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2015 (10) TMI 1286 - MADRAS HIGH COURT

2015 (10) TMI 1286 - MADRAS HIGH COURT - 2015 (324) E.L.T. 70 (Mad.) - Levy of penalty and confiscation of prohibited goods already exported Castor oil mixed with certain additives - Whether Tribunal was right in holding that Section 113 cannot be invoked for confiscation of goods and was justified in setting aside the penalty imposed under Section 114?

Held That:- Goods exported contrary to prohibition imposed by law; penalty was rightly imposed by the Adjudicating Authority - Trib .....

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JUDGMENT (Delivered by R.SUDHAKAR,J.) The above Civil Miscellaneous Appelas filed by the Revenue as against the order passed by the Customs, Excise and Service Tax Appellate Tribunal are admitted by this Court on the following substantial questions of law: "1. Whether the Tribunal is correct in holding that Section 113 cannot be invoked for confiscation of goods already exported? 2. Whether the Tribunal is correct in the interpretation of law i.e. interpretation of Section 113, which reads .....

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ustoms Act cannot be invoked for confiscation of goods already exported? 2. Whether the Tribunal was justified in setting aside the order of penalty on the exporter under Section 114 of the Customs Act?" 3. We have heard both sides at length on the re-framed questions of law. 4. The brief facts leading to the present case are as follows: Based on the intelligence gathered, the Officers of the DRI visited the premises of M/s.K.Kamala Bai, a proprietory concern run by Shri.C.Kantilal, in the .....

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notice was issued alleging as follows: "73.476 MT of Cassia imported and cleared duty free under the DEEEC Scheme by availing the benefits of Customs Exemption Notification No.116/88 dated 30.3.88 against Advance Licence No. P/K/3528067 dated 17.3.92 were not sent for distillation of Cassia Oil at the premises of the supporting manufacturer viz. M/s.Sha Devi India, Madurai, but clandestinely diverted to local market by the importer M/s.K.Kamala Bai, Madras without bills. 5. Apart from the a .....

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ustoms Act, 1962 read with Section 50(2) ibid; b. that as per section 18(1)(a) of Foreign Exchange Regulations Act, 1973, there is a prohibition on export of goods unless the exporter concerned furnished correct material particulars in the prescribed form. In the present case, the details of description of goods were incorrect as found during the course of investigation. Hence the goods appeared are liable for confiscation under section 113(d) of Customs Act, 1962 read with section 18(1)(a) of F .....

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76 Mts. of Cassia valued at ₹ 26,71,587 cleared duty free under Bill of Entry No.24969 dated 16.7.93; 27046 dated 30.7.93, 29539 dated 18.8.93 and 29579 dated 18.8.93 against advance licence No.P/K 3528067 dated 17.3.92 were not used in the process of extracting Cassia Oil for export. Instead 735 Kgs of cheap castor oil mixed with synthetic oil under the guise of cassia oil had committed. This appears to operate as a prohibition under section 113(d) of Customs Act, 1962 read with section 3 .....

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iable for confiscation under section 113(i) of Customs Act, 1962 read with section 50(2) ibid; b. that as per section 18(1) (a) of Foreign Exchange Regulations Act, 1973, there is a prohibition on export of goods unless the exporter concerned furnished correct material particulars in the prescribed form. In the present case, the details of description of goods were incorrect as found during the course of investigation. Hence the goods appeared are liable for confiscation under section 113(d) of .....

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ate attempt on the part of the exporter that 73.476 Mts. of Cassia valued at ₹ 26,71,587 cleared duty free under Bill of Entry No.24969 dated 16.7.93; 27046 dated 30.7.93, 29539 dated 18.8.93; and 29579 dated 28.8.93 against advance licence No.P/K 3528067 dated 17.3.92 were not used in the process of extracting Cassia Oil for export. Instead 735 Kgs or cheap castor oil mixed with synthetic oil under the guise of cassia oil had committed. This appears to operate as a prohibition under secti .....

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Devi India, Shri. K.R. Ramesh Babu, M/s. Deluxe Roadlines, Madras and Shri Lalith D. Shah Manager, M/s. Deluxe Road lines have indulged in various acts and omissions contravening the provisions of Customs Act, 1962 read with Foreign Trade (Development & Regulation) Act, 1992 and also Foreign Exchange Regulation Act, such acts abets ultimately led to the successful attempt of exporting goods which were liable for confiscation as aforesaid and are consequently liable for a penalty under Sectio .....

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hri. C. Kantilal, M/s. Sha Devi India, Madurai, Shri. K.R. Ramesh Babu K.R. Ravi Shankar Babu, M/s.Deluxe Road lines, Madras Lalith D.Shah and M/s. S. Ukkirapandian Pillai & Sons, Tuticorin are hereby required to Show Cause to the Commissioner of Customs, No.4A, Dindigul Road, Trichy within 30 (thirty) days of receipt of this notice as to why; i) the goods covered by the shipping Bill No:1758 dated 19.1.94 valued at ₹ 42,51,030 should not be held liable for confiscation under Section 1 .....

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n defeating the object of the DEEC Scheme. The findings of the Adjudicating Authority read as follows: "118. As the exporter had exported the goods by misdeclaration, I hold that the Castor Oil mixed with Cinnanic Aldehyde valued at ₹ 42,51,030/- which were already exported is liable for confiscation under Section 113(i) of the Customs Act, 1962 read with Section 50(2) of the Customs Act, 1962 and also under Section 113(d) of the Customs Act, 1962 read with Section 18(1)(a) and Sectio .....

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Customs Act, 1962. 120. I also hold that S/Shri. K.R. Ravishankar Babu of M/s. Sha Devi India and Lalit D. Shah of M/s. Deluxe Roadlines assisted Shri. C. Kantilal of M/s. K. Kamala Bai in the successful attempt of exportation of Castor Oil mixed with Cinnanic Aldehyde by manipulating their records and hence they are also liable for penal action under Section 114 of the Customs Act, 1962. 121. As far the goods valued at ₹ 25,000/- which were seized from the factory premises of M/s. Sha Dev .....

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Shipping Bill No.1755 dated 19.1.94 in the guise of Cassia Oil, inspite of the fact liability for confiscation exists, under Section 113(i) read with Section 50(2) of the Customs Act, 1962 read with Section 18(1)(a) and Section 67 of the Foreign Exchange Regulation Act, 1973 read with Section 3(3) of the Foreign Trade (Development and Regulation) Act, 1992 in as much as these goods are not available for confiscation, there is no point in ordering confiscation of the same. However the liability .....

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relevant portion of the order of the Tribunal: "4. After giving our careful thought to the submissions, we find that the impugned order was passed in adjudication of a show-cause notice pertaining to goods already exported. The assessee has argued, through counsel, that goods already exported were not liable to be confiscated under Section 113 and no penalty relatable to such confiscation was liable to be imposed on the exporter. This argument has been vehemently opposed. However, we have .....

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quot;any goods attempted to be exported by sea or air ... .. ". Clause (b) reads: "any goods attempted to be exported by land on inland water..." The rest of the clauses also read likewise. We have no doubt in our mind that, when the above provision was enacted, Parliament was conscious of the fact that goods already exported out of Indian territory was incapable of being confiscated. A significant contrast is noticeable in Section 111. The caption for Section 111 reads: "con .....

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pressed into service only to confiscate goods which are "attempted to be exported" in violation of any of the prohibitions mentioned in the various clauses thereof. The confiscation order in respect of the subject goods is, therefore, bad in law. Consequently, the order of penalty on the exporter under Section 114 is not sustainable. In the result, we set aside the order of the Commissioner and allow the assessee's appeal with consequential reliefs if any. Consequently, the Revenu .....

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ng Bill, the goods are liable for confiscation under Section 113 of the Customs Act. 12. Learned counsel appearing for the respondent/assessee submitted that the goods already exported were not liable for confiscation under Section 113 of the Customs Act. Consequently, the exporter could not be penalised under Section 114 of the Customs Act. 13. Heard learned Standing Counsel appearing for the Revenue and the learned counsel appearing for the assessee and perused the materials placed before this .....

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ot be invoked for confiscation of goods already exported. According to the Tribunal, the legislative intent behind Section 113 is only in relation to confiscation of goods attempted to be exported and therefore, it would not get attracted in a case of goods already exported. This proposition propounded by the Tribunal does not found to be correct, for the reason that Section 113(d) of the Customs Act makes it clear that the liability of goods for confiscation arise as soon as the goods are attem .....

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entioned therein. These purposes indeed cover very very wide fields. Some of the purposes for which the prohibition may be imposed as stated in Section 11(2) are, prevention of smuggling, prevention of shortage of goods of any description and prevention of the contravention of any law for the time being in force. Section 113 provides for liability of the goods to confiscation in case of any violation of the prohibition imposed under Section 11 of the Act and Sections 11 provides for personal pen .....

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analogy of the offence of attempt to commit suicide given in this connection are, in our opinion, misleading and devoid of merit. An attempt to commit suicide is indeed an offence and the act of committing suicide resuling from the successful attempt may not be considered to be an offence. This is so for the simple reason that once a person attempting to commit suicide succeeds in his attempt he places himself beyond the reach of law and no punishment is intended to be inflicted on the dead per .....

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is accrued liability is wiped out or extinguished with the exportation of the goods. It may be that after the goods had in fact been exported the liability of the goods to be confiscated may not be enforceable by actual confiscation of the goods. Personal penalty of any person who, in relation to the goods, does or omits to do any act which act or omission renders the goods liable to confiscation under Section 113 or abets the doing or omission of such an act has been provided in Section 114. Th .....

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iability of the goods to confiscation under Section 113 of the Act at the stage of the attempt to export the said goods, clearly remains and the said liability is capable of enforcement. In the case of illegal export of any goods contrary to prohibition the effect may be that the liability of the goods to confiscation which arises and accrues may not be capable of enforcement but the personal liability which arises with the accrual of liability of the goods to confiscation can be enforced and by .....

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consideration before the Division Bench and has been referred to the Full Bench and our answer to this question is therefore in the affirmative. 15. In the above-said decision, there was a show cause notice issued by the Department for taking penal action against the exporter under Section 114 of the Customs Act for violation of Section 12(1) of the Foreign Exchange Regulation Act, 1947. The contention of the Department was that by virtue of the amendment of Foreign Exchange Regulation Act, 1947 .....

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/s. Euresian Equipments and Chemicals Ltd., Calcutta, S/Sri Laxmi Prasad Jajodia, Manick Chand Jajodia and Jugal Kishore Jajodia were the persons concerned for the mis-declaration of the goods and values of the goods exported and hence liable for penal action u/s 114(1) of the Customs Act, 1962, 110. M/s. Euresian Equipments and Chemicals Ltd., Calcutta and its directors S/Sri Laxmi Prasad Jajodia, Manick Chand Jajodia and Jugal Kishore Jajodia were called upon to explain the matter in writing a .....

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the matter was referred to the Full Bench and the following questions of law were raised before the Full Bench: "(1) Whether, by virtue of Section 23A of the Foreign Exchange Regulation Act, 1947, the provisions of Sections 113 and 114 of the Customs Act,1962 are attracted for the contravention of Section 12(1) of the Foreign Exchange Regulation Act, 1947, in relation to goods which had been exported beyond India. (2) Whether, when goods have been exported beyond India such goods may be sa .....

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on or exportation of goods for purposes mentioned therein. These purposes indeed cover very very wide fields. Some of the purposes for which the prohibition may be imposed as stated in Section 11(2) are, prevention of smuggling, prevention of shortage of goods of any description and prevention of the contravention of any law for the time being in force. Section 113 provides for liability of the goods to confiscation in case of any violation of the prohibition imposed under Section 11 of the Act .....

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rt in Section 113(a), (b) and (d) and the analogy of the offence of attempt to commit suicide given in this connection are, in our opinion, misleading and devoid of merit. An attempt to commit suicide is indeed an offence and the act of committing suicide resuling from the successful attempt may not be considered to be an offence.This is so for the simple reason that once a person attempting to commit suicide succeeds in his attempt he places himself beyond the reach of law and no punishment is .....

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provision in the Act to suggest that this accrued liability is wiped out or extinguished with the exportation of the goods. It may be that after the goods had in fact been exported the liability of the goods to be confiscated may not be enforceable by actual confiscation of the goods. Personal penalty of any person who, in relation to the goods, does or omits to do any act which act or omission renders the goods liable to confiscation under Section 113 or abets the doing or omission of such an a .....

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which arises with the accrual of the liability of the goods to confiscation under Section 113 of the Act at the stage of the attempt to export the said goods, clearly remains and the said liability is capable of enforcement. In the case of illegal export of any goods contrary to prohibition the effect may be that the liability of the goods to confiscation which arises and accrues may not be capable of enforcement but the personal liability which arises with the accrual of liability of the goods .....

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the first question which came up for consideration before the Division Bench and has been referred to the Full Bench and our answer to this question is therefore in the affirmative. 26. An order by the proper officer permitting clearance and leading of the goods under Section 51 of the Customs Act does not effect the position. We have earlier noticed that under Section 113 of the Customs Act export goods incur the liability to confiscation at the stage when they are attempted to be exported. Th .....

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uent to the stage of the attempt, is not indeed of any material consequence. The goods are export goods as defined in Section 2(19) of the Customs Act, 1962 at the time the goods incur the liability to confiscation under Section 113 of the said Act. We accordingly answer the second question which came up for consideration before the Division Bench and which has been referred to the Full Bench in the manner indicated above." (Emphasis Supplied) 18. The Full Bench has clearly held that even i .....

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High Court is that the goods are liable for confiscation as soon as an attempt is made. We are in agreement with the said reasoning. 21. For better clarity, Sections 113 and 114 of the Customs Act read as follows: Section 113. Confiscation of goods attempted to be improperly exported, etc. The following export goods shall be liable to confiscation - (a) any goods attempted to be exported by sea or air from any place other than a customs port or a customs air port appointed for the loading of su .....

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ed to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force; (e) any dutiable or prohibited goods found concealed in a package which is brought within the limits of a customs area for the purpose of exportation; (f) any dutiable or prohibited goods which are loaded or attempted to be loaded in contravention of the provisions of Section 33 or Section 34; .....

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goods which do not corresponds in any material particular with the entry made under this Act or in the case of baggage with the declaration made under Section 77 in respect thereof; (j) any goods on which import duty has not been paid and which are entered for exportation under a claim for drawback under Section 74; (k) any goods cleared for exportation under a claim for drawback which are not loaded for exportation on account of any wilful Act, negligence or default of the exporter his agent o .....

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tion under Section 113 or abets the doing or omission of such an act shall be liable,- (i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding five times the value of the goods or one thousand rupees, whichever is the greater; (ii) in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding five times, the duty sought to be evaded on such goods or one thousand rupee .....

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