Gujarat High Court

Commissioner Of ... vs M/S Marvel Fashions on 30 July, 2025

Author: Bhargav D. Karia

Bench: Bhargav D. Karia

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                            C/TAXAP/1638/2007                                      JUDGMENT DATED: 30/07/2025

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                                      IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                                    R/TAX APPEAL NO. 1638 of 2007
                                                               With
                                                    R/TAX APPEAL NO. 1639 of 2007


                        FOR APPROVAL AND SIGNATURE:


                        HONOURABLE MR. JUSTICE BHARGAV D. KARIA
                        and
                        HONOURABLE MR. JUSTICE PRANAV TRIVEDI
                        ==========================================================

                                     Approved for Reporting                      Yes           No

                        ==========================================================
                           COMMISSIONER OF CUSTOMS(PREVENTIVE)(Amended as per Order
                                        dated 01.07.2024 in CA 1 OF 2024)
                                                      Versus
                                            M/S MARVEL FASHIONS
                        ==========================================================
                        Appearance:
                        MR CB GUPTA(1685) for the Appellant(s) No. 1
                        RULE SERVED for the Opponent(s) No. 1
                        ==========================================================

                           CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
                                 and
                                 HONOURABLE MR. JUSTICE PRANAV TRIVEDI

                                                            Date : 30/07/2025
                                                            ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1. Heard learned Senior Standing Counsel

Mr. C.B.Gupta for the appellant.

2. These appeals were admitted for

consideration of the following substantial

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questions of law by order dated

04.02.2008:

"a) Whether in the facts and in the circumstances of the case, the Tribunal is justified in holding that the goods were not liable for confiscation under Section 111(d) of the Customs Act, 1962 on the ground that they are not prohibited goods?

b) Whether in the facts and in the circumstances of the case, the Tribunal was justified in setting aside the order of confiscation of goods as well as in setting aside the order imposing penalty under Section 112(a) of the Customs Act, 1962?

c) Whether in the facts and in the circumstances of the case, the Tribunal is justified in holding that the goods did not become prohibited goods in terms of Section 111(a) of the Customs Act, 1962 and whether these goods were sought to be cleared claiming exemption under Notification No.53/07 Cus dated 6.3.1997 (as amended)?"

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3. Brief facts of the case are as under:

3.1 The respondent-M/s. Marvel

Fashions was a 100% Export-Oriented

Undertakings ['EOU' for short] having

requisite license to import any material

for the manufacture of the goods to be

imported.

3.2 One M/s. Avlon Syntex Pvt. Ltd

intended to import 100% Polyester Dyed

Piled Fabrics which was sold to M/s.

Marvel Fashions on High Sea Sales basis

by entering into an agreement.

Thereafter, M/s. Marvel Fashions filed 04

Bills of Entry claiming exemption under

Notification No. 53/1997-CUA as under:

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Sr. Bill of Entry for High Sale Invoice No and Bill of Lading Noand No Warehousing No and Agreement Date dates Date Date Changshu Winwell Import and Export Co.

Ltd. Changshu City, China 1 2184 dated 14.09.2001 01WWV50510 PSHBOM01 E5371 30.10.2001 dt 05.09.2001 dt 10.09.2001 2 2516 dt 26.09.2001 07.09.2001 01WWV535"17 PSHBOM01 E5357 dt 30.08.2001 dt 03.09.2001 3 2509 dt 26.09.2001 07.09.2001 01WWV535'16 PSHBOM01 E5356 dt 30.08.2001 dt 03.09.2001 4 2186 dtd 30.10.2001 14.09.2001 01WWV50509 PSHBOM01 E5370 dt 05.09.2001 dt 10.09.2001

3.3 Thereafter, separate letters from

M/s. Marvel Fashions duly signed by its

signatory and letter from M/s. Avlon

Syntex Pvt Ltd were submitted to the

Assistant Commissioner of Customs, Import

Department confirming High Sea Sale under

Para 5.0 of the EXIM Policy 1997-2002

with a request to grant permission for

noting of Bills of Entry as well as

completion of all formalities for

clearance of the goods.

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3.4 Thereafter, acting upon

intelligence DRI, Mumbai, made

investigation, by conducting examination

of the goods in question on 02.12.2002

under a panchnama and the goods in the

consignments were found to be scarves and

not dupattas, as declared. A search at

the factory premises of M/s. Marvel

Fashions was conducted on 22.02.2002 and

representative samples from the raw

material which was indigenous as well as

imported found lying in the factory

premises were also drawn under panchnama

dated 26.02.2002 and it was reported that

transport documents of the imported raw

material were not available in the

factory premises.

3.5 On scrutiny of the documents

seized during the search at the factory

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premises of the M/s. Marvel Fashions

which included Letter of Permission dated

12.06.2001, Import Export Code dated

19.06.2001 etc., it was found by the DRI

after conducting preliminary

investigation that, four consignments,

which were ready for export were placed

under seizure, were manufactured form

indigenous 100% Polyster Dyed Piled

Fabrics acquired locally and on

evaluation of the import of various raw

materials by M/s. Marvel Fashions it was

found that it cleared large number of

consignments on the Bill of Entry for re-

warehousing comprising of fabrics and

chemical i.e. 100% Polyester Fabrics and

other types of chemicals and all

consignments were imported by companies

like M/s. Avlon Syntex Pvt. Ltd,

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M/s. A.I. Feshani Trading Co, Surat etc.

and these consignments were sold on High

sea sales basis to M/s. Marvel Fashions

and Bills of Entry for warehousing were

filed by it for clearance of the goods

under Para 9.2 of the Export and Import

(Exim) Policy 1997-2002 through only one

clearing agent M/s. Salasar Shipping

Services at Mumbai and M/s. Shakti

Enterprise at Kandla Port. It was also

found during scrutiny that all the 74

consignments, which were acquired under

Bill of Entry for re-warehousing, were

disposed of as cleared under DTA sales by

claiming such material as misprints,

rejects and wastage mainly to 29 parties

at Surat and 04 parties at Hyderabad.

3.6 A show-cause notice was therefore,

issued after recording of statements of

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the concerned persons who were partners

of M/s. Marvel Fashions including

statement of Mr. Mohsin Akukara,

statement of Shri Vivek Gohil-Director at

M/s. Avlon Syntex Pvt. Ltd as to why the

goods imported through 04 Bills of Entry

should not be confiscated.

3.7 During the adjudication process, a

defence was raised on behalf of M/s.

Marvel Fashions contending that the show-

cause notice was time barred since the

goods were seized on 12.06.2003 by the

officers of DRI, Mumbai and a show-cause

notice was issued on 10.12.2003. It was

also contended that the contract for

purchase of 100% Polyester Dyed Piled

Fabrics was made on High Sea Sales basis

from M/s. Avlon Syntex Pvt. Ltd. and as

the contract did not materialize,

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negotiations were going on and goods were

not claimed and therefore, the High Sea

Sales did not materialize and letter

dated 10.05.2002 was written by M/s.

Avlon Syntex Pvt. Ltd to UTI Bank Ltd to

return the documents. Thus, the

transaction of High Sea Sale was denied

by M/s. Marvel Fashions in its defence.

3.8 The adjudicating authority, after

considering the facts and the evidence on

record, ordered to confiscate the goods

imported by M/s. Marvel Fashions through

04 Bills of Entry being 97583.40 sq.mtrs

100% Polyester Dyed Piled Fabrics valued

at Rs. 26,50,819.42 covered under the 04

Bills of Entry and also imposed penalty

of Rs. 1 Lakh on Shri Rafik Ghaniwala and

Shri Mohsin Akukara separately and

penalty of Rs. 5 Lakh on M/s. Avlon

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Syntex Pvt. Ltd, Rs. 1 Lakh on Shri Vivek

Gohil and Rs. 5 Lakh on M/s. Marvel

Fashions was imposed.

3.9 Being aggrieved, the appeal was

preferred by the respondent before the

Customs and Excise Service Tax Appellate

Tribunal, Ahmedabad [for short 'the

Tribunal'] challenging the Order-in-

Original dated 29.04.2005.

3.10 The Tribunal, after

considering the submissions made by both

the sides, by the impugned order held

that the confiscation of the goods in

question made by invoking section 111(d)

of the Customs Act,1962 [for short 'the

Act'] is not tenable as there is no

finding as to whether the goods were

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prohibited under the Customs Act or any

other law more particularly, when the

adjudicating authority has accepted that

the goods were not prohibited to be

imported into India but the same were

held to be prohibited in view of the

misdeclaration made in the Bills of Entry

including the Rules 11, 14(1), 14(2) of

the Foreign Trade (Regulations)Rules,

1993 ['the Rules' for short] on the

ground that when the goods were sought to

be cleared claiming exemption under

Notification No. 53/1997-CUS by

misdelcaring that the goods are required

for manufacture of export products in

100% EOU by M/s. Marvel Fashions when

there was no export order available with

M/s. Marvel Fashions and therefore, the

same are liable to be considered as

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prohibited goods in terms of section

111(d) of the Act.

3.11 The Tribunal therefore,

considering provision of section 111(d)

of the Act held that M/s. Marvel Fashions

being 100% EOU was working under the

permission granted by the Development

Commissioner and the Board of Approval

and there was nothing on record to

indicate that such permission was sought

to be revoked by the Customs Department

and therefore, it was eligible to import

goods without payment of duty and

admittedly, when the goods were not

prohibited under the Customs Act or any

other law, the same could not have been

confiscated by invoking section 111(d) of

the Act.

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3.12 The Tribunal therefore, set

aside the impugned Order-in-Original and

resultantly, the order imposing penalty

was also set aside.

4. Learned advocate Mr. C.B.Gupta reiterated

submissions made before the Tribunal and

relied upon the observations made in the

Order-in-Original for confiscation of the

goods and levy of the penalty.

5. Section 111(d) of the Act reads as under:

"111. Confiscation of improperly imported goods, etc.

- The following goods brought from a place outside India shall be liable to confiscation:-

                                                (d)       any    goods   which  are
                                                imported    or   attempted   to  be

imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or

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under this Act or any other law for the time being in force;"

6. On perusal of the above provision, it is

clear that the same would be applicable

for confiscation of the goods when goods

which are imported or attempted to be

imported or are brought within the Indian

Customs Waters for the purpose of being

imported are prohibited by Customs Act or

any other law for the time being in force.

Admittedly, the goods in question are not

prohibited either under the Customs Act or

any other law. The reasoning given in the

Order-in-Original for the purpose of goods

would be a prohibited goods under section

111(d) of the Act read with Rules 11,

14(1) and 14(2) of the Rules cannot be

accepted as such goods are not prohibited

goods. It would be germane to refer to the

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reasoning assigned by the adjudicating

authority for passing order of

confiscation as under:

"22.2. I find that M/s Avlon has placed order on foreign supplier for import of the impugned goods, the goods were shipped to India at their behest. The import is defined to mean bringing into India from a place outside India. The import of goods starts when the goods leave the supplier country for shipment to India. Hence, it is clear that they are the importer. Though these goods are not prohibited for import into India,the impugned goods became prohibited in terms of sections 111(d) of the Customs Act, read with rule 11(a), 14(a1) and 14(20 of the foreign Trade (Regulations) Rules, 1993 when these were sought to be cleared claiming exemption under notification no. 53/97-Cus. By mis-declaring that the impugned goods are required for manufacture of export product in the 100% EOU by M/s. Marvel Fashions. It is the case of the department that M/s. Avlon has played an active role in their fraudulent attempt to clar the impugned goods by mis- delcaring that these goods were required for manufacture of export

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goods namely garments. It is on record that M/s. Marvel Fashion was engaged in the maufacure of Scarves and dupattas and no other garments. M/s. Avlon has filed the delcarations with custom to the effect that they have sold the impugned goods to M/s. Marvel Fashions. They have also declared to Customs on 07.09.2001 that the title of the goods is unconditionally transferred to M/s. Marvel Fashions, though they retained the ownership of the goods and even has written to their Banker UTI Bank on 10.5.2002 to return the documents to the foreign supplier. Thus, it is clear that the transaction of sale was made only on paper to hoodwink the Customs and to facilitate the fraudulent duty free clearance of the impugned goods in the name of Marvel Fashion claiming exemption under notification No 53/97 Cus. This mis-delcaration made by them to the Customs showing that the goods have been sold to M/s. Marvel Fashions on High Sea Sale basis was not factually correct and this was done with fraudulent intention to evade Customs duty. Thus they are guilty of violation of rule 14(1) and 14(2) of the Foreign Trade (Regulations) Rules, 1993. In view of the above, I hold that M/s. Avlon and Shri Vivek O. Goel, Director of the Company are

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liable for penalty under section 112(a) of the Customs Act."

7. It appears that the adjudicating authority

has invoked section 111(d) of the Act on

misconception that misdeclaration was made

by M/s. Marvel Fashions to the Customs

Department showing that the goods were

purchased on a High Sea Sales basis and

with a fraudulent intent to evade custom

duty resulting into violation of Rules

14(1) and 14(2) of the Rules. Rules 11,

14(1) and 14(2) of the Rules, as it

existed at the relevant time, read as

under:

"11. Declaration as to value and quality of imported goods:- On the importation into or exportation out of, any customs port of any goods, whether liable to duty or not, the owner of such goods shall, in the bill of entry or the

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shipping bill or any other documents prescribed under the Customs Act, 1962, state the value, quality and description of such goods to the best of his knowledge and belief and in case of exportation of goods,certify that the quality and specification of the goods as stated in those documents are in accordance with the terms of the export contract entered into with the buyer or consignee in pursuance of which the goods are being exported and shall subscribe to a declaration of the truth of such statement at the foot of such bill of entry or shipping bill or any other documents."

"14. Prohibition regarding making, signing of any declaration, statement or documents.-

(1) No person shall make, sign or use or cause to be made, signed or used any declaration, statement or document for the purposes of obtaining a licenc or importing any goods knowing or having reason reason to believe that such declaration, statement or document is false in any material particular.

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(2) No person shall employ any corrupt or fraudulent practice for the purposes of obtaining any licence of importing or exporting any goods."

8. Section 111(d) of the Act is applicable

for confiscation of the goods when the

goods are prohibited goods either under

the Customs Act or under any other law.

9. In the facts of the case, the adjudicating

authority has invoked section 111(d) of

the Act to hold that the goods in question

are prohibited goods in view of violation