Customs, Excise and Gold Tribunal - Delhi
Universal Traders, Mehmood Gulam ... vs Cc (Exports) on 26 May, 2006
Equivalent citations: 2006(112)ECC357, 2006ECR357(TRI.-MUMBAI)
ORDER C.N.B. Nair, Member (T)
1. All these appeals are directed against the same adjudication order. They were heard together and are disposed of under this common order.
2. Material facts leading to the passing of the impugned order are that first appellant M/s Universal Traders, Mumbai filed shipping Bill No. 5137775 dated 25.09.2003 for exporting a consignment. The goods in ten drums was declared as 'Perfume Attar-Raat Rani'. The export price was declared around Rs. 1.4 lakhs.
3. Based on information that the consignment actually is Sandalwood Oil, the Customs authorities started investigation. The testing of sample in the customs laboratory confirmed the presence of Sandalwood Oil in the consignment. But purity could not be ascertained. Indian Institute of Technology of Mumbai stated as under about the samples:
The samples are analysed by Gas chromatography method on GC-MS. The above results are based on area percent of Santalol (Sandalwood Oil) in the volatile matter that can be analyzed on GC". The percentage of purity (based on Area%) of the volatile matter was reported as below.
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Sr. No. Sample No. Purity (based on Area%)
% of the volatile matter
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1. Drum No. 1 65.60%
2. Drum No. 2 22.50%
3. Drum No. 3 51.93%
4. Drum No. 4 54.60%
5. Drum No. 5 42.83%
6. Drum No. 6 56.70%
7. Drum No. 7 19.44%
8. Drum No. 8 61.91%
9. Drum No. 10 57.50%
4. Thus, the test report confirmed that the goods were Sandalwood Oil of different purities. Customs officers also carried out enquiries with the exporter. It was found that Mrs. Naseema Mohd. Patni was the sole Proprietor of the firm which had filed the Shipping Bill. Her explanation was that all the transaction in the export business were being handled by her brother Sh. Usman Sattar Patni and her husband Sh. Mohd Patni and she used to sign on export documents as instructed by them. She also stated that she was aware that the subject goods were prepared by mixing local base oil with sandal wood oil. Sh. Usman Abdul Sattar Patni stated that order for supply of sandalwood oil mixed with base oil was received from M/s Mak Flowers, Dubai (consignee). He also admitted knowingly misdeclaring the Sandalwood Oil to custom, because export of Sandalwood Oil was not allowed from India and it required special license from the Forest Department as well as DGFT. He also stated that the goods were under invoiced to avoid custom duty at Dubai. Shri Mehmood Gulam Hussain Patni also admitted to taking part in the preparation of the export consignment.
5. Based on the prices indicated by forest authorities, the consignment was valued about Rs. 25 lakhs against the declared value of Rs. 1.4 lakhs. Thus, misdeclared of value was also found.
6. Export of Sandalwood Oil is not permitted except under special license. This license is given only to specified categories. Since the appellants were found to violate the export law as well as under invoicing of the consignment, proceedings were initiated proposing to confiscate the goods and to penalize the present appellants. In the adjudication proceedings, the appellant denied all charges and sought permission to take the goods back. The Commissioner rejected the appellant's explanation and confirmed the charges in the show cause notice. He found that the appellants had knowingly misdeclared the Sandalwood Oil in the customs documents to overcome the restriction placed on export of Sandalwood Oil. He also confirmed the charge of under valuation. He, therefore, absolutely confiscated the consignment and imposed penalties on the appellants. The order reads:
36. Accordingly, I pass the following orders a. I order absolute confiscation of Sandalwood Oil covered under shipping bill No. 5137775 dt. 25.09.03 and now valued at Rs. 25,23,750/- (LMV) under the provision of Section 113(d), 113(h) and 113(i) of the Customs Act, 1962.
b. I impose penalty of Rs. 5,00,000/- (Rupees five lakhs only) on the Exporter M/s Universal Traders under Section 114(i) of Customs Act, 1962.
c. I also impose penalty of Rs. 2,00,000/- (Rupees two lakhs only) on Shri Usman Abdul Sattar Patni (Kapadia) under Section 114(i) of Customs Act, 1962.
d. I also impost, penalty of Rs. 50,000/- (Rupees fifty thousand only, on shri Mehmood Gulam Hussain Patni under Section 14(i) of Customs Act, 1962.
7. The present appeals are directed against the above orders. The contention of the appellants in the present appeals is that the case of the Revenue that the export consignment was Sandalwood Oil has not been proved inasmuch as the tests have not confirmed the consignment as of Sandalwood Oil. It is the contention of the learned Counsel that the presence of Sandalwood Oil in the consignment did not mean that the consignment was of Sandalwood Oil. Instead, it only means that perfume has been made by use of Sandalwood Oil. It is being pointed out that there is no prohibition on export of perfumes made by use of Sandalwood Oil. Purity also is very low. It is being submitted that since the case of the department has not been established, the consignment is required to be returned. It is also being contended that, in any event, the appellants should be allowed to redeem the consignment on payment of redemption fine.
8. As against the aforesaid contentions on behalf of the appellants, learned SDR submits that the case of misdeclaration remains fully established. It is his submission that once the consignment was found to be different from the declared goods i.e. 'Perfume Attar-Raat Rani' the charge of misdeclaration remains established. He also points out that the consignment is essentially Sandalwood Oil only, inasmuch as adding of base oil has been made only to conceal the identity of the real goods under export i.e. Sandalwood Oil. According to the SDR, the deliberate fraud by the appellant is clear from the published material about 'Attar' produced by the appellants themselves. The published material shows that 'Attar' is a perfume oil made from flower petals distilled in water using low heat and pressure. Some 'attars' also contain exotic woods, spices and resins. The steam containing the fragrance oils is collected over several weeks of distillation into a container of mild sandalwood oil. There, the oils blend together until the sandalwood is completely saturated with the fragrance of the flowers. The submission of the ld. SDR is that as against this method of manufacturing 'attar', in the present case, the appellants have only mixed cheap oil with Sandalwood Oil merely to conceal the identity. Learned SDR also submitted that fraud is clear from the massive under invoicing of the consignment. Learned SDR also contests the appellant's claim to redeem the goods. It is his submission that permission to redeem such offending goods would only encourage efforts to smuggle Sandalwood Oil. He, has therefore, submitted that the impugned order is required to be confirmed in toto.
9. Evidence on record clearly brings out that the consignment is not the declared item. The consignment was declared as of 'attar'. But it is not 'attar' at all. It was not produced or bought as 'attar'. It was prepared by mixing cheap oils into Sandalwood Oil. Therefore, the finding of the Commissioner that goods have been misdeclared and are liable to confiscation is sound. The evidence of the appellants themselves during investigation was that they had misdeclared the goods in regard to description and value for specific consideration. Description, because Sandalwood Oil is not allowed to be exported and value, so as to evade custom duty at Dubai. The method of preparation explained by them also shows that the consignment was deliberately prepared to conceal the real product under export i.e. Sandalwood Oil. Thus, this is a case of clear fraud on the Customs authorities, illegal activities like this also has remifications into the larger problem of illegal felling of Sandalwood trees., preparation of Sandalwood Oil illegally and illegal trading in this forest produce. Such illegal activities also cause crime An appellate authority would be well advised not to interfere with confiscation and penalty orders passed in such cases. Accordingly, we confirm the impugned order and reject all the appeals.
[Order pronounced on 01.2006] Archana Wadhwa, Member (J)
10. I have gone through the order proposed by my Ld. Brother and Shri C.N.B. Nair, I am fully in agreement with the finding of mis-declaration and under valuation arrived at by him. However I am of the view that the goods in question should be allowed to be redeemed on payment of fine in terms of the provisions of Section 125 of the Customs Act, instead of absolutely confiscating the same inasmuch as, admittedly the goods are not prohibited for exports but only required Special Licence for Export of the same. The law on absolute confiscation vis-a-vis option to redeem the same stands discussed in details by the Tribunal in the case of Gauri Enterprises v. Commissioner of Customs, Pune and it was observed that resort to absolute confiscation should be an exception and not the rule. As such, I am of the view that the appellant should be given an option to redeem the goods on payment of fine, for which purposes I remand the matter to the Commissioner for fixing the quantum of redemption fine.
(Archana Wadhwa) Member (J) Difference of Opinion
11. Whether the appeals are required to be rejected in their totality as held by Ld. Member (Technical) or the matter should be remanded for the limited purpose of fixing of redemption fine in respect of confiscated goods, as observed by Member (Judicial).
S.S. Kang, Vice President
12. The following difference of opinion is referred to the 3rd Member.
Whether the appeals are required to be rejected in their totality as held by Ld. Member (Technical) or the matter should be remanded for the limited purpose of fixing of redemption fine in respect of confiscated goods, as observed by Member (Judicial)
13. The ld. Counsel appearing on behalf of the appellant after relying upon the provisions of Section 125 of Customs Act and also on the EXIM policy for the year 2002-07, there was no restrictions for export of sandalwood oil. The contention is that even the goods are liable for confiscation, the adjudicating authority has discretion to allow the release of the goods on payment of redemption fine. The appellant relied upon the decision of the Tribunal in the case of Gauri Enterprises v. CC and submitted that the Tribunal in this case allowed the goods in question to be released on payment of redemption fine, after noticing the fact that in respect of the other exporters, the adjudicating authority has given an option to redeem the goods on payment of redemption fine. In the present case also the Commissioner of Customs vide order dated 16.1.01 in a similar situation where the goods were declared as Attar and the adjudicating authority held that the goods are Sandal wood oil and after confiscation given an option to redeem the goods on payment of fine. The contention of the appellant is that as per the provisions of Section 125 of Customs Act, the appellants are entitled to redeem the goods on payment of redemption fine.
14. The contention of the Revenue is that both the Hon'ble Members held that the sandalwood oil requires a special licence for export, therefore, the issue whether the sandalwood oil can be exported without any restriction or it is prohibited item cannot be gone into at this stage. The contention is that as the goods were mis-declared and were highly under value, therefore, these were rightly confiscated.
15. As per the provisions of Section 125 of Customs Act whenever confiscation of any goods is authorized by this Act, the adjudicating authority may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods, an option to pay in lieu of confiscation such fine as the said officer thinks, fit. The Tribunal in the case of Gauri Enterprises (supra) relied upon by the appellant has gone into in details on this issue held that absolute confiscation should be an exception rather than a rule and due to change in the object and reasons under the import and Export Act and foreign trade Act resort to absolute confiscation should be an exception and not the rule. The Tribunal after reiving upon the decision of Hon'ble Calcutta High Court in the case of Mercantile Express Co. Ltd. v. Assistant Collector and after nothing that in the case of other importers the same goods were confiscated and the same were allowed to be released on payment of fins. In the present case also the same goods were allowed to be redeemed on payment of fine vide order dated 16.1.01.
16. In view of the above discussion. I agree with the view taken by the Honble Member (Judicial) and the matter is to be remanded to the Commissioner of Customs for fixing the quantum of redemption fine.
(Dictated & pronounced in open Court on 26.5.06) (S.S. Kang) Vice President Final Order 305-307/06-Cus.
Archana Wadhwa, Member (J) In view of the majority opinion, the impugned order is set aside and the matter remanded to Commissioner for fixing the redemption fine in respect of the confiscated goods. The appeal is disposed of in above manner.