Customs, Excise and Gold Tribunal - Delhi
Metro Exports vs Collector Of Customs on 22 December, 1987
Equivalent citations: 2003(161)ELT989(TRI-DEL)
ORDER
G. Sankaran, Senior Vice-President
1. By the impugned order, the Collector of Customs, Cochin ordered the appellants to pay customs duty amounting to Rs. 5,53,971.81 and imposed a penalty of Rs. 50,000/- on them. It is against this order, that the present appeal has been filed.
2. The facts of the case, briefly stated, are that M/s. Metro Exports, Cochin (hereinafter referred to as the appellants) were issued an Advance Licence No. P/L/0342075, dated 14-6-1983 for import inter alia of 32 Metric Tonnes of white cardboard, other than ivory board, subject to the condition that the appellants shall export frozen shrimps etc. packed in packing material made inter alia of white cardboard for an F.O.B. value of Rs. 1,00,00,000/-. A Duty Exemption Entitlement Certificate (DEEC) Book No. 005166, dated 24-6-1983 was also issued to the appellants listing the materials (of c.i.f. value of Rs. 3,74,000/-) allowed to be imported duty free, one of them being 32 M.Ts. of white cardboard, other than ivory board. In part 'E' of the DEEC Book, the resultant export products were shown as frozen shrimps etc. packed in packing materials made inter alia of white cardboard, for an F.O.B. value of Rs. 1,00,00,000/-. The appellants imported at Madras Port, among other things, 31.97054 M.Ts. of white cardboard and cleared it free of customs duty under Notification No. 117/78-Cus., dated 9-6-1978. The appellants filed at Cochin Port shipping bills commencing with one on 21-4-1983 for export of frozen shrimps in purported discharge of their export obligation in respect of the packing materials. It appears that the Cochin Customs had information that the appellants had not utilised the imported white cardboard for the purpose for which it was allowed to be imported but that they had exported only locally made packing materials. Search and investigation followed. In a statement recorded from him, Shri G.P. Nair, Managing Partner of the appellant-firm, deposed that the firm was under the impression that as per Appendix 19 of the Import Policy, export could be effected in discharge of the obligation of export from the date of application for Advance Licence and that such discharge should be declared on shipping bills and suitable endorsements made in the DEEC book against such exports. Accordingly, the firm commenced exports from 21-4-1983 and got the necessary endorsements made. After the import of packing materials including white cardboard, the firm made only four shipments in discharge of their export obligation which involved a quantity of 3.9336 M.Ts. of white cardboard. With the last shipping bill dated 13-4-1984, the export obligation was fully completed and the DEEC book was got endorsed for a total quantity of 30.8484 M.Ts. of white cardboard against the stipulated figure of 29.1 M.Ts. Shri Nair further stated that the export obligation having thus been fully discharged, the duly discharged DEEC book was submitted to the Dy. Chief Controller of Imports and Exports, Ernakulam who also discharged the undertaking executed by the firm. He further deposed that the material imported at Madras was brought to Cochin and converted into inner cartons by two other firms. The firm had not claimed any drawback of duty in respect of the entire exports in discharge of their export obligation.
2.1 By a show cause notice dated 30-6-1986, the Assistant Collector of Customs, Special Investigation Branch, Cochin Customs House, alleged that -
(a) the appellants had purchased locally made corrugated master cartons and Duplex cartons and used them for packing frozen shrimps and falsely claimed discharge of export obligation and that the imported material was not utilised for the purpose for which it was imported. No evidence was available that the imported white cardboard had been converted into cartons as specified in the Advance Licence and the DEEC book. It was, therefore, alleged that the appellants had contravened Clauses (d) and (e) of the Customs Notification No. 117/78, dated 9-6-1978.
(b) It was further alleged that the appellants had deliberately mis-declared the description of the packing materials in the shipping bills with a view to get the export obligation fulfilled and thereby to evade customs duty on the imported white cardboard amounting to Rs. 5,53,971.81 and that they had misdeclared in the shipping bills that the inner cartons were made out of white cardboard. On this basis, it was alleged that the appellants had violated the provisions of Clauses (d) and (e) of the aforesaid notification.
(c) Since the goods covered by the 38 shipping bills in question did not correspond in material particulars with regard to the packing materials, with the entry made under Section 50 of the Customs Act, the goods were alleged to be liable to confiscation under Section 113(i) of the Customs Act. However, since the goods had already been exported, the appellants who had contravened Section 113(i) of the Customs Act, read with Section 50 ibid, with deliberate intent to evade Customs duty on the imported white cardboard had thereby rendered themselves liable to a penalty under Section 114 ibid.
2.2 The appellants denied all the charges and requested that the proceedings be dropped. After holding adjudication proceedings, the Collector of Customs, Cochin, passed an order dated 6-4-1987 holding that the appellants had failed to comply with the conditions specified in Notification No. 117/78 and ordering them to pay customs duty of Rs. 5,53,971.51 and imposing a penalty of Rs. 50,000/- on them. It is this order which is now challenged in the present appeal.
3.1 In his order, the Collector inter alia recorded a finding that in shipments which were made prior to the date of importation of the packing material on 19-1-1984, the appellants had not claimed drawback of duty. Similarly, subsequent to the importation of the packing material also, the appellants did not claim drawback till they completed the export obligation on 13-4-1984. In all, there were 38 shipments. They had, however, claimed drawback on cartons made out of the non-duty paid imported materials (apparently the Collector seems to be referring to later shipments, i.e., later than 13-4-1984 and till 19-4-1985). The Collector held that it was wrong on the part of the appellants to claim duty drawback when no duty had actually been paid on the imported material. As regards the appellant's contention that the Cochin Customs had no jurisdiction to issue a show cause notice in this matter, the Collector found that since the packing material had been imported duty free in accordance with Notification No. 117/78, and there had been violation of the conditions laid down in that notification and the exports had been effected through Cochin, the Cochin Customs had jurisdiction.
3.2 The evidence produced by the appellants to show that the imported cardboard had been converted into cartons was rejected by the Collector stating that there was nothing to prove that the said cartons were made only out of the imported material.
4. We have heard Shri A.K. Jain, Advocate, for the appellants and Shri G.V. Naik, Jt. CDR, for the respondent.
5.1 At this stage, we may, with advantage, notice some of the relevant provisions. By Customs Notification No. 5/76, dated 31-1-1976, the Central Government had exempted goods imported against an Advance Licence, being materials required to be imported for the purpose of manufacturing goods for execution of an export order, from duty of customs subject to the conditions laid down therein. One condition was that the materials should be covered by a DEEC. Another was that the exempt materials should be used in the manufacture of such resultant products and in such factories as were specified in the DEEC. They should not be sold or otherwise transferred to any other person or utilised in any other manner without the previous permission of the competent authority.
5.2 Notification No. 117/78, dated 9-6-1978 exempted the goods specified in the schedule to the notification, imported against an Advance Licence, being materials required to be imported for the purpose of manufacture of goods, or replenishment of the materials used in the manufacture of goods or both for executing one or more export orders, from customs duty. There were several conditions laid down including the one about DEEC. One of the conditions was that the exempt materials shall not be sold or otherwise transferred to any other person, or utilised or permitted to be utilised or disposed of in any other manner without the previous permission of the competent authority. However, this condition was not applicable to exempt materials which are imported for replenishment of the materials used in the manufacture of goods.
5.3 Thus two important differences are noticeable in the 1978 scheme as compared to the earlier scheme. One is that the imported materials were allowed to be imported duty free not only for the manufacture of specified goods for export but also for replenishment of the materials used in the manufacture of such goods. Secondly, the prohibition on the disposal of the goods by sale or otherwise without the permission of the competent authority was not made applicable to the materials imported for replenishment purposes.
6. At the outset, the learned Counsel for the appellants made certain submissions challenging the validity of the show cause notice issued to the appellants and the jurisdiction of the Collector of Customs, Cochin to adjudicate upon the proceedings initiated thereunder. With respect to the show cause notice, the submission was that it was issued by the Assistant Collector on 30-6-1986, i.e., after the amendment to Section 28 of the Customs Act by Section 3 of the Customs (Amendment) Act, 1985 on 27-12-1985. The effect of this amendment was two fold. First, the show cause notice for payment of duties not levied, short-levied or erroneously refunded, in a case involving collusion or any wilful misstatement or suppression of facts by the importer or exporter or his agent or employee, enabling the Revenue to invoke an extended period of five years instead of the usual period of six months, was to be issued by the Collector. Second, the order of adjudication must in such a case be passed by the Collector. In the present instance, the show cause notice was issued by the Assistant Collector though cause was required to be shown to the Collector. Further, neither the notice nor, for that matter, the order passed by the Collector did allege any suppression of facts, or mis-statement or collusion on the part of the appellants. Therefore, urged Shri Jain, the show cause notice was barred by time, the import having been effected on 19-1-1984 and the last shipment having been effected on 13-4-1984.
7. The second preliminary submission of Shri Jain was that the import having been effected at Madras Port, the Collector of Customs, Cochin had no jurisdiction to demand duty on the goods.
8. On the first point, the learned Jt. CDR's submission was that the Customs notification in question did not impose any time-limit within which the imported goods ought to be used. The demand for duty was not under Section 28 of the Customs Act, nor did the show cause notice invoke Section 28.
9. On the issue of the Cochin Collector's jurisdiction, Shri Naik stated that he could not cite any authority in support of the Collector's jurisdiction to demand duty in respect of goods imported at Madras. He, however, sought to draw an analogy to Central Excise Rule 196 which inter alia enjoins on the applicant-user of goods (procured free of duty from under Rule 192) to pay duty on such quantity of goods as are not accounted for to the satisfaction of the proper officer, Shri Naik cited in this context the Tribunal's decision in the case of Collector of Central Excise v. Amber Paints, Bombay, 1985 (22) E.L.T. 297 wherein it was held that the question of demanding duty on goods obtained under Rule 192 could not arise till the goods were taken into use in a manner otherwise than as provided or in the event of unsatisfactory accountal of the goods. It was further held that a demand for differential duty on the occurrence of such eventualities would not be the same thing as a demand for duty on account of non-levy or short-levy. Shri Naik also cited the Tribunal's decision in the case of Bajaj Tempo Ltd. v. Collector of Excise, Pune - 1984 (17) E.L.T. 205 = 1984 ECR 1160 (CEGAT).
10. Since the two preliminary submissions of Shri Jain are fundamental to the validity of the impugned order, we propose to deal with them first. Taking first the question of the Cochin Collector's jurisdiction to demand duty in the present case, we have to note that the import of the goods took place at Madras. Their clearance duty free in terms of Customs notification was granted at Madras. In terms of the said notification, a claim was required to be made to the Collector of Customs, Madras for exemption from duty. A bond/legal undertaking for complying with the conditions specified in the notification was to be executed before such authority as may be approved by the Central Government. A declaration was to be filed by the appellants before the Assistant Collector binding themselves to pay on demand an amount equal to the duty leviable, but for the exemption, on the imported materials in respect of which the conditions laid down in the notification had not been compiled with (this declaration was filed before the Assistant Collector of Customs, Madras). There is, therefore, no manner of doubt that the Assistant Collector of Customs or the Collector of Customs, Madras was the proper authority who was to return a finding of non-compliance with the conditions laid down in the notification and to demand customs duty in respect of the quantity of goods in respect of which the conditions were not complied with. It is, of course, true that the use or utilisation of the imported materials in the present case was not in the Madras Collector's jurisdiction. If the Cochin Collector had reason to believe that the conditions laid down in the notification had been violated necessitating proceedings against the appellants which could have led to demand of duty, penalty, etc., the proper course would have been for him to report the matter to the Collector of Customs, Madras to enable the latter to proceed against the appellants in accordance with law. The Cochin Collector, however, seems to have assumed jurisdiction to deal with the matter himself. The analogy with Central Excise Rule 196 as sought to be drawn by Shri Naik is inapplicable. The rule itself provides for demand of duly by the proper officer having jurisdiction over the applicant-user who may have got his requirement of materials cleared duty-free or at concessional duty in terms of Rule 192 from a manufacturer situated in another officer's jurisdiction. Such is not the case here. The two decisions cited in this context are of no help to the Revenue. Shri Naik has sought to justify the demand on the plea that what was demanded by the Cochin Collector was not really duty but only an amount equal to the duty leviable. This contention is, on the face of it, untenable. For one thing, what the notification makes the importer liable to pay on demand is an amount equal to the duty leviable but for the exemption. No doubt the duty has to be quantified in an amount but, for that reason, it does not cease to be duty. For another, the Collector himself has no such illusion. He has quite clearly and categorically asked the appellants to pay the customs duty demanded in the show cause notice. If indeed the amount in question was not duty it could not have been demanded in terms of an adjudication order under the Customs Act but only in enforcement of the bond or legal undertaking executed by the appellants, if necessary through appropriate proceedings in a Civil Court. Shri Naik's contention has, therefore, to be, and is, rejected
11. The Department has not produced any notification or other legal provision (none has been placed before us) under which the Cochin Collector was conferred jurisdiction to demand duty in respect of goods imported at Madras and cleared by the Madras customs either generally or in this particular case. The Central Government has issued notifications under Section 4 of the Customs Act appointing Collectors of Customs and lower officers for different jurisdictions. In terms of these notifications, the respective jurisdiction of the Collectors have been clearly spelt out (see, for example, Notification No. 36-Cus., dated 1-2-1963, as amended). Notification No. 37, dated 1-2-1963, as amended, appoints the Collector of Customs and Central Excise, Cochin, as the Collector of Customs in his jurisdiction. Evidently, it does not extend to Madras Port for which the Collector is the Collector of Customs, Madras, vide Notification No. 36, dated 1-2-1963. There are, of course, a few officers appointed as Collectors with all-India jurisdiction such as the Director of Revenue Intelligence but the Collector of Customs, Cochin is not one among them. In these circumstances, we hold that the Collector of Customs, Cochin had no jurisdiction to demand duty in the present case and, consequently, we set aside the demand.
12. Thus, we are now left with only the penalty imposed by the Collector on the appellants. The order does not in terms spell out the provision of the Customs Act under which the penalty has been imposed. However, the show cause notice called upon the appellants to explain why, in the circumstances stated in the notice, a penalty should not be imposed on them under Section 114 of the Customs Act, 1962. We have, therefore, to proceed on the basis that penalty has in fact been imposed under Section 114, though it is not clearly stated so. The Cochin Collector, in any event, could not have imposed any penalty for alleged violation of the Customs notification in question since, as we have already held, the demand for duty could not have been made by him and it follows that any adjudication leading to imposition of penalty in connection with any alleged violation of the notification could not also have been made by the Cochin Collector. Now, Section 114 provides that any person who, in relation to any goods, does or omits to do any act, which act or omission would render such goods liable to confiscation under Section 113 or abets the doing or omission of such an act, shall be liable to the penalties prescribed therein. Separate penalties are prescribed in the case of different types of goods. The first type is goods in respect of which any prohibition is in force under the Customs Act or any other law for the time being in force. It has not been shown before us that in respect of the exported goods, there was any such prohibition. This provision has no application to the present case. The Second type is dutiable goods other than prohibited goods. "Dutiable goods" in this context evidently means goods liable to export duty. The Department's case is not that the exported goods were dutiable or that they were exported without payment of duty. This provision again has no application. The third and the last type is goods that are exported under claim for drawback. In the present case, we are not concerned with goods which were exported under claim for drawback. In fact, the admitted position is that exports of the goods covered by the 38 shipping bills, including the four relating to goods shipped after the import of materials at Madras, were effected without claiming any drawback thereon. If this is so, then, the provision in Section 114 enabling the Collector to levy penalty in the case of goods exported under claim for drawback is also not applicable to the present case. What appears to have happened (though we do not wish to pronounce any verdict on this) is that the appellants seem to have claimed duty drawback on cartons made out of non-duty paid imported materials in certain shipments which, however, are not the subject matter of the present dispute because the Collector, in his order, has not demanded repayment of the drawback amount which he should have done if the present dispute was in relation to such shipments. Perhaps, there are separate proceedings in this regard. Be that as it may, it is obvious that in the case before us, the penalty has not been imposed on the ground that the appellants had exported goods under claim for drawback though they had been made out of non-duty paid imported materials.
13. In the above view of the matter, the penalty levied by the Collector is also not sustainable and is set aside.
14. In the view we have taken, there is no need to go into the other submissions made before us.
15. The result is that the impugned order is set aside and the appeal is allowed.