Gujarat High Court
Cmr Chiho Industries India Pvt Ltd vs Union Of India on 6 April, 2021
Bench: Sonia Gokani, Sangeeta K. Vishen
C/SCA/10521/2020 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 10521 of 2020
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MS. JUSTICE SANGEETA K. VISHEN
==========================================================
1 Whether Reporters of Local Papers may be allowed to
see the judgment ? YES
2 To be referred to the Reporter or not ?
YES
3 Whether their Lordships wish to see the fair copy of the
judgment ? NO
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
NO
order made thereunder ?
==========================================================
CMR CHIHO INDUSTRIES INDIA PVT LTD
Versus
UNION OF INDIA
==========================================================
Appearance:
MR DHAVAL SHAH(2354) for the Petitioner(s) No. 1,2
for the Respondent(s) No. 1,4
MR DEVANG VYAS(2794) for the Respondent(s) No. 2,3
==========================================================
CORAM: HONOURABLE MS. JUSTICE SONIA GOKANI
And
HONOURABLE MS. JUSTICE SANGEETA K. VISHEN
Date : 06/04/2021
ORAL JUDGMENT
(PER : HONOURABLE MS. JUSTICE SONIA GOKANI)
1. This is a petition preferred by the companies
in the matter relating to the Customs Act, 1962
('the Act' for short) and the Customs Tariff Act
C/SCA/10521/2020 JUDGMENT
seeking to quash and set aside the detention and
seizure by way of a writ jurisdiction.
2. This Court (Coram: Mr.Vikram Nath and Mr.
J.B.Pardiwala, CJ.,J.) at the time of issuance of
notice passed the following order on 07.09.2020:
"1. By this writ application under Article 226 of the Constitution
of India, the writ applicants have prayed for the following reliefs;
"(A) YOUR LORDSHIPS may be pleased to issue a writ of
Certiorari or writ n the nature of certiorari quashing and setting
aside the detention and seizure dated 29.07.2020 (AnnexureH
Colly), dated 03.08.2020 (AnnexureL & M) & 11.08.2020
(AnnexureW Colly);
(B) In addition to and in alternate to relief (A) above, Your
Lordships may be pleased to direct the Respondents their servants
and agent to release the goods provisionally, on such terms and
conditions that this Hon'ble Court deems proper;
(C ) During the pendency and final disposal of the present
petition, Your Lordships may be pleased to stay the
implementation of the Detention/ Seizure dated 29.07.2020
(AnnexureH Colly), 03.08.2020 (AnnexureL & M) & 11.08.2020
(AnnexureW Colly);
(D) This Hon'ble Court may be pleased to release the goods under
detention and Seizure pending hearing and final disposal of this
petition on such condition as are deemed proper;
(E) An exparte adinterim relief in terms of Para 8(C ) & 8(D)
above may kindly be granted on such terms and conditions
deemed fit by this Hon'ble Court.
C/SCA/10521/2020 JUDGMENT
(F) Any other further relief as may be deemed fit in the facts and
circumstances of the case may also pleased be granted."
2. The writ applicants are Private Limited Companies and are
engaged in the business of recycling/dismantling imported old
unserviceable electric motors.
In fact, the writ applicant No.1 is the main Company and the writ
applicant No.2 is its sister concern. Prima facie, it appears from
the materials on record that an extensive search was carried out
by the officials of the DRI at the warehouse/factory premises of
M/s. CMR Chiho Industries India Pvt. Ltd., situated at the
Survey No.995 (Old Survey No.454/3), Village Balasa Taluka:
Kadi, District: Mehsana on 28/29.07.2020. It came to the notice of
the respondents that M/s. CMR Chiho Recycling Technologies
Pvt. Ltd (the writ applicant No.2) also operates from the same
premises and the main business of these companies of the same
group is the segregation of copper, aluminum and iron/steel scrap
from the imported motor scrap from different types of motors, i.e,
large motors, medium motors, small motors etc. ]
3. To put in nutshell, the case of the Department against the writ
applicants is that the goods, i.e, scraps in different forms seized
from the premises were found to be imported without payment of
appropriate customs duty by wrongfully availing the benefit of the
notification.
4. The principal allegation levelled by the Department against the
writ applicants is that M/s. CMR Chiho Recycling Technologies
Pvt. Ltd. filed the Bills of Entry at the Thar Dry Port, ICD
Customs, Sanand falling under the jurisdiction of the
Commissioner of Customs, Ahmedabad by declaring the
description of their product as "discarded and nonserviceable
semibroken/broken motor" by mentioning CTH 7204 49 00 under
the Other Ferrous Waste and scrap.
5. The rawmaterials and finished goods lying in the factory were
seized under four different Seizure Memos dated 29 th July, 2020
and the seized goods were handed over to the Operation Manager
under the Panchnama dated 29 th July, 2020. It appears that the
respondent No.4 directed the writ applicants vide letter dated
03.08.2020 to pay the total differential duty of Rs.2,51,13,372/
C/SCA/10521/2020 JUDGMENT
and the interest as applicable on the ground that the benefit of the
Notification No.50/17CUS dated 30th June, 2017 was not
available in respect of the Copper Scrap Barely/Birch in which
case the said duty is required to be paid at the rate of 5% and,
therefore, the assessable value needs to be reassessed in view of
the different prices of respective types of scrap. It also appears
from the materials on record that the finished goods, I.e., after
dismantling/segregated scrap of 78710.6 Kgs of the estimated
value of Rs. 1,72,25,108/ of the ownership of M/s. CMR Chiho
Recycling Technologies Pvt. Ltd stored in the premises of their
sister concern, namely, M/s. CMR Chihor Industries Pvt. Ltd,
was also seized on 29th July, 2020 under the Panchnama dated
29th July, 2020.
6. It further appears that the entire matter, at present, is under
the investigation of the DRI. The Deputy Director, DRI, Zonal
Unit has issued "No Objection" for the provisional release of the
seized goods on 03.08.2020 and 11.08.2020 respectively.
7. The importer, i.e, the writ applicant No.1 applied for the
provisional release of the seized goods vide their application dated
05.08.2020. Upon receipt of the application, the same was
processed. The provisional release of the seized goods has been
ordered on the following terms and conditions;
" (1) Goods seized under Seizure Memo No.03.08.2020 of M/s.
CMR Chiho Recycling Technologies Pvt. Ltd, for quantity:
78710.6 Kgs valued at 17225108/ provisionally release on filling
of Bond of full value of the goods i.e., 17225108/ with Bank
Guarantee/ Cash Security Deposit of Rs.20,00,000/.
(2) Goods seized under Seizure Memo No.03.08.2020 of M/s. CMR
Chiho Industries Pvt. Ltd, for quantity 6884651 Kgs valued at
38,02,85,614/ provisionally release on filling of Bond of full
value of the goods i.e, 38,02,85,614/ with Bank Guarantee/Cash
Security Deposit of Rs.6,94,00,000/.
(3) Goods seized under Seizure Memo No.11.08.2020 of M/s. CMR
Chiho Industries Pvt. Ltd, for Bill of Entry No.8262901 dated
24.07.2020 of quantity 26140 Kgs valued at 23,59,891/
provisionally release on filling of Bond of full value of the goods
i.e. 23,59,891/ with Bank Guarantee/Cash Security Deposit of
Rs.4,31,000/
C/SCA/10521/2020 JUDGMENT
(4) Goods seized under Seizure Memo No.11.08.2020 of M/s.
CMR Chiho Industries Pvt. Ltd., of quantity 604990 Kgs valued
at 32256787.02 provisionally release on filling of Bond of full
value of the goods i.e., 32256787.02 with Bank Guarantee/Cash
Security Deposit of Rs.1,28,00,000/."
8. It is not in dispute that the writ applicants have not got the
goods released on furnishing the Bank Guarantee of the requisite
amount, referred to above.
9. We have heard Mr. Deven Parikh, the learned senior counsel
appearing with Mr. Dhaval Shah, the learned counsel for the writ
applicants and Mr. Devang Vyas, the learned Addl. Solicitor
General of India appearing for the respondents at length.
10. Mr. Parikh, the learned senior counsel has raised manifold
contentions as regards the legality and validity of the seizure of
the goods itself. The principal argument of Mr. Parikh is that
wrong classification of the goods under a particular head can
never be liable to confiscation and, therefore, the seizure itself is
illegal.
11. On the other hand, this writ application has been vehemently
opposed by Mr. Vyas. Mr. Vyas has raised a preliminary objection
as regards the maintainability of this writ application on the
ground of availability of alternative remedy in the form of
statutory appeal to the writ applicants. Mr. Vyas would submit
that the order of seizure of goods as well as the order of
provisional release of the goods is appealable under the
provisions of the Customs Act, 1962.
12. According to Mr. Parikh, the order of seizure is not appealable
and the only remedy for his clients is to come before this Court
invoking its writ jurisdiction under Article 226 of the Constitution
of India.
13. Mr. Parikh would submit that, as on date, the business of the
Company has come to a standstill. The seizure of the goods by the
Department has virtually brought the entire Industrial Unit to a
grinding halt. Almost 250 workers are without wages as there is
no work with the Company because of the seizure of the goods. He
C/SCA/10521/2020 JUDGMENT
would submit that if the Company is asked to furnish the Bank
Guarantee to the tune of Rs.8.46 Crore, then the Company will
have to raise the requisite balance in their Bank Account of such
amount. He would submit that only thereafter the Bank would
issue a Bank Guarantee. Mr. Parikh would submit that having
regard to the present scenario, even otherwise, the company is
facing acute financial crunches.
14. Mr. Parikh, the learned senior counsel submitted that the
larger issues involved in this writ application including the issue
whether any alternative remedy is available to the writ applicants
under the provisions of the Customs Act or not may be looked into
by this Court at a later stage. However, the fervent request made
by Mr. Parikh, as on date, is to release the goods in question
without insisting for furnishing of the Bank Guarantee of Rs.8.46
Crore as demanded by the Department. Mr. Parikh pointed out
that the amount of Rs.8.46 Crore, referred to above, includes
Rs.2.08 Crore approx. towards the differential duty. Mr. Parikh
has provided the following chart for the convenience of this Court.
S Co Date Plac Goo Good Our Letter Tota (%) Bon Duty Dut Pa
r mp of e of ds s requ recei l BG OF d calcu y ge
N any seizur seizu value value est ved aske Ban equa latio calc N
o e/lette re (FG) (RM) lette from d by k l to n as ulati o.
. r as decla r to Custo the Gu valu per on of
receiv decla red relea ms Rev ara e of our as th
ed red by se for enue nte good calcu per e
by Petiti goo Provi (Lac e s as latio Cus pe
Petiti oner ds sional s) on decla n tom titi
oner prov releas the red (Lac dept on
ision e val by s) . on .
ally ue the sing
of petiti le
the oner item
goo (Lac
ds. s)
1 CC 03.08. Fact 1,72, - 4.08 27.08 20.0 11. 172. 5.58 - 10
RT 2020 ory 25,1 .20 .20 0 61 25 8-
2 CC 03.08. Fact 5,83, 32,1 4.08 01.09 694. 18. 3802 123. - 11
IIP 2020 ory 62,1 9,23, .20 .20 00 25 .85 40 2-
C/SCA/10521/2020 JUDGMENT
3 CC 11.08. ICD - 23,5 13.0 31.08 4.31 18. 23.5 0.76 - 13
IIP 2020 9,89 8.20 .20 27 9 5 9-
4 CC 11.08. ICD - 3,22, 13.0 05.09 128. 39. 322. 78.9 - 14
IIP 2020 56,7 8.20 .20 00 68 56 9 2-
5 CC 03.08. - - - - - - - - - 9.72 10
6 CC 06.08. - - - - - - - - - 200. 10
IIP 20 81 0
L
Total 846. 4321
31 .25
15. Mr.Vyas, the learned Addl. Solicitor General of India
submitted that with a view to protect the interest of the Revenue,
the writ applicants must be asked to furnish the Bank Guarantee
as demanded if they want provisional release of the goods
inquestion. Mr.Vyas pointed out that the goods seized are in the
form of rawmaterials as well as finished goods.
16. Mr.Vyas has furnished four charts of four seizures as under:
Bond Value Value of Goods seized Rs.38,02,85,614/-
Bank Entire amount of duty leviable Rs.1,04,57,854/-
Guarantee on seized goods (Duty @2.5% +
amount 10% Surcharge)
IGST @ 18% Rs.18,82,414/-
Total Duty Rs.1,23,40,268/-
Redemption Fine @ 10% of Rs.3,80,28,561/-
value of seized goods
Penalty @ 5% of the value of Rs.1,90,14,281/-
seized goods
Total Rs.6,93,83,110/-
Bond Value Value of Goods seized Rs.23,59,891/-
Bank Entire amount of duty leviable Rs.64,897/-
Guarantee on seized goods (Duty @2.5% +
amount 10% Surcharge)
IGST @ 18% Rs.11,681/-
C/SCA/10521/2020 JUDGMENT
Total Duty Rs.78578/-
Redemption Fine @ 10% of Rs.2,35,989/-
value of seized goods
Penalty @ 5% of the value of Rs.1,17,995/-
seized goods
Total Rs.4,30,562/-
Bond Value Value of Goods seized Rs.3,22,56,787/-
Bank Entire amount of duty leviable Rs.17,74,123/-
Guarantee on seized goods (Duty @2.5% +
amount 10% Surcharge)
IGST @ 18% Rs.61,25,564/-
Total Duty Rs.78.99.687/-
Redemption Fine @ 10% of Rs.32,25,679/-
value of seized goods
Penalty @ 5% of the value of Rs.16,12,839/-
seized goods
Total Rs.12,73,8,205/-
i.e. Rs.128 Crore
Bond Value Value of Goods seized Rs.17,22,5,108/-
Bank Entire amount of duty leviable Rs.4,73,690/-
Guarantee on seized goods (Duty @2.5%
amount + 10% Surcharge)
IGST @ 18% Rs.85,264/-
Total Duty Rs.5,58,954/-
Redemption Fine @ 10% of Rs.8,61,255/-
value of seized goods
Penalty @ 5% of the value of Rs.8,61,255/-
seized goods
Total Rs.22,81,465/-
17.Having heard the learned counsel appearing for the
parties and having gone through the materials on record,
we are of the view that the larger issues, more particularly
the legality and validity of the seizure, shall be examined
on the next date of the hearing including the preliminary
objection raised on behalf of the respondents as regards
the alternative remedy available to the writ applicants.
C/SCA/10521/2020 JUDGMENT
However, having regard to the submissions made by Mr.
Parikh, we would like to balance the equities at this stage.
We would like to see that the writ applicants do not have
to suffer a huge loss in their business, and at the same
time, we must also ensure that the interest of the Revenue
is also protected.
18.We, accordingly, direct the writ applicants to furnish a
running Bank Guarantee of any Nationalized Bank to the
tune of Rs.2.00 Crores, and at the same time, the DRI
shall retain with them the rawgoods/materials upto the
value of Rs.10 Crore. If the writ applicants furnish the
Bank Guarantee, as referred to above, then the
respondents shall provisionally release the rest of the
goods (raw materials/finished) at the earliest.
19.Post the matter for further hearing on 12102020. "
3. It emerges that pursuant to these directions,
the Bank Guarantee of nationalized Bank to the
tune of Rs.2 Cr. has already been furnished and
the DRI has returned the raw goods/materials
worth Rs.10 Cr. The respondent has provisionally
released the rest of the goods, raw material,
however, subsequently by continuing the regular
business of import of goods in question when the
request was made to the Custom Commissioner to
clear the goods on a provisional assessment basis
by the petitioner for 49 Bills of Entry for the
period between 22.09.2020 to 08.12.2020 on
C/SCA/10521/2020 JUDGMENT
furnishing the bond for the full value of the
goods, the petitioner had been allowed to clear
the goods on the payment of duty of 2.5% on basic
custom duty. However, that order came to be
recalled by the respondent for 18 Bills of
Entries, which were assessed provisionally and
once again, they were reassessed provisionally at
the rate of 5% on basic custom duty.
4. The further consignment also arrived where
the petitioner also encountered the similar
difficulties and therefore, it has preferred a
separate petition being Special Civil Application
No.673 of 2021.
5. So far as the present petition is concerned,
the affidavitinreply has been filed by the
respondent No.3 - Director of Revenue
Intelligence ('the DRI' for short), who is
working as Deputy Director at DRI, wherein the
contention has been raised that the petitioner
unduly availed benefit of concessional rate of
2.5% Basic Customs Duty ('the BCD' for short)
C/SCA/10521/2020 JUDGMENT
instead of 5% in terms of serial No.368 of
Notification No.50/2017CUS dated 30.06.2017. On
the search being conducted of the premise of the
petitioner and of the Customs Broker Firm, the
Panchnama is drawn and the documents have been
seized. The statement recorded of various persons
also indicate how undue benefits have been reaped
by the petitioner company.
6. Another company of the same group Century
Metal Recycling i.e. of M/s.CMR CHIHO Recycling
Technology Private Limited petitioner No.2 was
operating from the very premise. The main work of
both these companies was segregation of Copper,
Aluminum and Iron/Steel scrap from imported motor
scrap and segregation of Copper from different
types of motors i.e. large motors, medium motors,
small motors and those segregated manually by the
labours. Mr.Navin Sharma the main officer
handling operation was available and he explained
that all imported goods received were not meant
for melting of Iron and Steel, but they also
C/SCA/10521/2020 JUDGMENT
consisted of Copper and Aluminum and after
dismantling, these goods were sold in different
forms i.e. Cast Iron Scrap, Copper Scrap,
Aluminum Scrap (US Tense H), MS Rotor, MS
Stamping, Old bearing scrap, Wires etc. to
different customers. Various machineries namely
Wet Shredder, Copper Pullers, Copper Granulator,
Press machines were found operating in the
premise for segregation, extraction and
dismantling of Copper from motor scrap. The team
also found physically in the compound the goods
after dismantling namely cast Iron scrap, Iron
scrap, Copper, MS Stamping, MS Rotter, PVC Wire
scrap, Old Bearing scrap, US Tense (Aluminum
scrap), Aluminum wire scrap, Stainless Steel
scrap, Rubber Plastic etc.
7. It is further the say of the respondent that
various goods in different forms lying in the
premise were found to have been imported without
payment of appropriate customs duty by mis
declaring the same and wrongly availing the
C/SCA/10521/2020 JUDGMENT
benefit of Notification No.50/2017CUS dated
30.06.2017. Therefore, the imported raw material
and finished goods belonging to both the
petitioners have been detained and seized.
8. It is further the say of the respondent that
the goods are not the melting scrap of Iron and
Steel (other than stainless Steel) as they have
been imported with an objective of dismantling
and procuring high valued product Copper. The
percentage of Copper is around 10% and it is
evident from the certificate of the analysis
furnished along with the import documents. There
is a sufficient reason to believe that the
petitioners had improperly imported the goods by
misdeclaring the same under Section 46 of the
Customs Act, 1962 with an intent to avail undue
benefit of concessional rate of duty of 2.5% and
therefore, the confiscation in terms of Sections
111(f) 111(m) of the Act is obligated. The goods
were initially seized on 03.08.2020 and
thereafter also, the cargo consisting of the same
C/SCA/10521/2020 JUDGMENT
goods were imported and seized on 11.08.2020 and
for the release of the goods, the mechanism has
been prescribed under Section 110(A)of the Act.
It is further contended that the respondent has
considered Note 7 of Section XV of Customs
Tariff, which speaks of classification of
composite articles except where the heading
otherwise requires, the articles of base metal
(including articles of mixed material treated as
the articles of base metal under the
interpretative Rules) containing two or more base
metal are to be treated as articles of the based
metal predominating by weight over each of the
other metals.
8.1 With Reference to ground C of the
petition, it is submitted that, the respondent
thoroughly considered Note 7 of Section XV of
Customs Tariff. The said Note 7 is reproduced
herein below for ready reference:
"Classification of composite articles: Except where the
heading otherwise require, articles of base metal (including
C/SCA/10521/2020 JUDGMENT
articles of mixed materials treated as articles of base metal under
the interpretative Rules) containing two or more base metals are
to be treated as articles of the base metal predominating by
weight over each of the other metals. For this purpose:
(a) Iron and Steel, or different kinds of iron or steel, are regarded
as one and the same metal;
(b) An alloy is regarded as being entirely composed of that metal
as an allow of which, by virtue of Note 5, it is classified, and
(c) A cermet of hading 8113 is regarded as single base metal."
In view of the above Note 7, the respondent
submits that Section XV of Customs Tariff covers
commodities with heading "Base Metals and
Articles of Base Metal". In Section XV, there are
12 Chapters which are as: Chapter 72 (Iron and
Steel), Chapter 73 (Articles of Iron and Steel),
Chapter 74 (Copper and Articles thereof), Chapter
(Reserved for Possible Future Use), Chapter 78
(Lead and Articles thereof), Chapter 79 (Zinc and
Articles thereof), Chapter 80 (Tin and Articles
C/SCA/10521/2020 JUDGMENT
thereof), Chapter 81 (Other Base Metals;
Cermets:Articles thereof), Chapter 82 (Tools,
Implements, Cutlery Spoons and Forks, of Base
Metal: Parts thereof of Base Metal) and Chapter
83 (Miscellaneous Articles of Base Metal).
Petitioner has declared its goods under CTH
72044900 which comes under "Iron and Steel". Note
7 of Section XV covers "Articles of Base Metal"
only, not base metal itself.
8.2 Respondent submits that base metals and
articles thereof are having separate identities
and the same can be differentiated from Chapter
72 which covers 'Iron and Steel' and Chapter 73
which covers 'Articles of Iron and Steel'. Even
for other base metals, respective base metals and
their respective articles have been
differentiated clearly in respective Customs
Headings and subheadings. Therefore, respondent
respectfully submits that Note 7 clearly speaks
of 'Articles of the Base Metal' predominating by
weight over each of the other metal. Petitioner's
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claim on this ground itself is contradictory as
on one side, they are declaring their product in
Chapter 72 (Iron and Steel) whereas they have
submitted their contention for 'articles of Iron
and Steel' which falls under Chapter 73 only and
altogether different from Chapter 72. Hence, Note
7 of Section XV of Customs Tariff is applicable
for 'Articles of Base Metal' only, not on base
metal.
8.3 Petitioners themselves have declared
their product as "Discarded and nonserviceable
semibroken motor scrap" which cannot be termed
as articles of base metal on any reasoning. On
the basis of facts available on records as on
date, respondent No.3 has not changed the
classification of their product till date.
Respondent No.3 has challenged their claim for
benefit of concessional rate of duty of 2.5%
instead of effective rate of 5% under Serial
No.368 of Notification No.50/2017 (Customs) dated
30.06.2017 as amended.
C/SCA/10521/2020 JUDGMENT
8.4 The Respondent contended further that
predominating nature of product will not be
applicable in case of CTH 7204 as mentioned at
Sr.No.368. Petitioner themselves have admitted
that they are importing motor scrap consisting
Iron Scrap 85%, Copper Scrap 10% and Aluminum
Scrap 5%. Moreover, at the time of import,
petitioner also furnishes certificates of
analysis issued by seller and Form 9 which is
presented for trans boundary movement document.
Both of these documents contained three separate
items/chapter heading however, invoice by seller
is being issued with only one description i.e.
"Discarded and Non Serviceable Semi Broken
Motor." Petitioner knowingly does not take into
consideration the certificate of analysis and
Form 9 intentionally to hide facts before the
department and declare its value on the basis of
invoice only. Respondent submits that petitioners
have adopted this modus in a very planned and
organised manner to avail benefit of concessional
C/SCA/10521/2020 JUDGMENT
rate of duty of 2.5%.
8.5 With Reference to ground D of the
petition, it is submitted that, petitioners have
contended that they imported scrap electric
motors, which has no specific tariff heading in
the Customs Tariff Act. However, it is very much
there on record that they declared the same under
Customs Tariff Heading 72044900. Description
mentioned in the said CTH 72044900 is reproduced
herein as under:
"7204 Ferrous waste and scrap; remelting scrap ingots of iron
or steel; other waste and scrap:
72044100--Turning, shaving, chips, milling waste, sawdust,
fillings, trimmings and stampings, whether or not in
bundles,72044900 other."
In view of the above, the respondents
emphatically contended that the petitioners have
declared their product "Discarded and non
C/SCA/10521/2020 JUDGMENT
serviceable semibroken motor scrap" under CTH
72044900 which falls under 'other' subheading of
Other waste and scrap of ferrous waste and scrap
or remelting scrap ingots of iron or steel. Since
they have declared the same under Scrap, the same
cannot be treated as "Articles of Iron or Steel"
or "Articles of Base Metals" and hence,
respondent submits that Note 7 of Section XV will
not be applicable in this case.
8.5(A) Further, respondent has challenged
benefit of 2.5% concessional rate of duty as
notified under S.No.368 of Notification
No.50/2017CUS. Dated 30.06.2017 as amended. With
regard to concessional rate of Basic Customs Duty
claimed under Notification No.50/2017CUS. Dated
30.06.2017 as amended stated as above, Serial
No.368 reads as follows:
"Serial No.368. CTH 7204 Melting scrap of iron or steel
(other than stainless steel):2.5%"
Petitioner was very well aware that their
C/SCA/10521/2020 JUDGMENT
imported product i.e. "Discarded and Non
serviceable semibroken Motor" cannot be termed
as Melting scrap of Iron or Steel (other than
stainless steel) falling under CTH 7204.
Petitioner themselves have admitted that they are
importing motor scrap consisting Iron Scrap 85%,
Copper Scrap 10% and Aluminum Scrap 5%. However,
to avoid payment of effective rate of duty i.e.
5% on their assessable value, they intentionally
did not declare their product properly in bills
of entry filed by them under Section 46 of the
Act. Prior to that, the petitioner was importing
their goods in separate three headings of three
different scraps and subsequently, they shifted
to one tariff heading merely by changing the
description of their imported goods to one
description in invoices issued by seller, who
appears to be company from the same group, with
whom they have joint venture agreement.
Respondent, at this point of investigation, have
not asked them to classify their product to three
separate headings, but has challenged their
C/SCA/10521/2020 JUDGMENT
declaration for benefit of concessional rate of
duty i.e. 2.5% instead of effective rate of 5% by
showing Sr.No.368 of Notification No.50/2017CUS
dated 30.06.2017 which is available for 'Melting
scrap of iron or steel (other than stainless
steel)', not on Copper scrap or Aluminum Scrap
under this S.No.368. Respondent further submits
that Copper scrap or Aluminum Scrap is far higher
in value as compared to Heavy Melting Scrap of
Iron or Steel.
9. It is, therefore, urged that the petitioner
was well aware that the imported product cannot
be termed as melting scrap of Iron and Steel
falling under the CTH 7204. They are importing
motor scrap consisting of Iron scrap 85%, Copper
scrap 10% and Aluminum scrap 5%, but to avoid
intentionally 5% value on the rate of duty of 5%
on the assessable value, they have declared the
entry filed under Section 46 of the Customs Act.
The petitioners used to import their goods under
three separate headings of different scraps and
C/SCA/10521/2020 JUDGMENT
subsequently they shifted to one tariff heading
merely changing the description of their imported
goods to one description invoice issued by the
seller.
10. Mr.Mohan Agrawal in his statement dated
31.07.2020 also admitted that there is a
difference in value of goods imported by the
companies which is ranging from US$ 500 to US$
1200, it is on account of the large, medium and
small motors in the combination thereof. The
large motors are the cheapest and the small are
more expensive, they comprise of Iron and Steel,
Copper and Aluminum, Asses and Brass etc. and the
value of each of these metals is different, the
larger motor consists of lower percentage of
copper whereas the smaller motor consists of
larger percentage of copper. This according to
the respondent, as the petitioner changed the
declaration of the product at the time of import
and also found another company with the different
name with same set of directors, a detailed
C/SCA/10521/2020 JUDGMENT
investigation was necessary.
11. According to the respondent, the commercial
bills have been issued by the supplier as per the
wish of the petitioner with a motive of evading
customs duty. The relationship between the
supplier and the petitioner also is suspicious.
The petitioners imported goods only from single
supplier, which also appears to be from the very
group, they might have entered into a joint
venture.
12. The stand is also taken of the alternative
remedy particularly relying on the decision
reported in (1997) 94 ELT 285, where the Court
has held that the appropriate course for the
asessee in each case was to reply to show cause
notice, to enable the authorities to record the
findings of the facts in each case and if,
necessary the matter should have been proceeded
to the Tribunal and thereafter to the Court. It
also relied on the Bombay High Court's decision
C/SCA/10521/2020 JUDGMENT
rendered in case of M/s.Red Bull Pvt.Ltd. vs.
Chief Commissioner of Customs, reported in
(2010) 251 ELT 43 (Bombay). According to this
decision, the alternative and efficacious remedy
once is available and when there are disputed
questions of facts involved in the writ
petitions, the writ petitions are to be dismissed
in limine.
13. According to the respondent, the petitioners
have made request for provisional release of
goods under Section 110 (A) of the Act and there
is no question of non availability of
alternative remedy with them. They can fulfill
the condition of provisional release of the goods
to be issued by the adjudicating authority and if
they are not agreeable, they can always have an
option to file an appeal in terms of Customs Act.
The detentions and seizures made by the
respondent No.3 since are in accordance with law,
the petition is merit less.
C/SCA/10521/2020 JUDGMENT
14. Affidavitinreply for and on behalf of the
respondent No.2 also dealt with the same issue
and insisted that the importer has applied for
provisional release of the seized goods, the
provisional release of the goods has been given
as under:
(i) Goods seized under Seixure Memo No.03.08.2020 of
M/s.CMR Chiho Recycling Technologies Pvt. Ltd., for
quantity:78710.6 kgs valued at 17225108/ provisionally
released on filling of Bond of full value of the goods i.e.
17225108/ with Bank Guarantee/Cash Security Deposit of
Rs.20,00,000/.
(ii) Goods seized under Seizure Memo No.03.08.2020 of
M/s.CMR Chiho Industries Pvt.Ltd., for quantity:6884651 Kgs
valued at 38,02,85,614/ provisionally release on filing of Bond
of full value of the goods i.e. 38,02,85,614/ with Bank
Guarantee/Cash Security Deposit of Rs.6,94,00,000/.
(iii) Goods seized under Seizure Memo No.11.08.2020 of
M/s.CMR Chiho Industries Pvt. Ltd., for Bill of Entry
No.8262901 dated 24.07.2020 of quantity 26140 Kgs valued at
23,59,891/ provisionally release on filing of Bond of full value
of the goods i.e. 23,59,891/ with Bank Guarantee/Cash
Security Deposit of Rs.4,31,000/.
C/SCA/10521/2020 JUDGMENT
(iv) Goods seized under Seizure Memo No.11.08.2020 of M/s.
CMR Chiho Industries Pvt.Ltd., of quantity 604990 Kgs valued
at 32256787.02 provisionally release on filing of Bond of full
value of the goods i.e. 32256787.02 with Bank Guarantee/ Cash
Security Deposit of Rs.1,28,00,000/."
15. According to this respondent, the importer is
yet to deposit the required fixed deposit
receipt, cash security as ordered for provisional
release. The provisional release order was issued
in reasonable time according to the respondent,
after due departmental procedure; however, the
delay has occurred because of non - availability
of the staff, infected by COVID19, in the
building.
16. Affidavitinrejoinder to the affidavitin
reply filed by the respondent Nos.2 and 3 also
has come on record, wherein Mr.Naveen Sharma,
Operation Manager and authorised signatory of the
petitioner company has denied each and every
allegation made by the respondent Nos.2 and 3 in
C/SCA/10521/2020 JUDGMENT
the affidavitinreply. According to him, the
petitioners are engaged in the import of non
usable and nonserviceable electric motor scrap
and its composition. It is generally defined and
classified as ELMO by the Institute of Scrap
Recycling Industries' Guidelines. It is a mixed
electric motors, which consists of whole electric
motors and dismantled electric motor parts, which
are primarily Copper wound and some contain
Aluminum wound material subject to agreement
between buyer and seller. There is no excessive
Steel attachment such as gear and reducer iron
bases and pumps or loose free irons. The
petitioner processes and separates the said
scraps of nonusable and nonserviceable electric
motors with Wet Shredder, Copper Pullers, Copper
Granulator. Again according to the petitioner,
the availing benefit of concessional rate of duty
is the matter of belief of assesses and does not
amount to misdeclaration or suppression for the
purpose of unduly availing benefit of
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concessional rate of duty. The authority always
has hidden behind the principle of
confidentiality during the investigation and it
does not disclose what is the intelligence. There
was no intelligence about any illegality, but the
authority has jumped to the conclusion that there
is a misdeclaration or misrepresentation. The
detention and seizure of the goods, according to
the petitioner, is without following the
provision of law. The exercise of powers of
seizure under Section 110 of the Act is
arbitrary, without jurisdiction and therefore is
illegal. The respondent failed to explain the
rational to rush to the seizure of the goods. The
proper officer cannot proceed to seize the goods
under Section 110 of the Act, unless he has a
reason to believe the goods are liable to
confiscation and the reason for formation of
belief must have a rational connection with or
relevant bearing on the formation of the belief
as the rational connection postulates that there
must be a direct nexus between the materials
C/SCA/10521/2020 JUDGMENT
coming to the notice of investigating officer and
formation of his belief that the goods are liable
for confiscation.
17. It is the say of the petitioner that the
power conferred by Section 110 of the Act is a
conditional power and not an absolute power to be
exercised at the discretion of the officer. The
condition is that there has to be a reason to
believe and the safe belief should reflect that
intense application of mind with reference to the
material available on record that it has become
necessary to confiscate the goods. The word 'may'
is not indicative of a matter of choice, but is
necessarily meant that the officer is duty bound
to give valid reason for the exercise of such
discretion and there is also an obligation to
state why it is necessary to confiscate the goods
as the exact nature of sub clauses of Section 111
of the said Act makes it obligatory. These all
were not followed in the present case and
therefore, initiation is unjustifiable. It has
C/SCA/10521/2020 JUDGMENT
thus emphasized that the BCD has to be 2.5% on
transaction value. There is no revenue loss by
misclassifying the goods under CTH 72. It is only
to prejudice the mind of the Court that such
allegation has been made. The full applicable
duty of excise on Copper Aluminum are paid on
dismantling of the electric motor scrap whether
at the time of resale or at the time of use of
manufacture, therefore, ultimately the higher
duty on the separate item is paid and there is no
revenue loss at all.
18. The new company, according to the petitioner,
is formed as per the legal advise and looking to
the market situation, it is within the four
corners of the law that the same has been set up.
19. It is further the say of the petitioner that
the alternative efficacious remedy is not the
reason for the Court to deny the entertainment of
the present petition. The unfettered discretion
exercised by the respondent in seizure of the
C/SCA/10521/2020 JUDGMENT
goods though the statute does not provide for
such powers, has entitled the petitioner to
approach this Court.
20. It is, therefore, urged that this Court may
allow the petition as neither the respondent No.2
nor respondent No.3 has any jurisdiction to
adjudicate the issue in question. The principles
of natural justice also have been violated and
hence, in absence of any proper opportunity to
the petitioner also, the civil liabilities of the
petitioner company demanding the huge amount of
custom duty would be impermissible.
21. Both the sides have relied on the following
decisions and some of which shall be discussed at
an appropriate point, as and when needed.
Sr No. Judgments/citations
1 Commissioner of Customs vs. Gaurav Enterprise, 2006 (193) ELT 532
(Bom.)
2 Commissioner of Central Excise vs. Wockhardt Life Science Limited,
2012 (277) ELT 299 (SC)
3 Northern Plastics Limited vs. Commissioner of Customs & Central
Excise, 1998 (101) ELT 549 (SC)
4 Commissioner of Customs, Calcutta vs. G.C.Jain, 2011 (269) ELT 307
C/SCA/10521/2020 JUDGMENT
(SC)
5 PSL Limited vs. Commissioner of Customs, Kandla, 2015 (328) ELT
177 (Tri-Ahmedabad),
6 Commissioner of Customs and C.Ex.Kanpur vs.Jas International, 2011
(272) ELT 282 (Tri-Delhi)
7 Krupa Chaton Mfg.Company Pvt. Ltd vs. UOI, SCA No.7499 of 2017
8 Eagle Impex Vs. CC, Kandla, 2017 (350) ELT 107 (Tri-Ahmd.)
9 Sarvalakshmi Paper and Board Vs.C.C., Madras, 2000 (126) ELT 935
(Tri-New Del.)
10. CC, Bombay vs. Hydranautics Membrance (India) Ltd., 1994 (71) ELT
711 (Tri.-New Del.)
11. T.G. Enterprise vs. Union of India, 2018 (18) G.S.T.L.17 (GUJ)
12. Sri Vijayalakshmi Leatehrs vs. Pr.CC-III (SIIB), 2020 (373) ELT 518
(MAD)
13 Indexone Infracon And Logistics Pvt. Ltd. vs. UOIO., 2019 (366) ELT
229(GUJ.)
14 Agya Import Ltd vs. CC, New Delhi, 2018 (362) ELT 1037
15 Max Enterprise vs. Deputy CC, Chennai, 2019 (367) ELT 753 (Mad)
16 CC, Chennai-II vs. Novel Impex , 2019 (365) ELT 312 (Mad)
17 Kanpur Edibles Pvt. Ltd vs. CC (preventive), 2019 (369) ELT 1281 (Tri-
Kol)
18 Rajkamal Industrial Pvt. Ltd., 2019 (370) ELT 353 (Tri.Abad)
19 Institutes of Chartered Accountants of India vs. L.K.Ratna & Ors,
(1986) 4 SCC 537
20 Biswanath Bhattacharya vs. Union of India & Ors, (2014) 4 SCC 392
21 Chairman and Managing Director, United Commercial Bank and Ors vs.
P.C.Kakkar, (2003) 4 SCC 364
22 Lakmi Devi vs. State of Bihar and Ors, (2015) 10 SCC 241
23 Bhikhubhai Vithalabhai Patel vs. State of Guj. & Ors, (2008) 4 SCC 144
24 Union of India & Ors vs. Agarwal Iron & Industries, (2014) 14 SCC 215
25 N.Nagendra Rao & Co vs. State of A.P., (1994) 6 SCC 205
26 Asst. Collector of Customs vs. Charan Das Malhotra, (1971) 1 SCC 697
27 Union of India & Ors vs. Meghmani Organics Ltd & Ors, (2016) 10
SCC 28
28 Bindal Smelting Pvt.Ltd vs. Addl. Director General, 2020(34)
G.S.T.L.592 (P&H)
29 ANGOU GOLMEI vs. VIZOVOLIE CHAKH, 1996 (81) ELT 440(Pat.)
30 Sheo Nath Singh vs. Appellate Asst. Comm. Income Tax, Kolkata,
(1972) 3 SCC 234
C/SCA/10521/2020 JUDGMENT
31 Om Sai Trading Co. Vs. Union of India, 2020 (372) ELT 542 (Pat.)
32 Fomento Resources Pvt. Ltd. vs. UOI, 2019(367) ELT 897 (Bom)
33 Baboo Ram Harucgabd vs, UOI, 2011 (270) ELT 356 (Guj.)
34 Mapsa Tapes Pvt Ltd vs. UOI, 2006 (201) ELT 7 (P & H)
35 J.K.Barodolia Mills vs. M.L.Khunger, Deputy Coll., 1994 (72) ELT 813
(SC)
36 S.N.Mukherjee vs. Union of India, (1990) 4 SCC 594
37 East Ciast Railway & Ors vs. Maha Dev Appa Rao & Or, (2010) 7 SCC
38 Sama Aruna vs. State of Telangana & Anr, (2018) 12 SCC 150
22. The first and foremost vital issue raised by
learned Additional Solicitor General Mr. Vyas is
as to whether this Court will have jurisdiction
to entertain this petition in wake of the
availability of the alternative efficacious
remedy. As contended by the respondent, this
petition is premature and the Courts have adopted
restraint and have chosen not to intervene at the
stage of show cause notice when ample opportunity
would be available to the party before the
statutory authority.
23. The law on the point if is regarded, it is
quite clear that jurisdiction under Article 226
of the Constitution of India is not to be
C/SCA/10521/2020 JUDGMENT
resorted to ordinarily when the alternative and
efficacious remedy is available, unless of course
the very issuance of notice is not sustainable
under the law.
24. However, before this Court proceeds further
to adjudicate upon the factual challenges which
have been raised before this Court, ratio of the
decision of Apex Court in case of Union of India
vs. Indalco Industries, 2003(3)SCR P.377 needs to
be referred to where in no unclear terms it has
been held that invocation under Article 226 needs
to be exceptional. It has also time and again
frowned upon such interference particularly under
the taxing statute.
"There can be no doubt that in matter of
taxation, it is inappropriate for the High
Court to interfere in exercise of
jurisdiction under Article 226 of the
Constitution either at the stage of show
cause notice or at the stage of assessment
where alternative remedy by way of filing a
reply or appeal, as the case may be, is
available but these are the limitations
imposed by the courts themselves in
exercise of their jurisdiction and they are
not matters of jurisdictional factors. Had
the High Court declined to interfere at the
stage of show cause notice, perhaps this
court would not have been inclined to
C/SCA/10521/2020 JUDGMENT
entertain the special leave petition; when
the High Court did exercise its
jurisdiction, entertained the writ petition
and decided the issue on merits, we do not
think it appropriate to upset the impugned
order of the High Court under Article 136
of the Constitution on a technical ground.
"
24.1. In case of Divisional Forests Officer
and Others vs. M. Ramalinga Reddy reported in
2007(9) SCC 289, the Apex Court examined
threadbare jurisdictional aspect in following
manner:
"13. In Management of Express Newspapers (Private) Ltd., Madras
v. The Workers and Ors., AIR (1963) SC 569, it
was opined:
"15. The High Court undoubtedly has
jurisdiction to ask the Industrial Tribunal
to stay its hands and to embark upon the
preliminary enquiry itself. The
jurisdiction of the High Court to adopt
this course cannot be, and is indeed not
disputed. But would it be proper for the
High Court to adopt such a course unless
the ends of Justice seem to make is
necessary to do so? Normally, the questions
of fact, though they may be jurisdictional
facts the decision of which depends upon
the appreciation of evidence, should be
left to be tied by the Special Tribunals
constituted for that purpose. If and after
the Special Tribunals try the preliminary
issue in respect of such jurisdictional
facts, it would be, open to the aggrieved
party to take that matter before the High
Court by a writ petition and ask for an
appropriate writ. Speaking generally, it
would not be proper or appropriate that the
C/SCA/10521/2020 JUDGMENT
initial jurisdiction of the Special
Tribunal to deal with these jurisdictional
facts should be circumvented and the
decision of such a preliminary issue
brought before a High Court in its writ
jurisdiction.
We wish to point out that in making these
observations, we do not propose to lay down
any fixed or inflexible Rule; whether or
not even the preliminary facts should be
tried by a High Court in a writ petition,
must naturally depend upon the
circumstances of each case and upon the
nature of the preliminary issue raised
between the parties. Having regard to the
circumstances of the present dispute, we
think the court of appeal was right in
taking the view that the preliminary issue
should more appropriately be dealt with by
the Tribunal. The appeal court has made it
clear that any party who feels aggrieved by
the finding of the Tribunal on this
preliminary issue may move the high Court
in accordance with law. Therefore, we are
not prepared to accept Mr. Sastris argument
that the Appeal court was wrong in
reversing the conclusion of the trial Judge
insofar as the trial Judge proceeded to
deal with the question as to whether the
action of the appellant was a closure or a
lockout."
14. In State of Uttar Pradesh v. Brahm Datt
Sharma and Anr., AIR (1987) SC 943 : [1987]
2 SCC 179, this Court held:
"9. The High Court was not justified in
quashing the show cause notice. When a show
cause notice is issued to a government
servant under a statutory provision calling
upon him to show cause, ordinarily the
government servant must place his case
before the authority concerned by showing
cause and the courts should be reluctant to
interfere with the notice at that stage
C/SCA/10521/2020 JUDGMENT
unless the notice is shown to have been
issued probably without any authority of
law. The purpose of issuing show cause
notice is to afford opportunity of hearing
to the government servant and once cause is
shown it is open to the Government to
consider the matter in the light of the
facts and submissions placed by the
government servant and only thereafter a
final decision in the matter could be
taken. Interference by the court before
that stage would be premature, the High
Court in our opinion ought not have
interfered with the show cause notice."
15. This Court in Special Director and Anr.
v. Mohd. Ghulam Ghouse and Anr., [2004] 3
SCC 440 stated the law, thus:
"5. This Court in a large number of cases
has deprecated the practice of the High
Courts entertaining writ petitions
questioning legality of the showcause
notices stalling enquiries as proposed and
retarding investigative process to find
actual facts with the participation and in
the presence of the parties. Unless the
High Court is satisfied that the showcause
notice was totally non est in the eye of
the law for absolute want of jurisdiction
of the authority to even investigate into
facts, writ petitions should not been
entertained for the mere asking and a
matter of route, and the writ petitioner
should invariably be directed to respond to
the showcause notice and take all stands
highlighted in the writ petition. Whether
the showcause notice was founded on any
legal premises, is a jurisdictional issue
which can even by urged by the recipient of
the notice and such issues also can be
adjudicated by the authority issuing the
very notice initially, before the aggrieved
could approach the court. Further, when the
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court passes an interim order it should be
careful to see that the statutory
functionaries specially and specifically
constituted for the purpose and are denuded
of powers and authority to initially decide
the matter and ensure that ultimate relief
which may or may not be finally granted in
the writ petition is not accorded to the
writ petitioner even at the threshold by
the interim protection granted."
16. This aspect of the matter has recently
been considered by this Court in Union of
India and Anr. v. Kunisetty Satyanarayana,
(2006) 12 SCALE 262."
24.2. It is thus quite clear that the writ
jurisdiction under Article 226 is not to be
entertained against the show cause notice when
statute provides for mechanism which is
efficacious, alternative and productive as the
very purpose of issuance of show cause notice to
afford opportunity of hearing to the party
concerned and on showing of the cause to the
statutory authority, a final decision is to be
rendered, it is prematured to interfere with the
show cause notice by the court. Although, the
Court has wide powers under Article 226 of the
Constitution and it can also exercise in certain
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circumstances at the stage of issuance of show
cause notice (when the show cause notice is
totally non est etc.) Accordingly such powers are
not to be exercised by the Court and this
approach of self restraint and self limitation is
adopted by the High Court always and that being a
well settled position of law, no further dilation
is needed.
25. Before this Court proceeds to consider
whether at the stage of show cause notice, it
needs to entertain this petition or whether show
cause notice is non est totally in the eyes of
law for absolute want of jurisdiction of
authority, would be considered a little later.
Appropriate it would be to firstly refer to the
decision rendered in case of M/S.CANNON INDIA
PRIVATE LIMITED V/S. COMMISSIONER OF CUSTOMS by
the Apex Court recently in Civil Appeal No.182775
of 2018 and allied matters, where the Court has
chosen to question the very action on the part of
DRI of issuing the show cause notice for want of
C/SCA/10521/2020 JUDGMENT
powers.
25.1. Before the Apex Court, statutory appeals
were preferred under Section 130 E of the Act,
which arose from the common final order of the
Central Excise and Service Tax Appellate Tribunal
('the CESTAT' for short). Vide such order, an
exemption of basic customs duty accorded to the
Digital Still Image Video Cameras ('DSIC')
imported by the Nikon India Pvt. Ltd., Canon
India Pvt. Ltd and other importers in terms of
exemption Notification NO.20/2005 dated
01.03.2005 as amended by Notification No.15/2012
dated 17.03.2012 came to be denied and the
consequential confiscation of goods, demand of
interest and imposition of penalty as provided
under the Customs Act, 1962 were upheld by the
CESTAT.
25.2 . The issue which had arisen for the
Court's consideration was whether after clearance
of the cameras on the basis that they were
exempted from levy of basic Customs duty under
C/SCA/10521/2020 JUDGMENT
Notification No.15/2012, the proceedings
initiated by the DRI for recovery of duty not
paid under Section 28 (4) of the Act was valid
under the law.
25.3. The consignment of cameras arrived at
Delhi, the importer submitted a Bill of entry
covering letter and literature containing
specification of the cameras and after
verification of the Bill of Entry by the
Inspector and the Superintendent, the importer
requested the Deputy Commissioner of Customs to
check the same. The compilation of the goods with
the description given in the literature also was
carried out and the goods had been cleared as
being exempted from paying the duties in terms of
Notification No.15/2012 issued on 17.03.2012.
25.4. A show cause notice was issued under
Section 28(4) of the Act alleging that the
Customs Authorities had been induced to clear the
cameras by willful misstatement and suppression
of the facts about the cameras. The decision of
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exemption was by the Deputy Commissioner, Air
Cargo, the show cause notice was issued by the
Additional Director General, DRI. The Apex Court
addressed the issue as to whether the DRI had
authority in law to issue a show cause notice
under Section 28(4) of the Act for recovery of
the duties not levied nor paid when the goods
were cleared for import by a Deputy Commissioner
of Customs, who decided that the goods were
exempted.
25.5. The provision of the Customs Act,
Section 28(4) empowers the recovery of the duty
not paid, part paid or erroneously refunded by
reason of collusion or any willful misstatement
or suppression of facts and confers the power of
recovery on the proper officer. The Apex Court
interpreted as to who could be called the proper
officer. The Apex Court held that the proper
officer must necessarily mean the proper officer,
who in the first instance assessed and cleared
the goods which in the matter before the Apex
C/SCA/10521/2020 JUDGMENT
Court was the Deputy Commissioner Appraisal
Group. Because no fiscal statue has shown the
power to reopen the assessment or recover the
duties which escaped the assessment could be
conferred on an officer other than the one (of
the rank of the officer) who initially took the
decision to assess the goods. It also went to an
extent of saying that statute when confers the
same powers to perform an act on different
officers, the two officers, especially when they
belong to different departments, cannot exercise
such powers in the same case. Where one officer
has exercised his powers of assessment, the power
to order reassessment must also be exercised by
the same officer or his successor and not by
another officer of another department though he
is designated to be an officer of the same rank
as otherwise, the same would result into "an
anarchical and unruly operation of a statute
which is not contemplated by any canon of
construction of statute".
C/SCA/10521/2020 JUDGMENT
25.6 The Apex Court, while interpreting the
notification dated 2.5.2012, has also held that
the Notification purported to have been issued in
exercise of the powers under sub-section (34) of
section 2 of the Customs Act; the said section
does not confer any power on any authority to
entrust any functions to the officers for, the
subsection is a part of the definition clause
of the Act and merely defines a "proper officer".
Section 6 is the only section which provides for
entrustment of functions of Customs Officers on
other officers of the Central or the State
Government or local authority. In para 21, it is
held that if it was intended that the officers of
the Directorate of Revenue Intelligence who are
officers of Central Government should be
entrusted with functions of the customs officers,
it was imperative that the Central Government
should have done so in exercise of its powers
under section 6 of the Act. Moreover, the
notification which purports to entrust functions
as proper officer under the Customs Act has been
C/SCA/10521/2020 JUDGMENT
issued by the Central Board of Excise & Customs
in exercise of nonexisting power under sub-
section (34) of section 2 of the Customs Act. The
Apex Court declared the notification as invalid,
the same having been issued by an authority which
had no power to do so, in purported exercise of
powers under a section which does not confer any
such power.
25.7 Relevant findings and observations of the
M/S.CANNON INDIA PRIVATE LIMITED V/S.
COMMISSIONER OF CUSTOMS are necessary to be
reproduced at this juncture profitably
hereinbelow:
"14. It is well known that when a statute directs that the
things be done in a certain way, it must be done in that way
alone. As in this case, when the statute directs that "the proper
officer" can determine duty not levied/not paid, it does not
mean any proper officer but that proper officer alone. We find
it completely impermissible to allow an officer, who has not
passed the original order of assessment, to reopen the
assessment on the grounds that the duty was not paid/not
levied, by the original officer who had decided to clear the
goods and who was competent and authorised to make the
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assessment. The nature of the power conferred by Section 28
(4) to recover duties which have escaped assessment is in the
nature of an administrative review of an act. The section must
therefore be construed as conferring the power of such review
on the same officer or his successor or any other officer who
has been assigned the function of assessment. In other words,
an officer who did the assessment, could only undertake re
assessment [which is involved in Section 28 (4)].
15. It is obvious that the reassessment and recovery of duties
i.e. contemplated by Section 28(4) is by the same authority
and not by any superior authority such as Appellate or
Revisional Authority. It is, therefore, clear to us that the
Additional Director General of DRI was not "the" proper
officer to exercise the power under Section 28(4) and the
initiation of the recovery proceedings in the present case is
without any jurisdiction and liable to be set aside.
16. At this stage, we must also examine whether the
Additional Director General of the DRI who issued the
recovery notice under Section 28(4) was even a proper officer.
The Additional Director General can be considered to be a
proper officer only if it is shown that he was a Customs officer
under the Customs Act. In addition, that he was entrusted
with the functions of the proper officer under Section 6 of the
Customs Act. The Additional Director General of the DRI can
be considered to be a Customs officer only if he is shown to
have been appointed as Customs officer under the Customs
Act.
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17. Shri Sanjay Jain, learned Additional Solicitor General,
relied on a Notification No.17/2002 Customs (NT) dated
7.3.2002 to show all Additional Directors General of the DRI
have been appointed as Commissioners of Customs. At the
relevant time, the Central Government was the appropriate
authority to issue such a notification. This notification shows
that all Additional Directors General, mentioned in Column
(2), are appointed as Commissioners of Customs.
18. The next step is to see whether an Additional Director
General of the DRI who has been appointed as an officer of
Customs, under the notification dated 7.3.2002, has been
entrusted with the functions under Section 28 as a proper
officer under the Customs Act. In support of the contention
that he has been so entrusted with the functions of a proper
officer under Section 28 of the Customs Act, Shri Sanjay Jain,
learned Additional Solicitor General relied on a Notification
No.40/2012 dated 2.5.2012 issued by the Central Board of
Excise and Customs. The notification confers various
functions referred to in Column (3) of the notification under
the Customs Act on officers referred to in Column (2). The
relevant part of the notification reads as follows:
"[To be published in the Gazette of India, Extraordinary, Part
II, Section 3, Subsection (ii)] Government of India Ministry of
Finance (Department of Revenue) Notification No.40/2012
Customs (N.T.) New Delhi, dated the 2nd May, 2012 S.O. (E).
- In exercise of the powers conferred by subsection (34) of
section 2 of the Customs Act, 1962 (52 of 1962), the Central
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Board of Excise and Customs, hereby assigns the officers and
above the rank of officers mentioned in Column (2) of the
Table below, the functions as the proper officers in relation to
the various sections of the Customs Act, 1962, given in the
corresponding entry in Column (3) of the said Table:
Sr.N Designation of the Officers Functions under Section of the
o. Customs Act, 1962
(1) (2) (3)
1. Commissioner of Customs (i) Section 33
2. Additional Commissioner of (i) Sub-section (5) of Section 46;
Customs and
(ii) Section 149
3. Deputy Commissioner or Assistant (i) .......
Commissioner of Customs and (ii)........
Central Excise (iii) .......
(iv) ........
(v).........
(vi) Section 28;
........
19. It appears that a Deputy Commissioner or Assistant
Commissioner of Customs has been entrusted with the
functions under Section 28, vide Sl. No.3 above. By reason of
the fact that the functions are assigned to officers referred to
in Column (3) and those officers above the rank of officers
mentioned in Column (2), the Commissioner of Customs
would be included as an officer entitled to perform the
function under Section 28 of the Act conferred on a Deputy
Commissioner or Assistant Commissioner but the notification
appears to be illfounded. The notification is purported to
have been issued in exercise of powers under subSection (34)
of Section 2 of the Customs Act. This section does not confer
any powers on any authority to entrust any functions to
officers. The subSection is part of the definitions clause of the
Act, it merely defines a proper
officer, it reads as follows:
C/SCA/10521/2020 JUDGMENT
"2. Definitions - In this Act, unless the context otherwise
requires,
...
(34) 'proper officer', in relation to any functions to be
performed under this Act, means the officer of customs who is
assigned those functions by the Board or the [Principal
Commissioner of Customs or Commissioner of Customs]. "
20. Section 6 is the only Section which provides for
entrustment of functions of Customs officer on other officers of
the Central or the State Government or local authority, it
reads as follows:
"6. Entrustment of functions of Board and customs officers on
certain other officers - The Central Government may, by
notification in the Official Gazette, entrust either
conditionally or unconditionally to any officer of the Central
or the State Government or a local authority any functions of
the Board or any officer of customs under this Act."
21. If it was intended that officers of the Directorate of
Revenue Intelligence who are officers of Cenral Government
should be entrusted with functions of the Customs officers, it
was imperative that the Central Government should have
done so in exercise of its power under Section 6 of the Act. The
reason why such a power is conferred on the Central
Government is obvious and that is because the Central
Government is the authority which appoints both the officers
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of the Directorate of Revenue Intelligence which is set up
under the Notification dated 04.12.1957 issued by the
Ministry of Finance and Customs officers who, till 11.5.2002,
were appointed by the Central Government. The notification
which purports to entrust functions as proper officer under the
Customs Act has been issued by the Central Board of Excise
and Customs in exercise of nonexisting power under Section 2
(34) of the Customs Act. The notification is obviously invalid
having been issued by an authority which had no power to do
so in purported exercise of powers under a section which does
not confer any such power.
22. In the above context, it would be useful to refer to the
decision of this Court in the case of Commissioner of Customs
vs. Sayed Ali and Another5 wherein the proper officer in
respect of the jurisdictional area was considered. The
consideration made is as hereunder:
"16. It was submitted that in the instant case, the import
manifest and the bill of entry were filed before the Additional
Collector of Customs (Imports), Mumbai; the bill of entry was
duly assessed, and the benefit of the exemption was extended,
subject to execution of a bond by the importer which was duly
executed undertaking the obligation of export. The learned
counsel argued that the function of the preventive staff is
confined to goods which are not manifested as in respect of
manifested goods, where the bills of entry are to be filed, the
entire function of assessment, clearance, etc. is carried out by
the appraising officers functioning under the Commissioner of
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Customs (Imports).
17. Before adverting to the rival submissions, it would be
expedient to survey the relevant provisions of the Act. Section
28 of the Act, which is relevant for our purpose, provides for
issue of notice for payment of duty that has not been paid, or
has been shortlevied or erroneously refunded, and provides
that:
"28. Notice for payment of duties, interest, etc. - (1) When any
duty has not been levied or has been shortlevied or
erroneously refunded, or when any interest payable has not
been paid, part paid or erroneously refunded, the proper
officer may,
(a) in the case of any import made by any individual for his
personal use or by Government or by any educational,
research or charitable institution hospital, within one year; or
(b) in any other case, within six months, from the relevant
date, serve notice on the person chargeable with the duty or
interest which has not been levied or charged or which has
been so short levied or part paid or to whom the refund has
erroneously been made, requiring him to show cause why he
should not pay the amount specified in the notice:
Provided that where any duty has not been levied or has been
shortlevied or the interest has not been charged or has been
part paid or the duty or interest has been erroneously
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refunded by reason of collusion or any wilful misstatement or
suppression of facts by the importer or the exporter or the
agent or employee of the importer or exporter, the provisions of
this subsection shall have effect as if for the words 'one year'
and 'six months', the words 'five years' were substituted."
18. It is plain from the provision that the 'proper officer' being
subjectively satisfied on the basis of the material that may be
with him that customs duty has not been levied or short levied
or erroneously refunded on an import made by any individual
for his personal use or by the Government or by any
educational, research or charitable institution or hospital,
within one year and in all other cases within six months from
the relevant date, may cause service of notice on the person
chargeable, requiring him to show cause why he should not
pay the amount specified in the notice. It is evident that the
notice under the said provision has to be issued
by the 'proper officer'.
19. Section 2(34) of the Act defines a 'proper officer', thus:
'2. Definitions. (34) 'proper officer', in relation to any
functions to be performed under this Act, means the officer of
customs who is assigned those functions by the Board or the
Commissioner of Customs;'
It is clear from a mere look at the provision that only such
officers of customs who have been assigned specific functions
C/SCA/10521/2020 JUDGMENT
would be 'proper officers' in terms of Section 2(34) the Act.
Specific entrustment of function by either the Board or the
Commissioner of Customs is therefore, the governing test to
determine whether an 'officer of customs' is the 'proper officer'.
20. From a conjoint reading of Sections 2(34) and 28 of the
Act, it is manifest that only such a Customs Officer who has
been assigned the specific functions of assessment and re
assessment of duty in the jurisdictional area where the import
concerned has been affected, by either the Board or the
Commissioner of Customs, in terms of Section 2(34) of the Act
is competent to issue notice under section 28 of the Act. Any
other reading of Section 28 would render the provisions of
Section 2(34) of the Act otiose inasmuch as the test
contemplated under Section 2(34) of the Act is that of specific
conferment of such functions."
23. We, therefore, hold that the entire proceeding in the
present case initiated by the Additional Director General of
the DRI by issuing show cause notices in all the matters before
us are invalid without any authority of law and liable to be
setaside and the ensuing demands are also set aside."
25.8. The Apex Court thus eventually allowed
the appeals and the common order passed by the
CESTAT was set aside and consequently, the demand
notice issued also was set aside holding that
entire proceeding initiated by the Additional
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Director General and DRI of issuance of show
cause notice was invalid in absence of any
authority under the law and consequently, had set
aside the show cause notice.
26. Taking a que from this decision, it has been
argued vehemently by the learned senior advocate,
Mr.Deven Parikh that in the present case, the
challenge is to the very action of the
respondentauthority of seizure of the goods and
once the seizure is set aside, the question of
provisional release under Section 110A of the
Act, which is by way of imposition of overtly
harsh and burdensome condition of release of the
goods by insisting upon the Bank Guarantee and
other requirement, would automatically go away.
He has also urged that the seizure of the goods
can be by an appropriate officer, who under
Section 110 of the Act has reason to believe that
the goods in question were liable to be
confiscated under Section 111 of the Act. He has
further urged that if the assessee makes the
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fullest disclosure than the mere wrong claim of
classification or wrong claim of the exemption,
is not misdeclaration as contemplated under
Section 111(M).
26.1 He has also relied on the judgment
rendered in case of PSL Limited vs. Commissioner
of Customs, Kandla, reported in 2015 (328) ELT
177 to contend that it is not expected by the
assessee to fill in the correct classification or
exemption as held in 2011 (269) ELT 307 (SC). It
is for the department to find the correct legal
position as to the classification if, the
department allows clearance, then the importer
cannot be held responsible. He has therefore
urged that subjective satisfaction must show that
it is not a case of mere wrong case of exemption
or wrong classification, but the assessee not
having disclosed all relevant informations and
having to defraud the department. A mere
different view as to the classification and
exemption, when otherwise all facts are known to
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the department beforehand cannot enable the
department to seize the goods as the same surely
would not amount to misdeclaration nor would it
render the goods liable to be confiscation as per
the settled position of law.
26.2 It is insisted that the subjective
satisfaction is based on irrelevant material and
not sustainable and is without jurisdiction.
There is no rational nexus between the material
and the subjective satisfaction and therefore, it
needs to be set aside. The Court shall need to
essentially examine as to whether the subjective
satisfaction was not arbitrary or capricious or
was sufficient or not as per the statute and
whether the same was not that of a normal
rational human being or was not germane to the
issue or was not as per requirement of the
concerned statute and was by way of mere
conjecture or surmise. His grievance is that as
per the settled law the imported product has to
be assessed in the condition in which it is
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imported and be made available for assessment
since what happens subsequently is not of much
consequence.
26.3 He has further argued that post
importation process from which different products
can be made from the imported product are
hopelessly irrelevant for classifying the product
at the time of import. The EDI system allowed
classification except Bill of Entry. Upon 100%
examination and nontesting and after referring
to the documentation and certification. It is
urged that the Custom Officer carried out the
assessment and all goods were accordingly
released after a fullfledged satisfaction and
assessment with open eyes to all relevant facts
and later on by some untold intelligence, the
investigation was restarted within a few months
and the seizure took place.
26.4. What all the DRI has done is to sit in
appeal over what the Custom Officer did at the
time of original assessment and for no fault of
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assessee, seized the goods. It is urged that once
the out of charge has been granted as provided by
the Bombay High Court in 2019 (3) 667 E.L.T. 897,
the seizure cannot be effected. He has heavily
relied on the decision of Cannon India Pvt. Ltd.
(supra) and urged that here also, show cause
notice is by the DRI and not by the officer who
had assessed the petitioner initially.
26.5. He has also urged that the Gujarat High
Court followed the Northern Plastic and held that
mere claim for classification or exemption may
not lead to the seizure of the goods in 2011 (27)
E.L.T. 356.
27. Learned Additional Solicitor General of
India, Shri Devang Vyas has strenuously urged
this Court that the intelligence received made it
abundantly clear as to how the petitioner
attempted to mis declare the goods, leading to
enormous loss to the revenue and such
misstatement itself is a cause of issuance of
show cause notice which would be aptly dealt with
C/SCA/10521/2020 JUDGMENT
by the statutory authority and this Court need
not regard the request of any interference.
27.1. Learned ASG has also further contended
before this Court that petitioner was fully
conscious that their imported product 'Discarded
and nonserviceable semi broken motor cannot be
termed as melting scrap of iron or steel. Their
scrap consist of 85% iron scrap, 10% of copper
and 5% of Aluminum scrap. However, to avoid
payment of 5% rate of duty on assessable value,
it has chosen not to declare correct details in
the bills of entry from three separate headings,
it chose to club under one tariff heading by
deliberately changing description of their
imported goods so as to let it fall under
classification CTH 7204 49 00 under the other
Ferrous Waste and Scrap and thereby availed undue
benefit of concessional rate of custom duty at
the rate of 2.5% instead of 5% scrap what
contended copper and aluminum and not only iron
and steel, this intentional and deliberate non
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declaration needs stringent dealing. He also
urged that Cannon India Pvt. Ltd. (supra) can
also be urged before the statutory authority
while arguing show cause notice.
28. As can be noticed from the detailed
submissions and the ratio laid down in Cannon
India Pvt. Ltd. (supra) in the instant case also,
the importer has filed bills of Entry at Thar Dry
Port, ICD Customs, Sanand and declared the
description of the product as "Discarded and Non--
serviceable semi broken Motor Scrap" classifying
the same under the Custom Tariff Act 7204 49 00
under the heading of other Ferrous Waste and
Scrap. The benefit of concessional rate of 2.5%
had been availed by the petitioner vide serial
No.368 of Notification No.50/2017:CUS dated
30.06.2017. The said serial No.368 is notified
for "melting scrap of iron or steel (other than
stainless steel)" for chapter 7204 in the said
Notification.
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29. It is alleged in the show cause notice and
in the affidavit in reply that, the importer was
aware that the scrap contained 10% of Copper,
which is evident from the certificate of analysis
and Form 9 furnished by the petitioner to the
authority. Therefore, it was the DRI, which
formed the "reasonable belief" that the importer
took undue benefit of concessional rate of duty
of 2.5% instead of the paying the effective rate
of 5%, resulting into short payment of custom
duty to the Government. Therefore, the DRI
placed under detention the imported motor scrap
(raw material) of 59,45,032 kilo grams of
imported motor scrap, nondismantled and 9,39,619
kgs of dismantled and segregated scrap of various
types.
30. Thus, the estimated value of scrap of
Rs.5,83,62,131 were placed under detention by DRI
on 29.07.2020 and the same had been handedover
to Shri Naveen Sharma, Operation Manager, M/s.CMR
Chiho Industries India Pvt. Ltd. petitioner
C/SCA/10521/2020 JUDGMENT
herein, under proper Suparat Nama dated
29.07.2020 for safe custody. These goods were
further placed under seizure on 03.08.2020 as
they were liable for confiscation according to
the authority under Section 111 of the Act.
According to the respondents, the entire matter
is currently under investigation of DRI, the
Deputy Director, DRI Zonal Unit has given 'no
objection' to the provisional release to the
seized goods on 11.08.2020 since, the importer
petitioner requested for release of the seized
goods vide letter dated 05.08.2020. It is quite
obvious that at the time of import of the goods,
the petitioner had declared the description of
the product as "Discarded in nonserviceable
motor scrap under Customs Tariff Heading 7204 49
00 under "other ferrous waste" and because of
that 2.5% of rate of concessional duty had been
made available under Notification 50/2017:CUS
dated 30.06.2017. What is not being disputed is
that the certificate of analysis and Form9 as
also other relevant materials had been placed
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before the Custom Authority which examined the
same and cleared the goods of import. It was
later on that the DRI with a "reasonable belief"
that there was an undue benefit of the
concessional rate of duty taken which resulted
into the short payment of custom duty, placed
the goods under detention and they were subjected
to confiscation. It is quite obvious that the
officer, who had permitted the import of the
goods is not the one who had formed a reasonable
belief of the petitioner having taken undue
benefit of the concessional rate of duty. It is
the officer of the DRI, who was not anywhere in
the picture when the import took place, had acted
and detained the goods and later on also
confiscated the same. A very serious challenge in
the instant case is also to the action of the DRI
officer of detention and seizure dated 29.07.2020
and 03.08.2020 so also of the confiscation dated
11.08.2020 along with the challenge to the very
action of show cause notice on the part of the
respondent.
C/SCA/10521/2020 JUDGMENT
31. What is vital for the Court to regard is
the factual details of the case on hand before
applying the judgment of the Cannon India
Pvt.Ltd. (supra) while exercising powers of
detention, the DRI alleges that the custom
authorities had been induced by the petitioner to
clear the goods which had been imported by
alleged willful misstatement and suppression of
the facts and this action according to the DRI
had led to the wrongful availment of the
concessional rate of duty. This misdeclaration
of the product along with the concessional rate
of duty resulted into the short payment of custom
duty and therefore, it chose to not only exercise
the powers of detention, but also of seizure on
11.08.2020. The provisional release order was
also passed on receipt of certain securities from
the petitioner.
32. The relevant permissions in connection
with the detention and seizure if are briefly
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noticed, Section 111 lays down that if the proper
officer has a reason to believe that any goods
are liable of confiscation under the customs act,
he may seize such goods.
32.1. Section 110A of the Act is an
attaching section where the provisional release
of seized goods pending adjudication is
contained, which says that any goods, documents
or things seized or bank account provisionally
attached under Section 110 of the Act, may,
pending the order of the adjudicating officer, be
released to the owner or the bank account holder
on taking a bond from him in the proper form with
such security and conditions as the adjudicating
authority may require.
32.2. Section 110(2) of the Customs Act also
provides that where any goods are seized under
subsection (1) and no notice in respect of the
same is given within six months under clause (a)
of section 124, the goods shall be returned to
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the person from whose possession they were
seized.
32.3. It is also further provided that not
only the principles of natural justice shall have
to be adhered to. It is obvious that there has to
be a show cause notice before confiscation of the
goods within six months after once the seizure of
the goods takes place under Section 110 (1) of
the Act.
32.4. Section 124 of the Act provides for
issuance of show cause notice before the
confiscation of the goods and states that no
order of confiscation or imposing of any penalty
on any person shall be made under this chapter
unless the owner of the goods or such person (a)
is given a notice in writing with the prior
approval of the officer of Customs not below the
rank of an Assistant Commissioner of Customs
informing him of the grounds on which it is
proposed to confiscate the goods or to impose a
C/SCA/10521/2020 JUDGMENT
penalty; (b) is given an opportunity of making a
representation in writing within such reasonable
time as may be specified in the notice against
the grounds of confiscation or imposition of
penalty mentioned therein; and (c) is given a
reasonable opportunity of being heard in the
matter, Provided that the notice referred to in
clause (a) and the representation referred to in
clause (b) may at the request of the person
concerned be oral. Provided further that
notwithstanding the issuance of notice under this
section, the proper officer may issue a
supplementary notice under such the circumstances
and in such manner as may be prescribed.
32.5. It also appears that under Section 125
of the Customs Act, there is an option to pay the
fine in lieu of confiscation as the said
provision provides that "whenever confiscation of
any goods is authorized by this Act, the officer
adjudging it may, in case of any goods, the
importation or exportation whereof is prohibited
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under this Act or under any other law for the
time being in force, and shall, in the case of
any other goods, give to the owner of the goods
or, where such owner is not known, the person
from whose possession or custody such goods have
been seized, an option to pay in lieu of
confiscation such fine as the said officer thinks
fit".
33. Thus, after once the officer concerned
forms a reasonable belief in relation to the
goods imported, firstly what happened was the
detention and thereafter, the seizure of the
goods.
33.1. Such goods had been periodically
released but before undertaking the process of
confiscation, opportunity of payment of fine also
can be given and there is a detailed procedure
mandated before actually confiscation takes
place.
33.2. Since the availing of due opportunity
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for following of principles of natural justice is
an integral part of the scheme of these
provisions, issuance of show cause notice is by
way of following the prescribed procedure.
33.3. And yet, what would be vital to examine
is whether the exercise of forming reasonable
belief in wake of noticeable material before the
authority could be held justifiable and whether
the issuance of notice by the officer concerned
of DRI, in wake of the latest decision, would
warrant interference on the ground of the same
being non est without any authority.
34. The Deputy Director, DRI respondent
No.3 herein in his affidavitinreply has alleged
that there is already improper declaration of
description of imported goods and consequential
claim and thereby, availment of undue benefit of
concessional rate of custom duty at the rate of
2.5% instead of 5%. The goods imported are not
melting scrap of Iron and Steel, but also
contained Copper scrap and Aluminum scrap.
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According to the Department, the petitioners were
aware that the imported products were labeled as
"Discarded and nonserviceable semibroken motor
scrap" and they simply cannot be termed as
melting scrap of Iron or Steel (other than
stainless steel) falling under Customs Heading
72044900. They have admitted that they are
importing the motor scrap consisting Iron Scrap
85%, Copper Scrap 10% and Aluminum Scrap 5% in
approximate. They are alleged of intentionally
not declaring their products properly in the
bills of Entry at the time of import under
Section 46 of the Act in terms of Section 17 of
the Customs Act. Section 17 provides that an
importer entering any imported goods under
Section 46 or an exporter entering any export
goods under Section 50 of the Act shall save as
otherwise provided in Section 85, self assess the
duty, if any, leviable on such goods.
35. Admittedly, the description in the Bill
of Entry "Discarded and nonserviceable semi
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broken motor scrap" even on inspection of the
goods were found exactly as entered into the Bill
of Entry i.e. discarded and nonserviceable
broken motor scrap. The only reason after having
allowed the import for not allowing the benefit
of reduced rate of duty is because the Copper
scrap and the Aluminum scrap in the material
imported to the extent of 10% and 5% respectively
and approximately could be taken out eventually
from these broken motors. That essentially
appears to be the reason for disallowing of the
exemption. As is apparent from the material in
the certificate of analysis produced at the time
of clearance of the goods itself, the existence
of the Copper scrap is also disclosed. It is not
disputed by the respondent No.3 that such
certificate of analysis had been produced. The
same has also finds a specific mention in the
panchnama dated 03.08.2020 and in the letter
dated 03.08.2020 addressed to the petitioner by
the Assistant Commissioner, ICD, Sanand.
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35.1. It is in the beginning of this
communication referred to "during the course of
post clearance audit of the Bills of Entry filed
by you in respect of clearance of goods
viz.,"Discarded and nonserviceable semibroken
motor scrap". It has been noticed that the
documents like bill of lading, PSIC and
certificate of analysis indicate that the
imported scrap consisted of (i) Copper scrap,
Barley/Birch (ii) Aluminum scrap (iii) Iron scrap
(HMS).
35.2. The petitioner is absolutely right in
pointing out that if the exemption was not
available to the petitioner on the basis of the
documents, which had been produced at the time of
import, the Assessing Officer of the Customs
could have denied the same and with the full
knowledge, he had permitted assessment of the
goods under the Customs Tariff Heading 7204 49
00 as Iron and Steel scrap and permitted the
exemption available under Notification
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50/2017:CUS dated 30.06.2017 under serial No.368.
36. It can be noticed that from the
disclosure made by the petitioner that it had
claimed the classification and exemption by
bringing to the notice of the department all
relevant details and therefore, to term this as a
misdeclaration and to arrive at a subjective
satisfaction for not allowing the benefit of
Notification on the ground of existence of the
Copper in the scrap motors, by the DRI Officer
surely in wake of the decision of Canon India
Pvt. Ltd (supra) shall need to be interfered
with. The assessment once when is done by the
concerned officer of the Custom Department, the
reassessment by the DRI Officer, who invoked the
powers, not being the proper officer as per the
decision of Canon India Pvt. Ltd. (supra) would
warrant indulgence. And, hence, his reasonable
belief would also have no bearing when otherwise
the authority concerned had allowed the import on
the basis of the material which had been already
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made available by the petitioner. Thus, on the
count of the DRI officer not being a proper
officer under the law as the action on the part
of the officer of DRI is not to be sustained.
Again, assuming that he would have powers to
reassess the very fact that entire material was
with the assessing officer, it was for him to
assess otherwise. Besides, vide notification
issued by the Central Board of Excise & Customs,
that is, notification no. 40/2012 - customs (NT)
dated 2.5.2012 and more particularly, item no.6
whereby, the Intelligence Officer in the Director
General of Revenue Intelligence and Directorate
General of Central Excise Intelligence, have been
assigned the powers of various sections including
the powers under subsection (1) and (2) of
section 110 of the Act, which notification has
been considered by the Apex Court with reference
to assigning the powers of section 28 of the Act
and has been held to be invalid. The learned
counsel for the Union, could not dispute the said
proposition as well as the applicability of the
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judgment to the facts of the present case,
therefore, applying the principles enunciated in
the case of Canon India Private Ltd (supra) the
petition deserves to be allowed.
37. The decision of the Apex Court rendered
in case of Commissioner of Customs, Calcutta vs.
G.C.Jain, reported in 2011 (269) E.L.T. 307 shall
also need to be referred to at this stage where
dispute was whether Butyl Acrylate Monomer (BAM)
can be said to be an adhesive for the purpose of
allowing the duty free clearances against advance
license issued under the DEEC scheme.
"24.It is also observed that the demand is
hit by the bar of limitation inasmuch as
the appellant had cleared the goods in
question after declaring the same in the
bills of entries and giving correct
classification of the same. Availing of
benefit of a notification, which the
Revenue subsequently formed an opinion was
not available, cannot lead to the charge of
misdeclaration or misstatement, etc. and
even if an importer has wrongly claimed his
benefit of the exemption, it is for the
department to find out the correct legal
position and to allow or disallow the same.
In the instant case the appellant had
declared the goods as Butyl Acrylate
Monomer with correct classification of the
same and the word 'adhesive' was added in
C/SCA/10521/2020 JUDGMENT
the exbond bill as per the appellant's
understanding that BAM is an adhesive. In
these circumstances it was for the Revenue
to check whether BAM was covered by the
expression adhesive or not and if even
after drawing of samples they have allowed
the clearances to be effective as an
adhesives appellant cannot be held
responsible for the same and subsequently,
if the Revenue has changed their opinion as
regards the adhesive character of BAM,
extended period cannot be invoked against
them. As such we are of the view that the
demand of duty in respect of 14
consignments is also barred by limitation."
37.1. It is of course for the department to
find out the correct legal position as to the
classification and if the department has
permitted the clearance, and subsequently changed
its opinion, to hold the petitioner liable and
responsible and alleged him of misdeclaration
since is impermissible.
38. Here is the case where the petitioner
has filed Electronic Bill of Entry in the EDI
system, where it can claim a particular exemption
or a particular classification. On subsequently
having noticed that the Copper and Aluminum
elements would not permit the exemption under the
C/SCA/10521/2020 JUDGMENT
Notification at the rate of 2.5% by itself would
not make the import of the goods as clandestinely
having been done, the least that could have been
done was to term the same as mala fide when
otherwise the relevant material had been already
placed with the department.
38.1. As mentioned hereinabove, the
communication dated 03.08.2020 in post clearance
audit of Bill of Entry was on the basis of
various documents including the certificate of
analysis, when it was realized by the department
that the product consists of the Copper scrap
also to the extent of around 10%. The DRI has
firstly detained the goods, which later on had
been seized. Assuming that the stage of
adjudication of show cause notice is yet to come,
this Court has no intent to go into the issue of
classification at all as it would be for the
proper officer to workout the same on following
the due procedure and on requisite scrutiny
however, noticing that the order of detention and
C/SCA/10521/2020 JUDGMENT
seizure by the DRI itself is unsustainable, we
allow the petition by quashing and setting aside
the seizure and the panchnama.
38.2 Resultantly, this Petition is allowed,
quashing and setting aside the detention and
seizure dated 29.07.2020 (AnnexureH ), dated
03.08.2020 (AnnexureL & M) & 11.08.2020
(AnnexureW ).
38.3. Petitioner shall be returned the
detained raw materials/goods in two weeks from
the date of receipt of copy of the judgement.
This would have no bearing on the aspect of
classification pending before the proper officer
and the same shall be determined on its own
merit.
38.4. Petition is disposed of accordingly with
no order as to cost.
(SONIA GOKANI, J)
(SANGEETA K. VISHEN,J)
M.M.MIRZA
