Customs, Excise and Gold Tribunal - Tamil Nadu
Cce vs Ejaz Tanning Co. on 11 December, 2001
Equivalent citations: 2002(102)ECR398(TRI.-CHENNAI), 2002(148)ELT876(TRI-CHENNAI)
ORDER S.L. Peeran, Member (J)
1. These are two revenue appeals against two orders-in-original No. 22/95 dated 29.12.1995 and 25/95 dated 29.11.1995. Both the orders are against the same assessee and the question in both the appeals is the same including the facts and evidence. Although the orders passed by the Commissioner in terms of the show cause notice and allegations, they are two different orders because they were two separate imports pertaining to a item declared as VER-CRON BLUE R. The importer had claimed duty free under DEEC scheme and also availed benefit of notification No. 159/90 dated 30.3.1990 and 122/92 dated 1.3.1992. The consignment were intercepted and samples drawn were sent for chemical analysis. The revenue not only got the samples tested from their department chemical lab but also for the following reasons:
9. In order to find out the type of dye and name of the manufacturer of similar/identical dyes, representative samples of the subject consignment which drawn at CWC, Chitlapakkam, on 16.11.1992 were sent to different laboratories and they were requested to do chemical analysis of the samples to ascertain the name of the dye, substrate dyable, colour index number, name of the manufacturer of similar/identical dyes and the unit price. Following were the gist of the reports received.
(i) M/s Jayasynth Dyechem Ltd., Bombay in their reports dated 2.11.1992 and 1.12.1992 had stated that the goods were disperse dyes and that they were not used in leather industry, but used for nylon and polyester. They had also stated that the imported dyes could be either FORON BLUE SR or DISPERSE BLUE 7 which could not be used for dyeing leather and that both were very expensive.
(ii) M/s Colourchem Ltd., Bombay, agents of M/s Hoechst, Germany, had in their report dated 18.12.1992 stated that the aforesaid dye was similar to DISPERSE BLUE 354 manufactured by M/s Sandoz, Switzerland and that the substrate dyable was indicated to be polyester.
(iii) M/s United Bleachers Ltd., Mettupalayam in their report dated 24.12.1992 have stated that the aforesaid dye was a disperse dye similar to FORON BLUE SR manufactured by M/s Sandoz, Switzerland and also stated that it was a textile dye and not a tanning dye.
(iv) M/s Sandoz (India) Ltd., Madras (Chemicals, Leather Service Center) vide their letter dated 27.10.1992 had stated that they were manufacturing dyes for leather as well as textiles and that to the best of their knowledge disperse dyes were not being used for dyeing leather and so the sale of disperse dyes was limited to textile industries only.
(v) M/s Sandoz (India) Ltd., Bombay vide their report dated 1.2.1993 had stated that the aforesaid dye was similar and appeared to be identical to FORON BRILLIANT BLUE SRK of M/s Sandoz, Switzerland in terms of its hue and application properties, and that to their knowledge FORON BRILLIANT BLUE SRK was not recommended for dyeing of. (sic).
(vi) To carry out the identity of dyes under import, sample of FORON BLUE SRK manufactured by M/s Sandoz and the sample from the import consignment under seizure were forwarded to AC College of Technology, Madras. In his report dated 25.2,1993, Dr. Venkat Rao of Department of Textile Technology indicated that as per the test carried out of Spectrophotometer, both the above dyes had the same wave length at 617mm and hence both the above said dyes may be of the same chemical composition.
2. All these tests and allegations were made in para 10 to 15 which is extracted below:
10. From the above test reports, it appeared that the subject consignment was similar to FORON BRILLIANT BLUE SRK having colour index n umber 'DISPERSE BLUE 354" manufactured by M/s Sandoz, Switzerland which was used in dyeing in textile and not for dyeing leather.
11. The following references as to the usage of dyes did seem to suggest that the disperse dyes under import were primarily intended for use in dyeing polyester dyes.
(i) As per page No. 161, 170 and 323 of Encyclopedia of Chemical Technology, III Edition, Volume 8 by Kirk-Othmer Published by John Wiley Sons (Newyork) Chichester, Brisbane, Toronto, Disperse Dyes were used in polyester, nylon, cellulose diacelate, cellulose triacetate and acrylic fabrics. As per the usage classification of dyes at page 170 of the said book, acid dyes, direct dyes, Mordant dyes were used on leather whereas Disperse Dyes were used on polyester, polyamide, cellulose, acetate, acrylic and plastics.
(ii) With reference to the specific application of the subject goods FORON BRILLIANT BLUE SRK of colour index No. DISPERSE BLUE 354, the substrate dyable was polyester and triacetate and not leather as per page No. 8105 of Colour Index International, 3rd Edition (3rd Revision)(1987), Volume 8 by the Society of Dyers and Colourisis, American Association of Textiles Chemists and Colourists.
12. M/s Sanmark Business Services, the canvassing agents in India for M/s Sandoz, Switzerland in their letter dated 24.12.1992 had stated that the Unit price of FORON BRILLIANT BLUE SRK (DISPERSE BLUE 354) was SWF. 77.25 per Kg. for import of more than one tone quantity. This dye was imported by textile manufacturers. M/s Garden Silk Mills Ltd. had imported 1,000 Kgs. of FORON BRILLIANT BLUE SRK (DISPERSE BLUE 354) at the unit price of 77.256 SWF. per kg. CIF from M/s Sandoz, Switzerland vide invoice No. 230176 dated 9.6.1992.
13. Scrutiny of Advance Licence No. P/L/3529404 dated 23.4.1992 and the DEEC Book No. 054691 dated 23.4.1992 under which clearance of subject consignment of disperse dyes was sought by Ejaz resulted in observing gross irregularities in the matter of issue of amendment slips in favour of Ejaz which enabled them in getting duly free clearances for abnormal quantities of dyes. In this connection, it was noticed that the quantity of dyes permitted for import as per the amendment slip attached to the relevant advance licence and the DEEC Book was exorbitant and manifold in comparison with the norms prescribed. Evidence gathered prima facie pointed out allegations as to collusion and conspiracy on the part of Ejaz of certain officials of the office of JCCI & E, Madias resulting in manipulation of the terms of advance licence by way of amendments which facilitated Ejaz to avail of the duty free clearances under DEEC Scheme in respect of huge quantity of dyes imported, not only in respect of the consignment under seizure but also in respect of several other earlier consignments. In short, prima facie, the following irregularities were noticed in the matter and amendments made on the licences under which the dyes in question were imported.
(a) Gross enhancement of quantity of select inputs in flagrant violations of norms' and "quantity Restrictions" and quantitative export obligations;
(b) Ante-dating of documents, namely, application of importer for enhancement of import quantity of select items to cover up the irregularities in the matter of issue of amendment slips leading to fabrication of false evidence;
(c) Unauthorised removal of individual quantity restrictions and
(d) Amendment slip enhancing export obligation found in the relevant file of JCC1 & E was not found in the relevant licence or DEEC Book.
14. The licence was issued as per the provisions of Export & Import Policy for 1990-93. As per the list attached to the licence, the same was valid for import of 450 Kgs. of dyes/pigments of C1F value US$ 1166.02. Export obligation under the said licence was Rs. 25 lakhs. As per the amendment slip attached to the licence, the quantity of dyes/pigments was enhanced from 450 Kgs. to 9899 Kgs. which was more by nearly 22 times, the original quantity whereas the CIF value of the licence was enhanced from US$ 40090.48 to US$ 95,025 and the FOB value of export obligation was increased from Rs. 25 lakhs to Rs. 50.25 lakhs only. It was observed that the quantities of dyes permitted for import as per the amendment slip is exorbitant and manifold in comparison with the norms prescribed. Scrutiny of file F.No. 04/08/040/00822/AM.92 relating to the issuance of advance licence by the office of JCCI & E, Madras revealed that M/s Ejaz filed an application on 29.4.1992 under para 343 of the Hand Book of Procedures for 1990-93 for enhancement of CIF value of the licence claiming that the prices of inputs and freight have increased and because of devaluation of rupee, the Indian equivalent of CIF value had also increased. It was to be noted that under the said para 343, the licensing authorities may enhance the CIF value of the licence in the case of higher freight on upward variation in exchange rate of increase in the cost of input allowed for import provided the FOB value of export obligation prescribed was also correspondingly enhanced on pro rata basis. It was clear from this para that the individual quantities of the items allowed for import could not be changed. However, as already stated, the quantity allowed for import of dyes was enhanced to nearly 22 times and original quantity. Ejaz in their application for enhancement of value of licence, did not request for increasing the individual quantities of items allowed for import. It was observed that there was collusion on the part of persons at the helm of affairs at Ejaz and certain official.of the office of JCCI & E, Madras resulting in the above mentioned manipulation by way of amendment which gave unintended benefit of Ejaz to avail of duty free clearances under the DEEC Scheme. A detailed reference was made to the JCCI & E, Madras on 2.2.1993 and in his reply dated 9.2.1993, he had confirmed that the quantities of item in the amendment slip No. 1 were not in accordance with the norms and that the same was unauthorised. The officials of the JCCI & E, Madras were examined in this regard as also Shri Ejaz Ahmed of Ejaz.
15. When the investigation was in progress, the importers filed W.P. No. 19791 and 19792 of 1992 in Madras High Court praying inter alia release of the consignment. After hearing the parties, Hon'ble Court by common order dated 15.12.1992 directed DRI to complete the investigation within eight weeks from 15.12.1992 and the Collector of Customs was also directed to issue the Show Cause Notice, if found necessary, within two weeks thereafter. The time for completion of investigation was subsequently extended upto 6.4.1993 and time to issue show cause notice was extended by two weeks after 6.4.1993 by order dated 12.2.1993 of Madras High Court.
16. During the course of investigation, statements under Section 108 of the Customs Act, 1962 were recorded from various persons, the gists of which were given below:
3. The paras 16 to 36 of the impugned order relates to various statement and other contraventions.
4. The paras 37 to 41 summarises the allegations and other charges. The same are extracted:
37. From the foregoing it appears that--
(i) the Disperse Dye imported by Ejaz and described "VERCRON BLUE R" in the invoice, Bill of Entry and other documents is required in the polyester/textile industry and not in leather industry;
(ii) the institutions/laboratories which have tested the dye including M/s. Sandoz (India) who are the local manufacturers of Sandoz, Switzerland products have ascertained that the dye under import is identical to FORON BRILLIANT BLUE SRK manufactured by M/s. Sandoz, Switzerland;
(iii) the technical authorities and testing houses, commercial houses who market disperse dyes and manufacturers of disperse dyes have confirmed that this disperse dye is not for use in leather industry. The literature on the product quoted earlier in this notice also states the same and M/s. Sandoz, Switzerland, the manufacturers of FORON BRILLIANT BLUE SRK has not recommended this dye for dyeing of leather;
(iv) under exemption Notification (DEEC Scheme) No. 159/90, only materials 'being materials required to be imported, for the purpose of manufacture of products' are eligible for exemption from Customs duty. As the dye under import is not required for use in leather industry, Ejaz, who hold DEEC import licence and book with obligation to export leather goods, is not eligible to import the said dye. Their claim is a wilful mis-statement and mis-representation.
(v) VERCRON BLUE R was not being used in the manufacture of leather good in Ejaz tannery. This is clear from the process book and dey-ing note. However, the advance licence register handed over by Shri Ish-tiaq Ahmed, partner of Ejaz on 22.10.1992 when he appeared under summons before the DRI authorities mentions receipt and consumption of VERCRON BLUE R at page 56. Certain quantities were mentioned presumably as quantity used without assigning any dates or other particulars. These entries appeared to lack all credibility as the process book and dyeing note did not reveal any use of this dye. As already staled in this notice, this dye was not for use in leather industry.
(vi) There is no dye in the registered brand name or trade name of 'VERCRON BLUE R' and the importer had not produced during enquiry any correspondence or any material to show that such a product existed and what its dyeing and other properties were. As Shri Ejaz Ahmed, in charge of import planning and other foreign trade related activities, had admitted in his statement that he was not aware of any of the qualities of this product, the invoice and other documents were produced only to conceal the real nature of the product and to clear the same in the guise of leather dye;
(vii) The amendment slip to licence No. P/L/3529404 dt. 23.4.1992 under which the import of 9,899 K.gs. dye had been authorised has been obtained by fraud and collusion. While the application from the importer (based on which such enhancement of quantity had been made) requested for proportionate increase of export obligation from Rs. 25 lakhs to Rs. 50.25 lakhs, that is twice the vlaue, authorisation had been given in respect of this item at an enhanced quantity from 450 kgs to 9,899 kgs., that was enhanced by nearly 22 times. Further, under para 343 of the Hand Book of Procedures, in this particular case, only increase in value alone,could be made on account of change in the exchange rates, freight, etc. and not in respect of quantities.
(viii) The amendment slip under reference had been issued with the connivance of certain official of the Office of JCC1 & E, Madras in contravention of rules for issue of amendments to advance licences in view of the same the said advance licence and the DEEC Book were not valid for duty free clearance of the said consignment against Customs Notification No. 159/90 and 122/92.
(ix) Sanmark Business Services, canvassing agents of M/s Sandoz had mentioned that the value of FORON BRILLIANT BLUE SRK (which is identical to the subject consignment of dye) as SWF 77.25 Kg. as against US$ 7.25 per Kg. declared in the invoice. Contemporaneous import of FORON BRILLIANT BLUE SRK was effected by M/s Garden Silk Mills at SWF 77.256 per Kg. at Bombay Port. The value declared by Ejaz was a gross misdeclaralion and the correct assessable value for the subject consignment under seizure was liable to be fixed at SWF 77.256 under Rule 8 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, and a duty of Rs. 34,16,031/- was chargeable thereon and
(x) As the importer had wilfully misstated the goods as to its nature and value as aforesaid, suppressed the fact that they were textiles dye and colluded with Shri M. Gopinath of JCCI & E office in getting amendment for enhanced quantity unauthorisedly and fraudulently and in a manner contrary to the provisions of the DEEC Scheme, the extended period of 'five years' prescribed under Proviso to Section 28 of the Customs Act, 1962 was invokable in this case for the purpose of demanding differential duty. The Hon'ble High Court of Madras had also extended the period for issue of show cause notice in this case up to 20th April, 1993.
38. Since the goods did not correspond with the description and value in the Bill of Entry filed under the Customs Act as aforesaid, the goods were liable to confiscation under Section 111(m) of the Customs Act, 1962.
39. It also appeared that M/s. Ejaz Tanning Co., and Shri Ejaz Ahmed, the Managing Partner of M/s. Ejaz Tanning Co., were liable to penalty under Section I I2(a) of the Customs Act, 1962, for the aforesaid misdeclarations which had rendered the goods liable to confiscation. Shri M. Gopinalh, ACCI & E, Madras appears to had been knowingly and deliberately acting in collusion with the importers and was issuing without authority and contrary to law amendment slips and enhancement of quantity in order to facilitate the aforesaid evasion of duty and hence he was liable for penalty under Section 112(a) of the Customs Act, 1962.
40. Therefore, M/s. Ejaz Tanning Co., Madras, were called upon to show cause to the Collector of Customs (Judicial), Custom House, Madras, as to why:
(a) the consignment of 1,000 Kgs. of VERCRON BLUE R under seizure should not be confiscated under Section 111(d) and (m) of the Customs Act, 1962,
(b) the benefits of notification No. 159/90-Cus., and 122/92-Cus. should not be denied and as to why Customs duty of Rs. 34,16,031/- (as detailed in the work sheet) should not be recovered from them under proviso to Section 28 of the Customs Act, 1962, for reasons of wilful mis-statement, fraud mentioned supra, and,
(c) penalty under Section 112(a) of the Customs Act, should not be imposed on them.
41. Shri Ejaz Ahmed, Managing Partner of M/s. Ejaz Tanning Co., Madras was called upon to show cause to the Collector of Customs (Judicial), Custom House, Madras-600 001 within 30 days from the date of receipt of show cause notice as to why penalty under Section 112(a) of the Customs Act, 1962, should not be imposed on him.
5. The impugned order refers to the reply filed by the respondent in para 45 to 98. The Commissioner has given his finding in para 98 to 100.3 setting aside seizure of consignment and grant of benefit of the notification and dropped the charge of imposition of penalty, etc. The finding in order-in-original No. 22/95 pertains to import of Sulphur Bright Green and in this case the department sent the samples to private lab namely M/s. Colour Chem Ltd. in view of the fact that the department had no facility. M/s. Colour Chem Ltd. gave the report on 4.12.1992 stating that the sample was found to be Sulphur Dye Stuff and it could mainly dye cotton material and not a leather dye. Therefore, the allegation was brought following that the imported material does not satisfy the term of the notification which grants benefit to dyes used for leather. However, the Commissioner after examining the matter dropped the proceedings.
6. The Revenue in this appeal contend that the Commissioner has not examined the test results of M/s. Jayant Dye Chem Ltd. Bombay, M/s. Colour Chem Ltd., Bombay and M/s. United Bleachem Ltd., Met-tupalayam and M/s. Sandoz, India. He has only relied on the importer's report obtained from Central Leather Research Institute (CLRI) and the samples were not drawn in the presence of the department officials and hence it was not classified or reliable evidence. The various documents seized and statement reveals that the item was not properly accounted and not been used for dyeing leather. It is also contended that there is no specific finding on the various tests results including the technical literature and the order is not a speaking order and in terms of these materials, the Commissioner ought to have confiscated all the goods and should have denied the benefit of notification imposing penalty.
7. Ld. DR Shri C. Mani took us through both the orders and grounds of appeal and prayed for setting aside the order and sought for an order of imposition of penalty.
8. The Respondents were served with notice to the Tribunal and also notices were directed to be served through Commissioner and the Commissioner has served the notices on the Respondents and has produced the acknowledgement dated 10.12.2001 of service of notice of hearing. Therefore, the Respondents despite service of notice have not appeared in the matter and as such both the orders are being taken up for decision on merits.
9. On a careful consideration of the order passed by the Commissioner in order-in-original No. 22/95 dated 29.12.1995 the previous import of VERCRON BLUE R, where the Commissioner has relied on the Respondent's test result produced from CLRI and also the letter clarifying the test result by M/s. Sandoz India. He has also noted that these goods have been cleared on earlier occasion by granting benefit. But there is no finding with regard to other test results relied by the Department. There is also no finding on the Department's contentions that the CLRI report cannot be relied as the samples were not drawn in the presence of departmental officials. We, after due consideration noticed that the Commissioner ought to have given complete finding as to why the reports relied by the revenue are not required to be accepted and in view of this infirmity we are of the considered opinion that the matter has to go back to the Commissioner for de novo consideration. The Commissioner has to give an opportunity to the respondent to counter all the allegations and after giving due opportunity of hearing and record his findings on all the points raised in the show cause notice including the evidence relied by the revenue.
10. In so far as the order-in-original No. 25/95 dated 29.12.1995 is concerned, we notice that the revenue had relied on the test results of the sample obtained from M/s. Colour Chem Ltd. The test result had clearly indicated that the item is mainly dyeing cotton material and not a leather dye. The report also had relied on Encyclopedia of Chemical Technology Third Edition, Volume 8 by Mr. K. Kirthomeer (sic) published by John Wilson besides Condensed Chemical Technology Tenth edition of Gessner G. Hawley which explains that sulphur dye was usually to cotton. We notice that the Commissioner has only taken into consideration the clarification of goods on previous occasion by the customs authorities. However, there is no categorical examination and finding on the report and chemical opinion by the Colour Chem Ltd. Therefore, this matter is also required to be remanded back to the Commissioner for de novo consideration. The Commissioner in both the matters will grant sufficient opportunity to the importers after due services of notices and re-adjudicate the matter in the light of allegation and the test results produced by the revenue. The respondents' submission may also be taken in for consideration as per law.
(Order dictated and pronounced in the open Court)