Customs, Excise and Gold Tribunal - Tamil Nadu
Rekha Overseas vs Commissioner Of Customs on 8 August, 2005
ORDER P.G. Chacko, Member (J)
1. M/s. Rekha Overseas, appellants in the 1st four appeals, had imported duty-free 80.576 MTs of Cassia valued at Rs. 31,22,337/- in terms of a quantity based advance licence dated 21-4-1992 issued by the Chief Controller of Imports and Exports (under the Ministry of Commerce, Government of India), under the DEEC Scheme and Customs Notification No. 159/90 as amended by Customs Notification No. 122/92. These imports were in 4 consignments and the clearances were made under 4 Bills of Entry with the following particulars:
___________________________________________________________________________________ S. No Bill of En- Qty. of Cassia Assess- Rate of Duty Amt. of duty try No. & Cleared (MT) able foregone Date Value (Rs.) as per (Rs.) DEEC Book __________________________________________________________________________________ 01 04032/ 273 Bales 5,15,360/- Rs. 20 per kg. 7,82,820 3-2-93 13.373 MT 55% + 45% __________________________________________________________________________________ 02 05172/ 270 Bales 5,15,052/- -do- 7,82,352 15-2-93 13.365 MT __________________________________________________________________________________ 03 8357/ 540 Bales 1,064,19/- -do- 9,04,566 11-3-93 27.000 MT __________________________________________________________________________________ 04 11519/ 540 Bales 10,27,73/- -do- 8,73,570 7-4-93 26.838 MT __________________________________________________________________________________ Under the DEEC Scheme, M/s. Rekha Overseas had to fulfil their export obligation by exporting 810 kgs. of Cassia Oil to be manufactured from the imported material. In due course of time, they filed 3 Shipping Bills covering a total quantity of 810 kgs. of what was declared as 'Cassia Oil'. The total F.O.B. value of the export goods, shown in these Shipping Bills, was Rs. 33,94,534/-. The export documents showed M/s. Rekha Overseas as having fulfilled their export obligation in terms of the advance licence under the DEEC Scheme. After these exports, the Directorate of Revenue Intelligence (DRI) instituted an investigation into the imports and exports made by M/s. Rekha Overseas and 2 other parties. Scrutiny of records showed that M/s. Rekha Overseas were working as a merchant-exporter and their supporting manufacturer was M/s. Natcon Fruit and Food Processors (Natcon, for short) as certified by the Spices Board (under the Ministry of Commerce, Government of India). The investigators also found that the Spices Board had certified that M/s. Natcon qua supporting manufacturers of M/s. Rekha Overseas had manufactured Cassia Oil through distillation of 80.576 MTs of Cassia imported by M/s. Rekha Overseas under the above advance licence and that the wastage generated from such distillation had been properly accounted and destroyed by M/s. Natcon. The Spices Board's Certificates were issued in terms of ALC Circular No. 9/92, dated 12-8-1992 of the CCI&E. The investigators also came across test reports on the export consignments, issued by the Customs House Laboratory. These reports indicated that the samples drawn from the export consignments were Cassia Oil. In the face of the documentary evidence of M/s. Rekha Overseas having transacted business in terms of the DEEC Scheme, the DRI officers proceeded with their investigation by searching the premises of the importer and their supporting manufacturer and scrutinising the documents recovered therefrom and by recording statements from M/s. Rekha Overseas, M/s. Natcon, transporters, bankers, Customs House Agents and brokers. From the results of these investigations, it appeared to the DRI that M/s. Rekha Overseas had diverted the imported goods to local market in stead of utilising if for manufacture of export product and had exported "Synthetic Cassia Oil" (mixture of Cinnamic Aldehyde and Benzyl Alcohol) in the guise of Cassia Oil. It also appeared that M/s. Natcon at Bangalore never received Cassia from M/s. Rekha Overseas (Madras) but manipulated their records as to make it appear that they received Cassia and extracted Cassia Oil out of it by distillation. It further appeared to the DRI that Sh. B.S. Suman Aggarwal, Power of Attorney holder of M/s. Rekha Overseas and Mr. Sujit Mukund, Director of M/s. Natcon, by their fraudulent acts, rendered the import/export goods liable to confiscation and also rendered themselves liable to penalty. On this basis, a show-cause notice dated 22-2-1995 was issued by the Collector of Customs by invoking the extended period of limitation under the first proviso to Section 28(1) of the Customs Act and demanding duty of Rs. 33,43,308/- on the imported goods from M/s. Rekha Overseas, proposing confiscation of the import/export goods and proposing penalties on Sh. B.S. Suman Aggarwal of M/s. Rekha Overseas and on Mr. Sujit Mukund of M/s. Natcon. These proposals were contested by the noticees. M/s. Rekha Overseas requested the Commissioner for permission to cross-examine all those whose statements had been relied upon in the showcause notice, but this request was turned down. Ld. Commissioner, after giving personal hearing to the parties, passed the impugned order confirming the demand of duty against M/s. Rekha Overseas and imposing on them a penalty of Rs. 1 lakh besides a redemption fine of Rs. 3 lakhs in lieu of confiscation of the imported/exported goods. The order also imposed a personal penally of Rs. 1 lakh on Sh. B.S. Suman Aggarwal. Hence these appeals of M/s. Rekha Overseas and Sh. Suman Aggarwal.
2. Heard both sides. Ld. Counsel for the appellants reiterated the grounds of the appeals and stressed the point that the documentary evidence of M/s. Rekha Overseas having discharged their export obligation relating to the imported Cassia, in terms of the DEEC Scheme, had not been rebutted by the Department. The entire case of the Department was based on statements, some of which were retracted. The Commissioner had not accepted these retractions, nor had he allowed the appellants to cross examine the persons whose statements had been relied upon in the show-cause notice and in the impugned order. According to the ld. Counsel, the Commissioner had denied natural justice to the appellants. Relying on the statements of transporters and others, the Commissioner had arrived at a finding that the imported Cassia was not actually transported from Chennai to Bangalore. The evidence of transporters was rebutted by the appellants by producing 'goods detention notices' and 'release orders' issued by the Sales Tax check-post authorities, which indicated that the appellants had despatched Cassia to M/s. Natcon, Bangalore. This documentary evidence was not considered by the Commissioner. It was also pointed out that the Certificates issued by the Spices Board were in proof of the appellants having got Cassia Oil extracted in the premises of M/s. Natcon from the imported Cassia in terms of the DEEC licence and the Customs Notification. The chemical lest reports conclusively proved that Cassia Oil had been exported by the appellants in discharge of export obligation under the DEEC scheme. It was argued by Id. Counsel that, under Section 114(e) of the Evidence Act, these official documents were to be presumed to have been prepared and issued in accordance with law. It was upto the Department to rebut this presumption. The impugned order did not rebut the presumption. In the circumstances, the Commissioner ought to have accepted the above documentary evidences and dropped further action against the appellants. It was also submitted by ld. Counsel that it was only a guess-work of the investigators that the appellants had exported 'Synthetic' Cassia Oil in the guise of Cassia Oil. There was no evidence on record to show that any mixture of Cinnamic Aldehyde and Benzyl Alcohol was exported by M/s. Rekha Overseas under the relevant Shipping Bills. Ld. DR reiterated the findings of the Commissioner.
3. After examining the evidences available on record and considering the submissions, we find great force in the submissions made by ld. Counsel.
ALC Circular No. 9/92, dated 12-8-1992 (vide infra) issued by the Chief Controller of Imports and Exports (Ministry of Commerce) had provided for grant of quantity-based advanced licences, under the DEEC Scheme, for import of Cassia for the manufacture and export of Cassia Oil.
ALC CIRCULAR No. 9/92 Sl. No. 47Dated 12th August, 1992 Import of Cloves, Cinnamon and Cassia under Duty Exemption Scheme.
Attention is invited to the ALC Circular No. 4/92, dated the 23rd June, 1992 by which it was clarified that no advance licence shall be issued for the imports of Cloves, Cinnamon and Cassia under the Duty Exemption Scheme, since these items are importable only under special licensing scheme. On a review of the position, it has been decided to grant quantity based advance licences only for the import of cloves, Cinnamon and Cassia for the manufacture and export of Clove Bud Oil, Cinnamon, oleoresin, Cinnamon oil, Cassia oleoresin, Cassia Oil and Curry Powder (containing Cloves Buds), cinnamon and Cassia to the extent of 5% collectively and other 95% ingredients to be (of locally produced items) under the Duty Exemption Scheme as per the norms given in Annexure-I to this circular.
2. (a) Only quantity based advance licence is to be issued.
(b) The facility of quantity based advance licence shall be available both to manufacturer-exporters and merchant exporters. While applying for a quantity based advance licence the applicant shall produce a certificate from the Spices Board conforming his own manufacturing capacity or of the supporting manufacturer (in case of merchant exporter). The merchant exporter shall furnish in his application the full details of the supporting manufacturers and his manufacturing capacity, together with an undertaking from him for the manufacture of the products for export.
(c) As indicated in Annexure I....
(d) After completion of the export obligation the advance licence holder shall obtain a certificate from the Spices Board that the wastages accrued on account of imported-inputs used in the exported product mentioned in Col. 3 of Annexure I of this circular have been properly accounted for and destriyed. This certificate shall be issued by the Spices Board in relation to a particular import licence and shall have to be produced to the licensing authority concerned at the time of closure of the DEEC.
The above circular extended the facility to both manufacturer-exporters and merchant-exporters. Either of these exporters was required to produce a Certificate relating to manufacturing capacity from the Spices Board, while applying for the advance licence. After completion of the exports, the advance licence holder should obtain a certificate from the Spices Board certifying that the wastage from processing of the imported inputs have been properly accounted for and destroyed. This Certificate should be produced to the licensing authority at the time of closure of the DEEC. We find that the above conditions laid down in the ALC Circular were, fulfilled by M/s. Rekha Overseas. The following Certificate dated 25-11-1992 issued by the Spices Board was produced by M/s. Rekha Overseas before the licensing authority in terms of Para 2 (b) of the ALC Circular.
CERTIFICATE This is to certify that M/s. Rekha Overseas; 433, Pantheon Road, Eg-more, Madras - 600 008 are registered exporters of spices with the Board. They have proposed to utilise M/s. Nat-Con Fruit & Food Processors, 490 (L) IV Phase, Peenya Industrial Area, Bangalore - 560 058 as their supporting manufacturer for the distillation of Cassia Oil. M/s. Nat-Con Fruit & Food Processors, Bangalore, who are also registered as exporters of spices with the Board, have the manufacturing capacity in respect of spice oils.
It is certified that the installed capacity of M/s. NatCon Fruit and Food Processors, Bangalore for spice oils is 1-1.5 tons per day.
This certificate is issued as per para 2 (b) of ALC Circular No. 9/92, dated 12th Aug., 1992 to obtain a quantity based advance licence for M/s. Rekha Overseas, Madras for the import of 81 MT of Cassia at a value of Rs. 40/- lakhs for the export production of Cassia oil.
This certificate is issued subject to the condition that
(a) M/s. Rekha Overseas, Madras and their supporting Manufacturer M/s. NatCon Fruit & Food Processors, Bangalore give an undertaking to the Spices Board that the waste material after the distillation of Cassia will be properly accounted and destroyed as per norms.
(b) They are also directed to inform the Board well in advance the method and time/date(s) of the disposal of waste material to supervise/test check the same and
(c) The input-output norms as specified in ALC Circular No. 9/92, dated 12th Aug., 1992 will have to be strictly adhered to.
Sd/-
(K.P.G. Menon) Director (Marketing) After completing the exports in question, M/s. Rekha Overseas in terms of para 2 (d) of the ALC circular produced the following Certificate dated 9-7-1993:
CERTIFICATE This is to certify that M/s. Rekha Overseas, 433, Pantheon Road, Eg-more, Madras - 600 008 have distilled Cassia oil from 80.576 MT of Cassia imported by them against the Manufacturing Capacity Certificate No. AL/IMP/02/92, dated 25-11-1992 issued by the Spices Board. M/s. Rekha Overseas, Madras had obtained the Advance CCP NO. P/K/352399, dated 21-4-1992 for the import of the above quantity of Cassia, The distillation of Cassia have been done by M/s. Nat Con Fruit & Food Processors, No. 490 (L), IV Phase, Peenya Industrial Area, Bangalore 560 058 on behalf of M/s. Rekha Overseas, Madras. The wastage accrued after distillation of 80.576 MT of Cassia imported against above mentioned Advance Licence have been properly accounted for and destroyed by M/s. Nat-Con Fruit & Food Processors, Bangalore.
This certificate is issued as per ALC Circular No. 9/92, dated 12th August, 1992.
Sd/-
(N.E. Cheriankunju) Jt. Director (Mktg.) The above Certificates of the Spices Board proved that the Cassia imported by M/s. Rekha Overseas had been processed (distilled) by their supporting manufacturer (M/s. Natcon) at Bangalore and that the wastage (residue of distillation) had been properly accounted for and destroyed by M/s. Natcon. The DEEC account was accordingly closed. Samples from the export consignments were tested in the Customs House Laboratory. The test reports confirmed the export goods to be cassia oil. As rightly submitted by Id. Counsel, the certificates of the Spices Board and the reports of the Chemical Examiner carried a presumption in favour of their authenticity and genuineness in terms of Section 114 (e) of the Evidence Act. The burden was on the DRI (investigators) to rebut this presumption, but woefully enough, they did not even attempt it. It was not open to the adjudicator to reject the above documentary evidence in the absence of rebuttal. The Commissioner seems to have thought that statements of transporters etc., to the effect that cassia was not transported from Madras to Bangalore and statement of Sh. Sujit Mukund to the effect that the material was not actually received at Natcon were enough to dislodge the evidence borne on the above official documents. He has erred. Any number of statements recorded from others would not come anywhere near rebuttal of the evidence forthcomig from the certificates of Spices Board and test reports of the Chemical Examiner. In respect of the Spices Board's certificates, rebuttal should have come through oral evidence of the Board officials concerned. In respect of the lest reports, it should have either come through retest of remnant sample at the Central Revenue Chemical Laboratory (New Delhi) or through oral evidence of the Chemical Examiner who issued the test reports.
4. It appears to us that, after noting that all the export documents were indicative of M/s. Rekha Overseas having fulfilled their export obligation under the DEEC Scheme, the Director of Revenue Intelligence lacked direction and intellgence to proceed to disprove what was certified by the Spices Board and reported by the Chemical Examiner. The Commissioner ought to have taken note of this erratic investigation. On the other hand, ld. Commissioner chose to act in the same wavelength. The Commissioner found the Spices Board officials to have been "tricked by M/s. Natcon into believing" that Cassia Oil was manufactured out of the imported Cassia and the waste generated out of the process was lying in the factory. However, he would not comment on the failure of DRI to expose the "trick". With regard to the test reports, ld. Commissioner observed that there was every reason to believe that these reports did not "reflect the sample taken from the actual consignment". Ld. Commissioner, however, would not disclose any reason. He fell into the error of thinking that the oral evidence of the supporting manufacturer, transporters and brokers was 'overwhelmingly' against the defence of M/s. Rekha Overseas. As a matter of fact, the unchallenged documentary evidence consisting of the export documents, Spices Board's Certificates, Chemical Test Reports and Sales-Tax Documents was overwhelming in this case and the same outweighed what was stated by the above witnesses. It also appears that most of these statements were retracted. M/s. Rekha Overseas, apprehending rejection of these retractions, wanted to cross-examine the witnesses. The Commissioner ought to have allowed the cross-examination. To proceed to rely on the retracted statements without giving any opportunity to the affected party to cross-examine the witnesses is negation of natural justice.
5. By all means, in this case, we have sat in judgment over a bad order. The overwhelming documentary evidence in this case indicates that M/s. Rekha Overseas were only acting in terms of the DEEC scheme. They have proved beyond reasonable doubt that they duly discharged export obligation in relation to the input they imported. The import/export goods did not attract Section 111 and 113 of the Customs Act. Even otherwise, any goods already exported cannot be confiscated under Section 113. It follows that the penal provisions of Section 112 were also not invocable in this case. The impugned order is set aside and these appeals are allowed.
(Operative part of the order was pronounced in open Court on 8-8-2005)