Customs, Excise and Gold Tribunal - Tamil Nadu
Gaur Impex vs Commissioner Of Customs on 16 December, 2003
Equivalent citations: 2004(94)ECC45, 2004(175)ELT696(TRI-CHENNAI)
ORDER Jeet Ram Kait, Member (T)
1. This appeal is directed against Order-in-Original No. 665/2003 dated 5.6.2003 by which the Ld. Commissioner of Customs (Export) has ordered confiscation of copper scrap weighing 86.963 MTs valued at Rs. 48,73,614 imported under Bills of Entry Nos. 31993, 31994, 31995 and 31996 dated 20.11.2001 under Section 111(o) of the Customs Act, 1962. However he has given an option to the importer-appellant to redeem the same on payment of fine of Rs. 20.00 lakhs. He also demanded duty amounting to Rs. 30,63,748 under Section 28(1) of the Customs Act, 1962 as the goods are not eligible for clearance under Annual Advance Licence No. 0510039746 dated 10.7.2001. He also imposed a penalty of Rs. 10.00 lakhs on M/s. Gaur Impex under Section 112(a) of the Customs Act, 1962.
2. Aggrieved by this order, the appellant have come in appeal on the following grounds which are extracted herein below:
"It is submitted that the appellant has not yet cleared the goods since a grave injustice has been done as per the impugned order. The appellant respectfully submits that the impugned order-in-original explicitly exhibits the lack of application of mind on that part of the Commissioner. The order is contrary to the facts and weight of evidence and it is therefore legally not sustainable.
2. The appellant submits that the Commissioner has confiscated the goods invoking Section 111 (o) of the Customs Act. This section of the Act is re-produced as under:
"111 (o). Any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer".
3. The appellant submits that the Commissioner has not pointed out the condition which was not observed with respect to the impugned goods. It is submitted that the goods are yet to be cleared. The appellant has agreed to clear the goods on payment of duty at merit rates forgoing his right to claim exemption under Nfn. 48/99-Cus. in view of the dispute raised by the Directorate of Revenue Intelligence with regard to the past import and the licence relevant to such imports. Therefore, the Commissioner has erred in invoking Section 111(o) of the Customs Act, 1962.
4. The appellant submits that staking a claim for exemption from duty on the strength of a notification issued under Section 25 of the Customs Act is not an offence by itself. The appellant staked its claim based on the advance licence granted to him which was valid at the material time. Notwithstanding the existence of the licence, the appellant agreed to clear the goods paying duty at merit rate and therefore there is no question of complying with any condition prescribed in the Nfn. 48/99-Cus.
5. It is respectfully reiterated that the goods were still within the purview of Section 47 and therefore the bill of entry ought to have been assessed on the merit rate applicable to the goods. No penalty or confiscation would therefore arise. In fact, this is the procedure being followed by the Customs wherever the exemption claimed is denied for any reason. To be specific, this is the procedure followed by the Customs with regard to M/s. Aglow Exports in an identical situation.
6. The appellant submits that even if it were to be true that there was no factory owned by the appellant and that he had diverted the goods imported earlier violating the actual user condition imposed as per Nfn. 48/99, yet the Commissioner has no legal authority to confiscate the goods as no violation as such has been committed in present in so far as the goods in question is concerned.
7. The appellant submits that the goods under import are not liable for confiscation inasmuch as there is no condition to be fulfilled or complied with by him when the goods are cleared on payment of duty at merit rate. Having demanded duty at merit rate and the appellant agreed to pay that, there can be no question of invoking Section 111(o) to confiscate the goods. As the confiscation itself is illegal, there can be no penalty on the appellant under Section 112(a) of the Customs Act.
8. The appellant submits that a show cause notice was issued on identical -- facts and circumstances to another importer of brass scrap viz., M/s. Aglow Exports. They agreed to clear the goods on payment of duty at merit rate. The Commissioner adjudicated the case without imposition of penalty or confiscation of goods vide Order-in-Original No. 187/2002 dt. 21.11.2002 passed by the Commissioner of Customs (Imports), Chennai.
9. The appellant submits that a reading of the findings by the adjudicating authority clearly reveals that he has been biased. He has confiscated the goods and imposed penalty on the appellant not because the appellant violated any provisions of law with regard to the live consignment but because the appellant has allegedly violated the conditions of Nfn. 48/99-Cus. with respect to the goods imported by him earlier. The alleged violation even with respect to the past import is yet to be adjudicated. The appellant accordingly submits that the impugned order is illegal since it is opposed to basic tenets of jurisprudence that no one can be punished till after a breach is committed or a contravention of law is noticed.
10. The appellant further submits that there has been no false declaration on his part even with regard to the earlier imports made. The brass scrap were imported to manufacture handicrafts. In the manufacture of brass artware following processes are involved.
i. conversion of raw scrap into specific alloy ingot.
ii. wooden pattern making as per requested designs and sizes iii. casting/moulding as per design.
iv. finishing at grinders and emery buffing.
v. machining as per filtering requirement.
vi. checking and packing.
For these seven or more different processes, different job contractors/workers scattered in the vicinity are employed. None of the manufacturers has all the arrangement in house. Therefore, the allegation by the Directorate of Revenue Intelligence that the appellant had no factory in the declared premises and therefore the goods were diverted without being used for manufacture of export goods is nothing but a figment of imagination.
11. The investigation conducted by the officers of the DRI did not establish that the brass scrap imported earlier by the appellant were diverted without being used for manufacture of export products viz., handicrafts. In fact, the narration in the show cause notice clearly established that the imported goods have been transported to Delhi and from there to the appellant's premises. The job workers contacted by the officers of the DRI also deposed that they did receive the raw material and manufactured handicrafts. The "planter" manufactured by the job worker was also available in the premises at the time when the offices visited the job worker's premises. The advance licence under which the goods were earlier imported and the licence under which exemption was initially claimed with respect to the goods under import are still valid having net yet been cancelled by the JDGFT.
12. The Commissioner demanded duty amounting to Rs. 30,63,748 under Section 28(1) of the Customs Act, 1962. As has been submitted by the appellant, there was no question of demanding duty under the said section inasmuch as the goods have not yet been cleared and the proper course is to assess the bill of entry under Section 47 at merit rates denying the exemption if any claimed by the appellant. The appellant also agreed to get the goods assessed at merit rate. In the absence of non-levy, short levy or erroneous refund, invocation of Section 28(1) of the Customs Act is not correct. The prior assessment and payment of duty is a pre-requisite to invoke Section 28(1).
13. The appellant further submits that the Commissioner has made an arbitrary exercise of his powers in ordering recovery of the duty and other liabilities by encashing the bank guarantee executed by the appellant in terms of the advance license. A recovery procedure would arise only when the duty to be collected is an arrears. It is obvious that no such recovery procedure is warranted when the appellant has agreed to get the goods assessed at the merit rate and discharge duty accordingly.
14. It is submitted that the goods are ordered to be cleared on payment of duty at merit rate. Therefore, the appellant is under no obligation to comply with any of the conditions of the Nfn. 48/99-Cus. Even if the appellant sells the goods to a third party and no goods are exported, there is no contravention of any of the provisions of the Customs Act, or conditions of the notification with regard to the goods under import.
15. The appellant accordingly prays that the impugned order may be set aside and the Customs may be directed to assess the goods at merit rate and clear the goods in terms of Section 47 of the Customs Act, 1962.
3. Ld. Advocates Shri B. Kumar and Shri Sathish Sundar appeared before us on behalf of the appellant-importer and submitted a chart of date of events and proposition on 28.10.2003, and invited our attention to the events. From the date of events, it would be seen that on 10.7.2001, the appellant company was issued with annual advance licence No. 0510039746 with DEEC book No. A029542 by Jt. DGFT, New Delhi under EXIM Policy 1997 - 2002 facilitating import of copper scraps valued at Rs. 5.00 crores free of customs duty in terms of Customs Notification No. 48/99-Cus. dated 29.4.99, as amended licence was issued with obligation to export copper sheet valued at Rs. 6.65 crores within 18 months from the date of issue of licence i.e. on or before 10.1.2003. During September to November 2001, appellant imported and cleared 445.162 MTs of copper scrap under 22 bills of entry availing licence and benefit of aforesaid notification (in respect of these consignments separate show cause notice was issued and not adjudicated). On 20.11.2001, bill of entry No. 31993, 31994, 31995 and 31996 were filed for clearance of 4 containers of copper scrap totally weighing 86.963 MTs. The goods were seized by the DRI officers on 14.3.2002 alongwith licence before the goods were cleared. On 26th - 29th of November, 2001 and on 3.12.2001 statements were recorded from Srinivasa Roadways Director and employee of Srinivasa Roadways. In their statement they had stated that the appellant's consignment in containers used to be handled by them and goods used to be transported from Chennai and despatched to Domestic container Depot at Tughlakabad, New Delhi where goods used to be sent to M/s. A.S. Pick & Move Transport Company for further transportation from D.C.T. On 5.12.2001, partner of Pick and Move namely Sunil Kumar Jain stated after receiving the containers at ICD/DCT from CHA/ Srinivasa Roadways, containers were transported to destination as per challans and instructions of party. On 7.12.2001, business premises of appellant-importer was searched by DRI and certain documents recovered. In her statement, Mrs. Gaur stated that there was no separate office. Enquiry also revealed that appellant did not have manufacturing unit for manufacture of resulted products out of duty free imported material though DEEC books show manufacturing unit at Basthi Gajurala, J.P. Nagar, U.P. On 19.12.2001, CHA's letter to DRI stated that one Dharmesh Gaur is a proprietor of appellant and Devendar Yadav, Manager of appellant-importer used to come to their office to hand over import documents and on clearance goods were sent by rail at CONCOR through M/s. Srinivasa Roadways and Indo Arys Central Transport and documents were sent to appellant directly. On 8.1.2002, statement of Dharmesh Gaur, Proprietor of Appellant-company had stated that he exported readymade garments valued at Rs. 6,65 crores in the year 2001 and 2002 on the basis of which he obtained annual advance licence which was deposited with Chennai Customs for imports as he was not well he entrusted the work of Gaur Impex to his friend Devender Yadav, who knows full details. He further stated that for keeping imported goods two godown were taken on rent in New Delhi and no exports were made so far. Shri Devendar Yadav in his statement recorded on 9.1.2002; 11.1.2002; 21.1.2002 and 12.4.2002 stated that the imports made under the impugned licence and transportation of the same to New Delhi were delivered at the two godowns. He also stated that the goods were despatched to M/s. Sun Rise Exports and M/s. Faran International both situated at Moradabad for manufacture of copper planter after such manufacturing 12 MTs were available at their godown. He also stated that the appellant had no casting facility but they have registration certificate. He further stated that the address given in the DEEC book Part A of the factory was used for manufacture of readymade garments and the factory had no facility to manufacture handicrafts. The factory was closed since January 2001 and the possession handed over to the owner. On 5.3.2002, officers of Central Excise conducted investigation at Faran International and Sun Rise Exports at Moradabad, both were found to be existing in the same building and both these firms got their work done through different job workers at Moradabad. It was revealed from the documents which were recovered from them that they have received copper scrap from appellant for manufacture of copper art wares as per appellant's specifications. Entire quantity received from the appellant were sent to different job workers at Moradabad who had manufactured finished goods as per appellant's specifications and the finished goods were found in premises belonged to appellant-importer. On 14.3.2002, goods pending clearance weighing 86.96 MTs at Chennai port were seized by the DRI, Chennai. On 17.7.2002, statement of Devendar Yadav was recorded in which he had stated that the goods were transported to Moradabad through one Rajendra Transport Contractor, who used to arrange for truck and labour. Transport builties were not in existence at given address. On 23.7.2002, Devendar Yadav produced 4 vouchers for payments made to Rajendra and vouchers and goods were sent alongwith each other. Statement of Rajendra was also recorded on 23.7.2002 who had issued builties for transportation of goods in the name of carriers namely M/s. Delhi Rajasthan Goods Carriers, B.K. Transport Ganesh Golden Transport. The address given in the builties were fake. He sent copper scrap of appellant to Moradabad between October 2001 and March 2002. On 23.8.2002, show cause notice was issued by ADG DRI seeking to extend time for issue of show cause notice. On 6.9.2002, Commissioner of Customs extends time from 13.9.2001 to 12.3.2003 for issue of show cause notice. In the meanwhile, 9.5.2002, Jt. DGFT issued show cause notice to the appellant for cancellation of licence and the proceedings are still pending. On 6.3.2003, show cause notice was issued in the present case in respect of 86.963 MTs of copper scrap imported under Bills of Entry No. 31993, 31994, 31995 and 31996. On 26.3.2003, show cause notice was issued for past clearances of 445.162 MTs. This show cause notice has not been proceeded upon and no adjudication of the same has taken place. On 10.4.2003, reply to the show cause notice was furnished. On 5.6.2003, Order-in-Original was passed by the respondent ordering confiscation of the imported materials under 111(o) of the Customs Act giving option to redeem the same on payment of fine of Rs. 20.00 lakhs and demanded duty of Rs. 30,63,748 and imposed a penalty of Rs. 10.00 lakhs. On 22.9.2003, Hon'ble Tribunal granted waiver in full and fixed the date of hearing of the appeal on 23.10.2003 which was further adjourned and finally taken up for hearing on 7.11.2003.
4. Ld. Advocates S/Shri. B. Kumar and Satish Sundar argued that the entire proceedings itself is pre-mature because the licence which was issued on 10.7.2001 and had 18 months from the date upto 10.1.2003 for fulfilment of export obligation whereas the DRI have seized the goods even as early as 14.3.2002 alongwith licence. The goods had arrived in November 2001 and were detained for investigation. Therefore for appellant could not exercise his right over the goods and fulfil the export obligations for which he had time till January 2003. Therefore it cannot be said that the appellant could not fulfil his export obligation thereby the goods becoming liable for confiscation under Section 111(o) and they were liable for any fine and penalty as has been done by the Commissioner of Customs, Chennai, the lower adjudicating authority. He further submitted that the department cannot seek to sustain the allegation that the appellant's goods have become liable for confiscation under Section 111 (o) of the Customs Act and the appellant are liable for penalty under Section 112(a) of the Customs Act on the basis of past clearances in respect of which department contends that the appellant had not fulfilled the export obligation and did not use the material imported earlier under 22 bills of entry for export, more so when the appellant had paid NIL duty availing benefit of Notification No. 48/99 under the advance licence. But for the seizure on 14.3.2002, the appellant could have taken steps for fulfilment of export obligations in respect of the materials imported. Therefore, the reasoning of the lower authority is incorrect.
5. Ld. Advocates further argued that even though Jt. DGFT issued show cause notice for cancellation of the licence till date the licence has not been cancelled. As long as the licence was valid and was in operation and not expire, all imports made under that licence cannot be called in question on the ground that the licence itself was obtained by fraud and therefore void ab initio. He further submitted that the customs authorities have no jurisdiction to sit in judgment over the validity of the licence, or otherwise and have no jurisdiction to say that the importers obtained the imports licence by mis-declaration. Till date the licensing authority has not even taken any steps to allege that they have obtained the licence fraudulently.
6. Ld. Advocate further submitted that even assuming that the appellant had no factory facility as given in Part A of the DEEC book, the fact that the appellant had despatched part of the goods to Moradabad for manufacture as per his specification for the purpose of export cannot be denied. The statements and material gathered in investigation will show that the materials had been despatched to units at Moradabad, the same worked upon by job workers and sent back to appellant. The manufactured goods as per appellant's specifications were found with job workers at Moradabad. Ld. Advocate invited our attention to para 7.17 of the EXIM Policy which permits to utilize the facility of supporting manufacturers and the importer need not have the manufacturing facility himself.
He can get the goods manufactured from various job workers to fulfil his export obligation and clear the goods duty free which are imported under the advance licence. He further submitted that in any event there is no mis-declaration in respect of the subject goods weighing 86.96 MTs and therefore they cannot be confiscated and no redemption fine can be imposed and no penalty can be imposed on them.
7. Ld. Advocates challenged the findings of the Ld. Commissioner contained in para 10.5 of the impugned order and submitted that the Customs cannot challenge the licence and cannot say that the licence is null and void. He further submitted that there is no order from the licensing authority for cancelling their licence. In this connection, the relied on the majority judgment rendered by 3 Member Bench of the Apex Court in the matter of East India Commercial Co. Ltd. Calcutta v. CC, Calcutta, 1983 (13) ELT 1342 (SC). He also submitted that a contract is never void and it is only voidable and there is no question of nullity. Para 35 of the judgment of the Apex Court is extracted below:
"35. Nor is there any legal basis for the contention that licence obtained by misrepresentation makes the licence non est, with the result that the goods should be deemed to have been imported without licence in contravention of the order issued under Section 3 of the Act so as to bring the case within Clause (8) of Section 167 of the Sea Customs Act. Assuming that the principles of law of contract apply to the issue of a licence under the Act, a licence obtained by fraud is only voidable : it is good till avoided in the manner prescribed by law. On May 1, 1948, the Central Government issued an order in exercise of the power conferred on it by Section 3 of the Act to provide for licences obtained by misrepresentation, among others, and it reads :
"The authorities mentioned in the Schedule hereto annexed may under one or other of the following circumstances cancel licences issued by any officer authorized to do so under clauses (viii) to (xiv) of the notification of the Government of India in the late Department of Commerce, No. 23-ITC/43, dated 1 July, 1943 or take such action as is considered necessary to ensure that the same is made ineffective, namely:
(i) When it is found subsequent to the issue of a licence that the same has been issued inadvertently, irregularly or contrary to rules, fraudulently or through misleading statement on the part of the importer concerned; or
(ii) when it is found that the licensee has not complied with any one or more of the conditions subject to which the licence may have been issued.
SCHEDULE
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Clauses licencing authority Cancelling authority
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Clause (xiii) Any officer authorises by Chief Controller of Imports the Central Government and/or Govt. of India."
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This order, therefore, authorised the Government of India or the Chief Controller of Imports to cancel such licences and make them ineffective. The specified authority has not cancelled the licence issued in this case on the ground that the condition has been infringed. We need not consider the question whether the Chief Controller of Imports or the Government of India, as the case may be, can cancel a licence after the term of the licence has expired, for no such cancellation has been made in this case. In the circumstances, we must hold that when the goods were imported, they were imported, under a valid licence and therefore it is not possible to say that the goods imported were those prohibited or restricted by or under Ch. IV of the Act within the meaning of Clause (8) of Section 167 of the Sea Customs Act.
8. He also invited our attention to para 21 of the Apex Court judgment rendered in the case of Union of India v. Sampat Raj Dugar, 1992 (38) ECC 83 (SC) : 1992 (58) ELT 163 (SC). The Apex Court in this case has held that under Section 111(d) goods imported which is contrary to any provisions imposed either by Customs Act or any other law for the time being in force, can be confiscated under Section 111(d) & (o) of the Customs Act. He further submitted that Section 111(o) would apply in cases for non-fulfilment of conditions and it would never apply in such a situation as they still had 18 months to fulfil the export obligation. He also submitted that not only an 18 months period for fulfilling the export obligation is over, even there is a provision for seeking further extension for another six months. Para 21 of the above Apex Court judgment is reproduced hereinbelow for ready reference:
"21. The next question is whether the import of the said goods was contrary to law in any manner and whether the said goods are liable to be confiscated under the Customs Act The only provisions relied upon by the appellants are Clauses (d) and (o) in Section 111 of the Customs Act which we have set out hereinabove. In our opinion none of these clauses are attracted in the present case. Clause (d) contemplates an import which is contrary to any prohibition imposed either by the Customs Act or any other law for the time being in force. No such prohibition can be pleaded in this case since on the date of the importer the said goods were covered by a valid import licence. The subsequent cancellation of licence is of no relevance not does it retrospectively render the import illegal. [East India Commercial Co. Ltd. v. The Collector of Customs, Calcutta, 1963 (3) SCR 338 at 372.] Clause (o) contemplates confiscation of goods which are exempted from duty subject to a condition, which condition is not observed by the importer. Occasion for taking action under this clause arises only when the condition is not observed within the period prescribed, if any, or where the period is not so prescribed, within a reasonable period. It, therefore, cannot be said that the said goods were liable to be confiscated on the date of their import under Clause (o). Further, merely because the second respondent had not complied with the condition imposed with respect to three earlier consignments, it may not be possible to presume that it would not be observed even with respect to the four consignments in question. Be that as it may, it is sufficient for the present to notice that so far no action has been taken on that account either under the Customs Act or under Section 4G of the Imports and Exports (Control) Act, 1947. Section 4G of 1947 Act is also conceived to meet such a situation, as a reading thereof would disclose. It says that non-compliance with any condition of licence relating to utilization of such goods renders the said goods liable to confiscation notwithstanding that such goods are mixed up with other goods or material. Even though a period of more than five years has passed by, no action has been taken either under the Customs Act or under Section 4G of Imports and Exports (Control) Act, though the import licence of the second respondent has been cancelled. We must presume in the circumstances that no such action was or is contemplated. In these circumstances the title of the first respondent to the said goods remains free of any cloud."
9. Ld. Advocates also invited our attention to the judgment rendered by the Apex Court in the case of Titan Medical Systems Pvt. Ltd. v. CC, New Delhi, 2003 (87) ECC 13 (SC) : 2003 (151) ELT 254 (SC). They relied on para 13 of the judgment and submitted that the Apex Court has held that once an advance licence was issued and not cancelled by the licensing authority, the customs authorities cannot refuse exemption on an allegation that there was misrepresentation and if there was any mis-representation it was for the licensing authority to take steps on that behalf. Ld. Advocates submitted that the fact in that case was that of indigenous material input was less than the promised and hence the goods were confiscated. In view of the Apex Court judgment he submitted that the Customs cannot question the veracity of the licensing authority and since the licence has not been cancelled and not even steps have been taken to cancel the licence and their goods cannot be confiscated and no fine and penalty can be imposed on them. Para 13 of the Apex Court judgment of the above case is extracted herein below:
"13. As regards the contention that the appellants were not entitled to the benefit of the exemption notification as they had misrepresented to the licensing authority, it was fairly admitted that there was no requirement, for issuance of a licence, that an applicant set out the quantity or value of the indigenous components which would be used in the manufacture. Undoubtedly, while applying for a licence, the appellants set out the components they would use and their value. However, the value was only an estimate. It is not the respondents case that the components were not used. The only case is that the value which had been indicated in the application was very large whereas what was actually spent was a paltry amount. To be noted that the licensing authority having taken no steps to cancel the licence. The licensing authority have not claimed that there was any misrepresentation. Once an advance licence was issued and not questioned by the licensing authority, the Customs authorities cannot refuse exemption on an allegation that there was misrepresentation. If there was any misrepresentation, it was for the licensing authority to take steps in that behalf.
10. Ld. Advocates also relied on para 4 and 5 of the Tribunal judgment rendered in the case of Marmo Classic v. Commissioner of Customs (EP), Mumbai, 2002 (143) ELT 153 wherein the Tribunal relying on the Apex Court judgment rendered in the case of East India Commercial Co. Ltd. Calcutta v. CC, Calcutta, 1983 (13) ELT 1342 (SC) has held that licence obtained by fraud is voidable and is good till avoided. It was in this circumstance the finding of the Ld. Commissioner regarding the liability for confiscation of the goods under Section 111(d) of the Customs Act, 1962 were set aside. Similarly relying on the Apex Court judgment rendered in the case of Union of India v. Sampat Raj Dugar, 1992 (38) ECC 83 (SC) : 1992 (58) ELT 163 wherein the Apex Court held that if on the date of import the goods were covered by valid import licence then subsequent cancellation of the same is not relevant and does not render retrospectively the import illegal and to call for confiscation under Section 111(d) of the Customs Act. It was also held by the Apex Court that Clause (o) of Section 111 contemplates confiscation of goods which are exempted from duty subject to a condition, which condition is not observed by the importer and occasion for taking action under Clause (o) arises only when the condition is not observed within the period prescribed, if any, or where the period is not so prescribed, within a reasonable period. In view of the above well settled legal position, the goods are not liable for confiscation on the date of their import nor subsequently unless they have not observed the condition. Para 4 & 5 of the above referred judgment is extracted herein below for ready reference:
4. The learned advocate for the appellants at length submitted a catena of decisions beginning from East India Commercial Company Ltd. v. Collector, 1983 (13) ELT 1342 of the Supreme Court and other decisions which laid down that a licence issued is valid till it is cancelled; in the case of K. Uttamlal (Exports) Pvt. Ltd, v. UOI, 1990 (46) ELT 527, Bharucha J., as he was then, has held that fraud would have to be established, and, even if established, the principle that would apply is laid down in the judgment of the SC in East India Commercial Co. Ltd. v. Collector of Customs, Calcutta, 1933 (13) ELT 1342 (SC), namely that a licence obtained by fraud is voidable and is good till avoided. Therefore following the same we would find no reason to uphold the findings of the learned Commissioner regarding the liability for confiscation of the goods under Section 111(d) of the Customs Act, 1962.
5. As regards the confiscation of the goods arrived at under Section 111(o) we would rely upon the decision in the case of Union of India v. Sampat Raj Dugar, 1992 (38) ECC 83 (SC) : 1992 (58) ELT 163 wherein the Apex Court held that if on the date of import the goods were covered by valid import licence then subsequent cancellation of the same is not relevant and does not render retrospectively the import illegal and to call for confiscation under Section 111(d). In this judgment it was also held that clause (o) of Section 111 contemplates confiscation of goods which are exempted from duty subject to a condition, which condition is not observed by the importer. Occasion for taking action under this clause arises only when the condition is not observed within the period prescribed, if any, or where the period is not so prescribed, within a reasonable period, it, therefore cannot be said that the said goods were liable to confiscation on the date of their import under clause (o). In this view of this law, laid down by the Apex Court, in this case we find no reason to order the confiscation of the goods under Section 111(o). When we find that there is no liability for confiscation of the goods under Section 111(d) and/or 111(o) arrived at by the Commissioner we cannot uphold the redemption fine and penalties determined by the Commissioner.
11. Ld. Advocates also submitted that the judgment of the Tribunal rendered in the case of Marmo Classic v. Commissioner of Customs (EP), Mumbai, 2002 (143) ELT 153 has been ratified by the Apex Court by dismissing appeal filed by Revenue as reported in 2003 (152) ELT A84. Ld. Counsels also invited our attention to the judgment rendered by the tribunal in the case of Jaysynth Dyechem Ltd. v. CC (EP), Mumbai, 2001 (136) ELT 1429. Ld. Counsel also invited our attention to para 7 of the judgment wherein it has been held that it is not for the customs authorities to interpret the licensing policy and to enforce the same once a valid licence is produced. Hence this function is with the licensing authority. If this bifurcation of the function is not adhered to there is every likelihood of utter confusion. The licensing authority may interpret one way and the customs authorities may take contrary view producing conflict between the two authorities resulting harassment to the importer. There has to be wide compartment between the customs authorities and the licensing authority. Para 7 of the order is extracted herein:
7. This conclusion of the Commissioner, in effect, puts him so that since he sits in judgment over the function of the Advance Licensing Committee or the Zonal Advance Licensing Committee. We are told by the Counsel for the appellants, these Zonal and Regional Committees comprises, in addition to the licensing authority, representatives of the Director General of Technical Development, Director of Industries of the concerned State and a representative of the Customs Department. He has, in effect, sat in judgment on the issue of license. It is now settled law that customs authorities cannot question the basis upon which the licence is issued. They are required to abide by the terms of the licence, even if they are of the opinion, the licence ought not to have been issued. The landmark judgment on this aspect was delivered by the Bombay High Court in Lokash Chemical Works v. M.S. Mehta, Collector of Customs (Preventive), Bombay and Ors., 1981 (8) ELT 235. In this judgment, the Court delineated the respective functions of the customs authorities with regard to import and assessment to duty of such goods. It said the function of the licensing authorities is to consider whether any particular items would be allowed to be imported or not looking into various circumstances. If satisfied it could permit import. It is their function to permit import by grant of licence and impose such conditions as necessary. As against this the function of the customs authorities starts only after, the goods are imported, brought into the territorial waters of the country. It is not for the customs authorities to interpret the licensing policy and to enforce the same once a valid licence, is produced. This function is with the licensing authority. If this bifurcation of the function is not adhered to there is every likelihood of utter confusion. The licensing authority may interpret one way and the customs authorities may take contrary view producing conflict between the two authorities resulting harassment to the importer. If the licence is granted for a particular item by the licensing authority the customs authority will have no right or power to go beyond the licence, Despite the passage of 20 years after the judgment was delivered, it is distressing to find the same situation. This judgment of the Court has been followed in number of decisions of the Tribunal. Therefore, if the Commissioner were of the view that the importer has misled the licensing authority or nay other authority formulated by it with regard to the quantity that it required for manufacture of the export product, it is his duty and function to intimate the licensing authority so that authority can investigate into the matter and institute necessary proceedings against the licensee under the statute. It is not his function to overrule the decision of the licensing authority to decide whether a particular item could or not be imported.
12. Ld. Counsels also made an alternate plea for allowing the goods to be cleared on merit rate as this item is freely importable under Open General Licence (OGL) and falls under Chapter heading 74.01. Copper scrap falling under chapter heading 74.01 are freely imported. He also invited our attention to the order passed by the Commissioner of Customs (Import) Dr. J. Sridharan vide his Order-in-Original No. 150/2002 dated 21.11.2002 in the matter of M/s. Aglow Exports, Moradabad, in which he has denied the benefit of exemption Notification No. 30/99-Cus. dated 1.4.99 and the importer was allowed to clear the goods on payment of duty at merit rate. Ld. Counsel further submitted that the case of M/s. Aglow Exports was worse than them as in that case licence was cancelled ab-initio by the authorities, who issued the licence. He, therefore, submitted that as they would not be able to fulfil the export obligation because of the seizure of the goods by the DRI and the adjudication by the customs authorities they may be allowed to clear the goods on merit rate as they are freely importable. In this connection, Ld. Counsel relied on paras 16 & 17 of the order passed by Commissioner of Customs, Chennai in the case of M/s. Aglow Exports Ltd., which is extracted herein below:
"16. I find from the totality of the facts and circumstances of the subject case that the very same importer had earlier cleared the goods under the same Advance Licence availing the benefit of conditional customs notification but failed to export. On top of all, I also find that the importer has submitted two shipping bills which appeared to be fabricated and the earlier consignments are being proceeded against separately, and do not form part of the subject proceedings. From the above I find that the credentials of the importers are questionable.
17. Thus, from the context of attendant facts, I find the department has a strong case.
In any case, the issue before me is limited to the subject goods under seizure, whether to be allowed against such licence which was misused already. I find further that this licence was cancelled ab initio by the authorities who issued licence. While so, there is no way to utilize the licence as the same stood cancelled. Therefore, I find that the importers have no say whatsoever but to pay the duty on merits for clearance of the goods. Besides the importer vide their letter dated 24.9.2002 had agreed to clear the brass scrap weighing 81.225 MT covered by the three bills of entry Nos. 32087 dated 21.11.2001; 32130 dated 21.11.2001 and 32184 dated 22.11.2001 on payment of duty at merit rate.
In view of my above findings, I pass the following order:
I deny the benefit of exemption under Customs Notification No. 30/99 dated 1.4.99 for the goods covered by bill of energy numbers 32087 dated 21.11.2001; 32130 dated 21.11.2001 and 32184 dated 22.11.2001 which are presently under seizure, in view of the fact that Advance Licence No. 2910000795 dated 12.7.2000 was cancelled ab initio and that the importer had agreed to pay the duty at merit rate."
13. Appearing on behalf of the revenue Shri A. Jayachandran, DR submitted that no request was made before the licensing authority to extend the time. He also relied on para 3 of the judgment rendered in the case of East India Commercial Co. Ltd. Calcutta v. CC, Calcutta, 1983 (13) ELT 1342 (SC) wherein the licence was issued subject to the conditions that the goods would be utilized only for consumption as raw material or accessories in the licence holder's factory and that no portion thereof would be sold to any party. Whereas in the application for licence it was stated that goods were not required for sale but for modernizing the lighting system of the appellant's factory at Ellore in Madras and therefore the facts mentioned in this case and the present case are clearly distinguishable. DR also relied on the judgment rendered by the Tribunal in the case of Kunal International v. CC, Calcutta, 2001 (138) ELT 132 wherein it was held by the Tribunal that redemption fine and penalty are imposable in a situation where the quantity based advance licence having been obtained by fraud and misrepresentation and which was cancelled with retrospective effect and the appellant having no manufacturing facilities and wrong address is given, the goods were held correctly liable for confiscation and the importer is held to be liable to penalty under Sections 111(d), 112 and 125 of Customs Act, 1962.
14. In counter, Ld. Counsels submitted that the judgment cited by Ld. DR in the case of Kunal International v. CC, Calcutta (supra) is not applicable and is clearly distinguishable as in the case of Kunal International, the licence was cancelled before the import took place. In this connection he relied on para 5 of the judgment wherein it is mentioned that licence was cancelled with retrospective effect before the clearance of the goods and at the point of clearance there could not be any question of assessing the goods in terms of the exemption Notification No, 30/97-Cus. Ld, Counsel also invited our attention to para 11 of the judgment and submitted that the facts in their case are clearly distinguishable and the Tribunal's judgment can never be read as contrary to the judgment of the 3 Member Supreme Court judgment. Ld. Counsel, therefore concluded his argument by praying that since the item imported is copper scrap falling under chapter heading 74.01 and freely importable under open general licence and they may be allowed to clear the goods on merit rate as has been done by the Commissioner of Customs, Chennai in the case of M/s. Aglow Exports, another importer. Moreover, they would not be able to fulfil the export obligation because of shortage of time even by utilizing the facility of getting their goods manufactured from the supporting manufacturers, they should therefore, be allowed to get their goods cleared by paying appropriate duty on merit rate. The order of the Commissioner confiscating and imposing redemption fine and penalty may also be set aside.
15. We have carefully gone through the case records and considered the submissions made by both the sides including the case laws cited. We notice that the entire proceedings itself is pre-mature because the licence was issued on 10.7.2001 and had 18 months from the date upto 10.1.2003 for fulfilment of export obligation whereas the DRI have seized the goods even as early as 14.3.2002 along with licence. The goods had arrived in November 2001 and were detained for investigation. Therefore, the appellant could not exercise his right over the goods and fulfil the export obligations for which he had time till January 2003. Therefore it cannot be said that the appellant could not fulfil his export obligation thereby the goods becoming liable for confiscation under Section 111(o) and they were liable for any fine and penalty as has been done by the Commissioner of Customs, Chennai, the lower adjudicating authority. It is noticed that the department cannot seek to sustain the allegation that the appellant's goods have become liable for confiscation under Section 111(o) of the Customs Act and the appellant are liable for penalty under Section 112(a) of the Customs Act on the basis of past clearances in respect of which department contends that the appellant had not fulfilled the export obligation and did not use the material imported earlier under 22 bills of entry for export, more so when the appellant had paid NIL duty availing benefit of Notification No. 48/99 under the advance licence. But for the seizure on 14.3.2002, the appellant could have taken steps for fulfilment of export obligations in respect of the materials imported. Therefore, the reasoning of the lower authority is incorrect. It is also noticed that even though Jt. DGFT issued show cause notice for cancellation of the licence, till date the licence has not been cancelled. As long as the licence was valid and was in operation and did not expire, all imports made under that licence cannot be called in question on the ground that the licence itself was obtained by fraud and, therefore, void ab initio. It is also noticed that the customs authorities have no jurisdiction to sit in judgment over the validity of the licence, or otherwise and have no jurisdiction to say that the importers obtained the import licence by mis-declaration. Till date the licensing authority has not even taken any steps to allege that they have obtained the licence fraudulently. It is further noticed that even assuming that the appellant had no factory facility as given in Part A of the DEEC book, the fact that the appellant had despatched part of the goods to Moradabad for manufacture as per his specification for the purpose of export cannot be denied. The statements and material gathered in investigation will show that the materials had been dispatched to units at Moradabad, the same worked upon by job workers and sent back to appellant. The manufactured goods as per appellant's specifications were found with job workers at Moradabad. It is also noticed that para 7.17 of the EXIM Policy permits to utilize the facility of supporting manufacturers and the importer need not have the manufacturing facility himself. He can get the goods manufactured from various job workers to fulfil his export obligation and clear the goods duty free which are imported under the advance licence. It is noticed that in any event there is no mis-declaration in respect of the subject goods weighing 86.96 MTs and therefore they cannot be confiscated and no redemption fine can be imposed and no penalty can be imposed on them. It is further noticed that the findings of the Ld. Commissioner contained in para 10.5 of the impugned order are not legal and proper since the authority of Customs cannot challenge the licence and cannot say that the licence is null and void when there is no order from the licensing authority for cancelling their licence. It is also noticed that a contract is never void and it is only voidable and there is no question of nullity. In para 21 of the Apex Court judgment rendered in the case of Union of India v. Sampat Raj Dugar, 1992 (38) ECC 83 (SC) : 1992 (58) ELT 163 (SC), the Apex Court has held that under Section 111(d) goods imported which is contrary to any provisions imposed either by Customs Act or any other law for the time being in force can be confiscated under Section 111(d) & (o) of the Customs Act. It is also noticed that section 111(o) would apply in cases for non-fulfilment of conditions and it would never apply in such a situation as they still had 18 months to fulfil the export obligation. It is also noticed that they not only they had an 18 months period for fulfilling the export obligation even there is a provision for seeking further extension for another six months.
It is also noticed that the judgment rendered by the Apex Court in the case of Titan Medical Systems Pvt. Ltd. v. CC, New Delhi, 2003 (87) ECC 13 (SC): 2003 (151) ELT 254 (SC) in para 13 the Apex Court has held that once an advance licence was issued and not cancelled by the licensing authority, the customs authorities cannot refuse exemption on an allegation that there was misrepresentation and if there was any mis-representation it was for the licensing authority to take steps on that behalf. It is also noticed that the fact in that case was that indigenous material input was less than the promised and hence the goods were confiscated. In view of the Apex Court judgment we notice that the Customs cannot question the veracity of the licensing authority and since the licence has not been cancelled and not even steps have been taken to cancel the licence and their goods cannot be confiscated and no fine and penalty can be imposed on them. It is also noticed from para 4 and 5 of the Tribunal judgment rendered in the case of Marmo Classic v. Commissioner of Customs (EP), Mumbai, 2002 (143) ELT 153 wherein the Tribunal relying on the Apex Court judgment rendered in the case of East India Commercial Co. Ltd. Calcutta v. CC, Calcutta, 1983 (13) ELT 1342 (SC) has held that licence obtained by fraud is voidable and is good, till voided. It was in this circumstances the finding of the Ld. Commissioner regarding the liability for confiscation of the goods under Section 111(d) of the Customs Act, 1962 were set aside.
21. Similarly relying on the Apex Court judgment rendered in the case of Union of India v. Sampat Raj Dugar, 1992 (38) ECC 83 (SC) : 1992 (58) ELT 163 wherein the Apex Court held that if on the date of import the goods were covered by valid import licence then subsequent cancellation of the same is not relevant and does not render retrospectively the import illegal and to call for confiscation under Section 111 (d) of the Customs Act. It was also held by the Apex Court that Clause (o) of Section 111 contemplates confiscation of goods which are exempted from duty subject to a condition, which condition is not observed by the importer and occasion for taking action under Clause (o) arises only when the condition is not observed with the period prescribed, if any, or where the period is not so prescribed, within a reasonable period. In view of the above well settled legal position, the goods are not liable for confiscation on the date of their import nor subsequently unless they have not observed the condition. It is also noticed that the judgment of the Tribunal rendered in the case of Marino Classic v. Commissioner of Customs (EP), Mumbai, 2002 (143) ELT 153 has been ratified by the Apex Court by dismissing their appeal as reported in 2003 (152) ELT A84. It is also noticed from the judgment rendered by the Tribunal in the case of Jaysynth Dyechem Ltd. v. CC (EP), Mumbai, 2001 (136) ELT 1429 in para 7, it has been held that it is not for the customs authorities to interpret the licensing policy and to enforce the same once a valid licence is produced. Hence, this function is with the licensing authority. If this bifurcation of the function is not adhered to there is every likelihood of utter confusion. The licensing authority may interpret one way and the customs authorities may take contrary view producing conflict between the two authorities resulting harassment to the importer. There has to be wide compartment between the customs authorities and the licensing authority.
16. However, it is observed that the counsels had made an alternate plea for allowing the goods to be cleared on merit rate as this item is freely importable under Open General Licence (OGL) and falls under Chapter heading 74.01. Copper scrap falling under Chapter heading 74.01 are freely imported. It is also noticed from the order passed by the Commissioner of Customs (Import) Dr. J. Sridharan vide his Order-in-Original No. 150/2002 dated 21.11.2002 in the matter of M/s. Aglow Exports, Moradabad, in which he has denied the benefit of exemption Notification No. 30/99-Cus. dated 1.4.99 and the importer was allowed to clear the goods on payment of duty at merit rate. It is also noticed that the case of M/s. Aglow Exports was worse than the present case as in that case licence was cancelled ab initio by the authorities, who issued the licence. It is also noticed that they would not be able to fulfil the export obligation because of the seizure of the goods by the DRI and the adjudication by the customs authorities, they have to be allowed to clear the goods on merit rate as they are freely importable. It is also noticed that the judgment cited by DR in the case of Kunal International v. CC, Calcutta (supra) is not applicable and is clearly distinguishable, as in the case of Kunal International, the licence was cancelled before the import took place and in para 5 of the judgment it is held that licence was cancelled with retrospective effect before the clearance of the goods and at the point of clearance there could not be any question of assessing the goods in terms of the exemption Notification No. 30/97-Cus. It is also noticed from para 11 of the judgment that the facts in Kunal International' case is clearly distinguishable and the Tribunal's judgment can never be read as contrary to the judgment of the 3 Member Supreme Court judgment. It is also noticed that since the item imported is copper scrap falling under chapter heading 74.01 and freely importable under Open General Licence, they have to be allowed to clear the goods on merit rate as has been done by the CC, Chennai in the case of M/s. Aglow Exports, another importer. Moreover, they would not be able to fulfil the export obligation because of shortage of time even by utilizing the facility of getting their goods manufactured from the supporting manufacturers, they would, therefore, be allowed to get their goods cleared by paying appropriate duty on merit rate and the order of the Commissioner confiscating and imposing redemption fine and penalty is set aside.
17. Since the appellants have requested for the imported goods to be cleared on merit rate, we allow them to clear the goods on merit rate by paying appropriate duty. The appeal is disposed of on the above terms, by setting aside the impugned order.