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TMI Blog1998 (10) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the 3 Shipping Bills in respect of quantity to be exported; (ii) duty demand on 16,472.205 Kgs of imported cotton yarn found in excess in the factory premises as also redemption fine thereon; and (iii) penalty of Rs. 2 lakhs on the earlier shipping bill. 3. Heard learned Advocate Shri R. Sashidaran and Mrs. Maithili, learned Advocate for appellants and learned JDR Shri S. Sankara Vadivelu for Revenue. 4. Appellants, unit is located in the Madras Export Promotion Zone (MEPZ) and the import entitlement of raw material is covered by Customs Notification No. 263/85 as amended. Learned Advocates submitted that with respect to the excess cotton yarn found in stock, the said yarn was imported legally under the said notification. In terms of the scheme under which the unit operates, all the export obligations have been met and the stock of cotton yarn found in the factory are remnants of the quantity totally imported. He submitted that no offence has been committed in respect of remnants stock found in their factory premises for the following reasons :- (a) the said notification does not prohibit the appellants from buying or using indigenous cotton yarn in the goods export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stage. Therefore, Section 113(d) does not apply. This section is cited in the case of Ambalal reported in AIR 1971 Cal. 444, wherein it was held that Section 113(d) ibid will not apply when value has been misdeclared in relation to payment of duty. Also he draws support from an interim order of the Tribunal as reported in 1995 (79) E.L.T. 256; (b) prohibition against goods is governed by Section 3 of the Import Export Trade (Control) Act, and as per the notification in the Gazette thereunder, these goods are not covered under this prohibition; (c) the Export Trade Control Order No. 1/77, dated 24-3-1977 (Clause 3) is to be read with the purpose behind the Customs Act, 1962 as is held in the case of Ambalal supra, otherwise a very wide power would be assumed by Customs. Therefore, there should be material misdeclaration which in this case do not exist; (d) Section 113(h) of the Customs Act, 1962 is also not applicable since the goods are neither dutiable nor prohibited; (e) Section 33(ii) of the Customs Act, 1962 defines prohibited goods. A perusal thereof shows that definition does not apply to the goods in question; and (f) Finally, he prayed that both Redemption F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inkage between Customs Act and ITC Act and therefore the goods are deemed to be prohibited. In this connection, he submits that duty has been forgone and imported goods are prohibited goods and therefore the Customs Law is directly involved. He cited the case-law of Exotic Fashions v. CC, Bangalore as reported in 1995 (79) E.L.T. 256 (T) and that of K. Janardhanan Pillai v. CC as reported in 1988 (38) E.L.T. 647 (T) and submitted that the analogy of jurisdiction under FERA as applicable to Customs also holds goods for jurisdiction under ITC. (E) With respect to the penalty on past exports, since the excess yarn is in factory, therefore it follows that short goods were shipped thereunder. The burden is on them to prove to the contrary. (F) The excess stock of yarn found not accounted for attracts Section 111(o), as involved. Non-invocation of Section 111(d) and meagre redemption fine of Rs. 1 lakh and no penalty are evidence of a lenient view having been taken. (G) No draw back would be available to MEPZ units as yarn was non-duty paid. Even if duty was paid, draw back of 15% would not be commensurate. (H) Clause 7 of relevant notification leaves option open with Customs to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y short. We further find that the Section 2(33) of the Customs Act, 1962 defines prohibited goods as follows :- Prohibited goods 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 complied with." 13. We further find that as per Clause 3(3) of Export Control Order No. 1/88 ETC, dated 30-3-1988 under Section 3 of Imports Exports (Control) Act, 1947, it is provided as follows :- If in any case, it is found, that the value, sort specifications, quality and description of the goods to be exported are not in conformity with the declaration of the exporter in those respects or the quality and specification of such goods are not in accordance with the terms of the export contract, the export of such goods shall be deemed to be prohibited. Applying these two laws to the facts of this case, we find that as both quantity and value were misdeclared in these shipping bills taken together, therefore these goods are hit by the aforesaid provisions and q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd any infirmity in the order impugned. 16. This leaves us to consider the third issue viz. dutiability and confiscability of unaccounted excess stock of imported yarn found in stock. There is no dispute of the goods alleged to have been found in excess of recorded balance in whatever accounts were being maintained. There is also no dispute on the fact that they are apart of those imported duty free under notification 263/85-Cus. What is disputed is whether in terms of Clause 1(7)(b)(i) of the said notification, whether duty is leviable on them or whether in terms of Clause 1(7)(b)(i) the importers (appellants) have time of one year for their re-export etc. and that question of dutiability arises only thereafter. The relevant portion of the said notification reads as under :- (7) the importer shall pay, on demand, an amount equal to the duty leviable - (a) on goods which are capital goods as are not proved to the satisfaction of the Collector of Customs to have been :- (i) installed or otherwise used within the Zone or re-exported within a period of one year from the date of importation thereof or within such extended period as the Collector of Customs may, on being satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves discretion to Customs to even extend this period of one year for re-export. In such a situation where two alternatives are provided for by law in an exemption notification, the general principle under taxation law, that the alternative which is chosen as favourable by the importer is to be allowed. In this case, the importer s say is that he chose to wait for one year before either re-exporting the yarn or paying-up. Hence, we find considerable merit in this submission of the learned Advocate. We find that as the period of one year from date of export had not expired on date of issue of SCN for duty amount and confiscation etc., the said proposals therein were premature. We, therefore, find that the demand of paying an amount equal to duty in this case needs to be set aside and order accordingly. Keeping in mind all the facts and circumstances of the case, we order that the interests of justice would be met if these goods are re-exported within three months from the date of this order. However, we also order that if this re-export is not completed within the said time-limit ordered above, then the appellants shall pay the amount equal to the duty leviable thereon as confirmed i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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