AI Insights
The case involves CMR Chiho Industries India Pvt Ltd and CMR Chiho Recycling Technologies Pvt Ltd, who filed a petition against the Union of India concerning the detention and seizure of imported motor scrap under the Customs Act, 1962. The goods were initially allowed for import under a concessional duty rate, which was later contested by the Directorate of Revenue Intelligence (DRI), leading to their detention and seizure. The petitioners argued that the seizure was unjustified as the proper legal procedures were not followed and the goods were misclassified. The court examined the legality of the seizure and the authority of the DRI to act in this matter, ultimately finding in favor of the petitioners.
Appeal Details
Counselvise Citation
[2021] 140 COUNSELVISE.COM (IT) 802419 (HC-GUJARAT)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Others
Pronouncement Date
06-04-2021
Assessment Year
misc
Judgement Text
"C/SCA/10521/2020 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 10521 of 2020 FOR APPROVAL AND SIGNATURE: HONOURABLE MS. JUSTICE SONIA GOKANI and HONOURABLE MS. JUSTICE SANGEETA K. VISHEN ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? YES 2 To be referred to the Reporter or not ? YES 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? NO ========================================================== CMR CHIHO INDUSTRIES INDIA PVT LTD Versus UNION OF INDIA ========================================================== Appearance: MR DHAVAL SHAH(2354) for the Petitioner(s) No. 1,2 for the Respondent(s) No. 1,4 MR DEVANG VYAS(2794) for the Respondent(s) No. 2,3 ========================================================== CORAM: HONOURABLE MS. JUSTICE SONIA GOKANI And HONOURABLE MS. JUSTICE SANGEETA K. VISHEN Date : 06/04/2021 ORAL JUDGMENT (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1. This is a petition preferred by the companies in the matter relating to the Customs Act, 1962 ('the Act' for short) and the Customs Tariff Act Page 1 of 79 C/SCA/10521/2020 JUDGMENT seeking to quash and set aside the detention and seizure by way of a writ jurisdiction. 2. This Court (Coram: Mr.Vikram Nath and Mr. J.B.Pardiwala, CJ.,J.) at the time of issuance of notice passed the following order on 07.09.2020: “1. By this writ application under Article 226 of the Constitution of India, the writ applicants have prayed for the following reliefs; “(A) YOUR LORDSHIPS may be pleased to issue a writ of Certiorari or writ n the nature of certiorari quashing and setting aside the detention and seizure dated 29.07.2020 (AnnexureH Colly), dated 03.08.2020 (AnnexureL & M) & 11.08.2020 (AnnexureW Colly); (B) In addition to and in alternate to relief (A) above, Your Lordships may be pleased to direct the Respondents their servants and agent to release the goods provisionally, on such terms and conditions that this Hon’ble Court deems proper; (C ) During the pendency and final disposal of the present petition, Your Lordships may be pleased to stay the implementation of the Detention/ Seizure dated 29.07.2020 (AnnexureH Colly), 03.08.2020 (AnnexureL & M) & 11.08.2020 (AnnexureW Colly); (D) This Hon’ble Court may be pleased to release the goods under detention and Seizure pending hearing and final disposal of this petition on such condition as are deemed proper; (E) An exparte adinterim relief in terms of Para 8(C ) & 8(D) above may kindly be granted on such terms and conditions deemed fit by this Hon’ble Court. Page 2 of 79 C/SCA/10521/2020 JUDGMENT (F) Any other further relief as may be deemed fit in the facts and circumstances of the case may also pleased be granted.” 2. The writ applicants are Private Limited Companies and are engaged in the business of recycling/dismantling imported old unserviceable electric motors. In fact, the writ applicant No.1 is the main Company and the writ applicant No.2 is its sister concern. Prima facie, it appears from the materials on record that an extensive search was carried out by the officials of the DRI at the warehouse/factory premises of M/s. CMR Chiho Industries India Pvt. Ltd., situated at the Survey No.995 (Old Survey No.454/3), Village Balasa Taluka: Kadi, District: Mehsana on 28/29.07.2020. It came to the notice of the respondents that M/s. CMR Chiho Recycling Technologies Pvt. Ltd (the writ applicant No.2) also operates from the same premises and the main business of these companies of the same group is the segregation of copper, aluminum and iron/steel scrap from the imported motor scrap from different types of motors, i.e, large motors, medium motors, small motors etc. ] 3. To put in nutshell, the case of the Department against the writ applicants is that the goods, i.e, scraps in different forms seized from the premises were found to be imported without payment of appropriate customs duty by wrongfully availing the benefit of the notification. 4. The principal allegation levelled by the Department against the writ applicants is that M/s. CMR Chiho Recycling Technologies Pvt. Ltd. filed the Bills of Entry at the Thar Dry Port, ICD Customs, Sanand falling under the jurisdiction of the Commissioner of Customs, Ahmedabad by declaring the description of their product as “discarded and nonserviceable semibroken/broken motor” by mentioning CTH 7204 49 00 under the Other Ferrous Waste and scrap. 5. The rawmaterials and finished goods lying in the factory were seized under four different Seizure Memos dated 29 th July, 2020 and the seized goods were handed over to the Operation Manager under the Panchnama dated 29 th July, 2020. It appears that the respondent No.4 directed the writ applicants vide letter dated 03.08.2020 to pay the total differential duty of Rs.2,51,13,372/ Page 3 of 79 C/SCA/10521/2020 JUDGMENT and the interest as applicable on the ground that the benefit of the Notification No.50/17CUS dated 30th June, 2017 was not available in respect of the Copper Scrap Barely/Birch in which case the said duty is required to be paid at the rate of 5% and, therefore, the assessable value needs to be reassessed in view of the different prices of respective types of scrap. It also appears from the materials on record that the finished goods, I.e., after dismantling/segregated scrap of 78710.6 Kgs of the estimated value of Rs. 1,72,25,108/ of the ownership of M/s. CMR Chiho Recycling Technologies Pvt. Ltd stored in the premises of their sister concern, namely, M/s. CMR Chihor Industries Pvt. Ltd, was also seized on 29th July, 2020 under the Panchnama dated 29th July, 2020. 6. It further appears that the entire matter, at present, is under the investigation of the DRI. The Deputy Director, DRI, Zonal Unit has issued “No Objection” for the provisional release of the seized goods on 03.08.2020 and 11.08.2020 respectively. 7. The importer, i.e, the writ applicant No.1 applied for the provisional release of the seized goods vide their application dated 05.08.2020. Upon receipt of the application, the same was processed. The provisional release of the seized goods has been ordered on the following terms and conditions; “ (1) Goods seized under Seizure Memo No.03.08.2020 of M/s. CMR Chiho Recycling Technologies Pvt. Ltd, for quantity: 78710.6 Kgs valued at 17225108/ provisionally release on filling of Bond of full value of the goods i.e., 17225108/ with Bank Guarantee/ Cash Security Deposit of Rs.20,00,000/. (2) Goods seized under Seizure Memo No.03.08.2020 of M/s. CMR Chiho Industries Pvt. Ltd, for quantity 6884651 Kgs valued at 38,02,85,614/ provisionally release on filling of Bond of full value of the goods i.e, 38,02,85,614/ with Bank Guarantee/Cash Security Deposit of Rs.6,94,00,000/. (3) Goods seized under Seizure Memo No.11.08.2020 of M/s. CMR Chiho Industries Pvt. Ltd, for Bill of Entry No.8262901 dated 24.07.2020 of quantity 26140 Kgs valued at 23,59,891/ provisionally release on filling of Bond of full value of the goods i.e. 23,59,891/ with Bank Guarantee/Cash Security Deposit of Rs.4,31,000/ Page 4 of 79 C/SCA/10521/2020 JUDGMENT (4) Goods seized under Seizure Memo No.11.08.2020 of M/s. CMR Chiho Industries Pvt. Ltd., of quantity 604990 Kgs valued at 32256787.02 provisionally release on filling of Bond of full value of the goods i.e., 32256787.02 with Bank Guarantee/Cash Security Deposit of Rs.1,28,00,000/.” 8. It is not in dispute that the writ applicants have not got the goods released on furnishing the Bank Guarantee of the requisite amount, referred to above. 9. We have heard Mr. Deven Parikh, the learned senior counsel appearing with Mr. Dhaval Shah, the learned counsel for the writ applicants and Mr. Devang Vyas, the learned Addl. Solicitor General of India appearing for the respondents at length. 10. Mr. Parikh, the learned senior counsel has raised manifold contentions as regards the legality and validity of the seizure of the goods itself. The principal argument of Mr. Parikh is that wrong classification of the goods under a particular head can never be liable to confiscation and, therefore, the seizure itself is illegal. 11. On the other hand, this writ application has been vehemently opposed by Mr. Vyas. Mr. Vyas has raised a preliminary objection as regards the maintainability of this writ application on the ground of availability of alternative remedy in the form of statutory appeal to the writ applicants. Mr. Vyas would submit that the order of seizure of goods as well as the order of provisional release of the goods is appealable under the provisions of the Customs Act, 1962. 12. According to Mr. Parikh, the order of seizure is not appealable and the only remedy for his clients is to come before this Court invoking its writ jurisdiction under Article 226 of the Constitution of India. 13. Mr. Parikh would submit that, as on date, the business of the Company has come to a standstill. The seizure of the goods by the Department has virtually brought the entire Industrial Unit to a grinding halt. Almost 250 workers are without wages as there is no work with the Company because of the seizure of the goods. He Page 5 of 79 C/SCA/10521/2020 JUDGMENT would submit that if the Company is asked to furnish the Bank Guarantee to the tune of Rs.8.46 Crore, then the Company will have to raise the requisite balance in their Bank Account of such amount. He would submit that only thereafter the Bank would issue a Bank Guarantee. Mr. Parikh would submit that having regard to the present scenario, even otherwise, the company is facing acute financial crunches. 14. Mr. Parikh, the learned senior counsel submitted that the larger issues involved in this writ application including the issue whether any alternative remedy is available to the writ applicants under the provisions of the Customs Act or not may be looked into by this Court at a later stage. However, the fervent request made by Mr. Parikh, as on date, is to release the goods in question without insisting for furnishing of the Bank Guarantee of Rs.8.46 Crore as demanded by the Department. Mr. Parikh pointed out that the amount of Rs.8.46 Crore, referred to above, includes Rs.2.08 Crore approx. towards the differential duty. Mr. Parikh has provided the following chart for the convenience of this Court. S r N o . Co mp any Date of seizur e/lette r receiv ed Plac e of seizu re Goo ds value (FG) as decla red by Petiti oner Good s value (RM) decla red by Petiti oner Our requ est lette r to relea se goo ds prov ision ally Letter recei ved from Custo ms for Provi sional releas e Tota l BG aske d by the Rev enue (Lac s) (%) OF Ban k Gu ara nte e on the val ue of the goo ds. Bon d equa l to valu e of good s as decla red by the petiti oner (Lac s) Duty calcu latio n as per our calcu latio n (Lac s) Dut y calc ulati on as per Cus tom dept . on sing le item Pa ge N o. of th e pe titi on . 1 CC RT 03.08. 2020 Fact ory 1,72, 25,1 08.0 - 4.08 .20 27.08 .20 20.0 0 11. 61 172. 25 5.58 - 10 8- 11 1 2 CC IIP L 03.08. 2020 Fact ory 5,83, 62,1 31.2 9 32,1 9,23, 482. 80 4.08 .20 01.09 .20 694. 00 18. 25 3802 .85 123. 40 - 11 2- 11 5 Page 6 of 79 C/SCA/10521/2020 JUDGMENT 3 CC IIP L 11.08. 2020 ICD - 23,5 9,89 1.44 13.0 8.20 31.08 .20 4.31 18. 27 23.5 9 0.76 5 - 13 9- 14 1 4 CC IIP L 11.08. 2020 ICD - 3,22, 56,7 87.0 2 13.0 8.20 05.09 .20 128. 00 39. 68 322. 56 78.9 9 - 14 2- 14 5 5 CC RT 03.08. 20 - - - - - - - - - 9.72 10 6 6 CC IIP L 06.08. 20 - - - - - - - - - 200. 81 10 0 Total 846. 31 4321 .25 15. Mr.Vyas, the learned Addl. Solicitor General of India submitted that with a view to protect the interest of the Revenue, the writ applicants must be asked to furnish the Bank Guarantee as demanded if they want provisional release of the goods inquestion. Mr.Vyas pointed out that the goods seized are in the form of rawmaterials as well as finished goods. 16. Mr.Vyas has furnished four charts of four seizures as under: Bond Value Value of Goods seized Rs.38,02,85,614/- Bank Guarantee amount Entire amount of duty leviable on seized goods (Duty @2.5% + 10% Surcharge) Rs.1,04,57,854/- IGST @ 18% Rs.18,82,414/- Total Duty Rs.1,23,40,268/- Redemption Fine @ 10% of value of seized goods Rs.3,80,28,561/- Penalty @ 5% of the value of seized goods Rs.1,90,14,281/- Total Rs.6,93,83,110/- Bond Value Value of Goods seized Rs.23,59,891/- Bank Guarantee amount Entire amount of duty leviable on seized goods (Duty @2.5% + 10% Surcharge) Rs.64,897/- IGST @ 18% Rs.11,681/- Page 7 of 79 C/SCA/10521/2020 JUDGMENT Total Duty Rs.78578/- Redemption Fine @ 10% of value of seized goods Rs.2,35,989/- Penalty @ 5% of the value of seized goods Rs.1,17,995/- Total Rs.4,30,562/- Bond Value Value of Goods seized Rs.3,22,56,787/- Bank Guarantee amount Entire amount of duty leviable on seized goods (Duty @2.5% + 10% Surcharge) Rs.17,74,123/- IGST @ 18% Rs.61,25,564/- Total Duty Rs.78.99.687/- Redemption Fine @ 10% of value of seized goods Rs.32,25,679/- Penalty @ 5% of the value of seized goods Rs.16,12,839/- Total Rs.12,73,8,205/- i.e. Rs.128 Crore Bond Value Value of Goods seized Rs.17,22,5,108/- Bank Guarantee amount Entire amount of duty leviable on seized goods (Duty @2.5% + 10% Surcharge) Rs.4,73,690/- IGST @ 18% Rs.85,264/- Total Duty Rs.5,58,954/- Redemption Fine @ 10% of value of seized goods Rs.8,61,255/- Penalty @ 5% of the value of seized goods Rs.8,61,255/- Total Rs.22,81,465/- 17.Having heard the learned counsel appearing for the parties and having gone through the materials on record, we are of the view that the larger issues, more particularly the legality and validity of the seizure, shall be examined on the next date of the hearing including the preliminary objection raised on behalf of the respondents as regards the alternative remedy available to the writ applicants. Page 8 of 79 C/SCA/10521/2020 JUDGMENT However, having regard to the submissions made by Mr. Parikh, we would like to balance the equities at this stage. We would like to see that the writ applicants do not have to suffer a huge loss in their business, and at the same time, we must also ensure that the interest of the Revenue is also protected. 18.We, accordingly, direct the writ applicants to furnish a running Bank Guarantee of any Nationalized Bank to the tune of Rs.2.00 Crores, and at the same time, the DRI shall retain with them the rawgoods/materials upto the value of Rs.10 Crore. If the writ applicants furnish the Bank Guarantee, as referred to above, then the respondents shall provisionally release the rest of the goods (raw materials/finished) at the earliest. 19.Post the matter for further hearing on 12102020. ” 3. It emerges that pursuant to these directions, the Bank Guarantee of nationalized Bank to the tune of Rs.2 Cr. has already been furnished and the DRI has returned the raw goods/materials worth Rs.10 Cr. The respondent has provisionally released the rest of the goods, raw material, however, subsequently by continuing the regular business of import of goods in question when the request was made to the Custom Commissioner to clear the goods on a provisional assessment basis by the petitioner for 49 Bills of Entry for the period between 22.09.2020 to 08.12.2020 on Page 9 of 79 C/SCA/10521/2020 JUDGMENT furnishing the bond for the full value of the goods, the petitioner had been allowed to clear the goods on the payment of duty of 2.5% on basic custom duty. However, that order came to be recalled by the respondent for 18 Bills of Entries, which were assessed provisionally and once again, they were reassessed provisionally at the rate of 5% on basic custom duty. 4. The further consignment also arrived where the petitioner also encountered the similar difficulties and therefore, it has preferred a separate petition being Special Civil Application No.673 of 2021. 5. So far as the present petition is concerned, the affidavitinreply has been filed by the respondent No.3 – Director of Revenue Intelligence ('the DRI' for short), who is working as Deputy Director at DRI, wherein the contention has been raised that the petitioner unduly availed benefit of concessional rate of 2.5% Basic Customs Duty ('the BCD' for short) Page 10 of 79 C/SCA/10521/2020 JUDGMENT instead of 5% in terms of serial No.368 of Notification No.50/2017CUS dated 30.06.2017. On the search being conducted of the premise of the petitioner and of the Customs Broker Firm, the Panchnama is drawn and the documents have been seized. The statement recorded of various persons also indicate how undue benefits have been reaped by the petitioner company. 6. Another company of the same group Century Metal Recycling i.e. of M/s.CMR CHIHO Recycling Technology Private Limited petitioner No.2 was operating from the very premise. The main work of both these companies was segregation of Copper, Aluminum and Iron/Steel scrap from imported motor scrap and segregation of Copper from different types of motors i.e. large motors, medium motors, small motors and those segregated manually by the labours. Mr.Navin Sharma the main officer handling operation was available and he explained that all imported goods received were not meant for melting of Iron and Steel, but they also Page 11 of 79 C/SCA/10521/2020 JUDGMENT consisted of Copper and Aluminum and after dismantling, these goods were sold in different forms i.e. Cast Iron Scrap, Copper Scrap, Aluminum Scrap (US Tense H), MS Rotor, MS Stamping, Old bearing scrap, Wires etc. to different customers. Various machineries namely Wet Shredder, Copper Pullers, Copper Granulator, Press machines were found operating in the premise for segregation, extraction and dismantling of Copper from motor scrap. The team also found physically in the compound the goods after dismantling namely cast Iron scrap, Iron scrap, Copper, MS Stamping, MS Rotter, PVC Wire scrap, Old Bearing scrap, US Tense (Aluminum scrap), Aluminum wire scrap, Stainless Steel scrap, Rubber Plastic etc. 7. It is further the say of the respondent that various goods in different forms lying in the premise were found to have been imported without payment of appropriate customs duty by mis declaring the same and wrongly availing the Page 12 of 79 C/SCA/10521/2020 JUDGMENT benefit of Notification No.50/2017CUS dated 30.06.2017. Therefore, the imported raw material and finished goods belonging to both the petitioners have been detained and seized. 8. It is further the say of the respondent that the goods are not the melting scrap of Iron and Steel (other than stainless Steel) as they have been imported with an objective of dismantling and procuring high valued product Copper. The percentage of Copper is around 10% and it is evident from the certificate of the analysis furnished along with the import documents. There is a sufficient reason to believe that the petitioners had improperly imported the goods by misdeclaring the same under Section 46 of the Customs Act, 1962 with an intent to avail undue benefit of concessional rate of duty of 2.5% and therefore, the confiscation in terms of Sections 111(f) 111(m) of the Act is obligated. The goods were initially seized on 03.08.2020 and thereafter also, the cargo consisting of the same Page 13 of 79 C/SCA/10521/2020 JUDGMENT goods were imported and seized on 11.08.2020 and for the release of the goods, the mechanism has been prescribed under Section 110(A)of the Act. It is further contended that the respondent has considered Note 7 of Section XV of Customs Tariff, which speaks of classification of composite articles except where the heading otherwise requires, the articles of base metal (including articles of mixed material treated as the articles of base metal under the interpretative Rules) containing two or more base metal are to be treated as articles of the based metal predominating by weight over each of the other metals. 8.1 With Reference to ground C of the petition, it is submitted that, the respondent thoroughly considered Note 7 of Section XV of Customs Tariff. The said Note 7 is reproduced herein below for ready reference: ”Classification of composite articles: Except where the heading otherwise require, articles of base metal (including Page 14 of 79 C/SCA/10521/2020 JUDGMENT articles of mixed materials treated as articles of base metal under the interpretative Rules) containing two or more base metals are to be treated as articles of the base metal predominating by weight over each of the other metals. For this purpose: (a) Iron and Steel, or different kinds of iron or steel, are regarded as one and the same metal; (b) An alloy is regarded as being entirely composed of that metal as an allow of which, by virtue of Note 5, it is classified, and (c) A cermet of hading 8113 is regarded as single base metal.” In view of the above Note 7, the respondent submits that Section XV of Customs Tariff covers commodities with heading “Base Metals and Articles of Base Metal”. In Section XV, there are 12 Chapters which are as: Chapter 72 (Iron and Steel), Chapter 73 (Articles of Iron and Steel), Chapter 74 (Copper and Articles thereof), Chapter 75 (Nickel and Articles thereof), Chapter 76 (Aluminum and Articles thereof), Chapter 77 (Reserved for Possible Future Use), Chapter 78 (Lead and Articles thereof), Chapter 79 (Zinc and Articles thereof), Chapter 80 (Tin and Articles Page 15 of 79 C/SCA/10521/2020 JUDGMENT thereof), Chapter 81 (Other Base Metals; Cermets:Articles thereof), Chapter 82 (Tools, Implements, Cutlery Spoons and Forks, of Base Metal: Parts thereof of Base Metal) and Chapter 83 (Miscellaneous Articles of Base Metal). Petitioner has declared its goods under CTH 72044900 which comes under “Iron and Steel”. Note 7 of Section XV covers “Articles of Base Metal” only, not base metal itself. 8.2 Respondent submits that base metals and articles thereof are having separate identities and the same can be differentiated from Chapter 72 which covers 'Iron and Steel' and Chapter 73 which covers 'Articles of Iron and Steel'. Even for other base metals, respective base metals and their respective articles have been differentiated clearly in respective Customs Headings and subheadings. Therefore, respondent respectfully submits that Note 7 clearly speaks of 'Articles of the Base Metal' predominating by weight over each of the other metal. Petitioner's Page 16 of 79 C/SCA/10521/2020 JUDGMENT claim on this ground itself is contradictory as on one side, they are declaring their product in Chapter 72 (Iron and Steel) whereas they have submitted their contention for 'articles of Iron and Steel' which falls under Chapter 73 only and altogether different from Chapter 72. Hence, Note 7 of Section XV of Customs Tariff is applicable for 'Articles of Base Metal' only, not on base metal. 8.3 Petitioners themselves have declared their product as “Discarded and nonserviceable semibroken motor scrap” which cannot be termed as articles of base metal on any reasoning. On the basis of facts available on records as on date, respondent No.3 has not changed the classification of their product till date. Respondent No.3 has challenged their claim for benefit of concessional rate of duty of 2.5% instead of effective rate of 5% under Serial No.368 of Notification No.50/2017 (Customs) dated 30.06.2017 as amended. Page 17 of 79 C/SCA/10521/2020 JUDGMENT 8.4 The Respondent contended further that predominating nature of product will not be applicable in case of CTH 7204 as mentioned at Sr.No.368. Petitioner themselves have admitted that they are importing motor scrap consisting Iron Scrap 85%, Copper Scrap 10% and Aluminum Scrap 5%. Moreover, at the time of import, petitioner also furnishes certificates of analysis issued by seller and Form 9 which is presented for trans boundary movement document. Both of these documents contained three separate items/chapter heading however, invoice by seller is being issued with only one description i.e. “Discarded and Non Serviceable Semi Broken Motor.” Petitioner knowingly does not take into consideration the certificate of analysis and Form 9 intentionally to hide facts before the department and declare its value on the basis of invoice only. Respondent submits that petitioners have adopted this modus in a very planned and organised manner to avail benefit of concessional Page 18 of 79 C/SCA/10521/2020 JUDGMENT rate of duty of 2.5%. 8.5 With Reference to ground D of the petition, it is submitted that, petitioners have contended that they imported scrap electric motors, which has no specific tariff heading in the Customs Tariff Act. However, it is very much there on record that they declared the same under Customs Tariff Heading 72044900. Description mentioned in the said CTH 72044900 is reproduced herein as under: “7204 Ferrous waste and scrap; remelting scrap ingots of iron or steel; other waste and scrap: 72044100—Turning, shaving, chips, milling waste, sawdust, fillings, trimmings and stampings, whether or not in bundles,72044900 other.” In view of the above, the respondents emphatically contended that the petitioners have declared their product “Discarded and non Page 19 of 79 C/SCA/10521/2020 JUDGMENT serviceable semibroken motor scrap” under CTH 72044900 which falls under 'other' subheading of Other waste and scrap of ferrous waste and scrap or remelting scrap ingots of iron or steel. Since they have declared the same under Scrap, the same cannot be treated as “Articles of Iron or Steel” or “Articles of Base Metals” and hence, respondent submits that Note 7 of Section XV will not be applicable in this case. 8.5(A) Further, respondent has challenged benefit of 2.5% concessional rate of duty as notified under S.No.368 of Notification No.50/2017CUS. Dated 30.06.2017 as amended. With regard to concessional rate of Basic Customs Duty claimed under Notification No.50/2017CUS. Dated 30.06.2017 as amended stated as above, Serial No.368 reads as follows: “Serial No.368. CTH 7204 Melting scrap of iron or steel (other than stainless steel):2.5%” Petitioner was very well aware that their Page 20 of 79 C/SCA/10521/2020 JUDGMENT imported product i.e. “Discarded and Non serviceable semibroken Motor” cannot be termed as Melting scrap of Iron or Steel (other than stainless steel) falling under CTH 7204. Petitioner themselves have admitted that they are importing motor scrap consisting Iron Scrap 85%, Copper Scrap 10% and Aluminum Scrap 5%. However, to avoid payment of effective rate of duty i.e. 5% on their assessable value, they intentionally did not declare their product properly in bills of entry filed by them under Section 46 of the Act. Prior to that, the petitioner was importing their goods in separate three headings of three different scraps and subsequently, they shifted to one tariff heading merely by changing the description of their imported goods to one description in invoices issued by seller, who appears to be company from the same group, with whom they have joint venture agreement. Respondent, at this point of investigation, have not asked them to classify their product to three separate headings, but has challenged their Page 21 of 79 C/SCA/10521/2020 JUDGMENT declaration for benefit of concessional rate of duty i.e. 2.5% instead of effective rate of 5% by showing Sr.No.368 of Notification No.50/2017CUS dated 30.06.2017 which is available for 'Melting scrap of iron or steel (other than stainless steel)', not on Copper scrap or Aluminum Scrap under this S.No.368. Respondent further submits that Copper scrap or Aluminum Scrap is far higher in value as compared to Heavy Melting Scrap of Iron or Steel. 9. It is, therefore, urged that the petitioner was well aware that the imported product cannot be termed as melting scrap of Iron and Steel falling under the CTH 7204. They are importing motor scrap consisting of Iron scrap 85%, Copper scrap 10% and Aluminum scrap 5%, but to avoid intentionally 5% value on the rate of duty of 5% on the assessable value, they have declared the entry filed under Section 46 of the Customs Act. The petitioners used to import their goods under three separate headings of different scraps and Page 22 of 79 C/SCA/10521/2020 JUDGMENT subsequently they shifted to one tariff heading merely changing the description of their imported goods to one description invoice issued by the seller. 10. Mr.Mohan Agrawal in his statement dated 31.07.2020 also admitted that there is a difference in value of goods imported by the companies which is ranging from US$ 500 to US$ 1200, it is on account of the large, medium and small motors in the combination thereof. The large motors are the cheapest and the small are more expensive, they comprise of Iron and Steel, Copper and Aluminum, Asses and Brass etc. and the value of each of these metals is different, the larger motor consists of lower percentage of copper whereas the smaller motor consists of larger percentage of copper. This according to the respondent, as the petitioner changed the declaration of the product at the time of import and also found another company with the different name with same set of directors, a detailed Page 23 of 79 C/SCA/10521/2020 JUDGMENT investigation was necessary. 11. According to the respondent, the commercial bills have been issued by the supplier as per the wish of the petitioner with a motive of evading customs duty. The relationship between the supplier and the petitioner also is suspicious. The petitioners imported goods only from single supplier, which also appears to be from the very group, they might have entered into a joint venture. 12. The stand is also taken of the alternative remedy particularly relying on the decision reported in (1997) 94 ELT 285, where the Court has held that the appropriate course for the asessee in each case was to reply to show cause notice, to enable the authorities to record the findings of the facts in each case and if, necessary the matter should have been proceeded to the Tribunal and thereafter to the Court. It also relied on the Bombay High Court's decision Page 24 of 79 C/SCA/10521/2020 JUDGMENT rendered in case of M/s.Red Bull Pvt.Ltd. vs. Chief Commissioner of Customs, reported in (2010) 251 ELT 43 (Bombay). According to this decision, the alternative and efficacious remedy once is available and when there are disputed questions of facts involved in the writ petitions, the writ petitions are to be dismissed in limine. 13. According to the respondent, the petitioners have made request for provisional release of goods under Section 110 (A) of the Act and there is no question of non availability of alternative remedy with them. They can fulfill the condition of provisional release of the goods to be issued by the adjudicating authority and if they are not agreeable, they can always have an option to file an appeal in terms of Customs Act. The detentions and seizures made by the respondent No.3 since are in accordance with law, the petition is merit less. Page 25 of 79 C/SCA/10521/2020 JUDGMENT 14. Affidavitinreply for and on behalf of the respondent No.2 also dealt with the same issue and insisted that the importer has applied for provisional release of the seized goods, the provisional release of the goods has been given as under: (i) Goods seized under Seixure Memo No.03.08.2020 of M/s.CMR Chiho Recycling Technologies Pvt. Ltd., for quantity:78710.6 kgs valued at 17225108/ provisionally released on filling of Bond of full value of the goods i.e. 17225108/ with Bank Guarantee/Cash Security Deposit of Rs.20,00,000/. (ii) Goods seized under Seizure Memo No.03.08.2020 of M/s.CMR Chiho Industries Pvt.Ltd., for quantity:6884651 Kgs valued at 38,02,85,614/ provisionally release on filing of Bond of full value of the goods i.e. 38,02,85,614/ with Bank Guarantee/Cash Security Deposit of Rs.6,94,00,000/. (iii) Goods seized under Seizure Memo No.11.08.2020 of M/s.CMR Chiho Industries Pvt. Ltd., for Bill of Entry No.8262901 dated 24.07.2020 of quantity 26140 Kgs valued at 23,59,891/ provisionally release on filing of Bond of full value of the goods i.e. 23,59,891/ with Bank Guarantee/Cash Security Deposit of Rs.4,31,000/. Page 26 of 79 C/SCA/10521/2020 JUDGMENT (iv) Goods seized under Seizure Memo No.11.08.2020 of M/s. CMR Chiho Industries Pvt.Ltd., of quantity 604990 Kgs valued at 32256787.02 provisionally release on filing of Bond of full value of the goods i.e. 32256787.02 with Bank Guarantee/ Cash Security Deposit of Rs.1,28,00,000/.” 15. According to this respondent, the importer is yet to deposit the required fixed deposit receipt, cash security as ordered for provisional release. The provisional release order was issued in reasonable time according to the respondent, after due departmental procedure; however, the delay has occurred because of non – availability of the staff, infected by COVID19, in the building. 16. Affidavitinrejoinder to the affidavitin reply filed by the respondent Nos.2 and 3 also has come on record, wherein Mr.Naveen Sharma, Operation Manager and authorised signatory of the petitioner company has denied each and every allegation made by the respondent Nos.2 and 3 in Page 27 of 79 C/SCA/10521/2020 JUDGMENT the affidavitinreply. According to him, the petitioners are engaged in the import of non usable and nonserviceable electric motor scrap and its composition. It is generally defined and classified as ELMO by the Institute of Scrap Recycling Industries' Guidelines. It is a mixed electric motors, which consists of whole electric motors and dismantled electric motor parts, which are primarily Copper wound and some contain Aluminum wound material subject to agreement between buyer and seller. There is no excessive Steel attachment such as gear and reducer iron bases and pumps or loose free irons. The petitioner processes and separates the said scraps of nonusable and nonserviceable electric motors with Wet Shredder, Copper Pullers, Copper Granulator. Again according to the petitioner, the availing benefit of concessional rate of duty is the matter of belief of assesses and does not amount to misdeclaration or suppression for the purpose of unduly availing benefit of Page 28 of 79 C/SCA/10521/2020 JUDGMENT concessional rate of duty. The authority always has hidden behind the principle of confidentiality during the investigation and it does not disclose what is the intelligence. There was no intelligence about any illegality, but the authority has jumped to the conclusion that there is a misdeclaration or misrepresentation. The detention and seizure of the goods, according to the petitioner, is without following the provision of law. The exercise of powers of seizure under Section 110 of the Act is arbitrary, without jurisdiction and therefore is illegal. The respondent failed to explain the rational to rush to the seizure of the goods. The proper officer cannot proceed to seize the goods under Section 110 of the Act, unless he has a reason to believe the goods are liable to confiscation and the reason for formation of belief must have a rational connection with or relevant bearing on the formation of the belief as the rational connection postulates that there must be a direct nexus between the materials Page 29 of 79 C/SCA/10521/2020 JUDGMENT coming to the notice of investigating officer and formation of his belief that the goods are liable for confiscation. 17. It is the say of the petitioner that the power conferred by Section 110 of the Act is a conditional power and not an absolute power to be exercised at the discretion of the officer. The condition is that there has to be a reason to believe and the safe belief should reflect that intense application of mind with reference to the material available on record that it has become necessary to confiscate the goods. The word 'may' is not indicative of a matter of choice, but is necessarily meant that the officer is duty bound to give valid reason for the exercise of such discretion and there is also an obligation to state why it is necessary to confiscate the goods as the exact nature of sub clauses of Section 111 of the said Act makes it obligatory. These all were not followed in the present case and therefore, initiation is unjustifiable. It has Page 30 of 79 C/SCA/10521/2020 JUDGMENT thus emphasized that the BCD has to be 2.5% on transaction value. There is no revenue loss by misclassifying the goods under CTH 72. It is only to prejudice the mind of the Court that such allegation has been made. The full applicable duty of excise on Copper Aluminum are paid on dismantling of the electric motor scrap whether at the time of resale or at the time of use of manufacture, therefore, ultimately the higher duty on the separate item is paid and there is no revenue loss at all. 18. The new company, according to the petitioner, is formed as per the legal advise and looking to the market situation, it is within the four corners of the law that the same has been set up. 19. It is further the say of the petitioner that the alternative efficacious remedy is not the reason for the Court to deny the entertainment of the present petition. The unfettered discretion exercised by the respondent in seizure of the Page 31 of 79 C/SCA/10521/2020 JUDGMENT goods though the statute does not provide for such powers, has entitled the petitioner to approach this Court. 20. It is, therefore, urged that this Court may allow the petition as neither the respondent No.2 nor respondent No.3 has any jurisdiction to adjudicate the issue in question. The principles of natural justice also have been violated and hence, in absence of any proper opportunity to the petitioner also, the civil liabilities of the petitioner company demanding the huge amount of custom duty would be impermissible. 21. Both the sides have relied on the following decisions and some of which shall be discussed at an appropriate point, as and when needed. Sr No. Judgments/citations 1 Commissioner of Customs vs. Gaurav Enterprise, 2006 (193) ELT 532 (Bom.) 2 Commissioner of Central Excise vs. Wockhardt Life Science Limited, 2012 (277) ELT 299 (SC) 3 Northern Plastics Limited vs. Commissioner of Customs & Central Excise, 1998 (101) ELT 549 (SC) 4 Commissioner of Customs, Calcutta vs. G.C.Jain, 2011 (269) ELT 307 Page 32 of 79 C/SCA/10521/2020 JUDGMENT (SC) 5 PSL Limited vs. Commissioner of Customs, Kandla, 2015 (328) ELT 177 (Tri-Ahmedabad), 6 Commissioner of Customs and C.Ex.Kanpur vs.Jas International, 2011 (272) ELT 282 (Tri-Delhi) 7 Krupa Chaton Mfg.Company Pvt. Ltd vs. UOI, SCA No.7499 of 2017 8 Eagle Impex Vs. CC, Kandla, 2017 (350) ELT 107 (Tri-Ahmd.) 9 Sarvalakshmi Paper and Board Vs.C.C., Madras, 2000 (126) ELT 935 (Tri-New Del.) 10. CC, Bombay vs. Hydranautics Membrance (India) Ltd., 1994 (71) ELT 711 (Tri.-New Del.) 11. T.G. Enterprise vs. Union of India, 2018 (18) G.S.T.L.17 (GUJ) 12. Sri Vijayalakshmi Leatehrs vs. Pr.CC-III (SIIB), 2020 (373) ELT 518 (MAD) 13 Indexone Infracon And Logistics Pvt. Ltd. vs. UOIO., 2019 (366) ELT 229(GUJ.) 14 Agya Import Ltd vs. CC, New Delhi, 2018 (362) ELT 1037 15 Max Enterprise vs. Deputy CC, Chennai, 2019 (367) ELT 753 (Mad) 16 CC, Chennai-II vs. Novel Impex , 2019 (365) ELT 312 (Mad) 17 Kanpur Edibles Pvt. Ltd vs. CC (preventive), 2019 (369) ELT 1281 (Tri- Kol) 18 Rajkamal Industrial Pvt. Ltd., 2019 (370) ELT 353 (Tri.Abad) 19 Institutes of Chartered Accountants of India vs. L.K.Ratna & Ors, (1986) 4 SCC 537 20 Biswanath Bhattacharya vs. Union of India & Ors, (2014) 4 SCC 392 21 Chairman and Managing Director, United Commercial Bank and Ors vs. P.C.Kakkar, (2003) 4 SCC 364 22 Lakmi Devi vs. State of Bihar and Ors, (2015) 10 SCC 241 23 Bhikhubhai Vithalabhai Patel vs. State of Guj. & Ors, (2008) 4 SCC 144 24 Union of India & Ors vs. Agarwal Iron & Industries, (2014) 14 SCC 215 25 N.Nagendra Rao & Co vs. State of A.P., (1994) 6 SCC 205 26 Asst. Collector of Customs vs. Charan Das Malhotra, (1971) 1 SCC 697 27 Union of India & Ors vs. Meghmani Organics Ltd & Ors, (2016) 10 SCC 28 28 Bindal Smelting Pvt.Ltd vs. Addl. Director General, 2020(34) G.S.T.L.592 (P&H) 29 ANGOU GOLMEI vs. VIZOVOLIE CHAKH, 1996 (81) ELT 440(Pat.) 30 Sheo Nath Singh vs. Appellate Asst. Comm. Income Tax, Kolkata, (1972) 3 SCC 234 Page 33 of 79 C/SCA/10521/2020 JUDGMENT 31 Om Sai Trading Co. Vs. Union of India, 2020 (372) ELT 542 (Pat.) 32 Fomento Resources Pvt. Ltd. vs. UOI, 2019(367) ELT 897 (Bom) 33 Baboo Ram Harucgabd vs, UOI, 2011 (270) ELT 356 (Guj.) 34 Mapsa Tapes Pvt Ltd vs. UOI, 2006 (201) ELT 7 (P & H) 35 J.K.Barodolia Mills vs. M.L.Khunger, Deputy Coll., 1994 (72) ELT 813 (SC) 36 S.N.Mukherjee vs. Union of India, (1990) 4 SCC 594 37 East Ciast Railway & Ors vs. Maha Dev Appa Rao & Or, (2010) 7 SCC 678 38 Sama Aruna vs. State of Telangana & Anr, (2018) 12 SCC 150 22. The first and foremost vital issue raised by learned Additional Solicitor General Mr. Vyas is as to whether this Court will have jurisdiction to entertain this petition in wake of the availability of the alternative efficacious remedy. As contended by the respondent, this petition is premature and the Courts have adopted restraint and have chosen not to intervene at the stage of show cause notice when ample opportunity would be available to the party before the statutory authority. 23. The law on the point if is regarded, it is quite clear that jurisdiction under Article 226 of the Constitution of India is not to be Page 34 of 79 C/SCA/10521/2020 JUDGMENT resorted to ordinarily when the alternative and efficacious remedy is available, unless of course the very issuance of notice is not sustainable under the law. 24. However, before this Court proceeds further to adjudicate upon the factual challenges which have been raised before this Court, ratio of the decision of Apex Court in case of Union of India vs. Indalco Industries, 2003(3)SCR P.377 needs to be referred to where in no unclear terms it has been held that invocation under Article 226 needs to be exceptional. It has also time and again frowned upon such interference particularly under the taxing statute. “There can be no doubt that in matter of taxation, it is inappropriate for the High Court to interfere in exercise of jurisdiction under Article 226 of the Constitution either at the stage of show cause notice or at the stage of assessment where alternative remedy by way of filing a reply or appeal, as the case may be, is available but these are the limitations imposed by the courts themselves in exercise of their jurisdiction and they are not matters of jurisdictional factors. Had the High Court declined to interfere at the stage of show cause notice, perhaps this court would not have been inclined to Page 35 of 79 C/SCA/10521/2020 JUDGMENT entertain the special leave petition; when the High Court did exercise its jurisdiction, entertained the writ petition and decided the issue on merits, we do not think it appropriate to upset the impugned order of the High Court under Article 136 of the Constitution on a technical ground. ” 24.1. In case of Divisional Forests Officer and Others vs. M. Ramalinga Reddy reported in 2007(9) SCC 289, the Apex Court examined threadbare jurisdictional aspect in following manner: “13. In Management of Express Newspapers (Private) Ltd., Madras v. The Workers and Ors., AIR (1963) SC 569, it was opined: \"15. The High Court undoubtedly has jurisdiction to ask the Industrial Tribunal to stay its hands and to embark upon the preliminary enquiry itself. The jurisdiction of the High Court to adopt this course cannot be, and is indeed not disputed. But would it be proper for the High Court to adopt such a course unless the ends of Justice seem to make is necessary to do so? Normally, the questions of fact, though they may be jurisdictional facts the decision of which depends upon the appreciation of evidence, should be left to be tied by the Special Tribunals constituted for that purpose. If and after the Special Tribunals try the preliminary issue in respect of such jurisdictional facts, it would be, open to the aggrieved party to take that matter before the High Court by a writ petition and ask for an appropriate writ. Speaking generally, it would not be proper or appropriate that the Page 36 of 79 C/SCA/10521/2020 JUDGMENT initial jurisdiction of the Special Tribunal to deal with these jurisdictional facts should be circumvented and the decision of such a preliminary issue brought before a High Court in its writ jurisdiction. We wish to point out that in making these observations, we do not propose to lay down any fixed or inflexible Rule; whether or not even the preliminary facts should be tried by a High Court in a writ petition, must naturally depend upon the circumstances of each case and upon the nature of the preliminary issue raised between the parties. Having regard to the circumstances of the present dispute, we think the court of appeal was right in taking the view that the preliminary issue should more appropriately be dealt with by the Tribunal. The appeal court has made it clear that any party who feels aggrieved by the finding of the Tribunal on this preliminary issue may move the high Court in accordance with law. Therefore, we are not prepared to accept Mr. Sastris argument that the Appeal court was wrong in reversing the conclusion of the trial Judge insofar as the trial Judge proceeded to deal with the question as to whether the action of the appellant was a closure or a lockout.\" 14. In State of Uttar Pradesh v. Brahm Datt Sharma and Anr., AIR (1987) SC 943 : [1987] 2 SCC 179, this Court held: \"9. The High Court was not justified in quashing the show cause notice. When a show cause notice is issued to a government servant under a statutory provision calling upon him to show cause, ordinarily the government servant must place his case before the authority concerned by showing cause and the courts should be reluctant to interfere with the notice at that stage Page 37 of 79 C/SCA/10521/2020 JUDGMENT unless the notice is shown to have been issued probably without any authority of law. The purpose of issuing show cause notice is to afford opportunity of hearing to the government servant and once cause is shown it is open to the Government to consider the matter in the light of the facts and submissions placed by the government servant and only thereafter a final decision in the matter could be taken. Interference by the court before that stage would be premature, the High Court in our opinion ought not have interfered with the show cause notice.\" 15. This Court in Special Director and Anr. v. Mohd. Ghulam Ghouse and Anr., [2004] 3 SCC 440 stated the law, thus: \"5. This Court in a large number of cases has deprecated the practice of the High Courts entertaining writ petitions questioning legality of the showcause notices stalling enquiries as proposed and retarding investigative process to find actual facts with the participation and in the presence of the parties. Unless the High Court is satisfied that the showcause notice was totally non est in the eye of the law for absolute want of jurisdiction of the authority to even investigate into facts, writ petitions should not been entertained for the mere asking and a matter of route, and the writ petitioner should invariably be directed to respond to the showcause notice and take all stands highlighted in the writ petition. Whether the showcause notice was founded on any legal premises, is a jurisdictional issue which can even by urged by the recipient of the notice and such issues also can be adjudicated by the authority issuing the very notice initially, before the aggrieved could approach the court. Further, when the Page 38 of 79 C/SCA/10521/2020 JUDGMENT court passes an interim order it should be careful to see that the statutory functionaries specially and specifically constituted for the purpose and are denuded of powers and authority to initially decide the matter and ensure that ultimate relief which may or may not be finally granted in the writ petition is not accorded to the writ petitioner even at the threshold by the interim protection granted.\" 16. This aspect of the matter has recently been considered by this Court in Union of India and Anr. v. Kunisetty Satyanarayana, (2006) 12 SCALE 262.” 24.2. It is thus quite clear that the writ jurisdiction under Article 226 is not to be entertained against the show cause notice when statute provides for mechanism which is efficacious, alternative and productive as the very purpose of issuance of show cause notice to afford opportunity of hearing to the party concerned and on showing of the cause to the statutory authority, a final decision is to be rendered, it is prematured to interfere with the show cause notice by the court. Although, the Court has wide powers under Article 226 of the Constitution and it can also exercise in certain Page 39 of 79 C/SCA/10521/2020 JUDGMENT circumstances at the stage of issuance of show cause notice (when the show cause notice is totally non est etc.) Accordingly such powers are not to be exercised by the Court and this approach of self restraint and self limitation is adopted by the High Court always and that being a well settled position of law, no further dilation is needed. 25. Before this Court proceeds to consider whether at the stage of show cause notice, it needs to entertain this petition or whether show cause notice is non est totally in the eyes of law for absolute want of jurisdiction of authority, would be considered a little later. Appropriate it would be to firstly refer to the decision rendered in case of M/S.CANNON INDIA PRIVATE LIMITED V/S. COMMISSIONER OF CUSTOMS by the Apex Court recently in Civil Appeal No.182775 of 2018 and allied matters, where the Court has chosen to question the very action on the part of DRI of issuing the show cause notice for want of Page 40 of 79 C/SCA/10521/2020 JUDGMENT powers. 25.1. Before the Apex Court, statutory appeals were preferred under Section 130 E of the Act, which arose from the common final order of the Central Excise and Service Tax Appellate Tribunal ('the CESTAT' for short). Vide such order, an exemption of basic customs duty accorded to the Digital Still Image Video Cameras ('DSIC') imported by the Nikon India Pvt. Ltd., Canon India Pvt. Ltd and other importers in terms of exemption Notification NO.20/2005 dated 01.03.2005 as amended by Notification No.15/2012 dated 17.03.2012 came to be denied and the consequential confiscation of goods, demand of interest and imposition of penalty as provided under the Customs Act, 1962 were upheld by the CESTAT. 25.2 . The issue which had arisen for the Court's consideration was whether after clearance of the cameras on the basis that they were exempted from levy of basic Customs duty under Page 41 of 79 C/SCA/10521/2020 JUDGMENT Notification No.15/2012, the proceedings initiated by the DRI for recovery of duty not paid under Section 28 (4) of the Act was valid under the law. 25.3. The consignment of cameras arrived at Delhi, the importer submitted a Bill of entry covering letter and literature containing specification of the cameras and after verification of the Bill of Entry by the Inspector and the Superintendent, the importer requested the Deputy Commissioner of Customs to check the same. The compilation of the goods with the description given in the literature also was carried out and the goods had been cleared as being exempted from paying the duties in terms of Notification No.15/2012 issued on 17.03.2012. 25.4. A show cause notice was issued under Section 28(4) of the Act alleging that the Customs Authorities had been induced to clear the cameras by willful misstatement and suppression of the facts about the cameras. The decision of Page 42 of 79 C/SCA/10521/2020 JUDGMENT exemption was by the Deputy Commissioner, Air Cargo, the show cause notice was issued by the Additional Director General, DRI. The Apex Court addressed the issue as to whether the DRI had authority in law to issue a show cause notice under Section 28(4) of the Act for recovery of the duties not levied nor paid when the goods were cleared for import by a Deputy Commissioner of Customs, who decided that the goods were exempted. 25.5. The provision of the Customs Act, Section 28(4) empowers the recovery of the duty not paid, part paid or erroneously refunded by reason of collusion or any willful misstatement or suppression of facts and confers the power of recovery on the proper officer. The Apex Court interpreted as to who could be called the proper officer. The Apex Court held that the proper officer must necessarily mean the proper officer, who in the first instance assessed and cleared the goods which in the matter before the Apex Page 43 of 79 C/SCA/10521/2020 JUDGMENT Court was the Deputy Commissioner Appraisal Group. Because no fiscal statue has shown the power to reopen the assessment or recover the duties which escaped the assessment could be conferred on an officer other than the one (of the rank of the officer) who initially took the decision to assess the goods. It also went to an extent of saying that statute when confers the same powers to perform an act on different officers, the two officers, especially when they belong to different departments, cannot exercise such powers in the same case. Where one officer has exercised his powers of assessment, the power to order reassessment must also be exercised by the same officer or his successor and not by another officer of another department though he is designated to be an officer of the same rank as otherwise, the same would result into “an anarchical and unruly operation of a statute which is not contemplated by any canon of construction of statute”. Page 44 of 79 C/SCA/10521/2020 JUDGMENT 25.6 The Apex Court, while interpreting the notification dated 2.5.2012, has also held that the Notification purported to have been issued in exercise of the powers under sub–section (34) of section 2 of the Customs Act; the said section does not confer any power on any authority to entrust any functions to the officers for, the subsection is a part of the definition clause of the Act and merely defines a “proper officer”. Section 6 is the only section which provides for entrustment of functions of Customs Officers on other officers of the Central or the State Government or local authority. In para 21, it is held that if it was intended that the officers of the Directorate of Revenue Intelligence who are officers of Central Government should be entrusted with functions of the customs officers, it was imperative that the Central Government should have done so in exercise of its powers under section 6 of the Act. Moreover, the notification which purports to entrust functions as proper officer under the Customs Act has been Page 45 of 79 C/SCA/10521/2020 JUDGMENT issued by the Central Board of Excise & Customs in exercise of nonexisting power under sub– section (34) of section 2 of the Customs Act. The Apex Court declared the notification as invalid, the same having been issued by an authority which had no power to do so, in purported exercise of powers under a section which does not confer any such power. 25.7 Relevant findings and observations of the M/S.CANNON INDIA PRIVATE LIMITED V/S. COMMISSIONER OF CUSTOMS are necessary to be reproduced at this juncture profitably hereinbelow: “14. It is well known that when a statute directs that the things be done in a certain way, it must be done in that way alone. As in this case, when the statute directs that “the proper officer” can determine duty not levied/not paid, it does not mean any proper officer but that proper officer alone. We find it completely impermissible to allow an officer, who has not passed the original order of assessment, to reopen the assessment on the grounds that the duty was not paid/not levied, by the original officer who had decided to clear the goods and who was competent and authorised to make the Page 46 of 79 C/SCA/10521/2020 JUDGMENT assessment. The nature of the power conferred by Section 28 (4) to recover duties which have escaped assessment is in the nature of an administrative review of an act. The section must therefore be construed as conferring the power of such review on the same officer or his successor or any other officer who has been assigned the function of assessment. In other words, an officer who did the assessment, could only undertake re assessment [which is involved in Section 28 (4)]. 15. It is obvious that the reassessment and recovery of duties i.e. contemplated by Section 28(4) is by the same authority and not by any superior authority such as Appellate or Revisional Authority. It is, therefore, clear to us that the Additional Director General of DRI was not “the” proper officer to exercise the power under Section 28(4) and the initiation of the recovery proceedings in the present case is without any jurisdiction and liable to be set aside. 16. At this stage, we must also examine whether the Additional Director General of the DRI who issued the recovery notice under Section 28(4) was even a proper officer. The Additional Director General can be considered to be a proper officer only if it is shown that he was a Customs officer under the Customs Act. In addition, that he was entrusted with the functions of the proper officer under Section 6 of the Customs Act. The Additional Director General of the DRI can be considered to be a Customs officer only if he is shown to have been appointed as Customs officer under the Customs Act. Page 47 of 79 C/SCA/10521/2020 JUDGMENT 17. Shri Sanjay Jain, learned Additional Solicitor General, relied on a Notification No.17/2002 Customs (NT) dated 7.3.2002 to show all Additional Directors General of the DRI have been appointed as Commissioners of Customs. At the relevant time, the Central Government was the appropriate authority to issue such a notification. This notification shows that all Additional Directors General, mentioned in Column (2), are appointed as Commissioners of Customs. 18. The next step is to see whether an Additional Director General of the DRI who has been appointed as an officer of Customs, under the notification dated 7.3.2002, has been entrusted with the functions under Section 28 as a proper officer under the Customs Act. In support of the contention that he has been so entrusted with the functions of a proper officer under Section 28 of the Customs Act, Shri Sanjay Jain, learned Additional Solicitor General relied on a Notification No.40/2012 dated 2.5.2012 issued by the Central Board of Excise and Customs. The notification confers various functions referred to in Column (3) of the notification under the Customs Act on officers referred to in Column (2). The relevant part of the notification reads as follows: “[To be published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection (ii)] Government of India Ministry of Finance (Department of Revenue) Notification No.40/2012 Customs (N.T.) New Delhi, dated the 2nd May, 2012 S.O. (E). – In exercise of the powers conferred by subsection (34) of section 2 of the Customs Act, 1962 (52 of 1962), the Central Page 48 of 79 C/SCA/10521/2020 JUDGMENT Board of Excise and Customs, hereby assigns the officers and above the rank of officers mentioned in Column (2) of the Table below, the functions as the proper officers in relation to the various sections of the Customs Act, 1962, given in the corresponding entry in Column (3) of the said Table: Sr.N o. Designation of the Officers Functions under Section of the Customs Act, 1962 (1) (2) (3) 1. Commissioner of Customs (i) Section 33 2. Additional Commissioner of Customs (i) Sub-section (5) of Section 46; and (ii) Section 149 3. Deputy Commissioner or Assistant Commissioner of Customs and Central Excise (i) ….... (ii)........ (iii) ….... (iv) …..... (v)......... (vi) Section 28; …..... 19. It appears that a Deputy Commissioner or Assistant Commissioner of Customs has been entrusted with the functions under Section 28, vide Sl. No.3 above. By reason of the fact that the functions are assigned to officers referred to in Column (3) and those officers above the rank of officers mentioned in Column (2), the Commissioner of Customs would be included as an officer entitled to perform the function under Section 28 of the Act conferred on a Deputy Commissioner or Assistant Commissioner but the notification appears to be illfounded. The notification is purported to have been issued in exercise of powers under subSection (34) of Section 2 of the Customs Act. This section does not confer any powers on any authority to entrust any functions to officers. The subSection is part of the definitions clause of the Act, it merely defines a proper officer, it reads as follows: Page 49 of 79 C/SCA/10521/2020 JUDGMENT “2. Definitions – In this Act, unless the context otherwise requires, ... (34) ‘proper officer’, in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the [Principal Commissioner of Customs or Commissioner of Customs]. “ 20. Section 6 is the only Section which provides for entrustment of functions of Customs officer on other officers of the Central or the State Government or local authority, it reads as follows: “6. Entrustment of functions of Board and customs officers on certain other officers – The Central Government may, by notification in the Official Gazette, entrust either conditionally or unconditionally to any officer of the Central or the State Government or a local authority any functions of the Board or any officer of customs under this Act.” 21. If it was intended that officers of the Directorate of Revenue Intelligence who are officers of Cenral Government should be entrusted with functions of the Customs officers, it was imperative that the Central Government should have done so in exercise of its power under Section 6 of the Act. The reason why such a power is conferred on the Central Government is obvious and that is because the Central Government is the authority which appoints both the officers Page 50 of 79 C/SCA/10521/2020 JUDGMENT of the Directorate of Revenue Intelligence which is set up under the Notification dated 04.12.1957 issued by the Ministry of Finance and Customs officers who, till 11.5.2002, were appointed by the Central Government. The notification which purports to entrust functions as proper officer under the Customs Act has been issued by the Central Board of Excise and Customs in exercise of nonexisting power under Section 2 (34) of the Customs Act. The notification is obviously invalid having been issued by an authority which had no power to do so in purported exercise of powers under a section which does not confer any such power. 22. In the above context, it would be useful to refer to the decision of this Court in the case of Commissioner of Customs vs. Sayed Ali and Another5 wherein the proper officer in respect of the jurisdictional area was considered. The consideration made is as hereunder: “16. It was submitted that in the instant case, the import manifest and the bill of entry were filed before the Additional Collector of Customs (Imports), Mumbai; the bill of entry was duly assessed, and the benefit of the exemption was extended, subject to execution of a bond by the importer which was duly executed undertaking the obligation of export. The learned counsel argued that the function of the preventive staff is confined to goods which are not manifested as in respect of manifested goods, where the bills of entry are to be filed, the entire function of assessment, clearance, etc. is carried out by the appraising officers functioning under the Commissioner of Page 51 of 79 C/SCA/10521/2020 JUDGMENT Customs (Imports). 17. Before adverting to the rival submissions, it would be expedient to survey the relevant provisions of the Act. Section 28 of the Act, which is relevant for our purpose, provides for issue of notice for payment of duty that has not been paid, or has been shortlevied or erroneously refunded, and provides that: “28. Notice for payment of duties, interest, etc. – (1) When any duty has not been levied or has been shortlevied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may, (a) in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution hospital, within one year; or (b) in any other case, within six months, from the relevant date, serve notice on the person chargeable with the duty or interest which has not been levied or charged or which has been so short levied or part paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any duty has not been levied or has been shortlevied or the interest has not been charged or has been part paid or the duty or interest has been erroneously Page 52 of 79 C/SCA/10521/2020 JUDGMENT refunded by reason of collusion or any wilful misstatement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this subsection shall have effect as if for the words ‘one year’ and ‘six months’, the words ‘five years’ were substituted.” 18. It is plain from the provision that the ‘proper officer’ being subjectively satisfied on the basis of the material that may be with him that customs duty has not been levied or short levied or erroneously refunded on an import made by any individual for his personal use or by the Government or by any educational, research or charitable institution or hospital, within one year and in all other cases within six months from the relevant date, may cause service of notice on the person chargeable, requiring him to show cause why he should not pay the amount specified in the notice. It is evident that the notice under the said provision has to be issued by the ‘proper officer’. 19. Section 2(34) of the Act defines a ‘proper officer’, thus: ‘2. Definitions. (34) ‘proper officer’, in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the Commissioner of Customs;’ It is clear from a mere look at the provision that only such officers of customs who have been assigned specific functions Page 53 of 79 C/SCA/10521/2020 JUDGMENT would be ‘proper officers’ in terms of Section 2(34) the Act. Specific entrustment of function by either the Board or the Commissioner of Customs is therefore, the governing test to determine whether an ‘officer of customs’ is the ‘proper officer’. 20. From a conjoint reading of Sections 2(34) and 28 of the Act, it is manifest that only such a Customs Officer who has been assigned the specific functions of assessment and re assessment of duty in the jurisdictional area where the import concerned has been affected, by either the Board or the Commissioner of Customs, in terms of Section 2(34) of the Act is competent to issue notice under section 28 of the Act. Any other reading of Section 28 would render the provisions of Section 2(34) of the Act otiose inasmuch as the test contemplated under Section 2(34) of the Act is that of specific conferment of such functions.” 23. We, therefore, hold that the entire proceeding in the present case initiated by the Additional Director General of the DRI by issuing show cause notices in all the matters before us are invalid without any authority of law and liable to be setaside and the ensuing demands are also set aside.” 25.8. The Apex Court thus eventually allowed the appeals and the common order passed by the CESTAT was set aside and consequently, the demand notice issued also was set aside holding that entire proceeding initiated by the Additional Page 54 of 79 C/SCA/10521/2020 JUDGMENT Director General and DRI of issuance of show cause notice was invalid in absence of any authority under the law and consequently, had set aside the show cause notice. 26. Taking a que from this decision, it has been argued vehemently by the learned senior advocate, Mr.Deven Parikh that in the present case, the challenge is to the very action of the respondentauthority of seizure of the goods and once the seizure is set aside, the question of provisional release under Section 110A of the Act, which is by way of imposition of overtly harsh and burdensome condition of release of the goods by insisting upon the Bank Guarantee and other requirement, would automatically go away. He has also urged that the seizure of the goods can be by an appropriate officer, who under Section 110 of the Act has reason to believe that the goods in question were liable to be confiscated under Section 111 of the Act. He has further urged that if the assessee makes the Page 55 of 79 C/SCA/10521/2020 JUDGMENT fullest disclosure than the mere wrong claim of classification or wrong claim of the exemption, is not misdeclaration as contemplated under Section 111(M). 26.1 He has also relied on the judgment rendered in case of PSL Limited vs. Commissioner of Customs, Kandla, reported in 2015 (328) ELT 177 to contend that it is not expected by the assessee to fill in the correct classification or exemption as held in 2011 (269) ELT 307 (SC). It is for the department to find the correct legal position as to the classification if, the department allows clearance, then the importer cannot be held responsible. He has therefore urged that subjective satisfaction must show that it is not a case of mere wrong case of exemption or wrong classification, but the assessee not having disclosed all relevant informations and having to defraud the department. A mere different view as to the classification and exemption, when otherwise all facts are known to Page 56 of 79 C/SCA/10521/2020 JUDGMENT the department beforehand cannot enable the department to seize the goods as the same surely would not amount to misdeclaration nor would it render the goods liable to be confiscation as per the settled position of law. 26.2 It is insisted that the subjective satisfaction is based on irrelevant material and not sustainable and is without jurisdiction. There is no rational nexus between the material and the subjective satisfaction and therefore, it needs to be set aside. The Court shall need to essentially examine as to whether the subjective satisfaction was not arbitrary or capricious or was sufficient or not as per the statute and whether the same was not that of a normal rational human being or was not germane to the issue or was not as per requirement of the concerned statute and was by way of mere conjecture or surmise. His grievance is that as per the settled law the imported product has to be assessed in the condition in which it is Page 57 of 79 C/SCA/10521/2020 JUDGMENT imported and be made available for assessment since what happens subsequently is not of much consequence. 26.3 He has further argued that post importation process from which different products can be made from the imported product are hopelessly irrelevant for classifying the product at the time of import. The EDI system allowed classification except Bill of Entry. Upon 100% examination and nontesting and after referring to the documentation and certification. It is urged that the Custom Officer carried out the assessment and all goods were accordingly released after a fullfledged satisfaction and assessment with open eyes to all relevant facts and later on by some untold intelligence, the investigation was restarted within a few months and the seizure took place. 26.4. What all the DRI has done is to sit in appeal over what the Custom Officer did at the time of original assessment and for no fault of Page 58 of 79 C/SCA/10521/2020 JUDGMENT assessee, seized the goods. It is urged that once the out of charge has been granted as provided by the Bombay High Court in 2019 (3) 667 E.L.T. 897, the seizure cannot be effected. He has heavily relied on the decision of Cannon India Pvt. Ltd. (supra) and urged that here also, show cause notice is by the DRI and not by the officer who had assessed the petitioner initially. 26.5. He has also urged that the Gujarat High Court followed the Northern Plastic and held that mere claim for classification or exemption may not lead to the seizure of the goods in 2011 (27) E.L.T. 356. 27. Learned Additional Solicitor General of India, Shri Devang Vyas has strenuously urged this Court that the intelligence received made it abundantly clear as to how the petitioner attempted to mis declare the goods, leading to enormous loss to the revenue and such misstatement itself is a cause of issuance of show cause notice which would be aptly dealt with Page 59 of 79 C/SCA/10521/2020 JUDGMENT by the statutory authority and this Court need not regard the request of any interference. 27.1. Learned ASG has also further contended before this Court that petitioner was fully conscious that their imported product 'Discarded and nonserviceable semi broken motor cannot be termed as melting scrap of iron or steel. Their scrap consist of 85% iron scrap, 10% of copper and 5% of Aluminum scrap. However, to avoid payment of 5% rate of duty on assessable value, it has chosen not to declare correct details in the bills of entry from three separate headings, it chose to club under one tariff heading by deliberately changing description of their imported goods so as to let it fall under classification CTH 7204 49 00 under the other Ferrous Waste and Scrap and thereby availed undue benefit of concessional rate of custom duty at the rate of 2.5% instead of 5% scrap what contended copper and aluminum and not only iron and steel, this intentional and deliberate non Page 60 of 79 C/SCA/10521/2020 JUDGMENT declaration needs stringent dealing. He also urged that Cannon India Pvt. Ltd. (supra) can also be urged before the statutory authority while arguing show cause notice. 28. As can be noticed from the detailed submissions and the ratio laid down in Cannon India Pvt. Ltd. (supra) in the instant case also, the importer has filed bills of Entry at Thar Dry Port, ICD Customs, Sanand and declared the description of the product as “Discarded and Non— serviceable semi broken Motor Scrap” classifying the same under the Custom Tariff Act 7204 49 00 under the heading of other Ferrous Waste and Scrap. The benefit of concessional rate of 2.5% had been availed by the petitioner vide serial No.368 of Notification No.50/2017:CUS dated 30.06.2017. The said serial No.368 is notified for “melting scrap of iron or steel (other than stainless steel)” for chapter 7204 in the said Notification. Page 61 of 79 C/SCA/10521/2020 JUDGMENT 29. It is alleged in the show cause notice and in the affidavit in reply that, the importer was aware that the scrap contained 10% of Copper, which is evident from the certificate of analysis and Form 9 furnished by the petitioner to the authority. Therefore, it was the DRI, which formed the “reasonable belief” that the importer took undue benefit of concessional rate of duty of 2.5% instead of the paying the effective rate of 5%, resulting into short payment of custom duty to the Government. Therefore, the DRI placed under detention the imported motor scrap (raw material) of 59,45,032 kilo grams of imported motor scrap, nondismantled and 9,39,619 kgs of dismantled and segregated scrap of various types. 30. Thus, the estimated value of scrap of Rs.5,83,62,131 were placed under detention by DRI on 29.07.2020 and the same had been handedover to Shri Naveen Sharma, Operation Manager, M/s.CMR Chiho Industries India Pvt. Ltd. petitioner Page 62 of 79 C/SCA/10521/2020 JUDGMENT herein, under proper Suparat Nama dated 29.07.2020 for safe custody. These goods were further placed under seizure on 03.08.2020 as they were liable for confiscation according to the authority under Section 111 of the Act. According to the respondents, the entire matter is currently under investigation of DRI, the Deputy Director, DRI Zonal Unit has given 'no objection' to the provisional release to the seized goods on 11.08.2020 since, the importer petitioner requested for release of the seized goods vide letter dated 05.08.2020. It is quite obvious that at the time of import of the goods, the petitioner had declared the description of the product as “Discarded in nonserviceable motor scrap under Customs Tariff Heading 7204 49 00 under “other ferrous waste” and because of that 2.5% of rate of concessional duty had been made available under Notification 50/2017:CUS dated 30.06.2017. What is not being disputed is that the certificate of analysis and Form9 as also other relevant materials had been placed Page 63 of 79 C/SCA/10521/2020 JUDGMENT before the Custom Authority which examined the same and cleared the goods of import. It was later on that the DRI with a “reasonable belief” that there was an undue benefit of the concessional rate of duty taken which resulted into the short payment of custom duty, placed the goods under detention and they were subjected to confiscation. It is quite obvious that the officer, who had permitted the import of the goods is not the one who had formed a reasonable belief of the petitioner having taken undue benefit of the concessional rate of duty. It is the officer of the DRI, who was not anywhere in the picture when the import took place, had acted and detained the goods and later on also confiscated the same. A very serious challenge in the instant case is also to the action of the DRI officer of detention and seizure dated 29.07.2020 and 03.08.2020 so also of the confiscation dated 11.08.2020 along with the challenge to the very action of show cause notice on the part of the respondent. Page 64 of 79 C/SCA/10521/2020 JUDGMENT 31. What is vital for the Court to regard is the factual details of the case on hand before applying the judgment of the Cannon India Pvt.Ltd. (supra) while exercising powers of detention, the DRI alleges that the custom authorities had been induced by the petitioner to clear the goods which had been imported by alleged willful misstatement and suppression of the facts and this action according to the DRI had led to the wrongful availment of the concessional rate of duty. This misdeclaration of the product along with the concessional rate of duty resulted into the short payment of custom duty and therefore, it chose to not only exercise the powers of detention, but also of seizure on 11.08.2020. The provisional release order was also passed on receipt of certain securities from the petitioner. 32. The relevant permissions in connection with the detention and seizure if are briefly Page 65 of 79 C/SCA/10521/2020 JUDGMENT noticed, Section 111 lays down that if the proper officer has a reason to believe that any goods are liable of confiscation under the customs act, he may seize such goods. 32.1. Section 110A of the Act is an attaching section where the provisional release of seized goods pending adjudication is contained, which says that any goods, documents or things seized or bank account provisionally attached under Section 110 of the Act, may, pending the order of the adjudicating officer, be released to the owner or the bank account holder on taking a bond from him in the proper form with such security and conditions as the adjudicating authority may require. 32.2. Section 110(2) of the Customs Act also provides that where any goods are seized under subsection (1) and no notice in respect of the same is given within six months under clause (a) of section 124, the goods shall be returned to Page 66 of 79 C/SCA/10521/2020 JUDGMENT the person from whose possession they were seized. 32.3. It is also further provided that not only the principles of natural justice shall have to be adhered to. It is obvious that there has to be a show cause notice before confiscation of the goods within six months after once the seizure of the goods takes place under Section 110 (1) of the Act. 32.4. Section 124 of the Act provides for issuance of show cause notice before the confiscation of the goods and states that no order of confiscation or imposing of any penalty on any person shall be made under this chapter unless the owner of the goods or such person (a) is given a notice in writing with the prior approval of the officer of Customs not below the rank of an Assistant Commissioner of Customs informing him of the grounds on which it is proposed to confiscate the goods or to impose a Page 67 of 79 C/SCA/10521/2020 JUDGMENT penalty; (b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and (c) is given a reasonable opportunity of being heard in the matter, Provided that the notice referred to in clause (a) and the representation referred to in clause (b) may at the request of the person concerned be oral. Provided further that notwithstanding the issuance of notice under this section, the proper officer may issue a supplementary notice under such the circumstances and in such manner as may be prescribed. 32.5. It also appears that under Section 125 of the Customs Act, there is an option to pay the fine in lieu of confiscation as the said provision provides that “whenever confiscation of any goods is authorized by this Act, the officer adjudging it may, in case of any goods, the importation or exportation whereof is prohibited Page 68 of 79 C/SCA/10521/2020 JUDGMENT under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods or, where such owner is not known, the person from whose possession or custody such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit”. 33. Thus, after once the officer concerned forms a reasonable belief in relation to the goods imported, firstly what happened was the detention and thereafter, the seizure of the goods. 33.1. Such goods had been periodically released but before undertaking the process of confiscation, opportunity of payment of fine also can be given and there is a detailed procedure mandated before actually confiscation takes place. 33.2. Since the availing of due opportunity Page 69 of 79 C/SCA/10521/2020 JUDGMENT for following of principles of natural justice is an integral part of the scheme of these provisions, issuance of show cause notice is by way of following the prescribed procedure. 33.3. And yet, what would be vital to examine is whether the exercise of forming reasonable belief in wake of noticeable material before the authority could be held justifiable and whether the issuance of notice by the officer concerned of DRI, in wake of the latest decision, would warrant interference on the ground of the same being non est without any authority. 34. The Deputy Director, DRI respondent No.3 herein in his affidavitinreply has alleged that there is already improper declaration of description of imported goods and consequential claim and thereby, availment of undue benefit of concessional rate of custom duty at the rate of 2.5% instead of 5%. The goods imported are not melting scrap of Iron and Steel, but also contained Copper scrap and Aluminum scrap. Page 70 of 79 C/SCA/10521/2020 JUDGMENT According to the Department, the petitioners were aware that the imported products were labeled as “Discarded and nonserviceable semibroken motor scrap” and they simply cannot be termed as melting scrap of Iron or Steel (other than stainless steel) falling under Customs Heading 72044900. They have admitted that they are importing the motor scrap consisting Iron Scrap 85%, Copper Scrap 10% and Aluminum Scrap 5% in approximate. They are alleged of intentionally not declaring their products properly in the bills of Entry at the time of import under Section 46 of the Act in terms of Section 17 of the Customs Act. Section 17 provides that an importer entering any imported goods under Section 46 or an exporter entering any export goods under Section 50 of the Act shall save as otherwise provided in Section 85, self assess the duty, if any, leviable on such goods. 35. Admittedly, the description in the Bill of Entry “Discarded and nonserviceable semi Page 71 of 79 C/SCA/10521/2020 JUDGMENT broken motor scrap” even on inspection of the goods were found exactly as entered into the Bill of Entry i.e. discarded and nonserviceable broken motor scrap. The only reason after having allowed the import for not allowing the benefit of reduced rate of duty is because the Copper scrap and the Aluminum scrap in the material imported to the extent of 10% and 5% respectively and approximately could be taken out eventually from these broken motors. That essentially appears to be the reason for disallowing of the exemption. As is apparent from the material in the certificate of analysis produced at the time of clearance of the goods itself, the existence of the Copper scrap is also disclosed. It is not disputed by the respondent No.3 that such certificate of analysis had been produced. The same has also finds a specific mention in the panchnama dated 03.08.2020 and in the letter dated 03.08.2020 addressed to the petitioner by the Assistant Commissioner, ICD, Sanand. Page 72 of 79 C/SCA/10521/2020 JUDGMENT 35.1. It is in the beginning of this communication referred to “during the course of post clearance audit of the Bills of Entry filed by you in respect of clearance of goods viz.,“Discarded and nonserviceable semibroken motor scrap”. It has been noticed that the documents like bill of lading, PSIC and certificate of analysis indicate that the imported scrap consisted of (i) Copper scrap, Barley/Birch (ii) Aluminum scrap (iii) Iron scrap (HMS). 35.2. The petitioner is absolutely right in pointing out that if the exemption was not available to the petitioner on the basis of the documents, which had been produced at the time of import, the Assessing Officer of the Customs could have denied the same and with the full knowledge, he had permitted assessment of the goods under the Customs Tariff Heading 7204 49 00 as Iron and Steel scrap and permitted the exemption available under Notification Page 73 of 79 C/SCA/10521/2020 JUDGMENT 50/2017:CUS dated 30.06.2017 under serial No.368. 36. It can be noticed that from the disclosure made by the petitioner that it had claimed the classification and exemption by bringing to the notice of the department all relevant details and therefore, to term this as a misdeclaration and to arrive at a subjective satisfaction for not allowing the benefit of Notification on the ground of existence of the Copper in the scrap motors, by the DRI Officer surely in wake of the decision of Canon India Pvt. Ltd (supra) shall need to be interfered with. The assessment once when is done by the concerned officer of the Custom Department, the reassessment by the DRI Officer, who invoked the powers, not being the proper officer as per the decision of Canon India Pvt. Ltd. (supra) would warrant indulgence. And, hence, his reasonable belief would also have no bearing when otherwise the authority concerned had allowed the import on the basis of the material which had been already Page 74 of 79 C/SCA/10521/2020 JUDGMENT made available by the petitioner. Thus, on the count of the DRI officer not being a proper officer under the law as the action on the part of the officer of DRI is not to be sustained. Again, assuming that he would have powers to reassess the very fact that entire material was with the assessing officer, it was for him to assess otherwise. Besides, vide notification issued by the Central Board of Excise & Customs, that is, notification no. 40/2012 – customs (NT) dated 2.5.2012 and more particularly, item no.6 whereby, the Intelligence Officer in the Director General of Revenue Intelligence and Directorate General of Central Excise Intelligence, have been assigned the powers of various sections including the powers under subsection (1) and (2) of section 110 of the Act, which notification has been considered by the Apex Court with reference to assigning the powers of section 28 of the Act and has been held to be invalid. The learned counsel for the Union, could not dispute the said proposition as well as the applicability of the Page 75 of 79 C/SCA/10521/2020 JUDGMENT judgment to the facts of the present case, therefore, applying the principles enunciated in the case of Canon India Private Ltd (supra) the petition deserves to be allowed. 37. The decision of the Apex Court rendered in case of Commissioner of Customs, Calcutta vs. G.C.Jain, reported in 2011 (269) E.L.T. 307 shall also need to be referred to at this stage where dispute was whether Butyl Acrylate Monomer (BAM) can be said to be an adhesive for the purpose of allowing the duty free clearances against advance license issued under the DEEC scheme. “24.It is also observed that the demand is hit by the bar of limitation inasmuch as the appellant had cleared the goods in question after declaring the same in the bills of entries and giving correct classification of the same. Availing of benefit of a notification, which the Revenue subsequently formed an opinion was not available, cannot lead to the charge of misdeclaration or misstatement, etc. and even if an importer has wrongly claimed his benefit of the exemption, it is for the department to find out the correct legal position and to allow or disallow the same. In the instant case the appellant had declared the goods as Butyl Acrylate Monomer with correct classification of the same and the word ‘adhesive’ was added in Page 76 of 79 C/SCA/10521/2020 JUDGMENT the exbond bill as per the appellant’s understanding that BAM is an adhesive. In these circumstances it was for the Revenue to check whether BAM was covered by the expression adhesive or not and if even after drawing of samples they have allowed the clearances to be effective as an adhesives appellant cannot be held responsible for the same and subsequently, if the Revenue has changed their opinion as regards the adhesive character of BAM, extended period cannot be invoked against them. As such we are of the view that the demand of duty in respect of 14 consignments is also barred by limitation.” 37.1. It is of course for the department to find out the correct legal position as to the classification and if the department has permitted the clearance, and subsequently changed its opinion, to hold the petitioner liable and responsible and alleged him of misdeclaration since is impermissible. 38. Here is the case where the petitioner has filed Electronic Bill of Entry in the EDI system, where it can claim a particular exemption or a particular classification. On subsequently having noticed that the Copper and Aluminum elements would not permit the exemption under the Page 77 of 79 C/SCA/10521/2020 JUDGMENT Notification at the rate of 2.5% by itself would not make the import of the goods as clandestinely having been done, the least that could have been done was to term the same as mala fide when otherwise the relevant material had been already placed with the department. 38.1. As mentioned hereinabove, the communication dated 03.08.2020 in post clearance audit of Bill of Entry was on the basis of various documents including the certificate of analysis, when it was realized by the department that the product consists of the Copper scrap also to the extent of around 10%. The DRI has firstly detained the goods, which later on had been seized. Assuming that the stage of adjudication of show cause notice is yet to come, this Court has no intent to go into the issue of classification at all as it would be for the proper officer to workout the same on following the due procedure and on requisite scrutiny however, noticing that the order of detention and Page 78 of 79 C/SCA/10521/2020 JUDGMENT seizure by the DRI itself is unsustainable, we allow the petition by quashing and setting aside the seizure and the panchnama. 38.2 Resultantly, this Petition is allowed, quashing and setting aside the detention and seizure dated 29.07.2020 (AnnexureH ), dated 03.08.2020 (AnnexureL & M) & 11.08.2020 (AnnexureW ). 38.3. Petitioner shall be returned the detained raw materials/goods in two weeks from the date of receipt of copy of the judgement. This would have no bearing on the aspect of classification pending before the proper officer and the same shall be determined on its own merit. 38.4. Petition is disposed of accordingly with no order as to cost. (SONIA GOKANI, J) (SANGEETA K. VISHEN,J) M.M.MIRZA Page 79 of 79 "
Other Referred Cases
Union of India vs. Indalco Industries, M/s.CANNON INDIA PRIVATE LIMITED V/S. COMMISSIONER OF CUSTOMS, Commissioner of Customs vs. Gaurav Enterprise, Commissioner of Central Excise vs. Wockhardt Life Science Limited, Northern Plastics Limited vs. Commissioner of Customs & Central Excise, Commissioner of Customs, Calcutta vs. G.C.Jain, PSL Limited vs. Commissioner of Customs, Kandla, Krupa Chaton Mfg.Company Pvt. Ltd vs. UOI, Eagle Impex Vs. CC, Kandla, Sarvalakshmi Paper and Board Vs.C.C., Madras, CC, Bombay vs. Hydranautics Membrance (India) Ltd., T.G. Enterprise vs. Union of India, Sri Vijayalakshmi Leathers vs. Pr.CC-III (SIIB), Indexone Infracon And Logistics Pvt. Ltd. vs. UOIO., Agya Import Ltd vs. CC, New Delhi, Max Enterprise vs. Deputy CC, Chennai, CC, Chennai-II vs. Novel Impex, Kanpur Edibles Pvt. Ltd vs. CC (preventive), Rajkamal Industrial Pvt. Ltd., Institutes of Chartered Accountants of India vs. L.K.Ratna & Ors, Biswanath Bhattacharya vs. Union of India & Ors, Chairman and Managing Director, United Commercial Bank and Ors vs. P.C.Kakkar, Lakmi Devi vs. State of Bihar and Ors, Bhikhubhai Vithalabhai Patel vs. State of Guj. & Ors, Union of India & Ors vs. Agarwal Iron & Industries, N.Nagendra Rao & Co vs. State of A.P., Asst. Collector of Customs vs. Charan Das Malhotra, Union of India & Ors vs. Meghmani Organics Ltd & Ors, Bindal Smelting Pvt.Ltd vs. Addl. Director General, ANGOU GOLMEI vs. VIZOVOLIE CHAKH, Sheo Nath Singh vs. Appellate Asst. Comm. Income Tax, Kolkata, Om Sai Trading Co. Vs. Union of India, Fomento Resources Pvt. Ltd. vs. UOI, Baboo Ram Harucgabd vs, UOI, Maps a Tapes Pvt Ltd vs. UOI, J.K.Barodolia Mills vs. M.L.Khunger, Deputy Coll., S.N.Mukherjee vs. Union of India, East Ciast Railway & Ors vs. Maha Dev Appa Rao & Anr, Sama Aruna vs. State of Telangana & Anr
Laws Referred To
Customs Act, 1962, Customs Tariff Act
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