Case Law Details
Climax Overseas Private Limited Vs Commissioner (Appeal) Custom, Central Excise & Service Tax, (CESTAT Delhi)
The factual matrix of this case clearly shows that not only the goods have reached ICD Garhi, Harsaru after the issue of DGFT notification restricting the import of natural rubber through Nhava Sheva and Chennai only on 20.01.2016, but the goods were also dispatched after this date on 03.02.2016 by the overseas supplier. The Commercial invoice was also issued on 25.01.2016, five days after issue of DGFT notification. The contract, however, was signed with the overseas supplier by the appellant on 12.01.2016 before the issue of DGFT notification. It is a well settled legal principle that any contract between parties is subject to law and public policies. If the laws change making it impossible to fulfil the contracts as per the original terms, it is open for the parties to either cancel or modify the contract to bring it in conformity with the laws of their respective countries. Framing laws is the sovereign right of the state and this is not subservient to any contract between two businesses. Needless to say that in the case of any conflict between a contract and the law, the latter prevails. After the notification was issued on 20.01.2016 the appellant could have negotiated changes to the contract and got an invoice issued and delivery modified to bring it in conformity with the new legal notification. The appellant did nothing but went ahead with inflicting the goods under a bill of lading with the port of discharge as Nhava Sheva and final destination as ICD Garhi, Harsaru. This only establishes that either the appellant was negligent or otherwise decided to import the goods in violation of the law.
FULL TEXT OF THE CESTAT DELHI ORDER
This appeal has been filed by M/s. Climax Overseas Private Limited 1 assailing the order in appeal2 dated 11.03.2019 passed by the Commissioner of Customs (Appeals), New Customs House New Delhi whereby he upheld the order in original dated 31.03.2016 passed by the Joint Commissioner of Customs and rejected the appellant’s appeal. Hence this appeal.
2. The facts of the case, in brief, are that the appellant signed a contract dated 12.01.2016 with a supplier in Vietnam for import of natural rubber RSS3. Thereafter, on 20.01.2016 the Director General of Foreign Trade issued a notification no. 32/2015-2020 revising the policy condition for import of natural rubber as follows:
“Revised policy condition; import allowed only through sea ports of Chennai and Nhava Sheva (Jawaharlal Nehru port).”
3. Thereafter, the overseas exporter issued a commercial invoice to the appellant on 25.01.2016 and dispatched the consignment of natural rubber by bill of lading dated 03.02.2016 from Ho Chi Min port in Vietnam with port of discharge as Nhava Sheva and final destination as ICD Garhi Harsaru, India. The appellant filed bill of entry dated 02.03.2016 at ICD Garhi, Harsaru to clear the aforesaid consignment. The appellant also submitted a no objection certificate dated 10.03.2016 from the Rubber Board as called for by the appraiser.
4. It was pointed out by the officers to the appellant that in terms of the EXIM policy as notified by DGFT notification dated 20.01.2016, the consignment of rubber could only be imported through Chennai or Nhava Sheva ports and not through ICD Garhi, Harsaru, India. The appellant submitted a letter dated 10.03.2016 waiving the issue of show cause notice and requesting for a personal hearing before the adjudicating authority. Accordingly a personal hearing was held on 11.03.2016 by the Joint Commissioner which was attended to by the appellant and an order in original dated 31.03.2016 was passed. The appellant had also deposited a redemption fine of Rs. 1,00,000/- and Rs.50,000/- as penalty by challan dated 15.03.2016. The operative part of the order in original was as follows:
a) I confiscate the goods imported under Bill of Entry No. 4422959 DATED 02.03.2016 having total assessable value of Rs. 17,47,951/- (Rupees Seventeen Lakhs Forty Seven Thousand Nine Hundred Fifty One Only) under Section 111 (d) of the Customs Act 1962. However, I give an option to the Importer to redeem the goods on payment of a Redemption Fine of Rs. 1, 00,000/-(Rupees One Lakh Only) in terms of provisions of Section 125(1) ibid.
b) I also impose a penalty of Rs. 50,000/- (Rupees Fifty Thousand Only) on the Importer M/s Climax Overseas Pvt. Ltd. under Section 112 (a) ibid.
5. This order was upheld by the Commissioner (Appeals) by the impugned order. Hence, this appeal on the following grounds:
a. There was no violation of DGFT notification dated 20.01.2016 as the port of discharge in their case was Nhava Sheva, although the goods were clear through ICD Garhi Harsaru. The goods should not have been forwarded to ICD Garhi, Harsaru by Nhava Sheva Port customs officers. Procurement certificate as required was also obtained by the appellant from the Central Excise authorities and a no objection certificate was also obtained from the Rubber Board, Kerala.
b. The adjudication order is not maintainable since no show cause notice was issued. On the basis of verbal order of the Joint Commissioner, they had deposited redemption fine of Rs. 1,00,000/- and a penalty of Rs. 50,000/- through challan on 15.03.2016 itself. This amount was not appropriated towards redemption fine and penalty and the order of Joint Commissioner was not a speaking order.
c. The imported consignment was under transitional arrangement because the appellant had already signed a contract on 12.01.2016 with overseas supplier well before the issue of the DGFT notification.
d. Imported goods are not liable for confiscation under section 111(d) which reads as follows:
“Confiscation of improperly imported goods, etc.-
The following goods brought from a place outside India shall be liable to confiscation:-
d. Any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force.”
This section provides for confiscation of goods which are imported contrary to any provision imposed by or under this Act or any other law for the time being in force. The DGFT notification dated 20.01.2016 allowed import of goods through port of Nhava Sheva as they did. Only the Customs clearance was done through ICD Garhi, Harsaru.
e. The penalties are not imposable under section 112 because the conduct of appellant has always been bonafide.
6. It was therefore, prayed that the impugned order may be set aside and the appeal may be allowed.
7. Learned Authorised Representative supports the impugned order and argues that it calls for no interference as the appellant had clearly and apparently imported natural rubber in violation of DGFT notification dated 20.01.2016. He submits that the port of import is the airport, land custom station, ICD etc. from where the goods are cleared by the importer. There cannot be two ports of import. It is a well settled legal position that the import is complete only when goods cross the customs frontiers. In this case, this happened at ICD Garhi Harsaru and not at Nhava Sheva. Before reaching the ICD the goods have to be discharged at some port and carried to the ICD and this does not make the port of discharge the port of import. The ICD is the dry port through which the goods are imported. In this case, it was Garhi, Harsaru and not Nhava Sheva. The appellant has clearly imported the goods in violation of DGFT notification and therefore the impugned order is correct and proper and calls for no interference.
8. We have considered the arguments and submissions of both sides and perused the records.
9. The factual matrix of this case clearly shows that not only the goods have reached ICD Garhi, Harsaru after the issue of DGFT notification restricting the import of natural rubber through Nhava Sheva and Chennai only on 20.01.2016, but the goods were also dispatched after this date on 03.02.2016 by the overseas supplier. The Commercial invoice was also issued on 25.01.2016, five days after issue of DGFT notification. The contract, however, was signed with the overseas supplier by the appellant on 12.01.2016 before the issue of DGFT notification. It is a well settled legal principle that any contract between parties is subject to law and public policies. If the laws change making it impossible to fulfil the contracts as per the original terms, it is open for the parties to either cancel or modify the contract to bring it in conformity with the laws of their respective countries. Framing laws is the sovereign right of the state and this is not subservient to any contract between two businesses. Needless to say that in the case of any conflict between a contract and the law, the latter prevails. After the notification was issued on 20.01.2016 the appellant could have negotiated changes to the contract and got an invoice issued and delivery modified to bring it in conformity with the new legal notification. The appellant did nothing but went ahead with inflicting the goods under a bill of lading with the port of discharge as Nhava Sheva and final destination as ICD Garhi, Harsaru. This only establishes that either the appellant was negligent or otherwise decided to import the goods in violation of the law.
10. The next question is whether the Nhava Sheva can be considered the port of import in this case or the ICD Garhi, Harsaru? In the normal course of business the goods move form port to port in different countries or even from one port of the country to another. Further, when in the era of containerised imports, the goods moved from ports to land customs stations, ICDs, etc. The port of import is the port where the Bill of Entry is filed to clear the goods. It is a well settled matter that until the goods cross the customs frontiers they are supposed to be in the course of international trade. In this case, the port of import is ICD Garhi, Harsaru, through which the impugned goods could not have been imported in terms of the DGFT notification. The appellant imported in violation of the notification.
11. Learned counsel for the appellant also argued that the adjudication order cannot be sustained because no show cause notice was issued to the appellant. This submission cannot be accepted because appellant itself mentioned in paragraph 8 of the appeal that had submitted a letter on 10.03.2016 waiving the show cause notice and requesting for personal hearing and that the Joint Commissioner held a personal hearing on 11.03.2016 which was attended to by the appellant. The appellant cannot blow hot and blow cold at the same time. It cannot waive the show cause notice in writing to expedite the process of clearance and thereafter complain that the no show cause notice was issued to it.
12. Another submission by the appellant is that the import consignment was a transitional arrangement as the contract was signed on 12.01.2016 before the issue of the notification and therefore the provision of notification is not applicable for this consignment. This submission cannot be accepted. The private contracts between parties cannot prevail over public policy and public law. If there is a conflict, the law prevails. The notification came into force on the date of publication regardless of the date of various business contracts.
13. Private contracts are always subject to public policy and laws and if in terms of the changed law the performance under the contract becomes impossible, the contract becomes void. Further, in this case, although the contract was signed on 12.01.2016, subsequent actions in pursuance of the contract viz., issue of the commercial invoice on 25.01.2016 and dispatch of the goods by bill of lading dated 03.02.2016 took place well after the DGFT notification. Therefore, the appellant was clearly violated the law.
14. It is further been submitted that goods cannot be confiscated under section 111(d) and no penalty can be imposed under section 112 (a). The ground on which these assertions are made are the same as above that the port of discharge in Nhava Sheva should be considered as the port of import, although they have cleared the goods to ICD Garhi Harsaru. For the reasons already discussed above this assertion cannot be accepted. The appellant has been clearly in violation of importing goods contrary to the import policy as notified by the DGFT notification. Goods so imported were therefore, liable for confiscation, and have been correctly confiscated under section 111 (d). Consequently, the appellant was liable for penalty under section 112(a) and a penalty has been imported.
15. It has also been submitted on behalf of the appellant that the appellant’s conduct has always been bonafide and he had no knowledge of liability of goods to confiscation and it is only the matter of interpretation and no penalty can be imposed upon it. Ignorance of law is not an excuse and the DGFT notification was issued on 20.01.2016 and thereafter the appellant proceeded to import goods in clear violation of the notification. We find nothing bonafide in the conduct of the appellant. On the contrary, we find a brazen violation of law. Consequently, the penalty has been correctly imposed.
16. In view of the above, we find that the impugned order is correct and proper and calls for no interference. Accordingly, impugned order is upheld and the appeal is rejected.
(Order pronounced in the open court on 10.06.2022)
