Customs, Excise and Gold Tribunal - Tamil Nadu
Swati Growth Funds Ltd. vs Collectof Of Customs on 21 March, 1995
Equivalent citations: 1995ECR511(TRI.-CHENNAI), 1995(79)ELT247(TRI-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. These appeals are against the order of the Collector of Customs, Madras. Under the impugned order 38,475 Kgs. of Cassia imported by the appellants has been confiscated under Section 111(d) & (m) of the Customs Act, 1962 read with Section 3(3) of the Foreign Trade Development and Regulation Act, 1992, and allowed to be redeemed on payment of a redem ption fine of Rs. 2,25,000 apart from levy of penalty of Rs. 2,00,000 on the appellants.
2. The learned lower authority has refixed the price of the imported goods for assessment purpose at Rs. 44 per kg. as against the lower declared value. The appellants before us are not contesting the re-fixation of the value and the pleas are only confined to the licensing angle i.e. whether the goods are allowed for import under OGL or they would require a licence for the importation.
3. Shri M.R. Srinivasan and Shri M. Ramachandran, learned Consultants, appeared on behalf of the appellants. The learned Consultant Shri Srinivasan pleaded that the appellants imported 3 consignments and filed 3 Bills of Entry dated 17-1-1994 and 19-1-1994 in respect of the same and claimed clearance of the goods under Public Notice No. 159/92-97 of 7-9-1993 issued by the Director General of Foreign Trade, claiming the benefit of clearance under OGL. He pleaded that under the said Public Notice import of Cassia was banned for importation under OGL and an exception was provided in this Public Notice by way of transitional arrangement allowing importation of Cassia in cases where the shipment was effected within 60 days of the said Public Notice and against firm orders backed by irrevocable Letter of Credit established between 16-7-1993 and 6-9-1993. He pleaded that inasmuch as the L.C. for the goods imported by the appellants had been opened on 23-7-1993 and the shipment had been effected within 60 days of the issue of the said Public Notice the appellants' goods should have been allowed clearance under OGL. He pleaded that the learned lower authority has not appreciated the evidence produced by them in regard to the opening of an irrevocable Letter of Credit and shipment of the goods within the stipulated period as set out in the Public Notice in proper perspective. He pleaded that the Bills of Lading in respect of the shipments in question are dated 1-11-1993, the date well within the limit of 6-11-1993 fixed for importation tinder the OGL. He pleaded that the learned lower authority had taken into consideration extraneous factors to arrive at the conclusion that the shipment was effected not on 1-11-1993 but later. He pleaded that the Departmental authorities had made enquiries abroad and ascertained that the ship by which the goods arrived sailed from Hongkong only on 8-12-1993 and the steamer agents had also confirmed that "correct shipped on board date was 7th December, 1993 RPT 7th December, 1993 for the above consignments". He has pleaded that no legal notice for the purpose of importation could be taken of the actual date of shipping of the goods or loading of the goods on the vessel concerned and what has to be seen for import purposes is as to what date should be taken to be the date of shipment of the goods. He pleaded that under the Hand Book of Procedure Vol. I of Policy 1992-97 at para 19(3) the validity of an import is stated to be decided with reference to the date of shipment/ despatch of the goods from the supplying country and not the date of arrival of the goods at an Indian port and the date of shipment is set out in this Handbook at page 109 at Sl. No. 259 as under :-
"259. Date of shipment/despatch for the purposes of imports will be reckoned as under:
Mode of Transportation Date of Shipment/Despatch
______________________ __________________________
(i) By sea The date affixed on the
Bill of Lading.
He pleaded that since the goods have come by sea, for the purpose of deciding the entitlement of the appellants to import the goods under OGL, in view of the above, the date affixed on the Bill of Lading should be taken to be the date of shipment. He pleaded that the learned lower authority has misdirected himself. He has pleaded that the learned lower authority while arriving at his conclusion as to the correct date of shipment for the purpose of importation of the goods has observed "it is difficult to accept that on 1-11-1993 a commercial liner will accept on its board a cargo which was intended for a voyage commencing from Hongkong on 8-12-1993" and has also considered the intimation received from the shipping agents that the cargo was shipped on board on 7th December, 1993 without any regard to what has to be taken as the date of shipment for the purpose of importation when the date of shipment has been defined under the Import and Export Policy as set out in the Handbook of procedure for the year 1992-97. He pleaded that in the allegations made in the show cause notice reliance was sought to be made on Rules 3, 4 and 7 of the Schedule of Rules relating to Bill of Lading in the (The Indian) Carriage of Goods by Sea Act, 1925 and under Rules 3 & 4 on receipt of the goods the carrier or the master or agent of the carrier is required to issue a Bill of Lading which will be prima facie evidence of receipt by the carrier of the goods and that under Rule 7 a shipper, if he so demands, has to be given a "shipped Bill of Lading" after the goods are loaded on the vessel. He has pleaded that any reference to Rule 7 would be misplaced as once the goods had been entrusted to the carrier or his agent so far as the shipper is concerned act on his part for shipping the goods is over and the relevant date, therefore, for shipment of the goods would be the date endorsed on the Bill of Lading given as a token of receipt of the goods by the carrier or his agent or the master of the vessel. He in this background, therefore, pleaded that the appellants' goods should be taken to have been shipped on 1-11-1993, the date which is covered by the exception for importation under OGL under the Public Notice 159/92-97 dated 7-9-1993. Dealing with the issue as to whether the appellants had opened an irrevocable letter of credit against firm order for the purpose of importing the goods under OGL as per the Public Notice 159/91-97, the learned Consultant referred to para 5 of the order of the learned lower authority and pleaded that originally the letter of credit was opened on 23-7-1993 on an application filed by the appellants with the Bank for opening of the L.C. and the validity of the L.C. was 31st August, 1993 for shipment and 21st September, 1993 for negotiations. This LC, he pleaded, was opened as per indent No. NOGW/CAS/01/93 as seen from the application of the appellants dated 6-7-1993 in favour of M/s. Green Wood Ltd. for shipment of the goods from China port to Madras. L.C. opened was by telex by the Vysya Bank Ltd., New Delhi, on Hong Kong Shanghai Banking Corporation, Hong Kong, for US dollars 71,360. He pleaded the terms regarding the shipment and negotiations came to be changed later and the validity of the letter of credit was extended to 30th September, 1993 for shipment and 21st October, 1993 for negotiations. He pleaded no doubt the shipment was effected on 1-11-1993, but this was by agreement between the supplier and the appellants and the bank and no formal amendment for shipment on 1-11-1993 was carried out. He pleaded that since all the parties agreed to this later date for shipment, the L.C. should be taken to have been effected according to the same L.C. which was opened earlier and it is pleaded, to be an irrevocable letter of credit.
4. The learned DR for the Department adopted the reasoning of the learned lower authority and pleaded that admittedly the Bill of Lading under which the goods have been imported and stated to have been shipped on 1-11-1993 were not shipped on that date and the goods in fact, as. revealed by the enquiries made, were shipped on board the vessel on 7th December, 1993 and there is no averment to the contrary so far as this aspect is concerned. He pleaded, therefore, the Bill of Lading could not be considered relevant for the purpose of Public Notice under which the goods were to be imported if the shipment was effected within two months from 7-9-1993, when the item was placed on the Negative List and the goods required a licence for importation. He cited in this connection the judgment of the Tribunal in the case of Metraco (India) Ltd. v. Collector of Customs, reported in 1990 (49) E.L.T. 207 (Tribunal) and referred to paras 7,8,10,12 and 14. He therefore, pleaded the shipment having been effected beyond the permissible time under the Public Notice referred to above, the goods have been rightly held to be confiscable under Section 111(d). He pleaded that so far as the condition regarding the importation under firm orders against irrevocable letter of credit is concerned the appellants' L.C. could not be taken to be irrevocable letter of credit with reference to the date of shipment of the goods. He has pleaded that originally, as per the appellants' own submission, the L.C. was valid till 31st August, 1993 for shipment and upto 21st September, 1993 for negotiations and this was amended for extension of shipment upto 4-9-1993 and thereafter upto 30th September, 1993. He has pleaded that the goods as such were shipped according to the appellants, on 1-11-1993 when there was no amendment as per the L.C. for shipment upto that date and inasmuch as there was no amendment to the L.C, the L.C. can be taken to have expired for the purpose of the importation and no firm commitment could be said to have been there even on the argument of the appellants that the L.C. opened was a firm one. He pleaded as it is no evidence has been produced that the L.C. as such was amended and the plea is that there was no acceptance of the date of shipment until 1-11-1993 and the letter produced by the appellants in this regard dated 30-9-1993 addressed to the Chief Manager, The Vysya Bank, is the only document that they have produced now. There is nothing on record to indicate any follow-up action. Even otherwise, he pleaded, after the Public Notice was issued in as much as the importation could not have been made with the shipment effected before 31st August, 1993 the original date stipulated in the L.C., the appellants should have allowed the L.C. to expire. He pleaded that this condition of the opening of the irrevocable letter of credit within the stipulated period, therefore, cannot be taken to have been complied with so far as the Public Notice 159/92-97 is concerned. For this reason also, he pleaded, the goods have been rightly held to be confiscable. He pleaded that so far as the valuation aspect is concerned, the appellants have accepted the loading of the value and have, therefore, accepted the undervaluation and the consequences, therefore, of the under-valuation naturally follow and the goods have been rightly held to be confiscable under Section 111(m) of the Customs Act and the appellants' liability to penalty.
5. The learned Consultant for the appellants in reply reiterated that amendment of the L.C. regarding the date of shipment does not tantamount to opening of a fresh L.C. He cited in this connection the judgment in the case reported in 1985 (20) E.L.T. 358 and referred to para 9 and also the case reported in 1990 (46) E.L.T. 109 (para 16). He pleaded in these judgments it has been held that the L.C. is only a mechanism for payment. He also pleaded that the fact that the amendment regarding the date of shipment and the negotiations of the letter of credit were subsequent to the ban imposed under Public Notice 159/92-97, does not in any way affect the nature of the L.C. being an irrevocable letter of credit. He pleaded the definitions and clarifications given in the Handbook of Procedure of the Import and Export Policy should be treated as part and parcel of the Policy. His plea is that the provisions in the Handbook are only for giving effect to the provisions in the Policy and both have to be read together. The date of shipment, therefore, according to him, should be read as given in the Handbook of Procedure i.e. the date on the Bill of Lading, In regard to the under-valuation aspect, he pleaded that the appellants had agreed to the loading of the price with a view not to prolong the proceedings and to get quick clearance of the goods. He pleaded that this loading was agreed to only for the purpose of assessment and it is not an acceptance of the fact that there was any under-valuation on the part of the appellants or any mala fides in the matter of importation of the goods at a lower price. He pleaded no penal consequence as a result of their agreeing to the loading of the price would flow.
6. We have given a careful thought to the pleas made by both the sides. It is observed that the goods in question could be imported under OGL until 7-9-1993 when these were brought under the Negative List requiring a licence for the importation by issue of Public Notice 159/92-97 dated 7-9-1993. An exception for importation under OGL was provided as a transitional arrangement allowing the goods to be imported under OGL where there was a firm order and irrevocable letter of credit had been opened between 6-7-1993 and 6-9-1993 and the shipments from port were made within 60 days from 7-9-1993, the date of issue of the Public Notice. The aspects, therefore, that require to be examined are:
(1) whether the importation was against confirmed order;
(2) whether irrevocable letter of credit had been established during the period 6-7-1993 to 6-9-1993; and (3) whether the shipment was made within 60 days from the date of the Public Notice i.e. 6-7-1993.
We will take up the last item first for consideration viz. whether the shipment had been effected within 60 days of the issue of the Public Notice i.e. 6-7-1993. The appellants' claim is that since the Bill of Lading for the goods in question is dated 1-11-1993 the shipment should be taken to have been effected within the stipulated period which expired on 6-11-1993. The goods, it is seen, arrived in Madras on 3-1-1994 and the enquiries made by the Department revealed that the ship in question on that date was nowhere in Hongkong from where the goods were shipped and the goods in fact were placed on board the vessel by which the goods were imported on 7-12-1993 and the voyage from Hongkong commenced on 8-12-1993. So far as these dates are concerned there is no averment to the contrary from the appellants in this regard. The question, therefore, for consideration is whether the date of shipment should be taken as 7-12-1993 i.e. the date on which the goods were shipped on board or 1-11-1993 which the appellants claim, was the date when the goods were entrusted to the agents of the carriers and when the Bill of Lading was issued to them. The appellants' claim for acceptance of 1-11-1993 as the date of shipment is based on the provisions in the Handbook of Procedure Vol. I, 1992-97 regarding the period of validity of a licence which is reproduced below for convenience of reference :
"(3) The period of validity means the period of shipment/ despatch permissible for the goods concerned. The validity of an import licence is decided with reference to the date of shipment/ despatch of the goods from the supplying country and not the date of arrival of the goods at an Indian port."
and date of shipment/despatch for purpose of import as set out in this Handbook is as under.
"259. Date of Shipment/Despatch for the purpose of imports will be reckoned as under :-
_______________________________________________________________ Mode of Transporta- Date of Shipment/Despatch Tion _______________________________________________________________
(i) By sea The date affixed on the Bill of Lading.
(ii) By air The date of the relevant Airway Bill
provided this represents the date on
which the goods left the last airport
in the country from which the import
is effected. The date of despatch of
the goods by rail, road or other
(iii) From land-lock- recognised mode of transport to the
ed countries. consignee in Indiaon through consignment
basis.
The appellants' plea is that in case of shipment by sea it is the date affixed on the Bill of Lading and inasmuch as in their case the date on the Bill of Lading is 1-11-1993 the said date should be taken to be the date of shipment for the purpose of the Public Notice 159/92-97. In this context the Hon'ble Supreme Court in the case of Darshan Oils Pvt. Ltd. v. Union of India, reported in 1995 (75) E.L.T. 32 (S.C.), have examined the validity of an import after a Public Notice was issued canalising the items by issue of a Public Notice under which an exception was carved out for the goods shipped on through consignment to India on or before 31st March, 1984 i.e. only in respect of shipments which had been effected before the date of the Public Notice. The Hon'ble Supreme Court in regard to this exception has observed as under :-
"In other words, the only exception made for import of the canalised items under Import licences already issued was in respect of the shipments already effected from the country of origin before the date of said amendment, that is, of shipments of which transit had already commenced from the country of origin."
and have further gone to observe as under :
"Obviously, the exception was made to cover only those goods of which the shipment had been made and were in transit, excluding all such goods of which no shipment had been made. The classification between goods in transit and those of which the transit had not begun, cannot be called irrational or unreasonable in the context."
The date of shipment in the context of the ban has been construed by the Hon'ble Supreme Court as the date on which the transit of the goods had commenced from the country of origin. In Venkataramaiya's "LAW LEXICON & LEGAL MAXIMS" 2nd Edition, the term shipment has been defined as under:
"Shipment - The term "shipment" includes not merely the loading of goods on board the ship but also the starting of the ship. - Kali Kanta Shaha v. Ismail, 20 C.W.N. 159 at pp. 161-62."
According to Chambers English Dictionary, shipment has been defined as 'the act of putting on board : a consignment orig. by ship, now extended to other forms of transport.'. In Webster's New Collegiate Dictionary shipment is defined as '1. the act or process of shipping 2. the goods shipped'. The term 'transit' has been defined in Chambers English Dictionary as 'the conveyance or passage of things or people over, across, or through'. The same is defined in Webster's New Collegiate Dictionary as under :
"an act, process, or instance of passing through or over : PASSAGE ... conveyance of persons or things from one place to another."
From the above it is clear that so far as the term 'shipment' for the purpose of Public Notice banning the import under OGL except where the shipment had been effected within 60 days of the issue of the Public Notice 159/92-97 is concerned, the goods should have been already on board for the commencement of the transit to India. The Hon'ble Supreme Court in the judgment referred to above has clearly held that the transitional provision being in the nature of an exception has to be interpreted strictly. In our view the definition of the term 'date of shipment' given in the Handbook of Procedure for the Policy 1992-97 does not in any way come to the rescue of the appellants. All that it envisages is as to what is to be considered as the date of shipment/despatch. So far as transport by sea is concerned the said date is referred to as the date on the Bill of Lading. In respect of transport of the goods by air or by road the date is the date on the Airway Bill provided this represents the date on which the goods left the last airport in the country from which the import is effected and in the case of despatch by road in the case of land-locked countries the date of despatch of the goods by rail or road on through consignment basis. In the case of the modes other than by sea the stipulation is clear that it is the date on which the goods actually moved by air or by rail for outward journey. There is no reason why similar date should not be considered as relevant date of shipment in case of despatch by sea. The Policy makers could not have intended different considerations for despatch by sea as it would make the provision anomalous so far as the date of shipment is concerned for the purpose of validity period of the licence, when the goods were despatched by sea. A particular buyer may have the goods kept for long periods before getting them placed on board with the agents of the carriers, which was the case in the present transaction as the goods had been kept by the agent of the carriers from 7-11-1993 onwards and get them shipped at convenience after having obtained a receipt of the goods by way of Bill of Lading by the agent of the carrier even though the goods were not even ready for being loaded on the ship, as the ship was to come much later for the voyage for the carriage of the goods. As it is the term 'Bill of Lading' has not been defined and we have to only see as to which Bill of Lading will reflect the actuality of shipment of the goods. Bill of Lading as has been brought out in the order of the learned lower authority and as has been also referred to in the order of the Tribunal in the case of Metraco (India) Ltd. v. Collector of Customs cited supra where the import had been made under similar circumstances, can be issued at different stages at the time of receipt of the goods as per Rule 3 of the Schedule of Rules relating to Bill of Lading (the Indian) Carriage of Goods by Sea Act, 1925 evidencing only the receipt of the goods by the Master or agent of the carrier and Rule 4 clearly states that such a Bill of Lading would be prima facie evidence of the receipt of the goods by the carrier. Under Rule 7 a shipped, Bill of Lading is issued on demand by the shipper after the goods are loaded on the vessel. It is this shipped Bill of Lading which evidences the commencement of the transit of the goods and which has been held by the Hon'ble Supreme Court as the relevant date to be considered for shipment of the goods. In fact when the goods are placed on board mate's receipt is issued which is the receipt by the Master of the vessel for receipt of the goods on board the ship and it is against this mate's receipt that a Bill of Lading is issued. In view of the discussion we hold that the Bill of Lading date, as pleaded by the appellants 1-11-1993, cannot be taken as the date of shipment of the goods but 7-12-1993 when the goods were actually placed on board when the shipped Bill of Lading was to be issued representing the commencement of the transit of the goods. The West Regional Bench of the Tribunal in the case of Metraco (India) Ltd. v. Collector of Customs, reported in 1990 (49) E.L.T. 207 (Tribunal), has also taken a similar view under similar circumstances. In the above view of the matter we hold that the goods could not have been imported under OGL in terms of Public Notice 159/92-97, referred to above, and these could be imported only under a licence issued by the Director General of Foreign Trade.
7. In regard to the validity of the letter of credit, we observe that admittedly the letter of credit was amended twice and the last amendment on record was for shipment upto 31-10-1993 while the actual shipment took place on 7-12-1993, and even on the appellants' own claim for shipment, the shipment was on 1-11-1993. It has been pleaded, no formal amendment of the L.C. was carried out for shipment beyond 31-10-1993 and shipment was effected against the L.C. on an informal understanding between the appellants and the banker and the supplier of the goods. We are afraid, the character of the L.C. has to be strictly construed for the purpose of importation in terms of the Public Notice 159/92-97 and in the absence of any amendment as such the L.C. no longer could be considered as an irrevocable letter of credit in operation for the shipment later than, as it is, 31-10-1993 when the last amendment was carried out. We observe for import under OGL specific conditions in the Public Notice have been prescribed. The import should have been against the firm order and against an irrevocable letter of credit and shipment should have been made within the specified period. The confirmation of sale filed by the appellants refers to the following conditions :
Shipment : by 31st August, 1993 by China Payment : Irrevocable letter of credit payable at 60 days.
The L.C. had been opened based on these. In the invoice a contract No. PSI/93121 has been shown while the confirmation of sale bears No. NOGW/CS/93, dated 6-7-1993. As it is this contract No. does not figure in the confirmation of sale and no correspondence has also been produced leading to the confirmation of the sale before us. It is not clear whether this confirmation of sale refers to the same contract No. as mentioned above and how the order could be treated as confirmed. No correspondence has also been produced before us for extending the date of shipment etc. and the reasons therefor. In a case where restrictions have been imposed for importation after a ban has been introduced, it is for the appellants to come on record as to the circumstances under which the extensions of shipment under the L.C. had to be made. The restriction regarding the opening of the confirmed letter of credit is to ensure that no fresh commitment of irrevocable nature is entered into and any commitment entered earlier or during the period permitted for the purpose of the L.C. does not spill over the restricted period envisaged in the Public Notice under which restrictions/ban have been imposed. What is expected is a degree of transparency in the transaction leading to the importation, and it has to be shown that the delay in shipment was on account of unavoidable circumstances and that the appellant would have been put to loss in case the L.C. opened was not honoured. In case there was a default on the part of the seller of the goods the appellants had a choice to revoke the deal. In the present case admittedly the last extension for shipment was not reflected in the L.C. and since the shipment as it is could not have been made as is shown by the facts on record within the earlier extended period, no reason has been shown as to why the appellants did not cancel the order. It is not the plea of the appellants that the shipment could not be made on account of any failure on the part of the appellants and in case the supplier had not been able to make the shipment they were under no obligation to go ahead with the deal. They have yet proceeded to go on with the deal when the L.C. as confirmed was not acted upon in full. The latitude under the Public Notice for importation was obviously given where the importers had to necessarily go through with the deal already arrived at for importation on pain of any damages which may have to be paid by them in case of any failure on their part to effect the importation. In the present case, therefore, the L.C. as was opened was not acted upon by the supplier and the appellants had the choice, therefore, not to go through with the transaction. The appellants have not shown us any document whereby they had questioned the failure on the part of the supplier to despatch the goods within the stipulated period as set out in the L.C. as was opened earlier in the first instance. In view of the above we hold that the shipment was not based on a confirmed letter of credit. We, therefore, uphold the order of the learned lower authority confiscating the goods under Section 111(d) of the Customs Act.
8. It is seen the appellants have not contested the valuation aspect and have merely stated that they accepted the value only for assessment purposes. The authorities have clearly shown that the value of the appellants' goods was lower than that of similar goods contemporaneously imported. The appellants without demur accepted the value fixed by the learned lower authority. The appellants have, therefore, to take the consequences of the under valuation and consequently the order of the learned lower authority confiscating the goods under Section 111(m), therefore, has to be upheld.
9. Taking into consideration the facts and circumstances of the case, we hold the redemption fine as fixed cannot be considered as high and, therefore, calls for no reduction. No case as such has also been made out for reduction of the redemption fine. Taking, however, the totality of the circumstances of the case and the pleas made, we hold that the ends of justice would be served if the penalty levied is reduced to Rs. 1,00,000 (Rs. one lakh) and we order accordingly.
10. But for the above modification the appeals are otherwise dismissed.