Custom, Excise & Service Tax Tribunal
Arcadia Shipping & Trading Company vs Commissioner Of Customs, Jamnagar on 15 September, 2017
In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad ~~~~~ Appeal No : C/72/2008 (Arising out of OIO No. 02/Commissioner/2008 dated 15.01.2008 passed by Commissioner of Customs, Jamnagar) Arcadia Shipping & Trading Company : Appellant (s) Vs Commissioner of Customs, Jamnagar : Respondent (s)
Represented by:
For Appellant (s) : Shri P. M. Dave, Shri Amal Paresh Dave, Advocate For Respondent (s): Shri J. Nagori, Authorised Representative CORAM :
Dr. D. M. Misra, Hon'ble Member (Judicial) Mr. Ashok K Arya, Honble Member (Technical) Date of Hearing: 11.09.2017 Date of Decision: 15.09.2017 ORDER No. A/12581 / 2017 Per : Ashok K Arya M/s Arcadia Shipping & Trading Company is in appeal against OIO NO. 02/Commissioner/2008 dated 15.01.2008 passed by Commissioner of Customs, Jamnagar, whereunder, interalia, the demand of customs duty of Rs. 24,51,459/- alongwith interest and equivalent penalty has been confirmed against the appellant. The impugned order also confiscates the subject item, namely, Grabs valued at Rs. 67,35,366/- and imposes a fine of Rs. 5,00,000/- under Section 125 (1) of the Customs Act, 1962 in lieu of confiscation.
2. The brief facts are that:-
(i) The appellant filed IGM (Import General Manifest) under Section 30 of Customs, Act, 1962 read with Import Manifest (Vessels) Regulation 1972 before Superintendent of Customs, Jamnagar.
(ii) The appellant requested the Superintendent, Jamnagar to unload the grabs at shore for sending it in due course to the incoming other vessels for cargo handling which was permitted by the Superintendent.
(iii) The appellant filed Bond dated 29.04.2006 before Superintendent, Jamnagar as agent of the owner of the said grabs i.e. M/s Martrade Shipping + Transport Gmbh, Germany (also referred to as M/s Martrade), interalia, binding themselves for taking care, to bring the said grabs for the purpose mentioned and deliver it back on the vessels coming in due course.
(iv) The appellant also further bound themselves to pay all the Customs Duties and penalties that may be imposed and if not paid, the same may be recovered from them under Section 142 of the Customs Act.
(v) The appellant filed letters dated 06.09.2006 and 07.09.2006 requesting for permission from Superintendent, Jamnagar to send the grabs to Porbandar Port and place on board of the vessel M. V. Antarios Breeze, which was to arrive on 07.09.2006. The said request was made on directions of the owner i.e. M/s. martrade.
(vi) M/s Keyur Shipping, Porbandar (also referred to as M/s Keyur) vide their letter dated 04.09.2006 requested the Superintendent of Customs, Porbandar for granting permission for taking five grabs to wharf new jetty area for loading of Bauxite onto vessel, M. V. Antarios Breeze to be returned after completion of loading, which was granted on 04.09.2006.
(vii) Acting upon intelligence, the Superintendent of Customs, Porbandar made an enquiry about two grabs, German Made, working on M.V. Antarios Breeze. On inquiry regarding importation of grabs, Superintendent of Customs, detained vide Detention Memo dated 09.09.2006. The Customs Department state that the said goods namely two imported grabs appeared liable for confiscation under provisions of Customs Act.
(viii) The Superintendent of Customs, Porbandar made confiscation in respect of the said two imported grabs and recorded the statements of various peoples. Thereafter, Commissioner of Customs (Preventive), Jamnagar issued SCN dated 07.03.2007 to the appellant & Ors. The SCN, interalia, stated the following:-
(a) It appeared that the said grabs were unloaded by M/s Arcadia from M.V. Slovenjia upon execution of the Bond without payment of duty as envisaged under Notification No. 27/2002-Cus dated 01.03.2002, according to which 15% of customs duty was to be paid in cash and rest of 85% was to be given in the form of Bank Guarantee, which was not done so.
(b) That the Superintendent, Porbandar seized the said grabs alongwith its accessories under reasonable belief that they were liable for confiscation under the provisions of Act vide Panchnama, dated 13.10.2006.
(c) That M/s Arcadia vide their letter dated 21.11.2006 requested for provisional release of the said seized grabs and further stated that M/s Martrade vide their letter dated 20.04.2006 had desired to keep the grabs in question at Bedi Port for repair maintenance and using for loading and unloading of goods on their ships; that they had vide application dated 29.04.2006 requested Superintendent, Jamnagar to grant them permission to unload the grabs; that the said permission was granted under Section 85 of the Act and therefore upon being asked, they had executed a Bond and accordingly the said grabs were unloaded from vessel alongwith its accessories on 01.05.2006 as per Masters Certificate.
(d) Since the grabs were not found useful at Bedi to M/s Martrade, and therefore they decided to take them back but since M.V. Slovenjia was not expected to visit Bedi or any nearby ports in near future, another vessel of M/s Martrade M. V. Antarios Breeze was scheduled to come to Porbandar on 07.09.2006 and therefore they had vide their letter dated 09.06.2006 applied to Superintendent, Jamnagar to permit them to send the grabs, being Ship Stores to Porbandar to place them on board of vessel, M.V. Antarios Breeze.
(e) It was further stated in the letter dated 21.11.2006 that upon being permitted by the Superintendent, Porbandar they had been placed on Board and were delivered to Master of the Vessel and hence they were under impression that their role of husbanding agent was over and will get the bond released; that however on 09.09.2006, Superintendent, Porbandar ordered for unloading of the same from the vessel and detained them vide his detention memo dated 09.09.2006.
(f) Subsequently, upon furnishing the authorization dated 28.11.2006 from M/s Martrade, the said two imported grabs valued at Rs. 67,35,366/- were provisionally released by the Commissioner of Customs (Preventive), Jamnagar upon payment of duty of Rs. 24,51,459/- alongwith Bond for full value of Rs. 67,35,366/- accompanied by Bank Guarantee of Rs. 10,00,000/- and the said facts were communicated to M/s Arcadia by Superintendent, Porbandar vide his letter dated 19.12.2006.
(g) That M/s Arcadia being an agent on behalf of M/s Martrade had unloaded the imported grabs at Bedi Bounder and sought the permission of Superintendent, Jamnagar by stating that it would be sent in due course to the incoming vessel for cargo handling and had stated the same into the Bond submitted to the Superintendent, Jamnagar but the fact is that M/s Martrade vide their letter dated 20.04.2006 had specifically asked them to repair, maintain and subsequently load back on their vessel for their use. Thus it appears that they were unloaded under specific directions to repair and maintain only and not to use but to be sent back on their vessel.
(h) It further appeared from the various statements of Shri Arvind K. Shah and their letter dated 21.11.2006 that they have not mentioned words repairing and maintenance in their letter and Bond submitted to Superintendent, Jamnagar; that no permission of proper officer was taken to load the said grabs onto the vessel M.V. Antarios Breeze; that the said grabs were unloaded as ships stores to be loaded again on the another foreign going vessel; that they had vide letter dated 06.09.2006 requested Superintendent, Jamnagar to send the grabs being Ship stores and had placed the same on the vessel and delivered to Master and no shipping bills were filed for its exportation; that the imported grabs were used for loading the goods into M.V. Antarios Breeze, that no procedure as prescribed under the Notification No. 153/94-Cus dated 13.07.1994 was followed.
(i) It appeared that Section 85 of the Cusotms Act provides for warehousing of stores without assessed to duty. Thus, for warehousing the stores under Section 85 of the Act the Warehousing Bill of Entry for the same had to be filed accompanied with the declaration and/or Bond which in this case had not been done. Further, the goods had been repaired after unloading.
(j) That the said goods were not warehoused and hence there was a violation of the provisions of Section 46, 59, 60, 65, 69, 71 and 72 and hence the goods were liable for confiscation under Section 111 (o) of the Act.
(k) That Notification No. 153/94-Cus dated 13.07.1994 grants exemption from Customs duty to the goods of foreign origin imported for repairs and return subject to filing of declaration, re-exporting the goods within six months and filing of bond as envisaged thereunder.
(l) That by repairing the said imported grabs without fulfilling the conditions set forth in Notification No. 153/94-Cus dated 13.07.1994, the appellant, M/s Arcadia had violated the conditions and therefore the duty exemption was not available and hence the said imported grabs were liable for duty.
(m) M/s arcadia had wilfully misstated the facts of repairing to the department officers at Jamnagar and Porbandar and thus had not also not filed Bill of Entry and Shipping Bills under Section 46 and Section 50 of the Act.
(n) That the said non duty paid grabs were used for loading of the cargo i.e. indigenous use with an intention to evade the duty and they were to be loaded onto the vessel without following any procedure for export as envisaged under Section 50,51,39,40,41 & 42.
(o) That the said grabs valued at Rs. 67,36,366/- unloaded from vessel M.V. Slovenjia were imported without filing Bills of Entry and without payment of duty of Rs. 24,51,459/- thereon, thus had violated the provisions of Section 47 of the Customs Act, and had rendered the goods liable for confiscation under Section 111 (i) of the Act.
(p) That M/s Arcadia had transported non duty paid goods from one customs station ie. Jamnagar to another Customs station i.e. Porbandar without following the procedure as envisaged under Section 54 of the Customs Act and therefore, had rendered the goods liable for confiscation under Section 111 (n) of the Act.
(q) M/s Arcadia imported the goods without filing bills of entry, payment of duty and transportation of non duty paid goods from one customs station to another Customs station were liable for penalty under Section 112 and 114A of the Act.
(r) That M/s Arcadia had placed two imported grabs on Board M.V. Antarios Breeze without filing/declaring the same in Export General Manifest under Section 41 of the Act readwith Export Manifest (vessels) Regulation, 1976 and therefore had rendered the goods liable for confiscation under Section 113 (h) of the Act.
(s) That M/s Arcadia had tried to export the said imported grabs without filing shipping Bills under Section 50 of the Customs Act and without an order of proper officer under Section 51 of the Act and therefore, had rendered the goods liable for confiscation under Section 113 (d) of the Act.
(t) M/s Arcadia, who had attempted to export the said imported non duty paid grabs M.V. Antarios Breeze without filing/declaring in Export General Manifest under Section 41 of the Act readwith Export Manifest (vessels) Regulation, 1976 without filing Shipping Bills under Section 50 of the Act and without an order of proper officer under Section 51 of the Act, appeared to have rendered the goods liable for confiscation under Section 113 of the Act as aforesaid are hence were also liable for penalty under Section 114 of the Act.
(ix). Based on the above, the SCN issued to the appellant and others called upon to show cause to the Commissioner of Customs (Preventive), Jamnagar as to why:-
(a) Duty amounting to Rs. 24,51,459/- should not be recovered from the noticees under the provisions of Section 28(1) of the Act also readwith proviso thereunder.
(b) Interest on the amount mentioned at (a) above should not be recovered from the noticees under Section 28 AB of the Act.
(c) The said imported non duty paid grabs valued at Rs. 67,36,366/- should not be held liable for confiscation under Section 111(o), 111(j), 111(n) and 113(h), 113 (d) of the Act.
(d) Penalty under Section 112, 114 and/or 114A of the Act should not be imposed.
(x) The SCN was adjudicated vide the impugned order in original dated 15.1.2008 whereunder interalia the demand of customs duty alongwith interest and imposition of equivalent penalty etc. as mentioned in Para 1 above was confirmed against the appellant.
3. With the above background of facts, both sides have been heard.
4. The main defence of the appellant is that:-
(i) They have fulfilled all conditions of Notification No. 153/94-Cus dated 13.07.1994 given in column No. 3 against Sr. No. 1 of the table annexed to the Notification except that they did not expressly declare at the time of import that the said goods were for Repair and Return.
(ii) Maybe another fault of the appellant is that no bill of entry at the time of import of subject goods and no shipping bill at the time of the loading to the foreign going vessels was done.
(iii) A Bond was executed by the appellant which was accepted by the Customs Authorites, which was a condition of above Notification No. 153/94-Cus dated 13.07.1994.
(iv) The conditions of the Notification were substantially complied with inasmuch as a declaration was made before the Superintendent seeking his permission for offloading (i.e. import); a Bond was executed; the goods were admittedly repaired at Bedi Port; the repaired goods were proposed to be re-exported within six months; and that permission for re-exporting from another Port was also taken from the Superintendent of Customs.
(v) Only because it was not stated in the application dated 29.04.2006 that two grabs were to be brought ashore for repairing, the exemption cannot be denied.
(vi) The Benefit of exemption Notification should be allowed, if there was a substantial compliance of the conditions, and the purpose of the Notification was satisfied. In support following decisions are relied upon:-
(a) Commissioner, Chandigarh vs. JCT Electronics Ltd. 2010 (261) ELT 267 (Tri.- Del)
(b) Commissioner, Chandigarh vs. JCT Electronics Ltd. 2011 (267) ELT 41 (P&H)
(c) India Infusion Ltd. Vs. Collector of Customs, 1994 (71) ELT 707 (Tri.)
(d) AUDCO India Ltd. Vs. Commissioner of Central Excise 2013 (297) ELT 374 (Tri.-Chennai).
(e) Indian Farmers Fertilizers Co-operative Ltd. Vs. UOI 1995 (75) ELT 218 (Guj.)
(vii) The benefit of Notification No. 153/94-Cus, is also denied on the ground that the exemption was available only for repairs and return of imported goods, but not in cases where the goods were used after repairing. The Notification nowhere stipulates that goods imported for repairs cannot be used after repairing and before their actual return. In the bond (and also in application dated 29.04.2006) the appellant has disclosed that the grabs were to be unloaded for using it in the vessels coming at Bedi Port in due course, and thus the prospective use of the grabs after repairing was disclosed.
(viii) The Notification only lays down that the goods imported for repairs should be returned (ie. Re-exported) and should not be kept in India permanently, but there is no bar on their use after repairing. In case of engineering goods like grabs, they would be ordinarily used at the Port after repairing as otherwise they tend to develop snags if kept idle and inoperational.
(ix) A Bill of entry under Section 46 was also not required to be filed for the grabs, which were ship stores, and hence covered under Section 85 of the Act. In any case, an application was submitted before the Superintendent of Customs on 29.04.2006 for offloading such grabs from M.V. Slovenjia, and therefore there was no illegal or clandestine import of the goods. The said Notification does not stipulate that exemption was admissible only if a bill of Entry was filed for goods imported for repairs and return.
(x) If the appellant was not allowed to execute a Bond and bring the grabs ashore without payment of duty, then 98% of any duty paid on importation was liable to be repaid to the appellant as Drawback under Section 74 of the Act. There being no dispute about the identity of the grabs i.e. the same grabs having been re-exported, almost entire duty payable was refundable; but this submission and request of the appellant to drop demand of duty to the extent of 98%, if exemption was denied, has not been addressed to by the Commissioner of Customs during adjudication.
(xi) In view of the scheme of Section 74 of the Act, the appellant could not have any intention to evade payment of duty nor for any mis-statement. The transaction was revenue neutral (except to the extent of 2% of duty), not requiring any proceedings. In support reliance is placed on following decisions:-
(a) CCE, Pune vs. Coca-Cola India Pvt ltd. Reportedin 2007 (231) ELT 490 (SC)
(b) PTC Industries Ltd. 2003 (159) ELT 1046 (C) Reliance Industries Ltd 2009 (244) ELT 253
(d) Final Order No. A/927-928/WZB/AHD/2012 dated 12.06.2012/03.07.2012 passed by this Honble Tribunal in the case of M/s. Jayshree Instruments Pvt. Ltd., Gandhinagar.
5. Ld. DR for the department reiterates the impugned order.
6. After having carefully considered the facts of the case and submission of both sides, it appears that the appellant though substantially complied with the conditions of the Notification No. 153/94-Cus dated 13.07.1994, they have been negligent in not giving a specific declaration at the time of unloading of subject goods that they were for Repairs and Return. Considering the ratio of Tribunals decision in the case of Commissioner of Central Excise, Chandigarh vs. JCT Electronics Ltd. 2010 (261) ELT 267 (TRI.-DEL.) and Honble Gujarat High Courts decision in the case of IFFCO Ltd. Vs. UOI 1995 (75) ELT 218 (GUJ.), we are of the view that the subject goods namely two grabs are eligible for benefit of the said Notification No. 153/94 (supra). There is no dispute about the identity of the subject goods which have already been re-exported and for which the appellant had given required bond undertaking as specified in the said Notification.
6.1. The Tribunal in the case of CCE, Chandigarh vs. JCT Electronics Ltd. 2010 (261) ELT 267 (Tri.- Del) has interalia observed as under:-
7.?We have carefully perused the records and considered the submissions. We observe that the exemption in terms of the notifications is sought to be denied on the sole ground that in respect of the impugned goods there was failure on the part of the importer to follow the 1996 Rules and thereby not fulfilling the condition of the notification for the goods to qualify for the exemption. We find that the only failure of the importer was that it did not use the imported inputs in the factory registered with the jurisdictional Asstt. Commissioner in terms of Rules 3 and 4 of the 1996 Rules, but used the same for the intended purpose in another of its factories with the approval of the department. In such circumstances, we find that the assessee cannot be denied a substantial benefit for its failure to follow a procedural condition condoned by the department. We do not find any reason to interfere with the impugned order and dismiss the appeals filed by the revenue as devoid of merit.
6.2. Honble Gujarat High Court in IFFCOs case (supra) also has distinguished that in a Notification there could be certain conditions in the category of mandatory and some conditions could be in the category of directory condition. The Honble Gujarat High Court in the said decision intealia observes as under:-
9. In this connection a reference deserves to be? made to the ruling of the Supreme Court in the case of Union of India v. Wood Papers Ltd., reported in 1990 (47) E.L.T. 500. It deals with the question of interpretation of an exemption Notification. It has been held therein :
Literally exemption is freedom from liability, tax or duty. Fiscally it may assume varying shapes, specially in a growing economy. For instance tax holiday to new units, concessional rate of tax to goods or persons for limited period or with the specific objective etc. That is why its construction, unlike charging provision, has to be tested on different touchstone. In fact an exemption provision is like an exception and on normal principle of interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment state revenue. But once exception or exemption becomes applicable, no rule of principle requires it to be construed strictly. Liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play has to be given to it and it calls for a wider and liberal construction. A notification has to be read in its entirety and construed as a whole. But a construction which results in inequitable results and is incongruous is to be avoided. It is thus clear that an exemption Notification has to be construed in the light of the contents thereof. As aforesaid the Notification at Annexure `A postulates three conditions for earning the exemption provided thereunder. The first two conditions have to be complied with in full in order to earn the exemption thereunder. Payment of contribution in the aforesaid fund is a condition precedent for claiming the exemption thereunder. The goods would not be allowed to be cleared unless undertaking to the effect of payment of contribution in the fund is given. The condition of giving undertaking will have also therefore to be treated as a condition precedent. So far as furnishing of proof is concerned, it is not always possible to comply with it fully within the stipulated time-limit for diverse reasons. It may be noted that such proof has to be furnished to the satisfaction of the proper officer. It is possible that the proof of payment furnished by the manufacturer may not be to the satisfaction of the proper officer and in order to furnish such satisfactory proof, the stipulated time-limit may prove short. It is possible that the proper officer might not be available for some reason when the manufacturer goes to him within the stipulated time-limit to furnish the proof of such payment. So far as giving of the undertaking and making of the payment in the aforesaid fund are concerned, they are within the control of the manufacturer. So far as furnishing sufficient proof of payment to the satisfaction of the proper officer is concerned, it is often beyond the control of the manufacturer. It may be that the amount is deposited in the Reserve Bank of India and the receipted challan is not received back within the stipulated time-limit and the sufficient proof cannot be furnished within the stipulated time-limit. It may be that the receipted challan is received within the time-limit and yet it gets destroyed before it is produced before the proper officer and its duplicate may not be received within the stipulated time-limit. A condition, the fulfilment of which depends partly on the person and partly on the outside agency, cannot be said to be a mandatory condition. It has to be treated as a directory condition and its substantial compliance would be sufficient to earn the benefit for which such condition is prescribed. We are therefore of the view that the first two conditions in the Notification at Annexure `A for the purpose of claiming the exemption thereunder are mandatory and the third condition regarding furnishing of the sufficient proof thereof to the satisfaction of the proper officer is directory. As aforesaid, the petitioner has complied with mandatory conditions in full and substantially complied with the directory condition. Even at the cost of repetition, we reiterate that there is no dispute that sufficient proof was furnished, if belatedly, by the petitioner regarding payment of the due money in the aforesaid fund.
10. The same result will ensue on examining the? question from a different angle. As aforesaid, payment of the specified amount in the aforesaid fund was a must for earning the exemption under the Notification at Annexure `A. That would certainly be a substantive part of the said Notification at Annexure `A. The first two conditions thereof would therefore, constitute a substantive part. It cannot be gainsaid that this substantive part has to be complied in toto for earning the exemption thereunder. Furnishing of proof of payment would be in the nature of a procedural part. The third condition in the Notification at Annexure `A would thus constitute a procedural part. This procedural part would require liberal construction. Substantial compliance of the third condition, being the procedural part of the Notification at Annexure `A should be sufficient to earn the exemption thereunder. This interpretation of the Notification at Annexure `A by us is in consonance with the aforesaid ruling of the Supreme Court in Wood Papers Ltd.s case (supra).
7. Following the ratio of Tribunals decision in CCE, Chandigarh vs JCT Electronics Ltd (supra) and Honble Gujarat High Courts decision in IFFCO Ltd (supra), the subject goods are entitled to benefit of the Notification No. 153/94-Cus dated 13.07.1994. Consequently, the demand of customs duty etc, and imposition of penalty and redemption fine imposed under Sec. 114A are hereby set aside.
8. However, the facts clearly indicate that there are clear procedural contraventions of the customs law and the rules made thereunder by the appellant in case of the subject goods. Therefore, the appellant is liable for the penalty under Section 112 (a) of the Customs Act, 1962 Considering overall facts including the negligence and consequential contravention of customs law, which is in the nature of contravention a penalty of Rs. 2,45,145/- is imposed under Section 112 (a) of the Customs Act, 1962.
9. In the result, the impugned order is modified to above effect and the appeal is partly allowed in above terms.
(Order pronounced on 15.09.2017)
(D. M. Misra) (Ashok K. Arya) Member (Judicial) Member (Technical)
G.Y.
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Appeal No. C/72/2008