Customs, Excise and Gold Tribunal - Tamil Nadu
Jay Ar Enterprises vs Cc (Sea) on 5 December, 2006
Equivalent citations: 2007(210)ELT459(TRI-CHENNAI)
ORDER P.G. Chacko, Member (J)
1. The appellants are manufacturers of leather. They had filed four Shipping Bills dt. 22.4.02, 1.7.02, 12.7.02 and 24.7.02 for export of finished leather falling under Heading 4106 19 09 of the First Schedule to the Customs Tariff Act. In respect of three of these four Shipping Bills, they realized sale proceeds and thereby foreign exchange, whereby DEPB credit in two scrips was obtained. Sale proceeds under the fourth Shipping Bill (24.7.02) could not be realized and, therefore, the party did not seek DEPB credit on the export covered under that Shipping Bill. The goods exported under all the four Shipping Bills were rejected by the foreign-buyer, whereupon the appellants filed a Bill of Entry on 15.3.2004 declaring USA as the country of origin in respect of the entire quantity of the goods. SIIB, who examined the goods, found the original Shipping Bill marks on all packages. From these and allied findings, it appeared to the Customs authorities that the goods covered under the Bill of Entry were the same as those exported under the aforesaid Shipping Bills. Statements were recorded from the party. From the results of investigations, it appeared to the authorities that the goods were liable for confiscation under Section 111(m) of the Customs Act on account of misdeclaration of the country of origin and the importers were liable for penalty under Section 112(a) of the Act. Hence show-cause notice dated 11.8.2004 was issued under Section 124 of the Customs Act proposing confiscation of the goods and penalty on the importer. The proposal was contested by the party who, inter alia, claimed the benefit of exemption from payment of duty on the above goods in terms of Sl. No. 3 of the Table annexed to Notification No. 94/96-Cus. The said Notification granted exemption from payment of duty on the goods described in column No. 2 of the said Table from so much of BCD, CVD and SCD as was in excess of the amount indicated in the corresponding entry in column No. 3 of the said Table. The goods exported under claim for drawback of Customs or Excise Duties or under claim for rebate of Central Excise Duty or under bond without payment of Central Excise Duty or under DEEC or EPCG schemes were covered by Sl. No. 1 of the Table annexed to the Notification. Goods other than those falling under Sl. No. l, exported for repairs abroad were covered under Sl. No. 2 of the Table. Goods exported under DEPB scheme were covered under Sl. No. 2A of the Table. Certain specified goods other than those falling under Sl. No. 1 were covered by Sl. No. 2B of the Table. Goods other than those falling under Sl. No. 1 & 2 were covered by Sl. No. 3 of the Table. The importer's claim was under this entry and, accordingly, duty-free clearance was sought. This claim was rejected by the Commissioner, who, apart from confiscating the goods with option for redemption thereof on payment of fine and imposing penalty on the appellants, directed them to produce DEPB before the proper officer of Customs for debiting an amount of Rs. 7,06,344/- being the DEPB credit % obtained by the party against some of the exports made by them. The redemption fine imposed by the Commissioner in lieu of confiscation of the goods valued at Rs. 84,19,320/- is Rs. 10 lakhs and the penalty imposed by him is Rs. 5 lakhs.
2. After examining the records and hearing both sides, we find that, in the SCN, there was no proposal to deny DEPB credit to the party. Hence the direction for debit of DEPB credit is beyond the scope of the SCN and the same cannot be sustained. It is, however, found that there is no valid challenge against the finding of misdeclaration of country of origin. It is the appellants' own case that the goods manufactured by them in India and exported were re-imported. Obviously, they were aware of the Indian origin of the goods. Hence declaring USA as the country of origin is a clear case of misdeclaration which, if not detected, would have enabled the party to treat the goods rejected by the foreign customers as a regular import and to claim attendant benefits. Misdeclaration of country of origin is an offence which attracts Clause (m) of Section 111 of the Customs Act and, accordingly, the goods became liable for confiscation. The redemption fine determined by the Commissioner cannot, in our view, be said to be unreasonable in the facts and circumstances of the case, and we sustain the same. Coming to the penalty, contentious arguments were advanced by both sides. Learned consultant has invited our attention to the full text of Section 112 of the Customs Act, which is reproduced below:
Section 112. Penalty for improper importation of goods, etc. - Any person, -
(a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111, or abets the doing or omission of such an act, or
(b) who acquires possession of or is any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under Section 111, shall be liable, -
(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty [not exceeding the value of the goods or five thousand rupees], whichever is the greater;
(ii) in the case of dutiable goods, other than prohibited goods, to a penalty [not exceeding the duty sought to be evaded on such goods or five thousand rupees], whichever is the greater;
(iii) in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under Section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty [not exceeding the difference between the declared value and the value thereof of five thousand rupees, whichever is the greater;
(iv) in the case of goods falling both under Clauses (i) and (iii), to a penalty [not exceeding the value of the goods or the difference between the declared value and the value thereof or five thousand rupees], whichever is the highest;
(v) in the case of goods falling both under Clauses (ii) and (iii), to a penalty [not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the value thereof or five thousand rupees], whichever is the highest.
It is submitted that the subject goods were not prohibited, nor dutiable, nor overvalued and, therefore, the penalty provisions in Clauses (i) to (v) under Section 112 are not applicable. Though learned SDR would concede the non-prohibited character of the goods, she has argued that the goods are 'dutiable' in terms of the relevant tariff provision and, therefore, penalty in terms of Clause (ii) under Section 112(a) would be imposable on the importer. This takes us to the question as what is meant by "dutiable goods"? This is an expression defined under the Customs Act vide Section 2(14). "Dutiable goods" mean any goods which are chargeable to duty and on which duty has not been paid. In the present case, admittedly, during the material period, 'finished leather' attracted duty at specified rate under the tariff but Exemption Notification No. 21/2002-Cus. (as amended) granted full exemption from payment of duty thereon. In other words, during that period, the Revenue was not entitled to charge any duty on the goods. Where duty is not so chargeable, the goods are said to be "not chargeable to duty" and, by virtue of the above definition, they are not 'dutiable' goods. Where the goods are not dutiable, the penalty in terms of Clause (ii) under Section 112(a) of the Customs Act is not liable to be imposed on the importer of the goods. ld. SDR has not claimed further under Section 112. At this stage, ld. SDR is fair enough to cite the Supreme Court's judgment in Associated Cement Companies Ltd. v. CC .
3. Paragraphs 79 & 80 of the apex court's judgment read as under:
79. Under the Central Excise Act, 1944 in definition of words "excisable goods" under Section 2(d), the very specification or inclusion of goods in the First and Second Schedule of the Central Excise Tariff Act would make them excisable goods subject to duty. Under the Customs Act, the provisions seem to be somewhat different. While by virtue of Section 2(22) all kinds of movable property would be 'goods' but it is only those goods which would be regarded as 'dutiable goods' under Section 2(14) which are chargeable to duty and on which duty has not been paid. The expression "chargeable to duty on which duty has not been paid" indicates that goods on which duty has been paid or on which no duty is leviable, and therefore no duty is payable, will not be regarded as 'dutiable goods'. It is only if payment of duty is outstanding or leviable that goods will be regarded as dutiable goods."
80. Section 12 of Customs Act provides that the duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act. When the Customs Tariff Act itself provides that the import of drawings and designs under Heading No. 49.06 is 'free', it must follow that these drawings and designs, though goods, were not chargeable to duty. In view of the difference in the language of the Excise and Customs Acts, the decisions in the cases of Vazir Sultan and Wallace Flour Mills (supra) may not be very apposite and if no customs duty is chargeable either by reason of tariff not providing for it or because of the exemption notification, those goods will not be regarded as dutiable goods "on which duty has not been paid". It is sufficient in the present case to observe that the drawings and designs which were imported by the appellant were correctly classifiable under Heading No. 49.06 and the tariff itself providing that the import of the same is free, the said drawings and designs were not dutiable articles and, therefore, no customs duty was leviable thereon even as a part of the passenger baggage. On this short ground alone the appeal of Videocon has to be allowed.
4. In the view we have taken, which has the apex court's approval, the penalty imposed on the appellants by the Commissioner under Section 112(a) of the Customs Act has to be vacated and we do so.
5. In the result, the appeal is allowed in part.
(Dictated and pronounced in open court)