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2017 (2) TMI 420 - GUJARAT HIGH COURT

2017 (2) TMI 420 - GUJARAT HIGH COURT - TMI - Non-fulfillment of export obligation - Diversion of imported polyester staple fibres under DEEC scheme - Whether in the facts and circumstances of the case, the learned Tribunal is justified in setting aside the demand of duty on the goods on the ground that though they were seized after customs clearance and absolutely confiscated under Section 111 [m] and 111 [o] of the Customs Act? - Held that: - The liability to pay duty has nothing to do wit .....

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e it was held and observed that the levy of duty and the order of confiscation both operate in a different field. It is further observed that the import duty has to be paid inevitably by the importer. Confiscation or fine in lieu thereof is an infliction on the offender or circle of offenders. It is also observed that sometimes, the burden in both the cases, falls on the same person and at the other times, they may fall on different person. - Appeal allowed - decided in favor of Appellant-R .....

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503/86 by which the learned Tribunal has allowed the Appeals preferred by the respondent herein [original appellant] and has set-aside the demand of duty on the goods seized and consequently confiscated under Section 111 [m] and 111 [o] of the Customs Act, 1962, the Revenue has preferred the present Appeal to consider the following substantial questions of law : [i] Whether in the facts and circumstances of the case, the Hon'ble Tribunal was right in law in passing the order for setting asid .....

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[iii] Whether it is legally valid and correct not to charge duty when goods are absolutely confiscated, while in terms of provisions of Section 125 of the Customs Act, 1962 in the case of goods confiscated but permitted to be redeemed against fine, duty on the goods is payable in addition to fine ? [iv] Whether the liability to pay duty under Section 12 of the Customs Act, 1962 is independent of the liability under various punitive provisions of the Act, in view of the decision of Hon'ble Su .....

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vely. One of the conditions of these licenses was that the licence holder should export 500 MT of man-made spun yard of ₹ 75 lakhs of f.o.b value and 2000 Mts of man-made spun yarn valued at US $ 29,00,000/=, as envisaged by the DEEC Scheme. Against the first import licence M/s. L.D Textile Industries Limited imported 2050 bales of manmade fibres of net weight 512.50 M/Ts valued at ₹ 82,71,459/= under Bill of Entry No. 63 dated 30.3.84 per M.T Strathfyne at Veraval Customs House and .....

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lement Certificate [DEEC] Book No. 5088/Kandla dated 6.8.83. This import entailed the export obligation of shipping 500 M/Ts of yarn spun out of imported man-made fibres of British counts 15s ranging to 60s of f.o.b value of ₹ 75,00,000/=. However, the importers could not fulfill the export obligation and they by their letter dated 26.2.85 signed by Shri Yogesh Mehra addressed to the Superintendent of Customs, Veraval intimated that due to our non ability to comply with the export obligati .....

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,09,631/= and ₹ 1,30,30,004/= respectively per m.v. Strathfyne and cleared them under Bill of Entry No. 22 dated 30.10.84 and 23 dated 30.10.84 respectively. The samples were drawn from these two consignments and sent to the Kandla Customs House for test. The test reports revealed that the goods were dull whit entangled mass of short staple fibre [discontinuous] wholly made of man-made fibres of cellulosic origin [Viscose]. These two consignments were also cleared free of duty vide the Dut .....

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Limited, Ankleshwar had imported large quantities of polyester staple fibres under the advance licence scheme and they were selling the same in the open market through misdeclaration of goods as non-cellulosic synthetic waste. The information further indicated that the goods sold were being sent to the truck under cover of fictitious consignees. On 13.3.85, a specific information was received that one truck containing 40 bales of polyester staple fibre was leaving Ankleshwar for Ahmedabad. There .....

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were selling the goods imported by them under the advance licence scheme. Accordingly, the Headquarters preventive party was sent to Ankleshwar on 14.3.85 to check the stock and accounts of M/s. L.D Textile Industries Limited of the fibre imported by them in terms of the Duty Exemption Export Entitlement Scheme. The check of the accounts revealed that their books of accounts showed Nil balance of the raw materials imported by them. Therefore, their godowns was searched and the search yielded 227 .....

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brand Eslon . These 1837 bales were also seized under a panchnama dated 15.3.85, the Customs Officers also seized records relevant to the enquiry, recorded statements and conducted investigations. The scrutiny of the seized documents revealed that M/s. L.D Textiles Industries Limited sold or transferred 1978 bales to different parties including the other captioned appellants. The investigations further confirmed that these 1978 polyester fibre bales were the same as imported under Bills of Entr .....

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bales of polyester staple fibre seized from M/s. P.G Textile Mills Limited on 16.3.85 and also 171 bags of yarn seized from M/s. Arunoday Mills Limited and 6 bales of polyester fibre seized from M/s. Jayashree Textiles Limited. He demanded duty amounting ₹ 4,20,88,370.16 in respect of bill of Entry No. 63 dated 30.3.85 for 2050 bales of polyester fibre after giving the credit of the duty already deposited by M/s. L.D Textiles Industries Limited through the bank draft in favour of Veraval .....

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the date of clearance of the goods through Veraval Customs House till the date of actual payment of duty. In addition, the Collector of Customs, demanded Customs duty amounting to ₹ 6,32,60,298=30 in respect of Bill of Entry No. 23 dated 30.10.84 covering 3000 bales of Polyester Staple Fibre bales with 18% interest the amount from the date of clearance of the goods till the date of payment of duty. 2.6 The Collector further held that the interest was determined with reference to para 21 of .....

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d order. The order of confiscation and levy of duty was made as part of adjudication without prejudice to the action for levy of penalty on the importers and other respondents, as mentioned in the show cause notice. 3. Feeling aggrieved and dissatisfied with the order passed by the Adjudicating Authority, the respondent herein preferred appeals before the learned CESTAT. By the impugned common judgment and order, the learned Tribunal has though confirmed the order of confiscation of the goods se .....

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e respondent. 6. The present Tax Appeal is of the year 2006 and as such arising out of the show cause notice issued in the year 1995 and arising out of the order-in-original passed by the Collector of Customs, Ahmedabad dated 21st April 1986, we proceed ex parte. 7. Ms. Avni A Mehta, learned counsel appearing on behalf of the Revenue has vehemently submitted that in the present case, the learned Tribunal as set-aside the demand of duty on the goods in question solely on the ground that they were .....

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Court has observed and held that the action/ proceedings under Section 111 and 125 are altogether different and they can be said to be penal provisions and despite the confiscation of goods under Section 111 of the Customs Act, the liability to pay duty on the confiscated goods still continues. It is submitted that in the present case, the demand of duty on the goods in question have been set-aside by the learned Tribunal solely on the ground that once the goods were seized, after customs cleara .....

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We have heard learned counsel appearing on behalf of the Revenue and perused the impugned judgment and order passed by the learned Tribunal. A short question which is put for our consideration is as to whether in the facts and circumstances of the case, the learned Tribunal is justified in setting aside the demand of duty on the goods on the ground that though they were seized after customs clearance and absolutely confiscated under Section 111 [m] and 111 [o] of the Customs Act ? Considering Se .....

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red by the Apex Court in the case of Security & Finance [P] Limited [Supra]. In the case before the Hon'ble Supreme Court, fine in lieu of confiscation under Section 183 of the Sea Customs Act was ordered by the Dy. Collector of Customs, who also imposed and directed payment of full duty on the goods imported. The question arose before the Hon'ble Supreme Court was, does the order under Section 183 of the Act preclude the Collector from levying duty under Section 20 of the Act ? Whil .....

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the decision, the Apex Court has observed and held as under :- 7. Import duty has to be paid inevitably in these cases, by the importer confiscation or fine in lieu thereof is an infliction on the offender or circle of offenders falling within Section 167 Entry 8. Sometimes, the burden in both the cases falls on the same person. At other times, they may fall on different person. In some cases, the importer as well as the confiscatee may be identified and so the duty and the penalty may be impose .....

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therefore liable to pay import duty normally leviable from pedal importers. He has admittedly transgressed the provisions of Entry 8 of Section 167 by importing goods not covered by the licence and therefore comes within the penal complex set out in Sections 182, 183 & 184. In the present case, the Deputy Collector, the competent authority has chosen to give the owner of the goods, the respondent, option to pay in lieu of confiscation, a fine. He has not confiscated the goods and therefore, .....

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