Customs, Excise and Gold Tribunal - Delhi
Famous International vs Collector Of Customs on 8 July, 1993
Equivalent citations: 1994(50)ECR108(TRI.-DELHI)
ORDER K.S. Venkataramani, Member (T)
1. These appeals have been filed against the order of the Additional Collector of Customs, New Delhi dated 6.5.1991. The appellants, herein, imported a consignment declared as Old Synthetic Rags (Completely pre-mutilated). They also submitted that additional licence is valid for goods imported under OGL Appx. 6 List 8 Part-I. Hundred per cent examination of the goods was conducted on 841.1990 and it was found that out of total consignment of 74 bales, 60 bales were found to be Old Synthetic Garments in two pieces of trousers as may be put together again and made into complete serviceable garments. The rest, namely, 14 bales were found to be Old Synthetic Rags and not properly mutilated as per Customs House Public Notice No. 11/88, but the examination of the report shows that these goods are not serviceable as such nor can they be made serviceable. The Customs House, therefore, found on the basis of the examination report, that the goods were not as per the declaration in the Bill of Entry and as per the description in the Invoice which described the goods as Old Synthetic Rags (Completely premutilated) and also that the goods were found insufficiently mutilated and not conforming to the Customs House Public Notice issued as per para 25(ii)(b) of the Import Policy 1988-91. Show Cause Notice issued to the appellants on 28.11.1990 holding that the Import Licence is not valid for the import of the goods and on consideration of their reply, the Additional Collector ordered confiscation of the goods found in two pieces under Section 111(d) & (m) of the Customs Act, 1962 holding the import as unauthorised and on a finding that there was mis-declaration. He gave the appellants option to redeem the goods valued at Rs. 2,34,263.00 (C.I.F.) on payment of a fine, in lieu of confiscation, of Rs. 5,85,000.00. He also imposed a personal penalty of Rs. 58,500.00 under Section 112(a)(i) of the Customs Act in respect of 60 bales found to contain two pieces of garments. In respect of balance 14 bales, the Additional Collector also ordered that they be released to the party after mutilation as per Public Notice 11/88 on payment of a fine of Rs. 5,500.00 and he also imposed a penalty of Rs. 5,500.00 under Section 112(a)(i) of the Customs Act, 1962.
2. The ld. Counsel, Shri Hari Om Arora, appearing...for the appellants, contended that the confiscation and penalty on the appellants was unjustified. He relied upon the Tribunal decision in the case of Kakkar & Co. and Ors. v. Collector of Customs, New Delhi which has been confirmed by the Supreme Court as reported in 1989 (42) ELT A44 that just because the goods were only in two or three pieces, it should not be held that they are not woollen or synthetic rags. It was, further, submitted that the Tribunal in the case of Radha Yarns (P) Ltd. v. Collector of Customs held that where the appellants had agreed for further mutilation of the goods, it should be permitted to be cleared without confiscation. It was submitted that this decision of Tribunal had also been confirmed by the Supreme Court as reported in Vol. 47 of ELT A101. The appellants, herein, had also offered to the Department that if they are not satisfied with the mutilation, the Department could order further mutilation. The Ld. Counsel, further, urged that the appellants have placed orders with the suppliers only for pre-mutilated rags, but the rags have been cut into 2 or 3 pieces only as the further cutting into several pieces would push up the cost of import. The ld. Counsel, further, relied upon the Gujarat High Court decision in the case of Rupani Spg. Mills v. Union of India wherein the Court held that pre-mutilation of the rags into several pieces abroad being cost prohibitive, further mutilation at importer's cost to be allowed at the port of import in India before clearance. The ld. Counsel pleaded that in any case with reference to 14 bales, it was only a technical offence even as per the adjudication order. It was argued that a fine imposed in lieu of confiscation, does not at all give any reason for fixing such a high quantum of redemption fine and there was also no reasoning in the impugned order as to how provisions of Section 112, relating to penalty, of the Customs Act, were found applicable to the facts of the case to the appellants, especially when the goods have been imported as a result of bona ifde order placed on the foreign supplier by the appellants and covered by a proper invoice.
3. The Ld. D.R, Shri Nair, contended that the decision of the Tribunal in the case of Kakkar & Co. (supra) was not relevant in the present import case. That decision related to the Import Policy 1985-88 whereas the present import took place under the subsequent Import Policy 1988-91 wherein the standard of mutilation had been laid down by the customs authorities as per the Import Trade Control Policy which was absent in the earlier Policy of 1985-88. The Customs House Public Notice 11/88 has laid down detailed standard of mutilation garment-wise which also includes such standard in respect of trousers which are imported. The Customs House Public Notice has been issued in pursuance of para 25(ii)(b) of Import Policy 1988-91 under Appendix 6 List 8 Part I of the Import Policy. This para required that mutilation must conform to the requirements specified by customs authorities in their notification. Ld. D.R., also, in this context, relied upon the decision of the West Regional Bench of this Tribunal in the case of Orient Woollen Textiles Mills v. Collector of Customs & Central Excise wherein the Tribunal held that synthetic rags, not conforming to the definition of rags as laid down in the Policy and the Customs House Public Notice, is liable to confiscation attracting penalty under Section 112 of Customs Act, 1962. Therefore, the fine and penalty in this case is justified because the goods have been found to be stitchable into serviceable garments and, therefore, cannot be considered as rags. The ld. D.R, further, submitted that the classification of the goods for assessment purposes, as garments in terms of Rule 2(a) of the Rules of Interpretation of the Tariff. While replying, the ld. Counsel produced a copy of the Rajasthan High Court Judgment in the case of Swastika Woollen Industries (P) Ltd. v. Union of India and Ors. dated 5.6.1992 to say that their case is covered by the judgement, but no detailed arguments were submitted on this.
4. The submissions made by both sides, herein, have been carefully considered. The goods imported have been described in the related Bill of Entry and Invoice as Old Synthetic Rags (completely pre-mutilated). The additional licence produced cover items appeared in Part 1 of List 8 of Appendix 6 of the Import Policy 1988-91. The examination of the goods revealed that in respect of 60 bales, the goods were in two pieces of trousers such as may be put together again and made into serviceable garments. The balance 14 bales were found to contain old synthetic rags in 3 to 6 pieces of trousers which were, on examination, found to be not serviceable, but their mutilation was not in accordance with the Public Notice 11/88 of the Customs House. This Public Notice issued by the Collector of Customs, New Delhi says that in respect of trousers and similar garments, there should be one cut across each leg standing left to right or right to left and at least one cut horizontally across so that these should result in a minimum of 7 separate pieces. The cuts should extend through the entire length or width of the garment. The cutting should not be at the seam or stitch and should be haphazard and in different directions making the cut pieces totally unserviceable as garment or cloth. This Public Notice has been issued in pursuance of the Import Policy 1988-91 Appendix 6 OGL which allows import of woollen rags/shoddy woollen/synthetic rags to actual users (Industrial) subject to certain conditions. The condition in respect of woollen rags, as given in para 25 shows that import of woollen rags/shoddy wool/synthetic rags will be allowed only when these are imported in completely pre-mutilated condition. It is also stated that woollen rags for this purpose is defined as old rags of woollen textiles fabrics including knitted and crocheted fabrics which are required for manufacture of shoddy yam and may consist of articles of furnishing or clothing or other clothing so worn out, soiled or torn as to be beyond cleaning or repair. It also lays down that the mutilation must conform to the requirements specified by Customs authorities in their Notification. A perusal of the examination report of the imported goods would show that they are not pre-mutilated as per the requirements specified in the Customs House Public Notice No. 11/88 in respect of trousers. The appellants' arguments that they are covered by the Kakkar & Co. decision of the Tribunal as confirmed by the Supreme Court (supra) is no more available to them because that decision related to the situation where the import policy did not have any standards of mutilation whereas the present import is under the Import Policy 1988-91 which does have detailed standard of mutilation as laid down by the Customs House in pursuance of the Import Policy directive. The conclusion of the Customs authorities that the goods are not pre-mutilated as per the requirements of the Import Policy and hence are liable to confiscation, goods beingnotin terms of OGL Appendix 6 List 8 Part I, is well-founded. A plea has been made that the appellants had offered further mutilation of the goods and the Customs authorities should have ordered such further mutilaticJn and released the goods without confiscation. Examining this contention, it is seen that this is an import of the year late 1990 whereas the policy with the detailed standards of mutilation has been in existence from 1988 onwards. It is not, as if that the appellants were totally in the dark about the requirements of pre-mutilation and the standards by the Customs House Public Notice which is also of the year 1988. This Tribunal had occasion to consider a similar case of import of rags immediately after the new Policy in the case of National Woollen Mills v. CC . In that decision also, the Tribunal had clearly held that for such import, the Kakkar A Co. decision (supra) was inapplicable. The Tribunal observed further in that case that in respect of importation after 1.4.1988, the public became aware that the woollen and synthetic rags imported under the OGL must conform to any standard of mutilation as laid down by the Customs authorities, and, further, observed in that case that it is admitted by the appellants that the Public Notice (specifying the requirement of mutilation) was available at the time of examination of the goods as is apparent from the examination report and the Tribunal observed that the Customs authorities were, therefore, well within their rights to impose this condition on the rags which were yet to be cleared from the Customs House. It is, therefore, apparent that in terms of prevailing position of law and the standard of mutilation, laid down by the Collector in terms of the enabling power in that law, the goods were not completely pre-mu-tilated and hence they are liable to confiscation under Section 111(d) of the Customs Act, 1962. Therefore, in the present case, when the import has taken place much later, when the Policy and the Customs House Public Notice laying the standard of mutilation have been in existence for quite some time, the present appellants cannot invoke the ratio of the earlier decisions given in respect of cases, which had come up for decision under the earlier Policy 1985-88. Yet another aspect to be noted here is that the examination report of the goods imported shows that though they were found to be old, they were not worn out or soiled which shows that they werenot such as to be beyond cleaning or repair as they were found to be such as can be put together again made into serviceable garments. Therefore, even applying the main definition in the Import Policy as those being so worn out, soiled or torn has to be beyond cleaning or repair, these goods imported were not so worn out as to be beyond repair. The Department's further claim to classify the goods as garments, is not supported by the precedent decision of the Tribunal in the case of Radha Yam (supra), in as much as the definition of rags for the purpose of lower rate of duty, in the Customs Tariff, did not speak of mutilation. Therefore, this conclusion of the departmental authorities regarding classification of the goods is not sustainable. The ld. Counsel had also placed on record the Rajasthan High Court decision in the case of Swastika Woollen Industries towards the end of the submissions, but we find that on facts the case is distinguishable. The Court was considering the issue whether in respect of rags imported at ICD, Jaipur, the Customs authorities could rely upon the Public Notice issued by the Delhi Customs authorities and also of the question whether the restriction on the imports of rags only through Delhi and Bombay is a reasonable restriction. Further, it has been herein found even applying the main definition, the goods are not rags. It may also be mentioned that apart from the handing of the copy of the judgment, no detailed arguments were submitted before us. Now coming to the question of the redemption fine and penalty on the appellants, it is observed that in the case of 14 bales, the Collector himself has held that it is a technical offence and in view of this finding, the confiscation andpenaltyin respect of the 14 bales weighing 6930.675 kg valued at Rs. 54,668.00 appears to be harsh and is, accordingly, set aside. As for the fine and penalty in respect of the goods contained in 60 bales, valued at Rs. 2,34,263.00, considering the facts and circum-stances of the case and also that the goods have been imported on the basis of a bona fide order placed on the foreign supplier for pre-utilated rags, the release thereof may be allowed aftermutilation as per the Public Notice 11/88 and on a lower redemption fine of Rs. one lakh. In coming to this conclusion, we bear in mind the relief in respect of fine and penalty given by the Tribunal in the case of National Woollen MilIs v. Collector of Customs and also the observation of the Tribunal in the case of Orient Woollen Textile Mills (supra) where it took into consideration the fact that the mutilation done by the supplier mighthave been done for reasons of economy or for want of labour or on similar consideration and that there is no evidence to show that the goods have been deliberately imported in that condition For the same mason a lower penalty in respect of the import of 60 bales is also called tor and the penalty is reduced to Rs. 25,000/-. The appeals are disposed of in the above terms.
Sd/- (K.S. Venkataramani) Member (T)
5. Per Shri S.L Peeran.--I have gone through the order of learned brother Shri K.S. Venkataramani. With due regards to him, I regret my inability to agree with his findings.
6. The Importer was charged under Section 111(d) and (m) of the Customs Act, 1962. Clause (d) and (m) read as follows:
any goods which are imported or attempted to be imported or are brought within the Indian customs water for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force.
(any goods which do not correspondent in respect of value or in any other particular) with the entry made under this Act or in the case of baggage with the declaration made under Section 77 in respect thereof;
The allegation is that the imported items are not in conformity with guidelines as laid down by P.N. No. 11/88 on the basis that the examination of the imported consignment reveals that the item is old synthetic garments in two pieces of trousers, as may be put together again and made into complete serviceable garments in respect of 60 bales out of 74 bales and 14 bales were found to be old synthetic rags not properly mutilated, as per the conditions laid down in the said Public Notice. The show cause notice admits that these goods are not serviceable as such cannot be made serviceable. It is also alleged that goods found in two pieces weighing 29699.325 kgs. and value at Rs. 2,34,263/- CIF do not conform to the declaration made by the importer in the Bill of Entry or invoice and other related documents submitted which describe the goods as old synthetic rags completely pre-mutilated. It is further alleged that goods found in sufficiently mutilated in pieces varying from three to six pieces of trousers weighing 6930.675 kgs. and valued at Rs. 54,668/- CIF do not conform to the guidelines in this respect as stipulated in Public notice No. 11/86. It is also alleged that the importer wanted to clear the consignment against additional licence which is not valid in case of goods found in two pieces and also the department has no documents lying in the file which may prove that importer is an actual user.
7. The learned Addl. Collector has held that on 100% examination of goods, it is found that 14 bales (weighing 6,930.675 kg) contained old synthetic trousers n 3 to 6 pieces valued at Rs. 54,668/- CIF which though not serviceable as such, out are not mutilated as per the Public Notice No. 11/88. He has further held :hat the remaining 60 bales weighing 29,699.325 kgs. contained old synthetic garments in two pieces of trousers valued at Rs. 2,34,263/- CIF. Therefore, the learned Addl. Collector has rejected the importer's contention that the goods are completely pre-mutilated rags and the declaration made in the bill of entry in this respect has been held to be wrong. The learned Collector has held that the goods should have been mutilated as specified in Delhi Customs Public Notice No. 11/88 dated 18.4.1988, which was issued to meet the requirements of 25(i) App. VI of Import and Export Policy, 1988-91 AM. He has also held that imported 60 bales do not Specify the contents specified in para 25(i) of the Import & Export Policy 1988-91 as the import is to be allowed only when these goods are allowed in pre-mutilated conditions. Therefore, the learned Addl. Collector has upheld the allegation that the imported goods are liable to confiscation under Section 111(d) and (m) of the Customs Act, 1962 for violation of Import and Export Control Order read with Section 3 of Imports and Exports Control Act and Section 11 of the Customs Act. He has also held that the subject goods have been imported without valid import licence in violation of Section 3(i) of the Import (Control) Order read with Section 3 of the Imports and Exports (Control) Act and Section 11 of the Customs Act. In respect of 14 bales, the Addl. Collector has held the offence to be technical one. As regards, the goods in 60 bales in two pieces, the learned Collector has held that these cannot be put together and made into complete serviceable garments and he has held that these goods are not in pre-mutilated conditions as per the PN No. 11/88 and liable to confiscation under Section 111(d) and (m) of the Customs Act. Therefore, he has held these to be liable to penal action under Section 112(a)(i) of the said Act and also held that the importer is not the actual user and a trader and hence, do not justify a lenient view.
8. From the reading of the show cause notice and order given by the learned Addl. Collector, it follows that there is no allegation to the imported goods that they were not so worn out as to be beyond repairs. The learned Member (Technical) has held that the Department's claim to classify the goods as garments is not supported by the decision of the Tribunal as in the case of Radha Yam. The learned Member has also held that the conclusion of the departmental authorities regarding the classification of the goods as not sustainable. I agree with the conclusion of the learned Member (Technical) on this aspect of the matter but however, I beg to differ that the goods imported were not so wom out as to be beyond repair as I do not find any specific allegation or findings on this aspect of the matter.
9. The question that arises for consideration is as to whether the Public Notice No. 11/88 can be applied in the present case and also as regards to the allegation and findings pertaining to import of rags covered under App. 6, List 8, Part I, Section 26 of the Import Policy 1988-91 AM and as to whether the goods have been imported without valid import licence and also whether the importei not being an actual user but a trader, justifying lenient view?
10. Shri Hari Om Arora, learned advocate has contended that the findings are not as per the rulings of the Tribunal in the case of Kakkar and Co. which has been confirmed by the Honble Supreme Court. He contended that the part) as per Section 24 of the Customs Act, had offered for mutilation and when such be the case, the department is not justified in imposing penalty and fine. He has also contended that if more goods (sic) were to be done on the garments, then it would have enhanced the cost and therefore, there was no mala fide the imported goods in two pieces. This aspect has been dealt with in Kakkar and Co. case. He has contended that as the learned Addl. Collector has held that it is a technical violation, the matter requires a lenient view. He has also contended that there was no need for addl. licence and that the Public Notice No. 11/88 has been struck down by the Hon'ble Rajasthan High Court in the case of Swastik Woollen Industries and Another. His further contention is that once the goods are cut into two pieces and more it is a damaged article, therefore, it cannot be considered as garment. The party had not mis-declared the goods and there was no violation of the Import Policy for the relevant Sections of the Customs Act. Shri Nair has supported the order and has contended that the ratio of the Kakkar and Co. do not apply in the present case as the present case has arisen out of Import Policy 1988-91 and therefore, the mutilation was required to be as per the Public Notice No. 11/88. He has also relied on the ruling rendered in the case of the Orient Textile Mills (supra).
11. On a careful consideration of the submissions and matter and perusal of the citations relied by the learned advocate, more particularly the ruling of Rajasthan High Court in the case of Swastik Woollen Mills Ltd. and Another, I find from this ruling that the Honble Rajasthan High Court has struck down Public Notice No. 11/88 as illegal. The Tribunal ruling in the case of Orient Woollen Textile Mills of WRB (supra) is based on Public Notice No. 11/88 and it appears to have been rendered prior to the ruling of the Honble Rajasthan High Court. In view of this development and the ruling of the Rajasthan High Court and no other contrary High Court Judgment in the matter, we have to follow the ruling rendered in the case of Swastik Woollen Ltd. and Another and the same cannot be ignored. The relevant findings of the Honhle Rajasthan High Court in the case of Swastika Woollen Industries (?) Ltd. & Another at pages 22 to 26 on this aspect of the matter, is reproduced below In order to examine as what is meant by completely pre-mutilated condition, reference may be made to the public notice No. 11/88 referred to here in above.
As per condition 29 Appendix 6 of the Import & Export Policy 1990-93, when the completely pre-mutilated condition of woollen rags/shoddy wool/synthetic rags is the condition precedent and a pre-requisite for the import and further the mutilation must conform to the requirements specified by Customs authorities in their notification. In this regard, three terms namely 'mutilation', 'Customs authorities' and 'Notification' assume importance. What should be the standard and extent of mutilation is to be specified by the Customs authorities through notification. The argument of Shri B.L. Sharma is that no such requirement have been specified by any Customs authorities by way of notification. His argument is that neither the Public Notice No. 11/88 on which reliance has been placed by the respondents, can be said to be a notification nor the author of such public notice namely Collector of Customs can be said to be a Customs authority--unless it is so defined either under the Act, the Rules, Import and Export Policy or the order. The term words "Customs authorities" has not been defined under the Customs Act, 1962. This term was also not defined in the Imports and Exports (Control) Act, 1947, rules or the policy, nor the OGL defines it. Section 3 of the Customs Act, 1962 thus provides for classes of officers of Customs. Section 4 provides for appointment of officers for Customs. But, there is nothing to show that who are to be regarded as Customs authorities for the purpose of issuing such notification. Sections 3 and 4 are reproduced as under -
Section 3--Classes of officers of Customs--There shall be the following classes of officers, namely--
(a) Principal Collector of Customs; (aa) Collectors of Customs; (b) Collectors of Customs (Appeals); (c) Deputy Collectors of Customs; (d) Assistant Collectors of Customs and (e) Such other class of officers of customs as may be appointed for the purpose of this Act.
Section 4--Appointment of officers of customs--(1) The Central Government may appoint such officers as it thinks fit to be officers of customs. (2) Without prejudice to the provisions of Sub-section (1) the Central Govt. may authorise the Board, Collector of Customs or a Deputy or Assistant Collector of Customs to appoint officers of Customs below the rank of Asstt. Collector of Customs.
In this view of the matter, it is not possible to identify as to who is to be regarded as the exact customs authority for the purpose of issuing the specification of mutilation. Reference was made by Shri Sudhir Gupta to Section 222 of the Customs Act by Mukherjee and it has also been submitted that in the commentary of the aforesaid book there is reference to Customs authorities at Note No. 9. Reference was also made to note 2 of the aforesaid book at page 54 under Section 11. Neither dictionaries can be treated as the dictor of statute nor commentators can confer the status of Customs authority on any officer. Now the question arises that in a situation like this when no customs authorities as such can be identified as the Customs authorities and admittedly when no such notification has been issued by any customs authority, whether the public notice issued by the Collector of Customs should be regarded as the notification issued by the Customs authorities for the purpose. Strictly speaking, the Collector of Customs, cannot be brought to the status of Customs authorities in the absence of a clear provision in this regard, lest it would amount to substituting the words "Collector of Customs" instead of 'Customs authorities' in condition No. 29(ii)(c). It cannot be presumed that the framers of the Import and Export Policy were not aware of the terms such as Collector of Customs or Customs authorities. The powers of the officers of the Customs have been defined in Section 5 of the Customs Act 1962. Even from this Section 5, it is not discernible that the Collector of Customs may be regarded as Customs authority for the purpose of issuing such notification. These powers are circumscribed by the provisions of the Act and the source of power for issuing such notification rests with the Central Government, in accordance with Section 11(B) of the Customs Act, 1962 and unless the source of power is shown for the Collector of Customs, the Collector of Customs has no competence to issue and specify the standard of mutilation through a Public notice which is otherwise required to be done by the Customs authorities through a notification. Neither in the strict sense of the term the Collector of Customs can be regarded as Customs authority for the purpose at hand nor the so-called public notice can be placed at the pedestal of notification. On these terms, if we examine the standard specified for completely pre-mutilated condition as contained in the Public notice No. 11/88, technically the rigours of such standard as contained therein, cannot be applied. The further dichotomy in this regard is that in the matter of Import Policy the concept of a uniform policy and uniform standard of mutilation cannot be given a go-bye and, if the Collector of Customs is taken to be the Customs authority, the Collector of Customs at different places and in different states may issue varying standard of mutilation which would not only result in disparity and uneven standard but would also lead to confusion and would give rise to the grievance of differential treatment to the importers operating at different places in the country-. Thus, when neither a particular authority is indentifiable as the customs authority nor the standards have been specified nor the notification has been issued, it is difficult for this Court to accept the plea of Shri Gupta that the standard of mutilation as provided in the Public notice should be applied. Apart from this, the grievance about the feasibility of such standards has also been voiced and the submission made with regard to increase of the cost factor involving more consumption of foreign exchange to meet the requirement of 6 to 8 cuts, is also a submission not without force. Looking to the totality of the matter and the span of controversy in this regard, I am of the opinion that for the purpose of determining as to whether the imported items are in completely pre-mulilated condition or not, the general sense of 'completely pre-mutilated condition' should be applied without insisting upon the plurality of the number of cuts, and the touch-stone on which the completely pre-mutilated condition is to be tested is that the woollen rags/shoddy wool and synthetic rags should be as under
RAGS SHOULD BE SO WORN OUT OR SOILED THAT IT MUST APPEAR TO BE BEYOND CLEANING OR REPAIR. IT SHOULD NOT BE CAPABLE OF BEING REUSED AS A GARMENT WITHOUT INSISTING UPON PLURALITY OF NUMBER OF CUTS. IT IS TO BE SEEN THAT THE ITEM SUFFERS FROM CUTS IN SUCH A WAY SO THAT IT NO MORE REMAINS CAPABLE OF BEING SERVICEABLE AS A GARMENT OR CLOTH.
This is the test which is to be applied by the respondents on the items which have been imported and are in question in the cases at hand. So far as the items which were shown to me by Shri Sudhir Gupta so as to demonstrate that they were not completely mutilated rags. Shri Sharma submitted that firstly, what had been shown by Shri Sudhir Gupta were not the representative samples and secondly, it was pointed out that these items were not being taken as completely pre-mutilated rags only on the ground that these items were not having the requisite number of cuts according to the Public notice. Once it is held that plurality of cuts as mentioned in the Public notice cannot be decisive so as to take an item to be completely pre-mutilated rag or not - it follows that no item can be withheld merely because of want of requisite number of cuts and, accordingly,'it is held that no item is to be taken as serviceable or capable of being re-stitched and thus, the plurality of the number of cuts cannot be insisted upon. The respondents would examine the items as rags in completely mutilated form on the basis of the test which has been quoted hereinabove.
As the entire proceedings proceeded on the basis of Public Notice No. 11/88 and the same has been held to be illegal, the same ratio has to be applied. However, the Hon'ble High Court of Rajasthan has laid down two conditions that rags should be so worn out or soiled that it must appear to be beyond cleaning or repair; it should not be capable of being reused as a garment There does not appear to be any dispute on the matter as the learned Collector has given a clear rinding that the goods can - not be put together again and made into complete serviceable garments. The case has proceeded only on the basis of mis-declarat as the goods are to be considered as pre-mutOatedand old synthetic garments and furthermore that the learned Collector has held that there aw nomala fides in the case and it is a technical offence. The charge under Section 111(d) and (m) of the Customs Act fails and as a consequence, the other charge pertaining to the additional licence as well as pertaining to the appellants not being an actual user also not sustainable and the teamed Collector plea has to be set aside on this matter also by accepting the parties defence on this matter. I therefore, allow the appeal by setting aside the order.
Sd/-(S.LPeeran)
Dt. 19.8.1992 Member (j)
12. In view of separate orders proposed by Members, the following points arise for determination and is referred to Hon'ble President in terms of Section 129-C(5) of the Customs Act.
1. Whether the goods imported by the appellant are covered by OGL Appendix 6 List 8 Part-I of Import Policy 1988-91 and Public Notice No. 11/88 and whether the additional licence product is valid to cover the imported goods.
2. Has the importer misdeclared the goods in the Bill of Entry ana chargeable for offence under Section 111(d) and (m) of the Customs Act?
3. Whether the goods are mutilated as per para 25(ii)(b) of Import Policy 1988-91 and Customs Public Notice No. 11/88 issued in pursuance thereof?
4. Is the importer liable to penalty and fine for contraventions as held by Member (T)?
5. Is the appeal to be allowed as held by Member(J)?
Sd/- (S.L Peeran) Sd/- (K.S. Venkataramani) Member (J) Dt. 25.8.1992 Member (T)
Hon'ble President: The points of difference are referred to Shri N.K. Bajpai, Member (Technical).
Sd/-(Harish Chander) Dt. 28.8.1992 President
13. Per Shri S.D. Mohile.--The case has been referred to me for resolving the difference of opinion between the learned Member (T) and the learned Member (J). The terms of reference are as follows:
1. Whether the goods imported by the appellant are covered by OGL Appendix 6 List 8 Part-I of Import Policy 1988-91 and Public Notice No. 11/88 and whether the additional licence produced is valid to cover the imported goods;
2. Has the importer misdeclared the goods in the Bill of Entry and chargeable for offences under Section 111(d) and (m) of the Customs Act?
3. Whether the goods are mutilated as per para 25(ii)(b) of Import Policy 1988-91 and Customs Public Notice No. 11/88 issued in pursuance thereof?
4. Is the importer liable to penalty and fine for contraventions as held by Member(T)?
5. Is the appeal to be allowed as held by Member (J)?
14. Brief facts of the case giving rise to the above difference of opinion are as follows:
The appellants, herein, imported a consignment declared as Old Synthetic Rags (Completely pre-mutilated). They also submitted that additional licence is valid for goods imported under OGL Appx 6 List 8 Part-I. Hundred per cent examination of the goods was conducted on 8.11.1990 and it was found that out of total consignment of 74 bales, 60 bales were found to be Old Synthetic Garments in two pieces of trousers as may be put together again and made into complete serviceable garments. The rest, namely, 14 bales were found to be Old Synthetic Rags and not properly mutilated as per Customs House Public Notice No. 11/88, but the examination of the report shows that these goods are not serviceable as such nor can they be made serviceable. The Customs House, therefore, found on the basis of the examination report, that the goods were not as perthe declaration in the Bill of Entry and as per the description in the Invoice which described the goods as Old Synthetic Rags (Completely pre-mutilated) and also that the goods were found insufficiently mutilated and not conforming to the Customs House Public Notice issued as per para 25(ii)(b) of the Import Policy 1988-91. Show Cause Notice issued to the appellants on 28.11.1990 holding that the Import Licence is not valid for the import of the goods and on con -sideration of their reply, the Additional Collector ordered confiscation of the goods found in two pieces under Section 111(d) & (m) of the Customs Act, 1962 holding the import as unauthorised and on a finding that there was misdeclara-tion. He gave the appellants option to redeem the goods valued at Rs. 2,34,263.00 (CIF) on payment of a fine, in lieu of confiscation of Rs. 5,85,000.00. He also imposed a personal penalty of Rs. 58,500.00 under Section 112(a)(i) of the Customs Act in respect of 60 bales found to contain two pieces of garments. In respect of balance 14 bales, the Additional Collector also ordered that they be released to the party after mutilation as per Public Notice 11/88 on payment of a fine of Rs. 5,500.00 and he also imposed a penalty of Rs. 5,500.00 under Section 112(a)(i) of the Customs Act, 1962.
15. The learned Counsel, Shri Hari Om Arora, appearing before the two Member Bench for the appellants, contended that the confiscation and penalty on the appellants was unjustified. He relied upon the Tribunal decision in the case of Kakker & Co. and Ors. v. Collector of Customs, New Delhi which has been confirmed by the Supreme Court as reported in 1989 (42) ELT A44 that just because the goods were only in two or three pieces, it should not be held that they are not woollen or synthetic rags. It was, further, submitted that the Tribunal in the case of Radha Yams (F) Ltd. v. Collector of Customs held that where the appellants had agreed for further mutilation of the goods, it should be permitted to be cleared without confiscation. It was submitted that this decision of Tribunal had also been confirmed by the Supreme Court as reported in Vol. 47 of ELT A101. The appellants, herein, had also offered to the Department that if they are not satisfied with the mutilation, the Department could order further mutilation. The ld. counsel, further, urged that the appellants have placed orders with the suppliers only for pre-mutilated rags, but the rags have been cut into 2 or 3 pieces only as the further cutting into several pieces would push up the cost of import. The ld. Counsel, further relied upon the Gujarat High Court decision in the case of Rupani Spg. Mills v. Union of India wherein the Court held that pre-muti-lation of the rags into several pieces abroad being cost prohibitive, further mutilation at importer's cost to be allowed at the port of import in India before clearance. The ld. Counsel pleaded that in any case with reference to 14 bales, it was only a technical offence even as per the adjudication order. It was argued that a fine imposed in lieu of confiscation, does not at all give any reason for fixing such a high quantum of redemption fine and there was also no reasoning in the impugned order as to how provisions of Section 112, relating to penalty, of the Customs Act, were found applicable to the facts of the case to the appellants, especially when the goods have been imported as a result of bona fide order placed on the foreign supplier by the appellants and covered by a proper invoice.
16. The ld. D.R. Shri Nair contended that the decision of the Tribunal in the case of Kakkar & Co. (supra) was not relevant in the present import case. That decision related to the Import Policy 1985-88 whereas the present import took place under the subsequent Import Policy 1988-91 wherein the standard of mutilation had been laid down by the Customs authorities as per the Import Trade Control Policy which was absent in the earlier Policy of 1985-88. The Customs House Public Notice 11/88 has laid down detailed standard of mutilation gar-mentwise which also includes such standard in respect of trousers which are imported. The Custom House Public Notice has been issued in pursuance of para 25 (ii)(b) of Import Policy 1988-91 under Appendix 6 List 8 Part I of the Import Policy. This para required that mutilation must conform to the requirements specified by customs authorities in their notification. Ld. D.R. also, in this context, relied upon the decision of the West Regional Bench of this Tribunal in the case of Orient Woollen Textiles Mills v. Collector of Customs and Central Excise wherein the Tribunal held that synthetic rags, not conforming to the definition of rags as laid down in the Policy and the Customs House Public Notice, is liable to confiscation attracting penalty under Section 112 of Customs Act, 1962. Therefore, the fine and penalty in this case is justified because the goods have been found to be stitchable into serviceable garments and, therefore, cannot be considered as rags. The ld. DR further submitted that the classification of the goods for assessment purposes was as garments in terms of Rule 2(a) of the Rules of Interpretation of the Tariff. While replying, the ld. Counsel produced a copy of the Rajasthan High Court Judgment in the case of Swastika Woollen Industries (?) Ltd. v. Union of India and Ors. dated 5.6.1992 to say that their case is covered by the judgement, but no detailed arguments were submitted on this.
17. The learned Member (T) after considering the arguments made by both the sides was of the view that in respect of 14 bales referred to above where the Collector himself has held that it is a technical offence and in view of this finding, the confiscation and penalty in respect of the 14 bales weighing 6930.675 kg. valued at Rs. 54,668.00 appears to be harsh and is accordingly set aside. As for the goods contained in 60 bales valued at Rs. 2,34,263.00 by applying, inter alia, the Public Notice No. 11/88, he has come to the conclusion that the goods did not satisfy the definition of rags and he has, therefore, upheld the confiscation of the goods contained in these 60 bales but has allowed their clearances after mutilation as per the Public Notice 11/88 on a lower Redemption Fine of Rs. 1 lakh. In coming to these conclusions he has borne in mind the relief in respect of fine and penalty given by the Tribunal in the case of National Woollen Mills v. CC and also the observation of the Tribunal in the case of Orient Woollen Textile Mills (supra). He has also reduced the penalty in respect of 60 bales to Rs. 25,000/-. As regards the Rajasthan High Court decision in the case of Swastik Woollen Industries holding as invalid Public Notice No. 11/88, he has come to the conclusions that the facts of the present case are distinguishable, for the reason given by him in his order. He has also observed that even by applying the main definition of rags, the goods (contained in 60 bales--Bale No. 8 to 37 of both the containers-- vide para 2 of the order-in-original) are not rags.
18. The learned Member (J) has come to the conclusion that as the entire proceedings proceeded on the basis of Public Notice 11/88 and the same has been held to be illegal, the same ratio (as laid down by the Rajasthan High Court in the case of Swastik Woollen Mills) has to be applied. He has also referred to the two conditions laid down by the Hon'ble High Court of Rajasthan, namely:
i) Rags should be so worn out or soiled that it must appear to be beyond cleaning or repair; and
ii) It should not be capable of being re-used as a garment;
19. He has observed that: there does not appear to be any dispute on the matter as the learned Collector has given a clear finding that the goods cannot be put together again and made into complete serviceable garments.
20. He has further observed that: the case has proceeded only on the basis of mis-dedaration as the goods are to be considered as pre-mutilated and old synthetic garments and furthermore that the Collector has held that there are no mala fide in the case and it is a technical offence.
21. He has accordingly passed an Order allowing the appeal by setting aside the impugned Order.
22.1 have given hearing to both the sides on 15.3.1993 when both the sides reiterated the arguments made earlier before, the two Member Bench and the gist of which is given above. I have gone through the separate orders passed by the two learned Brothers. After considering the arguments of both the sides and after going through the Orders passed by the learned Brothers, I am of the view that the Terms of Reference at serial No. 1 and 3 above are not happily worded inasmuch as the issues raised therein had to be considered, inter alia, in the light of Public Notice No. 11/88 which as pointed above has been held as invalid by the Hontole High Court of Rajasthan and no contrary decision of any other High Court or of the Apex Court has been cited although the learned Member (T) has come to the conclusion that the facts of the present case are distinguishable from the facts of the Swastic Woollen Industries' case decided by Hontole High Court of Rajasthan. I am not in complete agreement with the observations made by the learned Member (T) that the facts of the case are completely distinguishable from that of the Swastic Woollen Industries case decided by the Honble High Court of Rajasthan. However, for the reasons given below, I am of the view that his Order is maintainable even by applying the criteria laid down by the Hon'ble High Court of Rajasthan.
23. The learned Member (J) had observed that: there does not appear to be any dispute on the matter, that is whether the rags are so worn out or soiled or they must appear to be beyond cleaning or repair and that these should not be capable of being reused as garments. as the learned Collector had, accordingly, given a clear finding that the goods should not be put together again and made into complete serviceable garments and that the case had proceeded only on the basis of mis-declaration as the goods were to be considered as premutilated and old synthetic garments and furthermore that the learned Collector had, according to learned Member (J) held that there were no mala fide in the case and that it was a technical offence.
24. These observations of the learned Member (J) are not, in my opinion, bome out completely by the impugned Order. The above observations apply only in respect of the goods contained in the 14 bales, in respect of which the learned Member (T) has also set aside the confiscation, since there was a finding that the goods contained in these 14 bales were unserviceable as garments. However, as regards the goods contained in 60 bales, there is a clear finding that the goods could be re-made into serviceable garments. (Bale No. 8 to 37 of both the containers--vide para 2 of the order-in-original). In view of this finding, irrespective of number of cuts as laid down in Public Notice 11/88, and even by applying the criterion laid down by the High Court of Rajasthan in the case of Swastic Woollen Industries, these goods would not satisfy the definition of rags, as also held by learned Member (T).
25. All the decisions relied upon by the appellants pertain to 1985-88 Import Policy and hence are not relevant for the present import, which is covered by 1988-91 Policy. The facts of the present case are similar, if not identical, to the case of Orient Textile Mills where Tribunal has held that if the goods are not totally unserviceable (and there is a positive finding to that effect, as in this case) the import will be unauthorised, even without referring to the Public Notice.
26. In respect of goods contained in 60 bales while upholding their confiscation, the learned Member (T) has reduced the fine in lieu of confiscation and he has also reduced the penalty imposed on the importers taking into consideration the facts and circumstances of the case.
27. In the light of the foregoing the terms of reference are answered as follows:
1. The goods contained in 60 bales out of 74 bales involved in the present appeal are not covered by OGL Appendix 6, List 8 Pt.I of the Import Policy1988-91 and Public Notice No. 11/88 (as read down in the light of the Rajasthan High Court decision in the case of Swastik Woollen Industries and that the goods in respect of 14 bales should be held as covered by the said OGL As regards the second Part of serial No. 1, namely, whether the additional licence produced was valid to cover the imported goods. No arguments were raised before me in this behalf and there is also no discussion or finding regarding the same in the Order-in-Original and hence, it is neither possible nor necessary to give a finding on the validity of the said additional licence;
2. In view of the finding given with reference to Serial No. 1 of the reference, in respect of goods contained in 60 bales referred to above, there was mis-dedaration of the goods in the Bill of Entry chargeable tor offences under Section lll(d)and(m) of the Customs Act, 1962;
3. The goods contained in 14 bales out of 74 bales could be regardedasmutilated as per para 25(ii)(b) of Import Policy 1988-91 and Customs Public Notice 11/88 (as read down);
4. Yes. The importer is liable to penalty and fine for contravention as held by Member (T),
5. No. Sd/-(S.D.Mohile) Dt. 7.7.1993 Member (T)
28. In view of the majority decision as above, it is held that the order of confiscation and penalty in respect of 60 bales valued at Rs. 2,34,263.00 under Section 111(d) and lll(m) Customs Act, 1962 is valid and is upheld. However, for the reasons set out above, the fine in lieu of confiscation in respect of this quantity is reduced to Rs. 1 lakh only and the penalty is also reduced to Rs. 25,000/-(Rupees twenty five thousand only). The goods be released on fine after further mutilation as per the Import Policy. In respect of 14 bales weighing 6930.675 kg. valued at Rs. 54,668.00, the order of confiscation and penalty is, for the reasons set out above, set aside. The appeal is disposed of accordingly.
Sd/- (K.S. Venkataramani) Sd/- (S.L Peeran)
Member (T) Dt. 8.7.1993 Member (J)