ORDER
Jyoti Balasundaram, Member (J)
1. The second appellant is the sole proprietor of the 1st appellant concern.
2. The appellants imported second-hand machinery required for manufacture of automobile gears in 5 containers at Kandla Port in July and August 1988. On the basis of reports received by the Directorate of Revenue Intelligence that such machinery was being imported by certain parties in the name of non-existent companies declaring themselves to be actual users of the machines, investigations were conducted and it was verified that no such company or firm by the name of Agarwal Udyog was in existence at the address mentioned in the import documents. The containers were seized on the reasonable belief that they were liable to confiscation under Section 111(d) of the Customs Act, 1962. The appellants were called upon to show cause against proposed confiscation and penalty for alleged contravention of the Import Policy AM 1988-91 as import of the machines was permitted under OGL only to actual users while it appeared that Agarwal Udyog was a fictitious firm and import was effected by unknown persons with intent to trade in the goods. The second appellant replied on 3-9-1990 that they were a unit with provisional SSI Registration dated 16-3-1988 to commence the manufacturing activity of automobile gears and that the address given in the SSI registration certificate was the address of the proprietor and it belonged to his father, Shri Ramnath Chawla who had since disinherited him from the family business and property and that his application for further extension of the validity of the certificate was pending with the Department of Industries and he enclosed the relevant correspondence pertaining thereto. He also requested for a personal hearing which was granted. The appellants’ request for adjournment on the 2nd occasion was turned down as unjustified and the adjudication order was passed, confiscating absolutely the machinery for unauthorised import and imposing a penalty of Rs. 1 lakh on the 2nd appellant, holding that the appellant firm is non-existent, is not registered for the manufacture of any item and, therefore, the appellants’ intention was not to actually use the imported machines for production of any item, whereby they cannot be treated as actual users. Hence this appeal.
2. We have heard Shri G.L. Rawal, learned Counsel and Shri G. Bhushan, learned SDR.
3. Learned Counsel for the appellants contends that appellant No. 1 is a sole proprietorship concern of appellant No. 2 and it is registered with the Director of Industries Delhi as a Small Scale Industry. Registration Certificate dated 16-3-1988 for various manufacturing activities stated therein was issued initially for a period of 1 year as per guidelines according to which “provisional registration is valid for 1 year in the Ist instance and thereafter may be renewed for a period of two more years in 4-6 monthly extenstions by designated authority on submission of satisfactory proof that the party is taking concrete steps to establish the Unit “Existence of the Unit at the time of grant of registration or continuing the same is not a condition precedent. The guidelines provide that a unit is entitled to a period of 3 years to establish the unit and thereafter the question of grant of permanent registration will arise. Further guidelines issued on 14-1-1991 by circular No. 5(1)/90-SSI. Bd by the office of the Development Commissioner, Small Scale Industries, New Delhi, provide that initial provisional registration would be valid for a period of two years and two further extensions of one year each are to be granted. The learned Counsel submits that under the circumstances, the appellant No. 1 became Actual User (Industrial) in terms of Para 6(3) of the Import Export Policy 1988-91 and thereby entitled to import the machinery in dispute under OGL. The learned Counsel submits that both the s.c.n. and Order are without jurisdiction, as, once, the registration certificate has been admittedly issued by the concerned authority, the Customs authorities cannot go behind the Certificate and probe into the validity or correctness of its issue. In support of this proposition he places reliance on the following citations :–
1. AIR 1971 S.C. 1558 – U.O.I. v. Tarachand Gupta
2. 1981 (8) E.L.T. 235 (Bom.) – Lokesh Chemicals
3. 1982 (10) E.L.T. 171 – Bombay Chemicals v. U.O.I.
4. Order No. 327/89-C, dated 18-7-1989 – Wimpex Dyechemicals v. C.C.
5. 1990 (49) E.L.T. 190 (Bom.) – Bombay Chemicals v. U.O.I.
4. The learned Counsel further submits that the adjudicating authority has erred in holding that the Ist appellant firm and the 2nd appellant are non est appellant No. 2 has received the s.c.n. though belatedly and has appeared in person before the authorities at Kandla on 10/11 July, 1990 to collect it, and has replied to the s.c.n. on 3-9-1990, enclosing copies of correspondence exchanged with the Department of Industries for further extension of validity, which will repel the Department’s stand of non-existence of the Ist appellant. The next contention of Mr. Rawal is that in order to be treated as Actual User (Industrial) the only requirement is existence of registration certificate at the time of shipment of goods as per Para 86 of the Handbook of Import Export Procedures for 1988-91. This aspect has been dealt with by the Hon’ble Calcutta High Court in the case of Collector of Customs v. Priyanka Exports (1989 (41) E.L.T. 195. The import is valid as goods were shipped within the period of validity of the registration. Further according to the circular of 14-1-1991, all provisional registrations granted shall be deemed to be for a period of two years with a right of further two extensions each for a 1 year period. The Customs authorities were bound to grant clearance of the goods to the appellant as Actual User (Industrial).
5. Shri Rawal submits that the provisions of Section 111(d) of the Customs Act 1962 are not attracted to the facts of this case. The goods have not been imported contrary to any provisions of the Customs Act as the import is permissible under OGL and even assuming without admitting that the goods have been imported in violation of the Import Policy, no contravention of “any other law for the time being in force” (as stipulated in Section 111(d) arises as Policy does not have the force of law as has been held by the Hon’ble Supreme Court in the case of East India Commercial Co. AIR 1962 S.C. 1893 and the Tribunal in Jain Shudh Vanaspati v. U.O.I. 1990 (29) ECR 321 (SLP filed by U.O.I. against the above was dismissed by the Supreme Court on 19-11-1990). Learned Counsel also argues that non-disclosure of relevant sub-section of Section 112 for imposition of penalty also vitiates the Order relating to penalty, as has been held in various decisions of the Tribunal and the Madras High Court in Laxmichand’s case. Finally he submits that sufficient opportunity of hearing was not afforded to the appellant and therefore the impugned order has been passed in violation of the principles of natural justice and requires to be set aside.
6. In reply the learned SDR Shri Bhushan submits that the case of the Department is that Import of second-hand machines in question is permissible under OGL vide Appendix 6(3) of the A.M. 1988-91 policy which allows import to Actual Users (Industrial & Non-industrial) subject to actual user conditions. For the purpose of the Policy, the following words have been given the following meanings :–
(1) “Actual User” means a person who applies for securing licence forimport of any item or an allotment of an imported item required for his own use and not for business or trade in it. Thus, in the case of an industrial undertaking, the item concerned shall be utilised for the manufacturing processes or operations conducted within its authorised premises (or …)
(2) “Actual User Condition” shall be construed accordingly.
(3) “Actual User (Industrial)” shall mean an Industrial Undertaking …engaged in the manufacture of any goods for which it holds a licence or registration certificate from the appropriate Government Authority wherever applicable.
7. As per the provisions of the Import & Export Policy, importer claiming clearance under OGL must be in possession of valid registration certificate at the time of clearance of the goods, particularly according to Paras (1) & (2) of the conditions governing Imports under OGL. The importer herein was found upon verification to be non-existent. Verification about the existence of the 1st appellant firm at the address of consignee of 5 import consignments, at B-1/11, Paschim Vihar, New Delhi revealed that no such firm existed at that address and the premises was found to be the residence of one Shri Ram Nath Chawla (father of the 2nd appellant) who furnished a statement that the house is totally residential and is not being used for commercial purposes and he is not concerned in any manner with the firm. The partner of the Steamer Agent M/s. Velji P. & Sons Gandhidham, Kandla, who had filed the IGMs covering the disputed goods also stated that, in accordance with their usual practice, Notify Advises dated 17-7-1988 & 22-8-1988 were issued to the appellants. The 1st of them was received by one Mr. B. Chawla as seen from the acknowledgment receipt and the 2nd was received back with postal remark “left without address dated 31-8-1988” and that no one approached their office either personally or through Customs House Agent for clearance of the goods. On the basis of these enquiries the Department has rightly held that appellant No. 1 is non-existent. Further the registration certificate expired after a period of one year from 16-3-1988 i.e. the date of its issue and its validity has not been extended. Appellant No. 1 also did not take any steps to put up the industry and there was not even an industrial Shed to instal the imported machines and therefore the intention of the appellant not to actually use the imported machines (for which no B/E has been filed) for production of any item is evident. The confiscation & imposition of penalty is therefore justified.
8. We have carefully considered the rival submissions. The basis of the finding in the impugned order that the appellant firm is non-existent is that the address contained in the SSI Registration Certificate was verified from the father of the second appellant to be residential premises and that the first appellant firm did not take any steps in pursuance of the registration certificate to set up any industry. On the other hand, ld. Counsel relies upon several documents which have been relied upon in the show-cause notice which appear to be copies of correspondence exchanged between the appellants and the Department of Industries regarding revalidation of the provisional registration earlier granted to them. Ld. Counsel also relies upon the fact that the appellant firm has replied to the show-cause notice on 3-9-1990 to the effect that it was in possession of valid registration certificate at the time of importation/clearance of the goods and the case for further extension of validity is pending with the Industries Department and enclosing copies of related correspondence. In our view, however, this by itself, will not be sufficient to conclude that the appellant firm was in existence in view of the undisputed position that no firm was found to exist at the address of the consignee i.e. B-1/11, Paschim Vihar, New Delhi and the premises was found to be the residence of the father of the second appellant. It is also not the case of the appellant that the registration certificate continued to be in force beyond the period of one year from 16-3-1988 i.e. date of its issue. Even at this stage, ld. Counsel has not been able to satisfy us that the validity of the registration certificate was subsequently extended. We, therefore, see no reason to interfere with the finding that the first appellant firm does not exist in the eye of law.
9. We are not able to accept the contention of the ld. Counsel for the appellant that the appellants are (Actul Users Industrial) in terms of Para 6(3) of the Import Export Policy 1988-91. The case law cited by the ld. Counsel in support of his proposition is distinguishable on the facts.
In the case of Bombay Chemicals v. Collector of Customs – 1990 (49) E.L.T. 190 (Bom.), the exemption under the notification dt. 1-3-1968 was denied by the customs authorities on the ground that the imported chemicals i.e. High Boiling Tar Acid are not used for “agricultural purposes”. The Bombay High Court held that in the absence of any dispute regarding fulfilment of the two conditions in the notification relating to DGTD certificate and execution of bond, Customs authorities have no right to sit in judgment over the DGTD Certificates which are binding and conclusive save and except when it can be contended that they have been obtained by fraud or under some mistake. In the case of Collector of Customs v. Priyanka Overseas 1989 (41) E.L.T. 195 (Cal.), the Calcutta High Court decided that “palm kernels” are entitled to be imported under OGL in view of Para 79 of Handbook of Import Export which provides that the validity of an import licence is decided with reference to the date of actual shipment/despatch of goods and Clause 32 of Import Trade Control Order No. 68/85-88, OGL 1/87 dt. 1-4-1987 which provides that all goods must be shipped on through consignment to India on or before 31st March of licensing year. In the case of Bombay Chemicals 1982 (10) E.L.T. 171 (Bom.) the Court held that it was not open to the Customs Deptt. to ignore the DGTD certificates supporting the claim that goods imported i.e. pyrethaum flowers were chemicals by holding that the same were issued under an error. In the case of UOI v. Tarachand Gupta – AIR 1971 S.C. 1558, it was held by the Supreme Court that the Collector of Customs while examining goods imported under licence (Rixe Mopeds in CKD condition) and covered by Entry 295 of Schedule to Import Control Order, has only to ascertain whether goods are of the description in that Entry. In the case of Wimpex Dye-Chem. – O. No. 327/89-C, dated 18-7-1989, the Tribunal took the view that the appellant who held valid registration certificate which they produced after filing B/E, is entitled to OGL import as neither in the policy nor in the certificate issued by the Industrial Adviser is there any stipulation regarding purity of goods and permission has been granted with specific condition that goods will have to be utilised in manufacture of polishing salts. In none of the above cases did the Courts or Tribunal have occasion to deal with the issue in this case, namely existence of valid registration certificate at time of clearance of goods which is a condition governing imports under OGL.
10. In the present appeal, appellant No. 1 did not have a valid registration certificate at the time of the clearance of the goods which according to us is a requirement under Paras 1 & 2 of the conditions governing imports under OGL. The contention of the ld. Counsel that the only requirement is existence of registration certificate at the time of shipment of the goods in order to be treated as Actual Users Industrial, is, therefore, not correct.
11. The other submission of the learned Counsel that the opportunity of hearing was not granted before the adjudicating authority is also devoid of merits. As recorded in Para 7 of the impugned order, a personal hearing was granted to the appellants on 19-10-1990 and a second hearing was fixed on 12-11-1990, at their telegraphic request. A letter dated 1-11-1990 was received from the appellants in the office of the Collectorate on 12-11-1990 expressing inability to attend the personal hearing in view of the critical law and order situation in the country and consequent request for adjournment. Since the adjudicating authority was of the view that the adjournment request was not based on valid grounds, he proceeded to adjudicate the case on the basis of the available records. We are, therefore satisfied that sufficient opportunity was afforded to the appellants which was, however, not availed of by them.
12. The last contention of the learned Counsel that the order imposing penalty is bad in law for non-mention of specific sub-section of Section 112, also does not have any force. This Tribunal has held that as long as a reading of the order makes it clear as to which sub-clause of Section 112 is relied upon for the purpose of imposition of penalty, specific non-mention will not be fatal to the case of the Department.
13. In the light of the above discussion, we uphold the findings regarding non-existence of the appellants and unauthorised import of machinery and consequent confiscation and penalty. The impugned order is upheld and the appeal dismissed.