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CASE NO.: Appeal (civil)  5306-5307 of 2002

PETITIONER: M/s Relax Safety Industries,Mumbai and Anr

RESPONDENT: The Commissioner of Customs, (Import), Mumbai

DATE OF JUDGMENT: 09/05/2007

BENCH: Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T

Dr. ARIJIT PASAYAT, J.

       Challenge in these appeals is to the judgment of the  Customs, Excise and Gold (Control) Appellate Tribunal, West  Zonal Branch at Mumbai  (in short the ’CEGAT’). In the three  appeals before the CEGAT the order of the Collector of  Customs, Bombay was under challenge. By that order the  Collector of Customs (hereafter referred to as ’Collector’) had  ordered confiscation of a consignment comprising of dust and  mist respirators, one of earplugs and a mould, under clause  (d) and (m) of Section 111 of the Customs Act, 1962 (in short  the ’Act’). However, the appellants were permitted to redeem  the confiscated articles on payment of fine. He had ordered  enhancement of the assessable value of the respirators and  earplugs and imposed penalty under Section 112 of the Act on  Jaynat Maru, the proprietor of appellant No.1 and Himant  Tank.  

       Background facts in a nutshell are as follows:

Relax Safety Industries, the appellant had imported in  1994, a consignment of what it described in the bill of entry  that it filed for their clearance as "moulded plastic parts" and  "plastic fabricated cups". The value of the consignment was  declared by the importer to be of Rs.85670/-. The bill of entry  that was filed for their clearance indicated that some or all the  goods were subjected to some adjudication, as a result of  which they were permitted to be cleared on payment of fine.  This information was claimed to be available from the rubber  stamp put which prima facie indicates the result of  adjudication. A copy of the adjudication order claimed to  have  been passed was not made available to CEGAT by the  appellant despite its request. The goods were cleared on  payment of duty on the value declared by the importer.  Subsequently, the Directorate of Revenue Intelligence  investigated into the matter, seized the goods in Gujarat and  issued a notice which led to the adjudication. The notice  alleged that the goods were in fact respirators and earplugs,  based on the statement of Jayant H. Maru, alleged gross  under-valuation of goods, proposing enhancement of the value  of the goods to about Rs.27.88 lakhs. Confiscation of the  goods was proposed under clause (m) of Section 111 of the  Act. The notice also noted that respirator is classifiable under  heading 63.07 of the tariff, and not under heading 39.26 as  claimed.  Confiscation of the mould, which was not declared in  the bill of entry under clause (m) of Section 111 of the Act, was  also proposed as were penalties.  After considering the replies

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of the parties, and hearing them, the Collector passed the  order impugned in the appeals before CEGAT.

The contentions of the appellants were (a) the goods  having been subjected to adjudication once before, they could  not again be subjected to adjudication, and hence the second  order of confiscation is not tenable, (b) subsequently, the  goods have been subjected to adjudication on a third occasion,  (c) alternatively the goods were found by their manufacturer in  the United States of America not to conform to the local  standards and hence were given away for distribution to India.  They, therefore, could not be used as respirators or ear plugs.  That is why they were described as plastic moulded cups. It  was submitted that the Collector had ignored the certificates  issued by the manufacturer as to the use of the goods. Their  proposed confiscation under the import policy was questioned.  CEGAT noted that the same was without any reasoning in  support. It was also contended alternatively that if they are  held to be prime quality goods, they are life saving equipments  and did not require any import licence.         Revenue’s representative supported order of the  Collector.  

       The CEGAT noted that the basis for the contention that  the goods were subjected to adjudication earlier is a rubber  stamp on the bill of entry which was filed for clearance of the  goods. Despite the CEGAT’s directions neither the assessee  nor the revenue could produce the adjudication order.  According to the departmental representative the files were not  traceable in the Customs House as nearly a decade had  elapsed. No explanation was forthcoming from the assessee.  According to CEGAT, the rubber stamp is a kind that is used  to indicate the result of adjudication to importer or his agent  pending issue of formal order so as to expedite clearance of  goods.  All that could be culled out from the bill of entry was  that redemption value of Rs.15,000/- and penalty of  Rs.5,000/- was imposed.  

       The report filed by the shed operating staff on the reverse  of the bill of entry indicated that bag Nos. 41, 43, 44, 45, 80,  81 and 82 were nothing but the consumer goods and they are   mouth covers for dust protection fitted with elastic bulbs.  

The basic issue raised before the CEGAT was that once  goods were subjected to adjudication, confiscation for the  same goods were not impermissible. Though the appellant  placed strong reliance on Mohan Meakin Ltd. v. CCE [(2000  (115) ELT 3 (SC)] the CEGAT found that the same was not  applicable to the facts of the case. CEGAT noted that the  decision was inapplicable as only a part of the goods was  subjected to adjudication. The mere fact that they formed part  of the same consignment of which one part was held liable to  confiscation earlier does not impinge on the rest of the  consignment. That part can be subjected to confiscation  subsequently.  

       The CEGAT did not find any substance in the plea that  any of the goods had been correctly declared and a transaction  value had to be accepted. According to CEGAT question of  acceptance of transaction value would not arise where the  goods are supplied free of charge, as clear from the provisions  of Rule 4 of Valuation Rules which makes applicable as  transaction value the price actually paid or payable for the  goods when sold for export to India. Where the goods have not  been sold, the question of applying the transaction value

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would not arise.  It was accepted by the appellant before the  Commissioner that the goods were received free. The CEGAT  recorded a conclusion that the goods were mis-declared both  with regard to their identity and their value deliberately solely  in order to avoid their liability to confiscation and to pay duty.   So redemption fine and penalty were not reduced.  The penalty  was reduced to rupees twenty five lakhs so far as the appellant  Jayant Maru is concerned. The other appeal filed by Himant  Tank was allowed, as he is residing in U.S. and therefore the  provisions of the Act would not apply to him.  

       The CEGAT found that only those goods which were  already subjected to adjudication i.e. respirators cannot be  subjected to confiscation once again.                    The stands taken before the CEGAT are re-iterated before  us by learned counsel for the appellants.  It was submitted by  the appellants that CEGAT had erroneously come to the  conclusion that only part of the consignment was confiscated.  The consignment was cleared as one consignment. There was  consignment as a whole. It is also submitted that the so called  admission could not have been utilized as the same was  subsequently retracted.   

The only question which needs to be adjudicated is  whether there was confiscation of the whole consignment or  part of it earlier.  

The confiscation of the goods was ordered on two counts.  The first is that they are consumer goods usable as such and  the second is that their value has been grossly under declared.  It is not possible to accept the contention that because these  goods were supplied free of charge from an exporter from  United States of America, because they did not conform to  standards of the U.S. Federal Government, they are in fact not  earplugs and not usable as such. The fact that the earplugs  did not conform to a particular standard does not render them  unusable as such goods, or unsuitable for such use. All that it  shows is that in the particular country to those standards of  which they cannot conform, they cannot be put to such use.  There is nothing to prevent that they are being capable of use  as such elsewhere. This, in fact, has been the stand that  manufacturer of these goods took. They were manufactured by  Moldex Metric Inc, California. That company, in its certificate  dated 15.9.1992 signed by Albert Mintz, Vice President has  taken the stand that the goods did not conform to United  States of America’s Federal regulations or the earplugs did not  conform to the company’s standards, the products are either  trashed or given away for use outside USA. It further explained  "In the past we have also given these products to other  countries like Mexico, Columbia etc Enclosed documents  shows these approval" The documents enclosed to this  certificate contain the record of disposition by the Material  Review Board of this company to give away consignment of  respirators and earplugs in one case as a charitable  contribution for the Guadalaraja (in Mexico) explosion tragedy  through Red Cross, and in another case to "give away the  respirators for use in India". Thus it is clear that the goods in  question were by no means capable of use. Respirators and  earplugs could not be put to use in the rescue work following  the Mexican tragedy, unless they were capable of being so  used. Similarly, the manufacturer himself has specifically  indicated that the other consignment of respirators was for  use in India. It is thus clear that the goods were capable of  being used and intended to be put to use as earplugs. In other

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words, they might have been sub standard in the U.S.A. but  were identifiable as earplugs and capable of use as such. It is  not as if they were incapable of such use, and they could only  be used as scrap. In that case, one would expect them to be so  described. On the contrary, they have been described as  moulded plastic goods and classification is claimed, not under  heading relating to scrap, but as parts of plastic under chapter  34 of the tariff; nor is there any claim that the goods were in  fact put to use as scrap, and not sold or made use of as  earplugs. Allegation in the show cause notice that it was as a  result of the adjudication again that the importer faced as a  result of an earlier import in which goods were correctly  described, that they were ambiguously described in the  present consignment that has not been disputed. That being  the case, the goods were in fact earplugs and deliberately  declared to be plastic moulded cups, so as to mislead the  authorities into not treating the goods as consumer goods. The  view of the Collector that they are consumer goods because  they were not parts but they were items capable of use without  further processing and they protect from noise has been  rightly confirmed by CEGAT. The categorization of the goods  as consumer goods was also correct, and was not challenged  in the appeals before CEGAT. The contention that the goods  were life saving equipment and were freely importable has not  been substantiated by evidence to the provision of the import  policy. The confiscation of these goods under clause (d) of  Section 111 of the Act was rightly upheld by CEGAT.

       In para 8 of its judgment the CEGAT recorded as follows:

       "It is contended that the value of the goods has  been correctly declared and transaction value has to  be accepted. The question of acceptance of  transaction value would not arise in a case where  the goods are supplied free of charge. This is clear  from the provisions of Rule 4 of the Valuation Rules  which makes applicable as transaction value the  price actually paid or payable for the goods when  sold for export to India. Where the goods are not  sold the question of applying the transaction value  would not arise. It was in fact the contention of the  importer before the Commissioner that the goods  were received free. The manufacturer gave them  away to Silkat, New York. That company in its  certificate signed by Subhash Patel, General  Manager, has said that the amount charged to the  appellant was towards recovering our expenses  such as packaging, storage, shipping, handling,  insurance, nominal profits etc. It further certified  that it had not paid any money to the manufacturer.  In      effect, therefore the goods have been supplied  free of cost and the provisions of Rule 4 will not  apply. Jayant Maru, in his statement dated  8.9.1992 said that the correct CIF value of earplug  would be around 6.99 cents i.e. US $ 0.69 per plug.  He has confirmed this in his statement of 14.9.1992  where he has said that he has purchased the  earplug at US $ 138 per 2000 pairs. Maru has  affirmed an affidavit dated 22.9.1992 before a  notary retracting the admission made on the ground  that they were obtained by threat or assault. There  is no explanation for the delay of 15 days with  regard to the first statement and 8 days with regard  to the second statement. It is therefore not possible  to accept that the value that has been applied is

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incorrect. It is therefore not possible to accept that  the admissions made in his statement were not true  or voluntary. This being the position, confiscation of  the goods under clause (m) of Section 111 has also  to be confirmed. It is clear that the goods were mis  declared both regard to their identity and their  value deliberately solely in order to avoid their  liability to confiscation and to pay duty. We have  noted that Maru has accepted on an earlier  occasion in a case of import in the name of another  company, goods were rendered liable to confiscation  having incorrectly declared. This is therefore not a  case where the imports made were declared  unknowingly or innocently but deliberately. We  therefore do not think any reduction in the  redemption fine that would apply to these goods or  to the penalty for their mis-declaration and  unauthorised importation".

       Mohan Meakin’s case (supra) was rendered in entirely  different conceptual background. Para 6 of the judgment it  was noted as follows:

       "In the instant case, it is an admitted fact that  after issuing a notice as contemplated under  Section 124 of the Act, to the importer of the goods  in question and adjudication proceeding under  Section 125 had been conducted and the goods in  question were released on payment of redemption  fine, in such an event it matters little whether the  adjudication was under which sub clause of Section  111 because whichever is the sub clause, there was  an obligation on the adjudicating authority to find  out the market value of the goods so imported and  to collect all duty and other charges payable on the  goods in question before releasing the goods on  payment of redemption fine."  

       In the instant case, a categorical finding has been  recorded by the CEGAT that there was confiscation of only one  part and not the whole consignment. The effect of Section 28  of the Act also cannot be lost sight of, prima facie when there  is case of fraud made out.  In Mohan Meakin’s case (supra)  there was no notice to the original importer under Section   124. Mohan Meakin was found to be the ultimate bona fide  purchaser.  

       Looked at from any angle, the order of CEGAT is  irreversible. The appeals are sans merit and deserve dismissal  which we direct. Costs made easy.