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TMI Blog2005 (7) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... dicated as manufacturer of the reclaimed lubricating oil. M/s. Vibhuti Exports is merchant-exporter and it is a proprietory concern of M/s. Anjana Jagetia. Her father Shri Gulab Chand Jagetia was Chief Executive of M/s. Vibhuti Exports looking after the work of the import and export of the firm. On the basis of a specific information an enquiry was initiated by the Directorate of Revenue Intelligence about the misuse of DEEC Scheme by M/s. Vibhuti Exports. On enquiry, it was found that M/s. Vibhuti Exports imported waste oil under each of the seven advance licences mainly through the port of Mumbai and some consignments through ICD, Jaipur. The details of the imports were given in DEEC book. All the advance licences were quantity based and quantities of import entitlement as well as export obligation were indicated in terms of waste oil/reclaimed lube oil in barrels of 44 gallons each with CIF/FOB values. All the imports of waste oil were made in barrels of 44 gallons each. The export obligation was also in barrels of 44 gallons each which was equal to 30% of the number of barrels of waste oil imported. During investigation, it was found that for advance licence No. 2277817 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the export under these two advance licences No. 2277817 and 2277826 both dated 5-11-92 and agreed to pay the duty on the imports made by them for which export obligation was not fulfilled. Subsequently, he tendered three drafts for Rs. 13,22,380/- towards duty liability which were forwarded to the Commissioner of Customs, Mumbai for adjustment at the time of adjudication. It appeared that M/s. Vibhuti Exports and its Chief Executive who looked after the import/export activities of the proprietory firm has knowingly inflated the quantity of reclaimed lube oil exported under advance licences No. 2277817 and 2277826 in the shipping bills, packing list, invoices and GRs with a view to show fulfilment of entire export obligation by only one export consignment under each advance licence while physically exporting much less quantity, thus misusing the provisions of the DEEC Scheme. On these two licences, it appeared that they evaded duty of Rs. 14,26,557/-. 3. In respect of other five licences namely licence No. 2277827 dated 5-11-92 and 1535022 to 1535025 all dated 26-2-93, M/s. Vibhuti Exports adopted the same modus operandi as adopted in two advance licences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eared to have evaded Rs. 4,40,539/- relating to imports under advance licence no. 1535024 and 1535025 made through ICD, Jaipur and the remaining amount of Rs. 3,95,761/- relates to imports made through Mumbai Customs Port. It also appeared that in respect of exports made during the extended period, no foreign exchange was realized for the above said 5 advance licences. M/s. Vibhuti Exports did not submit GR forms to their bankers and obtained Revised Bank Realization Certificate from their bankers by misrepresentation. Thus these exports during extended period were in violation of notification 204/92-Cus. read with Export Import Policy. Duty evaded on import of waste oil on this count worked out to Rs. 37,34,796/- (Rs. 25,34,394/- for imports from Mumbai and Rs. 12,00,402/- for imports through ICD Jaipur). 4. After completion of the investigation, two show cause notices were issued to M/s. Vibhuti Exports, Gulab Chand Jagetia and Ms. Anjana Jagetia answerable to the Commissioner of Customs, Mumbai and two show cause notices were issued for imports made through ICD, Jaipur. Show cause notices issued for imports made at Mumbai were adjudicated by the Commissioner of Customs (Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 114 of the Customs Act and confiscated the goods valued at Rs. 11,23,891/- under Section 111(o) and Section 113(d) of the Customs Act. Since the goods were not available for confiscation, he ordered for payment of redemption fine of Rs. 3,00,000/- in respect of these goods. He imposed penalty of Rs. 6,00,000/- on Gulab Chand Jagetia under Section 112(a) of Customs Act. In respect of the charges found established for the show cause notice dated 1-6-98, he imposed a penalty of Rs. 4,00,000/- on M/s. Vibhuti Exports under Section 112(a) of the Customs Act. 6. Shri J.M. Sharma, learned Consultant, appeared for M/s. Vibhuti Exports, Shri Gulab Chand Jagetia and Ms. Anjana Jagetia. He pleaded that he is not contesting the findings of the respective Commissioners in respect of two advance licences namely advance licence No. 2277817 and 2277826 both dated 5-11-92 as far as the duty liability is concerned. He is contesting the findings of both these Commissioners in respect of other five advance licences for which duties have been demanded for not meeting the export obligation on the imports of the waste oil on the following grounds which are discussed below :- (i) The findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other licences and when all quantities of all five advance licences are taken together, then the export obligations have been fulfilled by clubbing the shortfall and excess of different licences. Para 122A of the Handbook of procedures 1992-1997 Volume-1 which reads as under, permits such adjustments :- "122A. The accountability of imports and exports shall be restricted in relation to the individual duty free licence issued under this scheme. The export obligation may be fulfilled by exporting to the same party which has placed the order or to any other party. In exceptional cases the ZALC under whose jurisdiction the licence is issued or ALC in other cases may also consider a request for clubbing all imports and exports of more than one quantity based duty free licence provided the description of the export product, input-output norms, value addition norms and other conditions imposed on the licences so clubbed are the same. Upon clubbing, the licences shall for all purposes be deemed to be one licence." (ii) Originally in respect of disputed five licences, they had exported 300 barrels each and realized the entire value of the goods for export obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g quantity of lube oil required to be exported to meet the export obligation has been paid and thus, no obligation remains, makes it clear that CBI had accepted their claim that under the five advance licences, export obligation was fulfilled and in case of two advance licences, they had paid duty for that portion of export obligation which was not fulfilled by them. (v) It was also pleaded that the demands are barred by time as show cause notices were issued after six months from the date of the imports and there is no mis-statement or suppression of facts on their part requiring application of extended period for demanding the customs duty. (vi) Waste oil imported by them is not liable for confiscation nor refined lube oil exported by them liable for confiscation under Section 111(o) and Section 113(d) of the Customs Act, as has been held by the Custom authorities. (vii) It is an accepted fact that licensing authority i.e. DGFT on the basis of the document submitted by the appellant firm has accepted that export obligation has been completed in full and discharged LUT in respect of all seven licences. It is not open for the department to sit in review on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y establish this fact that imports were made in the barrels of 44 gallons of British unit of gallons. All these imports are in the British unit of gallon and the export obligation is fixed on the same unit in terms of number of barrel of 44 gallon to be exported. Therefore, the appellant's claim that they have used the American unit of gallon is belied by the invoices of their supplier which clearly mentioned that these barrels were containing 208 litres of waste oil and this is possible only when British unit of gallon is adopted. Exports were required to be made in terms of British unit of gallons only. (iii) in respect of the exports made during the extended period, the bank realization certificate was not produced by the appellant and therefore, there is a violation of condition no. (vii) of the Notification No. 204/92-Cus. dated 19-5-92. (iv) CBI investigation, investigations started only from 25-10-99 i.e, much after the issue of show cause notices. CBI has given finding that several documents were not available to them for making investigation. Therefore, the finding of the CBI has no relation with the charges framed against the appellants in the show cause not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted waste oil for which the appellants had not fulfilled the export obligation is liable for confiscation under Section 111(o) of the Customs Act and the goods i.e. refined lubricating oil which was exported without realizing the foreign exchange becomes prohibited goods in terms of Section 18 of Foreign Exchange Regulation Act read with Notification No. Fl/67/EC/73-1 dated 1st. Jan. 1974 issued thereunder and Section 11 of the Customs Act. Therefore, this is liable for confiscation under Section 113(d) of the Customs Act. The Commissioner had correctly held these goods liable for confiscation and confiscated the goods. (vii) Para 6B.1 of the Exchange Control Manual of 1993 issued by the Reserve Bank of India relates to disposal of copies of Export Declaration Forms. According to this para, "customs will certify the value declared by the exporter on both the copies of the GR form at the space earmarked and will also record the assessed value. They will then return the duplicate copy of the form to the exporter and retain the original for transmission to Reserve Bank. Exporters should submit the duplicate copy of the GR form again to Customs along with the cargo to be shipp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revised certificates in good faith. Till date the exporter has not submitted the documents in spite of our repeated contact through visit/telephonic talk. He has not kept up his assurances." Thus, it is clear that no foreign exchange was realized for the subsequent exports made under the extended period. (viii) The appellants had got redemption of LUT and bank guarantee in respect of advance licences 2277817 and 2277826 both dated 5-11-92 by misdeclaration. They have now accepted that in case of these two licences they are willing to pay duty on imported waste oil not used in export production. In respect of other 5 licences they have not produced such redemption certificate and fulfilment of export obligation. Even if LUT/BG is redeemed action can be taken by Custom authorities as per last sub-para of Para 126 of Handbook of Procedures which is reproduced below - "Ordinarily redemption of LUT shall not preclude the Custom authority from taking action against the licence holder for any misrepresentation, misdeclaration and default detected subsequently." Thus, Customs can take action even after redemption of BG/LUT by Licensing authority if misdeclaration, misreprese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te oil under advance licences no. 2277817 and 2277826 both dated 5-11-92 and they have not fulfilled their export obligation. They have already paid a sum of Rs. 13,22,380/- as duty on the imports of waste oil and balance duty confirmed by the Adjudicating Authority in respect of these two licences is accepted by them and they are not challenging his findings on the quantum of duty required to be paid by them in respect of these two licences. Since these facts and obligation to pay duty has been accepted we are not discussing this further. 11. The appellants have claimed that in case of five licences that is licence no. 2277827 dated 5-11-92 and 1535022 to 1535025 all dated 26-2-93, initially they had exported the refined lube oil for each licence and had shown the entire value of the export obligation at the time of export of the goods in the shipping bill. The quantity of the goods exported was although less than the quantity required to be exported to meet the export obligation, therefore, they sought extension from DGFT to export the balance quantity to meet the export obligation. On getting extension, they exported the remaining quantity. According to condition no. (v) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gross weight per barrel of 44 gallons comes to 200 Kg. The difference between gross weight & net weight comes to 5510 kgs., which denotes the tare weight of 367 barrels. Therefore, tare weight of one barrel comes to 15 kg, & net weight of waste oil contents per barrel of 44 gallons comes to 185 kg. Under the Bill of Entry No. 000032 dated 11-4-1994, the noticee No. 1 had imported 288 barrels of Waste Oil under advance licence No. 1535024 dated 26-2-93. Under this consignment there were 3 containers each containing 96 barrels and weight of the consignment was declared as 87.6 MT (i.e. 19.2 MT in each container). Similarly, under Bill of Entry No. 000035 dated 26-4-1994 the noticee No. 1 had imported 288 barrels of waste Oil advance licence No. 1535024 dated 26-2-93. Under this consignment there were 8 containers each containing 80 barrels and weight of the consignment was declared as 128.00 MT (i.e., 16.00 MT in each container). I also find that under Bill of Entry No. 000006 dated 17-1-1994 the noticee No. 1 had imported 181 barrels of Waste Oil under advance licence No. 1535025 dated 26-2-93. Under this consignment there were 2 containers each containing 85 and 96 barrels and wei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portation and not the American gallon as contended by the noticees. 50. This finds more support from the following illustrations with respect to 4 Bills of Entry which can be considered as truly representative clearly establishing that the imports were made on the basis of British Gallon as a unit measure and not the American Gallon. Sl. No. Particulars If British Gallon is adopted as unit of measurement. (1 Gallon = 4.546 ltr.) If American Gallon is adopted as unit of measurement. (1 Gallon = 3.785 ltr.) (a) (b) (c) (d) 1(i) Quantity of Waste Oil in 288 Barrels of 44 gallons each (B/E No. 000032 dated 11-4-1994) 57606.91 Ltr. (288 x 44 x 4.546) 47963.52 Ltr. (288 x 44 x 3.785) (ii) Net weight of above quantity of waste oil of specific gravity 0.925 53286.39 Kg. (i.e., 53.28 MT) (57606.91 x 0.925) 44366.25 Kg. (i.e., 44.36 MT) (47963.52 x 0.925) (iii) Tare weight of 288 barrels (of 44 gallons each) @ 15 Kg. Per barrel. 4320 Kg. (i.e., 4.32 MT) 4320 Kg. (i.e., 4.32 MT) (iv) Gross weight of Waste Oil in 288 Barrels of 44 gallons each [Col. (ii) + (iii) above] 57.6 MT 48.68 MT (v) Weight of Waste Oil in 288 Barrels o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73.40 MT 73.40 MT (vi) Difference between the declared weight as per Col. (v) and gross weight calculated as per Col. (iv) above Nil 11.37 MT" 13. We are fully convinced with the findings of the Commissioner on this issue. The evidence relied on by the appellants is only one letter dated 4-10-95 of Globe Petroleum Corporation. We find that this letter is written much after the import and they have not given any reason nor it was in the earlier contract that the goods will be supplied in U.S. gallon. Therefore, we are unable to accept this letter. The Commissioner has given detailed reasons in his order that import should be taken as British gallon and not in U.S. gallon. We also find that there is no material in any of the invoices under which the goods were imported to show that unit gallon is relatable to U.S. gallon. Therefore the unit of one gallon equal to 4.546 litres has been correctly taken for all imports and for fulfilling export obligation. We have noted that the appellants have not shown in the shipping bill unit of exported goods uniformly. Some time that is shown in weight, some time number of barrels and sometimes litres. Therefore the investigating auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own net weight 4800 kg but in the invoice for buyer they have not shown weight but they have shown the total quantity of 300 barrels. This invoiced quantity of 300 barrels was shown against their export obligation. In the declaration enclosed with shipping bill at serial no. (e) they declared use of 980 barrel of waste oil for manufacture of these 300 barrels of lube oil. Thus by shipping small quantity in terms of weight in shipping bill but showing use of imported waste oil of 980 barrels in shipping bills and showing export of 300 barrel of 44 gallons in invoice, they have tried to mislead the department that they have fulfilled the entire export obligation in respect of this licence despite the fact that they have exported lesser quantity of 4800 kg. Similarly in all other shipping bills, they have not shown correct quantities or even in some cases they have not shown whether barrel was in gallon capacity or litre but in the invoices, they were showing that the refined lube oil in number of barrels of 44 gallon. Thus, there was a clear misstatement and suppression of facts in the invoices. They had given false declaration of quantity in para (e) of declaration submitted along w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tity of 12490 gallon in respect of licence no. 1535024 (Annexure T-6 of show cause notice) and 40957 gallon in respect of licence no. 1535025 (annexure T-7 of show cause notice), the value of these two quantities which were imported but corresponding export was not made works out to (Rs. 1,35,915/- plus Rs. 4,45,553/-) Rs. 5,83,468/-. Therefore, the redemption fine imposed by the Commissioner, Jaipur amounting to Rs. 3,00,000/- is reduced to Rs. 1,50,000/-. 16. On other minor grounds raised during hearing, we agree with the pleadings of Revenue which are based on facts. 17. Now coming to imposition of penalty on the appellants, we find that charge of violation of condition no. (v) of Notification No. 204/92 dated 19-5-92 is established against M/s. Vibhuti Exports, as discussed above. We also find that they have imported waste oil and had not exported the goods to the full extent as discussed above and thus made the imported goods liable for confiscation as they have not met the export obligation. Therefore, M/s. Vibhuti Exports are liable for penalty under Section 112(a) of the Customs Act. (i) We find that the Commissioner of Customs, Jaipur has imposed penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have rendered the goods liable for confiscation for violating of condition (vii) of Notification 204/92. 19. Shri Gulab Chand Jagetia was main person concerned with the import and export of the goods on behalf of M/s. Vibhuti Exports. The Commissioner of Customs, Mumbai under Order No. 296/2002 in para 45 has given finding that he is the person who in relation to the imported goods has done or omitted to do acts and/or omission which have rendered the imported goods liable for confiscation under Section 111(o) of the Customs Act and he was responsible for the entire activities of the Import/Export under the advance licence. We agree with this finding and uphold penalty of Rs. 3 lakh imposed on Gulab Chand Jagetia under Section 112(a) of Customs Act. We also find that penalty of Rs. 8,00,000/- (Rs. 2 lakhs plus Rs. 6 lakhs) has been imposed on Gulab Chand Jagetia under Section 112(a) of the Customs Act, by the Commissioner of Customs, Jaipur. We find that the Commissioner of Customs, Jaipur has imposed penalty of Rs. 2,00,000/- on Gulab Chand Jagetia in respect of show cause notice dated 6-1-98 (wrongly typed in the order as 1-6-98) and we had held above that on the goods ..... 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