2005 (98) ECC 116 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

West Zonal Bench -- Mumbai

Ms. Archana Wadhwa, Member (J) and Shri S.S. Sekhon, Member (T)

Sagar Auto Works

Versus

Commissioner of Customs, Goa

Appeal No. C/521/98-Mum.

[Arising out of Order-in-Original No. 24/98-COMMR dated 20.4.1998 passed by the Commissioner of Customs & Central Excise, Goa]

Order No. A/987/WZB/2004-C-II, dt. 8.10.2004, Certified on 25.11.2004

Interpretation

Redemption fine and penalty -- Redemption fine and penalty is a matter of discretion and such discretion has to be uniformly applied.

Redemption Fine (Customs)

The order of 100% redemption fine cannot be sustained even while upholding the liability to confiscation under Section 111(d) of the Customs Act.

Redemption fine and Penalty (Customs)

Quantum -- Imported consignment of Second-hand Diesel Engines -- No mis-declaration of value determined -- Quantum of fine kept at 45% and 5% penalty of the CIF value -- Appeal partially allowed by reducing the redemption fine and penalty.

PRESENT :

Shri Kantawala, Adv. for the appellant.

Shri Hitesh Shah, SDR for the respondent.

Cases Cited :

1. Jain Exports Pvt Ltd., 1993 (44) ECC 189 537 (SC).......................................... [Para 3]

2. Mansingka Brothers, 1988 (38) ELT 105.......................................................... [Para 3]

3. Margra Industries Limited, 2004 (171) ELT 334 (Tri-Del).................................... [Para 3]

4. Orion Business Systems (P) Ltd., 2002 (40) ECC 270 (T).................................. [Para 3]

5. S.S.P. International Enterprises, 2003 (90) ECC 870 (Tri-Chennai)..................... [Para 3]

6. Shehla Enterprises, 1995 (80) ELT 360............................................................ [Para 3]

7. Shree Ram Enterprises 1998 (103) ELT 184..................................................... [Para 3]

8. Sophisticated Marble and Granite Industries C-I/3051, 3052/WZB/03................. [Para 3]

Per : S.S. Sekhon

The appellant had imported a consignment of second-hand Diesel Engines on as is where is basis for reconditioning. These 157 old and used auto diesel engines were sought to be cleared on Bill of Entry No. 287 dated 23.10.97 at declared valued of Rs. 11,58,568. Matter was adjudicated by the Commissioner, an offer of redemption on fine of Rs. 12 lakhs in lieu of confiscation under section 111 (d) was arrived at alongwith a penalty of Rs. One lakh, imposed under Section 112 of the Customs Act, 1962.

2. The order has been arrived at, ignoring inter alia, the following written submissions on post import costs, filed vide letter dated 24.10.1997

"The barest costs involved in importation are as under and all the expenses stated below will have to incurred by us: --

(1) PROCUREMENT EXPENSES:- which have to be incurred in foreign countries which include locating such products from markets overseas selecting the suitable cargo through the foreign vendors to suit our requirements for the various types of engines as these are not standard goods available of the shelf.

(2) FINANCE COST -- which is approximately 20 to 25% of the total investment of the goods.

(3) WAREHOUSING & TRANSPORT COSTS -- 8 to 10%

(4) RECONDITIONING & REPLACEMENT charges in respect of pistons, rings engine bearing, belts, clutch and pressure plates, oil seals, water pumps etc, which account to 100 to 150% of the cost of the engine.

(5) DEMURRAGE & RETENTION charges subsequent to reconditioning of the engines and their marketing.

(6) CUSTOMS DUTY of 42% approximately.

We are giving below the following table for your reference:

Approximately average cost of an engine (CIF) Rs. 8000

Customs Duty (42%) Rs. 3300

Procurement costs Rs. 1000

Finance costs Rs. 2000

Warehousing, Transport and Labour Rs. 700

Reconditioning & Replacement expenses Rs. 10000

Average Costs of a Diesel engine Rs. 25000

Therefore an engine which values Rs. 8000 costs Rs. 25000. These engines in the whole sale market are sold from Rs. 30000 to Rs. 35000 and there is a gain of Rs. 5000 to maximum Rs. 10000 which is nearly 20 to 40%.

3. Heard both sides and considered the matter it is found --

(a) The perusal of the order confirms the submissions of the appellants that the Commissioner has not arrived at any reasons. Why he kept the fine at the level of 100%. The appellant had submitted data regarding post import costs and margin of profit. No finding thereon are arrived at. In this view of the matter the order of 100% redemption fine, as arrived, cannot be sustained even while upholding the liability to confiscation under Section 111(d). It was incumbent on the Commissioner to have recorded reasons as to why he was ignoring the instruction in the Appraising Manual and arriving at the fine at level of 100%. The Appraising Manual Vol II Chapter 5 para 5 prescribes --

"5. MARGIN OF PROFIT

(a) Market enquiries -- In terms of section 125 of the C.A. 62 the adjudication officer may impose a redemption fine on the offending goods not exceeding the market price of the goods confiscated less the duty chargeable thereon. It is therefore, understood that while fixing fine in lieu of confiscation the adjudication officer are guide by the margin of profit on the goods indicated by the assessing officer. It is therefore, necessary that the assessing officer should ascertain the market value of the offending goods and keep a record thereof in the file to be imposed is 100% of the value, as the market value is normally more than the CIF value of the goods plus duty (Ministry's letter F. No. 3/35/64-Cus. VI dated 15.3.65). However Board's D.O. letter mentioned below may also be seen.

(b) Norms for fine and list of basic articles -- The Board in its D.O. letter F. No. 8/62/68-Cus VII dated 12.3.70 has laid down the norms for imposition of redemption fine. In this respect the Board has made a distinction regarding "Basic Articles" in respect of which the ITC policy is not as restricted as in respect of "Other Articles". The norms of fine on the Basic articles and other articles are as follows:

(1) Basic Articles not banned under the Policy 25%

(2) Basic Articles banned to that category of licenses to which the importer belong -- 50%

(3) Other Articles -- 50% for non-banned 100% for banned to that category of licenses to which the importer belong.

In all cases whether relating to base articles or others, the fine will not be less than the margin of profit.

List of Basic Articles:

(i) Non-interchangeable parts of machinery and equipment (except cinema equipment) designed for use in project, mining, factories, agriculture, laboratories, training institutes and hospitals ("Equipment" will include instruments, apparatus and appliances and also specilised vehicles like Dumper & Fork-lift trucks).

(ii) (a) Unfinished forms, casting and forging of non-interchangeable parts specified under (I) above.

(iii) Specialized raw materials and intermediates for use in mining and in the manufacture of metals and alloys, leather, rubber, mineral oils, drugs and medicines, insecticides, pesticides, etc.

Board has also clarified that the fine should equal to the normal or the margin of profit whichever is higher. It is true that in some case the norm will be more than the margin of profit, but if a person has contravened any ITC restriction and there are not extenuating circumstances, there is no reason why only the margin of profit need be taken away. If however, there are extenuating circumstances the adjudicating officer will be at liberty to ignore the norm or for that matter, the margin of profit."

Therefore, it was imperative for the Commissioner to have determined the margin of profit before processing to decide that the goods under import need a redemption fine in excess of that stipulated in the Manual. He was also required to arrive at findings as to how and why the fine should be more than the `norms' as prescribed by the Board and Manual instructions. As also why the goods were not "basic articles"

He has only found that the goods under import are not capital goods and requires, being and old used item a specific licence. Such an order cannot be sustained.

(ii) The Exim Policy 1997-2002 stipulates "all second-hand goods shall be restricted for imports". Hence, second-hand i.e. old and used goods are treated as `Restricted' and no `prohibited/banned' goods. The ITC(HS) classification categorizing imports as free, restricted, canalized, prohibited. Import, of the impugned goods as herein would be permissible without a licence, as Capital Goods, to eligible class of importer, as held by this Tribunal in the case of Gripwell Forgings & Tolls {2002 (103) ECR 67}, therefore as prescribed, in the Manual, for Basic goods, redemption fines could not go beyond 50% if and when so required, special reasons are to be found to exist. No such special reasons are found by the adjudicator in the impugned order.

(b) The absence of the application of the adjudicators mind, on this vital issue of quantum, as found herein above cannot be substituted by the submissions made by the Ld. DR and his reliance on the decisions in the case of Margra Industries Limited, 2004 (171) ELT 334 (Tri-Del); S.S.P. International Enterprises, 2003 (90) ECC 870 (Tri-Chennai) : 2003 (158) ELT 479 (Tri-Chennai); Orion Business Systems (P) Ltd., 2002 (40) ECC 270 (T) : 2002 (141) ELT 411; Shree Ram Enterprises 1998 (103) ELT 184; Shehla Enterprises, 1995 (80) ELT 360; Mansingka Brothers, 1988 (38) ELT 105; Jain Exports Pvt Ltd., 1993 (44) ECC 189 537 (SC) : 1993 (66) ELT 537 (SC) and Sophisticated Marble and Granite Industries C-I/3051, 3052/WZB/03 dated 18.12.2003 and Bombay High Court decision dated 22.1.2004 in Writ Petition No. 39/04. This material does not induce us to deviate from the fine of 45% and penalty of 5% upheld by benches of this Tribunal as well submitted by the Ld. Advocate i.e. C-A/157/WZB/04 C-II dated 7.5.04, C-28/C-IV/WZB/04 dated 26.3.04, C-A/368 to 382/WZB/04 dated 2.6.04, C-II/3253/03-WZB dated 10.12.03, A/215/WZB/2004/C-I dated 6.2.04, on similar goods imported around the same time at same port, as seen from the materials placed before us in this case. We also take note on the submission made that the Revenue has "accepted" these orders of 45% fine and 5% penalty on such imports. Redemption fine and penalty is matter of discretion and such discretion has to be uniformly applied. We find no reasons to differ from the earlier orders of various benches as regards the quantum of redemption fine & penalties for such imports, made at around the same time at port of Goa for such goods have been shown to us.

4. In view of the findings, we would allow this appeal partially by reducing the redemption fine to 45% and penalty to 5% of CIF value determined.

5. Appeal to be disposed of in accordingly.

6. Ordered accordingly.

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