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TMI Blog1995 (9) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... position of penalty were also proposed. The respondents sent their reply to the show cause notice and were also granted personal hearing by the Collector. The Collector passed the impugned order after taking note of the replies and the submissions made in the hearing as also the affidavits, opinions etc., filed by both the sides. He substantially dropped the charges leveled in the show cause notice but held that the value of two items, Screw Pump Motors and Booster Pump Motors should be appraised by the Assistant Collector and duty assessed thereon at the Project Contract Rate under Heading 84.66 of the Customs Tariff. He also directed that the dismantling charges amounting to US $ 1.55 million be added to the value of the last consignment imported as part of the reconditioned equipment for assessment of duty under the same Tariff Heading. The respondents have filed their cross-objection to the appeal filed by Revenue wherein they have challenged the findings adverse to them. Both the Revenue appeal and the cross-objection are disposed of by this order. The facts leading to the adjudication order passed by the Collector which, in turn, has given rise to the present proceedings have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and installed at the PFY plant in Patalganga by mis-declaration, should not be deemed confiscable under Section 111 of the Customs Act, 1962 and why penalty should not be imposed upon M/s. RIL under Section 112 of the said Act; (c) Why the differential duty not paid to the extent of ₹ 74,34,10,211.58 should not be recovered from M/s. RIL on account of final assessment on merits of the entire PFY Project under 84.59 (2) as projects were registered by mis-declaration and intent to evade duty; (d) Why the Customs duty of ₹ 45,30,36,344.22 not declared at the time of import for assessment should not be recovered on the 4 additional machine lines from M/s. RIL; and (e) Why in respect of (c) and (d) above done with intent to evade duty the plant should not be deemed to be confiscable under Section 111(m) and (1) and why penalty should not be leviable on M/s. RIL under Section 112 of the Customs Act, 1962. 3. After the respondents had sent their reply to the show cause notice denying the charges and requesting for permission for (1) introduction of evidence in support of their case, (2) cross-examination of the signatory of the show cause notice and other Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new and fresh show cause notice containing new and fresh charges. It was contended that such a course of action was contrary to the principles of natural justice and fair play. Though the Collector had rejected this contention while passing his order, this plea has been reiterated by them before us while defending themselves in the departmental appeal and will be dealt with in detail, later on. 5. The allegations raised against RIL in the adjudication proceedings relate to the new machines and equipment imported by them as well as the reconditioned ones. As far as the new machines are concerned, the allegation is based upon the stand that what was allowed to be imported by them and for which they had registered a machinery contract for assessment at uniform machinery rate was machinery for production of 10,000 Tonnes of Polyester Filament Yarn whereas they had imported machines of more than double that capacity. It was hence alleged that the same were not covered by the Import Licence submitted by them for their clearance and that they were not eligible for the benefit available under the machinery contract procedure. Going by the estimated capacity of the machines and doubling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.0 cc/rev with water-plates, pump gear heads, variable speed motors and drive shafts. 7. 2560 Nos. Spinning pack assemblies with heat treated installation bolts. 8. 1 lot impact wrenches for pack installation and removal. 9. 4 sets of quench air systems each consisting of 33 Nos. positional quench air supply including replaceable distribution grid screen, supply fans, with motors (each 22 K.W.) absolute filter banks, coils, humidifier, instruments and control for accurate of quench air-conditions, and special quench air ducts within the spinning machine. 10. 4 sets of Waste conveying and collection system with waste jet assemblies and cut down devices. 11. 4 sets of finish oil application systems each complete with finish circulation pumps, 2 Nos. S.S. 15 gpm, head tank (SS), basked filters (SS), finish pans, rolls and drive motors. 12. 4 sets of inter floor tubes (total 129 Nos.) of special design. 13. 4 sets interlacing jet assemblies, waste jet assemblies. 14. 4 lots variable frequency power supply system with 9 functions each, solid state, each of cap. 500 KVA. 15. 4 sets of wind-up assemblies (total 130 Nos.) of 8 ends take-up each, with individual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents wherein he had stated that item No. 4 of the licence in question covered only the frames, mounting positions, brackets, etc. and not the complete spinning machines. This opinion was rejected by the Collector. He also considered the judgment of Bombay High Court and of the Supreme Court in Lokash Chemicals Works v. M.S. Mehta 1981 ELT 235 and Tata Chand Gupta AIR 1971 SC 1558 respectively and took note of the observations therein that it is not for the customs authorities to interpret licensing policy or to enforce the same once a valid licence is produced and that if a licence is granted in respect of a particular item by the licensing authority, the customs authority will have no right or power to go beyond the licence and determine as to whether the said licence related to prohibited item. He must assume the licence to be effective unless and until cancelled by proper authorities. He had then considered the departmental note prepared by the officers for spelling out the basis of the allegations which was furnished to the respondents. In the said note, the department relied upon certain correspondence addressed by the respondents to the different authorities as well as the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermination of the points arising out of the impugned order. When the appeal is examined, the Collector's order will come into proper focus. 10. The Central Board of Excise and Customs has passed their Order No. 62/R-69 dated 29.12.1989 under Section 129D(1) of Customs Act, 1962 in respect of the Collector's aforesaid order after calling for and examining the records leading thereto. It has been stated in their order that the Collector's order holding that:-- (i) the four additional machine lines were legally imported; (ii) the assessable value declared in the Bills of Entry except for Screw Pump Motors and Booster Pump Motors and the dismantling charges was in order; (iii) the production capacity of the imported plant was as per contract and industrial licence; (iv) they had not contravened either the provisions of Customs Act or Imports and Exports (Control) Act warranting penal action under Sections 111 and 112 of Customs Act; Is not legal and proper for the reasons spelt out by them. Thus, it has been stated that the Collector has wrongly reasoned that spinning frame could not be a spinning machine as detailed in Entry 4 of the list attached to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to decide the number of machines that were to be imported. Likewise the Collector had grossly erred in his finding that the direct evidence in the form of their letter dated 7.6.1984 addressed to the Ministry of Industry, their letter dated 20.10.1986 addressed to the Deputy Collector of Customs and the written statement of their Project Manager, Shri Narayan asserting that eight machines only and not twelve machines were imported could not be taken cognisance of in deciding the number of machines. These letters and statement confirmed that RIL had committed themselves irrevocably to a position that their documented transactions covered under the import licence in question were only for 4 spinning machine lines. He had likewise failed to recognise that the chartered engineer's certificate is the basic document on which the import licence for a specified value and quantity is issued. No import licence could be issued for a second-hand reconditioned capital goods without a Chartered Engineer's certificate. Any ambiguity in the import licence regarding value and quantity could be resolved by referring to the Chartered Engineer's certificate which is the respondent's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject installed capacity and the proposed addition thereto. Here, the installed or designed capacity of the plant was found to be much in excess of the licensed capacity. It was extraordinary and doing violence to the spirit and the letter of the Project Import Regulations to hold that this fact was irrelevant for determining whether the procedure of registration of contract with the customs authorities had been properly gone through. 11. It is then pointed out in the Board's order that the Collector failed to appreciate that the Government issued the letter of intent on 4th December, 1980 indicating annual capacity of 10,000 M. Tons without mention of denierage. The industrial licence issued on 17.8.1981 also did not mention any denierage. The claim of RIL that the capacity of their plant should be reckoned in terms of 40 Deniers has not been substantiated as there was no mention of 40D texturised yarn in their Agreement with Du Pont. The Board has accordingly held that RIL had illicitly imported spinning machine lines, undervalued the import of their entire plant and wrongly availed project import rate of duty, evading duty amounting to ₹ 119,64,46,556/-. With these r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies to the extent of ₹ 119,64,46,555.80 (Rupees One Hundred Nineteen Crores, Sixty Four Lakhs, Forty Six Thousand Five Hundred Fifty Five and Paise Eighty only); ix) Whether in the facts and circumstances of the case, this is a fit case for imposing a redemption fine in lieu of confiscation. If so, the quantum thereof; x) In the facts and circumstances of the case, whether this is a fit case of imposing a penalty under Section 112 of the Customs Act, 1962 on the importers. If so, whether the quantum of penalty should be commensurate with the offence having regard to the economic benefits accrued to the importers to date; and xi) Generally. 13. A statement of facts of the case has been given as Annexure I to the application wherein, apart from the relevant details which have been furnished in the impugned order of the Collector as well as in the Board's order, it has, inter alia, been pointed out that while the respondents had been contending till the issue of show cause notice that against the particular licence in question they had imported 4 spinning machine lines with 64 positions each and that after importation these four machines were split into 8 machine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 8 spinning lines and that 4 SM lines out of the same were having 64 positions each with 8 ends per position had not been controverted and resiled. He failed to take into account that none of their licences permitted import of spinning machines having 64 positions with 8 ends per position but only SM lines having 32 positions with 8 ends per position. He had erred and failed to act judiciously in ignoring the Chartered Engineer's certificate for determining the quantum of machinery imported. He failed to appreciate the relevance of Chartered Engineer's certificate for the import of second-hand machinery. He was in error in ignoring the relevance of break up invoice value for items A5 to A18 and item A4 for determining the number of spinning machine lines covered by the import licence as also the relevance of interconnection between the capacities of continuous polymerisation units and the spinning machines. He had erred in ignoring their letters to Industrial Credit and Investment Corporation for foreign currency loan and their letter dated 7.6.1984 to Ministry of Industry with reference to Proforma Invoice dated 9.3.1984. Without any basis, he had erroneously recorded a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chartered Engineer's certificate cannot be the basis for determining the value of the 13 spinning machines admittedly imported since it was only for 4 second-hand reconditioned spinning machines produced for evaluation. He was in error in extending the benefit of concessional rate of duty under Heading 84.66 of the Tariff when the capacity and value of the machinery imported were mis-declared. He erred in denying the right of the customs authorities to decide the validity of the import licences having regard to various factors including consultation with concerned authorities and relevant documents. He was in error in preventing the proper officers of customs to pass the appropriate orders for final assessment of the imported goods on proper evaluation under Heading 84.66 of the Customs Tariff. The last ground of appeal is that he was in error in dropping the charges (a), (b), (c) and (d) of para 26 of the show cause notice. 15. In their cross objection filed on 15.3.1990 the respondents have, inter alia, reiterated their earlier plea taken before the Collector that what he had done under the guise of supplying the basis of charges in the show cause notice was to send a fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of the Department has been that all the issues raised in the Writ Petition may be raised by the Petitioner before the Tribunal. Nothing, therefore, survives in the Writ Petition. It is dismissed as withdrawn. The appeal ultimately came up for hearing before us from 20th March, 1995 to 24th March, 1995 and from 27th March, 1995 to 30th March, 1995. The appellant Collector was represented by Shri N.V. Raghavan Iyer, learned Counsel, Shri A.S. Sunder Rajan, learned Consultant and Shri K.K. Jha, learned Senior Departmental Representative. The respondents were represented by S/Shri Rohan Shah and Ashok Mehta, learned Counsels, instructed by M/s. Kanga Company, Advocates Solicitors on 20th March who were joined by Shri J.J. Bhatt, learned Counsel from 21st March, 1995 onwards. 17. Shri N.V. Raghavan Iyer, learned counsel for the appellant Collector made a point that the respondents have raised certain preliminary objections and it will be necessary to get a decision thereon before he makes his submissions on merits. Explaining the position, he stated that the preliminary objections raised relate to the question whether the Central Board of Excise Customs had proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t fitness, appropriateness, suitability, appropriateness to the circumstances or conditions, conformity with requirement, rule or principle, Tightness, correctness, justness etc. As the term propriety thus covers correctness also, the objection taken against the Board's examination of the Collector's order does not stand and is dismissed. 18.1. In the writ petition filed by the present respondents before the High Court against the Board's order, mala fide exercise of power by the Board was alleged. It was, however, stated by the learned counsel that this point is not being pressed. It was also their stand in their Writ Petition that the Tribunal does not have the right and authority when making the final adjudication order to modify the order appealed against to the prejudice of the petitioners. We find that under subsection (4) of the said Section, an application filed to the Tribunal shall be heard by it as if such application were an appeal and made against such order or decision of the adjudicating authority and the provisions of the Act regarding appeals shall, so far as may be, apply to such applications. In terms of Section 129B the Tribunal may, after giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication for the purpose of correct determination. As the general reference above points has followed their discussion on various parts of the decision where they have spelt out their area of difference, the points for determination by the Tribunal in the appeal have been indicated. In fact, the respondents have also addressed arguments in refutation of such points. 20. The merits of the case were then argued by Shri Raghavan Iyer, ld. Counsel for the appellant Collector. He referred to the charge leveled against the respondents in the show cause notice that they had imported plant and machinery for the manufacture of polyester filament yarn which were of nearly double the licensed capacity which were, therefore, not covered by the capital goods import licences produced by them. They were also not covered by the contract executed by them with the Custom House under the machinery contract procedure and hence the goods in question were not eligible for the benefit of assessment at the concessional rate under Heading 84.66 of the Tariff. Further they had imported second-hand reconditioned spinning machines in excess of what they were permitted to import and hence such excess impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resh. (6) The question of fine in lieu of confiscation and penalty is linked with the de novo decision to be taken by the Collector. (7) As far as the cross-objection filed by the respondents is concerned, the same is dismissed. The appeal and cross-objection are disposed of on the above terms. Sd/- (K. Sankararaman) Member (T) Dt. 12.9.1995 P.K. Desai, Member (J) I have gone through the order, as proposed by my learned brother and am in complete agreement with the same. Though my ld. brother has exhaustively dealt with the facts as well as the law, with a view to supplement the same with my own independent assessment of the issues raised, I deem it desirable to pass a separate self contained order. Be it clarified that there is no divergence in the opinion between us. Omissions or additions as also laying emphasis on some points, merely indicate difference in mode and manner of dealing with an issue. 22. Under these circumstances, as also considering all the other points urged, there appears no merit in the contentions raised by the appellants, except in relation to the correct assessable value, and the appeal stands rejected on all other counts and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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