Customs, Excise and Gold Tribunal - Mumbai
Colour Chem Limited vs Collector Of Customs on 10 February, 1986
Equivalent citations: 1987(12)ECR1225(TRI.-MUMBAI), 1986(25)ELT402(TRI-MUMBAI)
ORDER K. Gopal Hegde, Member (J)
1. The Revision Application filed before the Government of India against the Order-in-Appeal bearing No/ S/49-146/78 Drawback dated 18.4.78 passed by the Appellate Collector of Customs, Bombay statutorily stood transferred to the Tribunal for being heard as an appeal.
2. The facts necessary for the disposal of this appeal lie in a small compass. The appellants M/s. Colour Chem Ltd. exported certain dyestuff and claimed drawback under shipping bill No. 28197 dated 28.4.76. The Assistant Collector of Customs, Drawback rejected the claim as inadmissible on the ground that the appellants by their letter dated 30.12.77 stated that the consignment under reference has not come back to India and has been reported lost abroad and therefore the claim for drawback was inadmissible. On appeal, the Appellate Collector rejected the claim by holding that the goods were only loaded on the ship and as those goods were not landed at the port of destination and that there was also no evidence to show that the goods left the territorial waters of India or were not brought back, the drawback claim had been rightly rejected by the Assistant Collector.
3. During the hearing of this appeal, Shri Bernard Misquith Commercial Assistant of the appellants submitted that the goods were loaded on board the vessel. They were so entered in the export general manifest of the vessel, entry outward was granted to the vessel and the loading of the goods was acknowledged by the Preventive Officer by his endorsement on the reverse of the Export Promotion copy of the S/B by way of Customs tally. Further, the vessel reached the port of destination as per Shipping agents communication. There was no report that the goods were jettisoned during the course of voyage of the vessel and therefore, the Appellate Collector was not correct in holding that the go6ds have not left the territorial waters of India or that they have not reached the port of destination. Shri Misquith further submitted that since the senior consulate refused to legalise the export, unless the Master of the vessel was instructed to bring back the goods to India but then the Master did not account for the goods. Shri Musquith submitted that there was an export and therefore the disallowance of the Drawback by the authorities below was illegal.
4. Shri Senthivel for the Respondent Collector however urged that since the goods had not reached the destination, it cannot be said that there was export of the goods and if there was no export, no drawback was admissible and as such, the authorities below were correct in rejecting the drawback claim. In support of his contention, Shri Senthivel relied upon the definition of the expression "Export" and "Export goods" given in Clauses 18 and 19 of Section 2.
5. Having regard to the rival contentions, the question that falls for determination is whether on the facts and in the circumstances of the case, the authorities below were unjustified in rejecting the drawback claim.
6. The drawback was claimed under Section 75 of the Customs Act. By reason of Section 75 and the Rules if the exported goods had been manufactured out of articles chargeable to duty and if duty had been paid, the exporter becomes entitled for the drawback. There was no controversy that the exported goods had not been manufactured out of articles chargeable to duty and there is also no controversy that import duty had not been paid on the articles out of which the exported goods had been manufactured. The controversy was and is that since the goods exported did not land in the country and also did not come back to India, the exporter is not entitled for the drawback amount. According to the deptt., the drawback becomes admissible only if the goods reaches its destination because then only it could be said that there was export.
7. Clauses 18 and 19 of Section 2 of the Act read as under:-
Clause 18 : "Export" with its grammatical variations and cognate expressions, means taking out of India to a place outside India. Clause 19 : "export goods" means any goods which are to be taken out of India to a place outside India; These definitions by themselves would not require that the goods should land at a place outside India before an export could be said to be completed. If the goods are taken out of India to a place outside India, the export becomes complete. Clause 27 of Section 2 reads:-
"India" includes the territorial waters of India.
If once the ' goods go out of the territorial waters of India, it could be said that the goods have been exported out of India to a place outside India. Further, the definitions given under Section 2 will have the meanings assigned to them unless the context otherwise requires. This aspect is clear from the wording of Section 2 itself. It is not the definition that is the governing factor, the context in which the expression is used assumes importance. Though in the Act, the expression "Import" is defined to mean bringing into from a- place outside India for the purposes of determination of the rate of duty payable the High courts have held that rate of Customs duty cannot be calculated at the point of time when ship enters the territorial waters of India but at the point of time when the goods are to be off-loaded, but then the moment when goods enters the territorial waters of India, it would be subject to the control of the Customs authorities and would also be subject to the provisions of the Customs Act and the provisions of other restrictions placed on the import would apply. On the same analogy for fiscal purposes, the export is complete when the S/B is presented and when entry outward of the vessel is granted. In this context, the decision of the Supreme Court reported in 1983 E.L.T. page/491 Gangadhar N. Agarwal v. P.S. Tribikraman and Anr. may be seen.
8. The department did not dispute that the goods were loaded on board the vessel m.v. "ROY 1"on 19th July, 1976 and that they were entered in the Export General Manifest of the vessel and that the vessel not only left the territorial waters but even entered the port of destination. Therefore, it could be said that there was export. Neither the provisions of Section 75 nor the Rules made thereunder require that the goods should reach its destination in order to grant drawback amount.
9. If the appellants have violated the condition of export or the provisions of Export Regulation Act, they may be liable to be proceeded for the said violations but on that ground drawback cannot be disallowed.
10. In the result, we allow the appeal, set aside the orders passed by the authorities below and direct that the appellants be granted consequential relief.
K.S. Dilipsinhji, Member (T)
11. I have given the utmost consideration to the foregoing order dictated by my learned brother, Shri Hegde. It appears that the lower authorities rejected the appellants claim for drawback of duty on the ground that the, goods were not offloaded at the port of destination. In the normal circumstances, the Customs would not be aware of such a contingency. But in the present case the appellants intimated the Customs of the fact of retention of the goods on board the ship at the port of destination and the goods being brought back possibly because the appellants wanted to take the benefit of import of the goods free of duty under Section 20 of the Customs Act. However, the goods were not brought back to India and it was not known what happened to the goods. Hence this question arose as to whether in terms of Section 2 and clauses 18 and 19 whether the subject goods could be said to have been exported and called 'exported goods' and whether the same would be eligible to grant of drawback under Section 75. Section 75 before its amendment by the Finance Act, 1983 permitted grant of drawback on the goods exported to any place outside India. The goods are exported by tendering a shipping bill under Section 50 of the Customs Act. The shipping bill mentions inter alia the port of destination. The shipping bill cannot be accepted for processing and for clearance of the goods for export in terms of Sections 50 and 51 unless the vessel has taken an outward entry for the port of destination under Section 39. Therefore, reading the law as a whole it is seen that the vessel has to enter outwards for a particular port, the shipping bill has to be filed under Section 50 and the goods have to be given permission to be loaded under Section 51. Thereafter, the ship takes port clearance under Section 42 and Export Manifest has to be delivered under Section 41. It is only when compliance is made with all these requirements and the goods reach their destination that the same can be held as the goods exported to any place outside India and the goods become eligible for the' grant of drawback in terms of Section 75. In case the goods are not to be landed but diverted from the port of destination such an action would require amendment to the Manifest. Applying the aforesaid criteria to the appeal under consideration I find that though the goods were shipped for Latakia under the relative shipping bill there is no knowing as to what happened to these goods. There is no amendment for the destination either in the shipping bill or in the 'Export Manifest1 of the vessel. In absence of such amendment it is not possible to accept that the goods were exported to Latakia or to any other port. While it is true that the goods cannot be retained on board the ship for indefinite period, for the purpose of determining whether they are exported goods eligible for drawback under Section 75 it is necessary to know where these goods were discharged. On the other hand the application of the importers showed that the goods were to be reimported into India. It is not known whether the goods were so reimported. Hence, it is not possible to presume that either they were discharged at any other port or reimported. In fact it is an open question and hence I am inclined to agree with the learned SDR's submission that the goods do not fall within the definition of 'Export goods' and hence they are not eligible to drawback under Section 75.
12. While Section 75 prior to its amendment in 1983 did not talk of exported goods but about the goods exported to any place outside India, it could not mean that the goods should leave the territorial waters of India as defined under Section 2(27). Such a situation would be unthinkable and would not be inconfirmity with the other Sections of the Customs Act as observed by me above. Similarly, the analogy cited on the import of the goods is also not relevant to the issue under consideration. While the imported goods attract the liability to duty as soon as the vessel enters the territorial waters, the levy of duty is actually postponed in terms of the concerned sections of the Customs Act. The same is true on the export side. However, the export is not completed on presentation of the shipping bill and on allowing the clearnace of the goods for export but only when the ship leaves the Indian port and territorial waters, and reaches destination. In this behalf it is relevant for me to observe that there have been many occasions when the Custom authorities have offloaded the goods loaded on a ship and asked another Customs port to offload the goods loaded from one Customs port on a foreign going vessel when the destination of the goods was a foreign port. It is, therefore, not correct to say that the export is completed when the shipping, bill is presented to the Customs under Section 50 and the outward entry is granted to the vessel. In fact the grant of outward entry precedes acceptance of the shipping bill by the Customs for the port for which the outward entry is taken by a vessel.
13. My learned brother has also relied on the Supreme Court's decision in the case of Gangadhar N. Agarwal v. P.S. Tribikraman and Anr., 1983 ELT page 1491. I beg to differ with his view and hold that the ratio of this judgment of the Supreme Court is not attracted to the present case. In the case before the Hon. Supreme Court, the Court held that for the purpose of levy of duty the actual date of arrival of the ship in port did not matter. But what mattered under Section 16 was the date of preservation of the shipping bill and if this date was earlier to the grant of entry outward to the ship it was deemed under the proviso to Section 16 that the shipping bill was presented on the date of such entry outward. The Supreme Court's decision therefore, clarifies the crucial date for the purpose of application of the rate of duty under Section 16 and it has no relevance to the date of export or the export of the goods for the purpose of grant of drawback under Section 75.
14. While therefore, there is no dispute that the goods were loaded on board the vessel m.v. "ROY 1", it is not known what happened to the goods and hence it could not be said that these were exported as required under Section 75 prior to its amendment. In fact the appellants made an application that they were to be reimported into India. Since the goods were not exported to any place outside India as required under Section 75, I hold that the appellants are not eligible to the grant of drawback and accordingly I reject the appeal.
15. Since there has been a difference of opinion between the two Members of this Bench in respect of this appeal, the matter requires reference to the President under Section 129C(5) of the Customs Act. The point for determination is as follows:- Whether for the purposes of Drawback under Section 75 to decide whether Drawback is admissible it is necessary to find that the goods exported to any place outside India would mean the goods leaving India including its territorial waters or reaching their destination.
K.L. Rekhi, Member (T)
16. As there was difference of opinion between the two learned Members who comprised the Bench, the President assigned the matter to me for disposal under Section 129-C(5) of the Customs Act, 1962.
17. After due notice and making available copies of the orders already recorded by my learned brothers, I have heard both sides at Bombay today. Shri Bernard Misquith appeared for the appellants and Shri S. Senthivel for the department. Both sides reiterated their stand.
18. I have carefully considered the matter. Undisputedly the goods in this case were, after due Customs scrutiny, loaded on the ship for export. They were so entered in the Export General Manifest of the ship. The ship left the territorial waters of India and reached the foreign ports of destination. The goods, were, however, neither landed there nor brought back to India. They are presumed to have been lost or misplaced. I agree with my brother Shri Hegde that in the circumstances of the case it has to be held that the goods had been duly taken out of India to a place outside India, and the export is thus, complete. There is no legal requirement that before becoming Entitled to receive drawback, the Indian exporter must prove off-loading of the goods at a foreign port nor, I was told by the learned representative of the department, there was ever any practice to ask the Indian Exporter to do so.
19. Accordingly, I allow the appeal.
FINAL ORDER
20. The point of difference in this appeal was referred by the President in terms of Section 129-C(5) to the third Member and that member has since recorded his findings.
As per Section 129-C(5) the appeal has to be disposed of in terms of the majority opinion. Accordingly, we allow this appeal, and set aside the orders passed by the authorities below and direct that the appellants be granted consequential relief.