TMI Blog1990 (6) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants and Shri K.M. Mondal, the learned SDR for the Revenue advanced extensive arguments. 2. At this juncture, it would be necessary to briefly indicate the long history of the case and also mention the relevant dates and events in the course of that history. 3. The appellants imported two consignments declared to be of Refined Industrial Coconut Oil, one consignment weighing 3002.557 MT-CIF value of Rs. 16367050/- and another consignment weighing 5342.369 MT CIF value of Rs. 29121450/-at the Port of Kandla. These imports were sought to be covered by Export House Additional Licences and Split Licences of the main licences and the imports have been effected by the appellants under the Letters of Authority by those licence holders. The appellants claimed that only edible variety of coconut oil was canalised in the 1980-81 Policy period and not the industrial non-edible variety of coconut oil. For this purpose they placed reliance on the letter from the Chief Marketing Manager of the State Trading Corporation of India, dated 30-10-1980 addressed to one of their sister concern M/s. Jain Shudh Vanaspati Ltd. to the effect that the State Trading Corporation of India are onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of the CEGAT, New Delhi. The appellants also went in appeal against the judgment of the Delhi High Court. The Hon ble Supreme Court dismissed two appeals filed by the appellants against the judgment of the Delhi High Court on the legality of import of industrial coconut oil under OGL. However, in the Writ Petition filed against the order of the CEGAT Full Bench, the Hon ble Supreme Court have set aside the order dated 5-12-1986 and remanded the matter back to the Tribunal for determining the question of quantum of redemption fine in the light of the decisions in the case of M/s. D. Navinchandra Co., Bombay and B. Vijay Kumar and also in the light of the observations contained in their judgment. The relevant portion of the judgment of the Hon ble Supreme Court giving direction to the Tribunal for determining the question of quantum of redemption fine are necessary to be reproduced here so as to appreciate the arguments from either side and proceed to determine the quantum of redemption fine on the basis of the direction from the Hon ble Supreme Court. The relevant portion reads: While determining the question of quantum of redemption fine it is essential to consider the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olicy 1980-81. As per Import Policy 1980-81, the item sought to be canalised was coconut oil. The des.c.ription coconut oil was construed to be applied only to edible variety of coconut oil, as is evident from the letter from the Chief Marketing Manager of State Trading Corporation of India dated 30-10-1980. It was also interpreted so by the Full Bench of the CBEC and this Appellate order of the CBEC dated 23-1-1981 was confirmed by the Government of India in their order dated 31-3-1981. In the context of the aforesaid background, the question of bona fide is to be looked into having regard to the direction given by the Supreme Court. (ii) The jurisdiction of this Tribunal is restricted within the directions issued by the Supreme Court in the terms set out by the Supreme Court. The limited question to be decided is only as to the bona fide of the appellants, which led to the import of the items in question. If the bona fides are established, then applying the ratio of the judgment of the Supreme Court in D. Navinchandra Co. and B. Vijay Kumar Ors., the entire redemption fine is required to be remitted. The Supreme Court s clear directions are to determine the question of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in these two appeals is the question of their bona fide at the time of import. Shri G.L. Rawal, the learned advocate, also gave the various definitions of bona fides and also the relevant portions from the judgments to emphasise what the term bona fide means. He contended that the concept of good faith without any fraud and in honest belief that what is being done is correct, establish the bona fide . In this case the matter is not to be looked upon by the subsequent judgment of the Delhi High Court and the Supreme Court declaring the import as unlawful for judging the. bona fides. The factors prevalent at the time of import are relevant for determining the question of bona fide. (vii) On the question of their claim for bona fide, his arugments rested on the following grounds: (a) State Trading Corporation of India is a Corporate Body 100% owned by the Government of India and it is a canalising agency. In terms of Appendix 9 of the Import Policy, import of coconut oil is canalised only through this agency. (b) The Chief Marketing Manager, one of the senior officers of State Trading Corporation, in his letter dated 30-10-1980, has categorically informed that they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mselves, who are competent to give the clarification. This will go to strengthen the bona fides on the part of the appellants. (f) The Customs authorities have, at different ports, been clearing the same item under OGL in terms of Import Licences issued under the Policy 1980-81. Even the Bills of Entry in Jan. 83 were cleared by the Collectorate at Calcutta in the case of Jayant Oil Mills and Metro Exports against licences issued during the Policy period 1979-80 and 1980-81. Hence, no doubt can be raised on the bona fides of the appellants in taking steps on the genuine belief that the import is lawful. (g) Even the Delhi High Court s judgment against the appellants were on the basis of the decision of the majority. The dissenting judge Hon ble Justice Wad had agreed with the submission of the appellants that the import is lawful. If one of the judges of the Delhi High Court, who himself was convinced of the lawful nature of the import, any ordinary citizen like the appellants could have entertained the bona fide belief that the import is lawful. Hence there cannot be better circumstances than that of the present case to give bona fides on the part of the appellants. Even when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court for following the ratio of the decision in D. Navinchandra Co. leaves no s.c.ope or room for doubt that irrespective of the Government s understanding of the matter, adjudication proceedings are to proceed and when such an adjudication takes place holding the goods liable for confis.c.ation, the Collector cannot be expected to pass an order merely holding the goods liable to confiscation and leaving the matter at that stage. The goods which are ordered confiscation can be allowed redemption only on payment of fine. In the case of B. Vijay Kiimar and Co., the order of the Supreme Court is esoteric to that case. They themselves have observed that in the peculiar facts and circumstances of that case and in the context of the findings of the Tribunal, they are remitting the redemption fine. However, in the case of the present appellants, the facts are to be critically examined and the findings are yet to be given by the Tribunal on the alleged claim of bona fide. Moreover, for applying the ratio of the judgment of B. Vijay Kumar Co., the facts dealt with by the Supreme Court in that case are required to be compared with the present appellants. Though these facts may not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 1982-83 Policy had also come into existence. The appellants are only Letter of Authority holders and their assignment is only to import the goods and hand over the same to the licence holders, who, in turn, are required to dispose of the goods in accordance with the conditions specifed in the licences. Notwithstanding this position, in this case, the goods have been sold on high sea sale basis by the Letter of Authority holders, though reportedly under the cover of separate agreements with the licence holders. In the context of the aforesaid factual position, their alleged claim of bona fide is required to be critically evaluated. Even assuming that there was a scope for different interpretation in the wording of the term coconut oil during 1980-81 Policy, the position has been made amply clear during the subsequent policy with effect from 3-4-1981. The only document which they hold before us is a letter from the State Trading Corporation that too issued during the 1980-81 Policy period. They are well aware of the fact that for getting any authoritative and binding opinion, they should approach the Chief Controller of Imports Exports (CCI E) and no one else. This is the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , posed the question, whether such an attitude can be termed bona fide (iii) On the question of clearances of industrial coconut oil, through Bombay and Kandla port and also through the Calcutta port, Shri Mondal, contended that excepting the photocopies of some Bills of Entry which also do not give any details regarding the date of opening the Letter of Credit, nothing has been produced by the appellants. It is also evident that all these imports are reported to have been effected during 1981-82 policy, against the licences issued during the earlier policy period. In the case of the appellants, the undisputed fact is that the imports have been effected in 1982-83 policy period the Letter of Credit having been opened on 31-7-1982 i.e. during the 1982-83 policy period. The circumstances under which the releases were ordered in those other cases cannot be precisely stated by him. All the same, based on their own claim, it is observed that in the case of the appellants, they have gone with the massive import even after coming to know that the Policy has been changed effective from 3-4-1981 and Letter of Credit has been opened as late as on 31-7-1982. The appellants have also cited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directions of the C.C.I. E. On the basis of these arguments, Shri Mondal, vehemently contended that there is absolutely no bona fide behind the imports. The appellants have deliberately flouted the import policy provisions. 7. On the alternative plea of the appellants, Shri Mondal, submitted that from the side of the department, they have given all the details in the affidavit filed before the Delhi High Court justifying the quantum of redemption fine. However, the appellants, despite the direction from the Delhi High Court to produce relevant details for determining the quantum of redemption fine have not given any details regarding the landed costs and other expenses including the sale price on high sea sale basis for arriving at the appropriate quantum of profit. On the contrary, the fine of Rs. 5.00 crores has been paid and the goods cleared, obviously showing that the appellants have made more than this and their present intention is to get back the money in one way or other, so as to get more margin of profit and enrich themselves at the cost of public interest. Hence no reduction in quantum of redemption fine is called for. The cases cited by the learned advocate are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kiimar Co., while confirming the redemption fine imposed by the Collector, set aside the order imposing penalty, after giving a finding that even the statutorily approved authority, namely the C.C.I. E. has clarified that the canalised items can be imported against those licences. The Supreme Court in the aforesaid civil appeals, set aside the order of the Tribunal, confirming the redemption fine, on the ground of inconsistent findings in regard to the question of bona fides by upholding confiscation for lack of bona fide but at the same time setting aside the penalty because of the absence of malafides. The Supreme Court held that once the bona fides are established on the basis of specific findings of the Tribunal, the Collector and the Tribunal were not justified in confiscating the goods or in imposing any redemption fine. This order of the Supreme Court is only with reference to the particular case before them and they, themselves, have clearly indicated that it is not to be treated as precedent. However, in the case of the present appellants before us, the Supreme Court themselves have specifically directed for following the ratio of these cases of B. Vijay Kiimar Co. a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mports have been made by the appellants as Letter of Authority holders on behalf of the holders of Additional Licences. As per the terms of Letter of Authority, the appellants were not authorised specifically to import industrial coconut oil but generally authorising import of permitted goods under the Additional Licences. These licences have been issued in 1980-81 Policy period but have been revalidated for period extending to 1981-82 and 1982-83 periods. The goods are neither for actual use of the appellants nor for the licence holders but admittedly sold on high sea sales to actual users, who during the period of import could not get this material, excepting through S.T.C. since as per 1981-82 Policy and thereafter, it is clear that both edible and non-edible variety of coconut oil is canalised through S.T.C. Letter of Credit has been opened and firm commitment established on 31-7-1982, during 1982-83 policy period, when the policy itself has made it clear leaving no s.c.ope for any different interpretation on the type of coconut oil canalised for import. 16. Their claim of bona fide is required to be judged in the context of the aforesaid factors as well, since the mental fra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their claim of bona fide and good faith. Moreover, this letter is dated 30-10-1980 issued during the Policy Period of 1980-81. The Letter of Credit has been opened as late as in 1982-83 Policy period, when the subsequent policy as early as in April 81 has clearly indicated that coconut oil, both edible and non-edible varieties is canalised through S.T.C. Hence the appellants being well-versed with the import export policy and procedures, must have known the clear policy with regard to the import of coconut oil at the time of opening the Letter of Credit. They have not chosen to approach the C.C.I. E. for clarification even after taking note of the clear position regarding non-eligibility of industrial coconut oil under OGL. This factor also leads us to believe that the appellants have deliberately remained contented with the letter of S.T.C. even after noticing the policy changes prevalent at the time of opening the Letter of Credit. The learned advocate, has contended that even the Tribunal in the case of Shama Valves Ltd., Bombay v. Collector of Customs, Bombay reported in 1984 (18) E.L.T. 533 (Tribunal) has held that the redemption fine is not leviable, when the bona fide is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icy when the policy itself makes the position abundantly clear. Hence for the limited purpose of judging the good faith, it is not only relevant but also necessary to look into the policy prevalent at the time of import of the goods for assessing the mental frame and the factors influencing the same at the time of import. In these cases, when the Policies 1981-82 and 1982-83 make the position abundantly clear that both edible and non-edible variety of coconut oil are canalised, if the appellants have gone to import industrial variety of coconut oil under OGL, it can only be with the motive of importing canalised items at a time, when even the actual user cannot import on their own for actual use either under OGL or otherwise. Such an action on the part of the appellants can only be motivated by profit considerations and for making huge profit taking advantage of the position provided by the letter from the S.T.C. during 1980-81 policy period. This letter, in our opinion could not have provided the motivation for good faith at the point of import of the goods. 19. The learned advocate also seeks to draw his support from a letter from the DGTD issued in the year 1985; firstly, this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on these clearances. Even assuming that these relate to additional licences and the clearances were effected in 1981-82 policy period, we also take note of the fact that the appellants themselves have produced two judgments of the Tribunal in support of their alternative argument, namely M/s. Allana Impex Pvt. Ltd. and M/s. Jayant Oils Mills Pvt. Ltd. It is clearly evident that in these two cases importation of industrial variety of coconut oil made during 1981-82 period against additional licences was held to be unauthorised and confis.c.ation and redemption fines were ordered by the Collector. The orders of confis.c.ation and imposition of fine were upheld by the Tribunal, but the quantum of redemption fine was ordered to be modified. From these two judgments cited by the learned advocate, it is evident that the department has not accepted the additional licences in similar cases but were adjudicated and redemption fine imposed. In view of this position, the person, well versed in the policy of import and export and procedures, cannot be expected to derive his good faith based on some clearances allowed by the Customs authorities, unless he is fully satisfied that the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can understand this position clearly and hence bona fides can be attributed on this ground. This argument, though attractive, has to be approached with caution. The judgment of the Delhi High Court deals elaborately with various points of law not only regarding the s.c.ope of the term coconut oil but also other issues as to whether the Government s order is binding on the Collector, the competent authority for clarifying the import licencing matters etc. All these are considered to be questions of law and the Delhi High Court thought it fit to grant leave of appeal before the Supreme Court for a final decision. That does not, however, entitle the appellants to derive the basis for entertaining the bona fide belief regarding the lawful nature of the imports, especially, when they, having noticed the policy changes carried out in 1981-82 policy and they were launching on these imports as late as on 31-7-1982. Appreciation of the intricacies of law and the arguments based on that may ultimately have to be resolved by the Supreme Court, but the judgment on the question of bona fide is to be arrived at on the basis of factual position and not on the intricacies of law canvassed before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details. If, however, they allege that the redemption fine is excessive, it is open for them to produce such materials, which can convince us that there is a s.c.ope for reduction in the quantum of redemption fine. This is why the Delhi High Court have directed the appellants to produce such materials as may be necessary for assessing the quantum of redemption fine. Since the appellants have not chosen to produce the details regarding the sale price on high sea sale, the expenditure on other charges, which have cut into their profits we are only to take note of the fact that the redemption fine of Rs. 5.00 crores has already been paid and the goods have been cleared and hence on that basis reasonably believe that the appellants have made up their margin, even after payment of this redemption fine. In view of this position, we have no other alternative but to reject the alternative prayer for reducing the quantum of redemption fine. At this juncture, we also would like to observe that the quantum of redemption fine is dependent on various factors, namely whether the items are imported for actual use by the actual user, whether the goods on sale have a high margin, whether there is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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