ORDER
R. Jayaraman, Member (T)
1. Appeal No. C/519/89 is directed against the Order-in-Original No. 39/Collr/1989 dated 26.7.89 passed by the Collector of Customs & Central Excise, Rajkot.
2. Appeal No. C/520/89 Bom is directed against the Order-in-Original No. 43/Collr/1989 dated 26.7.89 passed by the Collector of Customs & Central Excise, Rajkot.
3. Appeal No. C/521/89Bom is directed against the Order-in-Original bearing No. 42/Collr/1989 dated 26.7.89 passed by the Collector of Customs & Central Excise, Rajkot.
4. Appeal No. C/522/89 Bom is directed against the Order-in-Original No. 42/Collr/1989 dated 26.7.89 passed by the Collector of Customs & Central Excise, Rajkot.
5. Appeal No. C/523/89 Bom is directed against the Order-in-Original No. 40/Collr/1989 dated 26.7.89 passed by the Collector of Customs & Central Excise, Rajkot.
6. Appeal No. C/524/89 Bom is directed against the Order-in-Original No. 45/Collr/89 dated 1.8.89 passed by the Collector of Customs & Central Excise, Rajkot.
7. Since the facts of all the six appeals are similar and the issue involved is identical, all the appeals were heard together and hence are disposed of by this common order.
8. Shri V.N. Deshpande, the learned advocate, gave the facts which are similar to all the appeals. The appellants imported different consignments of synthetic rags declared to be old synthetic rags completely pre-mutilated. The goods, on examination, were found to be old pants cut into two pieces each. The department objected that the goods did not conform to the definition “rags” as laid down in condition No. 14 of the OGL Order No. 2/88-91 dated 30.3.88. In the adjudication proceedings initiated by the Collector, the goods allowed to be cleared on proper mutilation as prescribed by the Customs authorities on payment of appropriate duty. All the same, the appellants were imposed with a penalty with regard to each consignment and they have come in appeal against the imposition of penalties.
9. Shri V.N. Deshpande, the learned advocate, first contended that the Public Notice No. 60/88 dated 8.6.88 contemplates cutting of trousers and similar garments, there should be one cut across each leg extending left to right or right to left and atleast one cut horizontally across, so that these should result in a minimum of 7 or 8 separate pieces. In this case, though the requirement of cutting of the trousers is not so, the goods cannot be used as even after stitching because the cutting has been done vertically and not on the seams, only where it is cut in the seams, they could be re-stitched and used. The Collector’s findings that these could be utilised for children’s garments because the pieces are large enough is not supported by any evidence. He also pointed out that in the case decided by the Tribunal earlier, unless there is a positive evidence to the effect that the importers are going to use the larger pieces of garments for making smaller garments, such allegation cannot be sustained. He also relied upon the decisions of the Tribunal, copies of which were given to us during the hearing. He, however, conceded that all these decisions were in the context of the imports which have taken place prior to the issue of the Public Notice No. 60/88. All the same he argued that even earlier there was a Public Notice issued by the Bombay Customs House namely Public Notice No. 173/85 dated 30.12.85 containing more or less similar conditions and the judgments have been in the context of the provisions of the aforesaid Public Notice. He also submitted that even Public Notice No. 60/88 is under challenge before the Bombay High Court. However, there is no final judgment on the writ petition challenging the validity of the Public Notice No. 60/88. He also pointed out that the Collector has not given any finding to the effect that the goods are liable for confiscation and only when the goods are liable to confiscation, any penalty under Section 112 of the Customs Act could be considered against the appellants. He also submitted that the cutting of the trouser pieces has been done by the suppliers possibly on account of economy in the expenditure. Further, this lapse on the part of the suppliers should not be shifted to the appellants in the absence of any evidence to show that they have deliberately imported these pieces in that condition. He, therefore, pleaded that the penalties imposed are unjust and uncalled for especially when-the goods have been subject to further mutilation to the satisfaction of the Customs authorities and only thereafter cleared from the customs custody. He, therefore, strongly urged for setting aside the orders of penalties.
10. Shri Deepak Kumar, the learned JDR, on the other hand, supported the order of the Collector. He took us through the provisions of the Condition 14 of the OGL Order 2/88 and pointed out that under condition (ii)(b) “Old Rags” have been defined as those which are required for manufacture of shoddy yarn and may consist of articles of furnishing or clothing or other clothing so worn out, soiled or torn as to be beyond cleaning or repair. In this case, though the goods have been declared to be completely pre-mutilated, it is an admitted fact that the pants were only cut into two pieces and hence they could be re-used after repairing and re-stitching. So this condition itself is not satisfied. Moreover, as per the condition (c) of Para 14 of OGL Order the mutilation must conform to the requirements specified by the Customs authorities in their notification. Thereafter, he took us through the Public Notice issued by the Bombay Customs House whereunder the notice has been issued by the Collector notified under the condition 25(ii) of Appendix 6 corresponding to condition 14 of the OGL Order, whereunder the Collector has prescribed the specifications for import of mutilated rags. Since admittedly this condition has not been satisfied, the goods on import and at the point of import have contravened the provision of OGL condition and also have been mis-declared to that extent. On the question of absence of finding with regard to the liability to confiscation, Shri Deepak Kumar referred to the order of the Collector wherein the allegation regarding the liability to confiscation under Section 111(o) (m) and (d) of the Customs Act have been orally explained to the appellants because the appellants waived the requirement of issue of written show cause notice. He therefore contended that in the context of the allegation specifically explained to the appellants, it cannot be stated that the Collector has not held the goods liable to confiscation. The Collector has gone by the ratio of the decision of the Gujarat High Court wherein the goods could be allowed to be cleared on proper mutilation to the satisfaction of the Customs authorities and accordingly he has ordered. Though the goods have been cleared after mutilation, it cannot be said that the goods on import were validly covered by the OGL Order, and hence they were not liable to confiscation. On the question oimens rea he contended that the import of rags is an age old phenomena and it is well known that what are the requirements which should be satisfied. Even earlier a Public Notice was there of which the. appellants were also aware. Hence the contention of the learned advocate that the Bill of Lading and indent were prior to the issue of Public Notice dated 18.7.88 issued by the Rajkot Collectorate is not tenable because the appellants themselves were aware of the requirement laid down in the earlier public notice. Moreover, so long as it is held that the goods are liable to confiscation, any act of commission or omission rendering the goods liable to confiscation attracts penalty under Section 112 of the Customs Act and hence the penalties are justified. He also cited and sought to rely on the decision of the Delhi High Court reported in 1987 (31) ELT 639 (Del.) in the case of Rajiv Woollen Mills v. Union of India wherein the Delhi High Court has clearly held that if the garments properly not mutilated in accordance with the OGL conditions are imported, they cannot be permitted import under OGL.
11. Shri V.N. Deshpande, the learned advocate, in reply contended that the indents and Letters of Credit were opened as per the previous Policy AM 1985-88 and hence the citations made by him are applicable to the facts and circumstances of the case.
12. After hearing both sides and perusing the available record, we observe that it is an undisputed facts that the pants cut vertically into 2 pieces have been imported, in regard to all the consignments, by the appellants. The specifications laid down in the Public Notice dated 13.12.1985 as also dated 8.6.1988 stipulates the requirement in regard to trousers and similar garments as follows: There should be one cut across each leg extending left to right or right to left and atleast one cut horizontally across, so that these should result in a minimum of 7 or 8 separate pieces. It is also laid down that the cuts should extend through the entire length or width of the garment. The cutting should not be at the seams or stitching and should be haphazard and in different directions making the cut pieces totally unserviceable as garments or cloth. Admittedly in this case, the goods imported do not satisfy this requirement, and they have to be subject to further mutilation before allowing clearance. It is also an admitted position that these were subjected to such mutilation as required and only thereafter they were cleared. Now the question arises whether in the context of the decision and views taken by the Tribunal in the case cited by the learned advocate, similar ratio should be extended in this case as well. In all the cases of the present imports, the goods have arrived during the currency of Policy period and after issue of Public Notice. The plea made by the learned advocate Shri Deshpande is that the Letters of Credit and indents were placed during the earlier Policy period and hence the public notice issued subsequently in the context of the new Policy is not So be applied. However, it is not disputed buy him that the ingredients of the Public Notice issued on 18.7.88 by Rajkot Collectorate and on 8.6.88 by the Bombay Customs House contained the same provisions as those laid down in the Public Notice issued by the Bombay Customs House on 13.12.85. Even during the Policy period 1985-88 the definition of old rags has been given as per the present Policy but the only clause (c) namely the mutilation should conform to the requirement specified in the Notification by Customs authorities was not there which has been incorporated in the present Policy. All the same it is made clear therein that old rags are to be so worn out, soiled or torn as to be beyond cleaning or repair. Admittedly in this case the pants though are no doubt used, but they are not worn out or soiled. They are only cut into 2 pieces. The argument of the learned advocate is that cutting is not in seams which should render the ganments serviceable by re-stitching, whereas the learned JDR contended that because of the garments are in two pieces they could be re-stitched and altered to make serviceable. He also contended that the Collector has given a positive finding in this regard. In view of this position, even without having recourse to the public notice it appears to us that the pieces imported arc not the ones, which are beyond cleaning or repair or in any case, they are unserviceable rags. We also find that in the decision cited by the learned advocate there is a positive reference to the absence of any positive definition of rags and test of complete mutilation of garments made, earlier. Here, we find that the test of mutilation has also been prescribed in the new Policy and the Collector seeks to draw support for prescribing the extent of mutilation from the OGL order laid down in the new Policy. The requirement of mutilation prescribed in the earlier Public Notice was also known to the appellants. In this view of the matter, we are unable to accept the argument of the learned advocate that the goods have come as per the OGL condition. All the same, there is some force in what he says that mutilation was done by the suppliers and they might have done for reasons of economy in expenditure or for want of labour or on similar consideration and there is no evidence to show that they deliberately imported the goods in that condition. However, from the indent it is observed that they have only sought for import of old synthetic rags completely pre-mutilated but had not given the specifications of these rags as per OGL order. Since in our view, the pants cut into 2 pieces cannot even satisfy the definition of old rags as laid down even in the erstwhile Policy, the goods are not covered by OGL. As regards the argument of the learned advocate that the Collector has not held the goods liable to confiscation, it may be observed that the Collector taking into account the above fact and also the decision of the Gujarat High Court has permitted the goods to be cleared after proper mutilation. Otherwise the goods would have been confiscated and allowed clearance under redemption fine. All the same when the goods imported did not correspond to the condition of OGL, they become unauthorised imports at the point of import itself and any person making an unauthorised import is liable for penalty. We also observe that the appellants, being aware of the requirements for import under OGL should have taken care to give the details of specification as laid down in the Policy, so that the suppliers can comply with. As seen from the sale confirmation order of the suppliers, goods are generally described as old synthetic rags completely pre-mutilated. Even the special instructions for opening the L.C. do not contain any requirements as to how the pieces are required to be pre-mutilated. In view of this, while we do not agree with the learned advocate that no penalty can be imposed on the appellants, we deem it proper to reduce the penalties to Rs. 20,000/- (Rupees Twenty thousand only) for each consignment (total Rs. 1,20,000/- (Rupees One lac and Twenty thousand only). We do this only on the ground that the appellants are actual users and the goods have been allowed clearance after proper mutilation. The appellants may be granted consequential relief. But for this modification, the appeals are otherwise rejected.