9911796707
TMI Blog1991 (2) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of Agriculture for handling and distribution of Muriate of Potash (M.O.P. for short) were importing (as recorded in the impugned order) the said item and clearing the same regularly through the Bombay Customs. The import of M.O.P. (Potassium Chloride, other than Industrial Grade) during the relevant period (April 1983 - March 1984 and April 1984 - March 1985 Import Trade Control Policy periods) was canalised through the Public Sector Undertaking, Minerals Metals Trading Corporation (MMTC). Notification No. 146-Customs, dated 19-7-1980 and Notification No. 131-Customs, dated 11-5-1984 exempted M.O.P. from the whole of the duty leviable thereon subject to the condition that the goods shall be proved to the satisfaction of the Assistant Collector that the same is being imported for use as manure or in the production of complex fertilizers. Notification No. 131-Cus., dated 11-5-1984 exempted the goods from the whole of the auxiliary duty of customs and by virtue of Central Excise Notification No. 40/83 dated 1-3-1983, the goods were exempted from additional duty of customs as well. The goods imported were cleared free of duty on the basis of a declaration by the appellants that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Potash Ltd. and its subsidiary D.M.O. Pune, M/s. Amar Trading Co., M/s. V.I.P. Chem Ltd., M/s. Vipul Dyes, M/s. Ashok Kumar Goods Transport Company had collaborated with each other for arranging for supplies of the item Muriate of Potash imported for use as fertilizer and that 13,430 tonnes of Muriate of Potash (Fertilizer) imported and cleared duty free under a declaration that the same has been imported for use as fertilizer had in fact been used by M/s. Standard Alkali as an industrial raw material. (ii) that M/s. Standard Alkali were aware of the fact that Potassium Chloride was not available indigenously and that the goods purchased were imported Muriate of Potash, (Chemical Manure) and these goods were indexed as Refined Potassium Chloride in order to avoid suspicion from any agency. (iii) that M/s. Standard Alkali in collaboration with their suppliers M/s. Amar Trading Co., M/s. VIP Chem and M/s. Vipul Dyes had intentionally arranged to show the sale/purchase of these goods as a chemical - Potassium Chloride by referring to the same as Refined/Purified. The chemical analysis conducted by either of them clearly show that the goods could not be considered eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtations conditions. Since they have acted only as agents in the imports and distribution they stated that they are not liable for either payment of duty or penalty. The others (including M/s. Standard Alkali) to whom notices were issued also denied the charges against them. In due course, the Collector adjudicated the case by his order dated 9-10-1986 which is under challenge before us. The Collector s findings were :- (a) Once it is proved that the MOP cleared without payment of duty under the said exemption notification has been used for purpose other than for use as manure or in production of complex fertilizer, the said MOP becomes liable to Customs Duty and the exemption in the said notification would not be available. (b) The contention that in view of the changes in the notification, and the wording of the notification in force during the material period, the Asstt. Collector s satisfaction was to be the pre-clearance stage only and no duty liability arose if the imported M.O.P. was found to be used for other purposes by third parties, was not tenable. The changes in the notification only meant dispensing with end-uses bond and production of proof of end-use. (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stry, M.M.T.C. and the appellants were of no concern to the Customs House. He stated that in the opening para of his order (extracted earlier), the Collector had noted that the appellants have been importing the said item . It was not correct to say that unless the owner of the goods was identified, one holding himself out to be the importer was not concerned in the matter. Some of the bills of entry were filed by the appellants. Even in respect of the others, the requisite declarations (in terms of Section 46 of the Customs Act) were made by them. Therefore, for the purposes of the Customs Act, the appellants were the importers. As regards the O.G.L. facility, Shri Jayaraman submitted that the imports were made by the appellants in terms of valid letters of authority issued in their favour by the M.M.T.C. It was, therefore, that the goods were cleared under O.G.L. The appellants were not an agent, a Customs House Agent, as envisaged in Section 147 of the Customs Act and sub-section (3) for recovery of duty from the agent was not applicable to the instant cases. The Customs case was not that the appellants were owners of the goods but that they were the importers. 7. We have gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dian Potash Ltd. was only an agent of the Govt. of India in the Ministry of Agriculture and that the importer was the Ministry of Agriculture and that Indian Potash Ltd. had complied with all the requirements under the Fertilizer (Control) Order for the sale of M.O.P. 8. Having regard to the above narration, it is evident that the appellants were not the actual importers. The importer was the Ministry of Agriculture and later, the imports were canalised through the M.M.T.C. The appellants were merely handling agents for potassic fertilizer and for clearance of M.O.P. through Customs. The fact that some bills of entry had been filed by the appellants and that the requisite declarations were made by them would not, in itself, be conclusive of their status as importers. On the other hand, the evidence on record indisputably points to their status as handling agents, the actual importees being the Ministry of Agriculture, M.M.T.C. 9. The conclusion of the Collector that the appellants were the importers of the subject consignments cannot, therefore, be sustained. 10. The learned Departmental Representative has drawn our attention to the definition of importer in Section 2(26) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the owner, importer or exporter of any goods to be his agent in respect of such goods for all or any of the purposes of this Act, such person shall, without prejudice to the liability of the owner, importer or exporter, be deemed to be the owner, importer or exporter of such goods for such purposes : Provided that where any duty is not levied or is short-levied or erroneously refunded on account of any reason other than any wilful act, negligence or default of the agent, such duty shall not be recovered from the agent unless in the opinion of Assistant Collector of Customs the same cannot be recovered from the owner, importer or exporter." The submission of the learned SDR, Shri Jayaraman, was that the aforesaid proviso was not applicable to the facts of the present case inasmuch as the appellants were the importer and the Customs House was not proceeding against the Customs House Agent. The Revenue s contention, according to Shri Jayaraman, was that the appellants were the importer and not that they were the owners of the goods. We have already taken the view that the appellants were not the importers. In that view of the matter, the question of proceeding against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notification goods of any specified description from the whole or any part of the duty of Customs leviable thereon." We are concerned in the present cases with Notifications 180-Cus., dated 2-8-1976; No. 21-Cus., dated 7-2-1977 and 146-Cus., dated 19-7-1980. Notification No. 180-Cus., dated 2-8-1976 reads as follows :- Muriate of potash and falling under sub-heading No. (5) of Heading No. 31.02/05 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), is exempt from the whole of the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975, subject to the following conditions that :- (1) the said goods shall be proved to the satisfaction of the Assistant Collector of Customs that the same are being imported for use as manure; and (2) the said goods shall not be used for any purpose other than as manure." Notification No. 21-Cus., dated 7-2-1977 reads as follows :- Potassium Chloride - (Muriate of Potash) and falling under sub-heading No. (5) of Heading No. 31.02/05 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), is exempt from the whole of the additional duty leviable thereon under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly have entailed appropriate follow-up action even after the goods were released free of duty in terms of the notification on the satisfaction of the Assistant Collector that they were being imported for use as manure. The two conditions are separate though the underlying object might be the same. Now, we are concerned in these proceedings not with these notifications but with Notification 146-Cus., dated 19-7-1980 and 40/83-C.E., dated 1-3-1983. While the Central Excise Notification exempted fertilizers, all sorts, from the whole of the excise duty (and, therefore, had the effect of exempting like imported goods from the whole of the additional duty of customs) leviable thereon, the Customs Notification exempted M.O.P. from the whole of the customs duty leviable thereon subject to the condition that the goods shall be proved to the satisfaction of the Assistant Collector of Customs that the same were being imported for use as manure or in the production of complex fertilizer. In terms, the satisfaction is one which is to be derived prior to the removal of the goods from the control of the Customs. This conclusion flows from two circumstances :- (a) the words used are that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein that Government of India imports M.O.P. and I.P.L. (the appellants) works as the sole agent for its handling and distribution. A part of the material is handed over by I.P.L. to complex fertilizers manufacturing units in the country and the remaining quantity is sold by I.P.L. to farmers through the institutional agencies of the State Governments and private retail traders registered by the State Governments. The letter adds that the diversion of M.O.P. for non-agricultural purposes does not take place at the first stage of allocation/distribution made by the I.P.L. We may, for our present purpose, ignore the last sentence which we may assume to be only an expression of opinion by the Ministry of Agriculture. Going purely by the other relevant facts and circumstances, it is not possible to conclude that the appellants obtained clearance of the M.O.P. free of duty in terms of the 1980 Customs Notification knowing fully well that it was not going to be used as manure or in the production of complex fertilizer but was going to be diverted to other purposes. A contrary conclusion could have been possible only if it could be established by acceptable evidence that the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant company had no knowledge or intention to divert the imported M.O.P. for non-permissible uses, it has to be held, as indeed the Collector has held, that the appellant company had nothing to do, and had no hand in the diversion of the imported M.O.P. after its distribution or sale to manufacturers of complex fertilizers/registered dealers/institutional agencies of State Governments. 15. Shri K. Narasimhan contended that if the persons or organisations to whom the appellants were obliged to sell/distribute the imported M.O.P. had diverted the M.O.P. and used it for non-permitted uses, the Collector should not have allowed them to go scot-free. The Collector should have confiscated the goods which he had not done. He should have imposed penalties on them, which again, he had not done. He could have even sought to recover duty from them or, if this was not possible, imposed penalties keeping in mind, inter alia, the quantum of duty involved. 16. Shri Narasimhan further contended that apart from the aforesaid considerations, there has been no attempt on the part of the Collector to establish any link between the duty demands and particular clearances on specified bills o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indeed he could not have released them otherwise, after being satisfied that they were being imported for use as manure or in the production of complex fertilizer. We find nothing wrong in this in view of the circumstances of the imports. The Ministry of Agriculture had appointed the appellants as the handling agent for clearance of the goods through Customs. In terms of the Imports Control Order, M.M.T.C. was the canalising agent for import. The appellants were obliged to sell the imported M.O.P. to manufacturers of complex fertilizers/registered dealers/institutional agencies of State Governments. Therefore, there was nothing improper in the Assistant Collector being satisfied that the M.O.P. was being imported for use as manure or in the production of complex fertilizers. Apparently, after the M.O.P. was handed over to the concerned entities diversions have taken place. Now, the question is whether the appellants could be visited with the liability to pay duty. In our opinion, once the condition laid down in Notification No. 146-Cus., dated 19-7-1980 was satisfied, the appellants who were not the importers could not be visited with this liability. Goods which were diverted to u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to any specific importation. Therefore, there is no knowing whether the demands were made within the period of limitation in Section 28. We do not agree with the learned D.R. that there is no limitation for issue of demand. We are of the opinion that if Section 112 is not resorted to, the other recourse, in the absence of any legally valid bond, would be to Section 28 and demand under this section had to be made within the prescribed limitation. While on this aspect Shri Narasimhan pointed out that in C/Appeal No. 646/87-C the show cause notice was issued on 17-2-1986 (the other party involved being M/s. Hindustan Organic Chemicals Ltd.) when the amendment to Section 28, with effect from 27-12-1985, requiring the Collector to issue show cause notices under Section 28 if the longer period of limitation was sought to be invoked or if suppression of material facts etc. were alleged on the part of the importer, had already come into force. The show cause notice could not have been issued by the Assistant Collector on 17-2-1986. The earliest show cause notice in these proceedings was issued on 13-7-1985. The imports were all of 1982, 1983 and 1984 and, therefore, in any view of the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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