1991 (6) TMI 155 - AT - Customs

Appeal dismissed, penalty upheld for unauthorized diversion of goods under Customs Act.

MJ EXPORTS Versus COLLECTOR OF CUSTOMS

The appeal was dismissed, and the Tribunal upheld the penalty of Rs. 50 lakhs imposed on the appellants for confiscation of goods under Section 113(d) of ... Import Control Issues Involved:1. Confiscation of goods under Section 113(d) of the Customs Act.2. Requirement of permission from C.C.I. & E. for re-export of goods imported under OGL.3. Interpretation of 'stock and sale' under Import Control Order.4. Applicability of exemption notifications under Section 25 of the Customs Act.5. Legality and binding nature of C.C.I. & E.'s clarification.6. Quantum of penalty imposed.Issue-wise Detailed Analysis:1. Confiscation of goods under Section 113(d) of the Customs Act:The appeal is directed against an order holding the appellants' goods (life-saving equipment - Homodialysing machines with spare parts) liable to confiscation under Section 113(d) of the Customs Act. The goods were allowed export provisionally on execution of a bond by the appellants, covering the full value of the export goods, with a cash deposit of Rs. 6 lakhs and a Bank Guarantee of Rs. 10 lakhs. The Collector imposed a penalty of Rs. 50 lakhs and directed the appropriation of the cash deposit, enforcement of the bank guarantee, and payment of the balance of Rs. 34 lakhs.2. Requirement of permission from C.C.I. & E. for re-export of goods imported under OGL:The main argument from the appellants was that the restriction on re-export of goods imported against a license (including OGL) without permission from C.C.I. & E. was introduced only by an amendment dated 12-3-1990 and cannot be retrospectively applied with penal consequences. The goods were imported in October 1988, cleared in November 1988, and exported in December 1988, prior to the amendment. The respondent argued that even goods imported and bonded were allowed for export only as ship stores as per saving clause 11(d) of the I.T.C. Order 1955, and goods cleared for home consumption cannot be authorized for export without any manufacture.3. Interpretation of 'stock and sale' under Import Control Order:The appellants contended that the term 'sale' should not be restricted to sale within the country and referred to the Delhi High Court's prima facie view in Janak Photo Enterprises, which held that there is no provision of law stating that goods imported could be sold only within the country. The respondent countered that the goods were cleared for home consumption availing OGL benefit for stock and sale for those in India, and the term 'stock & sale' can only be taken to mean that it is for sale in the country.4. Applicability of exemption notifications under Section 25 of the Customs Act:The appellants argued that exemption notifications under Section 25 of the Customs Act are not intended only for goods imported for use and consumption in the country. The respondent maintained that life-saving equipment cleared free of duty and under OGL for stock and sale in the country on the basis of the Bill of Entry for home consumption can only be taken to mean that they are meant for benefiting the Indian public.5. Legality and binding nature of C.C.I. & E.'s clarification:The appellants argued that the clarification by C.C.I. & E. is not correct and not binding. The respondent emphasized that the appellants were agreeable to a reference to C.C.I. & E. and cleared the goods for export on furnishing a bond, and it is not now open for them to condemn the clarification from C.C.I. & E. The Tribunal held that the C.C.I. & E.'s clarification cannot be discarded as illegal or improper even prior to the insertion of clause 4B, as clause 10C of the I.T.C. order provides the C.C.I. & E. with the power to direct the sale of imported goods in certain cases.6. Quantum of penalty imposed:The Tribunal noted that the appellants earned a margin of profit to the extent of Rs. 94 lakhs in the export deal, which was not authorized under the policy. The diversion of goods imported under OGL for home consumption to export was motivated by profit consideration. The penalty amount should take care of this margin, and hence, the quantum of penalty imposed was justified.Conclusion:The appeal was dismissed, and the Tribunal upheld the penalty of Rs. 50 lakhs imposed on the appellants. The Tribunal also emphasized that the goods imported under OGL for home consumption should benefit the Indian public, and the appellants' action of re-exporting the goods without proper authorization was not permissible.