M/S. Sanghvi Reconditioners Pvt. Ltd vs Union Of India & Ors

As regards the 2nd show cause notice, the stand of the Commissioner was that one M/s Elektronik Lab, a partnership firm dealing in sales and servicing/maintenance of ship spares and navigation equipment, had placed purchase orders on the appellant for import of spare parts to be fitted on ocean going vessels, as they were not registered with the Director General of Shipping as a ship repair unit and were not eligible for duty free imports under the aforementioned Notification. The appellant imported the spare parts and sold the same to M/s Elektronik Lab; in contravention of the exemption notification.

6. At the next hearing before the Settlement Commission, it was asserted on behalf of the appellant that they had fulfilled all the conditions as stipulated in Notification No.211/83 dated 23rd July, 1983 and that no spare parts, so imported, were sold by them to M/s Elektronik Lab. The stand of the appellant was that they had installed the imported equipment on the ocean going vessels with the assistance of M/s Elektronik Lab, who were the authorised agents of the foreign supplier, M/s Kelvin Hughes, in India from whom the appellant had imported the goods. It was argued that the said Notification did not prohibit an importer from taking assistance of a third party in the repair of the ships. It was reiterated that all the "ship spares" imported by the appellant were fitted in the ocean going vessels directly by them with the assistance of M/s Elektronik Lab and, therefore, all the conditions, stipulated in the Notification, were fulfilled. Apparently, the Settlement Commission was not convinced with the explanation offered by the appellant. On the contrary, the Settlement Commission felt that the appellant had transferred/sold the imported goods to M/s Elektronik Lab; as pleaded by the 5 Commissioner. Accordingly, vide order dated 24th September, 2001, the Settlement Commission directed the Commissioner to submit his final report along with the relevant material to establish that the goods imported by the appellant were actually sold to M/s Elektronik Lab.

7. In his final report dated 27th September, 2001, the Commissioner submitted that the appellant had imported navigational equipments, such as, Radar System, SART, NATEX and EPIRB in pursuance of the Purchase Orders placed by M/s Elektronik Lab on them; delivered the cargo on board the ships of M/s Dredging Corporation, M/s Chowgule Steamships Ltd. and M/s Essar Coastal Ltd. and the purchaser, M/s Elektronik Lab, subsequently carried out installation of the said equipments on board the ships owned by the above three shipping companies. The stand of the Commissioner was that since M/s Elektronik Lab, who had purchased the imported spare parts from the appellant for the purpose of fitting on board the ships of the said three shipping companies, was not registered with the Director General of Shipping, they were not eligible to claim benefit of exemption Notification, and, therefore, they routed the imports through the appellant and further, since the "spare parts"

8. Upon consideration of the information furnished by the Commissioner, particularly the fact that the appellant had given details of the "consignee" as the ship owners, without disclosing the sale of imported "spare parts" to M/s Elektronik Lab, the Settlement Commission was satisfied that there was suppression of facts on the part of the appellant so as to avail of the benefit of duty exemption fraudulently. According to the Settlement Commission, the sale of ship spares/navigational equipments by the appellant to M/s Elektronik Lab was an independent transaction, distinct from the subsequent sale by the latter to the ship owners, which was in the nature of home consumption. Finally, concluding that the Revenue had been able to produce documentary evidence showing sale of imported "spare parts" by the appellant to M/s Elektronik Lab, who in 7 turn sold the same items to ship owners, the appellant could not claim any benefit under exemption Notification No.211/83, the Settlement Commission sustained the demand of duty of Rs.47,79,320/- in respect of 8 consignments sold by the appellant to M/s Elektronik Lab. The Settlement Commission, thus, confirmed the additional customs duty of Rs.68,78,106/- demanded from the appellant under the order of adjudication by the Commissioner. Inter alia, observing that though the appellant had not made a full and true disclosure of their duty liability but had cooperated with the Settlement Commission, the Settlement Commission waived penalty in excess of Rs.18 lakhs and granted total immunity to the appellant from prosecution. The Settlement Commission also held that since the case of the appellant pertained to a period prior to April, 1995, when Section 28AB of the Act was inserted by the Finance Act, 1996, interest on delayed payment of duty could not be levied on the appellant.

9. Being dissatisfied with the order passed by the Settlement Commission, the appellant took the matter to the High Court by preferring the aforementioned writ petition. Before the High Court, an application was moved by the appellant for amendment of the writ 8 petition, seeking to urge an additional ground to the effect that some of the consignments of "spare parts" having been imported under the procedure to be followed for "Transhipment" or for "warehoused goods for exportation", no customs duty was payable by virtue of the provisions contained in Sections 54 and 69 of the Act. Although, the amendment was allowed by the High Court in order to examine whether the initial stand, based on the exemption notification, could go hand in hand with the case now sought to be pleaded in the amended petition, but, ultimately, the High Court did not permit the appellant to urge the additional ground relating to the applicability of Sections 54 and 69 of the Act. The High Court was of the view that since the ground now sought to be raised was in fact contradictory to the earlier stand, at this belated stage, a fresh ground could not be entertained. As stated above, the High Court has dismissed the writ petition. Aggrieved by the said decision, the appellant is before us in this appeal.

18. With this background, we may now advert to the facts at hand to examine if the findings recorded by the Settlement Commission and the view taken by the High court in the judgment in appeal, 10 (2006) 4 SCC 772 11 2004 (171) E.L.T. 296 (S.C.) 12 1985 (19) E.L.T. 15 19 holding that the appellant could not be permitted to urge additional ground was justified or hit by the contentions to the contrary raised on behalf of the appellant.

23. Having considered the rival submissions with reference to the pleadings, the provisions of Section 127B of the Act and exemption 13 (1979) 4 SCC 121 27 notification No.211/83 dated 23rd July, 1983, we are of the opinion that the order of the Settlement Commission did not suffer from any error, legal or factual, and, therefore, the High Court was fully justified in dismissing the writ petition.

24. In view of the foregoing discussion, we see no merit in this appeal. The appeal is dismissed accordingly with costs, quantified at Rs.50,000/-.

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