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P.K. Desai, Member (J)
1. Though all the Four appeals arise out of different Orders-in-Original as indicated below, with the common issue involved, all of them have been argued together and are being disposed of by this common order.
2. Appeal Nos. C/480/95, C/486/95 and C/491/95 are against the Orders-in-Original CAO Nos. 53/95, 54/95 and 62/95 of the Collector of Customs II Bombay, whereas Appeal No. C/1810/95 is against the Order-in-Original No. 36/Cus./95 of the Collector-II of Central Excise & Customs at Pune.
3. All the Appellants engaged in manufacture of Power Capacitors, imported Aluminium Foils containing more than 90% of Aluminium and paid the Customs Duty at the concessional rate vide Notification No. 345/96, dated 16-6-1986. The foils so imported, which had suffered duty under concessional rate, had to be used in manufacture of Plastic Film Capacitors. On information received, investigations were carried out, which revealed that the foils so imported were issued in manufacture of Mixed Dielectric Capacitors and Bombay Customs also obtained opinion from prominent Institutions namely, The Bhabha Atomic Research Centre, The Indian Institute of Technology and The Electronic Regional Test Laboratory, to the effect that Plastic Film Capacitors and Mixed Dielectric Capacitors were distinct, it was felt that the importers had wrongly availed the benefit of concessional rate of duty and were liable to pay the differential duty. After due investigation and recording of statements of the persons concerned, Show Cause Notices were issued, for the matters adjudicated by the Collector of Customs-II at Bombay, the Show Cause Notices have been issued by the Collector of Central Excise & Customs, Bombay III and for the matter adjudicated by Collector-II of Central Excise & Customs, Pune, the same was issued by the Collector of Central Excise and Customs, Pune.
4. The Importers/Noticees contested their respective Show Cause Notices contending that there was no contravention of the terms of Notification No. 345/86 and claimed the demand as hit by the period of limitation. It was also contended that the Show Cause Notices were issued without jurisdiction and hence, were nullity.
5. The Adjudicating Authorities negatived all the contentions raised and held that there was a diversion of imported material and that use thereof in manufacture of Mixed Dielectric Capacitors could not be construed as the use in Plastic Film Capacitors. The proceedings intimated were held as legal and valid and the demands raised were confirmed with imposition of personal penalties vide Section 112(a) of the Customs Act.
6.1 Dr. N.R. Kantawala, the ld. Advocate for the Appellants has submitted that there is a preliminary objection as to the jurisdiction, inasmuch as the import is through the Bombay Port and what is alleged against the Appellants is wrong availment of exemption from payment of full Customs Duty, which has already been granted by the Bombay Customs and now the demand for differential duty is raised by the Collector of Central Excise, Bombay-Ill who has been simply designated as Collector of Customs vide Notification No. 58/92 and could at the best perform such functions, only within his own Jurisdiction, whereas here, the allegation being the one which has allegedly occurred beyond his jurisdiction. He could not have issued the Notice. He has pleaded that the demands raised being governed by Section 28 of the Customs Act, only the “proper officer” can issue the notice as per the definition of “proper officer” as given under Section 2(34) of the Act, the officer must have been assigned those functions by the Board. Amongst other decisions, he has referred to the decision of Karnataka High Court in Devilog Systems India v. Collector of Customs – 1995 (76) E.L.T. 520 (Kar.). He also submits that Madras High Court has however held some contrary view.
6.2 The ld. Advocate has further pleaded that so far as appellants in Appeal Nos. C/486/95 and C/491/95 are concerned, the Show Cause Notices are dated 10-12-1993 and period covered are 24-12-1988 to July, 1991 and 20-12-1988 to 15-2-1992 and as such both the Notices are beyond the normal period of limitation whereas for Appeal No. C/480/95, the Show Cause Notice dated 25-11-1993 covers the period from 29-12-1988 to 31-10-1993 and as such, only part of the demand is within the normal period. He has pleaded that there is no cause to allege suppression etc. so as to invoke extended period and for that he has referred to the decision of Supreme Court in Pushpam Pharmaceuticals Co. v. Collector – 1995 (78) E.L.T. 401 (SC), Tamil Nadu Housing Board v. Collector – 1994 (74) E.L.T. 9 (SC), Cosmic Dye Chemical v. Collector – 1994 (95) S.T.C. 604.
6.3 On merits, the ld. Advocate has pleaded that the DGTD have vide their letter dated 6-5-1986, clarified that the Capacitors using only Metallised Plastic Films or Hasy/plain Plastic Films as Dielectric, would be eligible to be classified as Plastic Film Capacitors where it is further clarified that the said Certificates could be used for import of Aluminium Foils for manufacture of Plastic Film Capacitors. As to the opinions obtained from prominent Institutions, the ld. Advocate has referred to some opinions obtained from the experts working in the same and other Institutions to plead that what they manufacture could also fall within the word Plastic Film Capacitor. He has also referred to McGraw Hill Dictionary.
7. Mr. A. V. Naik, the ld. Advocate for one of the Appellants has while adopting the submissions made by Dr. Kantawala, referred to the decision of the Tribunal in Universal Cables Ltd. v. Collector – 1991 (56) E.L.T. 114 (Tri.). He has also pleaded the demand to be barred by limitation, as the period for demand is 14-6-1987 to 16-9-1991 and Show Cause Notice is dated 9-6-1992.
8.1 Mr. K.M. Mondal, the ld. SDR has, on the point of jurisdiction, submitted that vide Government Notification No. 58/92-Cus. (N.T.), amongst others, Collector of Central Excise, Bombay-Ill has been appointed as Collector of Customs and in the said capacity, he is empowered to exercise such power as could be exercised by the Collector of Customs and thus could issue the Show Cause Notices. In his submission, in any case, the adjudication is conducted by the Jurisdictional Collector of Customs and as such the proceedings are by the competent authority whose jurisdiction cannot be challenged.
8.2 On the merits, the ld. SDR has pleaded that here the issue is specific, namely, whether in Notification No. 345/86, concessional rate of duty is available to Aluminium Foils, imported and the Notification provides that the concessional rate of duty is available if the same is used in manufacture of Plastic Film Capacitors. Referring to some other entries in the said Notification, the ld. SDR has pleaded that Plastic Film Capacitors and Mixed Dielectric Capacitors have been recognised as two distinct items. In his submission when a clear description is available, on inclusion of only one of them, the other item is deemed to have been excluded. He refers to the decision of the Supreme Court in Liberty Oil Mills v. Collector – 1995 (75) E.L.T. 13 (SC). In this submission, even the DGTD has given opinion in this regard.
8.3 As regards the plea of bar of limitation, the ld. SDR has submitted that there exists specific allegation of suppression and has read the averments to that effect in the Show Cause Notice.
9.1 Considering first the objection raised as to the validity or the Show Cause Notices issued by the Collector of Customs (Now Commissioner), Excise & Customs, Bombay-Ill, it is an undisputed position that in due assignments of duties, he has to mend the Commissionerate of Central Excise, Bombay-Ill and the jurisdiction thereof is duly identified in Rule 2(ii) of the Central Excise Rules, 1944.
9.2 For the performance of functions regarding Imports, Exports and collection of appropriate Customs Duty, there exists certain posts of Commissioners of Customs with their sphere of jurisdiction duly identified and for import of goods at the Port of Bombay and Collection of Customs Duties, there exists a post of Commissioner of Customs, Bombay.
9.3 The subject Show Cause Notices are basically the notice issued under the provisions of Section 28 of the Customs Act, 1962 and the said section provides for issuance of notice by the “proper officer”. The proper officer is defined in Section 2(34) of the Act to mean “the Officer of Customs who is assigned those functions by the Board or the Collector of Customs”. The definition given, thus makes it clear that only such of the officers of Customs to whom the specific functions (in the instant case, the functions of Collection of duty) are assigned, would be the “proper officer” and he alone, to the exclusion of any other officer of Customs, is authorised to issue the notice of demand vide Section 28(1) of the Act. This conclusion is obvious as otherwise, either the words “Officer of Customs” would have been used in Section 28(1) of the Act or the definition of “proper officer” would have been appropriately given. Specific assignment of particular functions is therefore, an essential criteria and only such of the officers who are specifically entrusted the functioning in that regard, could fall within the category of “proper officer”.
9.4 Recourse is taken to the Notification No. 58/92-Cus. (N.T.), dated 31-7-1992 where, amongst others, Collector of Central Excise, Bombay-Ill has been appointed as Collector of Customs. The said notification mentions that he would be the Collector of Customs within his jurisdiction. The Notification is issued in exercise of powers vested vide Section 4 of the Customs Act, 1962. By virtue of the notification, the Commissioner of Central Excise, Bombay-Ill has become the Commissioner of Customs and as such the officer of Customs, but as already indicated earlier, all officers of Customs are not ipso facto, the proper officer and only those who have been “assigned those functions” fall within that category. Section 5 of the Act provides that all the officers of Customs may exercise powers and discharge duties conferred or imposed on him under the Act and Sub-section (2) thereof, empowers an officer of Customs to exercise powers and discharge the functions of the officer subordinate to him. These provisions also could not be brought into play unless it is either show that the Commissioner issuing notice was either conferred the duty or was an officer Superior, not cadrewise but as a functionary, to the officer of Customs who had been assigned the function of collection of the Customs duty.
9.5 Further, the Commissioner of Central Excise and Customs, Bombay-Ill does not exercise even territorial jurisdiction over the Port Area and as per the Notification No. 58/92, he is appointed as Collector of Customs within the area falling within his jurisdiction. It is also significant to note here that the said authority having issued the Show Cause Notice has refrained from adjudicating upon the same. If he was the Commissioner of Customs for all purposes, he could have as well, himself adjudicated upon the same.
9.6 With none of the criteria indicating the Commissioner of Central Excise and Customs to be the “proper officer” competent to issue notice for demand, vide Section 28(1) of the Customs Act, 1962, the Show Cause-cum-Demand Notices issued by him have to be held as without jurisdication and hence, invalid and any adjudication proceedings initiated thereon have to be held as void.
10.1 A plea however, is raised that entire proceedings in any case, cannot stand vitiated as the Notices issued are composite notices both under Section 28(1) and Section 124 of the Act and no embargo exists in serving the notice under Section 124 of the Act and the said authority is already appointed as Collector of Customs.
10.2 The subject notices are composite notices and segregation thereof is not possible. There do exist some pronouncements which held that if part of the notice is beyond jurisdiction, adjudication can be continued for that much part which is within his jurisdiction to adjudicate upon. They however relate to the issues where part of the demand is time-barred and the authority adjudicating could not invoke extended period, whereas the other part was within his powers to adjudicate. The position here however is different and ratio of those pronouncements could not stand attracted so as to save part of the proceedings initiated.
11. The issue as to the validity of notice in relation to Appeal No. C/1810/95, however is different. With the imports effected at Bombay, the appellants had filed into Bond Bill of Entry and had removed the goods Central Warehouse at Pimpri, Pune, where they filed Bill of Entry for Home Consumption and the Show Cause Notice is issued by the Collector-II of Customs and Central Excise at Pune. He obviously falls within the category of “proper officer” and the notice issued by him vide Section 28(1) of the Act cannot be taken as vitiated on the ground raised by the other Appellants, whose appeals are heard along with this appeal.
12.1 The next ground on which all the four appellants have challenged the demand, is of the same being barred by limitation. The periods covered in each case are as under :
Appeal No. Period Show Cause Notice Dated -------------------------------------------------------------------------------- C/480/95 29-12-1988 to 31-10-1993 25-11-1993 C/486/95 24-12-1988 to 18-3-1992 10-12-1993 C/491/95 20-12-1988 to 15-2-1992 10-12-1993 C/1810/95 14-6-1987 to 31-5-1992 9-6-1992 -------------------------------------------------------------------------------- Thus, Show Cause Notices, in C/486/95 and C/491/95 cover the period which is entirely beyond six months, whereas in other two appeals, part of the period is within the normal period of limitation. 12.2 With Show Cause Notices issued in relation to Appeal Nos. C/480/95, C/486/95 and C/491/95 held as vitiated for want of jurisdiction in the authority issuing the same, the issue of the demand being barred by limitation has virtually become a non-issue.
12.3 So far as Appeal No. C/1810/95 is concerned, major part of the demand is beyond the normal period of limitation. The Appellants have, at the time of each import, produced essentiality Certificate from the competent authority, where their final products have been shown. From the records, it also appears that some correspondence was entered into in 1988 when the Appellants applied for grant of Duty Concession Certificate to the Deputy Director of industries at Pune and in their reply dated 29-6-1988 the appellants have clearly mentioned that they were manufacturing Mixed Dielectric Capacitors in LT. There is no evidence to show that during the relevant period, they had misrepresented that they required the imported items only for Plastic Film Capacitors. The Adjudicating Authority has, while justifying the invocation of the extended period, based his conclusion only on the ground that clearance of the goods was under misdeclaration. When however, clear declaration is made before the Competent Authority issuing essentiality and Duty Concession Certificate and when such Certificates issued do not give impression that imported Aluminium Film were only for Plastic Film Capacitors and when no other specific misdeclaration appears to have been made, there could be no cause to allege any act of misdeclaration and then invoke extended period. The demand for the period beyond the normal period, therefore, has to be held as hit by the limitation prescribed under the law. In view of the findings given on merits, however the issue of time bar has become insignificant.
13.1 The main issue however is whether the appellants are entitled to concessional rate of duty vide Notification No. 345/86, dated 16-6-1986 under which concessional rate of duty is available to imports of Plain Aluminium Foil containing more than 99% Aluminium, provided the same is used for manufacture of Etched as formed Aluminium Foil Electrolytic Capacitors or Plastic Film Capacitors and the allegation is that all the appellants have been manufacturing Mixed Dielectric Capacitors. The Customs Authority have obtained opinion from BARC, IIT and ERTL to allege that both are distinct items and as such, the concession under the said Notification is not available.
13.2 In McGraw Hill Dictionary of Physics, “Plastic Film’ Capacitors” has been defined as “a Capacitor constructed by stacking or forming into a roll, alternative layers of Foil and Dielectric which consists of Plastic such as Polystyrene, Mylar either alone or as a liminate with paper”. Mr. B.R. Bairi, Head of the Electronic Division, BARC on being approach by the Customs Authority, has in his opinion letter dated 19-8-1993, observed that “When the tissue paper is used along with Plastic film in manufacture of power factor improvement Capacitors, they are classified in the category of ‘Mixed Dielectric Capacitors’. The paper acts as a dielectric and supports the impregnant for improving capacitance and Dielectric strength. It leads to reduced size and also improves life expectancy of the products”. Mr. K.R. Gopalakrishnan, also the Head of Electronic Division, BARC, on being approached by the Appellants, seeking some clarification, has vide his letter dated 25-10-1995, stated that “Capacitors fabricated with Plastic Film and impregnated paper as Dielectric are treated under the topic “Plastic Film Capacitors”.” Dr. P.C. Pandey of Department of Electrical Engineering, Indian Institute of Technology has in his letter dated 27-7-1993 to the Customs Authority observed “When tissue paper and plastic film both are used between two layer” of Aluminium foils, the capacitors may be labelled as “Mixed Dielectric” type and the same authority has, on being requested to further clarify, vide his letter dated 11-10-1995, while referring to his earlier letter to the Customs Authority, observed “Capacitors made using Plastic Film as a Laminate with tissue paper and an impregnant may be referred to as “Mixed Dielectric Capacitors” but are one of the several types of “Plastic Film Capacitors”. According to Electronic Regional Test Laboratory as per their opinion dated 22-11-1993, the difference between Plastic Film type capacitors and mixed Dielectric type capacitors is that Plastic Film Capacitor has one type of Dielectric whereas Mixed Dielectric Capacitor will have more than one type of Dielectric.
13.3 The opinions given read with the definition given for Plastic Film Capacitor in the McGraw Hill Dictionary leads to indicate that even, the Mixed Dielectric Capacitors remain within the ambit of Plastic Film Capacitors. The Appellants have also produced an opinion from Secretary of International Electrotechnical Commission, Geneva, Technical Committee 33; Power Capacitors, who has also endorsed to such Mixed Dielectric Capacitors as falling within Plastic Film Capacitors.
13.4 There does not exist any specific allegation in any of the adjudication proceedings under consideration that no use whatsoever is made of Plastic as Dielectric.
13.5 Under the circumstances, what the Appellants have been manufacturing have to be accepted as still remaining within the category of Plastic Film Capacitors and as such, within the ambit of Notification No. 345/86.
14. In view of the findings on the merits as above, the import also cannot be held as unauthorised and the goods imported would not be liable to confiscation under Section 111 of the Act. The issue as to the validity of the notice under Section 124 of the Act also would not survive.
15. In the result, all the appeals are allowed and the orders appealed against are set aside. Consequential reliefs, if any to follow.