ORDER
S.L. Peeran, Member (J)
1. Both these appeals arise from Order-in-Original No. 166/97, dated 27-10-97 passed by the Commissioner of Customs, Chennai confirming the charges to the extent indicated in his order and imposing fine and penalty on appellant’s company and penalty on the Managing Director. The same is under challenge in these appeals.
2. The appellants filed Bill of Entry No. 24023, dated 10-6-94 for warehousing of cargo declared as “Second Hand Environment and Pollution Control System/Equipment in dismantled condition” of U.K. origin. The value was also declared on the basis of invoice. They sought clearance against the licence produced by them. The said goods were assessed to customs duty and the entire consignment was warehoused at Central Warehousing Corporation, Virugambakkam.
3. Subsequently, they had filed an ex-bond Bill of Entry for assessment at concessional rate of duty @ 25% under Notification No. 68/89-Cus., dated 1-3-89 and produced certificate dated 12-4-94 issued by the Department of Chemicals & Petrochemicals, Ministry of Chemicals and Fertilizers, Government of India, New Delhi and the Chartered Engineer’s certificate. The goods were provisionally assessed to duty extending the benefit of the said notification. However, the records were scrutinized by DRI and it was found that there was fraudulent and intentional mis-declaration as to the age of the plant, manufacturers’ name, description, value etc., of the dismantled solvent recovery equipment brought from U.K. and that the importer had smuggled into India huge quantity of Pelletised Activated Carbon by stuffing and concealing the same into the absorber vessels of the second hand dismantled plant. It was believed that there was manipulation of labels, name plates and Chartered Engineer’s Certificate by the importer in collusion with others abroad for facilitating customs clearance. After detailed investigation and recording of statements and scrutiny of documents, the appellants were issued with a show cause notice alleging that the imported item is not a “Pollution Control System/Equipment but a Solvent Recovery Plant. The value was also enhanced and further allegation was also brought out that they had separately imported pelletised activated carbon and attempted to clear the same without payment of duty. The appellants denied the allegation and contended that the item was a pollution control system and had been certified by the Ministry of Chemicals & Fertilizers and that they had given the certificate and annexures there to giving details of the machinery to be imported and it tallied with the notification in question. They had also contended that the proforma invoices, invoices and all documents filed with the department clearly indicated that the activated carbon was also a part of the main equipment and without it the main equipment cannot function. It was contended that there was clear declaration with regard to this item in all the documents and there was no attempt to smuggle the same. It was pointed out that when the equipment was examined by them, they had found that the activated carbon was not in the equipment, though the supplier had mentioned in the documents. Therefore, they wrote to the supplier stating that they would not clear the same unless it was supplied. It was submitted that the said activated carbon was supplied by the supplier in terms of the contract and, therefore, there was no mis-declaration or attempt to clear the same without payment of duty. They also contended that they were not liable to be penalised as there was no mis-declaration or an attempt to take a wrongful benefit of concessional notification in question. They also submitted that the fee paid to Shri Kesavan Chakravarthy was not includible in the assessable value as claimed by the department and in this regard, they relied on certain rulings which laid down that such fee did not form part of the assessable value, including the ruling of the Apex Court rendered in the case of Apollo Tyres v. Commissioner – 1997 (89) E.L.T. 7 (S.C.) wherein the Apex Court held that procurement charges paid to the purchasing agent does not enhance the value of the imported items and the equipment and hence not includible in the assessable value.
4. The Commissioner in the impugned order noted that the show cause notice had alleged that the impugned goods did not find a place in the table attached to the Notification No. 68/89 as amended and that the party had not come forward to indicate specifically as to under what item of the table to the notification, the impugned goods would be covered. He has noted that in the absence of such correlation the concessional rate of duty has to be denied. However, he has given a finding that the item in question is a pollution control system and also solvent recovery plant and such machinery has obviously dual function, namely, to control the environmental pollution and to act as a solvent recovery plant and this finding has been recorded in Para 14 of his order. The Commissioner in Paras 19 and 20 has also clearly recorded this finding that there is no other evidence to prove that the plant is more than 20 years old or so and that there is no connecting documentary evidence to the effect that the plant was built by Rotunda Ltd. and supplied to 3 M factory. He has concluded that on the basis of the evidence on record, the second hand plant is having a residual life of 5 years and it can be imported by actual users. He has also noted that there is no denial of the fact that the subject machine has got residual life of minimum period of 5 years. Therefore, he has given the benefit of doubt and contention of the importer has been accepted on this count.
5. With regard to the allegation of the department that the activated carbon being 15 MTs was stuffed in absorber vessel and the value of the plant is not inclusive of the activated carbon, he has taken into consideration the letter dated 6-8-96 of Shri Frank Smalley of Sure Grip in which he had stated that they were instructed by the appellant-importer to purchase 15 MTs of activated carbon from Chemviron Carbon Ltd. and they filled the solvent recovery vessels under their strict instructions. They also furnished a copy of the invoice raised by Chemviron Carbon Ltd., to the effect that they sold 15 tonnes of activated carbon and stuffed in the vessels as admitted by the company during the course of investigation. He has rejected the importer’s contention that there was no documentary proof of allegation produced by DRI as an after-thought in view of the fact that there is an invoice regarding purchase of activated carbon (15 MTs) and instructions to load the same in the plant. He has noted that this quantity supported by evidence is more reliable and the same is taken as the correct quantity loaded in the plant and not 10 MTs as claimed by the party. The Commissioner has, therefore, directed for enhancing the value to the extent of the value of 15 MTs of activated carbon.
6. The Commissioner has also held that the fee paid to Shri Kesavan Chakravarthy to the extent of Rs. 2 lakhs is required to be added to the assessable value. As a consequence of his finding, he has directed for confiscation of the impugned goods and imposed a fine of Rs. 5 lakhs and penally of Rs. 3 lakhs, besides a penalty of Rs. 1 lakh on the Managing Director.
7. We have heard ld. Counsel, Shri Ashok Mehta and Shri A. Jaya-chandran, ld. DR.
8. We have examined the records. While taking into consideration the pleas raised by both the sides including the citations referred to, during the course of recording of findings, the arguments would be referred to. There are three issues involved in this appeal for our consideration.
(i) The claim of benefit of Notification No. 68/89-Cus., as amended. (ii) Whether the value of 15 MTs of Activated Carbon is required to be added to the assessable value ? (iii) Whether the fee paid to Shri Kesavan Chakravarthy to the extent of Rs. 2 lakhs is required to be added in the assessable value ? (iii) Whether the order of confiscation and imposition of fine and penalty is required to be confirmed ?
9. Ld. Counsel took pains to refer to the certificate issued by the Ministry of Chemicals & Fertilizers, who are the authority, who are required to issue the certificate for importing the concerned Pollution Control Equipment under the notification. He also referred to the annexures to the certificate which detailed the items and the declaration filed with the department. The Commissioner has entered into a clear finding that the item is pollution control equipment and also acts as solvent recovery plant. In the light of the findings recorded, we have to accept the plea that the item is a Pollution Control System/Equipment. Revenue has not contested the findings arrived at by the Commissioner in favour of the appellants with regard to the item imported and the claim of benefit of notification. The only grounds on which the claim has been rejected is that the appellant-importers have not demonstrated that the items fall within the table annexed to the notification.
10. Ld. DR strenuously argued on the certificate referred to and the notification amending the various other notifications including the notification in question and contended that the benefit should not be extended.
11. We have examined records and notice that the notification which is mentioned in the certificate is an amending notification which amends large number of other notifications including the notification in question. As long as the notification in question is referred in the amending notification, no fault can be taken. The Commissioner has not raised the plea on this ground as argued by learned DR. Mere fact of wrong quoting of notification is not a ground for rejecting the claim as has been well laid down. The only ground for rejection, as noticed by us, by the Commissioner is that the party has not explained the details and the annexures attached to the table of the notification. The Commissioner ought to have given an opportunity to the party to correlate the same. The plea raised by the Counsel that they would have correlated the same, had they been given an opportunity is a well founded contention. As the Commissioner has entered into a clear cut finding that the item is a pollution control in terms of the certificate issued by the Ministry of Chemicals & Fertilizers, Government of India but has rejected the claim solely on the ground that there is no verification of the details, therefore, it is but proper that this issue is remanded back to the Commissioner to allow the appellants to demonstrate that the imported equipment satisfies the terms of declaration and annexures attached to the table of the notification, and that the certificate is valid and eligible one for claiming the benefit of notification in question. The Commissioner shall after giving full opportunity to the appellants decide the case on de novo on the availability of the notification and grant relief in so far as this issue is concerned.
12. As regards the plea that the Activated Carbon formed part of the equipment, we have taken note of the plea of the Counsel that all the documents reflected about the activated carbon being in the absorber vessel.
Although, it has been shown to us that there was clear declarations with regard to the presence of activated carbon in the documents yet the Commissioner has also entered into a clear finding that the activated carbon although is a part of the equipment but the allegation is that there was no supply of activated carbon, and it was only supplied on the appellants’ instructions and loaded the same in the plant. Ld. Counsel took the plea that the supplier was prejudiced against them and he made a wrong submission in the letter addressed to DRI but the appellants have not produced any correspondence between them and the supplier with regard to contents of the letter which is relied upon by the Commissioner to arrive at the finding that the appellants had instructed the supplier to supply 15 MTs subsequently and the same was later imported. There is an enormous evidence on record to show that the appellants had imported subsequently and the supplier has also vouched safe this fact. There is also statement from the witnesses recorded who have clearly admitted this position. In that view of the matter, the Commissioner’s finding arrived at on the basis of evidence that the value of 15 MTs of activated carbon is required to be added to the assessable value is required to be confirmed and we do so.
13. As regards the plea that the fee paid to Shri Kesavan Chakravarthy is not required to be added to the assessable value, the same is supported by judgment rendered by the Apex Court in the case of Apollo Tyres v. Commissioner -1997 (89) E.L.T. 7 (S.C.) wherein the Apex Court has held that procurement charges paid to the purchasing agent does not enhance the value of the imported item or equipment. This has been recorded by the Commissioner in Para 13 of his order but he has not applied the ratio while ordering for including the procurement charges paid to the agent. In view of Apex Court’s ruling that procurement charges are not required to be added to the purchasing agent and admittedly this amount was paid to Shri Kesavan Chakravarthy only as procurement charges, therefore, we order that Commissioner’s finding for addition of this fee paid to Kesavan Chakravarthy to the extent of Rs. 2 lakhs is required to be set aside by allowing the appellant’s plea.
14. In so far as the plea that the goods cannot be confiscated and penalty cannot be imposed, we have considered the plea that Section 111(f), (1) and (m) and Section 119 of the Act are not invokable. We are of the considered opinion that there is no infirmity in the order of confiscation as there is a clear evidence with regard to appellant’s having imported activated carbon separately and the same is supported by the letter of the supplier. In that view of the matter, the order of confiscation stands. However, as regards the quantum of fine and penalty, we have to remand it back to the Commissioner to hear the appellants again and re-fix the same in the light of submissions that appellants are eligible to benefit of the notification besides the procurement charges are not to be added to the assessable value. The Counsel has contended that penalty of Rs. 1 lakh on the Managing Director is excessive as he had not played any role and there is no finding given by the Commissioner. The Commissioner shall record his finding on imposition of penalty on the Managing Director taking into consideration all the facts and circumstances of the case and record a clear finding as to how the penalty is required to be imposed on the Managing Director. In case, if the appellants
succeed in showing that no penalty is required to be imposed on the Managing Director, then a clear findings are required to be entered into. Thus, the appeals are disposed of on the above terms as indicated above. The Commissioner shall decide the case de novo in the light of observations and finding entered into in this order. Ordered accordingly.