[Order per : T.P. Nambiar, Member (J)]. - These are two appeals filed by the above-captioned appellants against a common order passed by the Collector of Customs, Calcutta in Order No. 41/95 (Collr.), dated 22-5-1995. The appellant, Shri Sanjeeb Khanna is the Proprietor of the other appellant company, M/s. Shilpi Exports. In terms of the impugned order, the Firm namely, M/s. Shilpi Exports are imposed with a penalty of Rs. 50.00 lakhs under Section 114 and a penalty of Rs. 15,000.00 was imposed on its proprietor who is the appellant, Shri Sanjeeb Khanna.

2. The facts of the case are that the appellants through their clearing agents, M/s. M. Dutta Agency filed four Shipping Bills for export of 100% Mulberry Silks Superior Printed Ties to M/s. H.N.D. Kapur Textiles Ltd., Cheshire, SK 5 7NB, U.K. declaring the value as Rs. 22,38,251.36, Rs. 22,38,251.36, Rs. 22,38,251.36 and 32,77,439.50 respectively. The Shipping Bills were noted in Export Department on 25-6-1993. The goods were examined by the officers of the Appraising Docks and E.I.B. and were found to be Mulberry Silk Printed Ties. Representative samples were drawn and sealed in the presence of the appellant firm

3. During the course of enquiry, a doubt was entertained on the declared value of these export products. It is the case of the Department that the representative samples were shown to M/s. Mohan’s, New Market, Calcutta-87 and M/s. Handloom House, Calcutta-87. On inspection, they certified that similar Mulberry Silk Printed Ties were available in the local market @ Rs. 100.00 and 102.10 per piece. Thus it is the case of the Department that taking Rs. 102.10 on the higher side as per the above market prices collected, the total market price of the goods exported by the appellants would work out to Rs. 2,28,704.00 against the declared F.O.B. value of Rs. 22,38,251.36 each with reference to the three consignments as mentioned above under DEEF Nos. 139 to 141, dated 7-7-1993 and the value of the fourth consignment would work out to Rs. 3,34,888.00 against the declared F.O.B. value of Rs. 32,77,343.50. Accordingly, it appeared to the Department that there was over-valuation to the tune of Rs. 18,95,195.36 each against DEEF No. 139 to 141, dated 7-7-1993 (i.e. for the first three consignments) and that of Rs. 27,75,107.50 against the DEEF No.142, dated 7-7-1993 (i.e. for the fourth consignment).

4. Show cause notice was, therefore, issued as to why the penalty should not be imposed for having violated Section 113(d) of the Customs Act, 1962 read with Clause 3(3) of the Export(Control) Order, 1988 and Sections 3 and 4 of Foreign Trade (Development and Regulation) Act, 1992 and the benefit under DEEC Scheme for duty-free imports should not be rejected and why penalty should not be imposed on both M/s. Shilpi Exports and its Proprietor, Shri Sanjib Khanna in terms of Section 114 of the C.A., 1962.

5. The appellants replied the same and after hearing, the impugned order was passed.

6. Learned Consultant, Shri B.N. Chattopadhyay contended on behalf of the appellants herein that there is in fact no over-valuation. He stated that the samples were drawn and they were sealed in the presence of the appellants. But the case of the Department is that these samples were sent for examination. But the reports of M/s. Mohan’s and M/s. Handloom House (supra), do not show that these were the very samples of the goods in question which were examined by them. Hence he contended that these are only two pieces of evidence relied upon by the Department, to show that there was over-valuation. However, these two pieces of evidence are not sufficient to hold so.

7. Learned J.D.R.,Shri B.B. Sarkar on the other hand, contended that these two certificates both dated 27-9-1994, go to show that the price of similar goods is Rs. 102.10, as opined by M/s. Handloom House and Rs. 100.00 as opined by M/s. Mohan’s Tailors & Men’s Wear, Calcutta-87.

8. We have considered the submissions of both sides. The question for determination is whether these two certificates are sufficient to prove that the valuation arrived at by the Department on the strength of the same, is correct and the goods in question which were exported by the appellants herein were liable to confiscation in terms of Section 113(d) of the Customs Act, 1962. These certificates furnished by M/s. Handloom House and M/s. Mohan’s Tailors & Men’s Wear read as follows :

“To                            27-9-1994

Appraiser, Export Investigation Branch,

15/l, Strand Road,

Custom House,

Calcutta.

Dear Sir,

In response to your letter No. S41/18/93/EIB, dated 27-9-1994 I have seen the sample of Silk Ties which is approximately to our knowledge should be about Rs. 100.00 per pc. in retail.

Thanking you,

Yours faithfully,

Sd/-

For Mohan’s"

“To

The Appraiser,                       27-9-1994

Export Investigation Branch,

15/1, Strand Road,

Custom House,

Calcutta.

Sir,

In response to your letter No. S41/18/94/EIB, dated 27-9-1994, I have seen the samples of Silk Ties of which resembles with the ties i.e., sold through our handloom house, the rate to the same is Rs. 102.10 at retail price.....

Thanking you,

Yours faithfully,

Sd/-

For Handloom House"

These certificates are very vague in nature. They do not show as to what are the goods which the above companies have examined. These two certificates do not mention that they have examined the Mulberry Silk Superior Ties which were the goods seized from the appellants. They also do not state as to the basis on which they came to the conclusion that the prices mentioned by them were correct. There is no correlation of the samples of the goods seized as well as the samples examined by these agencies. There is no basis provided in these two certificates to show that the prices determined by them are correct ones with respect to the similar goods which were exported by the appellants. On that ground, the charge of over-valuation by the respondent Collector is not proved and that the appellants are entitled to succeed.

9.  Even otherwise, it was further contended by the learned Consultant, Shri Chattopadhyay that the mode of valuation prescribed under Customs Act, 1962 in terms of Section 14 does not apply in the present case in view of the fact that no duty is chargeable on these goods. In this connection, he relied upon the decision of the Tribunal in the case of Collector of Customs, Kandla v. Dimple Overseas Ltd. passed by the Special Bench : `A’ in Order No. 406/94-A, dated 22-12-1994.

10.  This decision was also cited before the Adjudicating Authority. But the learned Adjudicating Authority in the impugned order merely stated as follows :-

“...I observe that the Hon’ble Tribunal has not decided in the similar case.”

He did not discuss the decision at all except making a bare averment that the decision did not deal with that aspect. In this case, the exported goods are not dutiable ones. In the above-cited decision at para 16 the Tribunal held as follows :-

“...The mode of valuation prescribed in Section 14 of Customs Act is applicable whenever a duty of customs is chargeable on any goods by reference to their value....”.

After discussing this aspect, further in para 16 the Tribunal in the last sentence held as follows :-

“ . . . Hence, for the above-said reasons, the Collector ‘s conclusion that the rigours of Section 14 on valuation are not in terms applicable to the present case where the goods exported are not subject to any levy of duty at all, calls for no interference so far as this aspect of the case is concerned. ”

11. It is, thus, clear that this aspect was considered by the Tribunal in the light of the decision of the Calcutta High Court in the case of Bird & Co. v. K.K. Sengupta reported in 1988 ( 37 ) E.L.T. 70 . It is thus clear that the method adopted by the Department in arriving at the value as per Section 14 of the Customs Act, 1962 is also not applicable, since the goods in this case are not subjected to any levy of duty. On that ground, the appeals are to be allowed .

12.  It was further contended by the learned Consultant, Shri B.N. Chattopadhyay that the allegation in the show cause notice is that Section 113(d) of the Customs Act, 1962 is violated. He pointed out that Section 113(d) is not applicable to the facts of this case at all. Ld. J.D.R. reiterated the findings in the adjudication order. Section 113(d) reads as follows :-

“113. Confiscation of goods attempted to be improperly exported, etc. - The following export goods shall be liable to confiscation :-

(a).....   .....

(b).....   .....

(c).....   .....

(d) any goods attempted to be exported or brought within the limits of any customs area the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force;

...    ...    ..".

13. These are goods to be exported to the foreign countries and there is no prohibition for exporting these goods in view of our finding on value of goods. It is not spelt out in the order as to what is the Law which is contravened in exporting these goods. The allegation in the show cause notice in this regard is reproduced below :

“The misdeclaration in regard to value of the export goods attracts contravention of Clause 3(3) of the Export Trade Control Order No. 1/88 etc., dated 30-3-1988 read with Sections 3 & 4 of the F.T. (Dev. Reg.) Act, 1992.”

It is thus seen that Section 113(d) is not applicable to the present case as the goods are not prohibited goods. If at all any Section is applicable, it will be Sec. 113(i) ibid. which reads as follows :

“(i) any goods on which import duty has not been paid and which are entered for exportation under a claim for drawback under Sec . 74. ”

It is seen that Section 113(i) provides that only the dutiable or prohibited goods entered for exportation under a claim for drawback under Section 74 which do not correspond to material particulars with the Entry made under this Act, are liable for confiscation. In this case, the goods imported are neither dutiable nor prohibited nor are the goods entered for exportation under a claim for drawback. Therefore, Section 113(i) also is not applicable to the facts of this case in terms of the allegation made in the show cause notice. The corresponding Section 111(m) is as follows :

“111. Confiscation of improperly imported goods, etc. - The following goods brought from a place outside India shall be liable to confiscation :

(a).......     ...............

..........      .............

(m) [any goods which do not correspond in respect of value or in any other particular] with the entry made under this Act or in the case of baggage with the declaration made under Sec. 77 in respect thereof :

. . .     .....".

It is thus seen that under Section 111(m) any goods without any qualification are liable for confiscation if they do not correspond to any value or any other particulars being the Entry made under the Act. But under Section 113(i) only dutiable or prohibited goods or goods entered for exportation under a claim for drawback, and if they do not correspond in any material particulars to the Entry made under this Act including the Entry under Section 50 of the Customs Act, are liable for confiscation. The present goods do not answer to any of the above descriptions. Therefore, the goods are not liable for confiscation under Section 113 of the Customs Act, 1962.

14.  The appellants also cannot be penalised under Section 114 of the Customs Act, 1962 which reads as follows :

“114. Penalty for attempt to export goods improperly, etc. – Any person who, in relation to any goods, does or omits to do any act which act or omission would render. such goods liable to confiscation under Sec. 113, or abets the doing or omission of such an act, shall be liable,

(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding five times the value of the goods or one thousand rupees, whichever is the greater;

(ii) in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding five times the duty sought to be evaded on such goods or one thousand rupees, whichever is the greater;

(iii) in the case of goods under claim for drawback, to a penalty not exceeding five times the amount of drawback claimed or one thousand rupees, whichever is the greater."

It is thus seen that in order to attract Section 114 it must be established that the appellants in relation to the above-said goods did commit an act and that act should render the goods liable for confiscation under Sec. 113 of the Customs Act, 1962. Since in this case, the goods are not liable for confiscation under Section 113 ibid. as already discussed by us above , the question of imposition of penalty does not arise. Under Section 114(i) the penalty can be imposed in case of prohibited goods and under Section 114(ii) the penalty can be imposed in case of dutiable goods other than prohibited goods and in terms of Section 114(iii) the penalty can be imposed in case of goods under claim of drawback. This corresponds to Section 113(i) ibid as extracted above. Since there was no contravention of any of the prohibitions of Section 113 ibid the question of imposition of penalty also does not arise in this case.

15.  In this case, the fact remains that the appellants had brought foreign exchange and even in the impugned order, it is admitted by the Adjudicating Authority that the appellants had brought the foreign exchange. In Page No. 4 of the impugned order, the adjudicating authority records as follows :

“....Though they have realised the full export value as declared in the shipping bills as per copies of submitted Bank realisation certificates, their declared value cannot be taken as the value for Customs purposes...”.

A perusal of the above goes to show that it is admitted even in the impugned order that they have realised the full export value. If they have realised the full export value then it is not known as to how that value cannot be accepted. Again in the findings portion at Page No. 6 of the impugned order, the Adjudicating Authority observed as follows :

“........It appeared from records of the case that the exporter had realised the full foreign exchange remittance back through the proper legal channels as declared by them as the export value for the subject export consignments.”

16. It is, therefore, clear that whatever value the appellants had declared as export value, was realised by them in full foreign exchange remittance through the proper legal channels. If that is so, we fail to understand as to how the appellants can be penalised when they have realised the full foreign exchange remittance back through the proper legal channels which value they had declared to the Customs Authorities. It is also not discussed in the impugned order as to what was the advantage which they had obtained in view of this declaration of value made by them. There is no discussion on this aspect. On the contrary, it only shows that the country earned a larger foreign exchange which was realised through proper legal channels as admitted in the impugned order. In such circumstances, the imposition of penalty on all the above-said grounds is not tenable and accordingly, we set aside the same. In the result, both the appeals are allowed.

Operative part of the Order was already pronounced in the open Court, after conclusion of the hearing on 24-10-1995.