2005 (4) TMI 98 - HC - Customs

Appeal to High Court - New ground - Misdeclaration and undervaluation of goods - Confiscation - Imports fabrics - Whether the goods are liable for confiscation u/s 111(d) of the Customs Act 1962 read with Section 11 of the Foreign Trade (Development Regulation) Act 1992 ? - HELD THAT - Admittedly the respondent M/s. Kabul Textiles were not issued with any notice to show cause alleging that they were a party to any conspiracy with the importers to evade any customs duty. It is quite probable that at the request of the said Daulat the respondent agreed to change the invoices/Import Manifest thereby altering the description of the goods but as rightly held by the CESTAT the same is insufficient to invoke sub-section (m) of Section 111 of Customs Act 1962 as the word Entry in the said sub-section is restricted to a bill of entry which was admittedly not filed in the present case. The CESTAT was therefore right in concluding that even in case where the description was changed either in the invoices or in the bill of lading or the Import Manifest the same was not sufficient to call for confiscation liability of the goods u/s 111(m) of the Act. In our view the aspect of Section 111(m) of the Customs Act 1962 has been directly and squarely covered by the Judgment of this Court in the case of Pacific International Traders 2002 (1) TMI 1305 - SC ORDER . The learned second Judicial Member of CESTAT had referred to the case of Dynacast Industries v. C.C.(P) 1999 (1) TMI 192 - CEGAT MUMBAI . As long as no bill of entry was filed as contemplated by Clause (m) of Section 111 of the Customs Act 1962 the goods could not be said to have not corresponded in respect of value shown with the said entry in the bill of entry. The CESTAT was again right in holding that as confiscation could not be upheld there could be no cause or penal action as well u/s 112 of the Customs Act 1962. After having considered the Judgment of CESTAT dated 13-8-2004 in our view the first question (a) does not arise and question (b) has been rightly answered by the learned CESTAT by considering the law laid down by the Honorable Supreme Court in the case of Sampat Raj Dugar 1992 (1) TMI 103 - SUPREME COURT as well as Pacific International Traders (supra). We therefore find that there is no merit in these appeals and consequently the same are hereby dismissed.

Summary

Issues Involved:
1. Whether the goods are liable for confiscation under Section 111(d) of the Customs Act, 1962, read with Section 11 of the Foreign Trade (Development & Regulation) Act, 1992.
2. Whether the goods are liable for confiscation under Section 111(m) of the Customs Act, 1962 for misdeclaration.

Issue-wise Detailed Analysis:

Issue 1: Confiscation under Section 111(d) of the Customs Act, 1962

Section 111(d) of the Customs Act, 1962 deals with the confiscation of goods imported contrary to any prohibition imposed by or under the Act or any other law for the time being in force. The Revenue contended that the goods were imported in violation of Section 11 of the Foreign Trade (Development and Regulation) Act, 1992, which mandates that no import shall be made except in accordance with the provisions of the Act, rules, and the export and import policy in force.

The High Court observed that the Commissioner of Customs and Central Excise did not mention any violation of Section 11 in the show cause notice. The learned CESTAT also noted that no notice of confiscation was issued under Section 111(d). Both authorities concluded that there were no restrictions on the import of the goods, and they were freely importable. The High Court held that the Revenue could not raise a new point in the second appeal, as it did not have a foundation in the pleadings and did not emerge from the findings of fact reached by the lower authorities. Therefore, the High Court concluded that the goods were not liable for confiscation under Section 111(d).

Issue 2: Confiscation under Section 111(m) of the Customs Act, 1962 for Misdeclaration

Section 111(m) of the Customs Act, 1962 pertains to the confiscation of goods that do not correspond in respect of value or any other particular with the entry made under the Act. The Revenue argued that the respondent was part of a conspiracy to misdeclare the goods to evade customs duty. However, the High Court noted that no show cause notice was issued to the respondent alleging conspiracy or fraud. The CESTAT found that the respondent's actions, such as changing the description of the goods at the request of a broker, were insufficient to invoke Section 111(m), as the word "Entry" in the section is restricted to a bill of entry, which was not filed in this case.

The High Court referred to the Supreme Court's decision in Union of India v. Sampat Raj Dugar, which held that an exporter retains ownership of goods if the importer abandons them. The CESTAT concluded that the respondent, as the supplier, could not be assumed to be part of a conspiracy to import the goods fraudulently. The High Court agreed with the CESTAT's reliance on the case of Pacific International Traders, where re-export of goods was permitted in similar circumstances. The High Court upheld the CESTAT's decision that confiscation under Section 111(m) was not warranted, and consequently, no penal action under Section 112 of the Customs Act, 1962 could be taken.

Conclusion:

The High Court found no merit in the Revenue's appeals and dismissed them, affirming the CESTAT's decision to set aside the order of confiscation and permit the respondent to re-export the goods.