TaxTMI 
TaxTMI 
2009 (4) TMI 83
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....d respondent is not lilable to pay penalty under section 112(a) of the Customs Act 1962. 3. The relevant facts of the case is as hereunder: The second respondent had imported four consignment of Copper Scrap totally weighing 86.963 Mt.Tonns in four containers and filed four Bill of Entries on 20.11.2001. They availed the benefit of the Notification No.48/99- CUS dated 29.4.1999, which permitted import of goods free from Duty of Customs. The said notification pertains to an exemption in respect of import against Annual Advance Licence with Actual User Condition. 4. The allegation against the second respondent was that they were not entitled to the benefit of notification No.48/99 and therefore were liable for payment of duty for the goods imported. A show cause notice dated 6.3.2003 was issued by the Deputy Director, Directorate of Revenue in Intelligence, Chennai, (hereinafter referred as DRI), calling upon the second respondent to show cause within thirty days of receipt of the notice as to why the benefit of notification No.48/99-Customs DATED 29.4.1999 should not be denied for 86.963 metric tons of copper scrap valued at Rs.48,73,614/- imported by the second respondent ....
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.... manufactured out of the imported copper scrap. The authority ultimately held that the impossibility of performance of the licence condition renders the licence null and void and renders the declaration in the bill of entry as mis-declaration and ordered for confiscation of the goods under section 110(o) of the Act and liable for penalty under section 112(a) of the Act. The Adjudicating Authority had given an option to the Importer to redeem the goods on payment of fine of Rs.20 lakhs, demanded a duty of Rs.30,63,748/- under section 28(1) of the Act and impose a penalty of Rs.10 lakhs on the second respondent under Section 112(a) of the Act. 9. The second respondent filed an appeal before the CESSTAT against the order of the adjudicating authority ordering confiscation and imposing final penalty. The Tribunal after going through the factual and legal submissions made on behalf of the importer and the Department, came to a conclusion that the entire proceedings was premature because the licence was issued on 10.7.2001 and the second respondent had 18 months time for fulfillment of the export obligation, but the DRI seized the goods even as early as on 14.3.2002 along with the lic....
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....arged within the period specified or within such extended period. It was further submitted that the second respondent has declared themselves as manufacturer exporter and the investigation conducted by the Department reveals that there is no manufacturing unit and therefore, they are not entitled to claim the exemption under notification 48/99. That the terms and conditions of an exemption notification are subject to strict interpretation. 13. It was the further contented that the liability to manufacture and export goods from the materials imported is both statutory and contractual, the statutory obligation is enforced by the provisions of the various sections under the Customs Act, the Rules framed thereunder and the notification issued and the contractual obligations are not really enforced in view of the statutory powers. Thus it was contended that the licence is null and void, the declaration made by the second respondent is false and therefore the description in the bill of entry is a mis-declaration rendering the goods imported liable for confiscation under section 111(o) of the Act and consequently, the second respondent is also liable for penalty under section 112....
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....e specified in Part E of the said certificate (hereinafter referred to as resultant products). viii. exempt materials shall not be disposed of or utilized in any manner except for utilization in discharge of export obligation or for replenishment of such materials and the materials so replenished shall not be sold or transferred to any other person. 16. The importer shall also execute a declaration to the effect that the information furnished in the statement for obtaining the Licence is correct. A careful reading of the above referred notification establishes that the same is an Actual User Licence, were the Importer is bound to discharge the import obligation within the time prescribed. There is also a bar for disposal of the exempted materials except for the utilization in discharge of export obligation or for replenishment of such materials and the materials so replenished shall not be sold or transferred to any other person. In the schedule to the notification the person availing the exemption is required to furnish the name and address of the factory were the resultant products for export are to be manufactured and were the ancillaries to the resultant product are manuf....
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....that they have no manufacturing facility. The 2nd Respondent stated that they had a valid licence and that before the expiry of the period of licence the same has been seized and the goods have been seized on the apprehension that they will not be utilized and that the same cannot be a ground for confiscation under Section 111 (o) of the Customs Act. Thus it is safe to conclude that the declaration given by the 2nd Respondent that they are Manufacturer-Exporter for availing the Annual Advance Licence with Actual User Condition is a false declaration. 20. With this factual background, the point to be considered would be as to whether the 2nd Respondent would still be entitled to the benefit of exemption on the reasons assigned by the Tribunal. 21. The Tribunal held that the period of licence was upto 10.1.2003 and the licences were seized by the DRI on 14.3.2002 and therefore they could not fulfill the export obligation and the past conduct of the 2nd Respondent is not to be looked into and that the licence authority has not cancelled the licence and the License was valid and the benefit should be extended to the 2nd Respondent. The Tribunal placed reliance on the decision of ....
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....has been followed. The Learned Counsel for the Respondent placed reliance on the Judgment of the Hon'ble Supreme Court in Union of India vs. Sampath Raj Dugar reported in 1992 (58) ELT 163 (SC) were the Hon'ble Supreme Court held as follows. "21. the next question is whether the import of the said goods was contrary to law in any manner and whether the said goods are liable to be confiscated under the Customs Act. The only provisions relied upon by the appellants are Clauses (d) and (o) in Section 111 of the Customs Act which we have set out hereinabove. In our opinion none of these clauses are attracted in the present case. Clause (d) contemplates an import which is contrary to any prohibition imposed either by the Customs Act or any other law for the time being in force. No such prohibition can be pleaded in this case since on the date of the import the said goods were covered by a valid import licence. The subsequent cancellation of licence is of no relevance nor does it retrospectively render the import illegal. (East India Commercial Co., Ltd., vs. The Collector of Customs, Calcutta-1963 (3) S.C.R. 338 at 372). Clause (o) contemplates confiscation of goods which are exempte....
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....3/92, and the conditions to be satisfied for claiming exemption from payment of duty under Notification 203/92, have not been observed, the goods in question become liable for confiscation under Section 111(o) of the Act and therefore, such goods cannot be released to the Petitioner pending adjudication proceedings. The learned counsel also contended that even assuming that the importer had not participated in the illegal acts with regard to the falsification of the licence, the confiscation being an action in rem, would render the goods liable for confiscation in whosesoever hands and therefore, the release of such goods to the importer cannot be permitted. In support of the said contention, the learned counsel relied upon the decision in Collector of Customs, Madras and others vs. D. Boormull (AIR 1974 SC 859 = 1983 (13) ELT 1546 (SC). There is no substance in the above contentions of the Learned Counsel for the Department. Clause (o) of Section 111 of the Act contemplates confiscation of goods which are exempted from duty subject to a condition, which condition is not observed by the importer. Occasion for taking action under this clause arises only when the condition is not obs....
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....ore, we see no merit in Writ Appeals 353 and 354 of 1993 filed by the Department also. 24. The next decision relied on by the Learned Counsel for the Respondent is in the case of Titan Medical System Case which has been referred above. In the said decision the Hon'ble Supreme Court held that once an Advance Licence was issued and not questioned by the Licensing Authority the Customs Authority cannot refuse exemption on an allegation that there was misrepresentation. The Learned Counsel placed reliance upon a Division Bench Judgment of this Court in 2004 (177) ELT 57 (Madras) and is Lordship Mr. Justice V.S. Sirpurkar (As he then was), delivering the Judgment on behalf of the Division Bench, considered the Judgments of the Hon'ble Supreme Court in the cases of East India Commercial Company, Titan Medical System, Sampath Raj Dugar and the Judgment of the Hon'ble Supreme Court in 1996 (88) ELT 626 (SC). 25. Mr.S.Udyakumar Learned Senior Standing Counsel for the Appellant, would contend that this was a case were there has been a deliberate misrepresentation by the importer and it is an undisputed fact that there is no manufacturing facility with the importer which would disentitl....
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....s of Section 111(o). 10. We do not find in the provisions of Import and Export policy or the hand book of procedure issued by the Ministry of Commerce, Government of India, anything that even remotely suggests that the aforesaid power of the Customs Authorities had been taken away or abridged or that an investigation in to such alleged breach could be conducted only by the licensing authority. That the licensing authority is empowered [to] conduct such an investigation does not by itself preclude the Customs Authorities from doing so. 11. The communication of the Central Board of Excise and Customs, dated 13th May, 1969 refers to the breach of the condition of a licence and suggests that it may not be possible to take action under Section 111(o) in respect thereof. It is true that the terms of the said Exemption Notification were made part of the Appellants licenses and, in that sense, a breach of the terms of the said Exemption Notification is also a breach of the terms of the license, entitling the licensing Authority to investigate. But the breach is not only of the terms of the licence ; it is also a breach of the condition in the Exemption Notification upon which the Ap....
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....n of license. Therefore we find that the decision of the Judgment of the Apex Court in Sampat Raj Dugar would not be applicable to the facts of the present case. 30. Now coming to the Judgment of the Division Bench of this Court in 2004 (177) ELT 57 (Mad.) we find the Judgment would apply to the facts of the present case in its entirety. In the said case the Writ Petitions were filed challenging the summons issued under Section 108 of the Customs Act. The Learned Single Judge of this Court dismissed the Writ Petition as against which the appeals were filed before the Division Bench. The Appellants placed reliance on the Judgment of the Hon'ble Supreme Court in the case of East India Commercial Company case, Sampat Raj Dugar and Titan Medical Systems (as referred above) and stated that the Customs Authorities had no jurisdiction to issue to notice under Section 108 of the Customs Act. The Division Bench of this Court after considering the law laid down by the Hon'ble Supreme Court in the case of Sheshank Sea Foods case held as follows. 23. Though there will be no question of the binding principle as laid down by the Supreme Court being watered down, in our opinion, the observa....
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....s on this clause and says that it is in this direction that the enquiry has to be made. We agree with the Learned Senior Counsel that there can be a scope of enquire and the summons issued under Section 108 of the Customs Act for effecting the enquiry such as these cannot be bad for the lack of jurisdiction. 31. We are entirely in agreement with the law laid down by the Division Bench of this Court as stated above, which has followed the decision of the Hon'ble Supreme Court in the case of SHESHANK SEA FOODS and we are inclined to accept the contention of the Appellant Department. Admittedly in the present case the misrepresentation made by the importer has not been denied while submitting the explanation to the show cause notice and the importer took a technical stand that because the licenses were seized by the DRI prior to the period of expiry, it has disabled them from discharging the export obligation. Though the past conduct of the importer is not the subject matter of the show cause notice / adjudication in question, we cannot be asked to turn a blind eye to the allegations made in the show cause notice which remains unrebutted to the following effect. (vii) M/s.Gaur I....