Customs, Excise and Gold Tribunal - Mumbai
Bussa Overseas And Properties Ltd. vs Cc (Import) on 7 March, 2002
Equivalent citations: 2002(102)ECR300(TRI.-MUMBAI), 2001(137)ELT637(TRI-MUMBAI)
ORDER Jyoti Balasundaram, Member (J)
1. The background of these ROM applications is as follows:
2. In September, 1991 the applicants herein imported goods described in the three bills of entry as "compound alcoholic preparations" namely under-proof whisky used only for the manufacture of IMFL - Indian Whisky" and claimed clearance thereof against REP licences issued prior to 6.12.1990; the commercial invoices issued by the supplier described the goods in identical terms. The REP licences were valid for import of items covered in Appendix 3-A items in terms of entry No. 218 of Appendix 3-A of Import Policy 1990-93 which covered "ethyl alcohol". In the alternative it was claimed that the goods were covered by the residuary entry at serial No. 524 of Appendix 3-A which covered "chemical and allied items other those listed in Appendix 2, 5 and 6". The department objected to the imports on the ground that the goods were "concentrates of alcoholic beverages" covered by serial No. 31 of Appendix 2B of the Policy and hence the REP licence did not cover the goods.
3. Show cause notice dated 12.12.1991 was issued proposing confiscation of the goods under Section 111(d) and proposing penal action under Section 112(a) of the Customs Act, 1962. Against the issue of the notice the importers filed Writ Petition No. 3664 of 1991 before the Bombay High Court; the High Court directed that the importers should file written submissions which they did, and the Collector of Customs by the order dated 23.1.1992 held that the imports under three bills of entry were unauthorised as the goods attracted mischief of entry at serial No. 31 of Appendix 2B of the Policy, confiscated the goods with option to redeem them on payment of fine of Rs. 13.25 lakhs, Rs. 13.70 lakhs, and Rs. 13.70 lakhs respectively for each bills of entry and imposed a total penalty of Rs. 3 lakhs. While accepting the contention of the importers that the goods are under-proof whisky only (in para 26 of the adjudication order) he rejected their contention that only over-proof whisky is a concentrate of alcoholic beverage, and held that both over-proof whisky and under-proof whisky are covered by the expres-sion"concentrate of alcoholic beverages". Aggrieved by this order the importers filed appeal No. C/l 19/92 see 1999 (81) ECR 548 (T).
4. In November, 1991 the applicants imported one consignment described in the bill of entry as "compound alcoholic preparations namely under-proof strength whisky used only for the manufacture of IMFL, namely Indian whisky" and claimed clearance in terms of serial No. 524 of Appendix 3-A which covered " chemical and allied items other those listed in Appendix 2, 5 and 6". The department was of the view, based on the test report of the goods showing that the goods had the characteristics of whisky and alcoholic contents is 54.4% i.e. under-proof, that the REP licences did not cover the goods which appeared to be covered by serial No. 31 of Appendix 2B and hence a show cause notice dated 24.1.1992 was issued proposing confiscation and penal action. By the order dated 23.4.1992 the Collector of Customs upheld the charge in the show cause notice, confiscated the goods with option to redeem on payment of fine of Rs. 13.65 lakhs and imposed a penalty of Rs. 3 lakhs on the importers. Against this order the importers filed appeal No. C/263/92 see 1999 (81) ECR 548 (T).
5. In February, 1992 the applicants imported one consignment described in the bill of entry as "compound alcoholic preparations namely under-proof strength brandy used only for the manufacture of IMFL -Indian whisky" and claimed clearance against REP licence valid for import of Appendix 3A items under serial No. 524 covering "chemical and allied items other those listed in Appendix 2, 5 and 6". Show cause notice dated 13.3.1992 was issued proposing confiscation and imposition of penalty on the ground that the goods were not covered by the licence and by adjudication orderdated 24.8.1992 the Collector of Customs ordered confiscation of the consignment with option to redeem on payment of fine of Rs. 7,50,000/- and also imposed penalty of Rs. 1 lakh on the importers and this gave rise to appeal C/596/1992-Bom see 1999 (81) ECR 548 (T).
6. All the three appeals were disposed off by a common order bearing No. 1981-1985/WZB/1998 dated 16.7.1998 1999 (81) ECR 548 (T) by which the Tribunal held that the order of confiscation and penalty were sustainable but reduced the fine imposed in the adjudication order dated 23.1.1992 from Rs. 40.65 lakhs to Rs. 30 lakhs and the penalty from Rs. 9 lakhs to Rs. 3 lakhs; reduced the fine of Rs. 13.65 lakhs imposed in order dated 23.4.1992 to Rs. 8 lakhs and the penalty from Rs. 3 lakhs to Rs. 1 lakh; and reduced the penalty imposed in order dated 24.8.1992 from Rs. 1 lakh to Rs. 10,000/-. The applicants have filed the' above application for rectification of certain mistakes stated to be apparent from the face of the record.
7. We have heard Shri L.P. Asthana, learned Counsel who submits as under:
i. The Tribunal did not consider the judgment of the Hon'ble Bombay High Court dated 4.8.1992 in Writ Petition 1551 of 1992 in respect of 45 consignments of compound alcoholic preparations viz. under-proof strength preparations of a kind used for the manufacture of beverages imported by the applicants wherein clearance was sought in terms of the goods as ethyl alcohol under REP licences. The Customs authorities were of the view that these licences'did not cover the goods and also that the goods were not relatable to the raw material used in the manufacture of the product to be exported and that the goods were consumer goods covered by serial No. 121 of Appendix 2B of the Import Policy A.M. 1985-88. Writ petitions were filed for clearance of the goods and this was permitted subject to certain conditions and finally by the Judgment dated 9th November, 1990 the High Court held that the objection raised by the Customs authorities was without any merit and that the petitioners were entitled to the clearance of the goods. This decision was challenged by the Revenue by filing SLP before the Hon'ble Supreme Court but it was summarily rejected. The show cause notice issued on 18.3.1992 in respect of 45 consignments imported by the applicants alleging that the goods were concentrate alcoholic beverages used for manufacture of Indian whisky and covered by Appendix 2B serial No. 30 and 31 of the A.M. 1988-91 and 1990-93 Policy and therefore required specific licence for valid import. The notice proposed confiscation of the goods and also penal action. The show cause notice was challenged by the importer by Writ Petition No. 1551 of 1991 which was allowed by the High Court by its order dated 4th August, 1992 and the SLP filed by the Revenue challenging the Bombay High Court decision on the ground inter alia that the High Could did not consider whether import of impugned goods were permissible or not against REP licence submitted at the time of import in terms of the relevant Import Policy, was dismissed by the apex Court on 3.1.1996. Learned Counsel submits that although the attention of the bench was drawn to these judgments which according to him would support the Importers' stand that the goods in question were covered by the REP licences, the Tribunal did not recorded any finding thereon, hence resulting in an error apparent from the record.
ii. That, in para 11 of the Tribunal's final order the bench has rejected the clarification given by the Deputy Chief Controller of Imports and Exports on 9th October, 1990 to M/s. M & N Enterprises, Bombay that alcohol of volume 61% is covered by the entry at serial No. 218 of Appendix 3, Part A of the Import and Export Policy 1990-93 on the ground that such clarification was prior to 6.12.1990 when serial No. 218 of Appendix 3A was amended to read "denatured ethyl alcohol" ignoring the fact that the clarification dated 24.8.1990 of the Additional Chief Controller of Imports and Exports to the effect that import of whisky or malt spirit is not permissible as ethyl alcohol which has been relied upon by the Tribunal to uphold the confiscation of the goods, was also issued prior to 6.12.1990.
iii. That even otherwise the clarification dated 24.8.1990 is not specific.
iv. That the clarification dated 26.6.1990 communicated by the Additional CCI & E to the Collector of Customs, Bombay was never brought to the notice of the importers before the import of the goods in question and it was also not published in the form of a public notice or trade notice and hence penal action against of a public notice or trade notice and hence penal action against the importers is not justified.
v. That the Tribunal completely overlooked the following evidence submitted by the applicants before it for showing that only over-proof whisky/brandy is known as "concentrates of alcoholic beverages.
a) Copies of three Bills of Entry Nos. 012966, 012967 and 012968 dated 28.9.1989, appearing at pages 84 to 89 in appeal No. C/263/1992.
b) Test reports of the goods covered by the aforesaid three Bills of Entry reading that over-proof whisky may be considered as "whisky concentrate" appearing at pages 78-83 in the second appeal No. 263 of 1992.
c) Test Memo pertaining to the import of ifnder-proof Brandy, imported vide Bill of Entry No. 001347. The reading that under-proof Brandy may not be considered as "Brandy concentrate" being Exhibit 'J' appearing at pages 94 and 95 in the appeal No. C/119/1992.
d) Technical opinion of Chemical Examiner dated 12.2.1990 which clearly read that under-proof whisky may not be considered as "whisky concentrate" appearing at Page 90 in the first appeal No. C/119 of 1992.
e) Affidavit of Shri D. Premchand, Chemical Examiner appearing at pages from 206 to 208 in appeal No. C/l 19/1992.
f) Clarification issued by Commissioner of Prohibition & Excise, State of Maharashtra, appearing at page 89 in the appeal No. C/119/1992.
It is submitted by the applicants that this entire evidence which was crucial for examining the scope of "concentrates of alcoholic beverages" was disregarded by the Tribunal without assigning any reason.
vi. That the Tribunal also disregarded certificate dated 19.8.1991 given by R.R. Tatlock and Thomson, Analytical and Consulting Chemists of Glasgow certifying that goods covered by the invoices is under-proof whisky 55% by volume alcoholic strength and is distinguishable from concentrate of whisky which, according to the certificate is traditionally of over-proof alcoholic strength, on the ground that the entry does not prescribe the criterion of over-proof and that CCI & E has unambiguously clarified in its clarification of 24.8.1990 that the imports of malt spirit as Ethyl Alcohol is not in order. The Tribunal overlooked the fact that the entry for concentrates of alcoholic beverages (Serial No. 31) in Appendix 2B does not define this expression. The clarification dated 24.8.1990 also does not define the expression. It is well settled that the expressions appearing in Import Policy, unless they are defined in the Policy, have to be construed in accordance with the trade parlance i.e., the sense in which people dealing with the said commodities understand the product.
vii. That once the Tribunal itself came to the conclusion that there was doubt in the minds of both the importers as well as the Customs authorities regarding the coverage of such goods under REP licences the levy of redemption fine and imposition of penalty is unsustainable and requires to be set aside.
8. The prayer is opposed by the learned DR who supports the finding of the Tribunal and contends that the applicants are seeking to re-argue the appeals in the guise of ROM application which is not permissible in law.
9. We have carefully considered the matter and find force in the submissions made by the applicants. There are certain findings of the Tribunal which do not appear to be correct. It also appears that certain important submissions which have a direct bearing on the issues under consideration have not been considered by the Tribunal. These errors are apparent from the record, We, therefore, recall the order of the Tribunal under consideration and consider the matter afresh on merits.
10. The essential point for consideration is whether the goods imported are concentrates of alcoholic beverages. Such concentrates are restricted for import. The expression "concentrates of alcoholic beverages" is not defined in the Import Policy, although it is true that no percentage of alcohol is specified in the Entry. The clarification of 24.8.1990 on which the Tribunal heavily relied upon also does not specifically clarify the scope of the expression. It states that raw materials, components mentioned in the limited permissible list as well as those in the list of the Import Policy (Vol. 1) are meant for industrial use by the actual user. An item like Ethyl alcohol is not permissible for import for human consumption. There can be no quarrel with this preposition. However, the goods imported and under consideration, have not been imported directly for human consumption but are in the nature of compound alcoholic preparations which are used for blending with Indian whisky which is certainly industrial use. The clarification further states that the entry, concentrates of alcoholic beverages was incorporated in the restricted list of the Import Policy for the first time in 1988-91 Policy Book. Again there is no dispute that concentrates of alcoholic beverages were restricted for import. The question for consideration is as to what is a concentrate of alcoholic beverages. This has not been answered in the clarification of 24.8.1990. The clarification simply states that imports of malt spirit as Ethyl alcohol is not in order. Since this clarification does not give any reasoning for this conclusion nor does it define the expression "concentrates of alcoholic beverages", it does not have much relevance for deciding the issue under consideration and, therefore, the Tribunal was wrong in relying upon this clarification for holding the imports as unauthorised. The subsequent clarification of 9.10.1990 of CCI & E seems to be inconsistent with the clarification of 24.8.1990 and yet 11 consignments appear to have been allowed clearance at Madras on the basis of the clarification of 9.10.1990. The department has not led any evidence regarding the exact scope of the aforesaid expression. On the other hand, the applicants have adduced evidence from the consultants abroad as well as various reports given by Chemical Examiners from time to time and even in respect of one of the consignments under consideration, which supports the view that over-proof malt spirit alone is considered as concentrates of alcoholic beverages. The IS specifications 6749-1972 state that "degrees over-proof and under-proof are considered, depending on whether the liquid is more concentrated or more diluted than proof spirit. For example 20 over proof (20 O.P.) refers to 120% proof spirit and 20 under proof (20 U.P.) refers to 80% proof sprit. 100% proof spirit is equivalent to 57.1% alcohol by volume". The goods imported in all these 5 consignments contain less than 55% by volume of alcohol, as was found on the test of the samples.
11. It is settled law that in the absence of a definition in the law, the meaning is to be ascertained with reference to trade usage. It is also well settled that the burden of proving that the goods are prohibited or restricted for import lies on to Revenue. In the present case no evidence has been led by the department which could establish that the under-proof whisky/brandy could be regarded as concentrates of alcoholic beverages. The entire emphasis of the department has been on the clarification dated 24.8.1990. We do not think that this clarification, to the exclusion of other evidence submitted by the appellants and the subsequent clarification of 9.10.1990 can be regarded as conclusive or specific for defining the expression "concentrates of alcoholic beverages". We, therefore, find it difficult to hold that the import of the goods was unauthorised.
12. We further note that the applicants had earlier imported 45 consignments of under-proof whisky etc., and had declared them as compound alcoholic preparations. The clearance of these goods was allowed on execution of a bond and an undertaking. When the applicants produced licences for Appendix 3A items as in the present case, the ITC Bond and undertaking were cancelled by the Customs authorities.Thereafter a show cause notice was issued exactly on the same lines as in the present case alleging that the goods were concentrates of alcoholic beverages and were thus restricted for import. The applicants filed a writ petition in the Bombay High Court against the show cause notice. The High Court, without going into the question of any restriction, allowed the writ petition of the applicants on the ground that no show cause no-lice could be issued after the bond and undertaking had been cancelled. The department went in appeal to the Supreme Court and specifically pleaded that the goods were restricted for import in view of the aforesaid clarification of 24.8.1990. The Supreme Court rejected the department's appeal. All these developments were brought to the notice of the Tribunal but these have not been considered in the order. The Tribunal also did not express any opinion regarding the test reports of the Chemical Examiners who reported that concentrates of alcoholic beverages referred to over-proof whisky etc.
13. We agree, with respect, with the observations of the Bombay High Court, which were followed by the Tribunal that the past practice cannot operate as an estoppel against interpreting the law correctly. However, there is no material available on record which would compel us to hold that the past clearances were wrongly allowed, particularly in the light of the test report dated 12.12.1990 wherein the Chemical Examiner has opined that the goods under reference may not merit to be considered as whisky concentrate. The test report is reproduced below:
Compounded Alcoholic Preparation namely under proof strength whisky The term concentrates of alcoholic beverages in general or concentration of Whisky in particular have not been defined in the technical book available in the laboratory. However, as seen from the books in Scotland the Whisky fraction, which is of great importance as regards the characteristic of spirit, is collected usually between 11°C and 25°OP (over proof), that is it contains between 63 and 71 percentage of alcohol. It is subsequently aged (matured) in charred new oak container, blended/diluted to potable strength. It is further seen that bourbon whisky, rye whisky, wheat whisky, malt whisky or rye malt whisky is whisky which has been distilled at hot exceeding 160° proof (80%) from a fermented mash of not less than 51 % rye, corn, wheat, malted barley, or malted rye grain respectively, and stored at not more than 125° proof (62.5%) in charred new oak containers. Any of the whisky types mentioned above further qualify as straight whisky by complying with the following:
1) Withdrawn from the distillery at not more than 125° (62.5%) and not less than 81° (40%) proof (for maturation purposes); and
2) aged for not less than 24 months.
From the above in my opinion, it would appear to be reasonable to conclude that whisky distillate that has been distilled between 111° to 125° proof (11 to 25 OP) would merit to be considered as concentrate of whisky (whisky concentrate). Taking this as a criteria, in my opinion, the goods under reference may not merit to be considered as a whisky concentrate.
14. In these circumstances, we feel that there is an apparent error in the Tribunals order dated 16.7.1998 1999 (81) ECR 548 (T) that the import of present consignment of compound alcoholic preparations, namely, under-proof whisky/brandy were not covered by REP licences on the ground that they were concentrates of alcoholic beverages. As noted earlier, the expression 'concentrates of alcoholic beverages' is not defined and the burden to prove that the subject goods were concentrates of alcoholic beverages was on the Department, which it has failed to discharge. 'This error needs to be rectified and on such rectification, we cannot sustain the order of confiscation and imposition of fines and penalties. We accordingly allow the three ROM applications and three appeals and set aside the orders passed by the Collector of Collector of Customs and grant consequential relief to the appellants.