Customs, Excise and Gold Tribunal - Calcutta
National Trading Ltd. vs Collector Of Customs (Prev.) on 15 November, 1988
Equivalent citations: 1989(21)ECR106(TRI.-KOLKATA), 1990(45)ELT626(TRI-KOLKATA)
ORDER S.K. Bhatnagar, Member (T)
1. This matter relates to three appeals filed by M/s. National Trading Ltd. of Nepal against three orders passed by the Addl. Collector of Customs (Prev.), Muzaffarpur, which were heard concurrently with the consent of both the sides.
2. The Ld. Advocate, Shri Saha, for the appellants submitted in the main as under:
All the above appeals arise out of the importation of defective Japanese Iron rods by Messrs National Trading Ltd., an undertaking of His Majestry's Government of Nepal, through the Calcutta Port. As required by the Indo-Nepal Treaty of Trade, Transit and Co-operation, the importers issued Customs Transit Declaration No. S 51-4040/81A dated 3-7-1981 in respect of 1183.660 MT of iron rods contained in 2456 bundles. Approximately 1080.110 MT of the imported material had crossed over to Birgunj, Nepal, via Raxaul in India and necessary endorsements in respect of the same were made in the relevant CTD. 103.5 MT of the material, which was entrusted to a public carrier, did not cross-over to Nepal, as the public carrier failed to deliver the goods even after bringing the same to Raxaul. The delinquency of the public carrier was brought to the notice of the Police at Raxaul by the importer, NTL. Recovery of these goods and imposition of penalty on a portion of the recovered goods and confiscation of other portion of the goods by the Customs Authorities have led to the above-referred Appeals.
By these appeals the appellents contend that:
(i) The fine of Rs. 1 lac in lieu of confiscation in respect of 34.416 MT of the said goods which were covered by the Department, is illegal.
(ii) The ex-parte adjudication in respect of 6.6 MT of the imported goods which were recovered by the Department and absolutely confiscated, should be set aside and the sum of Rs. 40,000/- kept in deposit with the Department, in pursuance of the Order of the Hon'ble High Court at Patna, should be refunded.
(iii) A quantity of 7.3 MT of the imported material that has been confiscated by the Department and kept in its custody should be returned to the Appellant.
(iv) The Department should account for the balance of the quantity out of 103.5 MT of the imported goods which was admittedly seized by the Department on 29-6-1982.
During the course of submissions made on behalf of the appellants, the following factual incongruities were highlighted:
(i) When the Department was informed by the Appellants through a letter dated 14-5-1982 that 207 bundles of imported Japanese iron rods were not being delivered to the Appellants by the transport contractor and the same was lying with the transport contractor at Raxaul, why the Department did not take any redeeming steps immediately ?
(ii) How can the letter dated 29-6-82 be issued by the Superintendent, Land Customs Station, Raxaul when it had received and acted upon the letters addressed by the Appellants on 14-5-82 and 29-6-82 ?
(iii) By the letter dated 29-6-82, the Department categorically admits having seized the entire quantity of 207 bundles. In the subsequent Show Cause Notice dated 22/30-9-82, however, the Department calls upon the Appellants to show cause only in respect of 34.416 MT contained in 350 bundles. The patent contradiction between the number of bundles has not been clarified by the Ld. Adjudicator. The Seizure Memo and the Seizure Report, both dated 1-7-82, are irreconciliable with the letter dated 29-6-82.
(iv) As the goods had been lying "in an open field near Duncan Hospital for more than 6 months" and were being gradually pilfered, as stated in the Department's letter dated 29-6-1982 and as reiterated in the Seizure Report, a question naturally arises as to why the Department did not effect a seizure earlier and thus prevent the purported 'pilferage'. Even after being informed by the Appellants by their letter dated 14-5-1982, the Department did not officially take any steps whatsoever to prevent the illegality.
(v) Why the goods which were purportedly seized on 29-6-82 and/or on 1-7-1982 were not weighed before the same were handed over to M/S. North Eastern Roadways, Raxaul ?
(vi) Why wasn't a departmental enquiry instituted when, even after effecting delivery of 34.416 MT of the material, it was found that a further substantial quantity of goods were continuing to remain in the custody of the said M/s. North Eastern Roadways, Raxaul ?
(vii) As can be seen from the "reasons for my finding" in the Adjudication Order No. 3-Cus/83 dated 3-2-1983, "the goods of the description seized are iron rods of foreign origin as is clearly borne out by the markings on the rods"; it will also appear from the order passed by Shri R.K. Sharma, Assistant Collector of Land Custom, Raxaul, that "on physical examination of samples and stocks kept in the custody of M/s. North Eastern Roadways, Raxaul, I feel satisfied and have come to this conclusion that the above consignment of 6.6 MT iron rods in question is the part of the consignment covered under CTD No. S 51-4040/81A dated 29-5-81 which were transported by Messrs Srestha Byabasy, Raxaul, from Calcutta to Raxaul". Thus, it can be safely inferred that the goods imported by the Appellants were visually identifiable at all stages. Hence, the question arises as to why the Department found it necessary to effect a seizure of the said quantity of 6.6 MT of iron rods on 21-8-1982 and feigned ignorance of the ownership thereof, purportedly proceeded to issue a Claimant-cum-Show-Cause Notice on 6-1-1983 and absolutely confiscated the said quantity of goods by an ex-parte adjudication order on 3-2-1983.
(viii) Purportedly a quantity of 6.6 MT of iron rods was seized from "the field near Duncan Hospital" on 21-8-1982. Admittedly a large quantity of the same "visually identifiable" goods were seized from the same place on 29-6-82 and/or 1-7-1982 and show cause notice in respect thereof was issued to the Appellants. Hence, it is against preponderence of all probabilities that the Department could be ignorant about the ownership of the said quantity of 6.6 MT and could bona fide proceed with the ex-parte adjudication and confiscation thereof.
(ix) It is significant that the quantity of 6.6 MT was purportedly seized on 29-6-1982, the Claimant-cum-Show Cause Notice was purportedly issued on 6-1-1983 and the ex-parte adjudication and the consequent confiscation was completed on 3-2-1983 whereas the quantity of 34.416 MT of the goods was seized on 29-6-1982 and/or 1-7-1982, the Show Cause Notice in respect of the same was issued in the Appellants on 22/30-8-82 and the adjudication was completed on 20-4-1983. Evidently, the adjudication in respect of 6.6 MT was held before the expiry of 30 days from the date of issuance of the Claimant-cum-Show Cause Notice. It is surprising that the adjudication in respect of the seizure made on 29-6-1982 and/or 1-7-1982 could not be completed before 20-4-1983 whereas the adjudication in respect of 6.6 MT was completed in an undue haste before the expiry of one month from the date of issuance of the so-called issuance of the so-called Claimant-cum-Show Cause Notice.
(x) It is also significant that the same adjudicator wo confiscated upon ex-parte adjudication a quantity of 6.6 MT iron rods on 3-2-1983, after taking due notice of the special markings on the said iron rods, became aware of the ownership of similar iron rods while adjudicating in respect of a larger quantity on 20-4-82. It may be safely surmised that the Ld. Adjudicator had all along been aware of the fact that the concerned iron rods were owned by the Appellants.
(xx) There is no record to show that upon effecting the purported seizure of the quantity of 6.6 MT of iron rods from the ground near Duncan Hospital on 21-8-1982, the custody of the same was made over to M/s. North Eastern Roadways, Raxaul. There is only one instance of entrustment on record.
(xii) There is no Seizure List or Panchnama in record to uphold the story in respect of the purported seizure on 21-8-1982.
(xiii) Assuming but not admitting that there was a seizure of the quantity of 6.6 MT on 21-8-1982 and assuming further that the same quantity was also made over to M/s. North Eastern Roadways, Raxaul, for their Safe custody, there is nothing in the record to show that the quantity was properly weighed before the customs was purportedly made over.
(xiv) Although a reference was made to a purported "Seizing fficer's Report'' dated 24-8-1982, the same was neither made available to the Appellants in the Departmental Representative's paper book nor supplied to the Ld. Court at the time of hearing.
(xv) The purported Claimant-cum-Show Cause Notice dated 6-1-1983 was also not made available either to the Appellants or to the Court.
As far as the Order of adjudication dated 6-11.-1986 is concerned, from which the Appeal No. 58 of 1987 arises, it was submitted that prima facie the entire exercise pertaining to the so-called seizure of 7.3 MT iron rods from the custody of M/s. North Eastern Roadways, Raxaul, is illegal and vitiated by mistakes and errors of both fact and law, which are apparent on the face of the records. It was submitted, inter alia that:
(i) The concerned iron rods could not have been seized from the custody of M/s. North Eastern Roadways to which the goods were made over by the Department itself and which was admittedly the department's custodian for the concerned goods. Section 110 of the Customs Act, 1962 docs not contemplate any such seizure. The facts and circumstances prove beyond any doubt that the concerned officer of the department could not possibly believe reasonably that the said iron goods were "smuggles goods".
(ii) When it was evident from the facts and circumstances that the goods belong to the appellants and pertain to the same C.T.D., as with the quantity of 6.618 MT which was being returned to the Appellant on 7-6-1986, the departmental officer acted mala fide in issuing a so-called "Claimant Notice" contending that the goods were "unclaimed". If at all, the departmental officer ought to have issued a Notice to Show Cause to the Appellants. The so-called ''Claimant Notice" is prima facie illegal.
(iii) The Learned Adjudicator ought to have taken judicial notice of all the documents submitted by the Appellants' representatives and it was legally obligatory for him to record the reasons for which he did not consider the said papers and docments to be unacceptable/unreliable as the proof of the appellants' ownership of the concerned goods. The order of adjudication deserves to be quashed and set aside for being arbitrary, unreasonable and abrupt.
(iv) That fact that there was no application of judicial mind in passing the impugned order of adjudication is evident from the facts of the case. It is seen from the records that the Learned Adjudicator had before him the entire records pertaining to the enquiry and investigation conducted by the Assistant Collector at Raxaul in pursuance of the order of the Hon'ble Patna High Court, regarding 6.618 MT of the same material. As with the said quantity of 6.618 MT of iron rods, the concerned quantity of 7.3 MT of iron rods was also beint claimed by the Appellants. Hence, in all fairness, there ought to have been a similar inquiry and investigation in respect of 7.3 MT of iron rods also. The Adjudicator is not legally competent to inquire and investigate as also to adjudicate. In the present case, no investigation or inquiry worth its name was conducted. The cursory manner in which the order has been passed betrays that the Adjudicator was the victim of prejudice. In view of the fact that in a similar situation the Hon'ble Patna High Court had issued certain guidelines and directions, it was obligatory for the Learned Adjudicator to have caused an inquiry and investigation before he could issue any order in respect of the said quantity of 7.3 MT or iron rods.
(v) The validity or otherwise of the act of the so-called seizure on 7-6-1986, was not taken into consideration and the departmental action was taken to be sacrosanct.
POINTS OF LAW IN GENERAL (1) Section 111 has no application as the same concerns itself only with "improperly imported goods". In the instant case, goods were "brought from a place outside India" by the Appellants in accordance with proper and valid import licences granted by His Majesty's Government of Nepal and the same were put in the process of transmission from the Indian Port to Nepal in due compliance with the provisions of the Treaties between India and Nepal.
(2) The act of importation, as aforestated, cannot be stated to be "contrary to any prohibition imposed by or under this Act or any other law for time being in force", as laid down in Section 111(d). The department has neither pleased nor placed any Prohibitory Notification either under Section 11(r) or under Section 111(d) of the Act.
(3) The act of importation into India being prima facie legal, the provisions of Section 111(d) cannot be made applicable by a fiction that the concerned goods were "imported or attempted to be imported contrary to any prohibition" only because the goods were diverted by way of pilferage in the process of transmission from the India Port to Nepal.
(4) Further, according to the ratio in Radha Kishan Bhatia v. Union of India (AIR 1965 S.C. 1072 at pp 1073-1075), "a person who can be penalised under Section 167(8) [now Section 111 (d)] is one who is in any way "concerned" in the commission of the offence of bringing into India or taking out of the country goods with respect to which certain prohibitions or restrictions exist".
(5) The Appellants cannot, therefore, be siad to be concerned in the commission of the offence of illegally bringing into the country the defective iron rods of Japanese origin, unless the Appellants had been in some way responsible for the same by some act or omission. The ownership of the Appellants being legal and the transhipment from India to Nepal also being in consonance with the terms of the Treaty, the Appellants cannot be said to be "concerned" in any way in the commission of the alleged offence. The Hon'ble Supreme Court of India has held that:
"A mere finding of fact that a person is in possession of smuggled goods does neither imply that the Collector of Customs had considered the question of the person's being concerned in the commission of the offence of illegal importation of the goods nor in any way justifies the conclusion that the person must have been so concerned."
It is established from the facts and circumstances of the instant case that the Appellants had no nexus whatsoever with the happening of the incident of pilferage and/or diversion and they had no criminal intent to commit any offence. In any event, the department has not discharged the onus of proving the offence of the Appellants in any of the cases.
(6) If goods are "pilfered in transit", as has been admitted in the Adjudication Order No. 15/Cus., dated 20-4-1983 (First Appeal), then it cannot be stated that "the provisions of Treaty on Trade and Transit between the Government of India and Government of Nepal are clearly violated", as has been done by the Respondent (page 93 of the paper book in Appeal No. C 57/87-Cal-836A).
(7) Although the provision of Section 3(1) of the Imports and Exports (Control) Act, 1947 has been invoked in both the Adjudication Order No. 15/Cus., dated 20-4-1983 and No. 3/Cus., dated 3-2-1983, it is not seen as to how the matter in issue may be within the mischief of this Section without any order/notification making "provision for prohibiting, restricting or otherwise controlling" the importation of the said goods which were involved in the Adjudication orders, especially in the facts and circumstances pertaining to the instant cases.
Curiously, the Adjudication Order No. 3/Cus., dated 3-2-1983, in its concluding lines, also refer to and rely upon the Government of India, Ministry of Finance, Notification No. 76-Cus/85, dated 19-6-1985 which only deal with "goods which have been exported to Nepal from countries other than India" and only prohibits/restricts "import from Nepal to India".
(8) Evidently, the line of reasoning followed in the Adjudication Order No. 15/Cus., dated 20-3-1983 (The First Appeal), being No. 251 of 1983) has been derived from the erroneous interpretation of the ratio in the case of Collector of Customs, Madras v. K.D. Shoormul, reported in (1982) 2 Cenex L.J. 139, the Supreme Court has held with reference to Section 167(8) of the Sea Customs Act, 1878 [corresponding to Section 111(d) of the Customs Act, 1962] that the "proceedings for confiscation of contraband or smuggled goods under Section 167(8), Sea Customs Act, 1878, are proceedings in rem and, therefore, such goods may be confiscated without proceeding against any person and without ascertaining who their real owner or who was actually concerned in their illicit import. It is not necessary for the Customs Authorities to prove that any particular person is concerned with their illicit importation or exportation. It is enough if the department furnishes prima facie proof of the goods being smuggled goods.
This case is distinguishable from the cases in Appeal inasmuch as the goods in issue in the instant cases were neither contraband (there being no Notification) nor smuggled [the goods having been imported against proper and valid Import Licence granted by His Majestry's Government of (Nepal)]. A fiction was attempted to be created in the First Adjudication Order No. 15/Cus., dated 20th April, 1983, to treat the goods as smuggled goods, albeit unreasonably.
While adjudicating upon confiscations and penalties (Section 122), it is of paramount importance for the Adjudicator to ensure that it has been established that the goods in question have been unlawfully imported. The burden of establishing unlawful importation is on the Customs Authorities and does not ordinarily shift on the person charged with the offence (Ambalal v. Union of India, A.I.R. 1961 S.C. 264 and also AIR 1956 S.C. 404). The exception provided in Section 123 does not apply to the instant cases. Except in cases where Section 178A [now Section 123(1)] is applicable, the Customs Authorities are not relieved from their burden of establishing that the prohibition or restriction has been contravened in the importation of goods, merely because they want to proceed against the goods and not against the person (Mangla Prosad v. V.J. Manerikar, 68 CWN 383 at page 389-90).
(9) The Order of Customs Authorities imposing confiscation and penalties under Section 167(8) [now Section 111(d)] is quasi-judicial and the Customs Authority has the duty to act judicially in deciding the question as to confiscation and imposition of penalty. The discretion vested upon the Adjudicator must be exercised judicially and not arbitrarily. The Collector must decide in each particular case if there were circumstances which would call for the drastic punishment of confiscation. If there was a case in which discretion should have been exercised in favour of the Importer, then the Adjudicator has the responsibility of ensuring that it was so done. The Adjudicating Collector must always remain conscious and aware of the fact that he is vested with judicial discretion and must give a reason as to why the drastic punishment of confiscation should be imposted. [See Leo Roy Fray v. Superintendent, District Jain, Amritsar, AIR 1958, SC 119 and also Rikabdass Bhavarilal v. Collector of Customs, Madras - (1961) 2 MLJ 443 at P 448].
(10) The intent either to defraud the Government of any duty payable or to evade the restriction in force with respect to imports must be proved in order to bring the Appellants within the mischief of the Customs Act.
It seems obvious that generally speaking, such an intent cannot be attributed to a person who acquires possession or who is concerned in carrying, removing, depositing, harbouring, keeping or concealing any goods long after they were smuggled, and who is not the smuggler himself or one interested in the smuggler. A person who is concerned with the transaction of smuggling the goods might have the intent either to defraud the Government of any duty payable thereon or to evade any prohibition or restriction to the importation thereof (Sitaram Agarwala v. State - A.I.R. 1962, Calcutta 370).
Even if it is assumed (but not admitted) that the concerned goods were being 'smuggled' across the Indian border to Nepal from the Duncan Hospital fields, as found in the Adjudication Order No. 15/Cus., dated 20th April 1983, it cannot be stated by any stretch of imagination that the Appellants National Trading Ltd., an undertaking of His Majestry's Government of Nepal are "concerned with the transaction of smuggling". It was necessary for the department to prove that the Appellant had the intent either to defraud the Government in respect of duty i.e. to evade payment of duty or to evade any prohibition or restriction in force as to import.
(11) A person who can be penalised under Section 167(8) [now Section 111(d)] is one who is in any way "concerned" in the commission of the offence of bringing into India or taking out of India goods with respect to which certain prohibitions or restrictions exist. Neither has the Department proved the existence of any prohibition or restriction nor the fact of the Appellant's being "concerned" with the alleged offence. Hence the adjudications are bad in law.
(12) The existence of a 'reasonable belief on the part of the Seizing Officer, that the goods seized are smuggled goods is a condition precedent for the seizure Under Section 110 of the Act. It is a confirmed ratio that such belief must exist either before or at the time of seizure and it is not sufficient if such belief is entertained afterwards (Nathella Sampatuchetty v. Collector of Customs, Madras, A.I.R. 1959 Mad. 142 and also M.G. Abrol v. Ami Chand Vallamtji, 62 Bom. L.R. page 1043). The Supreme Court in Babulal Amthalal Mehta v. Collector of Customs, Calcutta (A.I.R.1957 S.C. 877) have held that the only pre-requisite... is the subjectivity of the Customs Officer in having a reasonable belief that the goods are smuggled. Such belief is a matter for the subjective satisfaction of the officer but the Court may consider whether the belief entertained was reasonable or not. In the case of Krishna Iyer v. Assistant Collector of Central Excise, Kozhikode, reported in Kerala Law Times at pp 901, 903, the circumstances which attended the seizure were found to be of considerable relevance.
(13) The impugned orders or Adjudication offend the terms and the tenor of Sections 13 and 23 of the Customs Act, 1962.
(14) Section 11 of the Act entitles the Central Government to prohibit importation or exportation of goods for the purposes stated in sub-section (N) thereof. Clause (r) of sub-section (ii) of the said Section states that "the implementation of any Treaty, agreement or convention with any country" is one of the said purpose. In the instant cases, the Department has not pleaded or proved the existence of any such prohibition in respect of the goods in issue and hence there is no question of violation of the provisions of Section 11 of the Act, as held in the Adjudication Order No. 15-Cus., dated 20th April, 1983.
(15) The findings in the impugned adjudication order mulitates against the provisions of Chapter VIII of the Act.
(16) On the face of the Summary of "Seizure in respect of Iron rods" submitted by the Department on 5th July 1988, the entire exercise pertaining to seizures is patently illegal. The said 'summary' admits that there was a so-called seizure on 11-5-1982 but the quantity seized in unknown. In the Adjudication Order dated 20-4-1983, however, the quantity seized on 11-5-1982 is stated to be 1.5 quintals. The said Adjudication Order betrays the Department's knowledge about the ownership of the said goods but no proceeding was initiated in respect of the said goods, ex-parte or otherwise. The seizures dated 1-7-1982 and that dated 29-6-1982 are confusing both in respect of the actual date of seizure and of the actual quantity seized. As far as the seizure dated 21-8-1982 is concerned, there is neither any seizure list or any Panchnama in respect of the same; no notice was served on the Appellants and the Adjudication was completed on 3-2-1983 i.e. within less than thirty days from the date of publication of the purported claimant-cum-show-cause notice on 6-1-1983. The seizure dated 7-3-1986 is prima facie invalid and illegal as there could be no seizure from the Department's own custodian M/s. North Eastern Roadways at Raxaul.
(17) The finding in the Adjudication Order No. 3-Cus/83., dated 3-2-1983 to the effect that "the goods are smuggled one" is perverse as, in the facts and circumstances of the cases, "smuggling" as defined in Clause 39 of the Customs Act, 1962 cannot be stated to have taken place. Reliance is placed on the definitions laid down in Trilochan Singh v. Union of India (1981 E.L.T. P 669); Shew Pujan Rai Inderson Rai Ltd. v. Collector of Customs (A.I.R. 1952 Cal. 789 at page 792); Kanungo & Co. v. Collector of Customs (AIR 1965 Cal. 248 at page 252) and also on the ratio of the case reported in AIR 1974 S.C. 859.
(18) It is seen from the papers submitted by the D.R. before the learned Tribunal on 5-7-1988 that there was a letter C. No. VIII (48)18-Misc./83/II/248 dated 14/15-1-1985 from the A.C. Raxaul to A.C. (Customs) Patna wherein it has been indicated that there was an Adjudication by the A.C. Raxaul, on 31-12-1982 in respect of 2 quintals of Iron Rods and the said Iron Rods were released.
The Appellants strongly objected to the introduction of new evidence on the concluding date of the hearings and had prayed that the same should not be considered for the purpose of Adjudication. The Appellants, however, state that if there was an ex-parte Adjudication on 31-12-1982 in respect of goods belonging to the Appellants, and the said goods were released upon adjudication then there was all the more reason for the department to have acted on the same principle and to have released the goods subsequently seized. In any event, no copy of the said letter dated 1/15-1-1985 was given to the Appellants and only an extract therefrom was handed over at the time of hearing.
(19) On 5-7-88 the learned Departmental Representative introduced another letter dated 21-6-1986 and gave a copy of the same to the Appellants Advocate inside the Court Room. Without prejudice to the admissibility of the said letter in evidence, a detailed comment on the contents of the said letter dated 21-6-1986 is hereto annexed marked with the letter "A".
(20) The ratio laid down in the learned Tribunal's Judgment in CD(Cal.) Appeal No. 74 of 1983 filed by M/s. Dolphin Laboratories, Calcutta against the Collector of Customs, Calcutta, decided on 14th November 1986 is totally relied upon regarding the non-applicability of Section 111(d) of the Customs Act, 1962 and also regarding imposition of fine and penalty under the Customs Act, 1962 while the entire judgment is emphatically relied upon, the following portions are quoted therefrom as the same are of extreme relevance:
"Merely because action against goods is action in men, it does not mean that a person who had committed no offence in respect of them or with reference to them could be made to suffer by way of payment of fine or otherwise.
"...we can hold a person as liable to punishment only if we find him responsible for some act of omission or commission with reference to the law and the goods in question. In our view, to impose or inflict punishment (directly or indirectly) on a person who is not guilty is against all cannons of natural justice and fair play.
"As already observed, although action against goods is action in rem ultimately the fine is paid or required to be paid by the owner of the goods just as a penalty is paid or required to be paid by the person who has violated the law.... But in both the cases, it is the non-observance of law by the person concerned which is required to be established in the first instance.
(21) Further emphatic reliance is placed on the learned Tribunal's judgment in Appeal Nos. CD(Cal.)-203 to 207 of 1980 in the case of M/s. Orbital Enterprise and Others v. The Collector of Customs, Calcutta. In consonance with the ratio of this judgment, the Customs Authorities at Raxaul were not authorised to seize and confiscate the Iron Rods inasmuch as their transit through India was as per the terms of the Treaty between the two countries. Special attention is drawn to paragraph 25 to 28 of the judgment and it is submitted that the ratio laid down in that paragraph applies mutatis mutandis' to the instant Appeals.
Similarly, the contents of paragraphs 45 to 50 of the judgment are extremely pertinent in understanding the purport of Section 11 of the Customs Act, 1962 vis-a-vis the Indo-Nepal Treaties. It is submitted that the observations made in paragraphs 68 to 75 and in paragraph 85 of the above referred judgment are applicable and warranted in the instant Appeals also.
(22) It will transpire from the records that all the cases are fraught with illegalities, irregularities, arbitrariness non-application of judicial mind, indifference and obvious negligence on the part of the Customs Authorities.
The Ld. J.D.R., Shri Jain, submitted in the main as under :-
(1) A consignment of 2456 bundles (1183.668 MT gross weight and 1181.340 MT net weight) was despatched from Calcutta to M/s. N.T.C. Ltd., Kathmandu vide C.T.D. No. S 51-4040/81A dated 3-7-1981. The whole consignment reached Raxaul by 3-10-1981 and started to be despatched to Kathmandu from 25-11-1981. In the last there was a balance of 207 bundles.
(2) The Sr. Superintendent Land Customs Raxaul issued Notice C. No. 2085 dated 29-6-1982 to M/s. N.T.L. with a copy to M/s. Shresatha Bryabasay Transporting Co. of Raxaul and directed the Seizing officer to take over the said goods in custody. Accordingly the Seizing officer visited the office of the Transport Co., Raxaul on 30-6-1982 but found closed. On enquiry from the neighbourers about the whereabout of the perosn Sri Suresh Prashad who is looking after the Transport Co., but nobody could give correct whereabout of the said person. Finding no other way, he called for two independent respectable persons of the locality and pasted the Notice No. 2085 of 29-6-1982 at the door of the office of the Transport Co. in presence of the independent witnesses. The Seizing officer prepared seizure list/Panchnama in presence of the independent witnesses. Copy of seizure list and panchnama are at pages 2 to 9 of the Department paper book. It may be seen that the actual seizure has been effected on 01-7-1982 persuaded to Notice No. 2085 of 29-6-1982. There was seizure of 34,415.900 KGM. of Iron rods (12... & (10 mm = 12848 pcz) valued at Rs. 275327.20. These goods were handed over to custodian M/s. North Eastern Roadways, Raxaul on 1-7-82. The operation started on 30-6-82 & completed on 1-7-82. It is clear from the above that there was no seizure on 29-6-82 but the seizure was effected only on 1-7-82. The above facts have been stated by the Seizing officer in his report dated 1-7-82 at page 10-11 of Department paper book. The Adjudicating Authority has correctly relied upon the Seizing officers' report and Seizure was for the goods as indicated in the seizure list and panchnama dt. 1-7-82. The reference in letter dt. 29-6-82 is obviously written under mis-conception of fact.
(3) The Additional Collector of Customs (Prev.) I.N.B. adjudicated the case vide order No. 15 dated 20-4-83. He has given detailed finding regarding confiscation of the goods. The order of the Additional Collector is correct in law. The above brief pertains to Appeal No. CD-251/83.
Appeal No. CD(Cal)-57/87.
(4) A consignment of 6600 kgm. valued at Rs. 39,600/- was seized on 21-8-82 lying in the field near Duncan Hospital. The goods were found in scattered condition. Claimant show cause notice was issued on 6-1-83 but nobody turned up to claim the ownership of seized goods. The goods under seizure were therefore, confiscated absolutely as unclaimed, vide order No. 3-Cus./83, dated 3-2-83.
(5) Inquiry and investigation were conducted by the Asstt. Collector, Raxaul in terms of order of the Hon'ble High Court, Patna on writ petition filed by M/s. N.T.L. quantity of 6.6 MT of Iron rod of Japanese origin kept in the custody of M/s. N.E. Roadway, Raxaul was released to the consignee M/s. N.T.L. Kathmandu, Nepal on their furnishing a bank guarantee of Rs. 40,000/- after appellant had satisfied the question of ownership of the goods.
(6) The nature of the case has completely changed after ownership of unclaimed goods has been established and in view of this changed situation & considering the prayer of the appellant we have no objection if the case is remanded for de novo examination.
Appeal No. CD(Cal.)-58/87.
(7) M/s. National Trading Ltd., Kathmandu had come for release of 6.6 MT of Iron rod on 5-3-1986 in terms of Assistant Collector's order dated 14-6-1985 mentioned above. The said consignment was ordered to be released as the appellant had paid the deposit of Rs. 40,000.
(8) It may be mentioned that Assistant Collector in charge wanted to get the goods physically weighed before release and surprisingly he found that net weight of goods lying with the custodian is 13.950 MT instead of 6.600 MT. The reasons stated for the difference was that it was for the first time on 5-3-1986 that there was a physical weighment of a part of this consignments. After allowing 6.6 MT (6618 KG) to be exported the rest 7332 KG was seized on 7-3-1986.
(9) Claimant-cum-show-cause notice dated 22-3-86 was issued. National Trading Ltd. claimed the ownership of the subject goods i.e. 7332 KG of Iron rod, Additional Collector rejected claim of National Trading Ltd. on the ground that the petitioner failed to substantiate their claim. They could not correlate the goods with the CTD in question. The goods were confiscated absolutely under Section 111(d) of Customs Act, 1962 as the claim could not be substantiated vide Order No. 189-Cus/86, dated 6-11-1986.
(10) The Additional Collector's findings are based on the facts and correct in law and hence the order of the Additional Collector may be confirmed.
4. We have carefully considered the submissions made by both the sides (both oral and written).
5. We find that the basic fact which emerges is that a certain quantity of Iron rods of Japanese origin was imported by M/s. National Trading Ltd. of Nepal through Calcutta Port in a number of consignments.
6. These consignments were allowed in-transit facilities in terms of Indo-Nepal Treaty of Trade & Transit, 1978.
7. One of these consignments was covered by CTD in question (No. S. 51-4040/81A dt. 3-7-81). When the entire quantity covered by the CTD did not reach Nepal, the appellants informed the Indian Customs and the Indian Police.
8. The border Indian Customs subsequently discovered a quantity of Iron rods with foreign markings lying in a field and issued a notice to the appellants (& the carrier) and seized the quantity found and after seizing the same entrusted it to a custodian.
9. The matter was subsequently adjudicated by the Addl. Collector of Customs and vide his Order No. 15-Cus./83 dt. 20-4-83 (passed with reference to the show cause notice No. 2085 dt. 29-6-82) 34,415.900 KG of Iron rods were confiscated but allowed to be re-exported on payment of fine of Rs. 1,00,000/-
10. In this connection, it is noticed that the show cause notice dt. 29/30-6-82 refers to CTD S 51-4040/81A dt. 3-7-81 and it charges the appellants for violation of provisions under Clause 3(1) of the Import (Control) Order read with Section 3 of the Import and Export (Control) Act, 1947 and Section 11 of the Customs Act, 1962, and proposes confiscation with reference to Section 111 of the Customs Act, 1962 and a penalty under Section 112 of the Customs Act, 1962.
11. The Addl. Collector in his Adjudication Order dt. 20-4-83 also refers to the above provision and while 'exonerating' the appellants 'of penal liabilities under Section 112 of the Customs Act, 1962,' confiscates the goods under Section 111D of the Customs Act, 1962.
12. It also appears from the records that as early as 29-6-82, the department had reason to believe that the goods found by them in the open field near the local hospital related to the above CTD issued in favour of the appellants. The entire proceedings including the show cause notice, the appellants' submissions to the original authorities and the Ld. Adjudication Officer's findings proceed on that basis. Even at the Tribunal stage this position that the goods related to the above CTD has been maintained and admitted by both the sides.
13. In view of this common premise about the bare facts a question arises whether this matter is covered by the provision of the Customs Act or of Indo-Nepal Treaty alone or by both.
14. In this connection, we find that a CTD is filed in respect of Nepal Cargo and is endorsed by Indian Customs in terms of the Indo-Nepal Treaty of Trade & Transit, 1978 and the procedure prescribed under the said treaty is required to be followed in respect thereof.
15. Further, in order to ensure proper implementation of the conditions of the treaty it has been provided in the memorandum to the said treaty (vide clause 9 thereof) that the goods shall be covered by an insurance policy/or such legal bindings, undertaken to the satisfaction of the Collector of Customs, Calcutta.
16. It is noteworthy that the prescribed procedure requires that such undertaking/policy was required to be assigned to the Collector of Customs, Calcutta and the amount assured was required to be paid to the Collector (of Custom, Calcutta,) in the event of the goods or parts thereof not reaching Nepal. Therefore, once the officers of Patna Collectorate were convinced that the goods found by them related to a particular CTD, all that was required of them was to allow the goods to be taken to Nepal in terms of the Treaty and the CTD issued thereunder. And if any shortage was found and not satisfactorily accounted for, they were simply required to inform the Collector of Customs, Calcutta, so that the latter could take action in terms of the Treaty and the Protocol. In this view of the matter no such show cause notice as has been issued was required to be served and there was no cause for adjudication or confiscation. In other words, the entire proceedings were mis-concicved ab initio.
17. Looking at it from a slightly different angle i( may be observed that the show cause notice alleges, inter alia, that the goods in question were being 'smuggled out to Nepal'.
18. A question arises that if the goods belonged to the appellants and were covered by the CTD, how does it become a case of smuggling to Nepal ?
19. The admitted fact that a CTD duly endorsed by the Calcutta Customs covered these goods shows ipso facto that they had been legally and properly imported and were allowed to be transited in accordance with the prescribed procedure and the appellants were entitled to legally take them into Nepal. Hence there was no question of their being smuggled into Nepal by the appellants. Again the show cause notice refers to pilferage. In this connection, we find that there are two aspects involved - (i) criminal aspect with which the police is concerned and (ii) that of compensation to Govt. of India from duty point of view. The customs are concerned directly with the second aspect in terms of provisions of the Indo-Nepal Treaty, which takes care of the consequences in this aspect by way of providing for undertaking/insurance. Therefore, in respect of any quantity pilfered and not found, it was open to the Calcutta Customs to take suitable steps under the Treaty and all that the Patna officers were required to do was to inform the Calcutta Customs suitably, so that the latter could initiate necessary action.
20. (Indeed, it also appears from a document filed by the Deptt. called as showcause notice for non-accountal of the goods covered by CTD No. S 51-4Q40/81A dt. 3-7-81 on contravention of the provisions of the treaty of transit between the Govt. of India and H.M.G. of Nepal dt. 20-2-85 that the matter had been brought to the notice of the Calcutta Customs and we were informed by the Ld. J.D.R. that action with reference to the same was still pending. This document has been referred to by us merely to show that our above analysis finds support in the departmental action itself).
21. Under the circumstances the question remains is as to whether the goods which had not been transited to Nepal within the prescribed period of time were rendered liable to confiscation under the Customs Act, 1962 and, if so, under which provision ?
22. In this connection we will like to reiterate and emphasise that (as admitted by both the sides) the goods are covered by the Indo-Nepal Treaty.
23. In order to bring implementation of any provision of this treaty (or of any International Treaty or protocol for that matter) within the ambit of the Indian Customs Act, it was necessary that a notification was issued under Section 11(2)(r) of the Customs Act, 1962. But in spite of a specific query in this regard the departmental representatives have not been able to cite or show any such notification. Therefore, it was incorrect on the part of the departmental officer to refer to Section 11 in the context of the Indo-Nepal Treaty and invoke the same.
24. Further, as a matter of fact, the present case is merely that of delay in transit and for such delays confiscation has not been provided for, either in the Treaty or in the Customs Act. In fact, the treaty (by itself) does not provide for any mechanism for adjudication of disputes; and the relevant provision under the Customs Act, 1962, namely Section 11(2) (r), lies dormant and has not been activated as yet by the Govt. of India.
25. Therefore, these goods which are admittedly covered by CTD were not liable to confiscation.
26. (It is also significant that the Addl. Collector himself has held that the appellants were not liable to penal consequences.)
27. In the view of the matter, the order of the Addl. Collector is liable to be set aside and the so-called redemption fine if already paid is required to be refunded.
28. Looking from yet another angle, it is really surprising that whereas the charge is made out to be that of smuggling to Nepal (i.e. illegal export or attempted illegal export to Nepal), the sections which have been relied upon are Sections 111 and 112 of the Customs Act, 1962, which relate to illegal import of goods into India and are not applicable to cases of export or attempted export. This aspect does not appear to have been taken note of by the Addl. Collector who has referred only to Sections 111 and 112 of the Customs Act in the operative portion of his order.
29. Be that as it may, as we have already seen, neither Section 3 of the Import Trade Control Act (or clause 3 of I.T.C. order) nor penal provision of the Customs Act, 1962, could be invoked by the Customs authorities in the absence of appropriate notification under Section 11 of the Customs Act, 1962. In other words, the Addl. Collector of Customs, Muzzafarpur are not even competent to adjudicate the matter and confiscate the goods and impose fine or penalty. Looking from this point of view as well the proceedings are bad in law and the order is null and void.
30. Even otherwise, the order is apparently based on assumption and presumption only and not sustainable in law.
31. The sum and substance of it all is that the matter only required condonation of delay caused due to reasons which have been satisfactorily explained by the appellants and there was no cause for confiscation and no authority to impose fine.
32. In view of the above discussion the order is set aside and the appeal is accepted.
33. In so far as the appeal No. CD(T)Cal-57/87 is concerned, we find that it relates to the so-called seizure of 6600 KG of Iron rods of foreign origin from a field near Duncun Hospital.
34. It is interesting to note that in this case also the Deptt. had the information that the goods were imported by N.T.L. of Nepal and were covered by CTD.
35. The date of the so-called seizure has been shown as 1-7-82 at one place and 21-8-82 at another place. We are using the words 'so-called' deliberately because the Deptt. has not been able to show that any seizure was indeed effected either on 1-7-1982 or on 21-8-1982. Perhaps, the date 1-7-1982 although mentioned in this case also relates to the seizure made and discussed in the previous case and has been referred to by the officer in his report more by way of reference to context. The department has not, however, been able to show till date any Panchnama or seizure memo with reference to the so-called seizure on 21-8-82. The department has also not been able to show us the so called claimant-cum-show-cause notice referred to in the order-in-original in spite of opportunities available in this regard.
36. Presuming, however, that one such notice was issued a question arises as to why the department decided to proceed ex-parte when the appellants had already informed them that all the goods relating to their C.T.D. had not reached Nepal and they had found this information correct as early as 29-6-82. In our opinion, if the office had found some (more) iron rods lying near the same Duncun Hospital in which they had earlier discovered Iron rods belonging to the appellants, they should have immediately contacted the appellants and asked them to identify the goods and indicate whether they also belonged to them and related to their CTD. There is, however, nothing to show that such an attempt was made by the departmental officers.
37. Furthermore, in case, the department has reason to believe that these goods had also been imported by a Nepal party under CTD. Then, the only other course open to them was to contact the Collector of Customs, Calcutta and inform them of the position and to see whether they could be related to any CTD, endorsed by the Calcutta Customs. There is, however, no indication that even this step was taken.
38. We also note that the department has not been able to produce even at this stage the so-called seizing officer's report dt. 24-8-1982.
39. We also find that the order is based apparently on assumption and presumption only and has no basis in fact or law and is liable to be struck down on this ground alone.
40. That apart, it appears that the appellants had moved the Hon'ble High Court at Patna and the latter had issued an order dt. 28-3-1985 for proper enquiry and investigation, and for handing over the goods to the appellants, in case the departmental authorities were satisfied that it was a part of the appellants' consignment covered by the relevant CTD.
41. Accordingly, the matter was investigated by the Asst. Collector and he was satisfied that these 6.600 MT of iron rods question were part of the consignment covered by the CTD S 51-4040/81A dt. 29-5-81 (the correct dt. should be 3-7-1981) which was transported by M/s. Surestha Babasaya, Raxaul, through Calcutta to Raxaul and, therefore, he released the quantity to consignee, M/s. National Trading Ltd., Kathmandu, i.e. the Appellants on their furnishing bank guarantee of Rs. 40,000/-.
42. The Ld. departmental representative has pleaded that in view of this finding the matter may be remanded.
43. A question, however, arises as to whether the remand would serve any purpose, once the department had itself came to the conclusion that the goods belonged to the appellants and were relatable to a particular CTD and the goods had already been allowed to go across the border.
44. Furthermore, since these goods had also been imported by N.T.L., Nepal in accordance with provisions of the Indo-Nepal Treaty and were covered by CTD prescribed thereunder, therefore, the legal position in this case was the same as in the previous one and our observations in para 21 to 25 (supra) were equally applicable.
45. In fact, except for delay in transporting the goods to Nepal (beyond the time allowed in the CTD) no other infringement appears to be involved. The appellants have explained satisfactorily the reasons for this delay. They have indicated the circumstances and have shown that they had lodged a complaint with the police and brought the matter to the notice of the Indian Customs Authority (albeit after lapse of quite some time). They had also established their title and their bona fide. Therefore, there was no cause for remanding the case and all that was required of us was to give a direction to the departmental authorities to return forthwith the amount of Rs. 40,000/- deposited by the appellants (in terms of the High Court order). It is ordered accordingly.
46. In appeal No. CD(T)Cal-58/87 it appears that 7332 KG of deformed round steel bars of foreign origin were 'seized' as 'unclaimed' from the custody of M/s. North Eastern Roadways, Raxaul. A claimant notice was issued. The matter was heard by the Addl. Collector. The appellants claimed the ownership of the goods and pleaded that they were a part and parcel of the same consignment which was despatched under CTD S 51-4040/81A dt. 3-7-81. The Addl. Collector, however, did not accept the contention and confiscated the goods.
47. We notice several peculiar aspects in this matter. First & foremost, the socalled claimant notice states that on 7-3-1986 the Customs Officers, Raxaul 'recovered' 7332 KG deformed round steel bars valued at Rs. 1,10,724.13. It does not indicate the description of the goods recovered. It does not indicate the place from where these were recovered, the person from whom they were recovered and the circumstances under which they were recovered.
48. Furthermore, it states that "since nobody came forward to claim ownership of the goods, the Customs Officers, Raxaul therefore, seized the same under Section 110 of the Customs Act, 1962". But from the order-in-original itself it appears that they were taken over from M/s. North Eastern Roadways, Raxaul, in whose custody the department itself had deposited the goods. Such taking over of the goods from their own custodien can neither he described as 'recovery' nor the same can be called as 'seizure' and Section 110 of the Customs Act simply does not come into picture. Hence, if any thing, this notice only shows the ignorance of the officers concerned about elementary aspects of law and procedure.
49. It is also interesting to note that although the department has described its action as 'recovery' and 'seizure' but no panchnama appears to have been drawn and, if any case, none has been produced.
50. Of course, the correct position in law was that the department's action did not amount to recovery or seizure and, no panchnama was really necessary for merely taking over the goods from the department's own custodian.
51. Further, the so-called claimant notice mentions that these goods were unclaimed; whereas the order-in-original itself shows that they were noticed at the time the appellants went to take delivery of the 6.600 MT from the Customs at the premises of M/s. North Eastern Roadways and the appellants have stated that they had immediately claimed these goods. Under the circumstances, it was incorrect to describe the goods as unclaimed.
52. In any eventuality, the appellants had responded to their claimant notice and made their submissions and it is not clear from the order of the Addl. Collector as to whether he found their claim unacceptable. Such goods had been described in the previous proceedings as those capable of visible identification and the Asst. Collector had satisfied himself in the previous case about 6.600 MT. Therefore, the probability was very high that the goods belonged to the appellants and related to the one or the other CTDs. It may be mentioned here that a number of consignments had been imported by the appellants which had moved under several different CTDs or supplimentary CTDs. Therefore, it was required to be seen with reference to documentary or circumstancial evidence coupled with physical verification as to whether the goods also belonged to the appellants and, thereupon, determine as to which CTD they relate.
53. The appellants have referred to a number of documents including the CTD, the Invoice, the Bill of lading and the certificate of origin which along with the visible marks and description of the goods were found sufficient by the Asst. Collector not only for the purpose of determining the ownership of 6.6 MT of similar material but also to relate it to the CTD in question. There is, however nothing to indicate that in respect of these 7332 KG a similar exercise was undertaken. In other words, the totality of the facts and circumstances and the evidence available have not been fully taken into account. The order is also vague and not a proper order. It is, therefore, set aside and the case is remanded for de novo consideration in accordance with law. It is further ordered that the type of investigation which was conducted by the Asst. Collector in the case No. CD(T)Cal-57/87 under the order of the Hon'ble High Court, Patna, shall also be conducted in the present case and, in the eventuality of the authorities being satisfied that the goods belonged to the appellants and had been imported by them under the terms of Indo-Nepal Treaty of Trade & Transit and were being transported under one of their CTDs the matter may be dealt with in terms of the said treaty keeping in mind the observations made by us in the earlier two cases. It is further directed that, if necessary the appellants may be given another opportunity to substantiate and prove their claim before the order is passed.
54. The matter should be disposed of within three months from the date of receipt of this order.
55. Before parting, we may mention that as a result of concurrent hearings of these three matters, the picture which emerges before us shows that various defects, inconsistancies, irregularities and improprieties, as pointed out by the Ld. Counsel (as also the Court itself) have been prima facie, committed by the department in dealing with the matter. Indeed, there is no doubt that investigations were not properly carried out, but how far it was due to ignorance or mis-conception of law and how far it was deliberate action with a view to harass the appellants and cause inconvenience or loss remains to be seen. As the matter stands now, the charge of mala fides brought out by the appellants is not proved beyond doubt. It is, however, open to the appellants, in the circumstances, to pursue the matter with the concerned administrative authorities, if they so choose and seek redressal in the appropriate forum.