of Customs, Bombay Vs. M/S Hardik Industrial
Corporation  INSC 923 (10 December 1997)
BHARUCHA, A.P. MISRA
Revenue is in appeal from an order passed by the Customs, Excise and Gold
(Control) Appellate Tribunal.
respondent filed, for clearance for home consumption, seven bills of entry
purporting to relate to polyethylene scrap. By reason of intelligence received
that serviceable material was likely to be cleared by the respondent as scrap,
the goods covered by the seventh bill of entry were examined by the Customs
authorities. It was found that what had been imported were plastic rolls of
LDPE films of continuous printed jumbo size bags, plain carry bags and printed
carry bags, all ready for use. The gods were seized. Statements were recorded
under the provisions of Section 108 of the Customs Act, 1962, and an order was
made on 8th March, 1994 by the Collector of Customs. Bombay.
order noted the correspondence between the respondent and its foreign
suppliers, the statements that had been made and other material on record. It
found that the respondent had sought to clear serviceable material as scrap. it
required that the goods be assessed as serviceable material;
the value thereof be enhanced; that they be confiscated with option to the
respondent to redeem them on payment of a fine; and that the respondent pay a
the Collector's order the respondent preferred an appeal to the Tribunal The
judgment and order thereon is the subject matter of this appeal. In its
judgment the Tribunal referred t the submission made on behalf of the
respondent that the goods had been imported for the purpose of recycling in the
manufacture of mono filament yarn and the respondent was not interested in
using the goods for any purpose other than as scrap. In order to establish the
respondent's bonafide, its counsel submitted that the respondent was willing to
have the goods mutilated at its own expense, and, in that context, referred to
Section 24 of the Customs Act. The Tribunal observed that the purpose of the
said provision was to ensure that where imported goods had more than one
purpose, they were rendered unfit for use except for one purpose. In other
words, the Tribunal said, where imported goods could be used as scrap or as
serviceable material, it should be open to an importer who contended that the
import was only for use as scrap to seek mutilation so that the goods could be
used only as scrap and not as serviceable material. The Tribunal referred to
the practice of permitting mutilation of serviceable garments which were
claimed to have been imported as rags. The Tribunal was satisfied that the same
procedure could be followed in the instant case, notwithstanding that rules had
not been made under Section 24. Setting aside the order of the Collector, the
Tribunal directed that the goods should be mutilated in such a manner that they
could be used only for recycling and not for any other purpose.
24 of the Customs Act reads thus:
to make rules for denaturing or mutilation of goods.- The Central Government
may make rules for permitting at the request of the owner the denaturing or
mutilation of imported goods which are ordinarily used for more than one
purpose so as to render them unfit for one or more of such purposes; and where
any goods are so denatured or mutilated they shall be chargeable to duty at
such rate as would be applicable if the goods had been imported in the
denatured or mutilated form" Mr. Usgaocar, learned Additional Solicitor
General, submitted that the respondent had attempted to clear serviceable
material as scrap. the goods had been, inter alia, confiscated and a redemption
fine and penalty had been imposed. The order under appeal had wiped out all
this, without going into the merits, only by relying upon Section
The purpose of Section 24 was not to condone or erase the consequences of an
offence that had been committed .
counsel for the respondent pointed out that the order of the Collector had
noted that it had been argued before him on behalf of the respondent that the
goods had been offered for mutilation, and submitted that this offer should
have been accepted because it proved the bona fides of the import. Learned
counsel submitted that the Tribunal was, therefore, justified in invoking
Section 24 and basing its judgment upon it.
point of time at which the respondent made the offer of mutilation is relevant.
If, at the very outset, the respondent had asked for mutilation of the goods, that
might have been a different matter. The Collector's order suggests that it did
not. It sought to clear the goods. It was only upon the examination of the
seventh container that it was noticed that a part of what it contained was
serviceable material. If that be so, the respondents offer of mutilation was
made only after the offence had been discovered.
order of the Tribunal does not discuss the merits of the case. It does not hold
as a fact that the goods were scrap or that the respondent had not sought to
clear as scrap what was really serviceable material or that the confiscation,
redemption fine and penalty were uncalled for.
so finding, the Tribunal could not have set aside the Collector's order and
directed merely the mutilation of the goods.
are, thus, unable to uphold the order of the Tribunal and must set it aside. At
the same time, the respondent should not be deprived of the opportunity of
satisfying the Tribunal upon the merits of its appeal; the appeal must,
therefore, be remanded to the Tribunal for being heard and disposed of on
merits, uninfluenced by the judgement and order that we have set aside.
appeals are allowed. The judgment and order under appeal is set aside. The
appeal (No. C. 481/91-A, 327- 328/95-A) is restored to the file of the Tribunal
(New Delhi) to be heard and disposed of on
respondent shall pay to the appellant the costs of the appeal.