ORDER
A.C.C. Unni, Member (J)
1. Aggrieved by the Order-in-Original No. 22/94, dated 5-4-1994 passed by the Collector of Customs, Calcutta confiscating 15,240 kgs. of CTC tea with option to redeem the goods on payment of a fine of Rs. 5 lakhs and imposing a penalty of Rs. 2.5 lakhs the appellants have filed the present Appeal.
2. By Shipping Bill No. 000496 dated 6-7-1993 filed through their Customs Clearing Agent Appellants sought the export of 15,240 kgs. of Indian CTC tea to Moscow. On examination of the goods by Customs on 12-7-1993 before their export it was found that the goods were not in conformity with the goods as declared in the Shipping Bill and representative samples were drawn and sealed in the presence of the exporter’s authorised representative and forwarded to the Tea Board for testing, the test report, inter alia, indicated that the samples consisted more of powdered stems and less of leafy matter and that the goods did not conform to the P.F. A. specifications for tea in respect of crude fibre. Tea Board also stated that as per the opinion of their tea expert the samples were ‘fluff which is considered as tea waste and not fit for human consumption. Tea Board recommended against the export of the consignment. A show cause notice was accordingly issued to the Appellants asking them to show cause why the consignment should not be confiscated under Section 113(d) and (i) of the Customs Act, 1962 and penal action should not be taken against the connected persons for violation of the provisions of Section 114(1) of the Act.
3. In reply to the SCN present appellants submitted that they had not violated any provisions of the Customs Act as the tea was supplied to them by M/s. Swill Ltd. who had cheated the appellants by supplying inferior quality of tea and therefore, the offence was actually committed by M/s. Swill Ltd. and not by them.
4. After allowing the present appellants personal hearing, Collector, Customs passed the impugned order.
5. We have heard Shri G.L. Rawal, Advocate for the appellants and Shri Jangir Singh, JDR, for the Respondent.
6. Shri Rawal submitted that the appellants were a reputed Export House and were engaged in the export of garments to the USSR for the past two decades. They had sought to diversify their exports by adding tea to their exports. Since it was their first venture in the export of tea they had entered into an arrangement with M/s. Swill Ltd., New Delhi by placing orders for the supply of tea. According to the appellants it was the responsibility of M/s. Swill Ltd. to get the goods inspected to meet with the description of the order placed on them. M/s. Swill Ltd. had also appointed M/s. Blacket & Co. Ltd., Calcutta as the Clearing Agents. Ld. Advocate also referred to the correspondence exchanged between the appellants and M/s. Swill Ltd., about the arrangements being made for the export of the consignments of tea. According to the ld. Advocate the appellants had acted in good faith in entrusting the entire job to M/s. Swill Ltd. and it was M/s. Swill Ltd. who were responsible for the supply of the inferior quality of the tea and M/s. Swill Ltd. had in fact cheated and played a fraud on the appellants. Appellants had all along been acting in a bonafide manner and there was no mens rea on their part. They were the victims of circumstances and there was no contumacious or mala fide conduct on their part. Though the appellants do not deny that they were the exporters, in the absence of any contumacious conduct on their part no penalty should have been imposed on them. He relied on the following decisions of the Supreme Court, the High Courts and the Tribunal in support:
1. AIR 1970 S.C. 253 (Hindustan Steel v. State of Orissa)
2. AIR 1970 S.C. 1782 (Commr. of Income Tax v. Anwar Ali)
3. AIR 1981 S.C. 1887 (A.C.C. v. C.T.O.)
4. 1990 (47) E.L.T. 161 (S.C.) (Akbar Baddas Uddiv v. C.C.)
5. 1987 (32) E.L.T. 355 (A.P. H.C.) (Boddu Ramaya v. UOI)
6. 1988 (34) E.L.T. 65 (Tribunal) (Junta Traders v. C.C.)
7. 1989 (43) E.L.T. 366 (K.R. Steel Union v. C.C.)
8. 1991 (52) E.L.T. 557 (Shri Khullar v. C.C.)
9. 1991 (56) E.L.T. 812 (TELCO v. C.C.)
10. 1992 (60) E.L.T. Ill (Cal. H.C.) (Indian Explosives v. C.C.)
7. Shri Jangir Singh reiterated the findings of the Collector and pleaded for the dismissal of the Appeal.
8. We have given careful consideration to the submissions of both the sides. Appellants have not contested the fact that they were the exporters of the goods and that they cannot escape the present proceedings. Their case is mainly that they had acted in a bona fide manner and in the absence of any contumacious conduct on their part and in the absence of mens rea, penalty was unwarranted and in any event, the quantum thereof was highly disproportionate. We find that in the case of Hindustan Steel (supra) the penalty under Orissa Sales Tax Act, 1947 was held not imposable on the assessee as the assessee was under a genuine belief that it was not a dealer. In the Anwar Ali case (supra) the question was whether the mere fact that the explanation given by the assessee in respect of a certain amount was proved to be false would give rise to the inference that the disputed amount represents his income. The Apex Court had observed that since proceedings under the Income-tax Act, 1922 are of a penal nature, the burden was on the department to prove that the receipt of the amount in dispute constitutes the income of the assessee. Any finding that a particular receipt was income would not be conclusive though it may be good evidence. Before imposing penalty the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars or had deliberately furnished inaccurate particulars. In the case of Associated Cement Co. v. Commercial Tax Officer, imposability of penalty under the Rajas-than Sales Tax Act, 1954 was in question in a case where the assessee had not included freight charges in the sale price under the bonafide belief that they were not liable to be included in taxable turnover. However, immediately after the decision of the Supreme Court declaring that freight charges would be includible as components of sale price the assessee had filed a revised return and paid the sales tax on freight charges also. On these facts the Apex Court by majority held that penalty would not be imposable on the assessee. In Junta Traders v. C.C. 1988 (34) E.L.T. 65 the Tribunal had held that penalty is quashable where the no mens rea is established against the importer. In the case of Indian Explosives Ltd. v. C.C. the Hon’ble Calcutta High Court had held that where the importer had acted bona fide penalty and fine is not imposable. In Akbar Badruddin Jiwani v. C.C. 1990 (47) E.L.T 161 S.C. the Supreme Court held that heavy fine was unwarranted where the importer had bona fide believed that import was legal. In K.R. Steel Union Pvt. Ltd. v. C.C. 1989 (43) E.L.T. 336 the Tribunal held that penalty under Section 112 will not be justified in the absence of deliberate misdeclaration. We find that the facts in the cases relied on by the appellants’ counsel are quite different from the facts of the case before us. None of the cases involved the attempted export of goods which did not conform to the standards laid down under Section 7 of the Prevention of Food Adulteration Act, 1954. Under Section 114(i) of the Customs Act any person who does or omits to do any act which would render the goods attempted to be exported liable to confiscation under Section 113 will be liable to a penalty not exceeding five times the duty of the value of the goods. We are unable to agree with the contention of the appellants that they had bona fide believed that the CTC tea sought to be exported on their behalf by M/s. Swill Ltd. were free from any deficiency and that the appellants had been defrauded by M/s. Swill Ltd. The Appellants have not denied that they were the exporters and the Shipping Bill drawn was in their name. In these admitted facts and circumstances we are in agreement with the observations of the Collector that the exporter cannot escape their liability. When an importer in a foreign country has placed orders for supply of goods of certain quality/specification the exporter in India has the responsibility to supply the goods of specified quality. Supply of inferior quality goods for export cannot be justified on the ground of bonafide belief that the goods were of the specified quality or that the appellants had no mens rea. We therefore, find no reason to interfere with the impugned order. The Appeal is accordingly rejected.
