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PETITIONER: M/S.  MOHAN MEAKIN LTD.

       Vs.

RESPONDENT: THE COMMISSIONER OF CENTRAL EXCISE, KOCHI

DATE OF JUDGMENT:       14/12/1999

BENCH: S.P.Bharucha, R.C.Lahoti

JUDGMENT:

     SANTOSH HEGDE, J.

     The  appellant  in these appeals manufactures beer  in its  Solan  and  Ghaziabad  Breweries   for  which  it  uses Lupofresh  aromatic  hop pellets which is normally  imported from  abroad.   For their requirement of abovementioned  hop pellets they used to place orders with an agent by name M/s. Pyarelal  Sarin (Agencies) Private Limited, New Delhi,  who, in  turn, used to arrange for supply of hop pellets required by  the appellant.  On 11.6.1991 the appellant was  informed that  2000 kg.  of hop pellets had been despatched to  their brewery  which  was received by them on 20.7.1991.  The  hop pellets  so received by the appellant were from M/s.  Arusan Industries  who,  in turn, had received the same  from  M/s. Integrated  Exports,  Madras.   In   view  of  certain  raid conducted  by the Directorate of Revenue Intelligence in the premises  of  the  appellant  with regard to  the  said  hop pellets,   they  came  to  know   that  there  was   certain investigation being conducted by the Customs Department with reference to the said consignment of hop pellets.  Since the appellant  was a bona fide purchaser in the ordinary  course of  its  business, it made enquiries with  M/s.   Integrated Exports  as  to  the  legality of the  import  of  said  hop pellets.   They were informed by the said Integrated Exports as  per  their letter dated 11.2.1992 that the  consignments from  which the appellant was supplied the hop pellets  were the  subject-matter  of certain proceedings initiated  under Section  111(d)  of  the Customs Act, 1962 (for  short  the Act) and after the said adjudication made by the Department at  the time of import, the goods in question were  redeemed by  them  on payment of redemption fine.  Hence,  after  the said  redemption the importation had become licit and  there could be no problem with the purchase of hop pellets made by the  appellant.   However,  in the meantime,  the  appellant received  a show-cause notice dated 24.3.1992 wherein it was stated  that  the  import of the entire consignment  of  hop pellets  made by the importers, a part whereof was purchased by  the  appellant,  was also in  contravention  of  Section 111(m)  of the Act.  Hence, the appellant was asked to  show cause why the hop pellets purchased by it not be confiscated and  action  taken for imposition of penalty  under  Section 112(b)  of the Act.  The appellant filed its reply  wherein, inter  alia,  it  pleaded before the Collector  of  Customs, Cochin,  who had issued the show cause notice, that they are

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bona  fide purchasers of the goods in question in the normal course  of their business and they had come to know that the goods  in  question  was the subject-matter  of  an  earlier proceeding  under Section 111(d) of the Act;  consequent  to which  the  goods  in question were released on  payment  of redemption fine and the purchase made by them was subsequent to  the  said redemption order made under Section 125(2)  of the Act.  Therefore, it is impermissible to subject the same goods for confiscation for a second time and further subject it to a fresh levy of redemption fine, penalty or duty.  The appellant  had  also  contended  that since  it  is  only  a purchaser  from an importer who had redeemed the goods under Section 125(2) of the Act, hence there could be no liability which  could be fastened to it.  In regard to duty  payable, if  any;  at the most action could be taken under Section 28 of  the Act against the importer for recovery of duty either not levied or short-levied.  The contention of the appellant was  rejected  by  the Collector who vide  his  order  dated 25.11.1992  released the goods by imposing a redemption fine totalling  Rs.   3.25 lacs which was appropriated  from  the securities  furnished by the appellant during the course  of the  proceedings.  Being aggrieved by the said order of  the Collector,  the  appellant  preferred   appeals  before  the Customs,  Excise & Gold (Control) Appellate Tribunal, Madras (for  short the tribunal) wherein the appellant raised the following  contentions  :-  (1) The goods had  already  been confiscated  under Section 111(d) and the same could not  be confiscated second time over under Section 111(m).  (2) Duty could  not be demanded from the appellants as the provisions of  Section  28 of the Customs Act, 1962 were available  for demanding  duty from the importers.  2(a) Proceedings  could not have been drawn against the appellants without the issue of  show cause notice to the importers.  (3) Duty could  not be  demanded  from the appellants as there was no  order  of confiscation in respect of the goods under Section 111(m) of the  Customs Act, 1962.  (4) Differential duty could not  be fastened  on the appellants for reason of being owner of the goods  when  the provisions of Section 28 are available  for demand of duty from the importers.

     On  behalf of the Department it was argued before  the tribunal  that after the goods in question were released  on payment  of redemption fine, it was found as a result of the investigation  that the said goods were heavily undervalued. It  was  contended  that the subsequent  proceeding  was  an independent  proceeding, therefore, the same was liable  for confiscation  for violation of Section 111(m) of the Act and consequently  fresh proceedings contemplated under  Sections 112 and 125 of the Act were permissible since the subsequent proceedings  were  for a different violation of the Act  and had  nothing  to do with the earlier proceedings.   We  have heard  learned  counsel  for the parties.  It is  seen  that under  Section 111 of the Act, the goods which were  brought in  contravention of Clauses (a) to (p) of that Section  are liable  for confiscation.  Relevant sections for the purpose of  our consideration are Section 111(d) and (m) of the  Act which  read  thus  :    111.   Confiscation  of  improperly imported  goods, etc.   The following goods brought from  a place outside India shall be liable to confiscation

     x x x

     (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

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

     (m)  any  goods which do not correspond in respect  of value  or in any other particular with the entry made  under this Act or in the case of baggage with the declaration made under Section 77 in respect thereof;

     Section  125 of the Act empowers the authorities after adjudication  to release the goods to the person from  whose possession  the  same  has  been seized,  on  collection  of redemption   fine  in  lieu  of  confiscation.    But   such redemption of the goods is subject to the owner being called upon  to pay any duty and charge that is payable in  respect of  such goods.  The proviso to Section 125(1) also makes it obligatory  on the adjudging authority to evaluate the  fine which  shall  not  exceed  the market  price  of  the  goods confiscated  (emphasis  supplied).   Therefore, there  is  a mandatory  requirement  on the adjudicating  officer  before permitting  the redemption of goods, firstly, to assess  the market  value  of  the goods and then to levy  any  duty  or charge  payable on such goods apart from the redemption fine that  he intends to levy on sub-clause (1) of that  Section. 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. Having  released  the  goods  thus   into  the  market   and permitting  the  sale of the same, in our opinion it is  not open  to the Collector to initiate another proceedings under another  clause  of  Section 111 to  recover  the  so-called difference  in  valuation  of the imported  goods  from  the ultimate  bona  fide purchaser for value.  If the  Collector failed  to  make a proper enquiry as to the market value  of the  goods  and  released  the  same  after  a  half-hearted adjudication,  we fail to see why a subsequent purchaser  be saddled  with the liability of under- valuation;  more so in the background of the fact that the appellant had no role to play   either   in  the   import  or  earlier   adjudication proceedings.   That apart, it is rather surprising that  the fresh  proceeding  under  Section 111(m)  is  not  initiated against  the original importer inspite of the provisions  of Section 28 of the Act.  Counsel for the respondent is unable to  convince  us why no notice under Section 124  is  issued against  the  original  importer who was  permitted  by  the Department  to redeem the goods under Section 125 of the Act and  sell the same in the open market.  In this  background, we  are of the opinion that the action of the Department  to initiate  proceedings  against the appellant, who is a  bona fide  purchaser  of the redeemed goods for value, is  unjust and  hence not sustainable in the facts and circumstances of this  case.   For  the reasons stated above, we are  of  the opinion  that  the initiation of proceedings  under  Section 111(m) of the Act is liable to be quashed.  Consequently, we allow  these  appeals, quash the orders impugned herein  and the  fine and duty, if any, collected from the appellant for redemption  of  the  goods is directed to be  refunded.   No

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costs.