Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs M/S Jindal Fibres, Shri Sachin Jindal, ... on 1 January, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT - I
Appeal No.C/277 to 282/2012
Arising out of: OIO No.KDL/COMMR/33/2012-13, dt.17.10.2012
Passed by: Commissioner of Customs, Kandla
For approval and signature:
Mr.M.V. Ravindran, Honble Member (Judicial)
Mr. B.S.V. Murthy, Honble Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
M/s Jindal Fibres, Shri Sachin Jindal, M/s Anita Exports,
Shri J.Y. Nathani, M/s Safari Fine Clothery, Shri M. Singh.
Respondent:
CC Kandla Represented by:
For Assessee: Shri Anil Balani, Shri J.C. Patel - Advocates For Revenue: Shri K. Sivakumar, Addl.Commissioner (A.R.) CORAM:
MR.M.V. RAVINDRAN, HONBLE MEMBER (JUDICIAL) MR. B.S.V. MURHTY, HONBLE MEMBER (TECHNICAL) Date of Hearing:01.01.13 Date of Decision:
ORDER No. /WZB/AHD/2013, dt._____________ Per: M.V. Ravindran:
All these appeals are disposed of by a common order as the issue involved in this case in these appeals is same though of different parties.
2. The relevant facts that arise for consideration are that the importers M/s Jindal Fibres, M/s Anita Exports, M/s Safari Fine Clothery are the units situated in Kandla SEZ (hereinafter referred to as KASEZ). They were given Letter of Permission and Letter of Approval by KASEZ authorities. On an information that the main appellant herein have mis-declared and grossly under-valued the consignment, containers of goods declared as having old and used worn clothing were examined. On investigation, it was found that the goods which were declared were tallying in some of the containers while in some of the containers, the goods were not tallying with the Customs declaration in as much as the goods were already sorted, segregated and processed in the country of origin and hence they appeared to be finished goods required no further sorting, segregation, re-conditioning or re-processing. The lower authorities held that LOA had a condition that the imports and local purchase will be permitted on all items except those listed in prohibited list for import and export. However, there was no explicit mention as regards the goods permitted for DTA clearance. On the basis of examination, it appeared to the lower authorities that the importer had resorted to mis-declaration in description and quality of goods and non-declaration of parameters which is brand, grade, specification which are relevant to the value and it was revealed during the examination that correct grade of imported worn clothing though available with the importer, were not declared deliberately in the Bill of Entry at the time of import. Statements of the partners were recorded. Upon the conclusion of the investigation, a show cause notices were issued to the main importers as well as the partners of the said importers to show cause as to why the declared value be not rejected and re-determined in accordance with the Customs Valuation Rules and the goods be not confiscated under the provisions of Section 111(m) and Section 111(d) of Customs Act, 1962 and why the penalties be not imposed under Section 113 on the company firm as well as the partners. The appellant-assessee company as well as the partners argued the case and sought time for filing detailed written submissions and subsequently filed the same, denying all the allegations and not accepting the charge of mis-declaration. The adjudicating authority did not agree with the contentions and upheld the charges on the appellant and rejected the declared value and also confiscated the goods with an option to re-deem the same on payment of redemption fine and also imposed penalties on the appellant-assessees as well as the partners of the said firm.
3. Ld.Counsel Shri J.C. Patel, Shri Anil Balani, Ms.Shilpa Balani appeared on behalf of all the appellants. Ld.Counsel would submit as under:
On Jurisdiction of Commissioner of Customs, Kandla:
2.1 On the two issues raised in the Show Cause Notice viz. (a) whether the goods are covered by the LOA and required for the authorized operations and can be admitted in the SEZ and (b) assessment of the value, the SEZ Rules, 2006 specifically vest the jurisdiction in the Development Commissioner and the Authorized officer under Rules 27 (2) and 29 respectively. The Commissioner of Customs, Kandla who exercises jurisdiction under the Customs Act 1962 and not under the SEZ Act has therefore no jurisdiction in respect of these two issues raised in the Notice. The SEZ Act and Rules are a special enactment for the SEZ and have overriding effect over other enactments as provided in Sections 51 and 52 of the SEZ Act. Section 51 provides overriding effect to fire SEZ Act and Section 52 makes inapplicable the erstwhile Chapter X-A of the Customs Act 1962.
2.2 On the issue whether any goods are covered by the LOA and required for the authorized operations, Rule 27 (2) of the SEZ Rules 2006 specifically provides that in case of doubt as to whether any goods are required for the authorized operations of the SEZ unit, the same shall be decided by the Development Commissioner. The Commissioner of Customs therefore had no jurisdiction to hold that the goods imported by the Appellants being already sorted/segregated were not covered by the LOA and were not required by the authorized operations and were therefore liable to be confiscated under Section 111 (d) of the Customs Act 1962.
2.3 It is sufficiently clear from Rule 29 that the Bill of Entry is not filed with the customs authority under Section 46 of the Customs Act l962 but is filed with the Authorized officer of SEZ who has to register and assess the same under the SEZ Rules. The mere presentation of the SEZ registered/assessed Bill of Entry at the port to the customs officer itself operates as permission to transfer the goods from the port to the SEZ. Thus no act or role is attributed to the customs officer at the port for either assessment or permission to transfer the goods to the SEZ. In these circumstances it is entirely beyond the jurisdiction of the customs officer at the port to decided the issue whether the imported goods are required or not for the authorized operations and to confiscate the same under Section 111 (d) of the Customs Act 1962 on the basis that the same are not required for the authorized operations.
2.4 The Commissioner has in the impugned Order turned a blind eye to the specific and unambiguous provisions of Rules 27 (2) and 29 of the SEZ Rules and proceeded as if these Rules do not exist at all. He has not said a word about these Rules. His only findings on this point are in Para 25 of his Order where he has completely ignored the provisions of Rules 27 (2) and 29 of the SEZ Rules. He has proceeded on a mis-conception that the Bill of Entry is filed with the Customs and he is under a further misconception that customs at the port have to give permission for transshipment. As submitted herein above the Bill of entry is filed with the authorized officer of SEZ and the mere presentation of the Bill of entry registered with the authorized officer to the customs at the port of import operates as permission to transfer the goods and no permission is required from the customs officer. Most importently whether the imported goods are required for be decided by the Development Commissioner as mandated in Rule 27 (2) and not by the Commissioner of Customs at the port of import.
2.4 Similarly under Rule 29, the assessment of the Bill of Entry is the function vested in the authorized officer of the SEZ and hence the customs officer at the port has no jurisdiction to re-determine and assess the value under the provisions of the Customs Act 1962.
2.5 Even otherwise when the goods are meant for SEZ and are going in the SEZ the same are not liable to customs duty and hence the question of their valuation being determined under Section 14 of the Customs Act 1962 does not arise. Reliance is placed in this behalf on the decision of the Tribunal in the case of Shilpa Creation P. Ltd v CC -2007 (220) ELT 503 in which it is held that since import by a SEZ unit is not required to pay duty the alleged undervaluation of goods imported by an SEZ unit is of an academic interest.
2.6 The confiscation of the goods under Section I l1 (m) of the Customs Act 1962 on the ground of mis-declaration is totally misconceived. The said Section 111(m) applies when the goods do not correspond with the entry made under the Customs Act 1962 i.e where a Bill of Entry is filed under Section 46 of the Customs Act l962.As submitted herein above in the present case the Bill of entry is not filed with customs under Section 46 of the Customs Act 1962 but is filed with the Authorized officer of S1Zunder Rule 29 of the SEZ Rules.
2.7 It would be apparent from Paras 24 and 26 of the Order of the Commissioner that he has tried to justify, the enhancement of value done by him by venturing into issues of positive foreign exchange earnings by the SEZ unit, an area which is totally beyond his jurisdiction and which is the domain of the Development Commissioner. Apart from the fact that the issue of positive net foreign exchange earning is beyond his jurisdiction, the Commissioner is under a misconception that the same is to be decided with reference to the import value which he may determine under Section 14 of the Customs Act l962. The concept of net foreign exchange earning has nothing to do with the value determined under Section 14 of the Customs Act 1962 and the same is decided with reference to the actual outflow and inflow of foreign exchange. It is not the case of the department in the Notice nor the finding of the Commissioner that the appellants have remitted any foreign exchange over and above the invoice value of the foreign supplier. In the absence of such a finding the re-determined value under Section 14 is of no decision of the Tribunal in the case of UOI v Glaxo Laboratories (I) Ltd - 1984 (17) ELT 284 (Bom).
3. ON MERITS:
Goods are clearly covered by LOA and arqreqgired for authorized operation:
3.1 Without prejudice to the aforesaid submissions that customs at the port have no jurisdiction to go into the question whether the imported goods are required for authorized operations, it is submitted that the imported goods are clearly covered by the LOA and required for the authorized operations.
3.2 The Show Cause Notice merely harped on the fact that the goods are not mixed and are already sorted according to their type i.e jeans in separate bales, sweaters in separate bales, etc. Firstly, mixed clothing is only one item in the LOA and not the only item. Apart from mixed clothing, the LOA also covers used worn clothing uncut for mutilation and reconditioning of clothes selected from old, used worn clothings. Thus merely because the imported goods are not mixed but segregated into jeans, sweaters and so on, it cannot be said that they are not covered by the LOA. Secondly, the Show Cause Notice labored under the misconception that the only kind of segregation which is conceivable is sorting according to the type of clothing. The Notice failed to appreciate that when used and worn clothing is imported for re-conditioning and export, it is essential to segregate such of the clothing as could be re-conditioned and exported and separate it from that which is to be mutilated. To determine which portion of the goods are export worthy and can be reconditioned, the goods would require detailed inspection and examination to ascertain their condition and residual life. Reconditioning of the export worthy clothing would entail processes such as replacing old/ broken buttons, zippers/Velcro which are not functional, stitching tom places if any, washing, ironing and re-packing. Thus the assumption made in the Notice that because the goods are already sorted according to type no further sorting and processes are required is to say the least totally naive and ill-founded.
3'3 In fact the Commissioner has himself in para 26 of his Order admitted that it is difficult to prove legally that the importer was not going to segregate these already segregated goods further on the basis of size, quality, category, male-female etc and hence it would not be correct not to allow these goods into SEZ. This is a clear finding therefore that the goods are as per the LOA and are required to be used in the authorized operations. In the light of this finding the confiscation of the goods under Section 111(d) of the Customs Act 1962 is patently erroneous and unsustainable in law.
On valuation:
4.1 Without prejudice to the submissions that the Commissioner had no jurisdiction to assess the value and re-determine the same, it is submitted that even otherwise on merits the re-determination of value made by the Commissioner is untenable in law.
4.2 The contention in the Show cause notice that goods of Korean origin are of better quality and condition compared to goods of other countries of origin and that since the difference between the declared price of the imported Korean goods was not much when compared to price of goods of other countries, the transaction value was liable to be rejected is totally untenable in law. The appellants have submitted data of contemporary imports of goods of Korean origin to show that contemporary imports were at or about the same price as the Appellant's import price. The Commissioner has completely ignored this data.
4.3 The Commissioner has erred in relying on the valuation report of Accurate Appraisal Services without giving their cross-examination. In the absence of cross examination being given, no reliance could have been placed on the said report as laid down in the following judgments:
Sounds N Images v Collector - 2000 (117) ELT 538 Swadeshi Polytex Ltd v CCE - 2000 (122) ELT 641 (SC)
4. Ld.Additional Commissioner (A.R.) would submit that the Customs authorities had power to intercept the consignment even if they are meant for SEZ. It is his submission that on interception it was found that there were various other appellants who were not required for the manufacturing activity of SEZ and did not contain the same. It is his submission that the lower authorities were correct in coming to conclusion and the impugned order is correct.
5. We have considered the submissions made at length by both sides and perused the records.
6. There is no dispute that all the appellant-assessees were having a Letter of Approval from Development Commissioner, KASEZ, granted which entitled the appellant to import the following goods in their SEZ unit.
Woolen/synthetic/hosiery/mixed clothing/used worn clothing uncut for mutilation, synthetic fibre waste/yarns/tows/thread waste, hard waste, soft waste, dyed waste and waste from job stock lot, reconditioning of clothes selected from old, used worn clothings/rags, waste yarns for making carpet yarns (for export of carpet).
7. It can be seen from the Letter of Approval that the appellants are entitled use old and used clothing for mutilation and for reconditioning. The appellants filed the Bills of Entry with the proper authorities i.e. KASEZ and claimed direct delivery under the provisions of Rule 29 of SEZ Rules, 2006 as provided under the SEZ Act.
8. The issue to be decided by us is whether the goods which were confiscated by the lower authorities are covered by LOA and required for authorized operations and can be admitted in the SEZ, and whether the re-assessment of the value needs to be done by Customs authorities.
9. On the fact there is no dispute that when the consignments were checked by the lower authorities, it was found that in the case of M/s Jindal Fibres that out of 64 Bills of Entry filed, only 26 Bills of Entry had non-declared goods, in the case of Safari Fine Clothery, out of 10 Bills of Entry filed, 6 Bills of Entry were non-declared goods, whereas in the case of M/s Anita Exports, out of 25 Bills of Entry filed, 20 Bills of Entry were having non-declared goods. The main appellants herein declared the goods as per the Letter of Approval received by them, while the Customs authorities found various un-declared and un-related items like leather bags, purses, jackets, and carpets in the containers. Due to such un-declared and un-related items which were found, the lower authorities rejected the declared value and valuation was done by an independent valuer. We find that as regards items for which permission was granted to the appellant as per the LOA, they could import used worn clothing, for mutilation and reconditioning of clothes selected from old, used worn clothings. We find that strong force in the contentions raised by the ld.Counsel , the lower authority i.e. adjudicating authority could not have adjudicated the issue of requirement or whether the goods are covered by LOA or otherwise, is covered by Rule 27(2) of SEZ Rules, 2006. In the case in hand, we find that the adjudicating authority has, on inspection, come to a conclusion that the goods which were declared and covered by LOA were neatly packed and ready in all respect and hence, cannot be considered as the goods for LOA. In order to appreciate the correct provision of law, we reproduce the provision of Rule 27 (2) which reads as under:-
In case of any doubt, as to whether any goods or services required by a unit or developer for authorized operation or not, it shall be decided by the Development Commissioner.
10. If the Customs authorities had any doubt as to the requirement of the goods by a unit in a SEZ for authorized operation or not, it should have been referred to the officers in KASEZ and left to them for arriving at a conclusion. In our considered view, the adjudicating authority, could not have exercised jurisdiction to come to a conclusion whether imported goods are required by the SEZ units or not and whether they are as per LOA or not; as we find that specific provision of Rule 27 (2) of SEZ Rules, 2006 (as indicated hereinabove) mandates Development Commissioner to come to a conclusion.
11. We also find strong force in the contention raised by the ld.Counsel that the provisions of Rule 29 of SEZ Rules, 2006 are very clear in as much as the said Rules mandates the unit or developer in SEZ to get direct delivery from the place of import for clearance of the goods. We find that the provisions of Rule 29(2)(a) & (b), specifically mandates the SEZ unit to register the Bill of Entry with the Authorised Officer in SEZ and assessment is to be done by the same officer and such registered or assessed Bill of Entry shall be submitted to Customs officers, and the same shall be treated as permission for transfer of goods to SEZ importer.
12. A holistic reading of the entire provisions of Rule 29 of SEZ Rules, 2006 would indicate that the unit in SEZ has to file a Bill of Entry with the authorized officer and the said authorized officer has to assess the said Bill of Entry. In the case in hand, we find that the Commissioner of Customs has assessed the Bill of Entry filed by the appellant-assessee before KASEZ authorities which he is not empowered to do so as per the provisions of Rule 29 of SEZ Rules, 2006. We find that ld. adjudicating authority has exceeded his brief on this point. We also find strong force in the contentions raised by the ld.Counsel that when the good are meant for SEZ and on going to SEZ, they are not liable for Customs duty and hence any question of valuation being determined under the provisions of Section 14 of the Customs Act, 1962 does not arise. This view is fortified by the decision of the Tribunal in the case of Shilpa Creation Pvt.Ltd. 2007 (220) ELT 503 (Tri-Kolkata). In view of this, we find that the goods which were found as per Letter of Approval in both the containers, could not be confiscated, nor their value could be determined by the Commissioner of Customs, Kandla as the said goods were going to SEZ and proper Bill of Entry was filed with the KASEZ authorities.
13. In view of this, the confiscation ordered by the adjudicating authority of the goods which are as per LOA is incorrect and beyond his powers to do so. Accordingly, the impugned order to that extent is set aside.
14. This takes us now to the goods which were mis-declared or un-declared i.e. the items like leather bags, purses, jackets, and carpets found in the container. In our view, these items, undisputedly, are not required and not permitted to be imported in SEZ as per the LOA granted to the appellant. The question arises here is whether the Customs authorities were correct in checking the consignment which were in the containers. In our view, on a specific intelligence, the Customs authorities, on suspicion, could inspect the consignment and on the inspection, if they find any items which are not allowed or entitled to be imported into SEZ, they are within their powers to seize the goods and act in accordance with the law. In this case, since the items like leather bags, purses, jackets, and carpets, are not included in LOA granted to the appellant for import into the SEZ for authorized operations, are liable to be confiscated and we hold it so. The value of the said goods should be determined in accordance with the law and the redemption fine be imposed in proportion to the value of such goods and imposition of proportionate penalties also needs to be imposed.
15. We were informed that all the containers are stuck up at Kandla and are not allowed to be moved to SEZ due to the impugned order. As we have already set aside the findings of the adjudicating authority as regards the goods which are allowed to be imported into the SEZ, we direct the lower authorities to release containers in which the goods are found to be as declared and can be used for SEZ operation. We also direct the lower authorities to seize and pass orders only those goods which are not allowed to be imported for authorized operations in SEZ.
16. In view of the foregoing, we dispose the appeals as indicated hereinabove.
(Pronounced in Court on ______________________)
(B.S.V. Murthy) (M.V. Ravindran)
Member (Technical) Member (Judicial)
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