ORDER
V. Rajamanickam, Member (T)
1. The appeal is against the order of the Collector of Central Excise, Kanpur who has held that the 10 kgs. of Palladium Chloride of foreign origin have been imported without proper import licence in contravention of I.T.C. regulations and thereby confiscated the same with option to redeem the same on payment of a fine of Rs. 1 lac and penalty of Rs. 1 lac on Shri P.C. Agarwal, Prop, of M/s. Standard Chemicals and Biological Manufacturing Co., Nagpur. Duty at the appropriate rate was also payable.
2. In this appeal, the appellants have stated that persuant to a tender notice floated by the Indian Turpentine and Rosin Co. Ltd. on 7-6-1984 inviting tender for supply of 20 kg of Palladium Chloride, the appellants procured the same from Shri Vijay Kumar Chauhan and had the 10 kgs of Palladium Chloride delivered. The Central Excise staff visited the factory of M/s. Indian Turpentine and Rosin Company Ltd. The business and residential premises of the appellants were searched but no contraband or incriminating document was found.
3. In the grounds of appeal Shri P.C. Agarwal has held that, in the main, (a) that the chemical in the plastic containers was only repacked and in the absence of evidence showing that the chemical contained therein was imported and smuggled, no conclusion can be drawn. (b) that the goods are neither covered under Section 11B of the Customs Act nor Section 123 and burden of proof shifts on the Department. (c) that because the supplier Shri Vijay Kumar, could not be traced it could not become an adverse inference. (d) that as per the Import Policies of 1984-85, and 1985-86, Palladium Chloride was covered under Appendix 3, Part A, which constitutes a list of limited permissible items. (e) that the price offered to the Government factory was a competitive price and not a specially depressed price, so as to suggest anything to the contrary.
4. In his hearing before the Tribunal, Shri A.N. Sharma, Ld. Consultant drew attention to the facts of the case and showed the samples, with labels which were found to indicate that they were made in Germany. He stated that the supply of the chemical was through the open tender and produced the copies as found in the paper book. His argument was that the supply was made against a tender and he had not made any importation, and the packing in repacked containers should not be construed as supply of foreign made Palladium Chloride. The burden of proving that they were imported in violation of the I.T.C. order and customs act rested on the Department.
5. He also referred to the statement of Shri P.C. Aggarwal dated 23-5-1985 who has stated that the product was supplied to the firm thro M/s. Orient Chemicals, Bombay and it was not of foreign origin.
6. The following case laws were cited.
S.N. Sultan and Shri Abdullah -1984 ECR 2296 on applicability of Section 123 Customs Act – on Burden of Proof Order A-159/85-NRB dated 4-4-1985 and Order A-318/85-NRB dated 30-9-1985.
7. The Ld. S.D.R. Smt. Dolly Saxena in her rejoinder pointed out that the supplier, Shri Vijay Kumar was not produced by the appellant for cross-examination, which itself goes to prove that the appellant had prior knowledge of the imported goods and was not able to produce proof of licit import and the identity of the labels as being of foreign origin was sufficient proof that they were imported. She referred to the statement of Shri P.C. Aggarwal dated 23-5-1985 wherein he has stated that he knows Shri Vijay Kumar, the supplier. Therefore, the appellant had knowledge of the foreign nature of the goods.
8. From the submission made by the Ld. Consultant Shri A.N. Sharma and the Ld. SDR Smt. Dolly Saxena, the issue in question is whether the goods seized viz. Palladium Chloride is liable for confiscation and other attending consequences on the fact that they were of foreign origin? The circumstances under which they were supplied to the Indian Turpentine and Rosin Co. Ltd. was through a tender floated by them and the appellant has procured it from another supplier. The Palladium Chloride was found in containers which bore labels indicating the origin of the chemical as “Made from Germany”. The labels were torn in some cases and the caps on which the containers was fitted was not a pilfer-proof cap and the same was fixed by adhesive tapes. The appellant claims that it was indigenous Palladium Chloride repacked in the containers having a foreign label. Will this alone provide sufficient proof that it was of foreign origin? The suppliers of the chemical to the appellant has not been interrogated, as he was not available, in which case how has the Department come to the conclusion that it was imported into India, without payment of duty? The material which was exhibited during the hearing was found to be in containers, and it is a matter of doubt whether this alone will provide sufficient proof that the goods were brought into the country through illegal means and are therefore liable to confiscation and chargeable to duty.
Moreover the goods are not notified under Section 123 of the Customs Act and the burden of proving that they are not smuggled does not rest with the appellants, neither is it a notified item under Chapter IV-A of the Customs Act. The appellants have further maintained that this is not a banned item under the I.T.C. Policy. The Collector in his order does not make any allegation on the point of import being banned. The whole issue has been thrashed out on the basis that the labels affixed bore foreign marking and no evidence has been let in about the fact that they were repacked. But one can take a contrary view that no evidence is made available by the Department that this was in original packing and was of foreign origin when the packaging indicated that labels were torn and the caps were affixed with adhesive tapes. The findings that the suppliers of the chemical was not traceable and had given a fictitious address will not by itself render the case has supporting the view that the goods were illegally imported. The Department has not gone beyond this stage to further investigate about the genesis of the goods at its first importation. Thereby being not a notified item, the burden of proving that it was acquired by illegal means rests with the Department.
The Collector has himself pointed out in his order that testing the goods may arise only if there is prescribed/universally accepted standard for Palladium Chloride of foreign origin, and in its absence no clue can be provided, and in the absence of any proof to suggest that they are of Indian origin, or procured from any indigenous manufacturer, or imported legally, he holds that the goods have been imported illegally. This finding is presumptions and not on any evidence, as such is a negative approach to the issue. The Department has not provided evidence of illegal import and non-payment of duty. The possibility of the goods having been imported legally and sold to the appellant has not been countered by any plausible findings except to the fact that the containers bore foreign markings and the original supplier was not produced for interrogation. More so is the presumptions finding not tenable, when the goods are not notified under Section 123. The citations quoted by the Ld. Consultant 1984 ECR 22% CEGAT – Shri S.N. Sarkarand Shri Abdul Lateef v. Collector of Central Excise, New Delhi relating to burden of proof – the decision “that the goods admittedly are neither notified goods under Section 123 of the Customs Act nor covered by Chapter IV-A, of the Act. The above circumstances alone would not justify a presumption as to their smuggled nature. Therefore the Collector was not justified in placing the burden on the appellants to prove the lawful origin of these goods” is in conformity with the facts and circumstances of the present case. Therefore the few evidence which lends support that the goods could be of foreign origin cannot be a basis for confiscation and duty liability, unless a concrete evidence is let in. In case the goods had been properly imported, and duty-paid, the Department cannot justify its action by merely presuming the goods to be an illegal importation. Therefore, there is no strong reason for upholding the order of the Collector and is therefore set aside and consequentially the appeal is allowed.