ORDER
P.K. Kapoor, Member (T)
1. Since these three appeals arise out of the same order, they are disposed of by this common order.
2. Briefly stated the facts of the case are that on the basis of information that a consignment of six wooden cases declared to contain car cassette player parts of Japanese origin was consigned to M/s. Savitri Electronics Co. 59, Janta Nagar, Jaipur, a fictitious firm, the officers of the Directorate of Revenue Intelligence detained the goods which were unloaded by the vessel ‘Shinkai Maru’ which arrived on 18-3-1986. On 4-4-1986 the goods were examined. It was found that the goods comprised of almost complete ‘car cassette’ players in CKD/SKD condition with only about 5% of the parts in terms of value not having been imported. In their letter dated 9-4-1986 M/s. Orient Shipping Agency (P) Ltd. informed the Department that under instructions from the suppliers in Tokyo the consignors’ name had been amended and the new consignors were M/s. Esvee Enterprises, New Delhi. Neither M/s. Savitri Electronics Co. nor M/s. Esvee Enterprises filed any Bill of Entry for the clearance of the goods. Shri Onkar Bhardwaj appeared before the Directorate of Revenue Intelligence Officers on 13-11-1986 and deposed that one O.P. Vij obtained his signatures on blank letter heads for obtaining registration certificate from the Directorate of Industries, Jaipur and Import Licence from the Chief Controller of Imports and Exports in the name of the bogus concern M/s. Savitri Electronics. He admitted that he was being paid only small sums by Shri O.P. Vij who was financing the imports in the name of various non-existent concerns. Shri Soodesh Verma, proprietor M/s. Esvee Electronics when questioned by the D.R.I. officers deposed that he/his firm had no connection with M/s. Savitri Electronics Co. He claimed that he had written to the suppliers M/s. Kisho Shokai Yokohama, Japan on 23-12-1985 in connection with the intended import of components of 5000 car cassette players. He stated that in their letter dated 15-3-1986 M/s. Kisho Shokai had informed him that one of their clients had refused to retire two Bills and offered the goods to him. Shri Soodesh Verma claimed that the offer by the Japanese supplier was accepted by him but before he could retire the documents relating to the goods in question from Allahabad Bank, New Delhi, he learnt that the goods had been seized by the D.R.I. authorities.
3. After investigations, a show cause notice dated 26-8-1986 was issued to M/s. Savitri Electronics Co., Shri Onkar Nath Bhardwaj, M/s. Esvee Enterprises and M/s. Orient Ship Agency Pvt. Ltd. Thereafter in the impugned order dated 30-11-1987, the Additional Collector held that M/s. Savitri Electronics who had not responded to the show cause notice was a firm which had been floated solely for the purpose of importing electronic components without having any manufacturing facility with the intention of selling the imported components in the market. On the grounds that M/s. Savitri Electronics had not produced any valid Actual User Import Licence, the adjudicating authority held that the goods were liable to confiscation under Section 111(d) of the Customs Act, 1962. He rejected the claim made by M/s. Esvee Enterprises that they were entitled to clear the goods on the grounds that there was strong suspicion that they had come forward to claim the goods at the instance of the foreign suppliers or Shri O.P. Vij in order to prevent the confiscation of the seized goods. He observed that even though M/s. Esvee Enterprises had claimed the goods they had failed to establish that they were covered by a valid import licence on the date of import i.e. 18-3-1986. On these grounds he ordered the confiscation of the goods under Section 111(d) of the Customs Act, 1962. He further held that M/s. Savitri Electronics Co. and Shri O.N. Bhardwaj were liable for penalty under Section 112(a) of the Customs Act, 1962. The adjudicating authority refrained from imposing any penalty on M/s. Esvee Enterprises on the grounds that there was no evidence to show that they were knowingly concerned in the attempted clearance, of the seized goods. He also dropped the charges against M/s. Orient Ship Agency Pvt. Ltd.
4. On behalf of M/s. Esvee Electronics, the learned Advocate Shri G.L. Rawal appeared before us. He stated that on account of the refusal by the original consignee to retire the documents, the ownership of the goods continued to vest with the foreign supplier. He contended that his client was entitled to clear the goods since the foreign supplier had transferred the documents in his name by instructing the concerned Bank as well as the Shipping Company. Shri Rawal reiterated his stand that in cases where the consignee does not retire the documents, the foreign supplier continues to be the owner of the goods and has the option either to have the goods re-shipped or alternatively he can transfer the documents in favour of another buyer. Shri Rawal added that M/s. Esvee Enterprises had to be deemed as the importers of the goods in question since after the transfer of the documents in their name they were willing to complete the necessary formalities for the clearance of the goods. He stated that his client could not retire the documents and proceed with the Customs formalities on account of the seizure of the goods. Shri Rawal reiterated his stand that the foreign supplier was entitled to find another buyer since ownership of the goods continued to vest in him and the documents having been transferred by the supplier in favour of M/s. Esvee Enterprises, they were entitled to clear the goods. On these grounds he prayed that the impugned order may be set aside to enable his client to clear the goods after completing the required formalities. In support of his contentions he cited the following case law:
1.
Union of India v. Sampat Raj Dugar reported in 1992 (58) E.L.T. 163 (SC)
2.
Anjali Shantilal Lunkad v. U.O.I. reported in 1991 (52) E.L.T. 203 (Bom.)
3.
Hindustan Photo Films Mfg. Co. Ltd. v. U.O.I. reported in 1990 (50) E.L.T. 234 (Del.)
4.
Telerama (India) Ltd. v. U.O.I. reported in 1991 (51) E.L.T. 341 (Tribunal)
.
5. On behalf of M/s. Savitri Electronics and Shri Onkar Nath Bhardwaj, the learned Advocates Shri T.G. Mahalingam and Shri Ajay Laroia appeared before us. Shri Laroia contended that the penalty imposed on his clients was not sustainable since Shri Onkar Nath Bhardwaj had not claimed the goods.
6. On behalf of the Revenue, the learned SDR Shri Ashok Mehta stated that Shri Onkar Nath Bhardwaj had admitted that he had assisted Shri O.P. Vij to float M/s. Savitri Electronics which was a bogus concern. Shri Mehta added that Shri Bhardwaj had also admitted that the goods imported against licences issued to M/s. Savitri Electronics were intended for sale in the market. He contended that the order passed by the Additional Collector was legal and proper since the goods not being covered by a valid licence at the time of import, were rendered liable to confiscation under Section 111(d) of the Customs Act, 1962. He contended that under these circumstances it was not permissible for the foreign supplier to assign the goods to any other party. He defended the penalties imposed on M/s. Savitri Electronics and Shri O.N. Bhardwaj on the grounds that they were concerned in the illegal importation of goods of large value with the intention of selling them in the market.
7. We have gone through the records of the case and considered the submissions made on behalf of both sides. In order to appreciate the rival contentions, we consider it desirable to recount certain facts. It is seen that the disputed consignment declared to contain car cassette players consigned to M/s. Savitri Electronics Co., Jaipur was discharged by the vessel Shinkai Maru which berthed at Bombay Port on 18-3-1986. On the basis of information that the M/s. Savitri Electronics Co. was a fictitious firm who were not equipped to carry out any manufacturing activity, the DRI officers seized the goods which on examination were found to comprise of sets of components/sub-assemblies for the manufacture of car cassette players. Shri O.N. Bhardwaj when questioned by the DRI Officers deposed that M/s. Savitri Electronics Co. was a bogus concern which was not carrying out any manufacturing activity. He disclosed that at the instance of one Shri Vij he had signed on a number of blank letter heads of the firm to enable him to obtain the Registration Certificate from the Director of Industries and Licences for the import of electronic components. Shri Bhardwaj claimed he was to receive only a nominal sum from Shri Vij who intended to sell the imported components in the market.
8. Since the documents sent on collection basis were not retired from the Bank by M/s. Savitri Electronics who were the consignees, the consignors M/s. Kishoo Shokai of Yokohama, Japan sent a fresh set of documents in favour of M/s. Esvee Enterprises through the Allahabad Bank. On 24-3-1986, the Bank informed M/s. Esvee Enterprises about the transfer of documents in their favour.
8A. The case of the appellants M/s. Esvee Enterprises is that they have no connection with M/s. Savitri Electronics, the original consignees of the goods. They have claimed that being interested in the importation of various components of car cassette players, on 9-9-1985 they had requested M/s. Kisho Shokai of Yokohama, Japan to send their quotations. Thereafter by their letter dated 27-1-1986 they placed an order for the supply of goods listed in their letter dated 23-12-1985 addressed to the Japanese supplier. They have contended that in their letter dated 15-3-1986 M/s, Kisho Shokai informed them that one of their customers in India had refused to retire the bill relating to about 5000 sets of components of car cassette recorders and they were prepared to divert the goods by drawing the documents in their favour. M/s. Esvee Enterprises have claimed that in their telegram dated 24-3-1986 they communicated their consent to the Japanese suppliers who drew up fresh documents in their favour on 24-4-1986 and they received an intimation from the Allahabad Bank, that documents had been received from the Japanese suppliers. According to M/s. Esvee Enterprises they did not take action to retire the documents and complete the other formalities in connection with the clearance of the goods since they had been seized on 4-4-1983.
9. We find that the facts in this case are similar to the facts in the case of
Union of India v. Sampat Raj Dugar reported in 1992 (58) E.L.T. 163 (SC)
wherein the Hon’ble Supreme Court had held that in a situation when an importer fails to pay for the goods and abandons them, the ownership of the goods will continue to vest in the exporter unless he is proved to be a party to any fraud or payment for the goods stands guaranteed to him by virtue of a Letter of Credit or otherwise. Paragraphs 19, 20 and 24 of the said judgment being relevant are reproduced below:
“19. We may first consider the question of title to the said goods. If we keep aside the provisions of law relied upon by the appellants viz. definition of ‘importer’ in Section 2(26) of the Customs Act, Clause 5(3) (ii) of the Imports (Control) Order as well as para 26(iv) of the Import-Export Policy, the position is quite simple. Since the second respondent did not pay for and receive the documents of the title she did not become the owner of the said goods, which means that the first respondent continued to be the owner. How do the aforesaid provisions make any difference to this position? The definition of ‘importer’ in Section 2(26) of the Customs Act is not really relevant to the question of title. It only defines the expression ‘importer’. The first respondent does not claim to be the importer. The provision upon which strong reliance is placed by the appellants in this behalf is the one contained in Clause 5(3)(ii) of the Imports (Control) Order. Sub-clause (1) of Clause 5 specifies conditions which can be attached to an import licence at the time of its grant. Sub-clause (2) says that a licence granted under the Order shall be subject to the conditions specified in Fifth Schedule to the Order. Sub-clause (3) sets out three other conditions mentioned as (i), (ii) and (iii) which shall attach to every import licence granted under the Order. First of these conditions says that the import licence shall be non-transferable except under the written permission of the Licensing Authority or other competent Authority. Condition (ii) – which is the provision relevant herein – says that the goods for the import of which a licence is granted “shall be the property of the licensee at the time of import and thereafter upto the time of clearance through customs.” This condition, however, does not apply to STC, MMTC and other similar institutions entrusted with canalisation of imports. It also does not apply to certain eligible export houses, trading houses and public sector agencies mentioned in the second proviso. Condition (iii) says that the goods for which the import licence is granted shall be new goods unless otherwise mentioned in the licence. Now coming back to the Condition (ii), the question is what does it mean and what is the object underlying it when it says that the imported goods shall be the property of the licensee from the time of import till they are cleared through customs. It is necessary to notice the language of the sub-clause. It says “it shall be deemed to be a condition of every such licence that ……the goods for the import of which a licence is granted shall be the property of the licensee at the time of import and thereafter upto the time of clearance through Customs.” The Rule-making authority (Central Government), which issued the order, must be presumed to be aware of the fact that in many cases, the importer is not the owner of the goods imported at the time of their import and that he becomes their owner only at a later stage i.e. when he pays for and obtains the relevant documents. Why did the Central Govt. yet declare that such goods shall be the property of the licensee from the time of import? For appreciating this, one has to ascertain the object underlying the said provision. The interpretation to be placed upon the provision should be consistent with and should be designed to achieve such object. In this context, it should also be remembered that expressions like ‘Property of and ‘Vest’ do not have a single universal meaning. Their content varies with the context. The aphorism that a word is not a crystal and that it takes its colour from the context is no less true in the case of these words. In our opinion the object underlying Condition (ii) in Clause 5(3) is to ensure a proper implementation of the Imports (Control) Order and the Imports and Exports (Control) Act, 1947. The idea is to hold the licensee responsible for anything and everything that happens from the time of import till they are cleared through Customs. The exporter is outside the country, while the importer, i.e., the licensee is in India. It is at the instance of the licensee that the goods are imported into this country. Whether or not he is the owner of such goods in law, the Imports (Control) Order creates a fiction that he shall be deemed to be the owner of the such goods from the time of their import till they are cleared through Customs. This fiction is created for the proper and effective implementation of the said order and the Imports and Exports (Control) Act: The fiction however cannot be carried beyond that. It cannot be employed to attribute ownership of the imported goods to the importer even in a case where he abandons them, that is, in a situation where he does not pay for and receive the documents of title. It may be that for such act of abandonment, action may be taken against him for suspension/cancellation of licence. May be, some other proceedings can also be taken against him. But certainly he cannot be treated as the owner of the goods even in such a case. Holding otherwise would place the exporter in a very difficult position; he loses the goods without receiving the payment and his only remedy is to sue the importer for the price of goods and for such damage as he may have suffered. This would not be conducive to international trade. We can well imagine situations where for one or other reason, an importer chooses or fails to pay for and take delivery of the imported goods. He just abandons them. (We may reiterate that we are speaking of a case where the import is not contrary to law). It is only with such a situation that we are concerned in this case and our decision is also confined only to such a situation. Condition (ii) in sub-clause (3) of Clause 5, in our opinion, does not operate to deprive the exporter of his title to said goods in such a situation.
20. At this stage, it may be appropriate to clarify one aspect. There may be cases, where the importer opens a letter of credit and makes some other arrangement ensuring/guaranteeing payment of price of imported goods. In such a case, it will be open to the exporter, in case of non-payment of price or abandonment by the importer, to collect the price by invoking such arrangement. In such a case, it is obvious, the exporter will not be allowed to claim title to and/or to re-export the goods. (Indeed, it is unlikely that in such a case, the importer abandons the goods ordinarily speaking). It is therefore, necessary that in all such cases, the authority should issue a notice to the importer and/or his agent before allowing the exporter to deal with or seek to re-export the goods. So far as this case is concerned, both the importer and exporter (RR 2 and 1 respectively) were present before the Collector (Customs) as well as before the High Court. R2 did not plead any such arrangement.
24. It is also significant to notice that it is not the case of the appellants that the first respondent was a party to any conspiracy or other fraudulent plan hatched or sought to be implemented by the second respondent. If that were the case, different considerations would have arisen.”
10. Since the documents in favour of M/s. Savitri Electronics Co., the original consignees of the goods in question were drawn on collection basis and payment for the goods was not guaranteed by virtue of a Letter of Credit or otherwise, it cannot be disputed that on failure on the part of M/s. Savitri Electronics to retire the documents from the Bank, the ownership of the goods continued to vest with the exporters M/s. Kisho Shokai of Yokohama, Japan. Under these circumstances and having regard to the fact that there is no evidence that the suppliers were a party to any fraud or attempted importation of the goods in question into India in contravention of any prohibition, in our view on the ratio of the Supreme Court judgment in the case of
Union of India v. Sampat Raj Ditgar
(supra) the exporters were entitled to either to find another buyer of the goods or ask for re-export of the goods.
11. It is seen that the adjudicating authority held that the goods under seizure were liable to confiscation since M/s. Esvee Electronics who had not claimed the goods which were not covered by a valid import licence on the date of their shipment and even on 18-3-1986 i.e. the date of which they were imported. In this regard, it is seen that in his statement dated 13-11-1986 Shri Onkar Nath Bhardwaj had stated that Shri O.P. Vij had obtained the registration certificate in the name of M/s. Savitri Electronics from the Director of Industries and also the Import Licence from the Deputy Chief Controller of Imports and Exports, Jaipur. It is evident that Shri Onkar Nath Bhardwaj and Shri O.P. Vij intended to clear the disputed goods against the Open General Licence by claiming M/s. Savitri Electronics to be as ‘Actual Users Industrial’ by virtue of the Registration Certificate from the Director of Industries and also against the Import Licence issued by the Deputy Chief Controller of Imports and Exports, Jaipur in favour of M/s. Savitri Electronics. It appears that on learning about the investigation launched by the D.R.I. Officers M/s. Savitri Electronics withdrew from the scene and decided to abandon the goods by not retiring the documents from the Bank. The Department did not make any enquiries either with the concerned Director of Industries or the Deputy Chief Controller of Imports and Exports, Jaipur whether the Registration Certificate and Import Licence were issued to M/s. Savitri Electronics or after being issued they had been cancelled. We are, therefore, inclined to believe that the foreign suppliers had shipped the goods on the understanding that M/s. Savitri Electronics were entitled to import them and but for the investigations launched by the DRI Officers, the importers M/s. Savitri Electronics would have come forward to claim the goods as covered by the Open General Licence or by the Import Licence issued to them.
12. Under these circumstances and having regard to the fact that the foreign supplier had not received the payment for his goods, we are of the view that instead of holding the goods as liable to confiscation on the ground that they were not covered by a valid licence at the time of importation, M/s. Esvee Enterprises in whose favour the documents had been transferred by the exporter should have been given an opportunity to clear the goods against any valid licence held by them after establishing that the import was otherwise legal and permissible.
13. In view of the above discussion, we set aside the impugned order and direct that the party in whose favour the documents have been transferred shall be given an opportunity to file the Bill of Entry for the clearance of goods against a valid licence or OGL after establishing that the import is otherwise legal and permissible. This is without prejudice to the rights of the Department to initiate fresh proceedings for any contravention of the law in respect of the goods or, against the concerned persons.
14. Having regard to the fact that the order confiscating the goods no longer survives and also taking into account the fact that M/s. Savitri Electronics and Shri O.N. Bhardwaj had not taken any steps to clear the imported goods, we take a lenient view and set aside the penalties imposed on M/s. Savitri Electronics and Shri O.N. Bhardwaj.
15. The, appeals are disposed of in the above terms.