1. The petitioners are a Private Limited Company which carry on business of manufacturing drums and barrels.
2. For the manufacturing process, the petitioners obtained in June 1962, two licences for importing steel sheets. Under the first licence, the petitioners were authorised to import 'milk steel item 180 black plain sheets drum quality for manufacturing drums and containers' subject to the terms and conditions detailed in annexure thereto. The total C.I.F. value of the licence was Rs. 40,00,000. The second licence was for 'Steel Drum for Lubricating Oil Packing' of the total C.I.F. value of Rs. 50,30,000/-. The petitioners placed orders for import of steel with a firm of manufacturers in the United States of America, and the goods under the two licences reached the Bombay Port in 12 separate consignments. On arrival of the consignments, the petitioners filed Bills of Entry for consumption of the goods but the Chief Customs Appraiser at Bombay did not allow clearance of the goods on the following grounds :
(a) That under the Import Licence the appellants were entitled to import only prime quality sheets and no other sheets;
(b) that the quality of the sheets imported by the appellants appeared to be industrial scrap (sheet cuttings);
(c) that the sizes of the Steel Sheets appeared to be odd and not regular; and
(d) that the value of the invoices was not according to the prevailing prices for steel sheets in prime quality.
3. To avoid liability for heavy demurrage, the petitioner Company applied for and obtained an order for clearance of the goods lying in the Dock. A show cause notice was issued by the collector of Customs requiring the petitioners to show cause why the sheets imported be not forfeited. The petitioners gave a detailed reply but the Collector rejected the representation and came to the conclusion that the licence issued in the case was for 'Prime Quality' sheets and the term 'Prime Quality' meant that the sheets were of standard sizes and lengths, with uniform dimensions and without surface defects. The Collector found that certain quantity of imported sheets were defective and of varying sizes and dimensions and, therefore, the importers have no valid licence to import such sheets. The Collector, accordingly, passed an order imposing penalties for different amounts in respect of each of the consignments. The petitioners carried appeals to the Central Board of Excise and Customs and the Board came to the conclusion that only those sheets could be imported against the licences which fulfilled two conditions : (1) the sheets were suitable for manufacturing drums and (2) they were of 'prime quality' material. The Board held that the sheets imported were not of 'prime quality' but they were also unsuitable for the manufacture of drums, specially those which were of 11, 12 and 13 gauges. The petitioners preferred revision applications before the Government of India to challenge the correctness of the order passed by the Central Board and the Government came to the conclusion by its order dated June 13, 1966 that the condition of 'prime quality' could not be applied to the sheets imported under the licence as the said condition was imposed only on December 6, 1962 by the public notice issued by Iron and Steel Controller and the public notice has no retrospective operation. The Government further observed that one of the two licences, i.e. licence dated June 13, 1962 covering the consignments was issued specifically for 18 gauge sheets and the petitioners have imported sheets of different sizes including 18 gauge against that licence and, therefore, the import had to be treated as unauthorised. The Government, accordingly, allowed the revision application in respect of seven consignments and reduced the fine in respect of six consignments covered by licence dated June 13, 1962.
4. The petitioners carried six appeals in respect of six consignments and the Supreme Court allowed the appeals by order dated January 6, 1971 and remitted the matter back to the Customs authorities. The judgment of the Supreme Court in the case of M/s. Bharat Barrel and Drum . v. The Collector of Customs, Bombay and another is reported in : AIR1971SC704 . The Supreme Court noticed that under the licence, the sheets were to be of 18 gauge quality and whether the sheets imported were not according to the conditions of licence or otherwise was not investigated by the Collector or the Central Board of Revenue and Customs. The Supreme Court further held that the three authorities did not deal with different consignments separately and did not consider whether on the ground that some sheets were not of the permitted gauge under the licence, the import may be regarded as unauthorised. The Supreme Court, accordingly, set aside the orders passed by the Central Government and remitted the proceedings back to the Government to reconsider the revision applications on merits. The Supreme Court granted liberty to the petitioners to lead additional evidence to prove that the goods or substantial part of the goods imported under various consignments were subject to 'permissible tolerance' according to the terms of the licence or for any other reason. The Supreme Court made it clear that the enquiry would be restricted to the question whether the consignments in respect of which fine has been imposed did or did not comply with the condition in the licence of the specification 'subject to the permissible tolerance' relating to 18 gauge.
5. In accordance with the order passed by the Supreme Court, the Government took up for consideration the six revision applications and by an order dated October 13, 1971, the proceedings were remitted back to the Collector of Customs for fresh decision in accordance with the directions given by the Supreme Court. On remand, the Collector of Customs issued a fresh notice to the petitioners in December 1974 but the fresh show cause notices were not restricted only to the order of confiscation under Section 111 of the Customs Act but were also in regard to the proposed imposition of penalty under Section 112 of the Customs Act. The petitioners did not file detailed statement before the Collector and ultimately on November 10, 1975, the Collector passed an order imposing penalty under Section 112 of the Customs Act for an amount of Rs. 2,91.500 in respect of six consignments. The petitioners carried appeals against the said order before the Central Board of Revenue and Customs and the appeals were allowed and the proceedings were remitted back to the Collector on the ground that the petitioners were denied opportunity of being heard. On remand, the Collector issued fresh show cause notice on November 17, 1978 and the petitioners filed detailed reply on October 24, 1978. The petitioners sought inspection of certain documents and demanded information on certain aspects of the matter. There is some dispute as to whether the petitioners were furnished with the information or not, but it is not necessary to investigate that aspect in the present petition. Ultimately, the hearing was fixed before the Collector and one Banwarilal Saraf appeared on behalf of the petitioners at the hearing. The Collector by the impugned order dated April 30, 1979, imposed personal penalty of Rs. 1,16,000 in respect of six consignments on the petitioners. The Collector came to the conclusion that all the consignments involved in the proceedings could not have satisfied the description of 18 gauges as specified in the import licence, and however, in the absence of complete examination, it is also doubtful whether the entire consignment would have fallen short of this requirement. The Collector felt that if part of the consignment has been rendered liable to confiscation, the petitioners would be liable to penal action under Section 112 of the Customs Act. The Collector took into consideration the fact that the goods though liable for confiscation under Section 111(d) of the Customs Act, the same being not available, the only order which could be passed is to impose penalty. The order of the Collector is under challenge.
6. The learned counsel appearing on behalf of the petitioners submitted that the impugned order passed by the Collector is entirely unsustainable on the findings recorded by the Collector himself. There is considerable merit in the submission of the learned counsel. The Collector observed in the impugned order that the proceedings suffer from a lot of difficulties as the goods were no longer available and many of the documents in respect of the import are in mutilated condition making it difficult to decipher the record. The Collector was conscious that the sole question for determination as directed by the Supreme Court was about the gauge of the goods imported by the petitioners. The Collector noticed that on import, the Customs Appraiser has examined the goods and recorded a finding that in all the cases, the examination report is not clear as to whether actual gauge found can be considered as 18 gauge after allowing for permissible tolerance. In view of this specific finding recorded by the Collector, it is impossible to hold that the consignment imported by the petitioners did not conform the description and the goods were liable to confiscation. The Collector tried to overcome this difficulty by observing that it appears from the record of examination that the examining officers had not found that the entire consignment was of 18 gauges, though the record suggests that some were in fact of 18 gauges. The Collector felt that in this state of affairs, it would be better to take a lenient view of the matter and imposed personal penalty. In my judgment, the order of the Collector cannot be sustained. The Supreme Court while remanding the matter had given specific direction that the authority should ascertain whether the goods in respect of each of the consignments did or did not comply with the conditions in the licence of the specification 'subject to permissible tolerance' relating to 18 gauge. The Collector undoubtedly found difficulty in recording conclusion in respect of each of the consignment because of the passage of time and non-availability of the record, but it is not permissible to by-pass the directions of the Supreme Court and pass an adverse order against the petitioners because of paucity of evidence. In case, the Collector felt that the record was not sufficient, then the benefit of doubt must go to the assessee and the petitioners cannot be foisted with the liability for no fault of theirs.
7. Shri Deodhar, learned counsel appearing on behalf of the Department, submitted that Banwarilal Saraf who appeared before the Collector accepted that in four cases, the imported goods were other than 18 gauge and in view of this statement, the order of the Collector need not be disturbed. It is impossible to accede to this submission. Firstly, it is not known whether Banwarilal Saraf had any personal knowledge about the goods imported in the year 1962. Secondly, the statement made by Banwarilal Saraf is so vague that it cannot impose any liability on the petitioners. In my judgment, in view of the specific direction of the Supreme Court, the Collector was bound to consider each of the consignments independently and was required to record a clear-cut finding that the goods imported did not conform to 18 gauges subject to the permissible tolerance and, therefore, the conditions of licence were not followed. As the Collector could not record such a finding, on the available record, the imposition of penalty is entirely misconceived and the impugned order is required to be quashed. As the petitioners have paid the amount of Rs. 2,91,500 to the Department in accordance with the order dated November 10,1975 passed by the Collector of Customs, it is necessary for the Department to return that amount to the petitioners within a period of four weeks from today.
8. Accordingly, the rule is made absolute and the impugned order dated April 30, 1979 passed by the Collector of Customs, Bombay, the copy of which is annexed as Ex. 'P' to the petition, is set aside and the proceedings commenced against the petitioners in respect of six consignments imported under the Import Licence dated June 13, 1962 are quashed. The respondents shall return the penalty amount of Rs. 2,91.500, if already paid by the petitioners, within a period of four weeks from today. In the circumstances of the case, there will be no order as to costs.