JAY AR ENTERPRISES Vs. CC (SEA)

JUDGEMENT

(1.) THE appellants are manufacturers of leather. They had filed four Shipping Bills dt. 22.4.02, 1.7.02, 12.7.02 and 24.7.02 for export of finished leather falling under Heading 4106 19 09 of the First Schedule to the Customs Tariff Act. In respect of three of these four Shipping Bills, they realized sale proceeds and thereby foreign exchange, whereby DEPB credit in two scrips was obtained. Sale proceeds under the fourth Shipping Bill (24.7.02) could not be realized and, therefore, the party did not seek DEPB credit on the export covered under that Shipping Bill. The goods exported under all the four Shipping Bills were rejected by the foreign -buyer, whereupon the appellants filed a Bill of Entry on 15.3.2004 declaring USA as the country of origin in respect of the entire quantity of the goods. SIIB, who examined the goods, found the original Shipping Bill marks on all packages. From these and allied findings, it appeared to the Customs authorities that the goods covered under the Bill of Entry were the same as those exported under the aforesaid Shipping Bills. Statements were recorded from the party. From the results of investigations, it appeared to the authorities that the goods were liable for confiscation under Section 111(m) of the Customs Act on account of misdeclaration of the country of origin and the importers were liable for penalty under Section 112(a) of the Act. Hence show -cause notice dated 11.8.2004 was issued under Section 124 of the Customs Act proposing confiscation of the goods and penalty on the importer. The proposal was contested by the party who, inter alia, claimed the benefit of exemption from payment of duty on the above goods in terms of Sl. No. 3 of the Table annexed to Notification No. 94/96 -Cus. The said Notification granted exemption from payment of duty on the goods described in column No. 2 of the said Table from so much of BCD, CVD and SCD as was in excess of the amount indicated in the corresponding entry in column No. 3 of the said Table. The goods exported under claim for drawback of Customs or Excise Duties or under claim for rebate of Central Excise Duty or under bond without payment of Central Excise Duty or under DEEC or EPCG schemes were covered by Sl. No. 1 of the Table annexed to the Notification. Goods other than those falling under Sl. No. l, exported for repairs abroad were covered under Sl. No. 2 of the Table. Goods exported under DEPB scheme were covered under Sl. No. 2A of the Table. Certain specified goods other than those falling under Sl. No. 1 were covered by Sl. No. 2B of the Table. Goods other than those falling under Sl. No. 1 and 2 were covered by Sl. No. 3 of the Table. The importer's claim was under this entry and, accordingly, duty -free clearance was sought. This claim was rejected by the Commissioner, who, apart from confiscating the goods with option for redemption thereof on payment of fine and imposing penalty on the appellants, directed them to produce DEPB before the proper officer of Customs for debiting an amount of Rs. 7,06,344/ - being the DEPB credit % obtained by the party against some of the exports made by them. The redemption fine imposed by the Commissioner in lieu of confiscation of the goods valued at Rs. 84,19,320/ - is Rs. 10 lakhs and the penalty imposed by him is Rs. 5 lakhs.

(2.) AFTER examining the records and hearing both sides, we find that, in the SCN, there was no proposal to deny DEPB credit to the party. Hence the direction for debit of DEPB credit is beyond the scope of the SCN and the same cannot be sustained. It is, however, found that there is no valid challenge against the finding of misdeclaration of country of origin. It is the appellants' own case that the goods manufactured by them in India and exported were re -imported. Obviously, they were aware of the Indian origin of the goods. Hence declaring USA as the country of origin is a clear case of misdeclaration which, if not detected, would have enabled the party to treat the goods rejected by the foreign customers as a regular import and to claim attendant benefits. Misdeclaration of country of origin is an offence which attracts Clause (m) of Section 111 of the Customs Act and, accordingly, the goods became liable for confiscation. The redemption fine determined by the Commissioner cannot, in our view, be said to be unreasonable in the facts and circumstances of the case, and we sustain the same. Coming to the penalty, contentious arguments were advanced by both sides. Learned consultant has invited our attention to the full text of Section 112 of the Customs Act, which is reproduced below:

(3.) PARAGRAPHS 79 and 80 of the apex court's judgment read as under: