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PETITIONER: COLLECTOR OF CUSTOMS, BOMBAY

       Vs.

RESPONDENT: M/S HARDIK INDUSTRIAL CORPORATION

DATE OF JUDGMENT:       10/12/1997

BENCH: S.P. BHARUCHA, A.P. MISRA

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T Bharucha, J.      The Revenue  is in  appeal from  an order passed by the Customs, Excise and Gold (Control) Appellate Tribunal.      The  respondent   filed,   for   clearance   for   home consumption, seven  bills of  entry purporting  to relate to polyethylene scrap.  By reason of intelligence received that serviceable  material  was  likely  to  be  cleared  by  the respondent as  scrap, the  goods covered by the seventh bill of entry  were examined  by the  Customs authorities. It was found that what had been imported were plastic rolls of LDPE films of  continuous printed  jumbo size  bags, plain  carry bags and  printed carry  bags, all  ready for  use. The gods were seized.  Statements were  recorded under the provisions of Section  108 of  the Customs  Act, 1962, and an order was made on 8th March, 1994 by the Collector of Customs. Bombay. The order  noted the  correspondence between  the respondent and its foreign suppliers, the statements that had been made and other  material on  record. It found that the respondent had sought  to  clear  serviceable  material  as  scrap.  it required that the goods be assessed as serviceable material; that the value thereof be enhanced; that they be confiscated with option to the respondent to redeem them on payment of a fine; and that the respondent pay a personal penalty.      Against the  Collector’s order the respondent preferred an appeal  to the Tribunal The judgment and order thereon is the subject  matter of  this appeal.  In  its  judgment  the Tribunal referred  t the  submission made  on behalf  of the respondent that  the goods had been imported for the purpose of recycling  in the  manufacture of  mono filament yarn and the respondent was not interested in using the goods for any purpose other  than as  scrap.   In order  to establish  the respondent’s  bonafide,   its  counsel  submitted  that  the respondent was  willing to  have the  goods mutilated at its own expense, and, in that context, referred to Section 24 of the Customs  Act. The  Tribunal observed that the purpose of the said  provision was  to ensure that where imported goods had more  than one purpose, they were rendered unfit for use except for  one purpose.  In other words, the Tribunal said, where  imported   goods  could   be  used  as  scrap  or  as

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serviceable material,  it should  be open to an importer who contended that  the import was only for use as scrap to seek mutilation so that the goods could be used only as scrap and not as  serviceable material.  The Tribunal  referred to the practice of  permitting mutilation  of serviceable  garments which were  claimed to  have  been  imported  as  rags.  The Tribunal was  satisfied that  the same  procedure  could  be followed in the instant case, notwithstanding that rules had not been  made under  Section 24. Setting aside the order of the Collector,  the Tribunal  directed that the goods should be mutilated  in such  a manner that they could be used only for recycling and not for any other purpose. Section 24 of the Customs Act reads thus:      "Power to make rules for denaturing      or  mutilation   of   goods.-   The      Central Government  may make  rules      for permitting  at the  request  of      the   owner   the   denaturing   or      mutilation of  imported goods which      are ordinarily  used for  more than      one purpose  so as  to render  them      unfit  for  one  or  more  of  such      purposes; and  where any  goods are      so  denatured   or  mutilated  they      shall be chargeable to duty at such      rate as  would be applicable if the      goods  had  been  imported  in  the      denatured or mutilated form"      Mr. Usgaocar,  learned  Additional  Solicitor  General, submitted  that   the  respondent  had  attempted  to  clear serviceable material  as scrap.  the goods  had been,  inter alia, confiscated and a redemption fine and penalty had been imposed. The  order under  appeal had  wiped out  all  this, without going  into the merits, only by relying upon Section 24. The  purpose of  Section 24  was not to condone or erase the consequences of an offence that had been committed .      Learned counsel for the respondent pointed out that the order of  the Collector  had noted  that it  had been argued before him  on behalf  of the  respondent that the goods had been offered  for mutilation,  and submitted that this offer should have  been accepted  because it proved the bona fides of the  import. Learned  counsel submitted that the Tribunal was, therefore,  justified in invoking Section 24 and basing its judgment upon it.      The point  of time  at which  the respondent  made  the offer of mutilation is relevant. If, at the very outset, the respondent had asked for mutilation of the goods, that might have been a different matter. The Collector’s order suggests that it  did not.  It sought to clear the goods. It was only upon the  examination of  the seventh  container that it was noticed that  a part  of what  it contained  was serviceable material. If that be so, the respondents offer of mutilation was made only after the offence had been discovered.      The order  of the  Tribunal does not discuss the merits of the  case. It does not hold as a fact that the goods were scrap or  that the  respondent had  not sought  to clear  as scrap what  was really  serviceable  material  or  that  the confiscation, redemption fine and penalty were uncalled for. Without so  finding, the  Tribunal could  not have set aside the Collector’s  order and directed merely the mutilation of the goods.      We are,  thus, unable  to   uphold  the  order  of  the Tribunal and  must set  it aside.  At  the  same  time,  the respondent should  not   be deprived  of the  opportunity of satisfying the  Tribunal upon  the merits of its appeal; the

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appeal must,  therefore, be  remanded to  the  Tribunal  for being heard  and disposed  of on merits, uninfluenced by the judgement and order that we have set aside.      The appeals  are allowed.  The judgment and order under appeal is  set aside.  The appeal  (No.  C.  481/91-A,  327- 328/95-A) is  restored to  the file  of  the  Tribunal  (New Delhi) to be heard and disposed of on merits.      The respondent  shall pay to the appellant the costs of the appeal.