Jyoti Balasundaram, Vice President
1. The above appeal arises out of the order of the Commissioner of Customs (Preventive), Jamnagar, adjudicating show cause notice dated 7-10-2003 by confiscating Crude Distillation Unit Column/Vacuum Distillation Unit Column Vessels (hereinafter referred to as CDU/VDU) and pre-flash vessel imported by the appellants herein under invoice dated 15-5-1998 and 21-5-1998 respectively, for setting up a 10.5 million tons per annum crude oil refinery at Jamnagar, by filing into bond bills of entry which were permitted in February 1999 to be substituted with bills of entry for home consumption, under the provisions of Section 111(j) with option to redeem them on payment of a fine of Rs. 1.2 crores, confirming a demand of customs duty of Rs. 11,67,62,735/- under Section 28(2) and ordering appropriation of Rs. 5,83,81,368/- paid on 31-3-2004, ordering recovery of interest under Section 28AB and imposing penalty of amount equal to duty confirmed and imposing a further penalty of Rs. 1 crore on the appellant in its capacity as the custodian of the imported goods, in terms of Section 112(a)(ii) of the Customs Act, 1962.
2. The goods have been confiscated on the ground that they were removed from the customs area without the permission of the proper officer; duty @ 10% has been confirmed, rejecting the appellants' request for coverage under the EPCG licences obtained by them on 27-11-2000 for the goods imported under the two bills of entry in question, under which they would have been entitled to clear the goods on payment of duty @ 5%, penalty of amount equal to duty has been imposed holding that the provisions of Section 114A are attracted against the importer for the reason that duty was short levied by reason of collusion or wilful misstatement or suppression of facts and therefore the person who is liable to pay duty or interest, as the case may be, as determined under Sub-section (2) of Section 28, shall be liable to penalty equal to duty or interest so determined; and penalty under Section 112(a) has been imposed upon the custodian for commission of acts, viz. removal of goods from customs area, which have rendered them liable to confiscation under Section 111(j).
3. We have heard both sides.
4. As regards the claim for EPCG benefit made by the appellants in para 4.24/6.6 of the Exim Policy 1997-2002 which reads as under :-
The licence issued under this scheme shall be valid for the goods already shipped/arrived provided customs duty has not been paid and the goods have not been cleared from Customs.
we note that the request for reassessment has been rejected on the ground that there can be no reassessment after determination of duty liability under Section 28(2), that reassessment can be done only under Section 17(4) in the situations prescribed therein and there can be no reassessment of goods after removal of the goods, under Section 17(4). The claim for EPCG benefit has been denied on the grounds that the goods had been removed unauthorisedly from the customs area without the permission of the proper officer and therefore cannot be treated as pending clearance from customs, as per para 6.6 of the Exim Policy and that the benefit of notification 49/2000 dated 27-4-2000 was not admissible to the appellants as the goods had already been removed from the customs area without producing the licence for debit before the proper officer at the time of clearance, as per the condition of the notification.
5. We are not in agreement with the reasoning of the adjudicating authority for rejection of the request for reassessment and for coverage of the goods under the EPCG licences. Section 45 of the Customs Act places certain restrictions on custody and removal of the imported goods. It stipulates inter alia that all imported goods unloaded in a customs area shall remain in the custody of such person, as may be approved by the Commissioner of Customs, until they are cleared for home consumption (in terms of Section 47) or are warehoused (in terms of Chapter IX of the Act) or are transhipped (in accordance with the provisions of Chapter VIII). Sub-section (2) of Section 45 prescribes inter alia that the person having custody of any imported goods in a customs area shall not permit such goods to be removed from the customs area or otherwise dealt with except under and in accordance with the permission in writing of the proper officer. It is significant to note that this section talks about removal of imported goods (emphasis supplied). Under Section 46, an importer of any goods, other than those intended for transit or transhipment, shall make entry thereof by presenting to the proper officer a bill of entry for home consumption or warehousing in the prescribed form and as per Section 47, where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty assessed thereon, the proper officer may make an order permitting clearance of the goods for home consumption.
6. The expression "have not been cleared from Customs" has to be interpreted for the purpose of grant of the benefit of clearance under EPCG scheme. Proceeding to examine the same, we find that -
(a) The Customs Act, 1962 uses the words "clearance/cleared" and "Removal/removed" at various places. While the expression "Removal/Removed" would encompass all shifting of goods or transfer of situs of the imported goods, after landing, the word clearance will encompass, a smaller area of 'legal clearance' of the goods. Thus a 'clearance from Customs/ of imported goods, would not necessarily mean physical shifting or change in location/site. It would definitely imply a change or alteration in the legal status of the imported goods leading to their out of Customs control, especially when it is noticed that the word used in Section 45 is 'Removal' and in Section 47, 'clearance for home consumption'.
(b) In the present case, the goods have been shifted by the custodian of the imported goods from the declared Customs Area and the Revenue's case is that they have been 'Removed without permission' under the provisions of Section 45 of the Customs Act, 1962, and deposited from where they were seized. Therefore, they were held liable to confiscation under Section 111(j) of the Act. The use of the word 'removed' in Section 111(j) and not 'cleared' is vital. If goods are only 'removed' or 'removal' has only taken effect, then the goods are not 'cleared from Customs' or 'Clearance from Custom' is yet required. If that be status of the goods herein, then there is no reason therefore to deny the benefit of Exim Policy para 6.6, and or clearance under the EPGC Scheme.
(c) The difference in the words 'Removed' and 'cleared' as applicable to shifting of goods, in Commodity Taxation, has been accepted by the Board way back in 1984. The Board vide Circular No. 202/55/84-CX-6 dated 24-11-1984 issued in the context of goods 'Removed' & 'Cleared' have taken a view, after obtaining the advice of Law Ministry, that 'clearance' refers to 'removal after payment of appropriate duty of excise.' That the word 'Clearance' cannot be applied to cover unauthorized or clandestine carting/carrying away or removal of goods has been considered by this Tribunal in the case of R. Subbiah Gounder - . There is no reason why
the same view cannot be applied to imported goods under the Customs Act, 1962 referring to 'Clearance/Cleared from Customs' and held to apply only to such goods which have discharged the import levy under the law and are out of Customs control, while Removal would cover only goods which are still within Customs control, not having discharged the levy.
(d) Custody of imported goods vests with the Port Trust or the Custodian so appointed by the Commissioner of Customs, under Section 45 of the Customs Act, 1962. Physical shifting of the goods, out of the Customs Area, will not necessarily mean that the goods have been 'cleared from Customs'. The Custodian, as Bailee of the goods, has rights & duties even after die goods are cleared from Customs on payment of duty but not physically taken over by the importer & shifted. As a Bailee, the Custodian is expected to keep the imported goods safe and secure before & after payment of duty.
7. Section 47 relates to clearance of imported goods (emphasis supplied). In the absence of an order by the proper officer permitting clearance of the goods in question for home consumption and in the absence of payment of duty thereon, the goods cannot be said to have been 'cleared from customs' even though they have been physically removed from the customs area. Goods can be reassessed to duty until an order for clearance of goods is passed under Section 47, even de hors provisions of Section 17(4), in the light of the Tribunal's order in Birla Jute Mfg. Co. Ltd. v. CC wherein it has been
held that Section 17 nowhere lays down that reassessment can only be made for the reasons mentioned in that Section alone and for no other reason, as reassessment can arise for various other reasons or situations such as disputes on valuation or classification or involving benefit of some exemption notification, and the Tribunal's decision in Indofil Chemicals Ltd. v. CC wherein reassessment
sought claiming benefit under notification 110/75-Cus. was held to be permissible even subsequent to assessment and it was held that there is no provision under the Customs specifically for reassessment and reassessment contemplated in Section 17(4) is limited only to cases where reassessment becomes necessary on account of discrepancy found on examination of goods after assessment is complete. In the present case, the benefit of concessional rate of duty of 5% was claimed in terms of notification 49/2000-Cus. dated 27-4-2000 is the goods were covered by a valid licence issued under the Export Promotion Capital Goods (EPCG) Scheme in terms of paragraph 6.2 of exemption policy permitting import of goods @ 5% duty - in other words, the request for reassessment arose for the reason that the benefit of exemption was being claimed. In the case of Arthanari Loom Centre v. CC , the Tribunal has extended the benefit of amended EPCG licence to goods in question in that case in the absence of any order permitting clearance for home consumption. In the present case, there is no order of the proper authority permitting clearance for home consumption in terms of Section 47 of the Customs Act and the EPCG licence has been produced by the importers for debit by the proper officer before clearance of the imported goods and the bills of entry were provisionally assessed and there was no determination of duty under Section 28(2) at the time when the EPCG licences were produced for debit by the importers. Therefore, we hold that the benefit of EPCG licence/notification 49/2000-Cus. is available to the importers and that the goods ought to have been reassessed by extending the benefit thereunder. Both sides confirm that the amount of Rs. 5,83,81,368/- already paid by the importers is the duty payable on an application of the notification. We, therefore, hold that the above amount already paid by the importers represents the correct duty payable and accordingly set aside the duty liability confirmed in excess of Rs. 5,83,81,368/-.
8. The contention of the appellants that the provisions of Section 28 under which the demand has been confirmed are not applicable to the facts of the case in view of our finding hereinabove that till date no order permitting clearance for home consumption under Section 47 of the Customs Act, 1962 has been passed by the proper officer and Section 28 applies only when duty has been short levied or non-levied pursuant to an order of assessment and since no order of clearance has been made till date, no short levy or non-levy of duty can arise for recovery in terms of Section 28 also has substance, and merits acceptance. The decisions of the Tribunal in HCL HP Ltd. v. CC and
Tata Infotech Ltd v. CC relied upon by the
Commissioner to hold that duty demand is sustainable under Section 28 when the date of duty payable and the removal is known, are distinguishable from the facts of the present case as in both those cases, an order permitting clearance of goods for home consumption was passed by the proper officer and thereafter the department issued a show cause notice alleging misdeclaration of value and seeking recovery of the differential duty by invoking the provisions of Section 125(2) of the Act and it is in this context that the Tribunal held that, if there was short levy, then duty ought to have been demanded in terms of Section 28 and that Section 125 was applicable only in cases where the date of short levy or importation was not available.
9. As regards confiscation, we note that the show cause notice as well as the order, herein, accept a dichotomy between the role played by the appellant, i.e. as an importer and as custodian. The notice contains one set of allegations directed against the appellant in its capacity as an importer and another set in its capacity as a custodian. The appellant, while replying to the show cause notice, also submitted explanations separately in two capacities. The impugned order of the Commissioner also maintains this dichotomy, which is evident from his findings in para 19.0 of the order, wherein it has been held that "M/s EOL have removed the goods unauthorisedly from the Customs area as custodian and taken delivery outside the Customs Area as importer without seeking clearance from the proper officer". This would show that the Commissioner has accepted that the act of removing the goods from the Customs area was effected in its capacity as a custodian only with a view to ensure safety and proper storage of the goods. The further finding of the Commissioner that the appellant had taken delivery of the said goods outside the Customs area as an importer, has been contested by the appellants, by pointing out that there was no basis for coming to such a conclusion, as, firstly, the goods were found in the same condition in which they had been imported and had not been put to use or even attempted to be put to use. Secondly, the refinery site belonged to the same appellant company, which was also the custodian of the goods and therefore there is no basis for presuming that the possession of the goods had been handed over by the appellant, acting as a custodian, to another. Surely, one cannot take delivery from ones own self. In our view, the fact that the goods were found by the Customs officers, in the same condition in which they had been imported, is sufficient indication of the fact that the goods had not been used or attempted to be used by the importer. Since the Department has not raised any dispute about the explanation of the appellant that the goods were removed from the Customs area due to shortage of space at the jetty and to prevent damage to the goods, it is reasonable to hold that the goods have remained with the custodian, albeit, outside the Customs area.
(a) This leads to the next question as to whether such an act was a violation of Section 45(2) of the Customs Act. This Section of the Customs Act deals with restrictions on custody and removal of imported goods and provides that all imported goods unloaded in a Customs area shall remain in the custody of such person as may be approved by the Commissioner of Customs until they are cleared for home consumption or are warehoused or are transhipped in accordance with the provisions of Chapter VIII. Sub-section (2) of this section is particularly relevant, as it provides that the custodian shall not permit the imported goods to be removed from the Customs area or otherwise dealt with, except under or in accordance with the permission of the proper officer. It has been contended before us by the counsel of the appellant that Sub-section (2) clearly permits a custodian to remove the imported goods from the Customs area if such removal is permitted by the proper officer in writing. It has been urged that the said section does not seek any pervious or prior permission to be obtained from the proper officer and that therefore if such a permission if granted, at a subsequent stage, then requirement of Section 45(2) would stand satisfied. It was also urged that since there was no dispute about the compelling reasons which induced the removal the goods from the Customs area to another location, the Commissioner ought to have regularized this removal by exercising his power under Section 45(2) and allowed the matter to rest there. There is force in these pleas, as the Commissioner himself has accepted that this act of removal was carried out by the appellant in its capacity as the custodian. Since Section 5(2) of the Customs Act empowers the Commissioner to do whatever his subordinates should have done under the Act, the Commissioner ought to have exercised his powers and accorded necessary permission under Section 45(2) and regularized the matter. In arriving at this conclusion, the following observations of the Supreme Court in LIC v. Escorts and Ors. are very relevant :-
61. From what has been narrated above, one of the principal questions to be considered is seen to be whether the Reserve Bank of India had the power or authority to give ex post facto permission under Section 29(1)(b) of the Foreign Exchange Regulation Act for the purchase of shares in India by a company not incorporated in India or whether such permission had necessarily to be "previous" permission.
62. We do not propose to refer to any dictionary to find out the meaning of the word 'permission', whether the word is comprehensive enough to include subsequent permission. We will only refer to what Sir Shah Sulaiman, CJ. said in Shakir Hussain v. Chandoo Lal AIR 1931 All 567 :1931 ALJ 865:
Ordinarily the difference between approval and permission is that in the first the act holds good until disapproved, while in the other case, it does not become effective until permission is obtained. But permission subsequently obtained may all the same validate the previous act.
63. We have already extracted Section 29(1) and we notice that the expression used is "general or special permission of the Reserve Bank of India" and that the expression is not qualified by the word "previous" or "prior". While we are conscious that the word "prior" or "previous" may be implied if the contextual situation or the object and design of the legislation demands it, we find no such compelling circumstances justifying reading any such implication into Section 29(1). On the other hand, the indications are all to the contrary. We find, on a perusal of the several, different sections of the very Act, that the Parliament has not been unmindful of the need to clearly express its intention by using the expression "previous permission" whenever it was thought that "previous permission" was necessary. In Sections 27(1) and 30, we find that the expression 'permission' is qualified by the word 'previous' and in Sections 8(1), 8(2) and 31, the expression 'general or special permission' is qualified by the word "previous", whereas in Sections 13(2), 19(1), 19(4), 20, 21(3), 24, 25, 28(1) and 29, the expressions 'permission' and 'general or special permission' remain unqualified. The distinction made by Parliament between permission simpliciter and previous permission in the several provisions of the same Act cannot be ignored or strained to be explained away by us. That is not the way to interpret statues. The proper way is to give due weight to the use as well as the omission to use the qualifying words in different provisions of the Act. The significance of the use of the qualifying word in one provision and its non-use in another provision may not be disregarded. In our view, the Parliament deliberately avoided the qualifying word 'previous' in Section 29(1) so as to invest the Reserve Bank of India with a certain degree of elasticity in the matter of granting permission to non-resident companies to purchase shares in Indian companies....
The above observations would be relevant to conclude that the post facto approval of removal should have been granted under Section 45(2) by the adjudicator and the matter dropped at that stage. It is found that there are several provisions in the Customs Act, 1962 which require previous permission to be obtained from the concerned authorities. For instance, Section 110 prohibits a owner of seized goods from removing or otherwise dealing with the seized goods except with the previous permission of the proper officer. Likewise, Section 137 requires a previous sanction of the Commissioner before a Court can take cognizance of any offence under Sections 132 to 137 of the Customs Act. Section 155 also refers to a prior notice to be served on the Central Government before a suit can be commenced against it or any officer of the Government for anything purported to be done in pursuance of the Act. Since the words, 'permission' appearing in Section 45 are not prefaced by the word 'previous' or 'prior', it will be reasonable to hold that permission under Sub-section (2) of Section 45 could be accorded by the proper officer subsequent to removal of the goods. The contention of the Department that there was an absolute bar on the custodian to remove the goods from the Customs area and that any such removal would immediately render the importer liable to pay duty thereon, cannot be accepted in view of the Apex Court's observation and the wordings of Section 45(2) of the Customs Act, 1962.
(b) The real test in determining whether or not there was violation of Section 45 and whether the custodian is liable to penalty is the test of bona fides. If the act of removal of the goods from the Customs area was actuated by the desire to evade duty, and if as a result of such an act the revenue was prejudiced, the finding of the Commissioner may be justified. Consequently, if the bona fides of the appellant are not in doubt, and it has been accepted that the removal of the goods from the Customs area was actuated by genuine need to shift them to a safer location and in the process no loss had been caused to the Revenue or any gain accrual to the appellant, there should be no hesitation in regularizing the matter by granting a post facto permission under Section 45(2) of the Act.
(c) The provision of Section 49 of the Customs Act, 1962 also permit the deposit of such goods in a warehouse in such cases. Keeping in mind the nature of the goods and the size of the same, deposit in an open warehouse, which is not even licensed under Section 57 or & 58 of Customs Act, 1962 was permissible. That aspect has not been contested nor considered by the Customs Authorities. The prescription of Section 49 could have solved the problem and even confiscation would not have been called for.
10. However, the confiscation is not challenged by the appellants and hence we uphold the same, but in the light of the above discussion and in view of the fact that the stand of the importers that the goods were removed in February 1999 after provisional assessment of the bills of entry by the proper officer on 26-2-1999 only due to space constraints and other operational problems at the jetty is not controverted by the Revenue, we reduce the fine to a token amount of Rs. 1,00,000/-.
11. As regards penalty, it is an uncontested fact that the appellants had presented Bills of Entry in respect of the said goods for clearance. The Bills of Entry were assessed provisionally. Subsequently, an EPCG Licence was obtained and the appellants approached the Department for re-assessment of the said BEs. It appears, that several letters were written, to the department; last one being letter dated 13-3-2003, requesting reassessment in terms of the EPCG Scheme to enable discharge of duty & clearance of goods for home consumption. The Show Cause Notice records that on 6-4-2003, a team of officers visited the Vadihar Port for verification of the uncleared goods and that in the course of such verification, the officers found that the subject goods were not present in the Port Area. Thereafter, on enquiry, they learnt that the goods had been shifted to the Project site. The Notice does not state that this verification was done on the basis of any prior intelligence. It appears that the appellants' persistent requests for reassessment caused the enquiry. When the officers went to the Project site, they found that the goods were lying in the same condition in which they have been imported several years ago. When the statements of the appellants' personnel were recorded, all stated that the Bills of Entry had already been filed, and that the goods had been shifted from the Port Area for want of space, and to prevent damage to the goods. This would indicate that all statements relied upon in the Show Cause Notice point to the appellants bona fide and none of them suggest that there was any intent to evade payment of duty. The notice merely relies upon the statements, without bringing on record any material to suggest that there was any intent to evade duty. Although the notice did allege that there was any intent, this allegation was contested by the appellants in the reply. There is no finding arrived at by the Commissioner in the impugned order, on this aspect; which leads to an inevitable conclusion that the bona fides of the appellant importer are now not disputed by the Department. During the hearing, the Id. Counsel for the appellants, informed us that due to delay in the setting up of the refinery, the Central Board of Excise & Customs had issued orders directing the Customs at the Port of lading not to dispose of the goods lying in the Port Area. In this manner, the time for payment of duty would be deemed to have been extended by the Board itself from time to time. We were also told that this date of payment for duty was last extended till 30-9-2004. That being the position, even if the goods had remained in the Port Area, the appellants could not have been coerced into making any payment of duty on such goods by resorting to the provisions of Section 48 of the Customs Act, 1962. All that the appellants would have to do was to discharge duty as per the extensions granted by the Board. That position would be no different, even if the goods were removed from the Port Area and kept at the refinery site, which admittedly belongs to the same company which holds the custody of the goods. In other words, it is not a case where, if the goods had been left within the Port Area, the appellant would have to pay any higher amount of duty or interest. In this context, there is no reason to disbelieve the explanation given by the appellants, that in the capacity as custodian, the goods had to be removed from the Port Area due to space constraints and for ensuring safety of the goods. We have also been shown the photograph of the goods in question. The goods are huge columns and vessels weighing several hundred tons. Being Bailor, the primary responsibility of the custodian was to ensure that the goods are properly and safely stored. That effort should not visit them with a penalty. We also find that it was the appellants themselves, who had approached the department, time and again, seeking reassessment of the Bill of Entry and offering to pay duty as per the EPCG Scheme. A different view could have been arrived at, had the appellants made any attempt to utilize the goods, before payment of duty. As found earlier, the goods were in the original packed condition, in the manner in which they were imported, and no attempt had been made to use them, which would prove the bona fides of the appellant as importer and/or as Custodian. Therefore this is a fit case where the principles laid down by the Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa 1978 (2) E.L.T. J 159 and Akbar Baddruddin Jiwani v. CC would apply. The Hon'ble Supreme Court has held that even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. We observe that a mountain has been made out of a mole hill by ordering confiscation and imposition of heavy redemption fines and penalties. The penalty is therefore required to be set aside in toto.
12. We also note that penalty under Section 114A can be imposed only when duty has not been levied or has been short levied by reason of collusion or wilful misstatement or suppression of fact and the person liable to pay duty under Section 28(2) would in addition, be liable to penalty. We have already held that the provisions of Section 28 are not attracted against the importers and therefore penalty of amount equal to duty (although the impugned order does not refer to Section 114A while imposing penalty equal to duty, the show cause notice proposes penal action under Section 114A on the ground that the appellants are liable to pay the duty short levied as determined under Section 28(2) cannot be sustained and is therefore set aside.
13. With regard to the appellants' role, as a custodian, we find that the provisions of Section 45 of the Customs Act, 1962 permit the proper officer to permit the custodian to remove goods from the Customs area, after obtaining written permission of the proper officer. The appellants claim to have applied for such a permission. Since after examination of the facts on record, the Commissioner does not dispute the appellants contention that there was shortage of space and that movement of goods from the customs area was necessitated due to concern of the safety of the goods, we do not see any reason as to why such a permission, if applied for or not, should not have been granted by the Commissioner. The Commissioner, in the impugned order, does not record anywhere that the circumstances of the case did not warrant grant of such a permission. If that had been the finding of the Commissioner, surely, the infraction of Section 45 would have been a substantive one and not merely procedural, while the provisions of Section 45 are procedural. In the absence of such a finding, we hold that non-obtaining of prior written permission from the proper officer would get reduced to a condonable breach for which a penalty is not justified. The penalty imposed under the provisions of Section 112 of the Customs Act, 1962 cannot be upheld.
14. To sum up, we order as under :-
(a) Liability of the imported goods to confiscation is upheld as it is not challenged.
(b) Redemption fine in lieu of confiscation is reduced to Rs. 1,00,000/-.
(c) EPCG licence covering the goods in question is accepted.
(d) Duty of Rs. 5,83,81,368/- already paid is the correct duty payable.
(e) The duty demand in excess of the amount already paid is set aside.
(f) Penalty equal to duty amount is set aside.
(g) Penalty under Section 112 is also set aside.
15. The appeal is thus partly allowed in the above terms.