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Hindustan Fashions Ltd. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Reported in(1985)(19)ELT240Tri(Mum.)bai
AppellantHindustan Fashions Ltd.
RespondentCollector of Customs
Excerpt:
.....section 50(2) on account of incorrect supplies by the manufacturer, who delivered the fabrics as handloom fabrics. at best a penalty upto rs. 1,000/- could be imposed under section 117 for this violation, if the benefit of doubt is not given. there is no warrant for imposing any penalty under section 114 as no violation of section 113(d) was involved. the appellate collector also failed to explain how the export policy for export of garments of powerloom fabrics differs from that for garments of handloom fabrics. both are under ogl3; both are covered by quota allotment from aepc; replenishment licences for both are at the same rate for import of the same items; and cash compensatory support, as well as duty drawback, is the same for both types. the appellant, therefore, had nothing.....
Judgment:
1.This is an appeal under Section 129A (1) of the Customs Act, 1962 against the order No. S/49-30/1982 Exports dated 23-11-1982 passed by the Collector of Customs, Bombay.

2. The Appellant filed the shipping Bill No. 4564 for export of 17 cartons of cotton garments valued at Rs. 39,300/ f.o.b. from handloom fabric on 10-7-1981. On examination, the customs found that the goods of style No. 905 comparising 672 pieces of Blouses contained in 7 cartons valued at Rs. 16,800/- f.o.b were not made out of handloom fabric but were of powerloom fabric. The Assistant Collector held that this constituted a case of misdeclaration rendering the goods liable to confiscation under Section 113 of the Customs Act and liability for imposition of penalty under Section 114. He did not believe the exporters explanation that the misdeclaration was not inten-ional and was a result of incorrect information given by the suppliers of fabric and they had still a quota of 45,000 pieces of powerloom blouses and would not resort to misdeclaration for only 672 pieces, since they are regular exporters of garments. The exporter has not produced any evidence by way of tcorrespondence that the supplier sent the cloth wrongly. He could have stopped the delivery but preferred to misdeclare. Since the cloth passes through many hands before being converted, the plea is unsound as well. He, therefore, confiscated the goods with an option to pay a fine of Rs. 16,800/- in lieu of confiscation and because of personal involvement due to prior knowledge imposed a penalty of Rs. 16,800 on the party.

3. The Appellate Collector did not accept the plea of absence of mens rea since the export policy for garments of powerloom and handloom is different. Further, such misdeclaration gives a bad name to Indian exports in the long run. However, he reduced the penalty to Rs. 1,000/- but otherwise rejected the appeal.

4. Shri Dadlani who is the Joint Managing Director explained that the export of Readymade garments made of Handloom as well as Powerloom fabrics to USA was and is allowed under O.G.L3 against Quota Allotment by the Apparels Export Promotion Council by endorsement on the Shipping Bills. The condition is applicable to both qualities and there was no prohibition against export of such garments to USA under the Customs Act or the Export Control Order. Violation of Section 113(d) would occur only if prohibited goods are attempted to be exported with wilful intention. Since there was admittedly a balance of quota of 45,000 pieces, they could not have attempted to export a negligible quantity of only 672 pieces by misdeclaration. They have unwittingly violated Section 50(2) on account of incorrect supplies by the manufacturer, who delivered the fabrics as handloom fabrics. At best a penalty upto Rs. 1,000/- could be imposed under Section 117 for this violation, if the benefit of doubt is not given. There is no warrant for imposing any penalty under Section 114 as no violation of Section 113(d) was involved. The Appellate Collector also failed to explain how the export policy for export of garments of powerloom fabrics differs from that for garments of handloom fabrics. Both are under OGL3; both are covered by quota allotment from AEPC; Replenishment licences for both are at the same rate for import of the same items; and Cash Compensatory Support, as well as Duty Drawback, is the same for both types. The appellant, therefore, had nothing whatever to gain by giving an incorrect declaration. Shri Dadlani stated that he was the pioneer who canvassed sale of readymade garments from India in the stores in USA and who started this export business. He would not like his reputation to be sullied by resorting to misdeclaration or other malpractice. This discrepancy was only due to the sheer volume of business being done by the firm and he has been personally inspecting the fabrics supplied and has taken up the matter with the suppliers to prevent any recurrence.

5. Shri Krishan Kumar argued that it is not in dispute that a Drawback Shipping Bill was filed for export of "handloom" garments but they were detected to be of powerloom fabrics, and also that separate quotas are allotted for the two types of garments. While quota allotment and endorsement by the AEPC are prescribed, the quota is to be treated as a licence for purposes of the Export (Control) Order. Since description was wrong, there was a breach; and in the alternative, in term of Clause 3 of the Order, export is deemed to be prohibited the goods are not in conformity with the description; so confiscation was correct.

Section 113(d) was also violated as the Drawback Shipping Bill filed under Section 50(1) was different from the goods sought to be exported so the goods are liable to confiscation and the penalty under Section 114 was justified. The Learned Departmental Representative asserted that the penalty imposed and the fine in lieu of confiscation imposed for the contravention are not harsh.

6. It is a fact that garments of powerloom fabrics had been sought to be exported against a description of handloom garments. As argued by the department there has been contravention of the Export Control Order and of the Customs Act. The confiscation of the offending goods and levy of penalty under the provisions of the Customs Act are, therefore, technically in order. The question is whether there are any extenuating circumstances as urged by the appellant. The department has not controverted the contention that there was a balance of quota of 45,000 pieces of powerloom blouses against which the 672 pieces could have been exported and that even otherwise the appellant had absolutely nothing to gain by way of Replenishment Licence, Cash Compensation, Duty Drawback etc. It is true, however, that such misdeclarations, whatever their cause, bring indirect harm to the country's exports and violation of the law in this regard cannot be ignored or glossed over.

7. Keeping all the circumstances in view, we reduce the penalty to rupees five hundred (Rs. 500/-) and while upholding the confiscation, reduce the fine in lieu of confiscation to rupees five thousand only.

The impugned order is modified to this extent and the appeal is otherwise rejected.


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