ORDER
Gowri Shankar, Member (T)
1. These appeals are against the order of the Principal Collector of Customs, Mumbai confiscating under Section 113 I of the Act, seven consignments of polyester blended yarn with an option to redeem on payment of fine, imposing penalty under Section 114 of the Act on the exporter and its managing director.
2. The common advocate for the two appellants explains that in his order the Commissioner has found that the yarn was made from waste fibre and not as claimed by the exporter from virgin polyester fibre. He says that the sole evidence relied upon, opinion of the Silk & Art Silk Mills Industries Research Association (SASMIRA) is unreliable. Ms. A. Kaplash, Dy. Director of SASMIRA who was cross-examined with regard to the certificate given, had stated to an-y other exporter that it was not possible to technically distinguish between yarn from virgin fibre and yarn from waste fibre in view of the process to which fibre is subjected during spinning. He next contends that in any event, the goods were not liable to confiscation. Clause (i) of Section 113 of the Act will only apply when the exported goods were dutiable or prohibited; the goods in this case were neither dutiable nor prohibited. The notice placed reliance upon Clause 3(3) of the Export Control Order, 1977. This clause has no application in the facts of the case and refers to export of goods in Schedule 3 of the order, with which the appellant was not concerned. He cites the decision of the Tribunal in Badriprasad and Sons v. CCE . It is next contended in the alternative that the exporter had not received or sought to receive any benefit of the advance licence. Therefore, there was no evasion of duty, confiscation and imposition of penalty were uncalled for. A first time contravention does not justify penalty and confiscation. Case of Dolphine v. CCE was cited in support.
3. The departmental representative contends that the Collector in his order has based his order on the testimony of the experts. He further contends that the background to the letter issued by Ms. Kaplash on which the appellant relies is not known. He contends that reference to Clause 3(3) of the Export Control Order the notice in the order is a typographical error. The notice specifically reproduces Sub-clause 3 of Clause 3 of the order which deems as prohibited goods the value, sort, specification, quality and description of which did not tally with the declaration filed in the export contract. The declaration and export contract were for yarn made of virgin fibre. The applicability of Section 3(3) was not an issue before the Tribunal in Badriprasad and Sons v. CCE. The statement of the managing director and others shows that they had knowledge of the use of the waste fibre in the spinning of the yarn exported. Had the attempt gone unchecked it that appellant would have wrongly benefited to the extent of Rs. 30 lakhs.
4. It has not been established to our satisfaction that there is insufficient material to sustain the charge that waste fibre was used in the manufacture of the goods. The seven test reports, one for a sample from each consignment have not been included in the appeal. A copy of one such report (no. 51/85) was produced before us. The report says that visual examination showed the presence of metre yarn of polyester fibre, varying in length and diameter, and concludes that the polyester fibre used for manufacture of yarn is waste fibre. The report is signed by a scientist and the Dy. Director. These were the two persons who were cross-examined. The record of the cross-examination has also not been produced, although it was made available to the appellant. The Collector refers in his order to the cross-examination of Paranjape apparently the scientist. He has categorically said that testing of the waste can reveal whether the yarn was made out of virgin fibre or waste fibre. Ms. Kaplash Dy. Director has taken a different view. It is this lady who has signed the letter dated 31.10.1984 to M/s. Siddharth Synthex, Bombay. The letter says that it is not possible to find out whether the fibre used in the sample of the yarn sent by the Customs is virgin fibre or not because characteristics of the fibre are likely to be affected while manufacturing the yarn as well as during the chemical treatment to which it is subjected for separating the fibres. In her cross-examination she has said that the term “virgin fibre” is generally not used to refer to man-made fibre. The question then arises why she used the term virgin fibre in the letter. This casts doubt on the reliability of the statement in her letter. Considering the categorical views of the scientist who is after all the technically qualified person who tested the sample, and the imperfection, there is not sufficient reason to say that the material contained in the report was not waste.
5. This is in fact confirmed by the appellant’s employees, managing director and President. The Managing Director of the company has said that waste fibre might have been used in the manufacture of good quality yarn. Mangal the President says that waste yarn was used for the export quality yarn. The spinning master says that fibre made from waste fibre is hardly distinguishable from fibre made from fresh raw material. It is thus clear that technically and in the trade, the waste fibre is used to make yarn of high quality and was so used in the appellant’s factory. Hence it is difficult to say that waste fibre was not used. The advocate for the appellant says that to a certain (negligible) extent this could have happened. It is difficult to say that this would happen to some extent, it could not happen to large extent. Textile raw materials are carefully segregated and then issued for manufacture governed by strict procedure. If the appellant accepted the presence to any extent of waste fibre in the fibre used in the manufacture in the industry, it is up to the appellant to use how much waste was used and to what extent. This has not been done. The conclusion that the goods therefore made out of waste fibre is to be affirmed. The goods were then rightly liable to confiscation.
6. Sub-clause (3) of Clause 3 of Export (Control) order cannot be invoked for confiscation of goods. It does not deal with this aspect. Paragraph 14 of the impugned order reproduces the words of Sub-clause (3) of Clause 3 of the order. We find it reasonable to accept the contention of the departmental representative with reference to Sub-clause (3) was a typographical error. The substance of the contravention and proposed basis for confiscation and penalty have been communicated to the appellant and the failure involved in citing wrong sub-clause does not there ore not vitiate the proceedings in the case. The Tribunal’s decision in Badriprasad & Sons did not have to go into the applicability of clause d of Export Control Order. This was not the ground argued before in that case.
7. The goods are thus liable to confiscation. The appellant’s argument in this regard is for exercise of leniency in the redemption fine. We do not see the presence of factors, which justifies leniency. The export was sought to be made under the DEEC scheme. If had been permitted the appellant would have been entitled to import more than the quantity of virgin polyester fibre, which was used in the export produce without paying duty thereupon. The value of the virgin fibre, it is evident, is higher than the value of waste fibre and the duty payable in the goods of import of relevant fibre specifically high. There is a clear motive to misdeclare the goods. The value of the goods is Rs. 11 lakhs. The duty that would have been involved is Rs. 30 lakhs. The redemption fine of Rs. 3 lakhs is commensurate with the value and duty.
8. It was contended that no reasons have been given by the Collector for the imposition of penalty on the firm and the managing director. The goods could not have been made out of waste fibre and sought to be exported were made out of virgin fibre without human direction. The managing director has in his statement accepted the presence of the waste fibre and our observation in that context would be relevant. On the facts of the case, we reduce the penalty imposed on the firm and Managing Director from Rs. 10 lakhs and Rs. 5 lakhs, to Rs. 7 lakhs and Rs. 3 lakhs respectively.
9. Appeals allowed in part.
(Dictated in Court).