TMI Blog2003 (12) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing grounds which are extracted herein below : "It is submitted that the appellant has not yet cleared the goods since a grave injustice has been done as per the impugned order. The appellant respectfully submits that the impugned order-in-original explicitly exhibits the lack of application of mind on that part of the Commissioner. The order is contrary to the facts and weight of evidence and it is therefore legally not sustainable. 2. The appellant submits that the Commissioner has confiscated the goods invoking Section 111(o) of the Customs Act. This Section of the Act is re-produced as under : "111(o). Any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer" 3. The appellant submits that the Commissioner has not pointed out the condition which was not observed with respect, to the impugned goods. It is submitted that the goods are yet to be cleared. The appellant has agreed to clear the goods on payment of duty at merit rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of duty at merit rate. The Commissioner adjudicated the case without imposition of penalty or confiscation of goods vide order-in-original No. 187/2002, dated 21-11-2002 passed by the Commissioner of Customs (Imports), Chennai. 9. The appellant submits that a reading of the findings by the adjudicating authority clearly reveals that he has been biased. He has confiscated the goods and imposed penalty on the appellant not because the appellant violated any provisions of law with regard to the live consignment but because the appellant has allegedly violated the conditions of Notification 48/99-Cus., with respect to the goods imported by him earlier. The alleged violation even with respect to the past import is yet to be adjudicated. The appellant accordingly submits that the impugned order is illegal since it is opposed to basic tenets of jurisprudence that no one can be punished till after a breach is committed or a contravention of law is noticed. 10. The appellant further submits that there has been no false declaration on his part even with regard to the earlier imports made. The brass scrap were imported to manufacture handicrafts. In the manufacture of brass art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrary exercise of his powers in ordering recovery of the duty and other liabilities by encashing the bank guarantee executed by the appellant in terms of the advance licence. A recovery procedure would arise only when the duty to be collected is an arrears. It is obvious that no such recovery procedure is warranted when the appellant has agreed to get the goods assessed at the merit rate and discharge duty accordingly. 14. It is submitted that the goods are ordered to be cleared on payment of duty at merit rate. Therefore, the appellant is under no obligation to comply with any of the conditions of the Notification 48/99-Cus. Even if the appellant sells the goods to a third party and no goods are exported, there is no contravention of any of the provisions of the Customs Act or conditions of the notification with regard to the goods under import. 15. The appellant accordingly prays that the impugned order may be set aside and the Customs may be directed to assess the goods at merit rate and clear the goods in terms of Section 47 of the Customs Act, 1962. 3. Ld. Advocates Shri B. Kumar and Shri Sathish Sundar appeared before us on behalf of the appellant-importer and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-importer used to come to their office to hand over import documents and on clearance goods were sent by rail at CONCOR through M/s. Srinivasa Roadways and Indo Arys Central Transport and documents were sent to appellant directly. On 8-1-2002, statement of Dharmesh Gaur, Proprietor of Appellant-company had stated that he exported readymade garments valued at Rs. 6.65 crores in the year 2001 and 2002 on the basis of which he obtained annual advance licence which was deposited with Chennai Customs for imports as he was not well he entrusted the work of Gaur Impex to his friend Devender Yadav, who knows full details. He further stated that for keeping imported goods two godown were taken on rent in New Delhi and no exports were made so far. Shri Devendar Yadav in his statement recorded on 9-1-2002; 11-1-2002; 21-1-2002 and 12-4-2002 stated that the imports made under the impugned licence and transportation of the same to New Delhi were delivered at the two godowns. He also stated that the goods were despatched to M/s. Sun Rise Exports and M/s. Faran International both situated at Moradabad for manufacture of copper planter after such manufacturing 12 MTs were available at their godow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Bills of Entry Nos. 31993, 31994, 31995 and 31996. On 26-3-2003, show cause notice was issued for past clearances of 445.162 MTs. This show cause notice has not been proceeded upon and no adjudication of the same has taken place. On 10-4-2003, reply to the show cause notice was furnished. On 5-6-2003, Order-in-Original was passed by the respondent ordering confiscation of the imported materials under Section 111(o) of the Customs Act giving option to redeem the same on payment of fine of Rs. 20.00 lakhs and demanded duty of Rs. 30,63,748/- and imposed a penalty of Rs. 10.00 lakhs. On 22-9-2003, Hon'ble Tribunal granted waiver in full and fixed the date of hearing of the appeal on 23-10-2003 which was further adjourned and finally taken up for hearing on 7-11-2003. 4. Ld. Advocates S/Shri B. Kumar and Satish Sundar argued that the entire proceedings itself is pre-mature because the licence which was issued on 10-7-2001 and had 18 months from the date up to 10-1-2003 for fulfilment of export obligation whereas the DRI have seized the goods even as early as 14-3-2002 along with licence. The goods had arrived in November, 2001 and were detained for investigation. Therefore the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e worked upon by job workers and sent back to appellant. The manufactured goods as per appellant's specifications were found with job workers at Moradabad. Ld. Advocate invited our attention to Para 7.17 of the EX1M Policy which permits to utilise the facility of supporting manufacturers and the importer need not have the manufacturing facility himself. He can get the goods manufactured from various job workers to fulfil his export obligation and clear the goods duty free which are imported under the advance licence. He further submitted that in any event there is no misdeclaration in respect of the subject goods weighing 86.96 MTs and therefore they cannot be confiscated and no redemption fine can be imposed and no penalty can be imposed on them. 7. Ld. Advocates challenged the findings of the ld. Commissioner contained in Para 10.5 of the impugned order and submitted that the Customs cannot challenge the licence and cannot say that the licence is null and void. He further submitted that there is no order from the licensing authority for cancelling their licence. In this connection, he relied on the majority judgment rendered by 3 Member Bench of the Apex Court in the matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Controller of Imports or the Government of India, as the case may be, can cancel a licence after the term of the licence has expired, for no such cancellation has been made in this case. In the circumstances, we must hold that when the goods were imported, they were imported, under a valid licence and therefore it is not possible to say that the goods imported were those prohibited or restricted by or under Chapter IV of the Act within the meaning of Clause (8) of Section 167 of the Sea Customs Act." 8. He also invited our attention to Para 21 of the Apex Court judgment rendered in the case of Union of India v. Sampat Raj Dugar as reported in 1992 (58) E.L.T. 163 (S.C.). The Apex Court in this case has held that under Section 111(d) goods imported, which is contrary to any provisions imposed either by Customs Act or any other law for the time being in force, can be confiscated under Section 111(d) (o) of the Customs Act. He further submitted that Section 111(o) would apply in cases for non-fulfilment of conditions and it would never apply in such a situation as they still had 18 months to fulfil the export obligation. He also submitted that not only an 18 months period for ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e years has passed by, no action has been taken either under the Customs Act or under Section 4G of Imports and Exports (Control) Act, though the import licence of the second respondent has been cancelled. We must presume in the circumstances that no such action was or is contemplated. In these circumstances the title of the first respondent to the said goods remains free of any cloud." 9. Ld. Advocates also invited our attention to the judgment rendered by the Apex Court in the case of Titan Medical Systems Pvt. Ltd. v. CC, New Delhi as reported in 2003 (151) E.L.T. 254 (S.C.). They relied on Para 13 of the judgment and submitted that the Apex Court has held that once an advance licence was issued and not cancelled by the licensing authority, the customs authorities cannot refuse exemption on an allegation that there was misrepresentation and if there was any misrepresentation it was for the licensing authority to take steps on that behalf. Ld. Advocates submitted that the fact in that case was that of indigenous material input was less than the promised and hence the goods were confiscated. In view of the Apex Court judgment he submitted that the Customs cannot question the ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and does not render retrospectively the import illegal and to call for confiscation under Section 111(d) of the Customs Act. It was also held by the Apex Court that Clause (o) of Section 111 contemplates confiscation of goods which are exempted from duty subject to a condition, which condition is not observed by the importer and occasion for taking action under Clause (o) arises only when the condition is not observed within the period prescribed, if any, or where the period is not so prescribed, within a reasonable period. In view of the above well settled legal position, the goods are not liable for confiscation on the date of their import nor subsequently unless they have not observed the condition. Paras 4 5 of the above referred judgment are extracted herein below for ready reference : "4. The learned advocate for the appellants al length submitted a catena of decisions beginning from East India Commercial Company Ltd. v. Collector - 1983 (13) E.L.T. 1342 of the Supreme Court and other decisions which laid down that a licence issued is valid till it is cancelled; in the case of K. Uttamlal (Exports) Pvt. Ltd. v. U.O.I. - 1990 (46) E.L.T. 527, Bharucha J., as he was then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of the judgment wherein it has been held that it is not for the customs authorities to interpret the licensing policy and to enforce the same once a valid licence is produced. Hence this function is with the licensing authority. If this bifurcation of the function is not adhered to there is every likelihood of utter confusion. The licensing authority may interpret one way and the customs authorities may take contrary view producing conflict between the two authorities resulting harassment to the importer. There has to be wide compartment between the customs authorities and the licensing authority. Para 7 of the order is extracted herein : "7. This conclusion of the Commissioner, in effect, puts him so that since he sits in judgment over the function of the Advance Licensing Committee or the Zonal Advance Licensing Committee. We are told by the Counsel for the appellants, these Zonal and Regional committees comprises, in addition to the licensing authority, representatives of the Director General of Technical Development, Director of Industries of the concerned State and a representative of the Customs Department. He has, in effect, sat in judgment on the issue of licence. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsels also made an alternate plea for allowing the goods to be cleared on merit rate as this item is freely importable under Open General Licence (OGL) and falls under Chapter Heading 74.01. Copper scrap falling under Chapter Heading 74.01 are freely imported. He also invited our attention to the order passed by the Commissioner of Customs (Import), Dr. J. Sridharan vide his Order-in-Original No. 150/2002, dated 21-11-2002 in the matter of M/s. Aglow Exports, Moradabad, in which he has denied the benefit of exemption Notifica- tion No. 30/99-Cus., dated 1-4-1999 and the importer was allowed to clear the goods on payment of duty at merit rate. Ld. Counsel further submitted that the case of M/s. Aglow Exports was worse than them as in that case licence was cancelled ab-initio by the authorities, who issued the licence. He, therefore, submitted that as they would not be able to fulfil the export obligation because of the seizure of the goods by the DRI and the adjudication by the Customs authorities they may be allowed to clear the goods on merit rate as they are freely importable. In this connection, ld. Counsel relied on Paras 16 17 of the order passed by Commissioner of Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory and that no portion thereof would be sold to any party. Whereas in the application for licence it was stated that goods were not required for sale but for modernising the lighting system of the appellant's factory at Ellore in Madras and therefore the facts mentioned in this case and the present case are clearly distinguishable. DR also relied on the judgment rendered by the Tribunal in the case of Kunal International v. CC, Calcutta as reported in 2001 (138) E.L.T. 132 wherein it was held by the Tribunal that redemption fine and penalty are imposable in a situation where the quantity based advance licence having been obtained by fraud and misrepresentation and which was cancelled with retrospective effect and the appellant having no manufacturing facilities and wrong address is given, the goods were held correctly liable for confiscation and the importer is held to be liable to penalty under Section 111(d), 112 and 125 of Customs Act, 1962. 14. In counter, ld. Counsels submitted that the judgment cited by ld. DR in the case of Kunal International v. CC, Calcutta (supra) is not applicable and is clearly distinguishable as in the case of Kunal International, the licence was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble for confiscation under Section 111(o) of the Customs Act and the appellant are liable for penalty under Section 112(a) of the Customs Act on the basis of past clearances in respect of which Department contends that the appellant had not fulfilled the export obligation and did not use the material imported earlier under 22 Bills of Entry for export, more so when the appellant had paid NIL duty availing benefit of Notification No. 48/99 under the advance licence. But for the seizure on 14-3-2002, the appellant could have taken steps for fulfilment of export obligations in respect of the materials imported. Therefore, the reasoning of the lower authority is incorrect. It is also noticed that even though Jt. DGFT issued show cause notice for cancellation of the licence, till date the licence has not been cancelled. As long as the licence was valid and was in operation and did not expire, all imports made under that licence cannot be called in question on the ground that the licence itself was obtained by fraud and therefore void ab initio. It is also noticed that the customs authorities have no jurisdiction to sit in judgment over the validity of the licence, or otherwise and have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey not only they had an 18 months period for fulfilling the export obligation, even there is a provision for seeking further extension for another six months. It is also noticed that the judgment rendered by the Apex Court in the case of Titan Medical Systems Pvt. Ltd. v. CC, New Delhi as reported in 2003 (151) E.L.T. 254 (S.C.) in Para 13 the Apex Court has held that once an advance licence was issued and not cancelled by the licensing authority, the customs authorities cannot refuse exemption on an allegation that there was misrepresentation and if there was any mis-representation it was for the licensing authority to take steps on that behalf. It is also noticed that the fact in that case was that indigenous material input was less than the promised and hence the goods were confiscated. In view of the Apex Court judgment we notice that the Customs cannot question the veracity of the licensing authority and since the licence has not been cancelled and not even steps have been taken to cancel the licence and their goods cannot be confiscated and no fine and penalty can be imposed on them. It is also noticed from Paras 4 and 5 of the Tribunal judgment rendered in the case of Marmo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two authorities resulting harassment to the importer. There has to be wide compartment between the customs authorities and the licensing authority. 17. However, it is observed that the counsels had made an alternate plea for allowing the goods to be cleared on merit rate as this item is freely importable under Open General Licence (OGL) and falls under Chapter heading 74.01. Copper scrap falling under Chapter Heading 74.01 are freely imported. It is also noticed from the order passed by the Commissioner of Customs (Import), Dr. J. Sridharan vide his Order-in-Original No. 150/2002, dated 21-11-2002 in the matter of M/s. Aglow Exports, Moradabad, in which he has denied the benefit of exemption Notification No. 30/99-Cus., dated 1-4-1999, and the importer was allowed to clear the goods on payment of duty at merit rate. It is also noticed that the case of M/s. Aglow Exports was worse than the present case as in that case licence was cancelled ab initio by the authorities, who issued the licence. It is also noticed that they would not be able to fulfil the export obligation because of the seizure of the goods by the DRI and the adjudication by the customs authorities, they have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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