Director Of Agricultrure vs Collector Of Customs
2006 Latest Caselaw 1824 Del

JUDGMENT

S. Muralidhar, J.

Page 3245

1. This is an application for condensation of delay of 736 days in filing the present application under Section 130A of the Customs Act, 1962('Act') against the impugned order dated 19.9.2001 passed by the Customs Excise & Gold(Control) Appellate Tribunal ('CEGAT') in appeal No. C/530/93-B.

2. In explaining the reasons for the inordinate delay, it is stated that initially an appeal under Section 130 of the Act against the impugned order was filed on 10.7.2002 but was returned by the Registry as not maintainable. It is Page 3246 stated that the impugned order dated 19.9.2001 was received by the appellant on 1.1.2002 and the appeal was first filed in this Court in April, 2002 and re-filed on 10.7.2002. Much of the delay appears to have been taken up in curing the office objections on account of the issue of non-maintainability of the appeal initially filed.

3. From the reply to the application filed by the Collector of Customs, it appears that since the applicant is aggrieved only by imposition of redemption fine and the issue is not one concerning classification or valuation, the appeal under Section 130 of the Customs Act was indeed not maintainable. It is on account of this that the present application has been filed under Section 130A of the Act praying that the High Court may direct the Appellate Tribunal to refer the question of law in para 8 of the application to the High Court for its decision thereon.

4. The Applicant is the Directorate of Agriculture, Government of Rajasthan. The Respondent is a Department of the Government of India. In the peculiar facts and circumstances of the present case where there appears to have been a bonafide confusion on the appropriate remedy to be sought in this Court, we are of the view that it would be in the interests of justice to condone the delay in filing the present application.

5. Accordingly, this application is allowed.

CUS.A.C. 8/2004

1. The facts, which are not in dispute, are that the applicant placed order for supply of two Fometa Fodder Production units with M/s Fometa India Machines Private Limited ('FIMPL') in the year 1988. This was on the specific advice from the Deputy Secretary of the Government of Rajasthan by a letter dated 12.7.1988. By the said letter the applicant was also informed that the purchase of these machines may be arranged out of the amount of Rs. 5 crores received as subsidy from the Prime Minister's Relief Fund. It is the applicant's case that at the time of purchase of the two machines FIMPL represented that they were the absolute owners of the machines and made no mention of any liability of the purchaser for customs duty. The payment of Rs. 12.24 lakh was made to FIMPL for the said machines against their invoices dated 5.7.1988 in which it was indicated that the machines were exempted from payment of excise duty. The two machines were installed at Central Sheep and Wool Research Institute, Avika Nagar, District Tonk and National Centre for Camels at Bikaner respectively.

2. The facts that subsequently emerged were that these two machines were part of 56 other similar machines that had been imported by Sanjeevani Fodder Production Private Limited Mumbai('Sanjeevani') for which an adhoc exemption order No. 103/87 dated 30.3.1987 had been issued by the Ministry of Finance, Department of Revenue, Government of India. The exemption from payment of the customs duty on these machines were conditional upon Sanjeevani donating 50 units to Bharat Krishak Samaj ('BKS') within 15 days from the date of clearance of the goods and further that BKS would use these imported units only for demonstrating and training of farmers. There was a prohibition on BKS selling, transferring or disposing of these machines for a period of 5 years from the date of import of these machines.

Page 3247

3. In an investigation carried out by the Directorate of Revenue Intelligence(DRI) it transpired that the imported machines were not donated to the BKS and remained in control of Sanjeevani at various sites and were utilised for commercial production of fodder. When these violations came to light, the Respondent [Customs Department] swung into action and confiscated all these machines which were at various sites. These included the two machines purchased by the applicant herein.

4. In the adjudication proceedings that ensued, the applicant was issued a show cause notice by the Collector of Customs, Madras. In its reply dated 20.4.1990 to the show cause notice the applicant stated that it was a bonafide purchaser of the two fodder production units from FIMPL from the open market and that the said two units were therefore not liable for confiscation. This stand was reiterated by the applicant at the personal hearing before the said authority on 25.7.1991.

5. By the adjudication order dated 5.3.1993, the Collector of Customs, Madras inter-alia confiscated 50 fodder production units valued at Rs. 20 lakhs each and extended an option to M/s Sanjeevani to have the same released on payment of a redemption fine of Rs. 3.5. crores. The two fodder production units purchased by the applicant herein were also directed to be confiscated under Section 111(d) and (o) read with Section 120 of the Act, redeemable on a payment of a redemption fine of Rs. 4 lakhs. In the entire order dated 5.3.1993, the only discussion as regards the role of the applicant herein is as follows:

The government bodies/research institutions from whose custody the above five Fodder Production Units were seized/detained have represented that they have purchased the same without being aware of the legal implications. Though their representation on the whole is that they are bonafide purchasers, in so far as to goods are traced as to their illicit origin as aforesaid and hence, rendered liable for confiscation, the pleas put forth on behalf of the government institutions could only be taken into consideration as warranting a lenient view in the manner of determining the quantum of redemption fine, to be levied if any.

6. It is against the above order dated 5.3.1993 that the applicant herein filed an appeal before the CEGAT which, by the impugned order, has reduced the redemption fine from Rs. 4 lakhs to Rs 1 lakh. What is interesting is that in the impugned order, which is of 5 paragraphs, the entire reasoning is contained only in the last paragraph which reads as under:

After having gone through the records of the case and hearing the rival submissions and in view of the fact that the appellant is a State Government, we find that ends of justice would be met, if the redemption fine of Rs. 4 lakhs is reduced to Rs. 1 lakh. Accordingly, the appeal is disposed of in the above terms.

7. Mr. Aruneshwar Gupta, learned Counsel appearing for the applicant submits that the impugned order of the CEGAT contains no reasons whatsoever why the appellant should be required to pay any fine at all much less a reduced redemption fine of Rs. 1 lakh. He submits that neither the Collector of Customs in his order dated 5.3.1993 nor the CEGAT in its impugned order dated 19.9.2001 has adverted to the specific plea Page 3248 of the applicant herein that it is a bonafide purchaser of the units in question from the open market. The failure to give reasons, according to him, constitutes a substantial question of law, requiring reference to this Court in terms of Section 130A of the Act.

8. On the other hand, Mr. Gaurav Sharma, learned Counsel appearing on behalf of the Respondent submits that the redemption fine having already been reduced from Rs. 4 lakhs to Rs 1 lakh by the CEGAT, no substantial question of law arises which requires the exercise of jurisdiction of this Court under Section 130A of the Act.

9. Having considered the submissions of learned Counsel for the parties and having examined the records of the case, we are of the view that the case of the appellant has not been considered on merits either by the Collector of Customs, Madras in the adjudication order dated 5.3.1993 or by the CEGAT in its impugned order dated 19.9.2001. There does not appear to be any consideration of the question whether the applicant through its officers purchased these machines in the full knowledge that the seller FIMPL through Sanjeevani had violated the exemption notification on the basis of which the duty free import was permitted. The further question whether such purchaser should be required to pay a redemption fine for the release of such goods irrespective of whether it is actually a party to the illegal imports has also not been examined. We may in this context refer to the following observation of the Hon'ble Supreme Court in Jain Exports Private Limited v. Union of India AIR 1993 SC p.2387:

The quantum of the redemption fine would depend on the facts and circumstances of each case and no hand and fast rule can be laid down in that behalf. So also the mere fact that the importers had acted in good faith and bonafide will not entitle them to claim that the entire redemption fine must be waived. Even in such cases the fixation of the quantum of the redemption fee will depend on the totality of the facts and circumstances of the case. Therefore, even if in a given case the importers show that their action was bonafide, that by itself will not entitle them to a waiver of the full redemption fine....

It was further held by the Hon'ble Supreme Court that(SC p. 2387):

Before we address ourselves to the question whether the facts and circumstances of this case warrant a total or partial waiver of the redemption fine it is necessary to bear in mind the fact that the fixation of the quantum of the redemption is in exercise of the discretionary jurisdiction of the authorities under the Customs Act and ordinarily the Court, while exercising jurisdiction either under Article 32 or under Article 136 of the Constitution would be slow to interfere with such an order unless it is shown to be thoroughly arbitrary or whimsical resulting in gross miscarriage of justice.

Page 3249

10. We are of the considered view that in the absence of any discussion by the Collector of Customs, Madras in the adjudication order dated 5.3.1993 of the case put forth of the applicant herein, the mechanical imposition of the redemption fine was without application of mind to the relevant material and was not justified exercise of the discretion vested in him. Further, the CEGAT was bound to pass a reasoned order for sustaining the imposition of redemption fine, even for a lesser amount. It is far too well settled that the CEGAT, while disposing of an appeal, has to give a reasoned order. A reference in this regard may be made to the decision of the Hon'ble Supreme Court in Standard Radiators (P) Ltd. v. CCE and this Court in Falcon Air Cargo & Travels(P) Ltd. v. UOI . The failure to give reasons in the impugned order gives rise to the following substantial question of law which would require to be referred to this Court by the CEGAT:

Is the impugned order dated 19.9.2001 passed by CEGAT liable to be set aside on the ground that the CEGAT has failed to give any reason for upholding the imposition of redemption fine on the applicant, Directorate of Agriculture, Jaipur Government of Rajasthan even while reducing the redemption fine from Rs. 4 lakhs to Rs 1 lakh?

11. We could dispose of this application by directing the Central Excise and Service Tax Appellant Tribunal ('CESTAT') to refer to the above question of law to this Court for being answered in terms of Section 130A of the Act. However, since we have examined the matter at length we are inclined to answer the said question ourselves, in the affirmative, thus avoiding further loss of time in sending the matter to the CESTAT for its again being referred to us. This course commends itself to us in the peculiar facts of the present case. In the circumstances, we set aside the impugned order dated 19.9.2001 passed by the CEGAT. The matter is remanded to the CESTAT for a rehearing of the applicant's appeal. The CESTAT will dispose of the appeal on merits and passed a reasoned order after hearing the parties.

12. The application stands disposed of accordingly.