9911796707
TMI Blog1994 (2) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... nHighSeasale basis, as an actual user. This agreement provided for (a) the assessee shall make full payment of document consisting of CIF value, L/C, bank's interest, commission and other charges levied in connection with the retirement of the documents to IC; (b) all titles to the goods would be transferred to the assessee on the retirements of the documents from the bank; (c) the assessee to arrange for the clearance of the goods, pay the custom duties, clearing charges, etc.; and (d) that IC shall subrogate their rights in favour of the assessee in case of insurance claim. The Bank of Credit Commerce Hongkong Ltd. advised the bankers of the assessee vide letter dated31-7-1987about the substitution of the name of the assessee and advised the assessee's bankers to send the revised documents. The goods landed at Kandla Port in June 1987 and the Bill of Entry bearing No. 2719 was prepared on 26-6-1987, based on which the purchase of 630 MT of isabutanol was entered in the books of the assessee. The assessee moved the Custom authorities for the clearance of the goods on the strength of the Bill of Entry and the goods were moved to the Custom Bonded Tank on29-6-1987. On testing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the sake of facility. Having carefully considered all the relevant facts and circumstances of the case, I order confiscation under section 111(d) of the Customs Act, 1962 of Isabutanol weighing 629.250 MT of CIF value Rs. 29,62,486.70. The market value of Isabutanol is Rs. 30 per Kg. and accordingly the market value of Rs. 1,88,77,500. The landed cost consisting of CIF value plus 5% of CIF duty and duty works out to Rs. 73,40,256.88. It is thus observed that the net margin of profit available is Rs. 1,15,37,243.12. Against the aforesaid confiscation I give an option under section 125 of the Customs Act, 1962 to M/s Vikas Chemicals,New Delhi, an option to pay a fine of Rs. 90 lakhs in lieu of confiscation within a period of thirty days from the receipt of this order. The margin of profit as mentioned above is Rs. 1,15,37,243.12 but considering the period of filing of Bill of Entry in June 87 the fine in lieu of confiscation has been adjudged as above. It is also clarified for removal of doubt that the importer shall pay appropriate duty leviable thereon in addition to the fine so imposed. From the above facts and circumstances it is evident that M/s Vikas Chemicals, New Delhi had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its favour would stand cancelled. GHC, in pursuance of the order of SC on2-5-1989directed the Customs to deposit Rs. 1.30 crores with the Registrar of GHC for keeping them invested in fixed deposit with nationalized bank for an initial period of 13 months. SC vide its order dated 4-4-1990 directed for the release of Rs. 44,06,769 towards Customs duty payable to them from out of the moneys kept in deposit with the Registrar of GHC, by encashing the fixed deposit. The Customs Tribunal vide its order dated 31-10-1990 on the appeal made by the assessee against the order of Collector of Customs dated 13-4-1988, reduced the fine to Rs. 45 lakhs and the penalty to Rs. 2 lakhs, noting the fact that, Rs. 44,06,769 had already been collected from the High Court towards the customs duty. GHC allowed the withdrawals of the fine and penalty of Rs. 45 lakhs an Rs. 2 lakhs in 1991 and on15-5-1991passed its order releasing the balance amount of Rs. 59,57,437.82 in favour of the assessee. 6. The ACIT, considered the above events and came to hold that, by virtue of the orders of SC accepting the offer of Rs. 1.38 crores made by KI on 14-3-1989, and directing the deposit of the sale consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounting adopted by the assessee, the sale accrued to it in March 1989 and therefore, was assessable in assessment year 1989-90. He held that, the finality of the amount payable to the assessee, though reached on15-5-1991, it only indicated the balance amount recoverable and not that the sale got concluded at that point of time. He also referred to the entry of purchase made by the appellant on26-6-1987, which was treated as on stock on31-3-1988, carried over as opening balance on1-4-1988, but reduced from the figure of opening stock, as stock returned. CIT (Appeals) also considered the argument of the assessee that, on confiscation of goods, the title on the goods vested on the Customs, but, by referring to the various litigation initiated by the assessee, claiming ownership of the goods, the rejected he claim so advanced. He accordingly approved the taxing of the profits in the assessment year under appeal and not in assessment year 1992-93. 8. CIT(A) further held that, the incidental charges of Rs. 8 lakhs and the cost of the goods at Rs. 30.31 lakhs were deductible from the sale consideration of Rs. 1.38 Crores. He did not allow deduction for the customs duty on the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 962, when read in sequence along with section 111(d) of that Act, it would clearly exhibit the procedure of confiscation of the goods that are held as improperly imported. Section 111(d) is the start of the procedure of confiscation, when the authorities feel that, the goods imported are not covered by licences. This is followed by the order of levy of fine and penalty under section 125 of the Customs Act, in lieu of confiscation of the goods. While this order was under challenge before the Customs Tribunal, the Customs proceeded to seek the intervention of the Courts for the sale of the goods, which is possible only when, they had invoked section 126 of the Customs Act of confiscating the goods. He contended that, the Customs sought the permission for sale, called for the tenders, placed before the Supreme Court which accepted the tender of KI and directed them to deposit the sale consideration with the Customs within a week from the date of their order, all go only to show that, the sale was at the instance of the Customs. 10. He pleaded that, the assessee could be treated as having made the sale only if it could be held that, the property in the goods was with the assessee, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its order that, the disputes between the parties could be held as having come to an end and their mutual rights decided. He submitted that, there is considerable similarity in the facts of the instant case with that of the case decided by the Supreme Court. He submitted that, the sale amount being kept in deposit with GHC indicated that, the claim on that amount is dependent on the finalisation of the dispute by GHC, which was so finalised in 1991, it is in that year that, the sale could be held as made by the assessee and the liabilities towards duties as simultaneously discharged by the assessee. 13. He submitted that, if it is to be held that, the sale was effected on 14-3-1989, then, in that event, the collection of the proceeds of sale having been made by the Government, it having retained its lien over the sale consideration, that was also recognized by GHC, in connection with the primary charge on the sale of custom duties, redemption fine and penalty, it ought to have been held that, the amount so collected by Customs and deposited with GHC, as equivalent to payment to the Government. He pleaded that, any other construction is not possible, because, if there, had been no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have in the normal course got the release of the documents from the bank in 1987 itself, in which event, there would have been no additional liability because of the exchange fluctuation. He contended that, the assessee having been prevented to get the documents released, the additional liability being imposed on the assessee, which is on the purchase price of the goods, the profit from which is being assessed, the same should be adjusted against the profits. 17. Shri A.K. Gupta, the learned departmental representative submitted that, IC in its capacity as recognized Export House, was exporting the goods manufactured by the assessee and IC was provided with the REP licences for the exports so made by it. He contended that, since the REP licences represented export benefits granted to an exporter and it was based on the goods provided by the assessee to IC, it has to be held that, the assessee was the rightful owner of the licences. He contended that, since the appellant-company is the owner of the licences, and it is on the strength of those licences that the goods have been imported, the question of it entering into an agreement for the purchase of the goods onHighSeasale ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the sale consideration with Customs, to which the assessee had raised no objection indicating its acceptance of the buyer and to the sale consideration, it would be a wrong premise to hold that, the sale was not effected on 14-3-1989 by the appellant and that, it was not assessable to the profits arising therefrom. He submitted that, the role of GHC was very restricted in the retention of the money in fixed deposit, which is in the course of finality of the customs duties, fine and the penalty, which amounts were charges on the sale consideration. He contended that, the sale required the goods being handed over to the buyer on payment of the consideration, both of which have been completed before31-3-1989and therefore, by no stretch of imagination it could be held that, the sale never took place before31-3-1989and that, the profits therefrom did not accrue for the assessment year 1989-90. He placed reliance on the Supreme Court decision in Korshed Shapoor Chenai v. CIT [1990] 181 ITR 400 and on the Madras High Court in T.N.K. Govindarajulu Chetty v. CIT [1973] 87 ITR 22. 21. Shri Gupta submitted that, the collection of the sale proceeds by the Customs, was at the direction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, the sale was effected for and on behalf of it in the assessment year under appeal, then, the sale consideration having been collected by Customs, deposited with GHC till such time the dispute on the fine and penalty is finalised and the amounts are released in favour of the Customs, has also to be treated as paid by it and the element of duty and fine are allowable deductions. The further claim raised was that, since the goods were not given to it, it could not clear the documents by making payment, the delay having resulted in enhancement of the value of the documents due to exchange fluctuation, being on trading account, is also allowable as a deduction. The main claim of the appellant is however is that, the sale was made by Customs which had the vested right over the goods and the sale consideration retained by GHC till the discharge of the dues of the Customs and the balance being released in its favour on 15-5-1991, it is at that point of time that, the sale should be held as having concluded and simultaneously, the dues of Customs as discharged and paid. The claim advanced by the department is to the effect that, the assessee was made a party to the sale and the entir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, which was not so passed, it has to be held that, there was no confiscation leading to the vesting of the goods in the Government. 25. The Customs have the right to sell the goods that are not cleared within thirty days after the goods have been unloaded. Section 48 of the Customs Act prescribes the procedure to be followed in cases of goods that are brought into India and not cleared for home consumption within thirty days from the date of unloading of goods or such further time allowed by the concerned official. It prescribes that, after giving notice to the importer and with the permission of the proper officer be sold by the person having custody of the goods. It is under this section alone that, the Customs get the power to sell the goods that are in their custody. In the present case, the effort by the Customs to sell the goods, seeking the permission to sell the goods from theApex Court, is with reference to the above stated section only. Therefore, the claim raised by the appellant that, the goods had vested on the Government is rejected. 26. Normally, every sale of goods is covered by the Sale of Goods Act, which treats every sale transaction as a contract involving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods, which documents are not yet cleared with the bankers. The claim made by the assessee by filing the Bill of Entry is therefore an act of identifying itself as an Importer within the meaning of the Customs Act. The term 'importer' as defined in section 2(26) of the Customs Act is, "in relation to any goods at any time between their importation an the time when they are cleared for home consumption, includes any owner or any person holding himself to be the importer". 29. Therefore, in the circumstances of the case, the assessee remains only a claimant of the goods with no title to the goods, though he remains the importer of the goods. When the assessee has no title to the goods, it cannot transfer in favour of the buyer any better title than what it had. It is an admitted position that, the title to the goods were transferable in favour of the assessee, by the banks on delivery of the documents after obtaining the payment therefor. Even for the sake of argument, we proceed on the basis that, the sale was effected by the assessee, it could not have given any better title to buyer of the goods than what it had, because, the title to the goods still remained with the banks. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elease of any balance remaining with it after satisfaction of all the dues of the Government. It is this fact that is similar to the case of Hindustan Housing Land Development Trust, where the High Court ordered the payment of the additional compensation to the claimant on the condition of provision of bank guarantee for the like amount, which made the apex court to hold that, the receipt of money by the claimant only established an inchoate right, which is yet to be converted into a valuable right by the decision of the Supreme Court. The sale consideration though has been determined, collected by Customs, deposited with GHC, the assessee's claim over it was subject to the liabilities attached thereto, which got free from all charges only on 15-5-1991, when GHC released the balance in its favour. It is at that point of release of the payment by GHC, the sale at best could be held to have come to a close as far as the assessee is concerned, though, the ownership and title to the goods in favour of the assessee remind to be established with reference to the documents being released in its favour by the bank. We accordingly hold that, in the assessment year under appeal, there was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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