Customs, Excise and Gold Tribunal - Delhi
Vardichand Chandanmal Jain vs Collr. Of Cus. on 1 March, 1996
Equivalent citations: 1996(83)ELT657(TRI-DEL)
ORDER
U.L. Bhat, President
1. Appellant imported 19.984 M.T. of goods declared as "Copper Scrap Birch" at invoice price US Dollars 0.55 per Ib GIF and sought clearance under OGL Appendix 6 List 8 Part III Item 4 of AM 85-88 Policy. Goods were assesseed to duty and allowed clearance subject to examination. Examination revealed that the goods were not scrap, but prime wire of copper running in length and in rolls without spool which could be imported only under specific licence as covered by No. 491 of Appendix 3 Part A of the Policy. The declared price was found to be low. On the appellant being informed, show cause notice was waived, but personal hearing was given. Finally, the Collector of Customs, Bombay passed an adjudication order confiscating the goods, fixing redemption fine of Rs. 3 lakhs, directing duty to be paid on GIF value determined as Rs. 3,72,000/- and imposing penalty of Rs. 50,000/-. This order is now challenged.
2. Puring personal hearing by the Collector, the appellant contended that the goods were ordered as scrap, that he was not aware how "these goods" came and he was "willing" to cut the goods and make them scrap. The Collector found that the goods were not "scrap" but prime copper wire the import which required a specific licence but the appellant did not possess any such licence. There was also misdeclaration of value since the lowest price of copper wire as ascertained from London Metal Exchange Bulletin was not less than US Dollars 1450 per M.T. On these grounds he found justification for confiscation and the other levies of the order. The duty was paid on 26-11-1986 and goods cleared. Personal hearing by the Collector was on 23-12-1986. The order was passed on the same day. The Collector did not specifically consider the effect of the 'willingness' expressed by the appellant to "cut" the goods and make them scrap.
3. Learned counsel for the appellant contended that the appellant had placed order only for "scrap" and the supplier sent invoice snowing the goods as "Copper Scrap Birch" and even after the impugned order gave an assurance that the goods were collected from Hitachi Cable(S) PTE Ltd. as scrap, that they were factory rejects and not serviceable and the relevant Import Policy did not define 'scrap' and the technical definition in Customs Tariff should not be adopted to see if the goods attract OGL or not. He further contended that the Collector should have considered the 'willingness' expressed by the appellant to cut the wires and to make them into scrap and allowed mutilation on the basis of the principles underlying Section 24 of Customs Act, 1962. If mutilation had been allowed, it is contended, confiscation could not have been ordered and consequent orders could not have been passed and the importer should not be allowed to suffer on account of the neglect by the Collector of his duty and function. It is further contended that without proving contumacious conduct or mens rea on the part of the importer, the impugned order could not have been passed. The importer had acted in good faith, firstly by placing an order for supply of scrap, and secondly, when it was found to be prime copper wire and not scrap, by offering to mutilate the goods and convert the same into "scrap" and hence the impugned order is illegal and unjust. These contentions are rebutted by the Senior Departmental Representative, according to whom, the goods imported being scrap and accepted as such it cannot be believed that the foreign supplier would have supplied prime copper wire if the agreement was only to supply scrap. She also commented on the conduct of the appellant in not applying for re-export or in not submitting an application under Section 24 of the Act. According to her, lack of bona fides and good faith is spelled out from the circumstances of the case. Both sides have placed reliance on certain decisions.
4. Examination showed the goods to be prime wire of copper in running length and in rolls without spool. The only answer of the appellant was that he had placed an order for scrap. During personal hearing he stated that he was not aware how "these goods came". This stand of the appellant would support the conclusion of the Collector that the goods imported were not scrap but prime material. It is further contended that these coils were factory rejects. Even assuming it to be so, since they were of good quality and running in length and in rolls they cannot be accepted as scrap. A similar contention was rejected by the Tribunal in D.M. Woollen Mills Pvt. Ltd. v. Collector of Customs, Bombay -1995 (75) E.L.T. 591 (T). Dealing with the import of goods alleged to be woollen rags, contrary to the guidelines in the Bombay Custom House Public Notice, the Tribunal observed -
"Therefore, while ordering for supply of rags to a foreign supplier, it would be incumbent upon them to clearly and unequivocally instruct them to supply only such item which passes the standard laid down by Indian Customs and if they even then, cause the import to be made of the items which could not meet with the prescribed standards, not only the items became liable to confiscation ... "
5. So far as the mutilation is concerned, there was no formal application before the Collector seeking permission for mutilation before clearance. It was only during personal hearing that the appellant expressed "willingness" to cut the wires to make them into scrap. In the absence of specific request for permission, we cannot find fault with the Collector for not passed any order in this regard. The request is forcefully made by learned counsel for the appellant before us. But then goods have already been cleared and consumed and hence is no longer possible to consider the question of permitting mutilation. Nor is it possible to proceed on the footing that if mutilation had been allowed, the question of confiscation, fixation of redemption fine and levying penalty would not have arisen; that is because there was no specific request to that effect made before the Collector at any time before release of goods.
6. Support of certain decisions has been canvassed before us. The first decision referred to is that of the Madras High Court in Madanlal Steel Industries Ltd. v. Union of India - 1991 (56) E.L.T. 705 (Mad.). The appellant was manufacturing ingots after melting scrap. He placed an order for stainless steel melting scrap. Six consignments were received. 20% was checked and Section 47 order was passed. Four out of the six containers were released. Subsequently, all the six consignments were seized by the DRI. Seizure was challenged in Writ Petition. Writ Petition having dismissed, Writ Appeal was filed. The Department took the view that the materials cannot be classified as prime or seconds and they cannot be classified as melting scrap since they are usable either for re-rolling or other direct industrial application. The Court declined to interfere with the seizure and decided on the merits of the issue until the proper stage of the notice is reached and further materials are available but the Court observed that it should be in the interest of both parties not to go in for proceedings and recourse could be Section 24. Having regard to the request made by the Counsel for the appellant for denaturing or mutilation of goods so that they can be usable only for the home consumption by the appellant and for no other purpose. The Court felt that this would advance the interests of justice. Accordingly, Court ordered that in case an application to this effect is filed by the appellant before the appropriate authority, the same will be entertained and decided in conformity with the requirements of Section 24 of the Act and goods released from seizure and notice of confiscation, if issued, to be recalled.
7. In Lakhotia Udyog v. Union of India - 1992 (58) E.L.T. 385 (Cal.) petitioner, manufacturer of brass slabs, imported "Yellow Brass Scrap 'Honey'". Examination showed that out of the consignment of 18.938 Kgs, buttons and snap fasteners constituted 1211.7 Kgs. According to the Writ Petitioner, buttons/snap fasteners were in fact brass scrap as they were not in good condition and did not form complete sets and could not be utilised for any purpose other than melting. They suggested that if the Customs had any doubt the same maybe mutilated before allowing clearance. There was an order of confiscation fixing redemption fine of Rs. 2 lakhs and also levying penalty. There was a direction for mutilation before release. Buttons require specific licence while scrap was importable under OGL. The Court observed that under Section 24, after mutilation, there cannot be any question of evasion of duty on the basis that the offending goods were not scrap. Since the goods were mutilated they will be chargeable to duty only at the rate applicable to the goods In the mutilated form. The Court noticed that buttons and snap fasteners were not in good condition and it could not be disputed that they could have been treated as scrap and that the petitioner even in the first instance had requested for mutilation so that the goods could be used as scrap. Recourse to Section 24 was stated to be equitable and rationale approach to the problem. It was observed that goods cannot be both mutilated into scrap and at the same time be treated as buttons and snap fasteners for the purpose of fixing redemption fine and imposing penalty. The order was set aside conditionally with the observation that all the contentions raised before the High Court could be raised before the appropriate authority. This would suggest that the High Court did not take final view in the matter under dispute.
8. In Rupani Spinning Mills Pvt. Ltd. v. Union of India -1992 (60) E.L.T. 77 (Guj.) the Court dealt with the import of woollen rags under OGL. The rags had not been completely mutilated as required in the Bombay Collector's Public Notice. The Court considered the question whether direction for further mutilation could be given under Section 24 and took the view that in the absence of rules the spirit underlying the provision can be invoked by directing the Customs authority to further mutilation before clearance. The Court took notice of the existing practice in the Bombay Custom House and commended it to other Custom Houses. The Court directed that the Collector should "at the expense of the importer, permit further mutilation till they are rendered wholly unserviceable before clearance on levy of personal penalty". Since the goods involved in two of the Writ Petitions were cleared and were no more available for further mutilation, the Court dismissed those writ petitions. The third Writ Petition was allowed since the goods were available for further mutilation and because the order of confiscation was passed pending the outcome of the Petition.
9. We may also refer to the 3 decisions of the Tribunal. D.M. Woollen Mills Pvt. Ltd. v. Collector of Customs, Bombay, 1995 (75) E.L.T. 591 (T) related to import of woollen rags of length exceeding the length notified in Collector's Public Notice which indicated that they had not been completely mutilated. There was an order for release on complete mutilation and imposition of personal penalty of Rs. 11,000/-. In Amber Woollen Mills v. Collector of Central Excise - 1995 (80) E.L.T. 355 (T) a single Member of the Tribunal dealt with an import of synthetic rags. 70% of the goods were not properly mutilated while 25% were properly mutilated and 5% were found to be garments without any cutting. It was held that the fact that only 5% garments were found to have no cutting showed the bona fides of the importer. The Additional Collector had ordered release of the partially mutilated goods after further mutilation. The Additional Collector had ordered further mutilation and imposed penalty of Rs. 70,000/-. The Tribunal set aside the order of absolute confiscation and penalty and permitted release of the goods after mutilation. The decision in Hardik Industrial Corporation v. Collector of Customs - 1996 (81) E.L.T. 172 (T) considered the case of import of what was alleged to be scrap by the importer as HDPE bags and LDPE films by the Custom House. The import was for the purpose of recycling. The Collector held that the entire quantity of goods were not scrap and ordered confiscation besides imposing penalty and fixing redemption fine. The Tribunal directed the entire quantity of goods to be mutilated in such a manner the goods can be used only for recycling and not for any other purpose and set aside the impugned order.
10. These decisions do not help the appellant. The decision of the Madras High Court referred to above was rendered at the stage of seizure and even before show cause notice and the Court declined to interfere with the seizure at that stage. In the light of the admitted fact that the goods could not be classified as prime or seconds, Court accepted mutilation to cut short proceedings. In the case decided by the Calcutta High Court, a very small percentage of goods were objected to as not scrap and even that part was not in a good condition and hence could not be treated as scrap and the importer, even on the first instance asked for mutilation and it was held that mutilation was equitable. Nevertheless the High Court left open all contentions for decision by the appropriate authority. In the decision of the Gujarat High Court, the Court declined to interfere in the case where goods were not available for mutilation and in another case directed mutilation before clearance on levy of personal penalty. In D.M. Woollen Mills Pvt. Ltd. case, there was no order for confiscation and the imposition of personal penalty was not set aside. The consignment in Amber Woollen Mills case was a mixed one consisting of properly mutilated rags, not properly mutilated rags and only 5% of unmutilated rags. The Tribunal upheld the bona fides of the importer and set aside confiscation and penalty. In the case of Hardik Industrial Corporation, the consignment consisted of scrap plastic and HDPE bags and hence the entire consignment was ordered to be mutilated. The facts of the present case are entirely different and therefore the above decisions cannot help the appellant. In two of the above cases, imposition of personal penalty, in spite of order for mutilation was justified.
11. In the present case prime quality copper wire had been imported, but declared as copper scrap. The former could be imported under OGL. Rate of duty was also different. Appellant did not think of seeking permission of the expert, though according to him, the supplier had sent goods not ordered. Appellant has no case that the alleged wrong shipment was taken up with the supplier. No application was made for seeking mutilation of goods to render them unfit for use as anything other than as scrap. The correspondence prior to Import or the copy of the order were not placed before the Collector and are not placed before the Tribunal. No attempt was made to seek order from the Tribunal before consumption of the goods. The cumulative effect of the circumstances in the case definitely lead to the inference of absence of bona fides and good faith on the part of the appellant and deliberate attempt on his part to import prime copper wire without specific licence under the subterfuge of import of scrap. Hence the order for confiscation and levy of penalty are justified. In fixing redemption fine, an option was being given to the appellant to redeem the goods taking care to ensure that he does not make any unmerited gain out of violation of law. In the circumstances the quantification of redemption fine and penalty is not excessive or unreasonable.
12. In the result, we find no ground to interfere and accordingly dismiss the appeal.