Custom, Excise & Service Tax Tribunal
Sanjay Chauhan vs Goa on 29 April, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS: C/99 & 104/2009
[Arising out of Order-in-Original No: 03/Commissioner/Goa/Cus/ 2008 dated 29/08/2008 passed by the Commissioner of Customs, Central Excise & Service Tax, Goa]
For approval and signature:
Honble Shri M V Ravindran, Member (Judicial)
Honble Shri C J Mathew, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Inderjit Nagpal
Sanjay Chauhan
Appellants
versus
Commissioner of Customs & Central Excise
Goa
Respondent
Appearance:
Shri Vipin Kumar Jain with Shri Roschil Michani, Advocates for the appellants Shri M.K. Sarangi, Jt. Commissioner (AR) for the respondent CORAM:
Honble Shri M V Ravindran, Member (Judicial) Honble Shri C J Mathew, Member (Technical) Date of hearing: 29/04/2016 Date of decision: 25/10/2016 ORDER NO: ____________________________ Per: C J Mathew:
Appeals of late Shri Inderjit Nagpal (continued by Smt Neera Nagpal) and Shri Sanjay Chauhan against order-in-original no: 03/Commissioner/Goa/Cus/2008 dated 29th August 2008 of Commissioner of Customs, Central Excise & Service Tax, Goa are taken up for disposal in this proceedings. The first issue that comes up for consideration is that of continuation of appeal proceedings by legal heir of the deceased appellant and, on whose behalf, the decision of Honble Supreme Court in Shabina Abhraham v. Commissioner of Central Excise 2015 (322) ELT 372 (SC) and of the Honble High Court of Karnataka in Commissioner of Central Excise, Bangalore III v. Dhiren Gandhi 2012 (281) ELT 64 (Kar.) was cited to support the contention that the appeal should abate as confirmed demands cannot be recovered from successors of a deceased assessee in the absence of statutory provision for doing so. Relying upon the definition of assessee in section 2 of Central Excise Act, 1944 and the object of recovery of duty that was short-paid or unpaid in section 11A, the Honble Supreme Court had held that legal heirs cannot be proceeded against. Likewise, the Honble High Court of Karnataka had held that legal heirs are not person chargeable to duty and penalty recoverable under the Act even where such successor of a deceased proprietor-manufacturer got registered as an assessee under the same name and style. Learned Counsel for Smt Neera Nagpal further submits that section 142 of Customs Act, 1962, the recovery mechanism, refers to person and person excludes deceased individuals.
2. Learned Authorised Representative distinguished the facts in re Shabina Abraham from those in the present dispute by contending that the cited rulings were rendered in disputes over the jurisdiction to invoke section 11A against legal heirs of those who had not paid or short-paid duties whereas Shri Inderjit Nagpal had challenged the confirmation of duty under section 28(1) upon conclusion of the proceedings and that, till the confirmation was set aside, the amounts were recoverable as dues to government.
3. Recovery under section 142 of Customs Act, 1962 was not the challenge mounted by Shri Inderjit Nagpal and hence we need not concern ourselves with the scope of the mechanism for recovery of arrears. That Smt Nagpal, as legal heir, chose to implead herself in the appeal amply evidences her own inference that the estate of the deceased is in jeopardy. With the confirmation of demand, the amount is a claim of the government and liable to be recovered. Section 129E makes it a condition mandatory for filing an appeal that duty, if any, demanded in the impugned order should, unless waived, be deposited; waiver is at the discretion of the appellate authority and is not a matter of right. The cited rulings apply to proceedings that are ante confirmation of demand by the adjudicating authority. The statute does not contemplate reversal of a confirmation of demand except through the appellate mechanism. The appeals do not abate and must be decided.
4. The next issue for determination is the first ground of appeal, viz., that the deceased appellant Shri Inderjit Nagpal, not having filed the bills of entry for the consignment on which differential duty was confirmed, could not have been fastened with the duty liability. Briefly, the facts are that, on the basis of information that MPEG cards were being imported by misdeclaring as PCB for VCD, investigation of M/s Shree Krishna Impex, M/s Marco Enterprises and M/s Navdurga Enterprises, who had imported consignments at Air Cargo Complex, Goa in 2002-03 and 2003-04, identified the customs house agent and transporter which led the investigation to conclude that Shri Inderjit Nagpal as the alleged beneficiary of the consignments. The customs house agent and the transporter also identified a control sample of MPEG card as identical to those cleared by them in the name of the referred firms. Show cause notice was issued for recovery of duty short-paid arising from mis-declaration of the goods from the firms or from Shri Nagpal, confiscation of the goods (which were no longer available) and for imposition of penalties under Customs Act, 1962. It was also alleged that some of the cards were retailed in the market through one Jawahar Lal Khubchandani operating his business in the name and style of Khubsons Electronics. He confirmed having entered into an understanding with Shri Inderjit Nagpal for supply of MPEG cards without any documentation at a price of about ` 400/- per piece. The said Khubchandani, upon being shown a sample drawn from a consignment of MPEG card seized from M/s Picasso Overseas, confirmed that the goods obtained by them were also the same. From the statements of the Custom House Agent and the bank records of Centurion Bank Ltd, New Deli, the investigators obtained evidence of flow of funds from M/s Everything International, belonging to Inderjit Nagpal, to the importing firms as well as to the clearing agent. The importing firms were established by Shri Sanjay R Chauhan, who is the brother of Shri Manoj Chauhan, an employee of the customs house agent at the alleged instigation of Shri Inderjit Nagpal. The customs house agency belonged to one Jaikishan Dhingra, the brother-in-law of Shri Inderjit Nagpal. The investigators also made enquiries with M/s Super Cassette Industries, Noida, who, after viewing the seized sample, admitted to import of the same goods after declaring them as MPEG cards at prices ranging from US$ 5.95 to US$ 6.05. Likewise, M/s HS Chawla & Company, Delhi also made a similar identification of parts of the products which were imported by them. The adjudicating authority rejected the declared value under rule 10A of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 and re-assess the value of the goods in accordance with rule 6 of Rules leading to confirmation of demand of ` 5,46,75,693/-. With the finding that the importing firms were non-functional and in the light of the financial flows from the firm of Shri Inderjit Nagpal and the various statements pointing to him as the mastermind of the operation to smuggle in MPEG cards by misdeclaration, Shri Inderjit Nagpal was held as the person from whom duty was to be recovered.
5. Not unnaturally, Shri Inderjit Nagpal denied any connection with Shri Sanjay Chauhan, ostensible owner of the importing firms, who, in turn, claimed that MPEG (Motion Picture Export Group) does not refer to a product but a standard which does not in any way constitute a separate dutiable product other than PCBs. The valuation adopted by Revenue was also questioned on the ground that the conditions for adoption of rule 6 of the said Rules had not been complied with. It is also claimed that there is no authority to revisit an assessment that has been finalized at the time of import and that assessment having been completed and finalized at the time of import, it is not proper to disturb the assessment without adequate reason. Shri Inderjit Nagpal also alleged that the statements implicating him were not admissible as these had been obtained by coercion, that payments to M/s Krishna Impex and M/s Damodar Enterprises took place at the end of 2003 long after he had ceased to be in the import business. The original authority had, besides confirming the demand of differential duty of ` 5,46,75,693 also held the goods liable for confiscation under section 111(m) of Customs Act, 1962 and imposed fine of ` 2,50,00,000/- in lieu of confiscation. Penalty of ` 5,46,75,693/- under section 114A and penalty of ` 2,50,00,000/- under section 112(a) of the Customs Act, 1962 were imposed on Shri Inderjit Nagpal besides recovery of interest on the amounts short-paid and imposed penalty of ` 10,00,000/- on Shri Sanjay R Chauhan.
6. Learned Counsel for the appellants placed reliance on the decision of the Tribunal in Schlumberger Asia Services Ltd v. Commissioner of Customs (Adj.), Mumbai 2015 (330) ELT 369 (Tri.-Mumbai) and Goodwill Clothing Co. v. Commissioner of Customs, Kandla 2008 (225) ELT 211 (Tri-Ahmd.) and the decision of the Honble High Court of Bombay in Commissioner of Customs (EP) v. Jupiter Exports 2007 (213) ELT 641 (Bom.). The decision of the Tribunal in re Schlumberger Asia Services was rendered after difference of opinion was settled by reference to Third Member who held:
36.2?The ld. AR (Additional Commissioner) has contended that.. the investigating authorities did not identify who the actual carriers were .......
36.3?I agree with the appellant that they are not the owners of the goods and consequently the sole premise on which the demand has been confirmed against them by the respondent cannot be sustained It was for the investigating authorities to have raised the demand against the person from whom it was legally due. However, having failed to raise the demand against the person from whom it is due Revenue authorities cannot fasten the same on the person who in the course of investigation deposited the said amount. The decision in the case of Associated Cement Companies Ltd. v. CC reported in 2001 (128) E.L.T. 21 (S.C.) which the ld. AR had relied upon, does not apply to the facts of the present case as in that case Videocon, against whom the demand has been confirmed in respect of baggage imports was the owner of the goods. In the instant case, as I have already observed above, the appellant is admittedly not the owner of the goods imported and consequently the ratio laid down in the case of Associated Cement Companies Ltd. v. CC does not apply to the facts of the present case.
37.1?The fifth question of difference is essentially whether in case of imports made by sea could duty have been demanded from the appellant?
37.2?It was submitted by the appellant that bills of entry for the import by sea were filed by ONGC and that the appellant has not assigned any reason for holding that the appellant was the importer. It was further submitted that the order-in-original clearly refers to the bill of entry no. and date and had the appellant been the importer the adjudicating authority would have clearly recorded this fact.
37.3?The ld. (AR) has contended that Appellant did not produce any evidence to the effect that Bill of Entry was not filed by it but by ONGC and consequently the demand of duty has rightly been confirmed against the appellant.
37.4?In my view the onus was on the Revenue to establish as to who had actually filed the Bill of Entry and had taken upon it the mantle of an importer. The Revenue having failed to discharge this burden, it was not open for the Revenue to draw an adverse inference against the appellant and call upon it to prove the negative. I also take note of the fact that the appellant has right from the stage of investigation itself clearly stated in no uncertain terms that ONGC was the importer, which fact has not been rebutted by the investigating authority. I therefore agree with Member (Judicial), that the demand of customs duty in respect of three consignments imported by sea cannot be fastened upon the appellant.
xxxxxxxx 38.1?For reasons recorded in the preceding paragraphs, I am of the view that the appellant not being the importer, as also the goods having been transshipped/re-exported, the duty liability could not be fastened upon the appellant.
7. In re Jupiter Exports, the Honble High Court of Bombay went into the definition and held that 23.?. . The definition of the term importer under Section 2(26) of the Customs Act defines the term importer and does not cover a person who has not caused the import of the goods and who does not hold himself out to be the importer or the owner of the imported goods. As the respondents are not the importer, it cannot be made chargeable to duty as the demand for duty has to be based on law and not on equity or moral considerations. The Tribunal rightly held that it was open to the department to proceed against a person who had obtained a license by fraud or misdeclaration in accordance with law. This was followed by the Tribunal in re Goodwill Clothing Co.
8. In addition, Learned Counsel placed reliance on the decision of this Tribunal in Nalin Z Mehta v. Commissioner of Customs, Ahmedabad 2014 (303) ELT 267 (Tri.-Ahmd.) 11.?In view of the above reproduced ratio of various judgments, it has to be concluded that an importer under Section 2(26) is a person who has filed the Bills of Entry for the clearances and has paid the Customs duty. The above said judgments also lay down a ratio that an IEC code holder cannot be denied the clearances of consignments if he has filed the Bills of Entry. In these appeals before us, it is undisputed that Bills of Entry are not filed by the appellant herein and in our considered view, he cannot be held as an importer.
12.?Reliance placed by ld. Departmental Representative on the decision of Honble High Court of Karnataka in the case of Ramesh Solanki may not carry the case of the Revenue any further, inasmuch as that their Lordships were considering the issue which was factually different than the cases in hand; it is to be noted that the decision of the Honble High Court of Chennai in the case of J.B. Trading Corporation (supra) has specifically interpreted the provision of Section 2(26) of the Customs Act, 1962. In the case of Ramesh Solanki, their Lordships were not considering that specific provision.
13.?In view of the foregoing, we find that the impugned order holding the appellant as an importer under Section 2(26) of the Customs Act, 1962 is unsustainable and is liable to be set aside and we do so.
9. Learned Authorised Representative, on the other hand, contends that the various statements recorded during the investigation and referred to in detail by the adjudicating Commissioner pointed to Shri Inderjit Nagpal as the owner of the goods which, as per the definition of importer in section 226 of the Customs Act, 1962:
owner or any person holding himself out to be the importer would render him to be the importer. Appellant contests the evidentiary value of various statements recorded from the individuals who themselves are not certain about the role of Shri Inderjit Nagpal when confirming, at the instance of the investigators, that he had given directions for the handling of the goods. Admittedly, there is money flow from the appellant to transporter and clearing agent.
10. The expressions owner or holding himself out to be importer in section 2(26) of Customs Act, 1962 need to be placed in context of the statute that deals with goods entered for export out of or imports into India. The definition specifically limits the period for which either of the two may be applied, i.e., in relation to any goods at any time between their importation and the time when they are cleared for home consumption. This is a corollary of the definition of imported goods which ceases to be so upon clearance for home consumption. Ownership, in general parlance, goes hand-in-hand with title to the goods but Customs Act, 1962 does not thrust the statutory obligations therein upon the owner of the imported goods. The scheme of Customs Act, 1962 envisages compliance with duty liability through a mechanism of control over vessels or aircraft carrying imported goods during their sojourn in Indian waters or at Indian airports. Once goods are discharged from conveyances they remain under the control of designated custodians till their warehousing or clearance for home consumption. It is only upon declaration of intent to warehouse or to clear for home consumption that duty liability is crystallized by assessment of bill of entry. The import manifest is the document that enables control over and accountal of goods intended to be landed in a customs port for import into India till such clearance.
11. The goods that are imported belong to some owner till the title is transferred to new owners. Ownership by persons outside India is not relevant to Indian laws and, in so far as they are outside the jurisdiction of the taxing statute, their identity is immaterial. The responsibility for safe carriage of goods is vested by the owner upon the person-in-charge of the conveyance for the duration of voyage or flight and thereafter with the steamer agent or airline agent till it is delivered to consignee. During this inter regnum, conventions associated with international carriage and possession of bill of lading determines title to the goods. Each bill of lading is entered as a line in the import manifest. The customs statute also acknowledges interest of shipper and carrier in the goods till the filing of bill of entry which, in section 46, is the first reference to importer in the Customs Act, 1962. It would appear that the person capable of producing the bill of lading pertaining to that consignment is the one who can file the bill of entry and take delivery of the goods upon payment of appropriate duties. When the owner files the bill of entry, he does not have to hold himself out to be the importer but when a person entitled to the bill of lading for taking delivery of the goods, but is not yet the owner, files the bill of entry, it is done so in the capacity of person holding himself out to be importer. The critical inference is that the importer is identifiable by the filing of bill of entry. The status of importer is not relevant thereafter except where oblique expressions are relatable to actions revolving around bill of entry. These include section 27 and section 28 of Customs Act, 1962 which are invoked with references to person who paid duty or person chargeable to duty. Hence the relevance of the definition of importer and the significance attached to that expression in the various judgments cited supra.
12. The consistent thread in the cited decisions is that liability to duty can be assigned only in accordance with statutory provision and is not fastened by acquiescence, from moral outrage or on revenue consideration. Non-levy of duty chargeable by law is not a matter to be taken lightly; the country and its denizens are, thereby, deprived of financial wherewithal without sanction of law. It devolves on the competent revenue authority to ensure that the lack is not tolerated. However, recovery beyond the authority of law is not sanctioned by modern tax statutes. Robin Hood had to live beyond the pale of the Kings justice because the Magna Carta, that forerunner of tax statutes of today, was yet to be granted. It is nobodys case that recovery of short-paid duties can be effected from buyer in due course; nor can there be a justification for effecting recovery on the belief of a few that an individual is the owner. The owner ceases to have relevance with the erasure of importer along with imported goods. With jurisdiction under section 28 of Customs Act, 1962 continuing over person chargeable to duty that has not been levied or short-levied, that provision can be invoked only on goods that have already been cleared for home consumption when the descriptions used till then cease to be valid; that would explain the expression person chargeable to duty obviously referring to the one who, by filing the bill of entry, had made himself liable to discharge duty liability. This should be apparent from section 28 (1) (a) of Customs Act, 1962. Considering the legal position and the decisions referred supra we have no hesitation in holding that there is no authority to demand duty short-levied or non-levied from anyone other than the importer.
13. There is danger of serious consequences attached to the proposition adduced in the impugned order as well as the contention of the Learned Authorised Representative that the person believed to be owner can be proceeded against under section 28 of Customs Act, 1962. It attempts to blur the transactional distinctions that are inherent in the commercial world. Consisting as it does of a series of activities with professional expertise brought to bear on the various sub-transactions, terms of compensation include right to the goods on default. Borrowal of funds is not only an accepted means of financing but, often, is the prevailing method. Financing is generally not offered by individuals but by financial institutions including banks. Again much of financing is tendered subject to conditions that may influence the purchase and sale transaction. If the proposition of Revenue were allowed to prevail, nothing would prevent the fastening of duty liability on banks merely owing to the inconvenience or impossibility of collection from the person chargeable to duty. Nothing would prevent the tax authority from acting against any citizen in the country on the ground that the person was the owner either originally or in due course of imported goods. The limits of action are never left to the balance or rationale of the tax collector; it is the law that has to determine the line that must never be crossed. The jurisdiction arrogated in the impugned order, unwarranted certainly, is not contemplated by law. Fraud may excite moral outrage but to allow such outrage to justify widening the tax jurisdiction beyond the plain reading of the statute is an invitation to regress to the tax regimes of the darker periods of history. The importers are, admittedly, identifiable and have been put on notice. Fastening of tax liability on Shri Inderjit Nagpal is without authority of law.
14. We now turn to the issue of confiscation of goods. Section 111 and section 113 empower adjudicating authorities to confiscate. But confiscation culminates in vesting the ownership of the confiscated goods in the Central Government under section 126 of the Customs Act, 1962 with the adjudicating authority mandated to take possession of the confiscated goods. It, therefore, necessarily follows that unless the goods are available for such possession they cannot be subject to confiscation. Invoking the authority under section 111 and 113 of the Customs Act 1962 and failing to act on behalf of the new owners under section 126 is a breach of agency and a breach of trust. In the alternative, confiscation effected on goods that are not traceable, and have never been traced after its clearance for home consumption, is nothing short of a travesty. Confiscation is attended by the requirement to offer the confiscated goods to the person from whom it was confiscated on payment of redemption fine. Attaching a fine to the act of confiscation without the wherewithal to complete the process is not only futile but detracts from the credibility of government. It would appear that the adjudicating Commissioner has not comprehended the semantically insignificant but substantively major distinction between confiscation and liability to confiscation. The two are distinct and separate; with a finding of liability to confiscate, the lack of goods is admitted, thus foreclosing the possession of goods, but the ingredient necessary for invoking section 112 and section 114 is breathed into existence. Therefore, the confiscation of the goods in the impugned order is not in accordance with the law.
15. We turn to the issue of penalty imposed on Shri Sanjay Chauhan. It appears from the impugned order that this was sought to be justified by a finding that he allowed Shri Inderjit Nagpal to import the goods by mis-declaration and, thereby, abetted in evasion of customs duty. The primary role assigned to Shri Inderjit Nagpal is erroneous in the circumstances referred to above. The case of Shri Sanjay Chauhan, therefore, requires further examination.
16. One of the contentions raised in the appeal of Shri Sanjay Chauhan is that MPEG cards are not goods but are standards. Undoubtedly and admittedly, MPEG is a means by which normal audio visual equipment, such as VCD, is enabled to play specific signals for the format. Though MPEG itself has a specific and exalted place in sound and picture industry, the manner in which it can influence the price, in the context of defence raised by Sanjay Chauhan, has not been considered by the adjudicating authority. And this can impinge upon the proceedings for alleged misdeclaration of the goods. It is therefore appropriate that the evidence of mis-declaration be subject to ascertainment of factual status and the roles played by the individuals be subject to fresh proceedings with the rider that duty can be demanded under section 28 of Customs Act, 1962 from the importer in the bills of entry.
17. Before parting with the matter, we would also observe that enhancement of assessable value is a re-assessment of the duty on the basis of evidence that was not available to the assessing officer. Nevertheless, it is inextricably linked with the original assessment. Each bill of entry has to be subject to a process that necessitates identification of the bill of entry in which short-levy was detected. Without a scrutiny of the original assessment and computation of demand on the respective consignment for which the bill was filed and without specific rejection of the value declared in the bill of entry, the process is not complete. We find a conspicuous lack of compliance of this requirement in the impugned order. In the present proceedings, we note that a blanket enhancement without reference to specific bill of entry has been attempted. The facts relating to each bill of entry do not appear to have been considered by the adjudicating authority. The adjudicating authority has rejected the declared value under Rule10A of the Customs Valuation (Determination of Price of Imported Goods) Rules 1988. The Rules are framed under section 156 read with the valuation provisions in section 14 of the Customs Act, 1962. Section 12 authorises charging of duty on each consignment presented for import. There is no authorization to encompass all imports effected during a period for recovery of duty that has allegedly been short-paid. In the impugned proceedings, no effort appears to have been made to identify the bills of entry which have been assessed and for which short-recovery has been effected. We rely on section 28 which specifies its scope as:
that any duty has not been levied or has not been short-levied and is to be invoked within the period counting from the relevant date in section 28(3) with the alternatives being one among (a) date on which the proper officer makes an order for clearance of the goods (b) the date of adjustment of duty after the final assessment thereof and (c) the date of payment of duty or interest. Each of these situations is inextricably linked to assessment under Section 17 or 18 and section 47 for clearance which is conditional upon payment of duty. Thus, section 28 can be invoked only in relation to specific consignments and the corresponding bill of entry. Without enumeration of the bill of entry concerned, the recovery of duty is without authority of law. This is a glaring lack that would render the proceedings to be untenable. This needs to be remedied in the remand proceedings if the outcome is to have a legal sanction.
18. We set aside the impugned order and remand the matter back to the adjudicating authority on the above terms.
(Pronounced in Court on 25/10/2016) (M V Ravindran) Member (Judicial) (C J Mathew) Member (Technical) */as 3 2