CHOICE APPARELS Vs. COMMISSIONER OF CUSTOMS, BANGALORE

JUDGEMENT

(1.) THESE two appeals are filed by M/s. Choice Apparels and Shri R. Abbas, Managing Director of the Company, against the Order No. 27/2002 Commissioner/Cus. Adjn. dated 21 -5 -2002 passed by the Commissioner of Customs, Bangalore.

(2.) THE facts in brief are that the appellants have obtained Advance License No. 07000790, dated 3 -7 -1997 for import of 100% wool fabrics under DEEC No. 235174. The licence has permitted the appellants to import raw wool fabric, Polyester Taffeta and non -woven fusing for a value of US $ 617860 under Notification No. 31/97 -Cus., dated 1 -4 -1997. The appellants were required to export the resultant product i.e. 58332 numbers of 100% wool ladies pants and 11273 numbers of 100% wool mens pants within a period of 18 months for the FOB value as mentioned in the said licence and they were required to submit the particulars and documents evidencing the discharge of export obligation within 60 days from the date of expiry of export obligation. The appellants however got the licence amended by amendment sheet No. 1, dated 16 -7 -1997 making the advance licence invalid for direct import of raw wool. Raw wool 32,539.37 Kgs for Rs. 1,83,99,760/ - was permitted to be procured indigenously from M/s. Grasim Industries Ltd. The balance CIF value of Rs. 35,96,062/ - was available for direct import. They again got it amended by Amendment sheet No. 2, dated 6 -8 -1997 by which raw material allowed for import vide amendment sheet No. 1 i.e. raw wool 32,539.37 Kgs was amended to fabrics (100% wool) 24,877.19 Kgs and raw wool allowed for indigenous procurement on amendment sheet No. 1, dated 16 -7 -97 was amended to fabrics (100% wool) 24,877.19 Kgs. No change was made in the CIF value of the advance licence as per DEEC Book No. 235174. The material obtained under advance licence No. 07000790, dated 3 -7 -1997 was eligible for exemption from customs duty subject to conditions specified in Notification No. 31/97 -Cus., dated 1 -4 -1997. The appellants were required to export the goods in terms of said Notification within 18 months from the date of issue of licences. As per condition to Notification 31/97 -Cus. they had to execute bond with surety or security binding themselves to pay on demand an amount equal to duty leviable on the imported goods but for exemption contained therein in respect of which the conditions specified in the Notification has not been complied with along with interest at the rate of 24% per annum from the date of clearance of raw material based on the permissions granted by JDGFT, Bangalore. The appellants M/s. Choice Apparels procured 21,979 Meters of 100% wool fabrics (flannel solids) and 10,119 meters of 100% wool fabrics (crepe solids) total valued at Rs. 58,55,638 under AR -3 No. 10/97 -98, dated 22 -8 -1997 vide Invoice No. 97500078, dated 22 -8 -1997. After procurement of the said goods they made only three exports and in respect of remaining material they failed to fulfil export obligation. The licence also expired and no attempt was made by them to revalidate till the case was registered by DRI. The JDGFT, Bangalore indicated that no extension in terms of Public Notice No. 48 (RE 01)/97 -2002, dated 7 -11 -2001) has been granted to M/s. Choice apparels. Therefore show cause notice was issued to them by the Commissioner of Customs for contravention of the conditions of the licence and conditions of Notification No. 31/97 -Cus., dated 1 -4 -1997 proposing to confiscate the goods seized under Section 111(o) of Customs Act and for charging customs duty of Rs. 37,56,389/ - and cess of Rs. 81,979/ - along with interest at the rate of 24% in terms of Notification 31/97 -Cus., dated 1 -4 -1997. Penalty was also proposed on them under Section 112 of the Customs Act. After giving them full opportunity to defend their case, the Commissioner finally adjudicated the case denying them the benefit of Notification No. 31/97 -Cus., dated 1 -4 -1997. He also confiscated the seized woollen fabrics measuring 25,787 meters valued at Rs. 83,53,171/ - seized on 15 -9 -2000 by DRI. However he gave them an option to redeem the same on payment of redemption fine of Rs. 15 lakhs. He also demanded duty of Rs. 37,56,389/ - and cess of Rs. 81,979/ - along with interest. He imposed a penalty of Rs. 5 lakhs on M/s. Choice Apparels and a penalty of Rs. one lakh on Shri A.R Abbas, Managing Director of M/s. Choice Apparels.

(3.) IN the appeal petition they pleaded that the adjudicating authority failed to consider that the appellants in the process of issuance of licence and amended licence lost valuable orders as the foreign buyers were not prepared to wait for receiving the export consignments and the said delay has caused harm and injury to them. From the end of the year 1997, there was a change in the trend in International market for woollen garments and in spite of best efforts, the appellants could not procure export order. The adjudicating authority has come to the conclusion that the appellants are not eligible for exemption from customs duty on the ground that they have not fulfilled the conditions laid down in Notification No. 31/97 -Cus., dated 1 -4 -1997. In coming to this conclusion, he has not addressed to the circumstance leading to non -fulfilment of such condition which were beyond the control of appellants. They were making sincere efforts to revalidate the licence and to get the extension for fulfilment of export obligation. The adjudicating authority has failed to consider the circumstances under which obligation and condition of Notification No. 31/97 -Cus. could not be complied with. The entire sock of raw material procured by them from M/s. Grasim Industries was available in stock. If they had any intention to defraud the Govt., the appellants could have disposed of the material clandestinely. There was no charge of misuse or abuse or deficiency of raw material in respect of which it has been exempted from duty under Notification 31/97. The adjudicating authority should have considered the case of the appellants sympathetically.