IMPORTANT POINT
Question of confiscation of prohibited goods under Customs Act has to be considered having regard to provisions of definition of “prohibited goods” “entry of goods” together with provisions of Foreign Exchange Regulation Act.

Headnote:Customs Act - Sections 2(33), 50 and 113 - Prohibited goods - Confiscation - Shipping bills were submitted under Duty Entitlement Pass Book Scheme - Bills were filed for post export benefit under the scheme claiming credit rate @ 15% - Goods were declared as “Dyed Printed Night Wears” - Show cause that cheap garments were being exported by grossly mis-declaring the description and heavily over invoicing the value under scheme - Order of confiscation of goods - Tribunal set aside the order holding that goods were not prohibited ones and thus were not liable to confiscation and that over valuation was not established as no expert evidence was led - Appeal - Definition of prohibited goods was a broad one - Question has to be considered having regard to definition of the “prohibited goods”, “entry of goods” together with provisions of Foreign Exchange Regulation Act - Tribunal should have considered the matter whether respondents violated provisions of Foreign Exchange Regulation - Matter needed to be remitted to Tribunal.
       Held : The definition of prohibited goods is a broad one. The said provision not only brings within its sweep an import or export of goods which is subject to any prohibition under the said Act; but also any other law for the time being in force.(Para 14)
       However, it appears, the same Bench considered the matter at some length in Om Prakash Bhatia (supra) and opined that the exporters were obliged to declare the value of the goods. In a detailed judgment, this Court not only took into consideration the provisions of the Customs Act, but also the provisions of Section 15 of the Foreign Exchange Regulation Act and the rules framed thereunder, as also the notifications issued by the Central Government from time to time. The Court opined that for determining the export value of the goods, it is necessary to refer to the meaning of the word "value" as defined in Section 2(41) of the Act, and the same must be determined in accordance with the provision of sub-section (1) of Section 14.(Para 18)
       It may be true that the said decision related to a matter concerning a drawback scheme, but a decision of this Court interpreting a different section by itself cannot, in our opinion, be brushed aside, only on the ground that the decision of the same bench in Prayag Exporters (supra) is applicable being related to DEPB Scheme. The question, in our opinion, has to be considered having regard to the provisions of the definition of the prohibited goods, entry of goods together with the provisions of the Foreign Exchange Regulation Act.(Para 21)
       In view of the order proposed to be passed by us, we do not intend to enter into the factual controversy of this matter any further. The Tribunal, in our opinion, should have considered the matter from another angle, namely, as to whether Respondents have violated the provisions of the Foreign Exchange Regulation or not. As regards, the finding arrived at by the Tribunal that Respondents had not over-valued the goods, inter alia, on the ground that no expert opinion regarding the value of the export goods had been adduced, the Tribunal did not advert to the materials which had been brought on records during investigation, whereupon the Commissioner relied upon. (Para 25)
       We are, therefore, of the opinion that the impugned judgment cannot be sustained, which is set aside accordingly. The appeal is allowed. The matter is remitted to the Tribunal for consideration thereof afresh.(Para 26)

JUDGMENT

S.B. Sinha, J. - M/s Ganesh Yarntex Export Private Limited filed six shipping bills under the Duty Entitlement Pass Book Scheme (DEPB Scheme) bearing Nos. 136 to 141 dated 06.01.2001. M/s Aadee Exports & Imports, Secunderabad filed five shipping bills bearing Nos. 142 to 147 dated 06.01.200. They declared their address as c/o ABC, II Floor, YMCA Complex, Sardar Patel Road, Secunderabad. All the said shipping bills were filed for post export benefit under the DEPB Scheme claiming credit rate @ 15% vide Sl. No.20(iii) of the DEPB Credit List, Product Group No.89 read with EXIM Policy. The goods were declared as "Dyed Printed Night Wears (Maxis)" in various sizes/colours. The value of the goods was claimed to be Rs.41 lakhs @ US$ 6.40 per piece. The total FOB value of the consignment was declared to be US$ 5,84,064/- (Rs.2.72 crores) approximately. The consignment was made in the name of M/s Reemj Al Maha Trading Est., Dubai, UAE.

2. It was allegedly found that cheap garments were being exported by grossly mis-declaring the description and heavily over-invoicing the value under the said Scheme by the aforementioned two firms. The goods were intercepted at Chennai. Upon examination, it was found that all the goods were ladies nightwear shaped garments and were found to be small, uneven and unshaped which could not be worn by any person of any age including children. The goods were purchased from Bombay and sent to Hyderabad to be loaded in a vessel at Chennai for export to Dubai. They were seized.

3. A show cause notice was issued on 18.07.2001 directing Respondents to show as to why :

"i)the goods sought to be exported in the name of M/s Ganesh Yarntex Exports (P) Ltd. and M/s Aadee Exports (P) Limited and M/s Aadee Exports & Imports vide shipping bill nos. 136 to 146 all dated 6.1.2001 through ICD Hyderbad with a declared FOB value of Rs.2.72 crores should not be denied to be exported under DEPB Scheme and the DEPB credit totally amounting to Rs.41,06,700/- should not be denied;

ii)The declared value of US$ 6.40 per piece in the above said shipping bills should not be rejected;

iii)The goods covered under the said Shipping Bills seized at Chennai port on 24.1.2001 should not be confiscated under section 113(d), 113(h) & 113(i) of the Customs Act, 1962;

iv)The goods seized vide panchnama dt. 24.2.2001 at Plot No. 18, Paigah Colony, S.P. Road, Secunderabad should not be confiscated under Section 113(d) of the Customs Act ibid; and

v)A penalty should not be imposed on each of them under section 114(i) of the Customs Act, 1962."

4. The Commissioner of Customs and Central Excise, in its order dated 31.03.2004 opined :

"1.The impugned goods sought to be exported vide S.B. nos.136 to 146 all dated 6.1.2001 with a declared value of Rs.2.7 crores is denied to be exported under DEPB scheme and DEPB credit amounting to Rs.41,06,700/- is denied as the declared value of US $ 6.4 per piece is also rejected.

2.The impugned goods as mentioned above are confiscated under section 113(d), (h) & (i) of the Customs Act, 1962 and in terms of Section 125 ibid they are ordered to be released on payment of Redemption fine of Rs.5,00,000/- (Five lakhs only). The option to redeem the goods should be exercised within one month from the date of receipt of this order.

3.The goods seized vide panchnama dt. 24.2.2001 at Plot No.18, Paigah Colony, Secunderabad are confiscated under Section 113(d) of the Customs Act, 1962 and in terms of Section 125 ibid I order release of the same on payment of redemption fine of Rs. 5,00,000/- (Rs. Five lakhs only). The option to redeem the goods should be exercised within one month from the date of receipt of this order.

4.In terms of Section 114(i) of the Customs Act, 1962, I impose penalties on Noticees as follows :

a)Mr. Suresh Jhunjhunwala Rs. 40,00,000/- (Rs. Forty lakhs only);

b)Mr. Deepak Jhunjhunwala Rs. 30,00,000/- (Rs.Thirty lakhs only);

c)Mr. Sachin Jhunjhunwala Rs. 25,00,000/- (Rs. Twenty five lakh

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Judicial Analysis

SupremeToday

2006 Supreme(SC) 965

IMPORTANT POINTQuestion of confiscation of prohibited goods under Customs Act has to be considered having regard to provisions of definition of “prohibited goods” “entry of goods” together with provisions of Foreign Exchange Regulation Act.

Cases Referred (6)

Judicial Analysis

IMPORTANT POINT
Question of confiscation of prohibited goods under Customs Act has to be considered having regard to provisions of definition of “prohibited goods” “entry of goods” together with provisions of Foreign Exchange Regulation Act.