2004 (97) ECC 92 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

West Zonal Bench -- Mumbai

S.S. Sekhon, Member (T) and T. Anjaneyulu, Member (J)

Mechano Graphic Machines Pvt. Ltd.

Versus

CC, Mumbai

Appeal No. C/875/2003 Mum

[Arising out of Order-in-Appeal 207/2003 MCH dated 31.7.2003 passed by the Commissioner of Customs (Appeals), Mumbai]

Order No. A/290/WZB/2004-C-II, dated 21.5.2004, Certified on 2.6.2004

Confiscation and Penalty (Customs)

Exim Policy 1985-88 -- REP Licences -- Assessee try to clear the goods under the assumption that previously identical consignments have cleared without objections from the custom under the same licence description (or under OGL) no penalty is to be imposed -- No finding about of lack of bonafide have been arrived hence confiscation and penalty set aside -- Sections 111(d) and 112(a) of Customs Act.

PRESENT :

Shri Naresh Thacker, Adv. for the appellant.

Shri Hitesh Shah, DR for the respondent.

Cases Cited :

1. Commercial Corpn. v. CC, Calcutta, Order 343/Cal/89/343 dt. 12.12.89.............. [Para 3]

2. J. R. Traders v. Collector of Customs (Appeal No. CD (Bom) 609/86) and vide Order No. 578/88 dated 29.3.1998................................................................................................................... [Para 7]

3. M/s. Manoranjan v. CC&CE, Rajkot the West Regional Bench, Order No. 1409/90-WRB, dt 28.8.1990 [Para 3]

4. Somjit Enterprise v. CC, 1993 (41) ECC 272 (Tri).............................................. [Para 4]

5. Vaghani Brothers, Bombay v. CC, 1983 (12) ELT 613....................................... [Para 7]

6. Vinod Gupta v. Collector of Customs, 1988 (17) ECC 328 (Cal).......................... [Para 3]

Per : S.S. Sekhon

Appellants filed a BE 1143 dt. 24.4.87 for clearance of "Staple Pins No. 10" imported for a supplier in UK vide B.L. dt. 12.3.87 on an Invoice dt. 26.2.87 and sought clearance under REP licence for product group `O' of Appendix 17 against Entry at S.No. (IX) para 188 of EXIM Policy 1985-88. Serial No. (IX) of product group `O' of Appendix 17 reads under --

"(IX). Pearl/headed pins/stapling pins and Industrial Stapling Machines."

The clearance was not allowed on REP licence as the Custom House Bombay had a clarification dt. 11.3.1987 from Deputy Chief Controller of Imports & Exports. The letter reads as follows:

"Please refer to your letter No. 7111/G(h)56/80-Appg/144 dated 4.1.1987, on the subject mentioned above.

2. In this connection, it is clarified that against REP licences issued for export product Group `O' of App-17 of the Import & Export Policy, 1985-88 (Vol.I), only those staple pins are allowed import which are used as an item of embellishment & trimmings in the manufacture of the export product. The stapling pins which are used as stationery item, are not permitted for import against to said export product Group `O'".

However, no Public Notice pursuant to this classification was issued.

2. The appellants were issued a Show Cause Notice dated 30.6.1987. They challenged the notice by a Writ Petition No. 2610/87 in the Bombay High Court. Interim relief was granted by Bombay High Court and the final decision by consent was granted on 2.8.95 directing the adjudication of the notice. The order in adjudication came to be issued on 3.1.2003 holding the goods liable for confiscation under Section 111(d) of the Customs Act, 1962. However, as the goods had been allowed clearance in terms of an interim order dated 18.1.1987 of the High Court, the same were not available for confiscation. Consequently, it was held that it was not permissible to impose fine in lieu of confiscation. Therefore, a penalty of Rs. 70,000 was imposed under Section 112(a) of the Customs Act, 1962, it was clarified in the order, that the amount of penalty would be inclusive of redemption fine that would have been imposed in lieu of confiscation, had the goods not been allowed to be cleared.

(b) The Commissioner (Appeals) found-

"I have gone through the records of the case and heard the appellants. It is observed that there is no dispute that the appellants imported staple pins which were mainly stationery items. The appellants have sought clearance thereof on REP licence on the ground that the same are used in the garment industry. However, in this context the clarification given by the D.G.F.T. vide letter dated 11.3.1987 is very unambiguous. It reads as under:

"only those stapling pins are allowed import which are used as an item of Trimming and Embellishments in the manufacture of export product. The Stapling Pins, which are used as stationery items are not permitted for import against the export produced under Group `O'."

It is not the case of the appellants that they are using the impugned staple pins as items of embellishment. Obviously, the same are being used only as a stationery item and this certainly does not bring them within the scope of the above concession. In my opinion, if the same are being used as stationery items even in the garment industry also they would not be covered under the REP licence produced by the appellants.

There is also no force in the appellants' plea that the change of practice not brought to their notice. The above clarification is dated 11.3.87 where the goods imported after more than a month i.e. on 24.4.87 and as such they cannot plead ignorance thereof.

There is certainly a delay in adjudication after Hon'ble High Court's order of 1995 but for this the appellants also share the blame because initially the delay started because of the filing of the Writ Petition before the Hon'ble High Court which the appellants did by by-passing the departmental quasi-judicial remedies available to them.

In view of the above facts the appeal lacks merit and no interference is warranted with the impugned order which is legal and proper."

Hence this appeal.

3. After hearing both sides, and considering the issues involved, it is found

(a) the facts of a practice in the department to clear such goods, as impugned in this case, on REP licences under para 188 of EXIM Policy for the year 1985-88 is stated on instruction by the D.R. to be not existing. The case of clearance of the appellants sister concern vide BE dt. 17.11.86 on invoice dt. 10.9.86 i.e. about 5 months earlier is explained away to be an error of judgment, not a practice. The reliance of the appellants on such a clearance being effected and a practice being prevalent in the Department is to be upheld. The Tribunal in the case of Somjit Enterprise v. CC, 1993 (41) ECC 272 (Tri) : 1993 (63) ELT 119 (Tri) (paras 5 to 7) has held

5. The learned Consultant, Shri B.B. Chakraborty appearing for the appellants contended that it is now an admitted case that the Customs Authority had allowed import of such staple pins during the previous years and it is an established past practice of the Custom House to allow such imports. In that view of the matter, the appellants acted bona fide and the fact that CCI & E. has given a clarification at a later date, is not sufficient to hold that the imports of such goods are unauthorised. In this connection, he placed reliance on the decision of the Calcutta High Court reported in 1988 (37) ELT 44. He also placed reliance on the decision reported in 1984 (17) ELT 50 (Bom). He also placed reliance on the decision of the West Regional Bench of CEGAT in Order No. 1409/90-WRB dated 28.8.1990 in the case of M/s. Manoranjan v. Collector of Customs & Central Excise, Rajkot. Reliance was also Commercial Corpn. v. Collector of Customs, Calcutta in Order No. 343/Cal/89/343 dated 12.12.1989.

6. The learned J.D.R., Shri B.B. Sarkar stated that in view of the clarification issued the C.C.I. & E., the Customs House was bound by the same. In such circumstances, the import was unauthorized and the accordingly supported the impugned orders appealed against.

7. We have considered the submissions of both sides. In the decision reported in 1988 (17) ECC 328 (Cal) : 1988 (37) ELT 44 (Cal.) in the case of Vinod Gupta v. Collector of Customs, their Lordship of the Calcutta High Court at para-38 held as follows: --

"38. In my view, having regard to the facts and circumstances of this case, the Customs authorities cannot be allowed to ignore their past practice and to adopt different standard and to take different views at different point of time with regard to the importation of the same commodity. It is their duty to inform the general public who are importing the goods and making it quite clear that what types of goods would not be allowed. Even if there is a dispute as to the interpretation of the Policy and the licence, the dispute should be resolved in favour of the subject..............."

It is, thus, clear that when C.C.I. & E. has given a clarification the same should have been informed to the general public who are importing the goods in question and they should have made clear as to what types of goods could not be allowed. It is, further, seen that even the Customs Department was doubtful about the interpretation of the Policy and it cannot be said that there were wants of bona fides on the part of the appellants. When there is such a confusion the benefit should always go to the citizens in this regard. In the case of M/s. Manoranjan v. Collector of Customs and Central Excise, Rajkot, the West Regional Bench in Order No. 1409/90-WRB, dated 28.8.1990 also had taken a similar view wherein at para-6 it is held as follows:

"6. Considering the submissions made, there is no dispute as to the item imported. The import of the same item by another party..... under similar REP licence, and objection similar to one raised here, was under consideration before the very Bench in M/s. J. R. Traders v. Collector of Customs (Appeal No. CD (Bom) 609/86) and vide Order No. 578/88 dated 29.3.1988, two Member Bench of this Tribunal held as under :

`The adjudicating authority's finding that the imported goods, staple pins, though apparently covered by the specific entry in Col. 4 of S. No. 0.1 would not be covered by the serial number inasmuch as the imported goods are used as office stationery and not as trimmings and embellishments which are permissible under S.No. 0.1, is not correct in our view. Though the same staple pins may be used as office stationery, no definite finding has been made that the staple pins imported by the appellants cannot be used in packing of the export product i.e. leather goods mentioned in Col. 2 of S.No. D.2.2. The item, "trimming and embellishment" has a very wide connotation and use of staple pins in closing the polythene packing of export product would also be covered by the said expression.'

The point, under the circumstances, having already stood decided and there being on (sic) distinguishing features, and objection raised for findings given by the authorities below, cannot be sustained."

Since in the case of Somjit Enterprise, the Bench of this Tribunal import of same impugned item viz. stationery staple pins under same EXIM Policy concluded the want of bona fides and bound the Custom to their past practice and allowed the appeal after setting aside the confiscation and penalty. We find no reason to come to a different view in the present import.

(b) The entity in the Vaghani Brothers, Bombay v. CC, 1983 (12) ELT 613, relied by the Ld. DR as it appears from para 2 of the decision cited by the Ld. DR were different. In that case, the Bench, after examination of the catalogue, which showed that the pins therein were for use with a carton stitcher which could be screwed to a work bench and the claim was for import of stapling pins on a licence for `packaging material' as `industrial staple pins' and were not claimed to be `stationery staple pins' it was held that such imports were not permissible. This decision also reinforces the view that a practice did exist of clearance staple pins. The decision does mention an inter diction of import of stationery pins by an order dt. 4.5.81. However, the policy in 1981 or prior to that was the same as to 1986-87 is not confirmed. Moreover, the Somjit case does indicate, the acceptance of a practice of, allowing stationery pins on REP licence. Therefore the case of Vaghani Brothers does not help the case of Revenue.

(c) The appellants rely upon the clearance granted to an import of similar goods imported from the same supplier abroad by their sister concern M/s. Colour Packs Pvt. Ltd. around October/November 1986 vide BE 007029 dt. 17.11.86. Therefore, the represent consignment imported vide Invoice dt. 25.2.1987 and Bill of Lading dt. 12.3.1987 should not call for a penalty based only on a classification dt. 11.3.1987 issued by a Dy Chief Controller to Imports and Exports and not Chief Controller of Imports and Exports. It was only the Chief Controller of Import and Exports who was only competent to issue clarification on Police. This letter dated 11.3.87 does not even refer to it being issued with the approval of the Chief Controller of Imports and Export. That a reference for clarification was called for by the Custom House, Bombay would go to indicate that Customs Department also had a doubt practice. No Public Notice of change in practice has been issued. It is found that Customs Appraising Manual Vol II Chapter 5 para 114 (i) provides --

"(i) Import of goods on basis of previous clearance, where identical consignments have been cleared previously without objection from the Customs under the same licence description (or under OGL) no penalty is to be imposed provided the Collector of Customs is satisfied that the bona fides of the importer are beyond question. However, each case should be examined on merits. Such lenient treatment should not be given as a general rule, since it is quite possible for an importer to get a small pilot consignment passed through the Customs and then claim the benefit of clearance for a larger consignment."

for the appellant. (Emphasis supplied)

No finding about lack of bona fides have been arrived by both the lower authorities. The penalty imposed therefore cannot be upheld in view of the clear instructions in the Manual. The same is to be thus set aside.

4. In view of the findings arrived, the penalty is set aside and appeal allowed.

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