 59,45,032 kilo grams of imported motor scrap, nondismantled and 9,39,619 kgs of dismantled and segregated scrap of various types. 33.3. And yet, what would be vital to examine is whether the exercise of forming reasonable belief in wake of noticeable material before the authority could be held justifiable and whether the action of seizure by the officer concerned of DRI, in wake of the latest decision, would warrant interference on the ground of the same being non est without any authority."
(MS. SONIA GOKANI, J. ) (SANGEETA K. VISHEN,J) sudhir Page 52 of 52 Downloaded on : Sun Jan 16 01:17:44 IST 2022