S.C.AGRAWAL - (1.) THIS appeal has been filed under Section 130 E(b) of the Customs Act, 1962 (hereinafter referred to as 'the Act) against the order dated 29/07/1986 gassed by the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as 'the Appellate Tribunal) whereby the Appellate Tribunal dismissed the appeal of the appellant against the order dated 24/02/1983 passed by the Collector of Customs and Central Excise, -Cochin (hereinafter referred to as 'the 'Collector).
(2.) M/s. Jacsons Thevara, the appellant herein, is a partnership firm. It was originally constituted on 1/01/1973, with two partners, Jacob Punnoose and K. 0.Thomas.It was registered as a Small Scale Industrial Unit with the Department of Industries and Commerce of the Government of Kerala, and was manufacturing wooden furniture and flush doors. The firm was reconsititud on 1/01/1974, and two minors,Thomman Jacob and Phili Jacob, were admitted to the benefits of the partnership. The reconstituted firm started ' manufacturing decorative Veneers of 3 mm thick by manual sawing operations. In July 1978,the appellant decided to diversify its business by manufacturing sophisticated decorative Veneers of thinner varieties and they decided to import a Horizontal Veneers Slicer and spares from Japan. The appellant obtained an import licence dated 14/02/1979, for the CIF value of Rupees 8,70,413 / - bearing a specific endorsement 1 "Project Import" from the Deputy Chief Controller of Imports and Exports, Cochin. After obtaining the, said licence, the appellant placed orders with the foreign supplier in Japan and opened a Letter of Credit on 12/04/1979. Since the financial resources of the appellant were not quite adequate to meet the financial commitments required for importation of the machinery as well as for purchase of raw materials, the appellant consulted Mr. T. K. Jacob and his wife Mrs. Sally Jacob, the parents of the two minor partners who had financial interests in the appellant and as a result of the said deliberations a private limited company M/s. Jacsons Veneers and Panels Private Limited (hereinafter referred to as 'the Company) was incorporated under the Cornpiknies Act, 1956 on J 6/06/1979. The said Company was also registered as a Small Scale Industry with the Directorate of Industries and Commerce, the Government of Kerala. On 14/07/1979, the partners of the appellant passed a resolutionl where by it was mutually agreed and resolved that the business herein to run under the name of the appellant be transferred with all its assets and liabilities together with import licences, permits, quotas, factory licences, leasehold rights, telephone connections etc., and for this purpose to enter into an agreement with the appellant. These resolutions were followed by an agreement dated 31/07/1979 executed by Mrs. Sally Jacob, Managing Director of the Company and Jacob Punnoose and K. 0. Thomas, partners of the appellant. Under the said agreement the Company agreed to take over and the appellant agreed to hand over the business run by the appellant. as a going concern with the assets and liabilities described in Schedule-A to the agreement and it was also agreed that the appellant shall transfer the import licences, permits, quotas, factory licences, leasehold rights, telephone connections etc. described in Schedule-B to the agreement to the Company and the Company agreed to pay to the appellant a net consideration of Rs. 38,587.52 paise. After the execution of the said agreement a joint application dated 31/08/1979 was submitted by the appellant as well as the Company before the Deputy Chief Controller of Imports and Exports, Ernakulam for approval for transfer of business of the appellant to the Company and for transfer of import licence dated Feb. 14, 1979 issued in favour of the ' appellant. The said application was based on the agreement dated 31/07/1979. In the meanwhile, on 31/07/1979, the goods had been shipped by the foreign supplier from Japan. By his letter dated 26/11/1979, the Deputy Chief Controller of Imports and Exports informed the appellant that since the shipment of the capital goods covered by the import licence dated Dec. 14, 1979, had already been effected the question of transfer of the licence does not arise. On the arrival of the goods the appellant filed the Bill of Entry on 12/11/1979, which contained a declaration signed by the partner of the appellant. The appellant also submitted an application dated 21/11/1979, for registration under Project Import (Registration of Contracts) Regulations 1965, wherein it was stated that the goods to be imported are for the substantial expansion of an existing plant and that the existing installed capacity was 25,000 sq. mtr. per annum and after expansion the said capacity would be 10.98,000 sq. mtr. Decorative Veneers per annum. On the basis of the aforesaid declaration in the Bill of Ent as well as the statement contained in theryapplication for Registratiold under Project Import (Registration of Contracts) Regulations, 1965 submitted by the appellant that goods had been imported for the purpose of substantial expansion of an existing unit, the customs duty payable on the goods was assessed at a concessional rate under Heading No. 84.66 in Chapter 84 of Schedule 1 to the Customs Tariff Act, 1975 and the appellant cleared the goods on 7/12/1979, on payment of Rs. 2,90,436.93 as customs duty. Thereafter the appellant, by letter dated 4/02/1980, informed the Deputy Chief Controller of Imports and Exports, Cochin, that the machinery imported by it was being transferred to the Company and that the said transfer is in pursuance of the provisions contained in paragraphs 351 to 354 of the Hand Book of Import and Export Procedures 1979-80. The Deputy Chief Controller of Imports and Exports, Cochin, by his letter dated 26/02/1980, replied that the transfer of imported machinery by the appellant to the Company, as already recommended by the General Manager, District Indus-, tries Centre, Ernakulam, had been noted by his office. Thereafter two of the partners in the appellant, K. 0. Thomis and Jacob Punnoose were formally associated as share holders of the Company on 12/03/1980, and the other two minor partners, Thomman Jacob and Dilip Jacob were formally associated as share holders of the Company on March 23, 198 1. The consideration amount of Rs. 38,587.52 paise payable to the appellant in terms of the agreement dated 31/07/1979 was satisfied by allotment of 400 Equity Shares of Rs. 100.00 each of the Company to the partners of the. appellant on 5/10/1985. Jacob Punnoose and K. 0. Thomas were allotted 50 shares each whereas Thomman Jacob and Dilip Jacob were allotted 150 shares each. The Assistant Collector of Customs issued a show cause notice dated 4/06/1982,' wherein it was stated that the machinery imported by the appellant under import licence dated Feb. 14, 1979, by paying concessional rate of customs duty applicable to Project Imports had not been installed by the appellant at its premises and the same was never utilised for the substantial expansion of their factory and that the declaration made in the application for registration of contract and in the Bill of Entry filed for clearance of goods in question was not correct and appellant had misdeclared and suppressed the actual facts for claiming the benefit of concessional assessment available to project imports and that the said wilful misstatement and suppression of facts by the appellant had resulted in the incorrect levy of the customs duty on the goods imported and therefore it was proposed to invoke the provisions of sub_ section ( 1) of Section 28 of the Act. In the sa' d show cause notice it was also stated that the 1 suppression and wilful misstatement of facts and the attempt made by the appellant to claim clearance of the goods in question at the concessional rate applicable to project imports when the goods were not actually meant for the said purpose make the goods liable to confiscation under Clauses (m) and (o) of Section 111 of the Act and the appellant was liable to penalty under Section 112 of the Act. The appellant was called upon to submit its written representation in the matter to show cause as to why the assessment made earlier should not be revised and why the goods in question should not be treated as liable to confiscation and why penalty should not be imposed on it. By another show cause notice dated 17/06/1982, the Assistant Collector of Customs (Import) Department informed the appellant that the customs duty amounting to Rupees 2,00,000/- was short levied in respect of the consignmerit imported by it and the appellant was required to show cause why the said amount should not be paid by it. The appellant submitted its replies dated 7/07/1982, and Ju 12/07/1982, to the said show cause notices. The Collector, by order dated February 24. 1 found that the clearance of the good question was effected by the appellent , uppressing certain vital information from the customs and that the declaration made the appellant that the machinery as imported dwas for the substantial expansion of in existing unit was incorrect and wrong andin view of the said suppression and wilful misstatement of facts and attempt made by the appellant to clear the goods at the lower rate of duty by getting the goods assessed under Heading 84.66 of the Customs Tariff Act, it was necessary to reassess the goods under Section 17(4) of the Act on merits without extending the benefit of assessment under Heading 84.66 of the Customs Tariff and that it is also necessary to invoke the provisionsof the provisotosub-section(l)of Section 28 of the Act to these goods. The Collector, therefore, ordered that the goods in question shall be reassessed to duty on imorts under the appropriate heading of the Customs Tariff without giving the benefit of assessment under Heading 84.66 and to collect the short levy from the appellant. The Collector in his order aforesaid further ohserved that the suppression and the wilful misstatement of facts and attempts made by the appellant to misdeclare material particulars for claiming clearance of the goods at a lower rate of duty and the attempt to evade payment of the correct duty payable on the goods made the goods liable to confiscation under Clauses (m) and (o) of Section 111 of the Act, and the appellant was liable to penalty under Section 1 12 of the Act and since the goods were not available for confiscation,the Collector imposed a penalty of Rs. 50,000.00ontheappellant.Inpursuanceof the said order of the Collector of Customs, the customs duty payable on the goods imported was reassessed at Rs. 4,16,600.37 p. and after deducting the amount of Rs. 2,90,436.93/ paise paid by the appellant at the time of clearance of the goods, a demand for Rs. 1,26,163.45 p. was raised by the Assistant Collector of Customs, Special Investigation Branch, Cochin, by his letter dated 27/07/1983. By the order under appeal the Appellate Tribunal has affirmed the order dated Feb 24/02/1983, passed by the Collector and has dismissed the appeal filed by the appellant.
(3.) SHRI Avadh Bihari appearing for the appellant has submitted that there was no suppression or wilful misstatement on the part of the appellant and that soon after the execution of the agreement dated 31/07/1979 a joint application dated 31/08/1979, was submitted on behalf of the appellant and the Company whereby the Deputy Chief Controller of Imports and Exports was informed about the transfer of business of the appellant to the Company and it was requested that the import licence dated 14/02/1979, may be transferred in favour of the Company. SHRI Avadh Bihari has also laid stress on the joint letter dated 18/09/1979, addressed by the appellant and the Company to the General Manager, District Industries Centre, Ernakulum, informing him with regard to transfer of business by the appellant to the Company as well as the letter dated November 20, 1979, sent by the General Manager, District Industries, Centre, Ernakulam to the Deputy Chief Controller of Importsand Exports, Ernakulam, recommending that the project is eligible to avail concessional rate of import duty, if rules permit, since the machinery which is imported is for the substantial expansion of the unit. SHRI Avadh Bihari has also placed reliance on the letter dated 4/02/1980, of the appellant addressed to the Deputy Chief Controller of Imports and Exports informing him about the transfer of the machinery imported by it under import licence dated 14/02/1979, to the Company and the reply dated 26/02/1980, sent by the Deputy Chief Controller of Imports and Exports to the said letter wherein the fact of transfer of the imported machinery by the appellant to the Company has been noted in the said office. The submission of SHRI Avadh Bihari is that from the aforesaid documents, it is clear that the appellant has not committed any breach of any condition of the import licence dated 14/02/1979, and that the import authorities have also not found that the appellant has contravened the conditions on the basis of .which the import licence was granted to the appellant and that in those circumstances it was not open to the authorities under the Act to proceed against the appellant. SHRI Avadh Blhari has in this regard placed reliance on the decision of this Court in East India Commercial Co. Ltd., Calcutta v. The Collector of Customs, Calcutta, (1963) 3 SCR 338: (AIR 1962 SC 1893), wherein it had been laid down that the customs authorities have no power to take action for breach of conditions of an Import licence. These contentions, in our view, are Misconceived because here the customs authorities have not taken action against the appellant for breach of any condition of the import licence dated 14/02/1979. Action has been taken against the appellant under the provisions of the Act for obtaining clearance of the goods by paying customs duty on a concessional rate under Heading 84.66 of the Customs Tariff by suppression and wilful misstatement of facts. What is of relevance is whether before obtaining clearance of the machinery imported under import licence dated 14/02/1979, the appellant had informed the customs authorities that the said machinery had been transferred to the Company under agreement dated 31/07/1979. The office of the Deputy Chief Controller of Imports and Exports, Cochin, had no role in the matter of levy of customs duty on the imported machinery and, therefore, the conduct of the appellant in informing the Deputy Chief Controller of Imports and Exports about the agreement dated 31/07/1979, entered into by the appellant and the Company with regard to transfer of business can have no bearing on the action taken by the customs authorities for the contravention of the provisions of the Act. The decision of this Court in East India Commercial Co. Ltd., Calcutta, (AIR 1962 SC 1893) (supra) is not applicable because the action that has been taken by the customs authorities is not for breach of the conditions of the import licence but for the contravention of the provisions of the Act.;