Calcutta High Court
Taiping International vs Collector Of Customs on 23 April, 1996
Equivalent citations: 1997(89)ELT457(CAL)
Author: Ruma Pal
Bench: Ruma Pal
JUDGMENT Ruma Pal, J.
1. The appellants had exported goods to India in July, 1988. According to the appellants, the goods were copper scraps and exported as such. According to the appellants, the goods were sent in two consignments in the names of two importers, namely, P.K. Kajaria and U.K. Kajaria (hereinafter referred to as 'the importers'). The payment for the goods was to be made through the Bank by retiring the documents of title to the goods. The importers failed to retire the documents. The documents were returned to the appellants' Banker in Singapore. The goods continued to remain at the Port of Calcutta.
2. In August, 1988 the goods were seized by the Customs Authorities. The appellants prayed to the Customs Authorities for leave to re-ship the goods as the title in the goods had not yet passed to the importers. The Customs Authorities refused. Instead, two Show Cause Notices, both dated 23rd February, 1989, were issued by the Customs Authorities to the importers alleging that they had contravened the provisions of the Customs Act, 1962 by misdeclaring at least 40% of the imported goods as copper scraps when they were, in fact, copper wires and by seeking to import copper wires unauthorisedly and without any valid licence. No Show Cause Notice was issued to the appellants, nor did the Show Cause Notice, issued to the importers, contain any allegation or charge against the appellants. Copies of the Show Cause Notices, issued to the importers, however, were forwarded to the appellants.
3. The importers did not submit any answer to the Show Cause Notices. The appellants did. In their answer the appellants claimed, inter alia, that the goods had been sent to India by the appellants pursuant to the orders placed by the importers and that the importers not having cleared the goods, the appellants should be permitted to re-ship the goods to Singapore. It was prayed that the Customs Authorities should 'allow any fresh buyer nominated by shipper/Banker to come forward and clear the goods upon payment of duty' and 'if no buyer is available, the goods should be allowed to be re-shipped at the earlier opportunity.'
4. It is not in dispute that out of the total amount of goods imported, only 40% of the goods are claimed by the Customs Authorities as being copper wires and not copper scraps. It is also not in dispute that as far as the copper scraps are concerned, it can by imported against an Open General Licence (in short, OGL). As far as copper wires are concerned, a separate licence was "required and the rate of duty was also higher than copper scraps at the relevant time.
5. The Adjudicating Authority held, "The action on the part of the importers in the present case to import the goods but to refrain from filing the Bill of Entry for clearance of the same is, therefore, an indication of the attempt that has been made, although not executed fully, to import the said goods in an unauthorised manner. As the invoice, the packing list and the Bill of Lading show that the goods were intended to be cleared by misdeclaring their description and value, and the importers stopped short of actual clearance after placing the order and importing the goods, the attempt on the part of the importers to unauthorisedly import these goods is clearly established. Since 40% of the goods are good quality copper wires, the value declared for the scrap is not valid and hence there is undervaluation to the extent of Rs. 2,41,318.00P. The party declaring the good quality copper wire as scrap has attempted to evade the duty to the extent of Rs. 5,13,961.OOP. The goods are, therefore, liable to confiscation under Section 111(m) of the Customs Act, 1962 and importers liable to penalty under Section 112(a) of the Customs Act, 1962.
6. The copper wires also require import licence under Appendix 3A whereas copper scrap is an O.G.L. item and in the absence of licence for the clearance of the goods the importation of the same in unauthorised.
7. As no valid import licence has been produced for the portion of goods requiring such a licence, the goods are liable for confiscation under Section 111(d) of the Customs Act, 1962 and the importers liable for penalty under Section 112(a) ibid. However, as the goods to the extent of 7.2756 tonnes (net weight) are in the form of copper coils the customs duty would be chargeable as copper coils both in terms of value and rate of duty. In the circumstances, the request of M/s. Taiping International for mutilation or for re-export of the goods cannot be permitted.
8. It will be seen that the basis of imposition of penalty and confiscation was a finding of the violation by the importers of provisions of the Customs Act, 1962 by misdeclaring 40% of the goods and unauthorisedly importing the same.
9. The importers then preferred an appeal before the Tribunal from the order of the Adjudicating Authority. The Adjudicating Authority was of the view, on the basis of the materials on record, that it was very doubtful whether there was any contract at all between the appellants and the importers. The Tribunal further held that the Adjudicating Authority itself had allowed the appellants the right to redeem the goods. It was clear, the Tribunal held, that the Adjudicating Authority had accepted the appellants as the owners of the goods. The Tribunal also held that there could be no question of misdeclaration as no Bill of Entry had been filed. According to the Tribunal, even assuming that there was an Agreement between the importers and the appellants herein, the Agreement was for supply of copper scraps and that if the appellants had sent something other than what had been ordered, (sic.) the importers could not be held liable. The Tribunal further held that although there may be a strong suspicion' against the importers, suspicion could not take the place of proof and that the importers should be granted the benefit of doubt. The penalty imposed on the importers by the Adjudicating Authority was accord- -ingly set aside. This was done on the finding that it had not been established that the importers had committed any offence by reason where of any sentence could be imposed upon them.
10. The appellants then filed a writ application before this Court. In the writ application the appellants challenged the order of the Adjudicating Authority and claimed, inter alia, re-shipment of the goods in question. In the alternative it was claimed that the respondent-Authorities should be directed to release 60% of the goods, which were admittedly copper scraps, to the appellants forthwith and to allow the balance 40% of the goods to be mutilated to copper scraps at the costs and expenses of the appellants and hand-over the same to the nominee of the appellants upon payment of customs duties as applicable to copper scraps.
11. The learned Single Judge rejected the writ application on the submission of the respondent authorities that the appellant had attempted to smuggle copper wire in coils mixing the same with copper scrap. The learned Single Judge also accepted the submission of the respondents that copper wire in coil could not be treated as a scrap. It was further successfully contended by the respondents before the learned Single Judge that the appellant had attempted to evade Customs duty. It was further submitted successfully that the whole consignment was correctly consfiscated as it was difficult to segregate the 60% scrap from the 40% of the wire as the wire would be damaged thereby.
12. In the appeal before us the appellant has submitted that the learned Judge's finding was wholly incorrect as there have been no allegation at any time against the appellant either that the appellant had sought to smuggle any goods into the country or that the appellant had tried to evade payment of duty. Secondly, it is submitted that the offence according to the adjudicating authority had been committed by the importers. On the basis of this finding the adjudicating authority had imposed penalty and directed confiscation of the goods. The Tribunal having found that the offence had not been established, the imposition of sentence either by way of personal penalty or confiscation of the goods could not also stand. Finally it is submitted that the learned Single Judge should have permitted the appellant to either re-ship the goods or permitted clearance of the 40% of the goods after mutilation of the same into scrap and payment of duty on such basis. Several decisions have been cited by the [appellant] in this context which will be considered subsequently.
13. The respondents have submitted that the show cause notice was in fact, made available to the appellant. The appellant had submitted an answer thereto. Reliance was also placed on the finding of the Tribunal in which certain adverse comments had been made regarding the Appellant. It is further submitted that if the Court were to allow the prayer of the appellant to clear the goods upon mutilation, the duty should be paid on the basis that 40% of the goods were copper wire and not copper scrap.
14. We are of the view that none of the submissions of the respondent can withstand scrutiny. The appellant is correct in its submission that there was no basis whatsoever for holding the appellant guilty of smuggling any portion of the goods as had been found by the learned Single Judge or that the appellant had been guilty of any evasion of duty. The show cause notice which was issued to the importers only contained allegations against the importers. No allegation at all of any kind has been made against the appellant under the show cause notice. The finding of guilt by the adjudication authority was also with regard to the importers and not with regard to the appellant. The mere fact that the appellant may have filed an answer to the show cause notice does not mean that there was any allegation against the appellant at all. It was the appellant's case from the beginning that what had been exported from Singapore to Calcutta was copper scrap and that there was no violation of any law by the appellant at any stage. Indeed the adjudicating authority also accepted this submission of the appellant.
15. Apart from the fact that the appellant had never been charged with having committed any offence under the Customs Act, 1962 is the further fact that the Tribunal has found that the only persons who had been charged with the offence could not be said to be guilty. The sentences imposed were consequential upon the establishment of the offence of alleged unauthorisedly attempting to import goods and of alleged misdeclaration. The Tribunal categorically held that the offence was not established. As a result, the consequential imposition of penalty and confiscation of the goods cannot be sustained. There is a further reason why the order of the Adjudicating Authority cannot be sustained. Admittedly only 40% of the goods had been allegedly imported in violation of the provisions of the Act. Yet the Adjudicating Authority purported to confiscate the entire amount and proceeded on this basis for the purpose of assessing the redemption fine.
16. The Adjudicating Authority also erred in not granting the prayer of the Appellant for reshipment or at least mutilation.
17. Section 24 of the Customs Act provides for the power to allow mutilation of imported goods at the request of the owner. When goods are so mutilated, in terms of the section itself they are chargeable to duty at such rate as would be applicable as if the goods had been imported in the mutilated form.
18. In addition in the Customs Appraising Manual Volume 1 (2nd Edition), 1990 paragraph 93 provides that the Customs authorities may when it is of the view that goods imported do not come within the definition of scrap, if no mala fide intention is suspected, allow clearance of the goods after mutilation of the goods at the rates applicable to scrap. As already found there has been no allegation by the Customs Authorities against the appellant at any stage regarding lack of bona fides in the show cause notice or in the order of adjudication.
19. In a series of decisions the High Courts as well as the CEGAT have permitted clearance of goods after mutilation when there was a dispute as to the nature of the goods imported. [See Lakhotia Udyog v. Union of India -; Appeal No. C-168/90, Order No. A-643/Cal/91, dated 7-10-1991; Hirdik Industrial Corporation, 108, Unique Industrial Estate, Cardinal Gracious Rd. v. Collector of Customs, Bombay - 1995 (11) RLT 245 (CEGAT-A); The Gwalior Rayon Silk Mfg. Co. Ltd. v. Collector of Central Excise, Indore - 1995 (11) RLT 248 (CEGAT-A)].
20. Having held that the order of the adjudicating authority cannot" stand and having regard to the power to allow mutilation of the goods, we are of the view that instead of allowing reshipment as prayed by the appellant, it would be for the benefit of all concerned if the goods were permitted to be imported by the appellants' nominee subject to the following conditions :
(i) 40% of the goods claimed by the Customs Authorities to be copper wire will be mutilated by the appellants in the presence of the Officers of the Customs so that they become copper scrap. The cost of such mutilation shall be borne by the appellant. Such mutilation shall be effected within a period of three weeks from date.
(ii) The appellant will submit a bill of entry to the Customs authorities after the goods have been so mutilated and in respect of the entire consignment of goods and will pay duty on the basis that the goods are copper scrap. The rate will be fixed on such basis in accordance with law. Such rate shall be determined on the bill of entry within a period of 48 hours from the date of submission thereof provided that the bill of entry is not submitted on Friday. After the bill of entry is so assessed by the Customs Authorities the appellant or its nominee will be entitled to clear the goods upon payment of the duty as assessed and upon payment of all Port charges, Warehousing charges, etc.
(iii) After the mutilation is completed the Customs Authorities will make over all original documents relating to the shipment of goods in question to the appellant or its nominee which had been handed over by the appellant to the Customs authorities.
21. There will be no order as to costs.
22. All parties concerned to act on a signed copy of the operative part of this judgment on the usual undertaking.
23. Let a xerox copy of the judgment, duly signed by the Assistant Registrar, be given to the parties upon their undertaking to apply for the certified copy of the judgment and upon payment of usual charges.
Sujit Kumar Sinha, J.
24. I agree.