Customs, Excise and Gold Tribunal - Delhi
Sneh Sales Corporation vs Collector Of Customs on 15 May, 1992
Equivalent citations: 1993(63)ELT128(TRI-DEL)
ORDER S.V. Maruthi, Member (J)
1. These two appeals are disposed of by common Order as they arise from a common Order of the Collector. The Collector by his order imposed a penalty of Rs. 5,00,000/- on M/s. Sneh Sales Corporation and penalty of Rs. 2,50,000/- on Shri Nitin Shah under Section 112(a) of the Customs Act on the ground that the appellants imported the goods under a licence which was subsequently cancelled.
2. The brief facts are as follows :-
The appellants obtained 4 licences namely licence No. 3082282, dated 24-6-1986 issued to M/s. Surjan Singh Balbir Singh, which was originally transferred to M/s. Chakradhar International India for a valuable consideration. The other licences Nos. are 3160049, dated 5-8-1986; 3051479, dated 18-3-1985 and 3158010, dated 30-6-1986. These licences were issued under Appendix 21 of Import Policy 1985-88 with an endorsement "Duty free imports against replenishment of licence". In pursuance of the licences the appellants imported two consignments of polyester filament yarn from Japan. One consignment consisting of 509 cartons was cleared through the I.C.D., New Delhi against Bill of Entry No. 1974, dated 31-10-1986. The second consignment consisting of 132 cartons was cleared through the I.C.D. New Delhi against Bill of Entry No. 1906, dated 23-10-1986. The appellants declared the value at US $ 2.15 per kg. The goods were assessed under Section 17 of the Customs Act, 1962 and were allowed clearance for home consumption under Section 47 of the Customs Act. After the clearance of the goods, the appellants despatched them by lorries to Bombay. Initially, these goods were intended to be stored at Sadanandwadi Godown. However, they could not be stored there owing to shortage of space. Therefore, the goods were re-loaded in lorries and taken to Shah & Nahar Industrial Estate and stored at Gala No. 211 on 13-11-1986.
3. Thereafter, there was search of the office premises of the appellants. During the search, the statements of various persons belonging to the appellants' concern were recorded. On 164-1987, the Directorate of Revenue Intelligence, Bombay issued Show Cause Notices to the appellants' concern and M/s. A.B. International, M/s. Top Sea Exports, New Delhi, M/s. Chadha International, New Delhi, M/s. Surjan Singh Balbir Singh, Amritsar and Shri Nitin Shah and various others. In the Show Cause Notices, it was proposed to confiscate the goods under various provisions of the Customs Act read with Section 3(2) of the Imports and Exports Act , 1947 on the ground that the licences under which the goods were imported were obtained on the basis of fabricated documents purported to show exports of readymade garments far in excess of the goods actually exported. It was also alleged in the Show Cause Notices that the licences under which the goods were imported were cancelled ab initio by the Dy. Chief Controller of Imports and Exports by his Order dated 7-11-1987. The third allegation made in the Show Cause Notices is that the goods in question were not covered by the import licence and therefore, they are liable to confiscation under Section 111(d) of the Act. It was also proposed in the Show Cause Notice to add the value of 6367 bobbins on which the polyester filament yarn of 509 has been wrapped. The appellants filed a reply denying all the allegations. On a consideration of the reply, the Collector passed the impugned Order.
4. The main contentions of Shri Asthana appearing for the appellants are that the Order of the Collector of Customs is without jurisdiction. Secondly, the goods were imported and cleared for home consumption on 31-10-1986, 23-10-1986 whereas the licences were cancelled by the Dy. Chief Controller on 18-12-1986 i.e. subsequent to the date of actual import of goods. Therefore, the cancellation of licences does not have any effect on the imports made by the appellants. His further submission is that the licences were cancelled on the ground that there was fraud and misrepresentation by the persons who obtained the licences. In cases where the licences are cancelled on the grounds of fraud and misrepresentation, the licences continue to be valid till they are set aside by the appropriate authority. Since the cancellation Order was passed on 18-12-1986 whereas the goods were imported on 31-10-1986, the cancellation Order does not affect the imports and therefore, the imports cannot be declared as unauthorised. In support of his contention, Shri Asthana relied upon two decisions of the Supreme Court:- (1) East India Commercial Co. Ltd. v. Collector of Customs, Calcutta reported in 1983 (13) E.L.T. 1342 (SC) and (2) Fedco Private Limited v. S.N. Bilgrami A.I.R. 1960 S.C. 415
5. Elaborating the arguments that the Bombay Customs Collectorate has no jurisdiction to seize the goods and pass the impugned Order, he submitted that the goods were cleared for home consumption at Delhi Airport and they were brought to Bombay. Therefore, the cause of action arose in Delhi and it is only Delhi Collectorate which has the jurisdiction to confiscate and pass the impugned Order. In support of this contention, he relied upon the case of Singh Radio and Electronics v. Collector of Customs 1988 (36) E.L.T. 713 (Tri.) and Ramnarain Vishwanath v. Collector of Customs, Calcutta 1988 (34) E.L.T. 202.
6. His next contention is that as regards the valuation the value of Bobbins which are returnable cannot be included in the value of goods imported. Therefore, there is no basis for charges of under-valuation. He also submitted that the goods imported by Vijay Synthetics are for 'A' grade quality whereas the goods imported by the appellants are standard size. Therefore, the evidence relied upon by the Collector is irrelevant.
7. Shri Satish Kumar, learned JDR appearing for the Department submitted that the question of jurisdiction of the Collector was not raised before the lower authorities. Therefore, the appellants should not be permitted to raise the same before this Tribunal. His next contention is that since the licences were cancelled on the grounds of fraud and misrepresentation, the licences are non est. Therefore, the imports are unauthorised imports. He also submits that since the value of Bobbins is not declared the Collector is justified in including the value of Bobbins.
8. The question, therefore, is whether the goods imported are unauthorised imports. The goods were imported under the Bills of Entry dated 31-10-1986 whereas the licences were cancelled on 18-12-1986. The relevant orders cancelling the licences read as follows :-
"I have carefully gone through the facts of the case and have come to the conclusion that the party has obtained the above licences by fraud and misrepresentation."
"Having regard to what has been stated in the preceding paragraph, the undersigned is satisfied that the case appropriately falls under Clause 9 of the ITC Order and as such licences in question should be cancelled ab initio or otherwise rendered ineffective. Therefore, I, in exercise of the power vested in me under Clause 9 sub-clause (a) of the Imports (Control) Order, 1955 hereby cancel the licence Nos. P/K/3160035 dated 31-7-1986 and P/K/3158010 dated 30-6-1986 ab initio which had been obtained by them."
Similar is the language used in the other Orders relating to the cancellation of licences.
9. From a reading of the Order cancelling the licences it is clear that the licences were cancelled on the ground that they were obtained by fraud and misrepresentation. Considering a similar case, the Supreme Court in East India Commercial Company Limited v. Collector of Customs (supra) held that "Nor is there any legal basis for the contention that the 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 goods within clause (8) of the Section 167 of the Sea Customs Act. Assuming that the principles of law of contract apply to the issue of licence under the Act, a licence obtained by fraud is only voidable, it is good till voided in the manner prescribed by law." The next decision of the Supreme Court which has considered a similar issue is Fedco Pvt. Ltd. (supra). The Supreme Court held "the entire scheme of control and regulation of imports by licences is on the basis that the licence is granted on a correct statement of relevant facts. That basis disappears if the grant of licence is induced by fraud or misrepresentation whether the licensee himself or some other party is responsible for the fraud or mis-representation the fact remains that in such cases the basis of the grant of licence has disappeared. It will be absolutely unreasonable that such a licence should be allowed to continue."
10. From the above it follows that where a licence is obtained on the basis of fraud or mis-representation it continues to be valid till it is avoided. Then, once it is declared that the licence is obtained on fraud and mis-representation it should not be allowed to continue. In other words, the cancellation did not operate with retrospective effect. Since on the facts of this case, it is clear that the cancellation of licence is subsequent to the imports of goods, the cancellation has no effect on the imports and, therefore, the imports cannot be treated as unauthorised.
11. The next contention of Shri Asthana is that the Order of the Collector is without jurisdiction as the import of goods took place in Delhi whereas the goods were seized and adjudicating Order was passed by Bombay Collectorate. In this context, we may refer to the Order of this Tribunal in Singh Radio and Electronics v. Collector of Customs (supra). Under similar circumstances, this Tribunal observed that "the goods were imported at Bombay Airport and allowed clearance under Section 47 by the proper officer of the Bombay Customs and therefore, the goods were taken out of custom charge and then the goods arrived at New Delhi and an Order under Section 47 having been passed by the proper officer of Bombay Customs. It was not the duty of the Delhi Customs. Delhi Customs should have informed the Bombay Customs for appropriate action in accordance with law....We hold that the Collector of Customs, New Delhi had no jurisdiction to pass any Order under Section 110 and to adjudicate. The Collector of Customs, New Delhi should have reported the matter to the Collector of Customs, Bombay or any authority having All India jurisdiction." While making the above observation this Tribunal followed an Order of this Tribunal in Ramnarain Vishwanath v. Collector of Customs, Calcutta (supra).
12. On the facts of this case, it is clear that the goods were cleared in New Delhi and Order under Section 47 was passed by the New Delhi Collector. Therefore, the Bombay Collectorate has no jurisdiction to pass the adjudication Order and confiscate the goods. The most that the Bombay Collectorate could do is to inform the Delhi Collectorate to take appropriate action. Therefore, the Order of the Bombay Collectorate is without jurisdiction.
13. As regards valuation the main contention of Shri Asthana is that the value of returnable Bobbins cannot be included in the assessable value of the goods imported. The Collector has not given any reasons except extracting the Show Cause Notice why the value of returnable Bobbins is to be included. We are, therefore, of the view that the finding of the Collector that there is mis-declaration of value is based on no evidence.
14. For the reasons, we set aside the Order of the Collector and allow the appeals.
P.C. Jain, Member (T)
15. I have carefully perused the order proposed by the learned Sister Ms. S.V. Maruthi, Judicial Member but I regret I do not agree to her finding on the question of jurisdiction. On the basis of Tribunal's judgment in the case of Singh Radio and Electronics v. C.C. 1988 (12) E.T.R. 561 and Ramnarain Vishwanath v. C.C. Calcutta 1988 (34) E.L.T. 202 ERB it has been urged by the learned advocate for the appellants that the Collector of Customs, Bombay had no jurisdiction to deal with this case inasmuch as the goods had been cleared from Custom House Delhi against Bill of Entry No. 1974 dated 31-10-1986 and Bill of Entry No. 1906 dated 23-10-1986.I am of the view that the facts in this case are distinguishable from the facts in the two cases relied upon by the learned advocate for the appellants. In the case of Singh Radio and Electronics consignment was cleared from Bombay Custom House and another consignment was cleared from Delhi Custom House. Both the consignments were cleared as parts of Radio Cassette Recorder. Clubbing of the two consignments, however, it is alleged would have made the goods as complete radio cassette recorders if the components had been assembled. It is, therefore, apparent that no taint as such attached to the goods or consignments as they were consignment from respective Custom Houses. It is in these circumstances, that it was held by the Tribunal that the goods cleared from the Bombay Custom House could not be seized by the Delhi Customs authorities and could not be adjudicated consequently. Similarly, I am of the view that the decision of the East Regional Bench of this Tribunal in the case of Ramnarain Vishwanath, mentioned supra is on peculiar facts and circumstances of this case. This is apparent from para 66 of the said Report which is reproduced below :-
"66. The learned counsel for the respondent has, of course, laid a lot of emphasis on the 'reason to believe' on the part of the proper officer(s) but it is really interesting to note that neither the so-called order under Section 110 has been produced nor any Panchnama has been produced nor the date and time and other particulars of seizure, if any, have been indicated. Not only that, we notice from the show cause notice and the order-in-original (vide para 2.1) that the words used are '... in the circumstances, there are strong reason to suspect that the goods in question cleared at Paradwip... being imported unauthorisedly'."
In the instant case however, we notice that the goods were cleared from Delhi Custom House on 23-10-1986 and 31-10-1986 on the strength of some import licences. Later on (18-12-1986), however, it came to the notice that those licences were cancelled by the Import (Control) Authorities. In view of this cancellation it was felt rightly or wrongly by the Customs authorities at Bombay that the goods had been imported without import licences and therefore, they were liable to confiscation. In other words, the taint of illegal importation was attached to the goods when the goods were in Bombay. The authority/power of all the Customs authorities had been exhausted after the clearance of the goods on the strength of import licences at the time of importation. It, therefore, cannot be said that Bombay Customs authorities had acted in excess of jurisdiction so far as the facts and circumstances of this are concerned.
16. I am, therefore, of the view that Bombay Customs authorities in seizing the goods and adjudicating upon them has not exceeded their jurisdiction. Nevertheless, this finding is only of academic interest as I agree with my learned Sister on the question that cancellation of licences takes place with effect from the date of cancellation and not with retrospective effect. I, therefore, hold, agreeing with the finding of the learned Sister that the goods had not been imported unauthorisedly. I also agree with her on the question of valuation. Accordingly, the appeal is allowed.