2010(10)LCX0014
IN THE HIGH COURT OF ALLAHABAD (LUCKNOW BENCH)
Devi Prasad Singh and Anil Kumar, JJ.
Commissioner of Customs C.G.O.
Versus
Sonam International Shop No. 9
First Appeal From Order No. 918 of 2005 Decided on: 07.10.2010
Cases Quoted -
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Collector of Cus., Bombay v. AVET Chemicals 2001 (137) ELT 1304 (Tri.) (Mentioned)
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Commissioner of Central Excise, Coimbatore v. CEGAT, Chennai 2006 (203) ELT 20 (Mad) (Mentioned)
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Advocated By -
Dipak Seth, Rajesh Singh Chauhan for the appellant
Anand Mohan, K.N. Srivastava, Naveen Mullick for the respondents
JUDGMENT
Devi Prasad Singh, J.
1. Present first appeal from order, under Section 130 of Customs Act, 1962 (in short the Act), has been preferred against the impugned order dated 5th April, 2005, passed by the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench, Mumbai in Appeal No. C/1185/04 Sonam International v. Commissioner of Customs Lucknow.
2. We have heard Sri Rajesh Singh Chauhan learned Counsel for the Appellant and Sri Naveen Mullick on behalf of Respondent as well as perused record.
Facts of the case
3. Directorate of Revenue Intelligence (in short DRI), Lucknow, received information that Respondent M/s. Sonam International, Shop No. 9, B-Wing, Devki Nagar, Eksar Road, Borivali (West), Mumbai 400103, is involved in illicit import of third Country Origin Vitamin E powder by misdeclaring as poultry feed supplement in the Bill of Entry from Nepal into India. The Supplier at Nepal M/s. Anivet Industries, Birganj, Nepal, through the Land Customs Station, Sonauli on the Indo-Nepal Border in the State of Uttar Pradesh is exporting Vitamin E powder as poultry feed supplement importing it from foreign countries in Nepal. Respondent M/s. Sonam International by misdeclaring the Vitamin E powder as "Poultry Feed Supplement" AV-117 of Nepali Origin, vide Bill of Entry No. 487/02, dated 1st December, 2002 and cleared on 21st May, 2003, through the Land Customs Station of Sonauli, on the Indo-Nepal Border in Uttar Pradesh, loaded on a truck bearing Registration No.;RJ-02/G-3837, were detained by the Officers of the Directorate of Revenue Intelligence (DRI), Lucknow on 26th May, 2003 in pursuance of powers conferred by Section 110 of the Act.
4. During the course of investigation, DRI found that poultry feed supplement were imported by misdeclaration in violation of conditions stipulated in the Custom Notification No. 40/2002-Cus. dated 12th April, 2002 and in contravention of provisions of Customs Notification No. 9/96-Cus (NT) dated 22nd January, 1996, issued under Section 11 of the Act and the provisions of Revised Protocol to the Indo-Nepal Treaty of Trade.
5. In follow up action DRI, Surat found, inter alia, that the premises/address 4/112, Master Road, Valsad (Gujarat) 396001, does not belong to Respondent M/s. Sonam International and they have never stored any goods belonging to them in the premises disclosed on papers. The premises belonged to one Shri Yashwant K. Shah. Shri Sanjay P. Shah, nephew of Shri Yashwant K. Shah and the Proprietor of M/s. Sanjay Agencies, Valsad, stated that he was engaged in the manufacture of "Poultry Feed Supplement" and he was having business relations with the Respondent M/s. Sonam International, which used to supply Vitamins of different varieties to his firm who used to impose and trade the same and that they utilised these vitamins for making broiler premix, layer premix, SK bed, SK Mix, ABDK, etc. It was further stated that the premises located at Master Road, Valsad, is owned by his uncle Shri Yashwant K. Shah and the premises was being used at his behest as Office/godown by Respondent M/s. Sonam International but in fact the Office of the Respondent M/s. Sonam International was never made functional from this premises nor any goods belonging to M/s. Sonam International, were ever kept there, since these premises were being used as godown by his uncle's Firm since last 20 years. It was further stated that Respondent M/s. Sonam International had wrongly shown the premises being used by it showing its Office address on paper only. It was further stated that goods of the Respondent M/s. Sonam International given in the name of AV-10 and AV-110 etc., were actually Vitamins only since they used to purchase only Vitamins from them. It was further stated that Respondent M/s. Sonam International used to extend credit facility to them on the goods being supplied to them and since he was in a financial crisis, therefore, he had allowed them to use the premises as Office on paper only, and no rent was ever taken. All post/letters received in their name, were sent to the Mumbai Office of the Respondent M/s. Sonam International.
6. DRI found that Sri Nailesh Shah looked after the imports of the Respondent M/s. Sonam International from Nepal into India and he also ran a manufacturing Unit at the Union Territory of Daman in the name and style of M/s. Baadar Schultz Laboratories, engaged in the manufacture of "Poultry Feed Supplement" and is a partner. Sri Nailesh Shah in view of these circumstances, had common interest in the affairs of both the firms namely, M/s. Baadar Schultz Laboratories at Daman and M/s. Sonam International at Mumbai.
7. In follow up action, the Officers of DRI at Surat detained 2,225 kgs. of Vitamin E Powder, which according to the Appellant, was misdeclared as "Poultry Feed Supplement-AV 110" in the Bill of Entry No. 5509/03, dated 27th February, 2003 filed for clearance of the same at LCS, Sonauli, at factory premises of M/s. Baadar Schultz Laboratories, Daman on 30th May, 2003 under the drawal of proper Panchnama. The goods seized were sent for test and analysis to the Central Revenue Control Laboratories, New Delhi on 23rd July, 2003 and to M/s. Analytical Testing Corporation, Lucknow on 6th June, 2003.
8. During investigation by DRI, Sri J.R. Nayak, CEO (Tech) of M/s. Baadar Schultz Laboratories, informed the DRI Officers on 20th January, 2003, inter alia, that he was handling the production work at the factory whereas Shri Nailesh Shah sits at Mumbai and having three partners viz. Kirtilal Shah and his two sons Nailesh and Kaplesh in M/s. Daadar Schultaz Laboratories. These three partners are also partners in other firms viz. M/s. Sonam International, M/s. Sheetal Pharma and M/s. Sheetal Enterprises whose Offices are located at Shop No. 9, B-Wing, Devki Nagar, Eksar Road, Borivali (W), Mumbai. It is stated by Sri J.R. Nayak that M/s. Baadar Schultz Laboratories, used the imported vitamins/feed supplements from various countries including Nepal. However M/s. Baadar Schultz Laboratories does not import these vitamins/feed supplements rather, it was imported by M/s. Sonam International and M/s. Sheetal Pharma which are sold to other firms. These are purchased from M/s. Anivet Industries, Adarsh Nagar, Birganj, Nepal, owned by Sri Pradeep Rungta and further sold to M/s. Baadar Schultz Laboratories, Daman, which was seized as discussed hereinabove.
9. The Analytical Testing Corporation, vide their test report dated, 12th June, 2003, reported that the samples of the goods are Vitamin E powder (49.5 per cent w/w) and is fit for human consumption, and these samples do not contain any Calcium Carbonate as declared by the importer.
10. The C.R.C.L., New Delhi, vide its report dated 29th August, 2003 also informed that sample is in the form of white powder essentially composed of Vitamin E and inorganic material mainly Silica (Ash content 43.15 percent w/w).
11. DRI found that these goods have got third country origin imported from Nepal and have not undergone any manufacturing process/value addition in Nepal as well as a change in the four digit HSN code conditions which are mandatory for availing duty free import benefit for Nepalese origin goods imported into India from Nepal as per provisions of Notification No. 40/2002-Cus., dated 12th April, 2002. Accordingly, it is found that these goods were imported from Nepal in contravention of provisions of 09/ 96-Cus. (N.T.), dated 22nd January, 1996 issued under Section 11 of the Act and the goods weighing 2,225 kgs., was Vitamin E powder valued at Rs. 7,82,644, which was seized under Section 110 of the Act on 6th September, 2003 by the Officers of DRI, Surat.
12. M/s. Baadar Schultz Laboratories, Daman, filed a Civil Misc. Writ Petition No. 6353 of 2003 in Bombay High Court in August 2003 for release of the goods seized by the DRI, Surat on 6th September, 2003. The Bombay High Court, by an order dated 13th October, 2003, directed, inter alia, that the department will draw three samples of the seized goods; one to be given to the Petitioners, the other to be sent for chemical analysis and the third to be retained by the department. The department was given the liberty to proceed with the investigation well within reasonable time and to complete the same within eight weeks from the date of order. The Bombay High Court has given liberty to adjudicate the matter with due compliance of principles of natural justice. The Court also directed the Petitioner to cooperate with the investigation. The goods were released subject to furnishing of bank guarantee of Rs. 5,50,000 and a bond for Rs. 7,50,000.
13. In spite of specific observations made by Bombay High Court, various persons relating to present controversy like Sri Pradeep Pathak, the Authorised Representative of M/s. Sonam International at Sonauli, Sri Nailesh Shah initially, did not appear in spite of service of notice. Because of non-cooperation, the Revenue moved an application in Bombay High Court for extension of time to investigate the matter.
14. Later on, in response to summons issued under Section 108 of the Act, Sri Pradeep Pathak, Authorised Representative of M/s. Sonam International, appeared before the Senior Investigating Officer, DRI, Lucknow on 2nd January, 2004. He stated that he does work for the Company in the capacity of Authorised Representative. He admitted that Shri Ashok Agarwal, Shri Nailesh Shah, Shri Kalpesh Shah, Shri Pradeep Soni, Shri Pradeep Rungta and Shri Suresh Rungta had constituted a syndicate for import of third country origin goods into India from Nepal by fabricating the documents and showing that these goods have undergone manufacturing process in Nepal, whereas in reality no manufacturing process/activity was done in Nepal on such imported goods.
15. It has also been stated by Sri Pradeep Pathak in his voluntary written statement recorded on 2nd January, 2004 and 3rd January, 2004 that M/s. Anivet Industries, Nepal do not have any facilities for manufacturing activities at Nepal. He further stated that he initially avoided summons because he had come to know and understand that the plans of the syndicate had been exposed and with regard to bringing third country manufactured goods by misdeclaring them as "Poultry Feed" from Nepal into India is an act of smuggling as it violates the provisions of Customs Notification No. 9/96 (NT)-Cus., dated 22nd January, 1996, issued under Section 11 of the Customs Act, 1962 and that he could have been arrested under Section 104 read with Section 135 of Customs Act, 1962 and hence, he was avoiding to appear before DRI Officers. He further stated that in reality the consignments are imported into Nepal from third countries and no manufacturing activity/process was done on them nor was there any value addition. The cost sheet and other documents are prepared to suit the provisions of the Treaty. Thus, Sri Pradeep Pathak who was instrumental on behalf of the Respondent, admitted his guilt with regard to illicit import of Vitamin E powder (AV-110) in his statement dated 2nd January, 2004 and 3rd January, 2004 before the DRI, Lucknow.
16. In view of the statements given, Sri Pradeep Pathak was arrested on 3rd January, 2004 and remanded to judicial custody. Bail application of Sri Pradeep Pathak was rejected by the Special Judicial Magistrate (Economic Offence), Lucknow on 5th January, 2004 and by the District and Sessions Judge Lucknow, on 28th January, 2004. A complaint under Section 135(1)(b) of the Act had been filed by the prosecution in the Court of Special Chief Judicial Magistrate (Economic Office), Lucknow on 28th February, 2004. In the meantime, Bombay High Court by an order dated 6th January 2004 extended time limit for investigation by eight weeks.
17. The Appellant after investigation found that imported goods have been declared as "Poultry Feed-AV 110" in the column 6 of the said Bill of Entry meant for description of goods. The Vitamins and "Poultry Feed Supplement" are different products and have different identity under the Customs Tariff, while the former is classifiable under Chapter 29 the latter is classifiable under Chapter 23.
18. Under Explanatory Note to HSN (Chapter 23), the characteristic feature of animal feed supplement is that they essentially contain products from each of the three group of nutrients i.e. "energy" nutrients consisting of high carbohydrates, "body building" protein rich nutrients or minerals and "functional" nutrients like vitamins, trace elements and antibiotics.
19. DRI found that in the copy of Invoice No. 50134 dated 25th March, 2001 of M/s. Chr. OLESEN & Company GMBH (Germany) by which M/s. Anivet Industries, Nepal, have imported Vitamin E into Nepal from Germany, contains the indication made by German Supplier in four digit HSN Code as 2936.
20. Copy of other Invoice No. 03SIN1846 dated 16th April, 2003 of M/s. Synchem International Company Limited, China, by which M/s. Anivet Industries, Nepal have imported Vitamin E into Nepal from China, contains the indication of Chinese supplier in four digit HSN Code as 2936.
21. In view of these documents, the DRI had inferred that M/s. Anivet Industries, Nepal, is exporting Vitamin E into India through Respondent under the garb of "Poultry Feed Supplement" which has been established by the DRI, corroborated by Lab report of goods supplied by M/s. Anivet Industries imported by Respondent against Bill of Entry 5509 and found to be Vitamin E (Classifiable under Customs Tariff Heading 2936 and falling under HSN Code 2936) and not Poultry Feed (which is classifiable under Chapter 2309 and fall under HSN Code 2309).
22. According to Notification No. 40/2002-Cus., dated 12th April, 2002, it is necessary that manufacturing activity/process should have been performed in the Nepal itself before importing to India under the provisions of Indo-Nepal Treaty.
23. According to report, the composition break up of the AV-110 has been shown as Vitamin E 990 gms, BHT 05 gms and stabilizers 05 gms per kg respectively. In other report the composition break up of the AV-110 is shown as Vitamin E as 500 gms, Carrier (Calcium Carbonate) 500 gms, BHT 05 gms and stabilizers 05 gms, per kg.
24. These two reports show different chemical compositions of the same product "AV-110" has been found which shows the Vitamin E to the extent of almost 50.
25. In view of the above, the Revenue/Appellant while proceeding ahead, took plea that importer have misdeclared the import goods and circumvented the Indo-Nepal Treaty Trade and provisions of Notification No. 40/02, dated 12th April, 2002 and hence liable for confiscation under Section 111M of the Act.
26. A Show Cause Notice under Section 112 of the Act was sent along with all the relevant documents which were responded by the Respondents vide reply dated 23rd April, 2002 (Annexure No. 2).
27. The Joint Commissioner Custom had elaborately considered and discussed rival contentions and statutory provisions and reached to the conclusion that seized goods of 2,225 kg Vitamin E, 50 per cent were imported by misdeclaring them as "Poultry Feed"/"Poultry Feed Supplement" AV-110 under the garb of Notification No. 40/02-Cus., dated 12th April, 2002 read with Revised Protocol to the Indo-Nepal Treaty of Trade and in violation of provisions contained in Notification No. 9/96 (NT)-Cus., dated 22nd January, 1996 issued under Section 11 of the Act and confiscated them under Section 111 of the Act and penalty was also imposed under Section 112 of the Act.
28. Confessional statement has been made by Sri Pradeep Pathak on 2nd January, 2004 and 3rd January, 2004 to the effect that Respondent M/s. Sonam International has been engaged in smuggling Vitamin E from Nepal and M/s. Anivet Industries does not possess any manufacturing unit of poultry feed supplement. The goods under the garb of poultry feed supplement Vitamin E is smuggled in India abusing the Indo-Nepal Treaty. It has also been stated by Sri Pradeep Pathak that M/s. Anivet Industries imports Vitamin E from overseas and exports to M/s. Sonam International in India. Sri Pradeep Pathak retracted the statement extracted from him, vide letter dated 8th January, 2004 but adjudicatory authority relied upon his statement as trustworthy and the facts and incidents are being supported by invoice dated 25th March, 2001 of M/s. Chr. OLESEN & Company GMBH (Germany), showing the classification of goods imported by M/s. Anivet Industries, Nepal as Vitamin E 50 per cent and four digit HSN Code as 2936, respectively, the test report showing 49.57 per cent ww Vitamin E.
29. Sri Pradeep Pathak stated that entire work of M/s. Sonam International is looked by Nailesh Shah and he used to discuss all matters with him. With regard to import made by M/s. Sonam International, Sri Pradeep Shah stated that he received instructions from Nailesh Shah which is corroborated from the statement dated 28th June, 2003 of Sri Kirti Lal Shah and the statement dated 3rd June, 2003 made by Sri Nailesh Shah. Thus, the retraction of Sri Pradeep Pathak seems to be after thought. The original statement given by him is corroborated by the statement of other persons, the circumstances, the test report and the imports receipts of Vitamin E of Ms. Anivet Industries. The facts that M/s. Sonam International had supplied the goods to Proprietor of M/s. Sanjay Agencies, Valsad, was Vitamin E, is also corroborated by the statement of Proprietor of M/s. Sanjay Agencies, Valsad, namely, Sri Sanjay P. Shah, recorded under Section 108 of Customs Act.
30. He admitted the business relationship with M/s. Sonam International and stated that he used to buy only Vitamin E from M/s. Sonam International who import and trade the same. Vitamin E supplied by M/s. Sonam International, is being used for making broiler premix, layer premix, SK bed, SK Mix, ABDK etc., and the goods in the name of AV107 and AV 110 etc., were actually vitamins since they used to purchase only vitamin and not poultry feed supplement. The statement of Sanjay P. Shah dated 2nd June, 2003 is the part of notice has not been disputed by the Respondents.
31. It has also been established that by the document that the composition break up of AV 110 was shown as Vitamin E 990 gm, BHT 5 gm and stabilisers 5 gm over per kg, respectively. In view of the above, the adjudicatory authority held that goods are rightly classified under the code of HSN as 2936. The raw material namely, Vitamin E 50 per cent imported from third country was classified by the supplier under 4 digit HSN Code as 2936.
32. The order dated 23rd April, 2004 passed by the Joint Commissioner of Customs, Customs (Prev.) Commissionerate, Lucknow was the subject matter of appeal before the Commissioner (Appeals). The Commissioner (Appeals) by the order dated 13th September, 2004 had disallowed the appeal, and upheld the original order passed by the Adjudicating Authority. The Commissioner (Appeals) also relied upon the confessional statement and test report coupled with other documents.
33. The Appellate Authority observed that the facts of the case clearly transpire that DRI Officers were investigating the case and were having prior cogent information that some smuggled of third country origin were being imported from Nepal to India by misdeclaring the same. The belief turned into truth after investigation and seizure of goods. The Appellate Authority further relied upon Section 111 of Customs Act, 1962 with regard to confessional statement and abuse of Indo-Nepal Treaty of Trade to import third country origin goods in India. It has further been held by the Appellate Authority that goods were imported in contravention of Notification dated 12th April, 2002 and under Section 112 of Customs Act, 1962, call for penal action. The papers were fabricated and third country origin goods were imported under the garb of poultry feed supplement.
34. Feeling aggrieved against the order of Appellate Authority, Respondent approached the Tribunal and the Tribunal by the impugned order dated 5th April, 2005, reversed the finding recorded by the authorities below.
Questions of Law
35. The present appeal was admitted and later on, additional questions were framed in pursuance of power conferred by Section 103 of the Act. The question of law which call for adjudication, are as under:
1. Whether the Respondents can avail the benefits of Notifications No. 40/2002-Cus dated 12th April, 2002 read with Revised Protocol to the Indo-Nepal Treaty and the provisions of Section 11 of the Customs Act, 1962 by misdeclaring true nature, composition and identity of the subject goods?
2. Whether the subject goods have been misdeclared under Chapter Heading 2936 and should have been classified under Chapter Heading 2309?
3. whether the goods having nor gone through any manufacturing process at Nepal, the order of the Tribunal is bad in law in view of Notification No. 9/96, 22nd January, 1996 issued under Section 11 of the Customs Act?
4. Whether keeping in view the provisions contained in Sections 17,46 and 47 of the Customs Act, 1962, the Bill of Entry being cleared by the Appropriate Authority is not open to review since the Revenue has not preferred any appeal in case the Revenue feels that it is a case of misdeclaration?
5. Having treaty between Nepal and Government of India and the consequential certificate, issued by the Competent Authority of Nepal declaring the seized goods as food supplement, whether it is not open to record a contrary finding with regard to the nature of goods seized?
6. Whether this Court lacks jurisdiction to entertain the present appeal as per the provisions provided under Section 130 of the Custom Act, 1962?
7. Whether the Board has misdeclared the classification of Tariff under Heading 23.09 which should have been classified under Heading 29.36 of the Tariff?
Statutory Provisions
36. Respondent's Counsel pleaded that goods imported from Nepal to India were poultry feed supplement classified under the Headings 23.90 of the Customs Tariff. Hence, the importation was proper and legal keeping in view the Notification dated 12th April, 2002.
37. On the other hand, department has taken contrary view and stated that the goods in question, were Vitamin E as such classifying the same under the Heading 29.36 of Customs Tariff, the Respondent is guilty of offence acting in contravention of Notification dated 12th April, 2002 and the notification dated 21st January, 1996 issued under Section 11 of the Customs Act, 1962.
38. The Heading No. 23.09 includes the product of a kind used for animal feeding, not elsewhere specified or included, obtained by processing vegetables or animal materials to such an extent that they have lost essential characteristics of the original material, other than vegetables waste, vegetable residues and by-products of such processing. Annexure No. 14 to the supplementary affidavit filed on behalf of Nailesh Shah authorized representative of the Respondent firm M/s. Sonam International, shows that the animal fodder includes various items under the Heading 23.01, 23.02 and so on. Under column of description of Article, various items have been given like flours, meals and pellets of meat or meat offal of fish or of crustaceans, molluscs or other aquatic invertebrates, unfit for human consumption; greaves; bran, sharps and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working of cereals or of leguminous plants. Chapter 23 contains varieties of animal feed supplements under various headings which does not contain Vitamin E as separate item.
39. The Government of India issued notification dated 26th March, 1996, with regard to classification of animal feed supplement under Heading No. 23.02 or 29.36 or Chapter 30 which provided that classification of each product being claimed as animal feed supplement, may be decided on merit in the light of guidelines given therein and in pursuance of explanatory note to Heading 23.09 of the HSN read with Chapter Note 1 of Chapter 23 of the CIST. Heading No. 2309 relates to preparation of a kind used in animal feeding and Sub-heading No. 2309.10 relates to dog or cat food, put up for retail sale and Heading No. 2309.90 relates to other animals.
40. The heading covers sweetened forage and prepared animal feeding stuff consisting mixture of several nutrients designed:
(1) to provide the animal with a rational and balanced daily diet (complete feed);
(2) to achieve a suitable daily diet by supplementing the basic farm-produced feed with organic or inorganic substances (supplementary feed; or
(3) for use in making complete or supplementary feeds.
41. Under the Heading No. 23.09, details of other preparations have been given the characteristics feature of which is as under:
(1) "Energy" nutrients, consisting of high-carbohydrate (high calorie) substances such as start, sugar, cellulose and fats, which are "burned up" by the animal organism produce the energy necessary for life and to attain the breeders' aims. Examples of such substances include cereals, half-sugar mangolds, tallow and straw.
(2) "Body-building" protein-rich nutrients or minerals. Unlike energy nutrients, these nutrients are not "burned up" by the animal organism but contribute to the formation of animal tissues and of the various animal products (milk, eggs, etc.). They consist mainly of proteins or minerals. Examples of the protein-rich substances used for this purpose are seeds of leguminous vegetables, brewing dregs, oil-cake, and dairy by products.
The minerals serve mainly for building up bones and in the case of poultry, making egg-shells. The most commonly used contain calcium, phosphorus, chlorine, sodium, potassium, iron, iodine, etc.
(3) "Function" nutrients. These are substances which promote the assimilation of carbohydrates, proteins and minerals. They include vitamins, trace elements and antibiotics. Lack or deficiency of these nutrients usually causes disorders.
42. The preparation known in trade as "premixes", are generally compound compositions consisting of number of substances, the nature and proportions of which vary according to animal products requirement. The substances are to improve digestion, to preserve feeding stuffs which serve as carriers.
43. The circular issued by the Government of India dated 26lh March, 1996 provides that where animal feed supplements are just inter-mixtures of vitamins only without other ingredients, except solvents, stabilizers or anti-oxidants, cannot be classified under Heading 23.02 even though they are used as animal feed supplements. The Board had observed that such inter-mixtures of vitamins are specially covered under Heading 29.36. The circular further provides that animal feed supplements use vitamins, provitamins, amino acids, antibiotics, "Coccidiostats" etc. in very small quantities (micro-quantities) and that the feed supplements contain other organic and inorganic feed ingredients as well. Such micro nutrients do not have any independent identity as pure chemicals, that they cannot be easily separated into individual pure chemicals, nor do they conform to standards laid down for medicaments. For these reasons, the circular provides that preparation containing active substances (vitamins or provitamins, amino acids, antibiotics, coccidiostats etc.) along with the said carriers would fall under Heading 23.02 of the CET provided such preparations are of a kind used in animal feeding.
44. However, Heading No. 23.09 of HSN, excludes product of Chapter 29 and medicaments of Heading No. 30.03 or 30.04. Hence, while deciding classification of products claimed to be animal feed supplements, it may be necessary to ensure that the said animal feed supplements are ordinarily or commonly known in the trade as products for a specific use to animal feeding.
45. From the above description, it appears that Vitamin E with a stabilizer or importer cannot remotely be classified under Heading No. 23.09 as the same is not mentioned under Chapter 23.
46. On the other hand, against the Heading No. 29.36 of the HSN, the description of the commodities are given as under:
29.36 Pro-vitamins and Vitamins, Natural or Reproduced by Synthesis (including natural concentrates Derivatives thereof used primarily as Vitamin, and the intermixture of the foregoing, whether or not in any solvent.
47. Thus, Heading No. 29.36 consists of kind of vitamin and their derivatives. The percentage of purity has not been mentioned under the Heading No. 29.36. Hence, vitamin of any purity seems to fall under the Heading 29.36 in so far as it has the characteristics of vitamin. This conforms with the description of goods mentioned under Heading No. 26.36 of the Customs Tariff Act, 1975 and the Central Excise Tariff Act, 1985.
48. Under the Heading No. 29.36, Vitamin has been defined as under:
Vitamins are active agents, usually of complex Chemical Composition, which are obtained from outside sources and are essential for the proper functioning of human or other animal organism.
Rival Submissions
49. Sri Rajesh Singh Chauhan, learned Counsel for the Appellant vehemently argued that questions framed, should be answered in favour of Revenue. While assailing the impugned order of Tribunal, he submits that Tribunal being the highest fact finding Appellate Authority, should have given reasons while allowing the appeal with regard to various issues factual and legal aspect adjudicated by the original as well as Appellate Authority. He would submit that Tribunal has not considered the factual finding as well as proposition of law recorded by the original as well as the Adjudicating Authority while dismissing the appeal of Respondent, which renders the order substantially illegal. He would submit that the Tribunal has failed to exercise jurisdiction vested in it and the goods seized, cannot be termed as animal feed supplement and shall not fall under the Heading No. 23.09 but it shall fall under the Heading No. 29.36 as held by two authorities below.
50. Sri Chauhan has also submitted that appeal is very well maintainable because of the fact that Respondent importer had committed fraud by importing Vitamin E under the garb of animal feed supplement by misdeclaring on the basis of fraudulent, manufacturing document which shall disentitle Respondent to claim benefit on the basis of clearance given by the Custom at Sonauli at the time of entry of goods.
51. It has been vehemently argued that M/s. Anivet Industries does not have got manufacturing unit in Nepal to produce animal feed supplement. Rather, it imports Vitamin E of foreign origin and exports to India under the mask of animal feed supplement. Sri Rajesh Singh Chauhan further submitted that confessional statement retracted almost after a week or six days, shall not loose its sanctity being corroborated by other evidence and surrounding facts and circumstances. He would submit that it is not a case of routine or regular assessment or payment of custom duty where an appeal may be filed against the impugned order before the Hon'ble Supreme Court. Rather, it is a case where smuggled goods were seized warranting penal action against the Respondent because of fraud played through misdeclaration. In such event, the appeal is very well maintainable under Section 130 of the Act.
52. It has also been stated that concurrent finding of facts, could not have been disturbed or reversed by the Tribunal without categorically dealing with the finding recorded by the two authorities below.
53. On the other hand, Sri Naveen Mullick learned Counsel representing the Respondent, submitted that retracted statement of Sri Pradeep Pathak has no evidentary value and he was not the employee of M/s. Sonam International but only a clearing agent. Sri Mullick would also submit that goods seized were animal feed supplement and only because of percentage of vitamin is higher, it shall not attract the Heading No. 29.36. He vehemently argued that once for two and half months, inspection was done, documents were checked by the authorities at Sonauli Check Post and released, in the absence of any appeal filed by the Appellant, clearance attains finality and not open for re-assessment. He would submit that Heading No. 29.36 of HSN covers only natural concentrates of vitamin in various preparation which are only vitamins. Sri Mullick submits that the appeal is not maintainable in the High Court and the Appellant should have gone to Hon'ble Supreme Court, in case they are aggrieved by the order passed by the Tribunal. He submits that the order of assessment was passed under Section 17 of the Customs Act on the Bill of entry under Section 46 of the Act, and it is appealable order and the assessment made on the Bill of Entry No. 5509 including the order of clearance under Section 47 of the Act being not challenged by the Commissioner of Customs under Section 120D of the Act, attains finality and it is not open to challenge. He submitted that no substantial question of law is involved and interference at this stage, will amount to re-assessment of Bill of entry and this Court has no jurisdiction to decide the issue of assessment. The classification falls under the Heading No. 23.09 and not under Heading No. 29.36. He has also submitted that once Bombay High Court released the goods, the matter attains finality. He further submitted that poultry feed supplement AV-110 imported from Nepal with due clearance by Nepal authorities under the terms of Indo-Nepal Treaty, cannot be placed against Heading No. 29.36 of Customs Tariff Act, 1975. He further submitted that premixtures containing Vitamin E, cannot be classified under Heading No. 29.36 and there is no evidence that such premixtures are brought and sold as only Vitamin E.
54. Sri Rajesh Singh Chauhan for Appellant relied upon the cases reported in (1995) 3 SCC 454 Collector of Central Excise, Shillong v. Wood Craft Products Ltd. 1997 (89) ELT 646 (S.C.) Surjeet Singh Chhabra v. Union of India 1996 (83) ELT 258 (S.C.) Naresh J. Sukhawani v. Union of India
55. Sri Naveen Mullick for Respondent relied upon the case reported in 1997 (90) ELT 241 (S.C.) K.I. Pavunny. v. Asstt. CoUr. (HQ), C. Ex. Collectorate, Cochin; 2001 (44) RLT 695 (CEGAT-Mum.) Rani Sati Fabric Mills (P) Ltd. v. Commissioner of Central Excise, Mumbai-III and Vice Versa; 2000 (120) ELT 280 (S.C.) Ass. Collr. Of C. Ex., Rajamundry. v. Duncan Agro Industries Ltd.; 2002 (53) RLT 503 (SC) Shalimar Rubber Industries and Ors. v. Collector of Central Excise, Cochin; 2007 (220) ELT 189 (Tri. - Chennai) Commissioner of Customs, ChennaL v. Lalchand Bhimraj; 1987 (28) ELT 63 (Bom.) Union of India and Ors. v. Popular Dyechem; 2004 (170) ELT 252 (Tri. - Del.) Kalinga Gases, v. Commissioner of Customs, Lucknow; 2000 (120) ELT 285 (S.C.) Collector of Central Excise, Kanpur. v. Flock (India) Pvt. Ltd; 1993 (68) ELT 3 (S.C.) Navin Chemicals Mfg. and Trading Co. Ltd. v. Collector of Customs; 2006 (203) ELT 20 (Mad.) Commissioner of Central Excise, Coimbatore. v. CEGAT, Chennai 2002 (142) ELT 27 (Raj.) Laxmi Udyog. v. Commissioner of Central Excise 2002 (142) ELT 292 (Bom.) Union of India, v. Auto Ignation Ltd. 1999 (30) RLT 366 (CEGAT) Tetragon Chemie (P) Ltd. and Ors. v. CCE, Bangalore and Ors.; 2001 (132) ELT 525 (S.C.) Collector of Central Excise, Bangalore, v. Tetragon Chemie P. Ltd. 2001 (132) ELT 526 (S.C.) Union of India, v. Madanlal Steel Industries Ltd.; 2005 (181) ELT 351 (S.C.) Commr. of C. Ex., Pane. v. Abhi Chemicals and Pharmaceuticals Pvt. Ltd. and 2001 (137) ELT 1304 (Tri.) Collector of Cus., Bombay, v. AVET Chemicals.
Jurisdiction
56. Sri Naveen Mullick, learned Senior Counsel has raised preliminary issue with regard to jurisdiction of the Tribunal. Sri Naveen Mullick submits that in view of the provisions contained under Section 17, 46 and 47 of the Act, appeal would lie to Hon'ble Supreme Court under Section 130E of the Act and not to High Court. It shall be appropriate to consider statutory provisions with regard to jurisdiction of the forum under the Act.
57. Section 2(2) of the Act defines the word, "assessment" which includes provisional assessment, reassessment and any order of assessment where duty assessed, may be nil.
Section 2(16) defines the word, "entry" relating to goods which means an entry made in a Bill of Entry, shipping bill or bill of export and includes in the case of goods imported or to be exported by post, the entry referred to in Section 82 or the entry made under the regulations made under Section 84.
Section 2(33) defines the word, "prohibited goods" which means any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been compiled with.
Under Section 2(39), the word, "smuggling" has been defined in relation to any goods which means any act or omission which will render such goods liable to confiscation under Section 111 or Section 113 of the Act.
58. Chapter IV of the Act empowers the Central Government to prohibit the importation or exportation of goods as may be specified in a notification. The purpose has been given in Sub-section (2) of Section 11 under the Chapter IV. Chapter IV-A provides detection of illegally imported goods and prevention of the disposal thereof. The word, "illegal import" has been defined under Section 11A(a) of the Act, as the import of any goods in contravention of the provisions of this Act or any other law for the time being in force.
Under Section 11B of the Act, the Central Government has been empowered to notify the goods. Section 11C provides that it is the statutory duty of every person possessing the notified goods to intimate the place of storage etc. The notified goods are to be evidenced by vouchers (Section 11 of the Act).
In view of the above, every notified goods imported in the country shall require disclosure to Appropriate Authority in appropriate form prescribed by the Act, Rules and Regulations.
59. Chapter V deals with the provisions with regard to levy of exemption from custom duties. Section 12 deals with the assessment of duty which provides that duties of customs shall be levied at such rates as may be specified under the Custom Tariff Act, 1975 or any other law for the time being in force, on goods imported into, or exported from, India. Detailed procedure has been provided under the chapter with regard to the duty on pilfered goods, valuation of goods, date for determination of rate of duty and Tariff valuation of imported goods.
Section 17 deals with the assessment of duty which provides that after an Importer has entered any imported goods under Section 46 or an exporter has entered any export goods under Section 50 the imported goods or the export goods, as the case may be, or such part thereof as may be necessary may, without undue delay, be examined and tested by the proper officer. After such examination and testing the duty, if any, leviable on such goods shall, save as otherwise provided in Section 85, be assessed.
60. Chapter VA deals with the provisions with regard to amount of duty in the price of goods, etc. for purpose of refund.
61. Chapter VII deals with the clearance of imported goods and export goods. Section 45 provides that all imported goods, unloaded in customs area, shall remain in the custody of such person as may be approved by the Commissioner of Customs unless they are cleared for home consumption or are warehoused or are transshipped in accordance with the provisions of Chapter VIII.
62. Section 46 deals with the entry of goods on importation. It provides that the importer of any goods, other than goods intended for transit or transshipment, shall make entry thereof by presenting to the proper office a Bill of Entry for home consumption or warehousing in the prescribed form. The Bill of Entry shall mention all the goods mentioned in the bill of lading or other receipt given by the carrier to the consignor. The importer while presenting a Bill of Entry shall at the foot thereof make and subscribe to a declaration as to the truth of the contents of such Bill of Entry and shall, in support of such declaration, produce to the proper officer the invoice, if any, relating to the imported goods. If the proper officer is satisfied that the interests of Revenue are not prejudicially affected and that there was no fraudulent intention, he may permit substitution of a Bill of Entry for home consumption for a Bill of Entry for a warehousing or vice versa.
63. Section 47 deals with the clearance of goods for home consumption and provides that 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, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption.
It shall be appropriate to reproduce Sections 17, 46 and 47 of the Act as under:
17. Assessment of duty.-(1) After an importer has entered any imported goods under Section 46 or an exporter has entered any export goods under Section 50 the imported goods or the export goods, as the case may be, or such part thereof as may be necessary may, without undue delay, be examined and tested by the proper officer.
(2) After such examination and testing, the duty, if any, leviable on such goods shall, save as otherwise provided in Section 85, be assessed.
(3) For the purpose of assessing duty under Sub-section (2), the proper officer may require the importer, exporter or any other person to produce any contract, broker's note, policy of insurance, catalogue or other document whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained, and to furnish any information required for such ascertainment which it is in his power to produce or furnish, and thereupon the importer, exporter or such other person shall produce such document and furnish such information.
(4) Notwithstanding anything contained in this section, imported goods or export goods may, prior to the examination or testing thereof, be permitted by the proper officer to be assessed to duty on the basis of the statements made in the entry relating thereto and the documents produced and the information furnished under Sub-section (3); but if it is found subsequently, on examination on testing of the goods or otherwise that any statement in such entry or documents or any information so furnished is not true in respect of any matter relevant to the assessment, the goods may, without prejudice to any other action which may be taken under this Act, be re-assessed to duty.
(5) Where any assessment done under Sub-section (2) is contrary to the claim of the importer or exporter regarding valuation of goods, classification, exemption or concessions of duty availed consequent to any notification therefore under this Act, and in cases other than those where the importer or the exporter, as the case may be, confirms his acceptance of the said assessment in writing, the proper officer shall pass a speaking order within 15 days from the date of assessment of the Bill of Entry or the shipping bill, as the case may be.
46. Entry of goods on importation.-(1) The importer of any goods, other than goods intended for transit or transshipment, shall make entry thereof by presenting to the proper officer a Bill of Entry for home consumption or warehousing in the prescribed form:
Provided that if the importer makes and subscribes to a declaration before the proper officer, to the effect that he is unable for want of full information to furnish all the particulars of the goods required under this sub-section, the proper officer may, pending the production of such information, permit him, previous to the entry thereof (a) to examine the goods in the presence of an officer of customs, or (b) to deposit the goods in a public warehouse appointed under Section 57 without warehousing the same.
(2) Save as otherwise permitted by the proper officer, a Bill of Entry shall include all the goods mentioned in the bill of lading or other receipt given by the carrier to the consignor.
(3) Bill of Entry under Sub-section (1) may be presented at any time after the delivery of the import manifest or import report, as the case may be:
Provided that the Commissioner of Customs may in any special circumstances permit a Bill of Entry to be presented before the delivery of such report;
Provided further that a Bill of Entry may be presented even before the delivery of such manifest if the vessel or the aircraft by which the goods have been shipped for importation into India is expected to arrive within 30 days from the date of such presentation.
(4) The importer while presenting a Bill of Entry shall at the foot thereof make and subscribe to a declaration as to the truth of the contents of such Bill of Entry and shall, in support of such declaration, produce to the proper officer the invoice, if any, relating to the imported goods.
(5) If the proper officer is satisfied that the interests of Revenue are not prejudicially affected and that there was no fraudulent intention, he may permit substitution of a Bill of Entry for home consumption for a Bill of Entry for warehousing or vice versa.
47. Clearance of goods for home consumption.-(1) 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, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption.
(2) Where the importer fails to pay the import duty under Sub-section (1) within five days excluding holidays from the date on which the Bill of Entry is returned to him for payment of duty, he shall pay interest at such rate, not below 10 per cent, and not exceeding 36 per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, on such duty till the date of payment of the said duty:
Provided that where the Bill of Entry is returned for payment of duty before the commencement of the Customs (Amendment) Act, 1991 and the importer has not paid such duty before such commencement, the date of return of such Bill of Entry to him shall be deemed to be the date of such commencement for the purpose of this Section:
Provided further that if the Board is satisfied that it is necessary in the public interest so to do, it may, by order for reasons to be recorded, waive the whole or part of any interest payable under this section.
64. Against every order passed by the proper authority imposing custom duty, an appeal shall lie under Section 128 to the Commissioner. The order of Commissioner is further appealable to Tribunal constituted under the Act in pursuance of provisions Section 129 of the Act. Section 130 as stood prior to its omission by the National Tax Tribunal Act, 2005 (29 of 2005) Section 30 and Sch. Pt. VI-7., with effect from 28th December, 2005, confers appellate power to High Court. For convenience relevant portion of Section 130 is reproduced as under:
130. Appeal to High Court.-(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law.
(2) The Commissioner of Customs or the other party aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be:
(a) filed within 180 days from the date on which the order appealed against is received by the Commissioner of Customs or the other party;
(b) accompanied by a fee of Rs. 200 where such appeal is filed by c the other party;
(c) in the form of memorandum of appeal precisely stating therein the substantial question of law involved.
(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.
(4) The appeal shall be heard only on the question so formulated and the Respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question:
Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question.
(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.
(6) The High Court may determine any issue which:
(a) has not been determined by the Appellate Tribunal; or
(b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in Sub-section (1).
(7) When an appeal has been filed before the High Court, it shall be heard by a bench of not less than two Judges of the High Court, and shall be decided in accordance with the opinion of such Judges or of the majority, if any, of such Judges.
(8) Where there is no such majority, the Judges shall state the point of law upon which they differ and the case shall, then, be heard upon that point only by one or more of the other Judges of the High Court and such point shall be decided according to the opinion of the majority of the Judges who have heard the case including those who first heard it.
(9) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.
65. From the plain reading of Section 130, it is evident that appeal shall lie to High Court in case it involves substantial question of law.
Under Sub-section (3) of Section 130, it is for the High Court to formulate the substantial question of law. The Legislature further clarified that determination of any question with regard to rate of duty of custom or value of goods for the purpose of assessment shall not be subject matter of appeal before the High Court.
Section 130E deals with the provisions with regard to appeal in the Hon'ble Supreme Court which is reproduced as under:
130E. Appeal to Supreme Court.-An appeal shall lie to the Supreme Court from:
(a) any judgment of the High Court delivered:
(i) in an appeal made under Section 130; or
(ii) on a reference made under Section 130 by the Appellate Tribunal before the 1st July, 2003;
(iii) on a reference made under Section 130A.
in any case which, on its own motion or on an oral application made by or on behalf of the party aggrieved, immediately after passing of the judgment, the High Court certifies to be a fit one for appeal to the Supreme Court; or
(b) any order passed before the establishment of the National Tax Tribunal by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment.
Thus, a combined reading of Section 130 and Section 130E of the Act reveals that whenever question relates to the determination of rate of duty of custom or value of goods for assessment, the appeal shall lie to Hon'ble Supreme Court but for rest of the matter, the appeal shall lie to the High Court. The Appellate power of Hon'ble Supreme Court may be exercised before the establishment of National Tax Tribunal.
66. In view of the above, the submission of the learned Counsel for the Respondent with regard to maintainability of appeal seems to be not sustainable. The appeal is very well maintainable under Section 130 of the Act. The Question No. 6 is answered accordingly against the Assessee and in favour of the Revenue.
Finality of order with regard to Custom and Bill of Entries at Check Post
67. Further submission made by the learned Counsel is that once, Bill of Entry has been cleared by the custom at Indo-Nepal Border, then, it is not open to review. It has been agreed at bar that after clearance from custom at Indo-Nepal Border, the Revenue has not preferred any appeal against the assessment made at the Border in pursuance of the provisions contained in Chapter IV-A read with Chapter VII of the Act. However, the controversy involved in the present case, seems to be different than what is argued by the learned Counsel for the Respondent.
68. Sri Rajesh Singh Chauhan learned Counsel has rightly submitted that the controversy involved, does not relate to the assessment made at check post or quantum of custom duties. Rather, the dispute relates to power of seizure, arrest and confiscation of goods improperly imported under Chapters XIII and XIV of the Act.
69. Chapter XIII empowers the authorities to proceed with search, seizure and arrest of suspected persons, goods and premises. Chapter XIV authorizes the custom officers to confiscate improperly imported goods.
(a) Under Section 111 of the Act, goods brought from place outside India, shall be liable for confiscation in case, the import is made by any prohibited goods. Conditions given in Section 111 of the Act from (a) to (p), are wide enough to cover each and every goods imported into the country and in the event of doubt, the authorities have got ample power to proceed in accordance with law even if such goods are being cleared by the customs at check post on the Border. Clearance at check post or the Border under Chapter VI and VII or even where assessment is made under Chapter V is not final but it is subject to action conferred by Chapter XIV of the Act. In case the goods are seized under Section 111 of the act, a penalty may be imposed under Section 112 of the Act.
(b) Section 114AA further provides that if a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purpose of this Act, shall be liable to a penalty not exceeding five times the value of goods. The provisions of Section 114AA inserted by the Act 29 of 2006 with effect from 13th August, 2006, makes existing law more stringent with intention to check the import of goods by unlawful means.
(c) Section 117 empowers the authorities to levy the penalty in the event of non-compliance of any provisions of the Act with which it was his duty to comply, where no express penalty is elsewhere provided for such contravention or failure.
70. Section 123 of the Act provides that burden to prove that goods are not smuggled, shall lie on the person from whose possession such goods are seized.
71. It shall be appropriate to take note of Section 132 of the Act under Chapter XVI, which provides that whoever makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document in the transaction of any business relating to the customs, knowing or having reasons to believe that such declaration, statement or document is false in any material particular, shall be punishable with imprisonment for a term which may extend to two years, or with fine, or with both. For convenience, Section 132 of the Act is reproduced as under:
132. False declaration, false documents, etc. - Whoever makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document in the transaction of any business relating to the customs, knowing or having reason to believe that such declaration, statement or document is false in any material particular, shall be punishable with imprisonment for a term which may extend to two years, or with fine, or with both.
Section 135 of the Act deals with the evasion of duty or prohibitions. Provisions contained under Chapter XVI of the Act, makes it offence to import goods by false declaration to evade tax or prepare false documents for the purpose of import of notified goods or to import or export the goods in violation of provisions contained under the Act.
72. In the present case, the goods imported, were shown as "Poultry Feed Supplement" but it was substantially found as Vitamin E. The Director of Revenue Intelligence on receipt of information seized the goods and after following due procedure as well as obtaining report from the Laboratory, held that goods are not poultry feed supplement but substantially, is Vitamin E. Accordingly, in the present case, the Revenue proceeded to seize goods and to impose penalty, under Chapters XIII and XTV of the Act. The action taken by the Revenue was subject matter of appeal before the Appellate Authority and the Tribunal.
73. In view of the above, even if the Bill of Entry was cleared by the Appropriate Authority at boarder the authorities will have right to proceed and to take action under the Act (supra), having smell of foul play at the check post by the Respondent on the basis of false declaration and fabricated documents. The declaration made at the check post and the custom duty paid thereon, is not final, and it is always subject to statutory control and action under Chapters XIII, XIV, XV and XVI of the Act.
74. The structure of central excise Tariff is based on internationally accepted nomenclature founded in HSN and therefore, any dispute relating to Tariff classification as far as possible, should be resolved with reference to nomenclature indicated by HSN unless there be an express different intention indicated by the Central Excise Tariff Act, 1985, vide (1995) 3 SCC 454 Collector of Central Excise, Shillong. v. Wood Craft Products Ltd.
75. Accordingly, while interpreting the heading as to whether the goods imported and seized by the custom, falls under the Heading 2309 or 2936, the entire related provisions including the Tariff, General Rules for interpretation of schedule provided under the Customs Tariff Act, 1985, should be taken into account.
76. It is trite in law that while considering the statutory provisions, meaning should be given to each and every word, Sections, Clauses and statutes as a whole. Statutory provisions cannot be interpreted in isolation or piecemeal, vide 2002 (4) SCC 297 Grasim Industries Limited v. Collector of Customs; 2003 SCC (1) 410 Easland Combines v. CCE; 2006 (5) SCC 745 A.N. Roy v. Suresh Sham Singh and 2007 (10) SCC 528 Deewan Singh v. Rajendra Prasad Ardevi .Accordingly, while considering the controversy in question not only General Rule for interpretation of schedule should be looked into but also entire provisions with regard to HSN code should be read as correct relevant for the purpose of the present controversy.
Indo-Nepal Treaty
77. Learned Counsel for the Appellant has submitted that goods imported under the garb of "Poultry Feed Supplement" are Vitamin E and they are not manufactured in Nepal hence, shall not be covered by Indo-Nepal Treaty. Primary condition to avail the benefit of Indo-Nepal Treaty as observed (supra), is that the goods must have been manufactured in Nepal. Along with Show Cause Notice, the import receipts of Vitamin E of Germany and China, were annexed. The Respondent has not denied the Appellant's version that M/s. Bio Vet Industries has imported Vitamin E from Germany. One of the receipts is dated 25th March, 2001 which shows that M/s. Anivet Industries, Nepal, had imported Vitamin E from Germany. Other receipt dated 16th April, 2003, shows the import from M/s. Synchem International Company Limited, China. One receipt relates to earlier period when the goods were imported. The other is of later period. Sri Pradeep Pathak in his statement admitted that M/s. Sonam International, imports Vitamin E which is purchased by various persons/firms to manufacture the "Poultry Feed Supplement" and other product. It has been categorically stated by Sri Pradeep Pathak in his original voluntary statement that on 2nd January, 2004, that M/s. Anivet Industries, Nepal, do not have facilities for manufacturing activities at Nepal. Sri Pradeep Pathak later on, retracted his original voluntary statement but keeping in view the fact that original voluntary statement dated 2nd January, 2004 is in his own handwriting and the statement is corroborated by documentary evidence like receipts with regard to import of Vitamin E from Germany and China and the statement of other witnesses i.e. Kirti Lal Shah, dated 28th June, 2003 and 3rd June, 2003 by Nailesh Shah, to the extent of use of Vitamin E in bulk the version of the Revenue seems to be correct that M/s. Anivet Industries, Nepal have no manufacturing facilities in Nepal rather it imports the Vitamin E in Nepal and the Respondent smuggled it into India.
78. There appears to be no evidence on record which may establish that M/s. Anivet Industries possesses any manufacturing unit in Nepal, rather it imports goods from the third country. In the present case, Vitamin E was imported in Nepal and exported to India through Respondent.
79. Once the Appellant prima facie had made out a case that M/s. Anivet Industries has no manufacturing unit at Nepal and goods were smuggled into India by misdeclaration, then burden was on the Respondent under Section 123 of the Act, to lead evidence to negate the charges.
80. The Respondent has failed to lead any evidence which may even prima facie establish that M/s. Anivet Industries is having manufacturing unit in Nepal to produce "Poultry Feed Supplement" which was imported by them. In view of the above, the Respondent does not seem to be entitle for the benefit of Indo-Nepal Treaty to secure its interest.
81. Much emphasis has been given by the learned Counsel representing Respondent with regard to certificate given by the authorities of Nepal. Of course, the authorities of Nepal have given certificate with regard to goods imported by the Respondents stating therein that the "Poultry Feed Supplement" in question, is the product of Nepal but the Indo-Nepal Treaty does not seem to contain any provision which may show that the certificate given by the authorities of Nepal, shall be final and not open to scrutiny by custom authorities. Merely because, some certificate has been issued by the authorities of Nepal, it shall not deprive the authorities under the Act of exercising the jurisdiction in pursuance of provisions contained in Chapters XIII, XIV and XVI of the Act. In the event of doubt, the Revenue authorities/Appellant shall be well within their power to exercise their statutory discretion to find out as to whether there is misdeclaration of goods, fabrication of records or abuse of the process of law to smuggle the goods under the garb of Indo-Nepal Treaty.
82. Unless specifically prohibited under the Customs Act, the authorities under the Act, will have power to exercise their jurisdiction to enforce the law. The Indo-Nepal Treaty or the certificate issued by the authorities of Nepal, shall not come in the way of Indian authorities to take action in accordance with law in case conditions given in Chapter XIV and XV of the Act are satisfied. In the event of misdeclaration or violation of conditions given in the Indo-Nepal Treaty, the Indian Authorities under the Act are empowered to proceed in accordance with law.
83. In view of the above, by misdeclaring the true mixture composition of identity of subject goods, it shall not be open to importer or Respondent to avail the benefit of notification dated 12th February, 2002 read with revised protocol to Indo-Nepal Treaty in case it is established that there was misdeclaration with regard to true mixture composition identity of the goods so imported.
84. Learned Counsel for the Appellant has vehemently argued that since the alleged Poultry Feed Supplement (AV110) is substantially Vitamin E, it shall fall under the Heading 29.36. Submission of learned Counsel for the Appellant is based on the statement of Sri Pradeep Pathak which was later on, retracted but to some extent, supported by the statement of other witness and laboratory report as well as receipts with regard to the purchase of Vitamin E from Germany and China along with supported documents (supra).
85. Sri Pradeep Pathak had retracted from his statement at later stage but the sum and substance of his statement seems to be corroborated by the evidence on record to the extent manufacturing of poultry feed supplement at M/s. Baadar Schultz Laboratories at Daman by use of Vitamin E.
86. Sri Pradeep N. Soni in his statement dated 2nd June, 2003, had stated that M/s. Sonam International (Respondent) is the property of his father and since he is aged person, he manages the affairs of the company. He admitted that the goods imported from M/s. Anivet Industries of 2000 kg of AV 110 was seized by DRI ON 30th May, 2002. He further states as under:
I state that in our factories M/s. Bader Schulz Labs and M/s. Bio Vet Industs., we manufactor feed supplements and vitamin premixes to different companies and customers. M/s. Ranbaxy (sic ) Feeds, (sic...), etc. In our said two factories different feed supplement imported from China, Japan and Europe are used. However, the said factories generally (sic.) from Sonam Industries and Sheetal Pharma and from various local importers.
87. From the aforesaid statement, it seems to correct that Vitamin E is imported by the Respondent from various countries for manufacture of animal feed supplement. The aforesaid statement is supported by receipts of imports of Vitamin E of M/s. Anivet Industries whereby, the industry has imported into Nepal Vitamin E from China and Germany. Coupled with the lab report, overwhelming evidence of record establish that it is not the animal feed supplement or poultry feed supplement but it is Vitamin E imported under the garb of animal feed supplement which is supplied to industries for manufacture of animal feed supplement.
88. Sri Naveen Mullick learned Counsel has given much emphasis on the fact that the statement given by Sri Pradeep Pathak was later on, retracted. It shall be appropriate to consider Section 123 of the Customs Act. For convenience, Section 123 of the Customs Act is reproduced as under:
123. Burden of Proof in Certain Cases.-(1) Where any goods to which this Section applies are seized under this Act in the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods shall be:
(a) in a case where such seizure is made from the possession of any person:
(i) on the person from whose possession the goods were seized; and
(ii) if any person, other than the person from whose possession the goods were seized, claims to be the owner thereof, also on such other person;
(b) in any other case, on the person, if any, who claims to be the owner of the goods so seized.
(2) This Section shall apply to gold, and manufactures thereof, watches, and any other class of goods which the Central Government may by notification in the Official Gazette specify.
89. In case from the material on record prima facie Revenue is satisfied that the goods are smuggled one then burden of proof that they are not smuggled goods lie on the person from whose possession the goods were seized or on the person other than person from whose possession goods seized and claimed to be owner thereof. The word "reason to belief" has been interpreted by the Lordship of Hon'ble Supreme Court vide Calcutta Discount Company v. ITO 1961 (41) ITR 191; Kesar Devi (Smt) v. Union of India and Ors. reported in 2003 (7) SCC 427 and 2008 (3) CRI LJ 3621: 2008 (14) SCC 186 Aslam Mohammad Merchant v. Competent Authority.
90. Once a statement was recorded by the Revenue in which a witness had confessed that goods are of foreign origin and there shape was changed because of melting down then Revenue was having reason to believe in confiscating the goods and draw an inference that goods are contraband of foreign origin. Burden was shifted on the Respondent to prove that they are the owner of goods and it is part of their stock and is poultry feed supplement, not Vitamin E. Merely by saying that goods seized is poultry feed supplement is not sufficient.
91. Hon'ble Supreme Court in a case reported in JT (2001)2 (SC) 407 Santosh Hazari v. Purushottam Tiwari (Dead) by LRs. held as under:
The Appellate Court has jurisdiction to reverse or affirm the findings of the Trial Court. First appeal is a valuable right of the parties and unless restricted by law, the whole case is therein open for hearing both on questions of fact and law. The judgment of the Appellate Court must, therefore, reflect its conscious application of mind, and record findings supported by reasons, on all the issues arising along with the contentions put forth, and pressed by the parties for decision of the Appellate Court.
Xxx xxx xxx
While reversing a finding of fact the Appellate Court must come into close quarters with the reasoning assigned by the Trial Court and then assign its own reasons for arriving at a different finding. This would satisfy the Court hearing a further appeal that the First Appellate Court had discharged the duty expected of it.
92. The aforesaid proposition of law has been reiterated in a case, reported in AIR 2001 SC 2171 Madhukar and Ors. v. Sangram and Ors.
93. In an earlier judgment, reported in AIR 1998 SC 2713 Punjab National Bank and Ors. v. Kunj Behari Misra, Hon'ble Supreme Court after considering catena of earlier judgments held that in case the Disciplinary Authority disagrees with the conclusion reached by the enquiry officer, then while recording his own finding, it shall be obligatory to deal with the reason given by the enquiry officer. On the same analogy, in case the Appellate Authority differs with the finding recorded by the assessing officer, then each and every issue, grounds and circumstances dealt with by the assessing officer must be considered and difference of opinion must be supported by reasoned order.
94. While interpreting a para materia provision and its constitutional validity as contained in Section 178A of the Sea Custom Act Hon'ble Supreme Court in a case reported in AIR 1962 SC 316 Collector of Customs v. Nathella Sampathu Chetty, observed that Section 178A operates to cast the burden of proof on the person from whose possession goods specified are seized, to establish that the goods are not smuggled. It includes persons who are concerned in and are charged with being concerned in the act of illicit importation.
Their Lordship further observed that the deleterious effect of smuggling in a report placed before the Court are real and prevention and eradication of Smuggling is a proper and legally attainable, objective which is sought to be achieved by the relevant law.
95. Aforesaid proposition of law with regard to burden to proof has been reiterated in the case reported in AIR 1962 SC 1559 Pukhraj v. D.R. Kohli While interpreting Section 178A of the Sea Custom Act their Lordship's held that Courts are not supposed to sit in appeal over the decision of an officer. Prima facie, justifying belief shall be sufficient.
It has further been held that in case, it is established that the goods have been seized in the manner contemplated by the Act, then burden to proof would be on the person concerned to establish that they are not smuggled the goods.
96. In one other case reported in AIR 1965 SC 476 Hukma v. State of Rajasthan, Hon'ble Supreme Court ruled that once it is found in consequence of Section 178A of the Sea Custom Act that the person was carrying the gold, the circumstances under which the gold was discovered, the manner in which he was carrying smuggled gold, the considerable quantity of the gold that was being carried namely, blocks and bars in which the major portion of the gold was found and expected to recover gold it may be inferred that the accused was evading the prohibition. The circumstances should be taken up cumulatively.
97. In the case of Kewal Krishan v. State of Punjab reported in AIR 1967 SC 737, their Lordship's held that when goods are seized with reasonable belief that they are smuggled one then onus proving that they are not smuggled goods, i.e. not of foreign origin on which duty was not paid shall be on the person on whose possession the goods are seized. The onus shall not be on the prosecution to show that the good are not of Indian origin.
In case contention of Respondent's Counsel is accepted then it will amount to shifting of onus on the prosecution.
98. Their Lordship of Hon'ble Supreme Court in a case reported in 1996 (83) ELT 258 (S.C.), Naresh J. Sukhawani v. Union of India had held as under:
4. It must be remembered that the statement made before the Customs officials is not a statement recorded under Section 161 of the Criminal Procedure Code, 1973. Therefore, it is a material piece of evidence collected by Customs officials under Section 108 of the Customs Act. That material incriminates the Petitioner inculpating him in the contravention of the provisions of the Customs Act. The material can certainly be used to connect the Petitioner in the contravention in as much as Mr. Dudani's statement clearly inculpates not only himself but also the Petitioner. It can, therefore, be used as substantive evidence connecting the Petitioner with the contravention by exporting foreign currency out of India. Therefore, we do not think that there is any illegality in the order of confiscation of foreign currency and imposition of penalty. There is no ground warranting reduction of fine.
99. In other case reported in 1997 (89) ELT 646 (S.C.) Surjeet Singh Chhabra v. Union of India their lordship of Hon'ble Supreme Court while considering the confessional statement held that statement though retracted at later stage shall be admissible. For convenience, relevant para from the judgment of Surjeet Singh Chhabra (supra) is reproduced as under:
3. It is true that the Petitioner had confessed that he purchased the gold and had brought it. He admitted that he purchased the gold and converted it as a Kara. In this situation, bringing the gold without permission of the authority is in contravention of the Customs Duty Act and also FERA. When the Petitioner seeks for cross-examination of the witnesses who have said that the recovery was made from the Petitioner, necessarily an opportunity requires to be given for the cross-examination of the witnesses as regards the place at which recovery was made. Since, the dispute concerns the confiscation of the jewellery, whether at conveyor belt or at the green channel, perhaps the witnesses were required to be called. But in view of confession made by him, it binds him and, therefore, in the facts and circumstances of this case the failure to give him the opportunity to cross-examine the witnesses is not violative of principle of natural justice. It is contended that the Petitioner had retracted within six days from the confession. Therefore, he is entitled to cross-examine the panch witnesses before the authority takes a decision on proof of the offence. We find no force in this contention. The Customs official are not police officers. The confession, though retracted, is an admission and binds the Petitioner. So there is no need to call panch witnesses for examination and cross-examination by the Petitioner.
100. In the case, Surjeet Singh Chhabra and Naresh J. Sukhawani (supra) Hon'ble Supreme Court while interpreting Sections 108 and 111 of Customs Act has held that confessional statement made before the custom officers, retracted, shall be binding since custom officers are not police officers. Accordingly, the statement of Pradeep Pathak cannot be thrown out as baseless only because of retraction at later stage.
101. It shall be relevant to take note of the fact that at no stage, the Respondent has either led evidence or tried to rebut the Appellant's version that M/s. Anivet Industries, does not have got any manufacturing unit at Nepal and it imports Vitamin E from china, Germany and other countries. No effort was made by the Respondent to establish that Vitamin E to the extent of 49; could have been used as animal feed supplement. Rather, it has been submitted that 1-2 gms is mixed in one tone or more in animal feed.
102. It is vehemently argued by Sri Naveen Mullick learned Counsel for the Respondent relying on Tetragon Chemie's case (supra) that there is difference between the product and preparation and existence of Vitamin E to the extent of 40-50 per cent, shall not change the head and it shall remain under the Heading 23.09 being used in micro quantity i.e. 1-2 gms per tone in animal feed. It is also submitted that role of Sri Pathak is only agent and no person from the Ministry of Finance and Commerce has visited Nepal authorities empowered in the treaty to verify the existence of product manufacturing unit of M/s. Anivet Industries. The goods was imported for human consumption as animal feed supplement. The order of assessment since not challenged before the Commissioner of Customs under Section 129D of the Customs Act, it attains finality. It is stated that M/s. Baadar Schulz Laboratories having its factory at Daman, is engaged in manufacturing of poultry feed supplement vitamin premixes. Respondent's Counsel vehemently relied upon the document of M/s. Anivet Industries which shows to be engaged in poultry feed supplement.
103. In Black's Law Dictionary 9th Edition, by Bryan A. Garner, the word, "product", has been defined to mean, "Something that is distributed commercially for use or consumption and that is used (1) tangible personal property, (2) the result of fabrication or processing, and (3) an item that has passed through a chain of commercial distribution before ultimate use or consumption.
The word, "preparation" has been defined to mean, "The act or process of devising the means necessary to commit a crime."
104. Both the aforesaid words, in Stroud's Judicial Dictionary of Words and Phrases, South Asian Edition, 2008 Vol. 3, have been defined as under:
Preparation, "Preparation for... an intended building" (Building (Safety, Health and Welfare) Regulations, 1948 (No. 1145. Regulation 2(1) includes any preparations necessary for ancillary work in connection with the intended building Hrsley v. Collier and Catley (1965) IW.L.R. 1359.
Preparation or other product containing a substance (Misuse of Drugs Act, 1971 (c.38), Sch.2, Pt.1 para.5). It is for the jury, applying the ordinary and natural meaning of the word, to decide what constitutes a "preparation". The mere picking of a certain type of scheduled mushroom did not constitute a "preparation" (R. v. Walker (1987) C.L.R. 565). Although "magic" muchrooms picked, packaged and frozen did not, in that state, amount to a "preparation" they did come within the meaning of the word "product" or within the phrase "or other product (Hodder v. DPP Matthews v. DPP (1990) C.L.R. 261).
Preparation...of...preserved food" (Food Act, 1984 (c. 30). s. 16). The slicing of cooked meats does not amount to "preparation" for the purposes of this Section (Leeds City Council, v. Dewhurst (1990) C.L.R. 725).
Stat. Def. Food and Drugs Act, 1955 (c.16), Section 135(1).
105. Reliance placed by Respondent's Counsel over the judgment of Tetragon Chemie (supra) with submission that goods in question covered, fall under Heading 23.09, includes the forage and other preparation, seems to be misconceived. There appears to be no reason to differ with the Tetragon Chemie's case that preparation mentioned under Heading 23.09 of HSN include sweetened forage and other preparations. Other preparations include preparations for supplementing farm-product feed and preparations for use in making the complete feeds. Vitamins or provitamins, aminoacids, antiDiotics, coccidiostats, trace elements, emulsifiers, flavourings and appitizers are the ingredients of these preparations. But when we come to question with regard to import of goods and custom duties with respect to finding recorded in Tetragon Chemie (supra), it does not seem to correct or at least, extends to no help to Respondent.
106. Admittedly, vitamin and pro-vitamins are used in little amount as 1-2 gram per tone. Under the Customs Act, the goods are notified. In case substantial portion of a goods is notified good, like Vitamin E in the present case, then it cannot be treated as animal feed supplement corresponding to Heading 23.09 of HSN. The reason is 40-50 per,cent Vitamin E cannot be fed to cattle. It is to be mixed in proper ratio with the animal feeds or animal feed supplement which contains vitamin, pro-vitamin, amino acids, antibiotics etc. They are used in micro quantity in animal feed supplement and not in the ratio of 40-50 per cent. Accordingly, the product imported by the Respondent, cannot be termed as animal feed supplement as it is to be mixed with animal feed supplement in proper ratio by the manufacturers.
107. Under Chapter V of Customs Act, 1962, duties of customs is levy duty at such rates as may be specified under the Customs Tariff Act, 1975 or any other law for the time being in force, on goods imported to or exported from India (Section 12). Imposition of duty has got no relationship with the future use of goods imported. Whether the product of M/s. Anivet Industries is used 1-2 grams per tone or more in ratio in animal feed supplement, has got no concern with the action under the Customs Act, 1962. The customs is concerned with regard to payment of duties on notified goods at check post or entry point. The assessment of goods with regard to payment of custom duty is to be made on the basis of its contents. Admittedly, Vitamin E has been classified under Customs Tariff Heading 29.36 and not poultry feed which falls under Heading 23.09 of HSN.
108. In poultry feed, the contents of vitamin, amino acids etc. may be in microgram but it cannot be in the ratio of 40-50 per cent. The characteristics of animal feed supplement is to use it as energy nutrients consisting of carbohydrates body building protein rich nutrients or minerals. The ratio of vitamin in animal feed supplement should be micro gram or in one or two grams per tone. Once ratio of vitamin increased and comes to 40-50 per cent in the present case, it may not be treated as animal feed supplement but it shall be Vitamin E, a notified item for which it shall be necessary for importer to make true declaration and pay custom duties.
109. The argument of learned Counsel for the Respondents could have carried weight in case in the Bill of Entry, they would have declared the contents of Vitamin E to the extent of 50 per cent or less. Because of substantial percentage of Vitamin E in goods in question, it shall be a product for its future use in animal feed supplement and shall fall under HSN Code 29.36.
110. It has been brought to the notice of this Court that special leave petition filed against the judgment in Tetragon Chemie's case (supra) has been dismissed by the Hon'ble Supreme Court but mere dismissal of special leave petition shall not mean that the judgment and ratio of case of Tetragon Chemie, shall be deemed to be the judgment of Apex Court and binding under Article 141 of the Constitution of India. It is settled law that judgment of Hon'ble Supreme Court shall be the judgment which lays down law while adjudicating a dispute and should be considered in reference to context and only thereafter, it will have the binding effect under Article 141 of the Constitution of India.
111. From the composition break up of AV 110 also it appears that Vitamin E was 990 grams, BHT 05 gms and stabilizers 05 gms per kg, respectively. The overwhelming percentage of Vitamin E in goods under dispute makes out a case for classification under four digit under HSN code as 2936. As observed supra, the Revenue concerns with the goods imported for the purpose of payment of custom duties and not with its future use. In case goods imported, is a notified goods and liable to pay custom duties, then importer has to pay custom duties without insisting to avoid to pay duties on the ground of its future use. The non-declaration of exact percentage of vitamins amounts to misdeclaration and makes out a case to proceed against the Respondent under the Customs Act. Merely because, M/s. Anivet Industries has shown the goods in question as animal feed supplement, shall not prohibit the custom authorities to discharge their statutory obligation under Chapters 13 and 14 of the Customs Act.
Tribunal's judgment
112. There is one other aspect of the matter. The original and adjudicatory authority as well as the Appellate Authority has discussed the evidence in detail. However, while deciding the appeal, the Tribunal has not taken care to meet the reasoning given and discussed by two authorities below. The Tribunal should have dealt with each and every point or issue adjudicated by the two forums instead of deciding their appeal mechanically.
113. In the case reported in AIR 1964 All. 534 Babu Ram Ashok Kumar and Anr. v. Antarim Zila Parishad, full Bench of Allahabad High Court observed to quote:
A Court of appeal would not interfere with the exercise of discretion by the Court below. If the discretion has been exercised in good faith, after giving due weight to relevant matters and without being swayed by irrelevant matters. If two views are possible on the question, then also the Court of appeal would not interfere even though it may exercise discretion differently, were the case to come initially before it. The exercise of discretion should manifestly be wrong.
114. In the case reported in AIR 1951 SC 177 Firm Sriniwas Ram Kumar v. Mahabir Prasad and Ors. AIR 1963 SC 1007 Tulsi Das Khimji v. The Workmen and AIR 2005 SC 4362 Pentakota Satyanarayana and Ors. v. Pentakora Seetharatnam and Ors. their lordships held that if the Courts below have recorded finding of fact, the question of re-appreciation of evidence by third Court does not arise unless it is found to be totally perverse. The higher Court does not sit as regular Court of appeal. The position may be different in case finding of fact is materially affected by violation of any Rule or law or absolute perversity.
As observed, it is trite in law that Appellate Authority while dissenting with the subordinate authority should meet out finding recorded by the Original Authority by binding reasons.
115. Classification made by Revenue keeping in view the overwhelming percentage of Vitamin E in the goods seized, seems to be reasonable classification on the basis of HSN code. Hence, Tribunal seems to have exceeded jurisdiction while reversing the finding of fact of two forums below without expressing the difference of opinion on various issues adjudicated by the original and Appellate Authority.
Other case relied upon by the learned Counsel for the Respondent while defending the Tribunal's order are discussed hereinafter.
116. Much emphasis has been given by the learned Counsel for the Respondent on the case reported in 1983 (13) ELT 1566 (S.C.) Dunlop India Ltd. and Madras Rubber Factor Ltd. v. Union of India and Ors. which seems to extend no help. In that case, their lordship observed that once an Article is classified and put up in a distinct entry, the basis of classification is not open to question. Once, Article are in circulation and come to be described and known in common parlance, there is no difficulty for statutory classification under a particular entry.
117. The case reported in Shalimar Rubber Industries (supra) relates to purchase of raw material, where invoices were in fictious name and in spite of request made, opportunity was not given to cross-examine the witnesses. Hon'ble Supreme Court ruled that it amounts to violation of principles of natural justice and no reliance could have been placed on the statement but in the present case, learned Counsel for the Respondent could not invite any attention of this Court to any material on record by which he would have made a prayer to cross-examine Sri Pradeep Pathak with regard to statement made by him.
118. In the case of Duncan Agro Industries Ltd., Hon'ble Supreme Court held that statement recorded under Section 108 of Customs Act, should be tested by the Court as to whether inculpating portions were made voluntarily or whether it is vitiated on account of any of the premises envisaged in Section 24 of the Evidence Act. However, in the present case the statement of Respondent itself has been relied upon by the two forums below while recording an adverse finding which has been turned down by the Tribunal without expressing difference of opinion. Hence the case of Duncan Agro (supra) is not applicable to the facts of the present case.
119. The case of Rani Sati Fabric Mills (supra) also relates to opportunity of cross-examination which seems to not attract to the facts of the present case.
120. In the case of K.I. Pavunny (supra), Hon'ble Supreme Court held that custom shall require to prove the offence by cogent trustworthy evidence. However, in the present case, the Appellant seems to have discharged its duty by material documentary and oral evidence to establish that goods recovered is Vitamin E and not animal feed supplement.
121. In the case of Kalinga Gases (supra), Delhi Tribunal held that assessment cannot be re-opened by issuing fresh Show Cause Notice proposing confiscation of goods etc. on the ground of misdeclaration in Bill of Entry.
With respect, the judgment of Tribunal at Delhi Tribunal, does not seem to lay down correct proposition of law to the extent with regard to its application to the present controversy. As observed, this is not a case where notice was issued for reassessment but it is case where the goods were seized on the basis of information received and later on, found to be Vitamin E falling under HSN code 2936. The Tribunal failed to appreciate the statutory right and duty of custom authorities provided under Chapters XIII and X IV of Customs Act, 1962.
122. The case of Collector of Central Excise, Kanpur v. Flock (India) Put. Ltd. (supra) seem to be not applicable under the facts of the present case where Hon'ble Supreme Court held that in case Adjudicating Authority has passed an order appealable under the statute, party aggrieved did not choose to exercise statutory right of filing appeal, it is not open to question the correctness of order of the Adjudicating Authority subsequently by filing of claim for refund on the ground that Adjudicating Authority has committed error.
123. Much emphasis has been given by Sri Naveen Mullick learned Counsel for the Respondent on the case of Navin Chemicals (supra) which relates to determination of question having a relation to the rate of duty of custom or to the value of goods for the purpose of assessment. Hon'ble Supreme Court held that the key lies in the words "for purposes of assessment" means case must have a direct and proximate relationship to the rate of duty and to the value of goods for purposes of assessment. The judgment seems to be not applicable to the face of the present case.
124. The case of Laxmi Udyog (supra) relates to reference made to High Court. It also relates to determination of rate of duty of excise and value of goods. Hence, not applicable under the facts and circumstances of the present case.
125. The case of Auto Ignation Ltd. (supra) relates to reference made to High Court with regard to rate of duty. It also seems to not attract the facts of the present case.
126. Emphasis has been given by the learned Counsel for the Respondent on the judgment of the Delhi Tribunal in the case of Tetragon Chemie (supra). In this case, the Tribunal considered the dispute with regard to animal feeding preparation consisting of one or more vitamins and nutrients mixed with diluent classified under Heading 2302 of CETA 1985. The Tribunal upheld the classification as animal feed supplement on the ground that Heading 23-09 of HSN include sweetened forage and other preparation. Other preparations include preparations for supplementing farm-product feed and preparations for use in making the complete feeds. Vitamins or provitamins, aminoacids, antibiotics, coccidiostats, trace elements, emulsifiers, flavourings and appitizers are the ingredients of these preparations and since preparation are known in trade i.e. animal feeding they are known to the users as preparation of a kind used for animal feeding and are so described.
127. Though the case of Tetragon Chemie (supra) does not seem to apply on the facts and circumstances of the present case, but it shall be appropriate to observe that presence of Vitamin E between 45-50 per cent or 900.90 grams out of 100 grams, does not seem to cover by HSN Code 2309. More so when admittedly, the goods seized were sent to industries in Maharashtra for manufacturing of animal feed supplement for animal feed. In case goods imported itself were animal feed supplement as claimed, then there would have been no occasion to send the goods to utilise, it for preparation of animal feed supplement. Virtually, the overwhelming presence of Vitamin E in the goods seized shows that deliberately, knowingly and intentionally, it was imported as Vitamin E and sent to various industries for preparation of "animal feed supplement" which has been virtually admitted by the witnesses.
128. It has been admitted by the Respondent's Counsel that Vitamin E supplied by the Respondent M/s. Sonam International, is used for making broiler premix, layer premix, SK bed, SK Mix, ABDK, etc. In case the goods in question for preparation would have been directly imported for use as animal feed supplement, then things would have been different and it could have been treated as HSN Code 2309. The Tribunal seems to be impress by the word,' "includes", under Chapter 23 of CETA. With regard to scope of Heading 2302, by using the word, "includes", does not mean that language or words, used in Heading 2936 may be given go-bye. Virtually by using the word, "includes", undoubtedly, the legislature provided in addition to preparation mentioned in Heading 2302 products of a kind, used in animal feeding and processing may be included. Inclusion does not mean that a product or goods because of overwhelming presence of an ingredients having independent existence, shall lose its identity. In the present case, though, Vitamin E may be used in preparation of animal feed supplement but because of such permissibility, the independent identity of Vitamin E shall not extinguish under the mask of animal feed supplement. In case, Vitamin E is not in proportionate to other ingredients necessary for the product of animal feed supplement, then in appropriate case even if some other materials are mixed, such goods may be categorized under Heading 2936. The Tribunal seems to overlook this aspect of the matter.
129. We should not overlook the fact that the Vitamin E in animal feed supplement may be used in small quantity but its constituent should be in definite proportion to make it edible for cattle. Vitamin E cannot be used up to 45-50 per cent in the present case as animal feed supplement. Nothing has been brought on record by the Respondent to establish that there are animal feed supplement containing Vitamin E to the extent of 45-50 per cent. Rather from the evidence on record, it appears that the goods seized was sold to the industries in Maharashtra for preparation of animal feed supplement.
130. From the definition noted by the Tribunal in Tetragon Chemie's case (supra), under Customs Excise Tariff Act, 1985 or Rules framed thereunder, the animal feed supplement as defined under the Exemption Notification dated 15th February, 1984, affirms this proposition. The definition as noted by the Tribunal, in Tetragon Chemie's case (supra), is reproduced as under:
99...."animal feed supplement mean an ingredient or combination of ingredients added to the basic feed mix or part thereof to fulfill the specific need usually used in micro quantities and requiring careful handling and mixing" Further, "Animal feed Concentrates" means a feed intended to be diluted with other feed ingredients to produce a complete feed optimum nutrition balance.
Thus, even if in view of the definition Clause, the ingredients of animal feed supplement to the extent it relates to vitamins aminoacids, antibiotics, coccidiostats, trace elements, emulsifiers, flavourings and appitizers etc. should be in minute quantity. This fact is evident from the evidence on record which shows that the goods seized by the Appellant, were used in preparation of animal feed supplement in the industries (supra).
131. That is why, Chapter 23 under Heading 2309 includes product of a kind used as animal feeding not else where specified or included, obtained by processing vegetables or animal material to such extent that they have lost the essential characteristics of the original material, other then vegetable wastes, vegetables residues and by-product of such processing. Thus, note under Chapter 23 itself provides that the product under Heading 2309 contains the preparation under Heading 2309 which has lost their original identity or essential characteristics after mixed with other products while preparing animal feed supplement. The extent of 45-50 per cent of vitamin speaks volume.
132. The case of Abhi Chemicals and Pharmaceuticals Pvt. Ltd. (supra), does not seem to be applicable to the facts and circumstances of the present case.
133. The aforesaid proposition seems to be supported by Apex Court judgment relied upon by the Respondent reported in 2001 (132) ELT 525 (S.C.) Collector of Central Excise, Bangalore v. Tetragon Chemie P. Ltd (supra) whereby, the Tribunal's judgment was affirmed by Hon'ble Supreme Court. Their lordships while dismissing the appeal of Customs Department, affirming Tetragon Chemie's case (supra), observed that animal feed supplement were included in Tariff item 2302 being preparation of a kind used in animal feeding including dogs and cats. Affirmation of judgment of Tetragon Chemie (supra by Hon'ble Supreme Court, is based on the fact that the issue before the Tribunal was with regard to assessment of 'animal feed supplement' under Heading 2302. In the present case, the product or goods seized were sent to Maharashtra in various industries including Baadar Schulz Laboratories as base material for preparation of animal feed supplement and admittedly, Vitamin E is used by the industries as base material along with other materials to prepare animal feed supplement.
134. The case of Abhi Chemicals (supra), relied upon by the Respondent's Counsel, also relates to animal feed supplement where, Hon'ble Supreme Court held that vitamin mix with anti-oxidants, minerals, solvents, stabilizers, used as animal feed, is classifiable as animal feed supplement under Heading 23.02 of Central Excise Tariff and not as inter-mixture of vitamins under Sub-heading 2936.00. In the present case, the question with regard to inter-mixture of vitamin or of animal feed supplement but seizure of goods (Vitamin E) which is used as base material for preparation of animal feed supplement.
135. The case of Lalchand Bhimraj (supra), also relates to animal feed supplement where, final preparation was used as additives in animal feed. In the present case, the goods seized were sold to industries for manufacture of animal feed supplement as base material.
136. In view of the above, the substantial question of law framed, is answered as under:
Question No. 1 to 5
Because, of misdeclaration and for the reasons discussed hereinabove, the Respondent cannot avail the benefit of Indo Nepal Treaty on the basis of certificate issued by the authorities of Nepal and M/s. Anivet Industries Limited.
Question No. 2 and 7
The goods seized, has rightly been held by the original and Appellate Authority with finding that they should have been classified under Heading 2936 of the Tariff. The finding recorded by the Tribunal, suffers from substantial illegality as observed in the body of judgment.
Question No. 3
The original and Appellate Authority has rightly held that the goods have not gone under manufacture process at Nepal hence, order of Tribunal is bad in law keeping in view the Notification No. 9/96, 22nd January, 1996, issued under Section 11 of the Customs Act.
Question No. 4
The provisions contained under Sections 17, 46 and 47 of the Customs Act, 1962, have got no bearing with the present controversy to the extent it relates to seizure and punishment under Chapters XII and XIV of Customs Act, 1962.
Question No. 6
The present appeal is very well maintainable in the High Court under Section 130 of the Customs Act, 1962 hence, substantial question of law are adjudicated by this Court.
137. In view of the above, the appeal is allowed. The impugned order passed by the Tribunal, dated 5th April, 2005 in Application No. C/S/2971 to 2974/04 in Appeal No. C/1184/04, C/1185/04, C/1186/04, C/1187/ 04 is set aside. The orders passed by the Adjudicating Authority and Appellate Authority, are restored.
Costs is made easy.
Equivalent 2010 (181) ECR 0106 (Allahabad)
Equivalent 2012 (275) ELT 0326 (All.)