TAXAP/757/2007 1/37 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 757 of 2007 With CIVIL APPLICATION No. 212 of 2007 In TAX APPEAL No. 757 of 2007 For Approval and Signature: HONOURABLE THE ACTG. CJIEF JUSTICE MR.M.S.SHAH AND HONOURABLE MR.JUSTICE RAVI R.TRIPATHI ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================= COMMISSIONER OF CUSTOMS Versus JHUNJHUNWALA VANASPATI LTD. ========================================= Appearance : MR HARIN P RAVAL for the Appellant MR KL RAVAL SENIOR ADVOCATE with MR DIPEN A DESAI for the Respondent ========================================= CORAM : HONOURABLE MR.JUSTICE M.S.SHAH and HONOURABLE MR.JUSTICE RAVI R.TRIPATHI TAXAP/757/2007 2/37 JUDGMENT Date : 04/07/2008 CAV JUDGMENT (Per : HONOURABLE MR.JUSTICE RAVI R.TRIPATHI) 1. By this appeal under Section 130 of the Customs Act, 1962, Commissioner of Customs, Kandla is before this Court being aggrieved by judgment and order dated 26.12.2006 rendered in Appeal No.C/978/2006 by the Customs Excise & Service Tax Appellate Tribunal, West Zonal Bench, Ahmedabad bearing No.A/42/WZB/A'bad/07, whereby the Tribunal set aside the order of the Commissioner of Customs, Kandla dated 16.05.2006 being Order in Original No.KDL/COMMR/21/2006 and issued following directions:- “7. Taking into account the ratio of various judgments quoted by the learned Advocate for the appellant, the order of the Commissioner is set aside with the following directions:- a) The bills of entry filed by M/s Magpie Overseas Co. should be treated as cancelled. b) The present appellant shall be permitted to file fresh bill of entry / bills of entry in respect of the entire quantity of 500Mts. c) The appellant shall file fresh bill of entry without claiming exemption under Notification No.21/02 and the same shall be processed as per law and applicable duty and interest shall be collected. d) The appellants are also directed to produce indemnity TAXAP/757/2007 3/37 JUDGMENT Bond to the satisfaction of the Commissioner of Customs for value of the goods indemnifying the department against claim/damage by M/s Magpie Overseas Co. in respect of this consignment. e) No order is being passed with regard to duty remitted by M/s Magpie Overseas Co. on the basis of assessment made by customs.” 2. The appeal was filed on 03.05.2007 on the following questions of law:- (a)Whether or not bill of entry assessed to payment of customs duty on which customs duty is paid and out of charge order issued under Section 47 of the Customs Act, 1962 can be permitted to be amended in view of the provisions of Section 149 read with Section 30(3) of the Customs Act, 1962? (b)Whether or not CESTAT has erred in law in allowing cancellation of bill of entry after its assessment after out of charge order by permitting fresh bill of entry to substitute the name of the importer in the bill of entry? 3. On 13.06.2007, when the matter reached for hearing before the Court, learned counsel for the appellant prayed for time to reframe the questions. The matter was adjourned to 28.06.2007. On 28.06.2007 / 10.07.2007, learned counsel for the appellant submitted reframed substantial questions of law which read as under:- a) Whether in the facts and circumstances of the case, the TAXAP/757/2007 4/37 JUDGMENT Tribunal is justified in permitting the respondent to file a fresh bill of entry contrary to the provisions of Section 149 of the Customs Act, 1962 which provides that no bill of entry or a shipping bill or a bill of export shall be authorized to be amended after the imported goods have been cleared for home consumption or deposited in a warehouse or the export goods have been exported? b) Whether in the facts and circumstances of the case, the Tribunal is justified in permitting the respondent to file a fresh bill of entry in respect of 500 MT of imported goods despite a bill of entry having been assessed to payment of customs duty, customs duty having been paid and out of charge order having been issued under Section 47 of the Customs Act, 1962? c) Whether in the facts and circumstances of the case, the Tribunal is justified in permitting filing of fresh bill of entry after an out of charge order is issued so as to substitute the name of the importer in the bill of entry as finalized?” The Court, by order dated 10.07.2007, admitted the appeal on the above referred reframed substantial questions of law a) and b). 4. In Civil Application No.212 of 2007 in Tax Appeal No.757 of 2007, the Court passed following order on 09.10.2007:- “We do not grant any interim order or interim direction,when the appeal is filed against the Tribunal's order. Considering the facts, we deem it proper to hear the appeal TAXAP/757/2007 5/37 JUDGMENT itself finally on 20th November,2007. Learned counsel for the Revenue prays time to prepare paper book. List the appeal on 20th November,2007.” Later on, the Court directed the learned counsel for the Revenue to place on record notification dated 01.03.2002 on the basis of which the duty was assessed originally in 2005. Similarly, on 20.12.2007, the Court asked the counsel for the parties to place on record the relevant agreement entered into between respondent and M/s Magpie Overseas Company. BRIFE FACTS OF THE CASE 5. The brief facts set out by the appellant are as under:- 5.1 M/s. Jhunjunwala Vanaspati Ltd. (hereinafter referred to as “the respondent”) imported a consignment of Crude palm oil-non- edible grade/industrial grade falling under Chapter Heading No.1511 90 90 of the Customs Tariff Act, 1975. Out of the same, the respondent sold quantity of 500 MT to M/s. Magpie Overseas Company, Delhi (hereinafter referred to as “M/s. Magpie”) on High Sea Sale basis under an agreement dated 06.09.2005. 5.2 On the basis of the said High Sea Sale Agreement, M/s. Magpie filed two bills of entry Nos.119410 and 119384 on TAXAP/757/2007 6/37 JUDGMENT 12.09.2005 of 250 MT each for home consumption and claimed benefit of concessional rate of duty under the Notification No.21/2002 dated 01.03.2002 [Sr. No.30(A)] as amended from time to time. 5.3 The said bills of entry were assessed by the concerned officer on 26.09.2005, taking into consideration the documents presented. After the assessment order was passed on bill of entry No.119410 dated 12.09.2005, M/s. Magpie paid duty amounting to Rs.9,53,771/- together with interest thereupon of Rs.1568/- on the same day, i.e. 26.09.2005. On payment of duty, orders for “out of charge” were passed on the same day, i.e. 26.09.2005 with regard to the goods covered under the bill of entry No.119410. So far as bill of entry No119384 is concerned, M/s. Magpie did not pay any duty though the said bill of entry was duly assessed. 5.4 On the basis of the intelligence received and preliminary investigation report sent to the Customs authorities to the effect that the goods lying at Kandla Port would not be used by the importer in absence of capacity to store/process for the manufacture of soap. The officers of SIIB, Customs House, Kandla placed the goods under seizure by drawing panchnama on 08.02.2006, as according to the officers, the goods were liable for confiscation under the provisions of the Customs Act, 1962. 5.5 In view of the above, the respondent (M/s. Magpie) preferred a petition being Special Civil Application No.5037 of 2006 before TAXAP/757/2007 7/37 JUDGMENT this Court. The same was disposed of by order dated 21.03.2006. The Court directed respondent No.2 to – appellant herein – Commissioner of Customs, Kandla to take a final decision on applications/letters submitted by the present respondent – the petitioner in that petition on 06.10.2005 and 30.12.2005 within four weeks from the date of receipt of the said order. The Court was also pleased to direct that if respondent No.2 thought it necessary to hear the petitioners (of that petition) respondent herein, he shall issue notice so as to procure presence of the petitioners and in that event, the Court was pleased to direct that the petitioners shall extend full cooperation to respondent No.2 so that the final decision could be taken as directed by the Court. The Court was also pleased to direct that if the order that may be passed by respondent No.2 is not in favour of the petitioners, the respondent shall record the reasons for which he is unable to accept the request which was made by the petitioners in the said letters. A copy of the order of this Court disposing of Special Civil Application No.5037 of 2006 is produced at Annexure-A to this appeal. 5.6 After the disposal of the aforesaid Special civil Application by this Court, the respondent submitted letter dated 04.04.2006 requesting to release the seized goods by treating High Sea Sale Agreement as cancelled and permit them to substitute the bills of entry in place of M/s. Magpie by adjusting the duty paid by M/s. Magpie at normal rate of 65% ad valorem. TAXAP/757/2007 8/37 JUDGMENT 5.7 Pursuant to the aforesaid order passed by this Court in Special Civil Application No.5037 of 2006 the respondent as well as M/s. Magpie were issued notice bearing No.F.No.S/23-3/ Jhunjhunwala/2006 – Gr.-I dated 02.05.2006 in the following terms: The respondent was called upon to show cause on or before 09.05.2006. (a)In respect of bill of entry No.119410 where the clearance for home consumption under Section 47 of the Customs Act, 1962 has already been passed, why the request for cancellation and permission for filing a fresh bill of entry be not rejected. (b)Why the seized goods covered by the aforesaid bill of entry which were attempted to be cleared under concessional rate of duty based on declarations made by Magpie, be not proceeded against in terms of the relevant provisions of the Customs Act, 1962 for specific violations by way of separate proceedings and; (c) Why the request of notice for cancellation of bill of entry No.119384 on which order for clearance for home consumption under Section 47 of the Customs Act, 1962 has not been passed by considered for amendment, subject to compliance with the requirements of Section 30 of the Customs Act, 1962 read with Section 149 of Customs Act, 1962 and be not assessed to duty, subject to the relevant provisions of Customs Act, 1962 and of any other law for the time being in force to be considered by the proper authority. 5.8 Personal hearing was fixed on 15.05.2006, wherein the respondent was represented by an advocate along with their TAXAP/757/2007 9/37 JUDGMENT authorised representative. The respondent submitted written submissions. 5.9 The Commissioner of Customs, Custom House, Kandla, taking into consideration the facts of the case and the arguments advanced on behalf of the respondent, recorded the following findings:- I. M/s. Magpie had filed two bills of entry bearing Nos.119410 and 119384 both dated 12.09.2005 for home consumption of goods and they made declarations as prescribed under Section 46 of the Customs Act, 1962 and that there was no dispute over the fact that M/s. Magpie had filed these two bills of entry in pursuance to a High Sea Sale Agreement dated 06.09.2005 between them and the noticee. II. Bill of entry No.119410 dated 12.09.2005 was assessed to duty based on declarations made on the bill of entry as provided under Section 17 of Customs Act, 1962 and upon Magpie making payment of duty amount (along with interest) as assessed. Out of charge order as envisaged under Section 47 of Customs Act, 1962 was given on 26.09.2005. The Noticee vide his letter dated 06.10.2005 has pleaded for cancellation of above bill of entry and permission for filing a fresh bill of entry for the same goods by stating that Magpie were unable to clear the goods. They reiterated this request through another letter dated 30.12.2005. This request of Noticee (the respondent – M/s. Jhunjhunwala Vanaspati Ltd.) as contained in these two letters (for which Hon'ble High Court has passed the oral order dated 21.03.2006) is not supported by Customs Law. There is no provision under Customs law for cancellation of a bill of entry once goods are TAXAP/757/2007 10/37 JUDGMENT given out of charge. M/s. Magpie on the basis of High Sea Sale agreement had held themselves out to be the importer and it cannot be said that there was any documentary evidence as envisaged under Section 149 of Customs Act, 1962 so as to consider amendment in the bill of entry with regard to name of importer..... III.As far as the second bill of entry is concerned which has been presented to the department on the basis of High Sea Sale agreement effected by the Noticee in the name of Magpie, claiming concessional rate of duty in terms of notification No.21/2002 – Cus., as amended, it may be seen that this bill of entry has already been assessed and released for payment of duty on 26.09.2005. In this case, Magpie has already held themselves out as importer and filed bill of entry on the basis of High Sea Sale Agreement. The definition of the term importer in Section 2(26) of the Customs Act, 1962 very clearly specifies that importer, in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer. As such, Customs Law, in the period between the importation of the goods and the time when they are cleared for home consumption does not hold any ownership test. In short, for holding oneself out to be an importer, a person need not be the owner of the goods. That Magpie held themselves out as importer and filed a bill of entry subscribing to declarations and claiming certain concessions to which apparently they were not entitled as per investigation which were commenced by Department at the relevant time and the Noticee were party to the whole act facts well borne out by record. IV.In this case, the import had taken place in the name of M/s. Jhunjhunwala Vanaspati Ltd. They had put on record a High TAXAP/757/2007 11/37 JUDGMENT Sea Sale Agreement and M/s. Magpie held themselves out as importer and claimed certain duty concessions on the basis of declarations made on the bill of entry. When investigation commenced by the department on their entitlement for such concession, M/s. Magpie vanished and M/s. Jhunjhunwala Vanaspati Ltd. (Noticee) re-appeared on the scene. That M/s. Magpie was a fictitious firm is clear when even letters sent across to them returned undelivered as addressee not found and during personal hearing, the noticee themselves admitted that they are also not able to trace them. The issue herein is that matter is still under investigation and not so much known whether the fiction of M/s. Magpie was the creation of Noticee themselves. The fact of the fiction is, however, a realty and M/s. Magpie sought to defraud the revenue by false declarations on the bill of entry is very much evidenced by that very bill of entry which is not sought to be cancelled by this application of the Noticee.” 5.10 The Commissioner of Customs, Custom House, Kandla did take into consideration the judgment of the Hon'ble the Apex Court in the case of Sampat Raj Dugar, recorded in 1992 (58) ELT 163 (SC) and recorded its reasons in the later part of paragraph No.5.2.5 of the Order in Original for which the same is held to be not applicable to the facts of the present case. The said reasons read as under:- “The ratio of Hon. Supreme Court's judgment in the case of Sampat Raj Dugar, 1992 (58) ELT 163(SC) is with reference to an importation by a person who had an advance license issued in his name which got cancelled and as such, the foreign supplier's rights with reference to the goods were TAXAP/757/2007 12/37 JUDGMENT sought to be established for smooth functioning of foreign trade. This case, however, as explained above, is with regard to a high sea sale effected by the Noticee who has initially imported the goods and then transferred it on high sea sale basis to a fictitious firm, with or without motive, and once that firm was investigated and vanished from the scene, seeks to substitute themselves as the importer. The bill of entry filed by M/s. Magpie which has been duly assessed by the department is still very much on record. As such, the element of fraud which is very much involved in the present case was not an issue before Hon. Supreme Court in the case of Sampat Raj Dugar.....” 5.11 After recording the aforesaid findings and relying upon the decisions, set out in paragraph No.5.2.5, the Commissioner of Customs passed the Order in Original rejecting the request of the respondent for cancellation of bills of entry Nos.119410 and 119384 dated 12.09.2005 filed by M/s. Magpie, which the Commissioner of Customs found to be a fictitious company. The Commissioner of Customs also declined to accept the request made by the respondent (M/s. Jhunjhunwala Vanaspati Ltd.) for substitution of its name in place of M/s. Magpie as importer. The Commissioner of Customs orders initiation of separate proceedings in accordance with provisions of the Customs Act, 1962 against the assessed goods covered by aforesaid two bills of entry. A copy of the Order in Original is at Annexure-B. 5.12 The respondent herein, being aggrieved and dissatisfied with the said Order in Original, preferred an appeal before the Customs TAXAP/757/2007 13/37 JUDGMENT Excise Service Tax Appellate Tribunal, West Zonal Bench, Ahmedabad being Appeal No.C/978/2006, which was allowed by order dated 26.12.2006, against which present appeal is filed. SUBMISSIONS MADE BY MR. HARIN P.RAVAL, LEARNED ASSISTANT SOLICITOR GENERAL OF INDIA ON BEHALF OF THE APPELLANT:- 6. Mr.Harin P.Raval, learned Assistant Solicitor General of India, strenuously contended before this Court that the order passed by the CESTAT in Appeal No.C/978/2006 is not in accordance with law and is required to be quashed and set aside by this Court, answering the substantial questions of law accordingly. The learned Assistant Solicitor General of India supported the order passed by the Commissioner of Customs. 6.1 The learned Assistant Solicitor General of India invited attention of the Court to Sections 2(26) , 46(1), 47 and 149 of the Customs Act, 1962. 6.2 The learned Assistant Solicitor General of India submitted that in the present case, it was M/s. Megpie who presented the bill of entry and thus, it presented itself as the importer of the goods. 6.3 The learned Assistant Solicitor General of India submitted that Section 45 of the Act provides for, 'restrictions on custody and removal of imported goods, whereas Section 46 of the Act provides TAXAP/757/2007 14/37 JUDGMENT for, 'Entry of goods on importation'. He submitted that Sub-section (1) of Section 46 is relevant for our purpose, which is as under:- “(1) The importer of any goods, other than goods intended for transit or transhipment, shall made entry thereof by presenting to the proper officer a bill of entry for home consumption or warehousing in the prescribed form.” 6.4 The learned Assistant Solicitor General of India submitted that under Sub-section (1) of Section 46, the importer of the goods is under a duty to make entry thereof by presenting to the proper officer a bill of entry for home consumption or warehousing, as the case may be, in the prescribed form. He submitted that in the present case, it was M/s. Magpie who presented the bill of entries for the goods in question. 6.5 The learned Assistant Solicitor General of India invited attention of the Court to Section 47 of the Act, which deals with, 'clearance of goods for home consumption'. Section 47 of the Act reads as under:- “47. Clearance of goods for home consumption.- (1) Where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption. (2) Where the importer fails to pay the import duty under sub-section (1) [within [five days], excluding holidays] from TAXAP/757/2007 15/37 JUDGMENT the date on which the bill of entry is returned to him for payment of duty, he shall pay interest [at such rate, not below [ten per cent] and not exceeding thirty-six per cent, per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette] on such duty till the date of payment of said duty: Provided that where the bill of entry is returned for payment of duty before the commencement of the Customs (Amendment) Act, 1991 and the importer has not paid such duty before such commencement, the date of return of such bill of entry to him shall be deemed to be the date of such commencement for the purpose of this section:] [Provided further that if the Board is satisfied that it is necessary in the public interest so to do, it may, by order for reasons to be recorded, waive the whole or part of any interest payable under this section].” 6.6 The learned Assistant Solicitor General of India emphasized Sub-section (1) of Section 47 and submitted that in the present case, it was M/s. Magpie, who having presented the bill of entry, after the same was processed, did pay the necessary duty, qua one of the bills of entry, whereupon the proper officer passed necessary orders. He submitted that after the aforesaid events have taken place, a claim of the respondent (Jhunjhunwala Vanaspati Ltd.) to permit it to file fresh bill of entry by substituting M/s. Magpie in place of importer, is not permissible under the law. 6.7 The learned Assistant Solicitor General of India also invited attention of the Court to Section 149, which deals with, TAXAP/757/2007 16/37 JUDGMENT 'amendment of documents'. Section 149 reads as under:- “149. Amendment of documents.- Save as otherwise provided in sections 30 and 41, the proper officer may, in his discretion, authorise any document, after it has been presented in the customs house to be amended: Provided that no amendment of a bill of entry or shipping bill or bill of export shall be so athorised to be amended after the imported goods have been cleared for home consumption or deposited in a warehouse, or the export goods have been exported, except on the basis of documentary evidence which was in existence at the time the goods were cleared, deposited or exported, as the case may be.” 6.8 The learned Assistant Solicitor General of India emphatically submitted that save as otherwise provided in Sections 30 and 41, a proper officer, in his discretion, can authorise any document, after it is presented in the custom house, to be amended. He submitted that Section 149 confers discretion, but then the said discretion is curbed by the proviso, whereby the legislature provided that no bill of entry shall be authorised to be amended after the imported goods are cleared for home consumption or deposited in a warehouse, meaning thereby except in the aforesaid circumstance, an officer can exercise the discretion vested in him. So far as in eventualities contemplated in the proviso are concerned, the proper officer has no discretion to allow any amendment. 6.9 The learned Assistant Solicitor General of India submitted TAXAP/757/2007 17/37 JUDGMENT that in the present case, there was no question of exercise of discretion by the proper officer because after the goods landed, M/s. Magpie filed the bill of entry after which the same were not only assessed but in case of one of the bills of