TaxTMI 
TaxTMI 
2003 (7) TMI 88
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....are parts etc. to various parties including Indian Navy and Indian Coast Guards. The petitioners had inter alia imported two Dracone barges and filed two bills of entries on 18th December, 1992 and 28th January, 1993 for warehousing. The said barges were collapsible barges and form essential part of any oil pollution control package. The said barges are generally carried by rolling up on the Deck of the skimming vessel to the disaster area to collect the oil spillage in the sea. The said barges are also carried in cargo nets below the helicopter and dropped at the centre of the operational area, for collecting the oil spillage in the sea. 3.The petitioners cleared the barges from the warehouse, by filing pink shipping bills showing "SSK Controller of Procurement, Naval Dock, Lion Gate, Bombay" as the consignee of the said barges. On the basis of the declaration made on the shipping bills to the effect that the barges are to be supplied to the Indian Navy, the said barges were assessed and allowed to be cleared without payment of duty under Section 90 of the Customs Act. 4.Sometime in October, 1997, the Officers of the Directorate of Revenue Intelligence, Bombay (DRI) on investiga....
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....000/- towards penalty and granted immunity from fine. The Commission also imposed simple interest at the rate of 10% per annum on the duty evaded from the date of removal of the warehoused goods till the date of deposit of duty and on the balance amount of Rs. 23,83,287/- till the date of payment. Challenging the said order, the petitioners have approached this Court by way of present petition. 6.Mr. Nankani, learned Counsel appearing on behalf of the Petitioners, though not strongly, but feebly contended that the clearance of the goods under Section 90 of the Customs Act was in accordance with law because according to him Indian Coast Guard is a part of Indian Navy and, therefore, supply of barges to the Indian Coast Guard should be considered as supply to the Indian Navy. At this stage, we may point out that by a letter dated 11th September, 2002 (Exhibit - "U' to the petition) the Coast Guard Head Quarters, New Delhi has clarified that the Indian Coast Guard is not a part of Indian Navy and that the Coast Guard is an armed force of the Union, under the Ministry of Defence, and is governed by the Coast Guard Act, 1978. 7.Mr. Nankani, however, strongly urged that on realising th....
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....n order with the petitioners for supply of various items including three heavy duty barges. On the basis of these facts on record, Mr. Nankani submitted that it is evident that right from inception, the import was for and on behalf of Indian Coast Guard and the same is corroborated by the fact the imported barges have been actually supplied to the Indian Coast Guard. Since the identity of the imported goods and its supply to the Government agency is established, the Counsel submitted that even though there is no letter expressly authorising the petitioners to import, the notification has to be interpreted liberally and in the facts of the present case since the goods have been imported and supplied to the Indian Coast Guard the benefit of Exemption Notification No. 291/84-Cus. cannot be denied. Mr. Nankani submitted that the Exemption Notification cannot be construed narrowly and once it is established that the import was in furtherance of an order placed by a Government enterprise and on import, the same is actually supplied to the Government enterprise, then the benefit of Exemption Notification must be given to the petitioners. Mr. Nankani submitted that the fact that the Coast ....
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.... the purpose of the exemption and if there are two possible interpretation, then the interpretation which subserve the object and purpose should be accepted. Accordingly, it was submitted that the import of barges were for Indian Coast Guard and in fact the barges have been supplied to the Indian Coast Guard and, therefore, Notification No. 291/84-Cus. was applicable to the imports and the goods were liable to be cleared without payment of duty. 11.It was next contended that assuming that the benefit of Notification No. 291/84-Cus. is not available and the customs duty is payable in respect of barges imported by the petitioners, then and in that event the interest could not be levied from the date of clearance of the goods from the warehouse because at the relevant time there was no provision to levy interest on the duty amount under the Customs Act. Mr. Nankani submitted that Section 72 of the Customs Act is not a charging section and Section 72 does not empower the authorities to levy interest on the Customs duty found payable. He submitted that interest under Section 61 of the Customs Act could be levied only if the goods are not cleared within the warehousing period. He submit....
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....inspection of the barges at the petitioners factory, it could not be said that the import was on the authority of the Coast Guard. Mr. Rana further submitted that the sanction order issued by the Central Government clearly shows that in respect of the items to be imported, free foreign exchange was sanctioned and in respect of local purchases such as barges no foreign exchange was sanctioned. It was submitted that in view of overwhelming evidence on record, it is clear that the import was not under the authority of Coast Guard and, therefore, the benefit of exemption notification was not available to the petitioners and the duty demand is in accordance with law. 13.As regards the levy of interest on the duty amount, Mr. Rana submitted that Section 72 read with Section 61(2) of the Customs Act makes it clear that if the warehoused goods are removed improperly then the interest is payable on the duty amount. In the instant case, on account of false declaration made on the Shipping Bills, the barges were removed from the warehouse without payment of duty and once it is held that the clearance is improper, then it would mean that the goods are improperly removed from the warehouse and....
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....upplied to the Coast Guard, the benefit of the notification could not be denied to the petitioners. Mr. Nankani further submitted that the decision of the Apex Court in the case of National Insurance Company (supra) is also distinguishable on facts as the said decision is based on the concession of the Counsel. As regards levy of interest, Mr. Nankani submitted that in the show cause notice, the petitioners were not specifically called upon to show cause as to why interest should not levied upon the petitioners. He submitted that in the present case Section 72(1)(a) of the Customs Act was not applicable because the goods were cleared on assessment and, therefore, it cannot be said that the goods were improperly removed from the warehouse and consequently no interest could be levied. 15.We have carefully analysed the submissions made by Counsel on both sides. In the present case it is the case of the petitioners that on account of their misdeclaration in the Shipping Bill that the consignee is Indian Navy, the goods were allowed to be cleared without payment of duty under Section 90 of the Customs Act and, therefore, they have approached the Settlement Commission seeking settlement....
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....irst time claim before the commission benefit of Exemption Notification No. 291/84-Cus., dated 28th December, 1984 is an issue raised in this petition. In view of the fact that the settlement proceedings have been enacted with a view to allow the parties to come clean by fully and truly disclosing the commission or omission on their part and settle the entire dispute by granting immunity wherever found justified, we proceed on the footing that the Petitioners are entitled to seek benefit of Notification No. 291/84-Cus. for the first time before the commission. Therefore, the question to be considered is, in the facts of the present case whether the petitioners are entitled to the benefit of Notification No. 291/84? 17.Exemption Notification No. 291/84-Cus., dated 28th is issued by the Central Government under Section 25 of the Customs Act, 1962 exempting whole of basic customs duty and whole of additional duty payable on machinery, equipment, components, raw materials required for construction of or fitment to the ships of the Coast Guard, when imported into India by :- (a) the Government of India, or (b) &nb....
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....petitioners furnishing a certificate that the Sales Tax charges has not been exempted under the Sales Tax Act. The supply order further reserved the right of the Coast Guard to reject the barges which are offered by the petitioners for inspection. All these conditions set out in the supply order of the Coast Guard clearly show that there was no authority granted to the petitioners to import. On the contrary the supply order clearly shows that the petitioners could acquire barges locally and supply it to the Coast Guard and in that process if the petitioners were required to pay Sales Tax, then the Coast Guard had agreed to reimburse the Sales Tax. Therefore, it cannot be said that duty free import of barges was contemplated by Coast Guard. Shri Kirit Kamdar, partner of the(e) petitioner in his statement recorded under Section 108 of the Customs Act, 1962 has admitted that the imported goods have been disposed off in the open market. If the barges were imported for Coast Guard, then it could not be sold locally. Therefore, it cannot be said that the import was on the authority of Coast Guard. From the inspection note (Exhibit : E-1,(f) page 55 of the petition), it appears that the....
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.... and if the petitioners on their own imported barges with a view to supply the same to the Coast Guard, then they are liable to pay customs duty and benefit of Notification No. 291 of 1984 will not be available to the petitioners. 19.Even, if the Petitioners had imported the barges with a view to supply to the Coast Guard, that fact itself will not make the import for and on behalf of the Coast Guard, because under the contract, acceptance of the barges by the Coast Guard was dependant on inspection and approval and not on importation. On inspection the Coast Guard could reject the barges and in that event the petitioners were entitled to sell the said barges to any other purchaser. Therefore, the duty liability on the imported barges payable at the time of clearance cannot be said to be dependent upon the acceptance of the barges by the Coast Guard after clearance and on inspection. Therefore, in the present case, merely because the Coast Guard happened to purchase some barges from the Petitioners, it cannot be said that the barges imported by the Petitioners were for and on behalf of Coast Guard. 20.It is also important to note that if the barges were imported for and on behalf....
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....hority whatsoever given by Coast Guard to the petitioners to import barges. All that the contract provides is that the petitioners shall arrange for inspection of the barges within the stipulated time and on inspection if approved and accepted, the Coast Guard will buy the barges at the agreed rate and if the petitioners were required to pay any taxes for the said barges, the same will be borne by the petitioners and if sales tax was paid, the same was to be reimbursed by the Coast Guard. In this view of the matter, it cannot be said that the barges imported by the petitioners were for and on behalf of Indian Coast Guard and accordingly benefit of Notification No. 291/84-Cus. cannot be extended to the barges imported by the petitioners. 22.Now, let us turn to the authorities cited by the Counsel for the petitioners. Mr. Nankani relied upon the decision of the Apex Court in the case of Mangalore Chemicals and Fertilizers (supra) and contended that the conditions set out in the notification should not be construed rigidly and if it is established that the imported goods were supplied to the Government then the benefit of notification should not be denied. In the above case before th....
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....t payable on the barges from the date of clearance of the barges from the warehouse till payment. According to Mr. Nankani there is no provision under the Customs Act which empowers the Settlement Commission to levy interest on the duty amount found payable in respect of the goods cleared on assessment in the year 1993. In other words, according to Mr. Nankani Section 28AB of the Customs Act which came into force with effect from 28-9-1998 is not applicable to the present case because the barges were cleared on assessment prior to that Section was enacted. Similarly Section 72 read with Section 61 of the Customs Act is also not applicable because the goods were in fact cleared on assessment without payment of duty and, therefore, it cannot be said that the goods were improperly removed from the warehouse. There is no merit in this contention. Section 72 of the Customs Act provides that where the goods are improperly removed from the warehouse, then the proper Officer is entitled to demand the full amount of duty together with interest and other charges payable in respect of such goods. In the present case, the barges were assessed for duty free clearance under Section 90 of the Cus....