2. In appeal No. 2095/83, Collector of Central Excise, Jaipur by his order dated 16-5-1983, demanded differential Customs duty amounting to Rs. 5,94,075.90 and imposed personal penalty of Rs. 1,00,000/-, under Section 112 of the Customs Act, 1962 (hereinafter called the Act).
The appellants, M/s. Taito Watch Manufacturing Industries (hereinafter called M/s. Taito) are registered as Small Scale Industrial Unit with Director of Industries, Rajasthan for the manufacture of wrist watches as per the phased production programme approved by the Development Commissioner Small Scale Industries, New Delhi. The appellants were required to manufacture 20,000, 30,000, 40,000, 50,000, 50,000 50,000 and 50,000 watches in the first, 2nd, 3rd, 4th, 5th, 6th and 7th year of progressive production programme and for the purpose were permitted to import components in CKD condition without foreign brand names. The appellants were also permitted to import 10,000 pieces each of cases and dials without foreign brand names, being 50% of the number of watches to be manufactured in the first year of their manufacturing programme. They were permitted only to import permissible items of components in CKD condition as provided for in the Import Trade Control Policy in operation, as per Development Commissioner, New Delhi's letter No. 13(38) 79/MMI dated 13-2-1980. The appellants had also obtained an Excise licence for manufacture of wrist watches. The appellants imported by post through 15 parcels which were claimed to be components of watch parts as per the details set out in Annexure-E, beginning the period September, 79 to September, 1981. Relevant Import Licence Numbers and dates are set out in Annexure-B of the Order-in-Original. The parcels were opened by the Customs and examined.
The appellants claimed concessional rate of duty under Notification No.240-Cus., dated 30-12-1978 at the time of clearance and this was accepted by the Customs authorities and concession granted. Later the Revenue authorities received information that the appellants had clandestinely imported watch movement and banned items instead of wrist watch parts and components in collusion with their foreign associates from Hong Kong. The authorities, therefore, investigated into the matter and found that the appellants had committed the breach of the licence and conditions allowing such imports, under the Notification No. 240-Cus., aforesaid.
A show cause notice dated 29-3-1981 was therefore, served on the appellants to show cause and explain to the Collector of Central Excise, Jaipur as to why differential duty as set out above as per details shown in Annexure-A and B of the Order-in-Original be not recovered from them under Section 28 of the Customs Act, 1962 (hereinafter called the Act) for having fraudulently availed of the concessional rate of Customs duty under aforesaid notification and why penal action should not be taken against them under Section 112 of the Act for unauthorisedly importing watch movements and watch parts valued at Rs. 10,08,555.00 by mis-declaring the contents of the parcels addressed to them in collusion with their foreign Associates, in violation of the Clause 3(1) of Import (Control) Order, 1955 read with Section 11 of the Customs Act, 1962.
The appellants by their reply dated 24-7-1982 denied the allegations set out in the show cause notice. They submitted that all the parcels were physically examined and reports show that the goods imported by them were watch parts i.e. movements in CKD condition. The quantity of goods in each parcel was found and described in sets. Had movements been imported in those parcels, the quantity must have been shown in pieces. The examination reports specifically mentioned that the goods were found as per invoice. The goods were cleared in accordance with prescribed rules. They also denied having not adhered to the production programme or having contravened any provision of the Import (Control) Order. The show cause notice was submitted to be barred by limitation and so was demand of differential duty.
After following the usual procedure, the Collector of Central Excise, Jaipur passed orders demanding differential duty and imposing penalty as set out above.
3. In the other appeal (No. 2096/1983-B), the appellants M/s. Rajasthan Watch Manufacturers, Jaipur (hereinafter called M/s. Rajasthan) are also registered Small Scale Industrial Unit with the Directorate of Industries, Jaipur for manufacture of wrist watches as per phased production programme approved by the Development Commissioner Small Scale Industries, New Delhi. This appellants Unit was required to manufacture number of watches as set out in Development Commissioner's letter dated 8-5-1975. They had also obtained a Central Excise Licence for the manufacture of wrist watches. They imported between July, 1979 to June, 1980, 10 parcels containing components of watches as set out in Annexure-A to the Order of the Collector. The description of Import Licences in appellants favour numbering 10 are set out in Annexure-B to the said order. The appellants at the time of import claimed concessional rate of duty under Notification No. 240-Cus., dated 30-12-1978, which was accepted and clearance made on that basis. The Revenue authorities on examination of Appendix-18 register, maintained by the appellants found the same suspicious as part of it had been obliterated. The Revenue authorities on scrutiny of the appellants, papers came to the conclusion that watch parts and components imported by the appellants at concessional rate of duty were far in excess of actual number of wrist watches manufactured which rendered the exemption inadmissible to the appellants because the components imported were in fact not used for manufacture of wrist watches in accordance with the approved production programme. It also appears that the appellants had imported watch movements, which were banned item and such import was not permissible under the condition of the approved programme. They appeared to have imported in violation of the provision of Import (Control) Order, 1955.
A show cause notice dated Its-3-1982 was issued to the appellants calling upon them to show cause and explain as to why differential duty amounting to Rs. 2,74,997.85 and Rs. 1,70,589.51 be not recovered from them and penalty imposed. The appellants filed reply dated 24-7-1982 denying the allegations and took up pleas similar to those taken up by M/s. Taito.
After following the usual procedure, the Collector of Central Excise, Jaipur passed orders demanding differential duty and imposed penalty as set out above. Aggrieved with the orders the appellants have filed the present appeals to the Tribunal.
4. At the hearing of the appeals, Sh. Harbans Singh, learned Advocate for the appellants argued that the goods imported by the appellants were cleared by the Customs only after physical examination, at the time of clearance, no objection was raised and therefore there cannot be any charge of mis-declaration. He further added that finality was attached to clearance made under Section 47 of the Customs Act, 1962, and the same could not be disturbed in the absence of clear evidence of suppression or fraud on the part of the appellants. He further submitted that demand of differential Customs duty raised against the appellants was time-barred under Section 28 of the Customs Act, 1962.
He further submitted that the two appeals were on all fours with M/s.
Vikash Watch Manufacturing Industries, Jaipur v. Collector of Central Excise, Jaipur Order No. 445/1984-B in Appeal No. 2026/83-B decided by this very Bench and therefore the demand of differential duty and penalty should be set aside.
5. On behalf of the respondent Shri V. Luxmikumaran, learned S.D.R.attempted to argue that limitation for demand of differential duty would commence running only after appellants satisfied the Customs authorities of fulfilment of conditions stipulated under Notification No. 240-Cus., dated 30-12-1978.
When his attention was drawn to the fact that in this case no provisional assessment had been done and in absence of the same and proof of suppression or mis-statement or fraud, the decision of the Tribunal in M/s. Vikas Watch Case on shorter time-limit of six months under Section 28 of the Act would be applicable, he had no comments to make. He also attempted to argue that it was a case of review by Collector of the assessment under Section 13D of the Customs Act, 1962 and time for the same would begin to run only after appellants satisfied the authorities about the fulfilment of conditions under the Notification. However, when his attention was drawn to the orders of the Collector negativing such plea, he threw off his hands and stated that he had no comments to make. He however generally defended the orders passed by the lower authorities.
6. Taking up first the charge of mis-declaration against the appellants M/s. Taito, we have gone through 19 invoices of subject goods imported by this appellant. Invoice Hongkong dated November 6, 1979 describes 800 sets as Lever Watch movements in complete knocked down condition.
Invoices dated December 28, 1979, Jan. 24, 1980, February 14, 1980, February 25, 1980, February 27, 1980, February 25, 1980, March 24, 1980, April 22, 1980, April 24, 1980, April 30, 1980, May 2, 1980, June 11, 1980 (three) August 7, 1980 and September 12 & 16, 1980 describe the goods as components of watch movements or components of watch parts. Of the above noted invoices, Invoice January 24, 1980, February 14, 1980, May 2, 1980 referred to 'Dials and hands also'. Only one Invoice No. SW/0617/80 dated Hongkong Septmber 16, 1980 refers to 1,000 watch movements (movements Nos. 69 & 96). According to the Memo, of appeal, the parcel No. of this consignment is 20106/9/80. Examination report at page-83 of the paper book shows No. of parcel to be 20106/9/80. According to photostat copy of the Examination Report, the goods were Watch Movements-enclosed in a circle and in another circle alongwith the words CKD are written and encircled. The appellants have claimed that according to Inspection Report these were watch movements in CKD. The correctness of the Inspection Reports has not been challenged by the Department.
Now the description of the goods in the invoices has been set out above. From the Examination reports it does not appear that goods imported did not tally with the invoices or that they were complete watch movements. Had it been so the Customs authorities would naturally have taken objection and not allowed the clearances.
In para 19 of the order, in the case of Appellants, M/s. Taito, the learned Collector admits that the description of the goods in the relevant invoices was watch parts/components. He adds that the examination reports show that what was actually imported was watch movements. He further says that the examination reports in each individual assessment file give ample testimony in as much as these reports do not indicate that the watch movements were in CKD/SKD condition. Had it been so, the examination reports would have said so and the party would have made entries of this fact in their appendix 18 registers.
7. We have not been able to appreciate the reasoning and findings of the learned Collector. If the description of the goods in the invoices did not tally with the goods on physical verification by the' Customs authorities, one would expect the Customs authorities to make a suitable note of the same in the examination reports and not allow the clearances of the goods. We have already pointed out above, that there is no allegation of collusion between the appellants and the officers of the Customs or even any allegation of negligence on their part. The appellants have filed photostat copies of the examination reports running into 15 pages as Annexure 'K' to the Paper Book (page 72 to 85 including page 76A).
By way of abundant precaution, we have examined these examination reports also. At page 72 bearing No. 91910/4/70 watch movements 800 sets are described as CKD, at page 73 bearing No. 102076/79 (rest is not clear) watch movements are described to be in CKD, page 74 does not refer to movements, at page 75 bearing No. 11796/1000 components are also movements against both the items in circle CKD is mentioned, in the note 2000 components is followed by the word movements in bracket with recommendation for release. At page 76, there is no reference to movements but only to watch parts and components. At page 76A against Number 13235 to 13237/4/ 80, there are two entries 1000 movements plus other watch parts against TP No. 13235 & 13236, against TP 13237/4/80, the report is watch movements 2000 sets the words CKD are written. It appears that words watch movements 2000 sets CKD are the total of 1000 and 1000 movements referred to earlier. At page 77, the intial CKD follow the words watch movements. At page 78, the contents are watch parts movements CKD. At page 79 against TP 14325/5/80 the report is 500 wttch components CKD followed by the words movements. At page 81 for TP Numbers 14630 to 14633 the relevant description is 500 watch movements CKD (there are descriptions like this against other numbers also). Page 82 does not refer to watch movements. Page 83 about Parcel No.20106/9/80 has already been referred to above as being in CKD. At page 84 about TP No. 7932/10/80, the report is examined the parcel and found one watch movement sample. c.i.f. value of this consignment is calculated at Rs. 96/- and basic duty at Rs. 48/- and cvd at Rs. 11.50.
This report does not relate to the present case. Page 85 related to parcel Numbers 19941 to 19944 does not relate to watch movements.
From the foregoing, it would be seen that the learned Collector's statement that the movements were not described to be in CKD or SKD is not borne out by the record. We might again emphasize that the copies before us are photostat copies of the report but their correctness has not been challenged by the Department. In the above state of evidence the charge of mis-declaration against the appellants M/s. Taito Watch must fail.
8. Taking up the next, the case of M/s. Rajasthan, Invoices dated July 30, 1979, Jan. 24, 1980, Feb. 14, 1980, April 16, 1980, March 24, 1980, April 22, 1980 (two), April 30, 1980, May 3, 1980, May 31, 1980, all described the goods as components of watch parts. Invoice dated July 30, 1979 described the goods components of watch movements and gives full details of the parts. Invoice dated May 3, 1980 also refers to 200 pieces of watch dials for calibre 166. It would be seen that in one of the invoices, the goods are described as complete watch movements as such. The Examination Reports also say that the goods were either components of watch movements or watch parts in CKD condition. The description of components of movements or watch parts in CKD would clearly indicate that the goods imported were not assembled watch movements. The goods were cleared after physical verifica-tioa and at that time no objection was raised that they did not tally with the invoices or that they did not conform to Import Licences. In view of these reports read alongwith the invoices and in absence of any allegation that there was collusion between the appellants and the Customs Officers, it would have to be held that the appellants had not imported watch movements. Even the learned Collector in para 18 of the order has observed that Watch movements may not have been a banned item under the Import Policy for the relevant year but added that it cantot be denied by the pary that watch movements were not covered by the Import Licence produced.
We have also gone through the examination reports in the case of M/s.
Rajasthan. In Annexure 'K' to the Memo, of appeal at pages 67 to 76 in 10 pages. At page 67 against JFP 24306/7/79, the report is 1000 sets of components of watch movements. At page 68, there is reference to movements at 6 places and against each of them the initials CKD are written. At page 69, there is a reference to movements at 4 places and at each place the words components and CKD are written. At page 70 for 5 T.P. Numbers 13241 to 13244 watch movements are described to be components in CKD as per invoices. At page 71, there is reference to movements at 5 places and at each place the words SKD are written. In the end, there is a note that contents are watch movements as per invoice. At page 72 with respect to 5 TP numbers, report is watch parts movements as per invoice (invoice description of the goods is components of watch parts). At page 73, the result of the examination of two parcels in the note is contents watch movements in SKD. At page 74, about Parcel No. 14515/5/80, the report is components movements in CKD. At page 75, against 4 TP numbers the description is components movements CKD. At page 76, description is movements in CKD. This would show that even about this appellant, the learned Collectors' reasoning in para 14 of the order that the examination reports do not show that the watch movements were in CKD/SKD condition is not borne out by the record. We might again state that this finding is on the basis of photostat copies filed by the appellants, whose correctness has not been challenged by the other party. About M/s. Rajasthan, it may also be said that the liability cannot be fastened on them for having made some corrections in appendix 18 register.
9. The learned Collector in the two orders stated that concessional rate of duty under the Notification No. 240-Cus., dated 30-12-1978 was dependent on the phased programme and relying on Section 3(66) of the General Clauses Act observed that the 'year' would mean British calendar year and that the appellants' production programme did not conform to this. No papers have been filed in these cases. From a perusal of the orders passed in Mis. Vikash Watch Manufacturing Company vis-a-vis that of these two appellants, it was a case relating to the same period and same very notification, and we found that the concerned authorities had clarified that phase is the completion of that much quantity approved for the particular phase and not necessarily the 12 months of the calendar/financial year. From the orders of the learned Collector, it is not possible to make out what exactly was the phase in the case of the appellants and in what way the appellants did not fulfil the same in the light of this clarification.
10. About demand of differential duty axcept as hereinafter stated it appears that in respect of goods order permitting clearance for home consumption was made under Section 47 of the Customs Act, 1962. It also appears that except as hereinafter stated that no provisional assessment of duty under Section 18 of the Act was made. In Vikash Watch Manufacturing Company's case, the Bench while considering the concessional rate of duty under Notification No. 240-Cus., dated 30-12-1978 inter alia relying on Delhi High Court decision in Jain Shudh Vanaspati Ltd. and Anr. v. Union of India and Ors. - 1982 E.L.T.43 (Delhi) held that in such cases the Customs authorities themselves having not made provisional assessment under Section 18 of the Act cannot urge that limitation for differential duty should run only after the Importer has satisfied the Customs authorities that they have fulfilled the conditions of the Notification. It was further held that Tribunal could not invent the concept of deemed provisional assessment and that in such cases limitation applicable would be 6 months from the date of payment of duty.
11. In M/s. Taito's case the learned Collector in paras 27 and 33 of the order has observed "Import of watch parts (dials and cases in excess was not in order). Dials were imported by them in excess of the quantity covered by the licences which in any case did not qualify for the concessional rate of Customs duty under Notification No. 240-Cus., dated 30-12-1978. In paras 23 & 29 in M/s. Rajasthan's order also are observations to that effect. A perusal of the licences shows that most of the licences were value based though some of the licences were both as per value and quantity. Both from the order and crypitic paras, as referred to above, it is not possible to make out as to on what basis the learned Collector concluded that the 'dials' were in excess of the quantity allowed. In absence of clear reasoning, it is not possible to uphold this part of the order. Besides, as already pointed out above, demand of differential duty from the appellants where there was no provisional assessment could be made only within time stipulated under Section 28 of the Act and in the instant cases the time-limit applicable could be 6 months from the date of payment of duty. Denial of concession under Notification No. 240-Cus., dated 30-12-1978 except as stated above and hereinafter would have to be set aside.
12. There is however, an important fact requiring mention which was not urged by the parties during the arguments nor is it mentioned in the order of the learned Collector. Annexure 'K' which is examination report bearing No. JFP/10/80/79 in respect of Parcel No. 24306/7/79 has an endorsement "Reqd. bond executed may be accepted". Entered in Bond register. There is further endorsement "bond detached to place in the appropriate file". It is not clear for what purpose the bond was obtained. It is made clear that relief granted by this order in respect of differential duty is only in respect of those clearances which are not subject-matter of provisional assessment of duty under Section 18 of the Act. If the endorsement mentioned above are in respect of any other clearances which are the subject matter of the present appeals and provisional assessments were made, no relief in respect of differential duty demanded would be taken to have been granted unless the appellants are able to satisfy the authorities of fulfilment of conditions of Notification No. 240-Cus., dated 30-12-1978.
13. As a result of aforesaid discussion, penalty imposed against the appellants is set aside, demand of differential duty for those consignments in which no provisional assessment was made but clearances were allowed under Section 47 of the Customs Act, 1962 are set aside.
It is, however, made clear that if in any case provisional assessment was made under Section 18 of the Customs Act, 1962, the demand of differential duty would be covered by Notification No. 240-Cus., dated 30-12-1978 and on fulfilment of conditions set out therein. The appeals are disposed of accordingly.