2017 (8) TMI 346 - HC - Customs

Mis-declaration of goods - imported vessels and barges - confiscation - penalty - Held that - the power and scope of High Court to interfere with the findings so arrived at, by the CESTAT. Having once noted above, we have gone through the reasons while setting aside the order of confiscation and penalty. The CESTAT has considered the issue of port clearance and its procedure, as prescribed under Section 42 (2)(d) read with Section 111(j) of the Customs Act. It is noted that the fact of grant of port clearances, which includes the safeguard and security required for the Custom House were never recalled. The goods were permitted to remove from the customs area, by the concerned officers. The importers and/or their agents or employees cannot be held responsible for removal from the Customs area of the port in such situation. The CESTAT has noted that the removal and clearance cannot be equated to clear the goods for home consumption under Section 47 of the Customs Act. The permissions to clear the goods would not be in violation of Section 111(j), which is applicable to removals and not to the clearance . There is no justification and explanation on record as to why those permissions and clearance were not revoked or set aside. There is no denial to the fact of granting clearances and permissions and release of vessels with goods. There is no case of declaration or mis-declaration. The necessary documents were with the concerned department, even at the time of such permissions and clearance stage. Both the parties, including the concerned officers have knowledge of the documents and the supportive material. It is an admitted position that the payment of duty has been made before issuing show cause notice itself. It is settled that Section 46 of the Customs Act contemplates, directory procedure. Sections 48 and 46 read together support this aspect. The duties were paid even prior to show cause notices. Every technical breach cannot be treated, as breach for penalty or confiscation - in the present case, the Department /revenue failed to discharge its burden, as required under the law. There is no case made out of any willful or intent to evade duty to bring in the case of fraud and collusion . There is no case of stated misstatement or suppressing of fact . The impugned order, therefore, needs no interference, even on the ground of stated delayed decision. Appeal dismissed - decided against Revenue.

Issues Involved:
1. Legality of confiscation under section 111(j) of the Customs Act, 1962.
2. Validity of goods clearance based on port clearance permissions versus statutory requirements under section 47 of the Customs Act, 1962.
3. Treatment of imported goods as vessels requiring permissions for conversion and port clearance versus imported cargo requiring compliance under section 46 and 47 of the Customs Act, 1962.
4. Applicability of confiscation under section 111(j) concerning permissions for removal versus clearance of goods.
5. Confiscation under section 111(j) in light of the importers having pay orders ready for payment of duty.
6. Sustainability of the Tribunal's order passed after six months of the conclusion of the hearing.

Detailed Analysis:

1. Legality of Confiscation under Section 111(j):
The court examined whether the CESTAT was correct in holding that the confiscation under section 111(j) was not legal because the importers had obtained permissions for conversion of the vessels and port clearance without an order permitting clearance of goods for home consumption under section 47. The court noted that the vessels, barges, and tugs were imported for specific purposes and were subject to re-export conditions. The permissions and clearances granted by the concerned officers were never revoked, and the importers had completed the necessary formalities. Therefore, the court upheld the CESTAT's decision that there was no contravention of section 111(j).

2. Validity of Goods Clearance Based on Port Clearance Permissions:
The court addressed whether clearance of goods based on port clearance permissions was proper despite the statutory requirement of permissions under section 47. It was found that the Respondents had obtained necessary permissions and clearances, and the vessels were examined by the customs officials. The court emphasized that the delay in assessment by the customs officers could not be attributed to the importers. Thus, the clearance based on port clearance permissions was deemed valid.

3. Treatment of Imported Goods as Vessels versus Imported Cargo:
The court considered whether the CESTAT was correct in treating the goods as foreign vessels requiring permissions for conversion and port clearance instead of imported cargo requiring compliance under section 46 and 47. The court noted that the goods were imported as vessels and were subject to specific conditions. The permissions for conversion and port clearance were obtained, and the vessels were cleared accordingly. Therefore, the court upheld the CESTAT's treatment of the goods as vessels rather than imported cargo.

4. Applicability of Confiscation under Section 111(j):
The court examined whether the confiscation under section 111(j) was applicable, given that section 111(j) deals with permission for removal of goods while section 47 relates to permission for clearance. The court endorsed the CESTAT's reasoning that "removal" and "clearance" are distinct terms and that the permissions obtained for port clearance did not violate section 111(j). Hence, the confiscation under section 111(j) was not applicable.

5. Confiscation in Light of Pay Orders for Duty Payment:
The court addressed whether the confiscation under section 111(j) was correct, given that the importers had pay orders ready for payment of duty. It was noted that the importers had complied with the necessary formalities and had the requisite permissions and clearances. The delay in assessment by the customs officers could not be a reason for confiscation. Therefore, the court upheld the CESTAT's decision that confiscation under section 111(j) was not justified.

6. Sustainability of Tribunal's Order:
The court considered whether the Tribunal's order was sustainable, having been passed after six months of the conclusion of the hearing. The court found no case of perversity or illegality in the CESTAT's order and upheld it. The court noted that the written permissions and clearances on record could not be overridden by oral evidence, and the delay in the Tribunal's decision did not affect its validity.

Order:
(a) The appeal was dismissed, and the CESTAT order was maintained.
(b) The questions of law were answered in favor of the assessee and against the revenue.
(c) Consequential actions/orders were to follow.
(d) The interim order dated 18th July 2007 was vacated.
(e) No costs were awarded.

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