2014(11)LCX0112

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI [COURT NO. II]

Shri Ramesh Nair, Member (J)

AUTHENTIC IMPEX

Versus

Commissioner of Customs (General), Mumbai

Final Order No. A/H99/2014-WZB/C-IV(SMB), dated 24-11-2014 in Appeal No. C/85111/2013-Mum

Cases Quoted -

Hum India Fab Pvt. Ltd. v. Commissioner - 2007(11)LCX0045 Eq 2008 (222) ELT 0453 (Tribunal) - Relied on ... [Paras 2, 3]
Ravi International v. Commissioner - 2008(01)LCX0151 Eq 2008 (225) ELT 0248 (Tribunal) - Relied on [Paras 2, 5]
Successes Engineering v. Commissioner - 2007(06)LCX0058 Eq 2007 (215) ELT 0210 (Tribunal) - Relied on [Paras 2, 5]

Departmental Clarification Quoted-

C.B.E. & C. Circular No. 36/2000, dated 8-5-2000 [Para 2]

Advocated By -

Shri J.C. Patel, Advocate, for the Appellant.
Shri Senthil Nathan, Dy. Commissioner (AR), for the Respondent.

[Order]. -

The present appeal is directed against Order-in-Appeal No. 848/MCH/JC/ICD(M)/2012 dated 09-10-2012 passed by the Commissioner of Customs (Appeals), Mumbai Zone -I, wherein Id. Commissioner (Appeals) upheld the impugned order and dismissed the appeal of the appellant. The fact of the case is that the appellant filed Bill of Entry No. 2904709, dated 07-03-2011 for the clearance of 24.110 M. Tones of 'old white and coloured, cut wiper industrial rags' valued Rs. 14,52,787/- classified under CTH 63109010 as woolen rags. On examination, it was revealed that out of 480 bales, 180 bales are coloured and remaining 300 bales white. It was verified that the goods are not completely pre-mutilated and they are identical form and appear to be new. It was also reported that the goods are not of wool or hosiery but appeared to be of cotton. The Dy. Chief Chemist on examination vide Test Report No. 730, dated 15-03-2011 given following report.

(a) The Fabric having off white, red, reddish colour is composed of polyester filament yarn on one side and polyester spun yarn on the other side.

(b) The fabric having brownish, maroon, black, green and yellow colour is wholly composed of polyester spun yarn.

(c) The fabric having blue colour is wholly composed of cotton yarn.

(d) The fabric having white colour is composed of blended spun yarn of polyester and cotton on both sides.

Further to check the contents of hazardous dyes and whether goods are old and used or new the samples were forwarded to Textile Committee as per Textile Committee report dated 07-04-2011, it was ascertained that the goods does not contain any hazardous dyes, however it cannot be ascertained whether goods are old and used or new. In the adjudication the original authority held that the goods are small new textile cutting and not 'old, white and coloured, cut wiper industrial rags as declared by appellant and held goods merits classification under CTH 63101090 as others, which is restricted goods under policy. Accordingly, the impugned goods were confiscated under Section 111(d) of Customs Act, 1962 with an option to redeem the goods on payment of redemption fine of Rs. 4 lakhs and penalty of Rs. 1.50 lakhs was also imposed under Section 112(a) of Customs Act, 1962. Being, aggrieved with the said adjudication order, the appellant preferred the appeal before the Commissioner (Appeals), which was dismissed. Hence the appellant is before me.


2. Shri J.C. Patel Id. Counsel for the appellant submits that even as per test report of Dy. Chief Chemist, entire goods are not of cotton as contended in the orders of the lower authority. He also submits that on retesting done by the Textile Committee, it could not be ascertained that whether the goods are old and used or new. He submits that as per HSN notes of Chapter 63.10., even small new cutting also considered to be rags, therefore it is not necessary that only old and used rags are classifiable under Chapter 63.10. He submits that reliance on the Board Circular No. 36/2000, dated 08-05-2000 by the original authority was mis-interpreted inasmuch as the contention that garments are only old and used serviceable after repair, must classify under CTH 6309. Only garments which are totally unserviceable and beyond repair should be classified under CTH 6310. In this regard he submits that this condition is applicable only in case oi garments whereas in the present case the goods are not garment but it is cut pieces of fabric so if the fabric is new and it is in mutilated form, it will be covered under 6309. He submits that even in the finding of adjudication authority so confirmed; it is accepted that woolen rags/synthetic rags/shoddy wool, the import of the same is permitted as per para 2.32.4 of Import policy read with para 5.3 of ITC(HS). The impugned goods of the appellant will be covered in such category for the reason that from the test report it is admitted that all majority of the fabric is that of polyester filament, polyester spun and cotton. It is his submission that from admitted fact, it is clear that out of 480 bales, 180 bales are coloured of two types and remaining 300 bales white. As per the test report only blue colour fabric is wholly composed of cotton yarn therefore majority of material is of polyester. It is his submission that in view of above fact the product is clearly covered under CTH 63109040 and not under 63101090 as claimed by the Revenue. He further submits that since goods have been ordered for re-export, therefore redemption fine and penalty in the present case is very harsh. In support, he relied upon the following case laws :

2008(01)LCX0151 Eq 2008 (225) ELT 0248 (Tri.-Kolkata) - Ravi International v. CC (Airport), Kolkata
2007(06)LCX0065 Eq 2007 (215) ELT 0220 (Tri.-Ahmd.) - Successes Engineering v. CC, Kandla
2007(11)LCX0045 Eq 2008 (222) ELT 0453 (Tri.-Chennai) - Hum India Fab. Pvt. Ltd.



3. On the other hand, Shri Senthil Nathan, Dy Commissioner (A.R) reiterates the findings of the impugned order.


4. I have carefully considered the submissions made by both the sides.


5. The issue to be decided is that whether the goods 'old white and coloured, cut wiper industrial rags' is classified under CTH 63109010 or new rags sorted under CTH 63101090, however there is no difference of rate of duty. In the present case the goods have been tested and in the test report it was found that the goods are not rags and it was not found to be completely mutilated rags. It is observed that the impugned goods are admittedly small new textile cutting and which is sorted, therefore it merits classification under CTH 63101090 as others and same is restricted under the Foreign Trade Policy, import of the same is re-quired licence from Foreign Trade Department, therefore I agree that the impugned goods is not classifiable, as declared by the appellant. However, it is correctly classifiable as others under CTH 63101090, which is restricted. The appellant has not obtained special import licence for clearance of the same, therefore they have made liable themselves for imposition of penalty. However, as regard the submission of the appellant that the goods were ordered to be re-exported the redemption fine and penalty is not imposable. In this regard I have carefully gone through the judgments relied upon by the appellant, the relevant paras of the judgments are reproduced below :-
Ravi International v. CC (Airport), Kolkata

4. After hearing both sides and considering all aspects of the case, we find merit in the arguments of the learned Consultant that since the goods are to be re-exported, the issue of valuation need not be gone into. In view of the fact that the importers were not involved in any past offence and their inability to get the goods released was on account of non-availability of the required certificate from the Drugs Control Authorities, we are of the view that a lenient consideration is called for. Accordingly, we set aside the penalty imposed on the appellants and reduce the redemption fine to a token amount of Rs. 25,000.00 (Rupees Twenty-five thousand) subject to the condition that the appellants shall take release of the consignment and reexport the same immediately thereafter. The appeal is partly allowed.
Successes Engineering v. CC, Kandla

6. We have carefully considered the submissions from both sides. The shipments were made on the basis of documents against payments. The explanation given by M/s. Success Engineering, Hong Kong that there was a downward revision of prices necessitating issue of another invoice is not acceptable for the simple reason that no reliable correspondence culminating in a downward revision has been produced. Even if there was down ward revision, there was no need for issue of anti-dated invoices. But for the investigation commenced by the DR1, the consignments could have been cleared giving the invoice for US $ 550/MT. Having submitted the documents through the Bank for certain value, to supply invoice at a lower value to the importer does not seem to be a bona fide exercise. Test results show that the materials imported were "prime" quality instead of "near prime" quality. This modus operandi could not be explained merely as issue of an anti-dated second invoice to give effect to reduction in price of HDPE. Therefore, the offending nature of the goods is established and therefore the order of the Commissioner confiscating the goods and imposition of penalty on M/s. Success Engineering are valid. However, taking the entire facts and circumstances of the case, and taking into account that the consignments have already been re-shipped to Hong Kong after payment of fine, we reduce the redemption fine from Rs. 20 lakhs to Rs. 7 lakhs (Rupees Seven lakhs only). The penalty is reduced from Rs. 5 lakhs to Rs. 2 lakhs (Rupees Two lakhs only).

7. As regards the other appellants viz. M/s. C. Jivram Joshi & Sons and partner of the firm, no evidence showing knowledge on their part to declare a lower price with a view to wrongly avail_ benefits has been produced and therefore no intention to violate customs law on their part is proved. Failure/negligence if any on their part, does not justify penal action under Section 112 of the Customs Act. Therefore, the appeals by them deserve to be allowed.

8. Thus the appeal of M/s. Success Engineering is partly allowed by reducing the redemption fine from Rs. 20 lakhs to Rs. 7 lakhs (Rupees Seven lakhs only) and penalty from Rs. 5 lakhs to Rs. 2 lakhs (Rupees Two lakhs) and the other two appeals are fully allowed.

Hum India l-'ab. Pvt. Ltd.

5. After considering the submissions, we note that, in the case of Siemens Ltd. (supra), the Apex Court found that the party was not in a position to re-export the goods in question within 3 months granted for the purpose by the adjudicating authority, on account of certain actions of the Customs authorities. In those circumstances, it was held that the party was not liable to pay redemption fine or duty in respect of the goods which were reexported during the course of the court proceedings. The facts of the present case are different from those of the case considered by the Apex Court. In the case of Sankar Pandi (supra), the HonTsle High Court was following the decision of the Apex Court in Siemens case on a similar set of facts and circumstances. Hence the case considered by the High Court also may not have any bearing on the present case. In the case of M.V. Marketing & Supplies (supra), this Bench was considering a case of wrong shipment of supplier, more or less similar to the instant case. In that case, however, the importer had not paid for the goods supplied by the foreign party and, therefore, it was held that title of the goods had not passed on to the importer. Nevertheless, the importer was allowed to re-export the goods on payment of redemption fine and penalty. In the instant case, it is not in dispute that the Customs authorities received a letter from the supplier, which stated that the mistake of wrong shipment was on their part. Nowhere in the orders of the lower authorities is there any averment, observation or finding in the nature of discrediting the supplier's statement. It is also on record that, almost soon after examination of the consignments, the importer took up the matter with the supplier and also requested the department for permission to re-export the goods. In the circumstances, the request should have been favourably considered. This is not to say that there was no misdeclaration of goods by the importer. In the bills of entry the importer declared the goods as 100% cotton fabrics but physical examination of the goods revealed to the contra. What happened was misdeclaration, which fact would attract Section lll(m) of the Customs Act. In other words, confiscation of the goods is unquestionable on the facts of this case. The surviving question is whether the redemption fine imposed by the lower authori-ties is reasonable. As there can be no dispute of the fact that the misdeclaration of the goods by the importer rendered them liable for penalty under Section 112(A) of the Act, the ancillary question as to the quantum of penalty also arises.

6. The lower authorities imposed a fine of Rs. 5 lakhs under Section 125 of the Customs Act in lieu of confiscation of the goods valued at a little over Rs. 9 crores. In the fact and circumstances of this case, the quanta of fine and penalty are disproportionate, and we reduce the same to Rs. 3 lakhs (Rupees Three lakhs only) and Rs. 2 lakhs (Rupees Two lakhs only) respectively. On the findings we have already recorded, it goes without saying that the appellants shall be permitted to re-export the goods on payment of fine and penalty, there being no requirement of payment of duty.

7. The appeal is disposed in the above terms.

From the above judgments it can be seen that in the cases where goods have been allowed to be re-exported, this Tribunal has consistently taken lenient view on imposition of redemption fine and penalty.

5.1 Following the ratio of the above judgments and considering the facts and circumstances of the present case, I am of the view that the appellant deserve reduction in fine and penalty. I accordingly reduce the redemption fine from Rs. 4 lakhs to Rs. 2 lakhs and penalty is reduced from 1.50 lakhs to Rs. 50,000/-. The appeal is partly allowed in the above terms.
(Operative part of the order pronounced in the Court 24-11-2014)

Equivalent 2015 (318) ELT 0305 (Tri. - Mumbai)