ORDER
Gowri Shankar, Member (T)
1. P.J. Pipes and Vessels, the appellant in appeal C/360/92, in May and July, 1989 was issued two special import licences by the licensing authorities for the import of total quantity of 5600 tons of stainless steel plates. The licences required the imported material to be utilised for the manufacture of thread protectors for pipes which were to be utilised for the manufacture of thread protectors for pipes which were to be exported. The appellant imported September, 1989 to February, 1990 a total of 547962 tons of these plates. It claimed and was granted benefit of exemption from duty under notification 513/86. The notification permits import of raw materials and components required for manufacture of goods supplied to Oil and Natural Gas Commission, Oil India Ltd and Gas Authority of India Ltd. It requires the importer to execute a bond binding itself to fulfil the obligation and conditions stipulated in the notification to pay on demand the duty payable but for the exemption on that quantity of raw materials and components which have not been proved to the satisfaction of the licensing authority to have been used for the purpose specified in the notification and requires the importer to produce evidence to the satisfaction of the licensing authority for the purpose of discharging the liability in respect of customs duty as well as discharging the obligations under the import licence.
2. The appellant did not use any of the stainless steel plates in the manufacture of thread protector due to technical problems. It made thread protectors out of carbon steel which it purchased from the market and supplied them to ONGC.
3. The appellant execute the necessary bond with the licensing authority. The supply was made between November, 1989 and August, 1990. In June, 1990 the appellant applied to Chief Controller and Import and Export for discharging the bond which it executed in respect of the first licence and in October for the second. That authority discharged the bond in September and November, 1990. The appellant had i n the meantime, in July, 1990 sought permission from the licensing authority for the disposal of the plates. An application for sale of goods was made for the second goods imported by the appellant in August, 1990. While the reply was pending with the licensing authority the appellant sold 276 tonnes of imported material in the local market. The customs authorities coming to know of this affair seized from the premises the remaining quantity from the possession of the appellant on 3rd November, 1990.
4. This was followed by issue in April, 1991 of a notice demanding duty under Section 28 of the Act on the 600 tonnes which had been cleared in terms of the notification on the ground that the plates were not utilised in the manufacture of thread protectors, proposed confiscation of these goods and penalty upon the appellant and on its officers. In November, 1991 the Collector passed orders demanding duty on the goods, confiscating the 271 tonnes of plates seized from the appellant with an option to clear it on payment of fine, imposed penalty on the appellants. This order is challenged in these appeals.
5. Collector has invoked the extended period contained in the proviso under sub-section (1) of Section 28 of the Act. He finds that the appellant suppressed significant facts while claiming clearance of the goods in terms of notification 513/86.
6. It has to be accepted as a general proposition that where goods are permitted to be cleared without payment of duty or under concessional rate of duty in terms of notification issued under Section 25 of the Act, provisions of Section 28 cannot be invoked to recovery the duty not levied or short levied if subsequently it is found that there has been no compliance of the condition of the exemption. In such cases, there has been no short levy in terms of Section 28. Goods were consciously cleared without payment of duty or part of the duty subject to they being utilised for a particular purpose. Therefore when they were cleared there has been no short levy or non-levy. Any subsequent action to recover duty, if they are not used for the purpose for which they were exempted would have to be in terms of bond. That is in fact the view of the Tribunal in Gold’N Sand Vs. CC 1999 (107) ELT 697. That however, is not the basis on which the Collector has demanded duty. The Collector finds that the benefit of the notification itself has been wrongly extended to the goods. He finds that the appellant had no such intention to utilise the imported material in the manufacture of the thread protectors. And that even when the appellant applied for special import licences it had no intention to utilise the material for manufacture of the thread protectors.
7. We do not find any basis to interfere with the conclusion of the Collector. The actions and omissions of the appellant relating to the imported goods lead us to conclude that it did not at any point of time have any serious intention to utilise the imported goods in the manufacture of the goods to be supplied to the ONGC. To begin with, it is clear that when the appellant asked for the import licence for the stainless steel plates in March, 1989, and the licence was issued in July of that year, the appellant did not have any machinery in its factory for making the thread protectors from out of stainless steel plates. The thread protectors are basically caps screwed onto the thread on either end of pipes, to protect the threading from damage during transit and unloading.
8. Bharat Vora, the meaning director of the firm, in his statement on 4.11.1990 accepted (paragraph 17) that due to certain technical difficulties, the importer could not manufacture the stainless steel thread protectors. This admission, the lack of ability to manufacture stainless steel thread protectors in the factory is also confirmed in the statements of G. Ramarao, Director; A D’Souza, Dy. General Manager (Quality Control); M.S. Watwe, Senior Manager; I.M. Tyagi, Group General Manager; and A.K. Sinha, Manufacturing Manager. They all confirmed that the thread protectors were never been manufactured out of stainless steel in the factory.
9. There is also no material cited to indicate that anyone concerned made any attempt to get the necessary machinery or take such steps to commence, manufacture of thread protectors our of stainless steel plates in the factory. It is thus clear that there was at no stage, commencing from the point of application for import licence, any intention to manufacture thread protectors out of the stainless steel plates in the appellant’s factory.
10. This is amply confirmed by the conduct of the appellant after the import. Not a part of any consignment of stainless that was imported reached the factory at Taloja. After clearance from customs these consignments were deposited in private warehouse in Chembur and Turbhe, both at a considerable distance from the factory. All of them had been sold without getting the permission from the licensing authority (except to the extent of the 271 tonnes). The licensing authority was never informed of the fact that this stainless steel was not used in the manufacture of the thread protectors supplied to ONGC and had been sold. The licensing authority was Joint Chief Controller of Imports & Exports, Mumbai. Instead of informing the licensing authority, the importer by letter dated 26.5.1990 made an application to the Chief Controller of Imports & Exports at New Delhi for discharge of the legal undertaking on the ground that the conditions of the first licence had been fulfilled. Again on 11th July, the importer informed the Chief Controller of Imports & Exports at New Delhi for permission to dispose of the stainless steel plates. The subsequent application for discharge of the legal undertakings and permission to sell the goods imported against the second licence was also addressed to the authority at New Delhi. That authority, based on the statement made by the importer supported by the certificates given by Punawani, a Chartered Engineer, discharged the undertakings.
11. It is difficult to resist the conclusion that the importer cleverly read upon the lack of co-ordination between the headquarters officers of the licensing authority at Delhi and the office at Mumbai. The appellant’s factory and office was not at Delhi but at Mumbai. It would not have been so difficult, had it so wished, to go across to the licensing authority’s office and inform them of the failure to utilise the stainless steel plates imported by it. Instead of doing so, it merely proceeds to write a letter to the head office at New Delhi, no doubt, fully aware that the letter would in the course of bureaucratic procedure take around for quite some time. The cancellation of the legal undertaking itself was obtained by mean of incorrect certificates which Punawani, the Chartered Engineer was inveigled into giving as he admits in his subsequent statement.
12. Thus from the beginning to end, the conduct of the importer has been one of deceit dishonestly. Without having the machinery or experience to utilise the stainless steel plates and clearly without any intention to utilise them it imported them. It did not at any stage make any effort either to utilise the goods or to inform the appropriate authorities on the failure to utilise it.
13. This course of conduct was spread over quite a long period. In the import licence was issued in July, 1989. The import commenced in September, 1989 and the supply to be made in February, 1990. During the same period, September, 1989 to February, 1990 the appellant supplied ONGC with mild steel thread protectors, kept selling the stainless steel plates in the market without permission; informed the Chief Controller of Imports and Exports at Delhi of the utilisation of the stainless steel plates; led the Chief Controller of Imports and exports at Delhi to believe that the stainless steel plates had been utilised for supply to ONGC. How the Chief Controller of Imports and Exports accepted the claim of fulfilment of export obligation while considering the application for discharge of legal undertaking while turning away the request of the sale of the steel plates on the ground of non utilisation is a mystery. No doubt, the two letters went to two different sections in the office of the Chief Controller of Imports & Exports were never matched, a fact of which the appellant, would have been fully aware. Whatever be the position with regard to this, we are entirely satisfied that the appellants conduct shows that it had, at any stage, even to prior to import, any intention to utilise the stainless steel plates for supply to ONGC. That being the case the claim made in each of the bill of entry for exemption under notification 513/86 was made while the appellant was fully aware and conscious that the stainless steel plates would not be used for any purpose indicated in the. Therefore, the claim for the benefit of the notification suppressed the fact from the department that the goods would not be used for making the protector and led the department into thing that they would be. This was not a simple case of claiming the benefit of an inapplicable notification on the belief that it was available. It is a case of an importer, while knowingly fully well that he would not comply with the conditions of the notification and except with regard to the first consignment when the goods already imported under the claim of the notification had not been used for the purpose for which exemption was permitted, consciously making the claim for notification. In the background of these facts that we have considered the claim made by the importer for the benefit of the notification is nothing less than deliberate and conscious attempt to mislead the department. Therefore the finding of the Collector that the extended period contained in the proviso to sub-section (1) of Section 28 of the Act would apply, has to be confirmed.
14. We agree that the demand for duty cannot be made with regard to the 271 tonnes of the stainless steel which ordered to be confiscated. The decision of the Tribunal in Indsu Vs. CC 1998 (100) ELT 385 and Khub Engineering Industries Pvt. Ltd. Vs. CC 1999 (114) ELT 612 would apply. There was no serious attempt by the departmental representative to question this contention. The demand for duty therefore has to be limited to the remaining quantity that the appellant had sold.
15. On the basis of these facts that it is clear that the importer and Bharat Vora are liable to penalty. Bharat Vora in his own statement has admitted that it was he who took the decision to import stainless steel sheets, a fact which is also confirmed by the statements of other persons. Having regard to the conscious and deliberate and continued acts of Bharat Vora and the importer in the duty evasion penalty of Rs. 24 lakhs on the importer and Rs. 7.5 lakhs on Bharat Vora do not call for reduction.
16. In his order the Collector had ordered with regard to the recovery of duty as follows: “I direct that the entire amount confirmed in this order be recovered by invoking Section 142 and adjusted from the amount of CCS due to the party from the licensing authorities adjusting the amount of duty already deposited by the importer.” The appeal by the department contends that there is an error in thin only. Section 142 does not empower the department to appropriate any amount due to the party from any other department, and in any event the importer is not entitled cash compensatory support (CCS).
17. It appears to us that what the Collector meant to say was that the amount due should be recovered either by invoking the provisions of Section 142 of the Act or by recovering the amount from cash compensatory support amount payable to the importer. We do not find it possible to say that the Collector has said that it should be recovered only from the cash compensatory support. The Collector, in our opinion, has also asked the department to apply the provisions of Section 142 of the Act. With this clarification we dismiss the department’s appeal.
18. Accordingly the appeal C/360/92 is partially allowed. The duty confirmed by Collector is set aside and the matter remanded to the Commissioner for working out and communicating to the appellant the duty payable on the quantity of stainless steel plates. The appellant shall forthwith pay the duty so indicated.
19. Appeals C/361/92 and C/16/93 dismissed.