ORDER
C.T.A. Pillai, Member (T)
1. Appeal under Section 129A of the Customs Act, 1962 praying that in the circumstances stated therein, the Tribunal will be pleased to set aside part of the order of the Additional Collector of Customs, Visakhapatnam dated 18-5-83 in No. S. 10/72/82-Pr. (Bonds).
2. This appeal coming up for orders upon perusing the records and upon hearing the arguments of Shri N. Mookerjee, Advocate for the appellant and upon hearing the arguments of Shri V. Ramachandran, Senior Departmental Representative for the respondent, the Tribunal makes the following order :
3. The appeal is directed against the aforesaid order of the Additional Collector of Customs, Visakhapatnam, demanding duty of Rs. 14,88,872.71 on certain goods said to have been warehoused in the bonded warehouse of the appellant. The brief facts of the case are :
4. On 14-9-82, the appellant’s Accounts and Materials Manager at Visakhapatnam wrote to the Assistant Collector of Customs (Preventive), Visakhapatnam, referring to statements, in respect of their private bonded warehouse, Licence No. 7/82, pointed out that due to certain organisational changes-change of personnel both on the part of the appellant’s office and that of Customs Department-the appellants were unable to connect the various records to compile the required statements. The Assistant Collector was also requested to depute an officer to verify the contents of the warehouse. In consequence, the inspection of the warehouse was done by officers of the Custom House on 17-9-1982, 20-9-1982, 27-9-1982, 30-9-1982 and 3-11-1982 in the presence of the appellant’s representatives. It was found then that (i) certain goods listed out in Annexure A to the first Show Cause Notice dated 15-1-1983 referred to below was not in the bonded store-room but in a second room adjoining the room licensed hereabove ; (ii) the appellant had not taken action to clear the goods belonging to consignments listed in Annexure B either for home consumption or warehousing as provided in the Customs Act; (iii) goods listed in Annexure C to the Show Cause Notice had been taken out without permission of the proper officer as provided under Section 62(2) of the Act and without taking action as stipulated in Section 71 ; (iv) goods listed in Annexure D to the Show Cause Notice were received at Lova Gardens, Visakhapatnam but were taken out without clearing them for home consumption or warehousing as provided in the Act. One T.K. Sudarsan, Accounts & Material Manager of the appellant-firm gave a statement on 30-12-82 wherein inter alia he stated that the appellant had no knowledge about the missing items both in the bonded warehouse as well as in the second room. However, proof of having placed the goods referred to on board the trawlers belonging to the appellant firm had been presented to the verification officer of the Department;. thus proof of consumption has been shown to the satisfaction of the verification officer. Two Show Cause Notices Nos. S. 10/72/82-PR(BONDS), both dated 15-1-1983 were issued by the Assistant Collector of Customs, Visakhapatnam calling upon the appellant to show cause to the Additional Collector of Customs, Visakhapatnam as to why for the various irregularities set out in the Show Cause Notices,
(a) the licence granted to the appellant under Section 58(1) of the Customs Act, 1962 should not be cancelled ;
(b) why confiscation proceedings under Section 111 (f) of the Act should not be taken for dutiable goods for attempted to be removed from the warehouse without the permission of the proper officer ;
(c) why a penalty should not be [imposed on the appellant under Section 112 of the Act;
(d) why amounts of Rs. 9,37,923.18 and Rs. 5,50,949.53 should not be collected from the appellant in terms of Section 72(1) (a) read with (d) of the Act,
inasmuch as the warehoused goods mentioned in Annexure A to the notice were removed from their warehouse without the permission of the proper officer contravening the provisions of Sections 62(2) and 71 of the Customs Act, 1962 and goods mentioned in Annexure B were taken out before warehousing them or clearing them for home consumption as provided for in the Customs Act thus violating the conditions of the bond executed under Section 59 of the Act. After considering the reply of the appellant and taking into account the points made during the personal hearing, the Additional Collector decided that “having regard to the facts and circumstances of the case, as far as the procedural lapses are concerned”, he was convinced that there are no mala fides involved ; hence, he did not propose to cancel the licence issued to the appellant ; nor did he propose to confiscate the goods or impose a penalty on them. He dropped the charges apparently with reference to the first Show Cause Notice. With reference to the second Show Cause Notice he confirmed the demand for payment of duty. In doing so, he did not accept the plea of the appellant that documents with the appellant would show that the goods in respect of which duty is demanded had in fact been placed on board fishing trawlers belonging to the appellant. In particular, he noted that on verification, it was found “that the Company had been following the procedure of obtaining the signature of skipper of the trawler on the shipping bill as well as on a receipt in token of receipt of the goods, whenever goods were received for fitment to the trawler. In respect of the goods in question there is no document to prove actual receipt of the goods by skipper”. Hence he concluded that there was no documentary evidence that the goods had been utilised for the purpose for which they were imported. He thus demanded duty of Rs. 14,88,872.71 under Section 72(1) of the Act.
5. Before us the Advocate for the appellant briefly referred to the procedure for warehousing and clearances and stressed that a new set of officers of the Company took charge of the operations at their Visakhapatnam factory; they doubted the correctness of the accounts and thus they themselves initiated the stock verification when it was found that the two categories of goods viz., (i) not warehoused but present and cleared and (ii) goods warehoused but not cleared on documents were listed. He drew particular attention of the observa-tion of the Additional Collector in para 9.2 of his order wherein he has accepted the bona fides of the appellant that what had happened were really procedural lapses; however, in respect of proof of export of the goods he stated that though the receipt of skipper was not available, internal documentation of the company would show that these goods had been duly received, entered in their stock register and covered by issue cards. Whenever a demand is made by the skipper of a trawler, a delivery is authorised by one set of officers, goods are released from the store-room by another set of officers, and report of having issued them to skipper verified and duly entered in the issue cards. The receiving report for the goods is signed by a Maintenance Engineer and this is accepted internally for the purpose of accounting. He also stressed that the appellant cannot have access to the bonded warehouse which is under the lock and key of an officer of the department itself (bond officer). This factor coupled with the internal documentation of the department with particular reference to the signature of the maintenance engineer, would show that the goods have in fact been placed on board the trawlers.
6. The Senior Departmental Representative on the other hand, referred to para 9.3 of the order of the Additional Collector according to which the documents in possession of the appellant had already been verified by the department but it was found that they did not have a receipt signed by the skipper, as is normally available when goods were issued for fitment to trawlers. He also referred to the decision of this Bench of the Tribunal in the case of ‘Hindustan Shipyard Limited v. Collector of Customs, Madras’-Appeal No. CD(T) (MAS) 78/80, dated 23-12-82-in which the Bench had observed that the provisions of law are enforceable notwithstanding an earlier practice to the contrary. He justified the demand in terms of Section 72 (1) (a) and (d) of the Act. Section 72(1) (a) provides that where any warehoused goods are-removed from a warehouse in contravention of Section 71 duty could be demanded. Section 72(1) (d) provides that in respect of goods to which a bond has been executed under Section 59 had not been cleared for home consumption or exportation are not duly accounted for to the satisfaction of the proper officer, duty could be demanded. He then referred to Section 71 which prohibits the removal of goods from the warehouse except as provided under the Act ; and Section 69 provides that goods for export will have to be covered by a shipping bill presented in the prescribed form and an order for clearance for export obtained from the proper officer. He also explained that information regarding goods cleared in an unauthorised manner has been obtained from the bond register maintained by the Department in the Custom House itself.
7. In reply, the Advocate for the appellant stated that most of the goods had been received on transhipment after import at Madras, Calcutta or Bombay; they are transported under cover of a bond executed with the respective Collectors at the port of importation. They cannot be treated as. warehoused goods for the purpose of Section 72 of the Act and duty demanded thereon. In this connection, he specifically referred to Annexures A and B to the first Show Cause Notice.
8. We gave sometime to both sides to verify the correctness of the statement that goods had been imported at other ports and brought in transit to Visakhapatnam and to determine what the goods were. Contradictory claims were made. However, we do not go into the details of this controversy as we are disposing of the case on different grounds.
9. We have examined the points urged on both sides. The details for the demand for payment of duty are set out in Annexure C and Annexure D to the first Show Cause Notice (It would appear that these are the two an-nexures to the second Show Cause Notice demanding duty). Annexure C is headed “warehoused goods taken out contravening Section 71 of Customs Act, 1962” and gives details of the bond number, VSR No., quantity, value, classification, rate of duty and amount of duty. Annexure D is headed “Goods not warehoused and not available”; this gives details of VSR (naturally there is no bond number) along with quantity, value, classification, rate of duty and amount of duty. A check of Annexure D with Annexure B shows that goods not warehoused in Annexure D are shown as Annexure B (as consignments not warehoused). The entries therein tally. It is also to be noted that SI. No. 3 of Annexure B relating to consignments not warehoused and consisting of 54 VSRs is the same as Annexure A headed consignment lying in Room No. 3, i.e., the room outside, the approved bonded store-room and adjoining thereto. From these, it is clear that we are dealing with the demands for duty in respect of goods in Annexure C for goods which were in the warehouse but which were not physically found ultimately at the time of verification, and in respect of Annexure D goods which were not warehoused at all. The latter point gets strengthened when we note that most of the goods had been imported at other ports and brought under what may be called as transit bonds, sample copies of which were made available during the course ¦of series of hearings before us. The operative part of one bond reads,
“Now the condition of the above written bond are such that if the said M/s. Union Carbide India Limited, Gandhigram, Visakhapatnam or their heirs and representative shall deliver or to cause to be delivered to the said Collector within 15 days or such extended period as may be allowed by the Asstt. Collector of Customs from the date hereof the clearance certificate signed by proper officer of Customs at Visakhapatnam or if the said Importer, their heirs or representative or any of them shall in lieu of delivery of such clearance certificate on demand by the said Collector pay or cause to be paid to heirs on behalf of the President of India, the sum of Rs. . . . plus any fine and penalty if adjusted for violation of the condition when the above written bond shall be paid and no effect otherwise bond shall be and remain in full force and vigour”.
It is also seen from a photostat copy of the telegram dated 17-12-81 that Vizag Customs has intimated the Asstt. Collector of Customs, Import Noting Deptt., Custom House, Calcutta, of the receipt of a series of consignments in bond which has been placed in UCIL Private Bonded Warehouse. Thus, we recognise the existence of goods which had been brought into the premises at Visakhapatnam and kept outside the bonded store-room and as set out in the heading of the statement some were not actually warehoused.
10. Demand for duty in respect of goods not warehoused is also made under Section 72(1 )(a) read with Sub-section (d) of the Act on the score that the provision of Sections 59 and 71 had not been followed. It will be useful to set out the broad provisions of import and warehousing of goods to appreciate the point at issue. Section 46 of the Customs Act, 1962 provides that “the importer of any goods, other than the goods intended for transit or transhipment, shall make entry thereof by presenting to the proper officer a bill of entry for. . . or warehousing in the prescribed form”. According to Section 17(1) “after the importer has entered any imported goods under Section 46” such goods may “be examined and tested by the proper officer”. Thereafter, they shall be assessed [Sec.l7(2)]. Section 59 provides that “the importer of any dutiable goods which have been entered for warehousing and assessed to duty under Section 17. … shall execute a bond” in the prescribed form and Section 60 indicates that “when the provisions of Section 59 have been complied with in respect of any goods,” (entry of the goods followed by its assessment and execution of a bond), “the proper officer may make an order permitting the deposit of the goods in a warehouse”. We now turn to Section 2 of the Act; according to Section 2(44).
“Warehoused goods” are defined as “goods deposited in a warehouse.” Thus, when Section 59 talks of warehoused goods it could only refer to goods which have undergone the procedures and processes set out earlier. If as in the case of goods covered by Annexure D they are not even in the bonded store-room and are not covered by a regular bond in terms of Section 59, they cannot be treated as “warehoused goods” for purposes of Section 72; nor can they be treated as goods in respect of which a bond has been executed under Section 59 and which has not been cleared for home consumption or exported; the goods not having been warehoused could not have been improperly removed from such a place. We are strengthened in the above view if we note the wording of Section 49 relating to storage of goods; what is permitted in Section 49 is storage as distinct from the deposit in a warehouse. None of the provisions of Chapter IX relating to “Warehousing” would
obviously apply to the goods stored in a warehouse in terms of Section 49. We accordingly find that in respect of goods covered by Annexure D for which also the demand has been confirmed by the Addl. Collector are not “warehoused goods” and hence that part of the demand cannot be sustained in terms of Section 72 of the Act. It is set aside.
11. In respect of goods for which a bond has been executed under Section 59 and which were not found on verification in the warehouse (that the good covered by Annexure C to the Show Cause Notice), we uphold the plea of the Department that the party had not accounted for the goods as provided in the Act. The plea that internal documentation of the company would show that they have in fact been placed on board the trawlers and hence exported in terms of Section 69 of the Act is not supported by documents prescribed under the Act. The demand in respect of these goods has been correctly made and confirmed by the Additional Collector. That part of the order is thus upheld.
12. Before parting with the case, we would like to observe that in the latter class of goods referred to in paragraph 11, they were in a warehouse under the double lock of the appellant as well as of the bond officer of the Department; access to the warehouse at all times has to be in the presence of both and with the consent of an officer of the Customs. The theory that the goods could have been removed for any ulterior purpose other than clearance for shipment would thus be far fetched. One could accept the plea of the appellant that the goods were in fact removed from the warehouse and fitted on to fishing trawler and hence have not in fact been consumed within the country. Though therefore, in strict law, we are upholding the order of the Additional Collector in respect of the goods, we feel that if the matter is raised properly with the Government of India, it may like to consider the grant of suitable relief with sympathy.