Custom, Excise & Service Tax Tribunal
General Export Enterprises vs Commissioner Of Customs (Export), ... on 14 December, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No. C/552/09 (Arising out of Order-in-Original No. 03/2009 dated 6.4.2009 passed by Commissioner of Customs (Export), JNCH, Nhava Sheva) For approval and signature: Honble Mr. P.G. Chacko, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== General Export Enterprises Appellant Vs. Commissioner of Customs (Export), Nhava Sheva Respondent Appearance: Shri S.S. Sekhon, Advocate with Shri R.V. Shetty, Advocate, for appellant Shri B.P. Pereira, Authorised Representative (JDR), for respondent CORAM: Honble Mr. P.G. Chacko, Member (Judicial) Date of Hearing: 14.12.2010 Date of Decision: 14.12.2010 ORDER NO
This appeal has arisen from time to time for final hearing. As it appears from the records, the Bench wanted to know whether the subject-goods were cleared for export under bond. The DR was required to produce the bond, if any, for which purpose the matter stood adjourned from time to time. Today, the learned JDR submits that all the queries in this regard have gone unheeded by the Commissionerate concerned. In this connection, he has shown me copies of the letters issued by him to the Commissioner of Customs (Export), JNCH, Nhava Sheva. These letters indicate that the Commissioner was requested to confirm whether any bond or undertaking had been executed by the appellant before the goods were exported. Apparently, the Commissioner of Customs (Export) has not so far cared to answer the crucial queries put by the JDR. In this scenario, adverse inference will be raised against the department. Accordingly, I would like to proceed on the premise that the appellant was not required by the proper officer of Customs to execute any bond or undertaking before the goods were cleared for export.
2. Three consignments of manmade fabrics of 100% polyester filament were presented for export under shipping bills wherein the FOB values and GSMs of the goods were declared as shown below:-
Sr. No. Shipping Bill No. & Date FOB value (Rs.) Declared GSM
1.
4635120 / 29.9.2006 13,38,073.00 110-180
2. 4658444 / 9.10.2006 6,21,661.70 110-180
3. 4714924 / 1.11.2006 22,20,128.00 130 +/ 10% Total: 41,79,862.70 The shipping bills were filed under DFIA (Duty-Free Import Authorisation) Scheme. The DFIA licences in respect of the first and second consignments permitted export of 100% polyester fabric (made of manmade filament) with GSM of 110-180 and entitled the exporter to import manmade filaments of the same material and of the same GSM as also of the same FOB value. In respect of the third consignment, the exporter could export similar fabrics dyed/printed (lungies) of GSM +/-10% and was entitled to import the fabrics (unprocessed) of the same GSM and of the same FOB value. The shipping bills were processed and the consignments were cleared for export under Let Export Orders issued by the officer. The representative samples of the goods, which were drawn before exportation of the goods, were sent to the departments chemical laboratory for ascertaining the nature and composition of the goods and the GSM of the fabrics. The Chemical Examiner reported the GSM (grams per square meter) of the fabrics covered by the shipping bills dated 29.9.2006, 9.10.2006 and 1.11.2006 to be 95.7, 102.8 and 94.2 respectively. The department found the GSM values reported by the Chemical Examiner to be very low compared to those declared by the exporter. A similar view was consequently taken in respect of the FOB value. On this basis, a show-cause notice was issued to the party, proposing (a) to confiscate the goods under Section 113(h) & (i) of the Customs Act; (b) to impose penalty under Section 114 of the Act, and (c) to deny the benefit of the DFIA Scheme to the exporter. These proposals were contested. In adjudication of the dispute, the learned Commissioner of Customs (Export) passed the following order:-
ORDER
(i) I order confiscation of goods exported vide 3 S/Bills viz. S/Bill No.4658444/09.10.2006, 4714924/01.11.2006 and 4635120/29.09.2006 totally valued at Rs.41,79,862.70 under the provisions of Section 113(h) & (i) of the Customs Act, 1962. I allow the exporter M/s. General Export Enterprises to redeem the goods on payment of redemption fine of Rs.8,00,000/- (Rupees Eight Lakhs Only) under section 125 of the Customs Act, 1962.
(ii) I deny the benefits to the exporter under Duty Free Import Authorization Scheme pertaining to the said three S/Bills.
(iii) I impose penalty of Rs.4,00,000/- (Rupees Four Lakhs Only) on exporter M/s. General Export Enterprises u/s. 114(iii) of the Customs Act, 1962. The present appeal is directed against the above order of the Commissioner.
3. The learned counsel for the appellant has, apart from reiterating the grounds of this appeal and the further submission dated 9.11.2010, advanced certain legal arguments. It is submitted that, as the goods were not available for confiscation, no fine could have been validly imposed by the adjudicating authority. In this connection, the learned counsel has relied on a plethora of decisions including Shiv Kripa Ispat Pvt. Ltd. vs. CCE, Nasik 2009 (235) ELT 623 (Tri.-LB), wherein it was held by a Larger Bench of this Tribunal that Section 125 of the Customs Act was applicable only in those cases where goods under import or export were allowed to be cleared under bond or other security furnished by the importer/exporter. I have heard the learned JDR also on this aspect. The goods in question were allowed to be cleared for export without requiring the exporter to furnish any bond or undertaking. They were not physically available for confiscation when the impugned order was passed. On these facts, the Larger Bench decision is squarely applicable and, consequently, the fine imposed by the Commissioner in lieu of confiscation of the goods is liable to be set aside. It is ordered accordingly.
4. The next question is whether the penalty imposed on the appellant under Section 114 of the Customs Act is legally sustainable. The learned Commissioner imposed the penalty on the exporter on the ground that they had misdeclared the goods by way of misdeclaring their GSM values. The learned counsel has argued that, in the facts and circumstances of the case, it cannot be held that the appellant misdeclared anything with ulterior purposes. The shipping bills were filed and processed in the EDI system and a copy thereof was delivered to the exporter by the proper officer of Customs after ascertaining the actual GSM values of the goods from the Chemical Examiners report. The licensing authority (DGFT) would consider such copy of the shipping bill in the context of issuing a DFIA. In other words, according to the learned counsel, nothing was misdeclared before the licensing authority with intent to enjoy undue DFIA benefit. It is further argued that the goods, which were not available for seizure and, for that matter, for confiscation, cannot be said to be liable to confiscation under Section 113 of the act. It is argued that such liability has got to be determined with reference to the provisions of Section 110 of the Act. The learned counsel has endeavoured to amplify the point. The gist of his submissions is that the provisions of Section 113 of the Act could be invoked only where the goods are available for seizure. An officer of Customs would seize goods if he has reason to believe that the goods are liable to confiscation under the Customs Act. In the absence of the goods, there can be no reason to confiscate either and, therefore, goods which are not available for seizure cannot be held liable to confiscation and, for that matter, the importer or exporter, as the case may be, cannot be held to have indulged in any commission or omission rendering the goods liable to confiscation. The learned JDR has opposed these arguments. It is submitted that, if these arguments of the counsel are accepted, the provisions of Section 113 would become deadletters.
5. The learned counsel has also relied on case law. In the first instance, he has claimed support from Haniff Shabbir Brothers vs. CC, Madras 1997 (96) ELT 27 (Mad.). In the cited case, it was held that, in the absence of any order of confiscation of goods under import, there could not be any imposition of penalty under Section 112 of the Customs Act. In that case, though the show-cause notice proposed confiscation in addition to levy of penalty, no such order of confiscation was made at all and only penalty simpliciter was imposed. Apparently, the order of adjudication, in that case, was challenged before the Board and the Boards decision was taken to the Revisionary Authority (Government of India) and the matter ultimately stood transferred to the Tribunal. The Tribunals order came to be the subject-matter of a reference to the High Court. One of the questions referred to the High Court was Whether the Tribunal was correct in setting aside the order after holding that an imposition of penalty under Section 112 could not be legal when there was no finding in regard to the liability of the goods to confiscation. This issue was answered in the negative against the department by the Honble High Court. Therefore, the argument of the learned counsel is that, in the absence of liability of the goods to confiscation, there can be no penalty under Section 114 of the Customs Act on the exporter. Reliance has also been placed on Hindustan Steel Ltd. vs. State of Orissa 1978 (2) ELT (J 159) (SC), wherein it had been held by the apex court that no penalty should be imposed for technical or venial breach of legal provisions or where the breach flowed from the bona fide belief that the offender was not liable to act in the manner prescribed by the statute.
6. I have considered the submissions. In the present case, the show-cause notice proposed to impose a penalty on the exporter under Section 114 of the Act, alleging that they had misdeclared the GSM of the export goods. The adjudicating authority upheld this allegation and imposed a penalty on the party under the said provision of law. It invoked Section 113(h) & (i) of the Act to hold the subject-goods liable to confiscation. It held to the effect that the exporter had rendered the goods so liable to confiscation and, hence, was liable to be penalized under Section 114 of the Act. Under Section 113(h), any goods which are not included or are in excess of those included in the entry made under the Customs Act are liable to confiscation. Any goods in excess of what was entered in the shipping bills was not presented by the party for exportation, nor was it the Revenues case that the quantity of the goods presented for exportation was less than the quantity entered in the shipping bills. Therefore, clause (h) of Section 113 is not applicable. Under clause (i), any goods entered for exportation, which did not correspond in respect of value or in any material particular with the entry made under the Customs and are also liable to confiscation. The appellant has no case that they had no obligation to declare GSM in the shipping bills. As a matter of fact, the learned counsel has fairly shown me a copy of the relevant public notice issued by the Government of India, which clarified the relevant provisions of the EXIM Policy. This public notice was issued on 27.9.2007 clarifying the Policy of 2004-09. The exports in question were made in 2006. The clarificatory public notice is liable to be given retrospective effect. Therefore, it has to be held that the appellant was liable to declare GSM of the fabrics under export under the DFIA Scheme. It is significant to note that the appellant has not argued to the contra. The Chemical Examiners report furnished GSM values below the declared GSM values. The report has not been contested by the appellant. Before the adjudicating authority, they raised a feeble contention that there was bound to be 10% error on the part of the Chemical Examiner, but this contention was rightly rejected by the Commissioner. Had it been the case of the appellant that the Chemical Examiners report was unacceptable, they could have asked for retest of the samples. Be that as it may, the GSM declared by the appellant was much higher than the actuals and consequently, the FOB values were also bound to be higher. In this scenario, I am not in a position to fault the view taken by the Commissioner on the question whether the appellant had misdeclared any particulars in the shipping bills. The appellant did misdeclare the GSM values thereby attracting Section 113(i) of the Customs Act. In other words, the appellant, by their commission, rendered the goods liable to confiscation. I do not think that the absence of the goods would, in any way, detract from this position. The appellant has already got the benefit of the absence of the goods by getting the redemption fine vacated. Actual confiscation is not imperative for holding a person liable to be penalized under Section 114 of the Act. Liability of the goods to confiscation is enough for this. The goods in question, having been found liable to confiscation under Section 113(i) of the Act, were rendered so liable by the misdeclaration of its GSM by the appellant. The appellant, therefore, cannot escape the penal liability. Any case law to the contra has not been cited before me. The decisions cited are easily distinguishable.
7. The Honble High Court, in the case of Haniff Shabbir (supra) held that, in the absence of any order of confiscation of the goods under import, there could not be any penalty on the importer under Section 112 of the Act. As I have already noted, the show-cause notice, in the present case, categorically alleged that the goods were liable to confiscation under Section 113(i) of the Act on the ground that its GSM had been misdeclared by the exporter. The adjudicating authority found to the same effect, and rightly so, and ordered confiscation. In this scenario, the above decision of the Honble High Court is inapplicable. However, the appellant seems to have a case against the quanta of fine and penalty. The total FOB value determined by the Commissioner is over Rs.41 lakhs. A fine of Rs.8 lakhs and a penalty of Rs.4 lakhs do not appear to be reasonable. The impugned order does not indicate the basis for such high fine and penalty. In the facts and circumstances of this case, I reduce the quantum of fine to Rs.6,00,000/- (Rupees six lakhs only) and that of penalty to Rs.1,00,000/- (Rupees one lakh only).
8. Yet another finding recorded by the Commissioner is objectionable. He has denied DFIA benefit to the appellant, which is clearly beyond his jurisdiction.
9. The Commissioners order will stand modified to the extent stated above. The appeal is disposed of in the above terms.
(Pronounced in Court) (P.G. Chacko) Member (Judicial) tvu 1 11