Custom, Excise & Service Tax Tribunal
Shri Dinesh Maheshwari vs -Kolkata(Prev) on 24 January, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Customs Appeal No. 75643 of 2020
(Arising out of Adjudication Order No.03/CUS/CC(P)/WB/2020-21 dated 03.09.2020
passed by the Commissioner of Customs (Preventive), Custom House, 3 rd Floor, 15/1,
Strand Road, Kolkata - 700 001)
Shri Vijay Biyani, Managing Director, : Appellant
M/s. Future Enterprises Limited (Assessee)
Knowledge House, Shyam Nagar,
Off Jogeshwari-Vikroli Link Road,
Jogeshwari (East), Mumbai - 400 060
VERSUS
Commissioner of Customs (Preventive) : Respondent
Custom House, 3rd Floor, 15/1, Strand Road, (Revenue)
Kolkata - 700 001
WITH
Customs Appeal No. 75644 of 2020
(Arising out of Adjudication Order No.03/CUS/CC(P)/WB/2020-21 dated 03.09.2020
passed by the Commissioner of Customs (Preventive), Custom House, 3 rd Floor, 15/1,
Strand Road, Kolkata - 700 001)
Shri Dinesh Maheshwari, : Appellant
Chief Financial Officer and Executive Director, (Assessee)
M/s. Future Enterprises Limited
1801, Grandeur Tower, Near Magathane Telephone Exchange,
Western Express Highway, Borivali East, Mumbai - 400 066
VERSUS
Commissioner of Customs (Preventive) : Respondent
Custom House, 3rd Floor, 15/1, Strand Road, (Revenue)
Kolkata - 700 001
WITH
Customs Appeal No. 75645 of 2020
(Arising out of Adjudication Order No.03/CUS/CC(P)/WB/2020-21 dated 03.09.2020
passed by the Commissioner of Customs (Preventive), Custom House, 3 rd Floor, 15/1,
Strand Road, Kolkata - 700 001)
Shri Bhagchand Baser, : Appellant
Senior Manager - Corporate Accounts & Taxation (Assessee)
M/s. Future Enterprises Limited
A-602, Poonam Estate, Cluster-3,
Srishti, Mira Road-East, Thane - 401 107
VERSUS
Commissioner of Customs (Preventive) : Respondent
Custom House, 3rd Floor, 15/1, Strand Road, (Revenue)
Kolkata - 700 001
Page 2 of 35
Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB
& C/75127-75131/2021-DB
WITH
Customs Appeal No. 75044 of 2021
(Arising out of Adjudication Order No.03/CUS/CC(P)/WB/2020-21 dated 03.09.2020
passed by the Commissioner of Customs (Preventive), Custom House, 3rd Floor, 15/1,
Strand Road, Kolkata - 700 001)
Shri Rakesh Biyani, Director : Appellant
M/s. Future Group (Assessee)
S/o. Shri Gopi Kishan Biyani,
B-1903, Vivarea Building, Sane Guruji Marg,
Mahalaxmi, Mumbai - 400 011
VERSUS
Commissioner of Customs (Preventive) : Respondent
Custom House, 3rd Floor, 15/1, Strand Road, (Revenue)
Kolkata - 700 001
WITH
Customs Appeal No. 75127 of 2021
(Arising out of Adjudication Order No.03/CUS/CC(P)/WB/2020-21 dated 03.09.2020
passed by the Commissioner of Customs (Preventive), Custom House, 3 rd Floor, 15/1,
Strand Road, Kolkata - 700 001)
Commissioner of Customs (Preventive) : Appellant
Custom House, 3rd Floor, 15/1, Strand Road, (Revenue)
Kolkata - 700 001
VERSUS
Shri Vijay Biyani, Managing Director, : Respondent
M/s. Future Enterprises Limited (Assessee)
Knowledge House, Shyam Nagar,
Off Jogeshwari-Vikroli Link Road,
Jogeshwari (East), Mumbai - 400 060
WITH
Customs Appeal No. 75128 of 2021
(Arising out of Adjudication Order No.03/CUS/CC(P)/WB/2020-21 dated 03.09.2020
passed by the Commissioner of Customs (Preventive), Custom House, 3 rd Floor, 15/1,
Strand Road, Kolkata - 700 001)
Commissioner of Customs (Preventive) : Appellant
Custom House, 3rd Floor, 15/1, Strand Road, (Revenue)
Kolkata - 700 001
VERSUS
Shri Rakesh Biyani, Director : Respondent
M/s. Future Group (Assessee)
S/o. Shri Gopi Kishan Biyani,
B-1903, Vivarea Building, Sane Guruji Marg,
Mahalaxmi, Mumbai - 400 011
Page 3 of 35
Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB
& C/75127-75131/2021-DB
WITH
Customs Appeal No. 75129 of 2021
(Arising out of Adjudication Order No.03/CUS/CC(P)/WB/2020-21 dated 03.09.2020
passed by the Commissioner of Customs (Preventive), Custom House, 3 rd Floor, 15/1,
Strand Road, Kolkata - 700 001)
Commissioner of Customs (Preventive) : Appellant
Custom House, 3rd Floor, 15/1, Strand Road, (Revenue)
Kolkata - 700 001
VERSUS
Shri Dinesh Maheshwari, : Respondent
Chief Financial Officer and Executive Director, (Assessee)
M/s. Future Enterprises Limited
Tower-C, 247 Park, 4th Floor, LBS Marg,
Vikroli (West), Mumbai - 400 083
WITH
Customs Appeal No. 75130 of 2021
(Arising out of Adjudication Order No.03/CUS/CC(P)/WB/2020-21 dated 03.09.2020
passed by the Commissioner of Customs (Preventive), Custom House, 3 rd Floor, 15/1,
Strand Road, Kolkata - 700 001)
Commissioner of Customs (Preventive) : Appellant
Custom House, 3rd Floor, 15/1, Strand Road, (Revenue)
Kolkata - 700 001
VERSUS
Shri Bhagchand Baser, : Respondent
Senior Manager - Corporate Accounts & Taxation (Assessee)
M/s. Future Enterprises Limited
Tower-C, 247 Park, 4th Floor, LBS Marg,
Vikroli (West), Mumbai - 400 083
AND
Customs Appeal No. 75131 of 2021
(Arising out of Adjudication Order No.03/CUS/CC(P)/WB/2020-21 dated 03.09.2020
passed by the Commissioner of Customs (Preventive), Custom House, 3 rd Floor, 15/1,
Strand Road, Kolkata - 700 001)
Commissioner of Customs (Preventive) : Appellant
Custom House, 3rd Floor, 15/1, Strand Road, (Revenue)
Kolkata - 700 001
VERSUS
Shri Pramod Nahata, Director, : Respondent
M/s. ERT Shipping & Warehousing Private Limited (Assessee)
1st Floor, Room No.: 110,
28, Strand Road, Kolkata - 700 001
Page 4 of 35
Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB
& C/75127-75131/2021-DB
APPEARANCE:
Shri Vishal Agarwal, Advocate
Assisted by Shri Arindam Banerjee, Representative
For the Assessee(s)
Shri Subrata Debnath, Authorized Representative
Shri Sameer Chitkara, Authorized Representative
for the Revenue
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NOs. 75118-75126 / 2025
DATE OF HEARING: 13.11.2024
DATE OF DECISION: 24.01.2025
ORDER:[PER SHRI ASHOK JINDAL] Both sides are in appeal against the impugned order.
2. The assessees, namely, Shri Vijay Biyani, Shri Dinesh Maheshwari, Shri Bhagchand Baser and Shri Rakesh Biyani are in appeal against the penalties imposed, jointly and severally, under Section 114AA of the Customs Act, 1962. The assessee, namely, Shri Rakesh Biyani is also in appeal against the penalty of Rs.8,00,000/- imposed on him under Section 112(a)(ii) of the Customs Act, 1962.
2.1. Whereas, the Revenue has filed the appeals against Shri Vijay Biyani, Shri Rakesh Biyani, Shri Dinesh Maheshwari and Shri Bhagchand Baser for imposing penalties jointly and severally under Section 114AA of the Customs Act, 1962 and for non- imposition of penalty on Shri Pramod Nahata, Director of M/s. ERT Shipping & Warehousing Private Limited, against whom it has been observed by the ld. adjudicating authority that proceedings can be initiated under Section 28(4), Section 114A, Section 114AA, Section 111(o) and Section 112(a) of the Customs Act, 1962, but no penalty has been imposed on him.
Page 5 of 35Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB
3. Therefore, these appeals.
4. The facts of the case are that during the impugned period, the Company viz. M/s. Future Enterprises Limited, Knowledge House, Shyam Nagar, Off. Jogeshwari-Vikroli Link Road, Jogeshwari (East), Mumbai - 400 060 (IEC No. 0389048224) (Company) was engaged in the business of multi-brand retailing across the country. The clothes and apparels in their clothing retail outlets were sourced domestically as well as from countries such as Bangladesh, Sri Lanka, etc. For overseas sourcing of the goods, the Company had engaged with global trading houses, who had elaborate supply chain channels across several countries which served end-to-end procurement, manufacturing and supply functions. Since such trading houses had supply capabilities in Bangladesh which emerged as a leading manufacturer of garments and apparel of good quality at low prices, the Company placed the required orders on such trading houses. The goods were manufactured in Bangladesh and directly consigned to the Company in India, i.e., the goods were of Bangladeshi origin. The Company had accordingly, availed the benefit of exemption granted under Notification No. 099/2011- Cus. dated 09.11.2011, by virtue of which the imported goods were exempt from Basic Custom Duty as long as they complied with the Rules of Determination of Origin of Goods under the Agreement on South Asian Free Trade Area (SAFTA) Rules, 2006 notified vide Notification No. 75/2006- Cus (N.T.) dated 30.06.2006 ('Rules of Origin').
4.1. A Show Cause Notice dated 12.08.2019 was issued to the Company and the assessees herein, alleging that the FOB value and invoice details mentioned on the Certificates of Origin (COOs) issued by the Export Promotion Bureau, Bangladesh were Page 6 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB different from that mentioned on the corresponding Bills of Entry filed with the Customs authorities in India. Accordingly, it was proposed that the 82 Certificates of Origin (COOs) submitted by the Company be rejected and the benefit of the exemption Notification be denied to the Company, the readymade garments imported by the Company under 82 Bills of Entry be confiscated and penalties be imposed on the Company and the assessees for alleged acts of omission and commission.
4.2. The dispute before the adjudicating authority was limited to imports against 57 Bills of Entry, as the Company had already discharged the liability and sought discharge of the Notice under Section 28(6) of the Customs Act in respect of 25 Bills of Entry, which has been duly acknowledged and allowed and is not at all a subject matter of the present proceedings.
5. Insofar as the remaining 57 Bills of Entry are concerned, after considering the submissions made by the assessees, the ld. adjudicating Authority, vide the Adjudication Order No.03/CUS/CC(P)/WB/2020-21 dated 03.09.2020 (hereinafter referred to as the "impugned order"), confirmed the demand of Rs. 81,20,953/- under Section 28(8) of the Customs Act, 1962 in respect of 6 Bills of Entry (details stated hereunder). Vide the impugned order, a penalty of Rs. 81,20,953/- under Section 114AA of the Act was also jointly and severally imposed upon the Company and the assessees and a further penalty of Rs. 8,00,000/- was imposed upon Mr. Rakesh Biyani under Section 112(a)(ii) of the Customs Act.
Page 7 of 35Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB No. BoE COO details Differential Reason for of details Customs confirming the BoEs Duty (INR) demand 3466444 EPB(C)13980 2,53,915/- Non-originating dt. content exceed 03.10.17 maximum limit 3486920 EPB/DHK/ 26,882/- of 70% dt. 11137 04.10.17 6 3535664 EPB(C)14006 67,26,411/-
dt.
07.10.17
3596856 EPB/DHK 2,98,883/-
dt. /11368
12.10.17
3597949 EPB/DHK/ 80,762/-
dt. 11349
12.10.17
3276926 EPB/DHK 7,34,101/- COO obtained
dt. /10385 with tampered
18.09.17 value
5.1. The ld. adjudicating authority, however,
dropped the proceedings in respect of the remaining 51 Bills of Entry after noting that even as per the Revenue's recalculation of the value of non-originating material by adding the difference between the FOB value declared by the Company in India vis-à-vis the FOB value of export declared by the original manufacturer in Bangladesh, while supplying to the trading houses, such value of non-originating material was less than 70%.
6. Aggrieved by the impugned order, the assessees are in appeal before this Tribunal against imposition of penalties on them, while the Revenue is in appeal against the dropping of all the proceedings vide the impugned order in respect of the remaining 51 Bills of Entry as also against the joint and several imposition of penalty under Section 114AA on the assessees as also against imposition of penalty under Section 112(a)(ii) on Shri Rakesh Biyani on the ground that no such provision exists under the Customs Act.
Page 8 of 35Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB
7. The Ld. Counsel appearing on behalf of the assessees has made the following submissions: -
A. Incorrect manner of arriving at the value of the non-originating material
(i) At the outset, it is submitted that the ld.
adjudicating authority failed to appreciate that the values and details mentioned on the Certificates of Origin submitted by the Company and the corresponding Bills of Entry were correct and there was no discrepancy whatsoever in respect thereof.
(ii) As per the SAFTA Agreement read with the Rules of Origin, Bangladesh has been identified as one of the 'Least Developed Contracting States'. Accordingly, as per Rule 10 of the Rules of Origin, the permissible content of non- originating material for goods being produced/manufactured in Bangladesh is a maximum of 70%.
(iii) It is submitted that the ld. adjudicating authority failed to appreciate that the value mentioned in COO indicated the value at which goods had been supplied by the Bangladeshi supplier to the trading house in Dubai. Therefore, the COO captured details in respect of the goods manufactured in Bangladesh and the value of non-originating material that had been used by such Bangladeshi supplier in manufacturing of such goods.
(iv) The value declared in the Bills of Entry in India was the value at which the trading house had supplied the goods to the Company. There is no justification in terms of the Rules of Origin on the basis of which the Revenue has added to the value of the non-originating material declared in the COO, the difference between the Page 9 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB FOB value at which goods had been supplied by the Bangladeshi supplier to the trading houses and the FOB value at which goods had been supplied by such trading houses to the Company, to arrive at the value of the non- originating material.
(v)It is submitted that the method for valuation of non-originating material, as provided under Rule 11 of the Rules of Origin [as inserted vide Notification No. 75/2006-Cus.(N.T.) dated 30.06.2006] provides as under:
Rule 11 : Method for Valuation of non-originating materials
(a) The value of the non-originating materials, parts or produce shall be:
(i) The CIF value at the time of importation of the materials, parts or produce where this can be proven or
(ii) The earliest ascertainable price paid for the materials, parts or produce of undetermined origin in the territory of the Contracting States where the working or processing takes place.
(b) In order to determine whether or not a product originated in the territory of a Contracting State it shall not be necessary to establish whether the power and fuel, plant and equipment, and machines and tools used to obtain such products, originate in third countries.
(vi) In view of the above, it is submitted that the calculation of the value of the non-
originating material, as done by the Revenue in the present case on an ad hoc basis, as also being contrary to the specified Rule in the Rules of Origin is incorrect and could not have been accepted by the Adjudicating Authority. It is submitted that it is trite law that when the law provides something to be done in a particular Page 10 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB manner, it has to be done in that manner alone. Reliance in this regard is placed on the judgment of the Hon'ble Supreme Court in the case of J.K. Housing Board & Anr. v. Kunwar Sanjay Krishan Kaul & Ors. [(2011) 10 SCC 714].
(vii) It is submitted that the onus was on the Revenue to establish that the value of the non- originating material, as declared in the COO, was not in consonance with the manner specified under the Rules of Origin, before seeking to recalculate such value, which in any case could not have been done by the Customs authorities in India and had to be necessarily referred to the Issuing Authority in Bangladesh. In any case, such recalculation of value of non- originating material could not have been done on an ad hoc basis, which not only defies logic but is also contrary to the provisions under the Rules of Origin.
(viii) Without prejudice, it is further submitted that in cases where the Customs authorities in India had any doubt regarding the determination of origin of the goods or the details mentioned in the COOs, they ought to have gotten such COOs cancelled from the issuing authority in Bangladesh. In the absence of such cancellation of the COOs, it is not open for the Customs authorities in India to ignore such COOs and deny the benefit of the Exemption Notification.
(ix) It is submitted that the ld. adjudicating authority failed to appreciate the very object of the SAFTA Agreement and the Exemption Notification. The benefit of exemption from BCD has been extended to goods manufactured in SAFTA nations, imported to India to strengthen Page 11 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB intra-SAARC economic cooperation to maximise the realisation of the region's potential for trade and development for the benefit of their people. Therefore, the endeavour of the Revenue to somehow deny the benefit of the Exemption Notification, rightly availed by the Company, is contrary to the terms of the SAFTA Agreement, the Exemption Notification and the Rules of Origin. Consequently, the imposition of penalties on the Assessee is unwarranted.
(x)In view of the above, it is submitted that the ld. adjudicating authority has erred in denying the benefit of the exemption Notification in respect of goods imported under the said 6 Bills of Entry and consequently, erred in imposing penalties upon the assessees.
B. SAFTA exemption correctly extended to the 51 Bills of Entry
(i) It is submitted that the ld. adjudicating authority has rightly extended the benefit of the Exemption Notification to the consignments imported under 51 Bills of Entry, despite having calculated the value of non-originating material incorrectly.
(ii) It is submitted that when the value of non- originating material was found to be much less than 70%, even as per the Revenue's calculation, had the said value been calculated as per Rule 11 of the Rules of Origin, it would have been evident that the actual value of the non-originating material was much lower, as was declared in the COO.
(iii) Further, it is submitted that the contention in the Revenue' s appeals that the ld. adjudicating authority erred in dropping the Page 12 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB proceedings with respect to the 51 Bills of Entry after having confirmed the demand for 5 Bills of Entry on the same count is unwarranted. The ld. adjudicating authority, in the impugned order, has clearly observed that even at the time of assessment, the mismatch of FOB values between the COO and the Bills of Entry had been noticed by the Customs authorities and a query had also been raised to that effect. However, the response of the Company that such mismatch was on account of the margins of the suppliers was accepted by the Customs authorities and the goods had been permitted to be cleared by allowing the benefit of the Exemption Notification.
(iv) Further, it is submitted that the contention of the Revenue in its appeals that certain COOs mentioned the origin criteria to be under category "B" and therefore, the value of non-originating material could not have been more than 60% is unwarranted.
(v)It is submitted that as per the SAFTA Agreement read with the Rules of Origin, Bangladesh has been identified as one of the 'Least Developed Contracting States'. Accordingly, as per Rule 10 of the Rules of Origin, the permissible value of non-originating material for goods being produced/ manufactured in Bangladesh is a maximum of 70%.
(vi) It is submitted that as per Appendix-I to the Operational Certification Procedures under Annexure B to the Rules of Origin, the correct manner of indicating the value of non- originating material in the COO was by using the letter "D" (for Least Developed Contracting States) followed by the value of non-originating material expressed as a percentage of the FOB Page 13 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB value of the product, e.g. "D" 52 per cent. Therefore, the mention of the letter "B" in certain COOs was a 'minor discrepancy', as COOs issued by the issuing authority in Bangladesh always would have contained the letter "D". Accordingly, it is submitted that such minor discrepancy was rightly appreciated by the Adjudicating Authority in terms of Article 14 of the Operational Certification Procedures under Annexure B to the Rules of Origin.
7.1. In view of the above submissions, the Ld. Counsel for the assessees prayed that the appeals filed by the assessees be allowed and the appeals filed by the Revenue be dismissed.
7.2. The Ld. Counsel appearing on behalf of the assessees has also made further submissions, which are as under: -
A. Reg: No contravention of Section 11 4AA and/or Section 11 2(a) (The individual roles of each person, as arrived by the Adjudicating Authority and the infirmity therein, are more particularly stated hereinafter.)
(i) It is submitted that the present proceedings by which penalty has been imposed under Section 114AA of the Customs Act, 1962 ('Customs Act') on all the individual assessees named above, jointly and severally along with Future Enterprise Limited ('FEL'), is bad in law. The primary basis for imposition of penalty on the above named individual assessees is that FEL was not eligible to claim exemption from payment of Basic Customs Duty on the import of garments manufactured in Bangladesh, in Page 14 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB terms of Notification No. 99/2011-Cus. dated 09.11.2011 ('Exemption Notification') read with Notification No. 75/2006-Customs (N.T.) dated 30.06.2006, being the Rules of Origin framed under the SAFTA Agreement ('Rules of Origin'), on the count that the value of the 'non-
originating material', as certified by the Export Promotion Bureau ('EPB'), Bangladesh on the Certificate of Origin ('COO'), was incorrect.
I. Vijay Biyani
Appeal Nos. Designation Findings in OIO Penalty imposed
C/75643/2020 Managing Being the MD of Rs.81,20,953/-
Director FEL, he was under Section
and ('MD') responsible for the 114AA jointly and
actions of his severally with FEL
C/75127/2021 subordinates and other co-
noticees.
(Ref. Para 80 of
OIO)
(ii) It is submitted that penalty under Section 114AA of the Customs Act is imposable in a case where a person knowingly or intentionally does something in the transaction of business under the Customs Act, knowing fully well that the same is false or incorrect. This Section does not contemplate imposition of penalty on account of any vicarious liability as is the basis in the Adjudication order.
(iii) In any case, Mr. Vijay Biyani was merely the MD of FEL during the relevant period and used to take only policy decisions and devise strategies in respect of the business of FEL. It is submitted that he was not overseeing the day-to- day operations of FEL, for which the required personnel had been appointed.
Page 15 of 35Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB
(iv) Accordingly, it is submitted that there is no evidence on record to suggest, let alone establish, that the issuance/ revision of the COO was within his knowledge or at his behest and therefore, no penalty under Section 114AA of the Customs Act could have been imposed upon him.
II. Rakesh Biyani
Appeal Nos. Designation Findings in OIO Penalty imposed
C/75044/2021 Director in Though not Rs.81,20,953/-
Future Group holding any under Section
and position in the 114AA jointly and
Company, he severally with the
C/75128/2021 played a vital role co-noticees and
in getting the Rs.8,00,000/-
COOs revised/re- under Section
issued from 112(a)(ii)
Bangladesh
expeditiously
(Ref. Para 79 of
OIO)
(v)It is submitted that penalty under Section 114AA of the Customs Act is imposable in a case where a person knowingly or intentionally does something in the transaction of business under the Customs Act, knowing fully well that the same is false or incorrect. This Section does not contemplate on account of any vicarious liability as is the basis in the Adjudication order.
(vi) It is submitted that assuming that Mr. Rakesh Biyani played a vital role in getting the COOs revised/ re-issued from Bangladesh, that by itself is no ground for imposing penalty as there is nothing to establish that Mr. Rakesh Biyani knowingly or intentionally made a false or incorrect declaration/ statement or otherwise in the transaction of Page 16 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB business under the Customs Act. It is nobody's case that Mr. Rakesh Biyani had any knowledge that the revised/re-issued COO were not issued by the competent authority.
(vii) It is submitted that it is a matter of record that none of the COOs had been revised at his insistence and such revision has been done by GBX Trading, Dubai ('supplier' or 'GBX Trading') at their own instance when they had been called upon by FEL to explain the reason for the difference in the FOB values declared in some of the SAFTA COOs vis-a-vis the FOB value in the corresponding Bills of Entry. It is nobody's case that the revised COOs were issued at the instance of Mr. Rakesh Biyani.
(viii) It is submitted that insofar as penalty under Section 112(a) of the Customs Act is concerned, the same can only be imposed in cases where the act or omission on the part of a person renders the imported goods liable to confiscation under Section 111of the Customs Act. In the present case, the goods imported under 6 Bills of Entry have been held to be liable for confiscation on the ground that the value of non-originating material in these consignments was more than the prescribed limit of 70%, which was calculated on an incorrect and ad hoc basis. Therefore, as the goods are otherwise not liable for confiscation, the occasion to invoke Section 112(a) does not arise. Even otherwise, there is nothing to show that there was any act or omission on the part of Mr. Biyani which rendered any goods liable to confiscation so as to result in imposition of penalty under Section 112(a) of the Act.
Page 17 of 35Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB III. Dinesh Maheshwari Appeal Nos. Designation Findings in OIO Penalty imposed C/75644/2021 Chief Responsible for Rs.81,20,953/-
Financial submitting defective under Section
and Officer documents obtained 114AA jointly
through mis- and severally
C/75129/2021 declaration and with the co-
suppression of facts noticees.
before the Customs
authorities for availing
undue exemption
(Ref. Para 80 of OIO)
IV. Bhagchand Baser
Appeal Nos. Designation Findings in OIO Penalty
imposed
C/75645/2021 Manager, Responsible for Rs.81,20,953/-
Corporate submitting defective under Section
and Account and documents obtained 114AA jointly
Taxation through mis- and severally
C/75130/2021 declaration and with the co-
suppression of facts noticees.
before the Customs
authorities for availing
undue exemption
(Ref. Para 80 of OIO)
(ix) It is submitted that penalty under Section 114AA of the Customs Act is imposable in a case where a person knowingly or intentionally does something in the transaction of business under the Customs Act, knowing fully well that the same is false or incorrect. This Section does not contemplate on account of any vicarious liability as is the basis in the Adjudication order.
(x)It is submitted that the COOs were obtained by the suppliers in Bangladesh, while supplying the goods to the trading houses in Dubai/Singapore. There is no evidence that Page 18 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB Mr. Baser and/ or Mr. Maheshwari were aware that the COO being submitted at the time of customs clearance was obtained by the supplier through mis-declaration or suppression, if any.
(xi) It is submitted that in any case, the COOs issued by EPB, Bangladesh have not been cancelled or revoked. In view of this matter, there is no basis for holding that Mr. Baser and/ or Mr. Maheshwari were responsible for submitting defective documents, which were obtained through mis-declaration or suppression.
(xii) Further, it is submitted that as per the report of the 27th Standing Committee of Finance (2005-2006) under which the Taxation Laws (Amendment) Bill, 2005 was tabled before both the Upper and Lower Houses of the Parliament of India, Section 114AA of the Customs Act had been introduced to penalise serious frauds in respect of export of goods, where documents were being fabricated for availing benefits under various export promotion schemes while no underlying goods were actually being exported. It was further discussed that the said provision would only cover offences committed with criminal intent and such offences could not be treated at par with other instances of evasion of duty. The Standing Committee had further advised the Government to monitor the implementation of the said provision with due diligence and care to avoid undue harassment to Bonafide assessees, such as in the present case before this Tribunal.
Page 19 of 35Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB B. Reg: No basis for disregarding the Certificates of Origin
(i) It is submitted that penalty on the individual assessees herein is not imposable both on the count that it has not been demonstrated that they have knowingly or intentionally made, signed or used any declaration, statement or document, which is false or incorrect in any material particular, in transaction of any business under the Customs Act and also on the count that the reasons assigned for denying the benefit of COO are unsustainable in Law.
(ii) It is submitted that Rule 11 of the Rules of Origin, prescribes the manner for computing the value of non-originating material, in the following terms:
"(a) The value of the non-originating materials, parts or produce shall be:
(i) The CIF value at the time of importation of the materials, parts or produce where this can be proven or
(ii) The earliest ascertainable price paid for the materials, parts or produce of undetermined origin in the territory of the Contracting States where the working or processing takes place.
(b) In order to determine whether or not a product originated in the territory of a Contracting State it shall not be necessary to establish whether the power and fuel, plant and equipment, and machines and tools used to obtain such products, originate in third countries."
(iii) Despite there being a specific prescription in the Rules of Origin for computing the value of Page 20 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB the non-originating material, the Custom Authorities in India, have arbitrarily recomputed the value of the non-originating material, by adding to the value of the non- originating material declared in the COO, the difference between the FOB value declared by FEL in the Bills of Entry filed with Customs in India vis-a-vis the FOB value of export declared by the original manufacturer in Bangladesh, while supplying to the trading houses based out of Dubai and Singapore, who in turn had supplied to FEL/Company.
(iv) In other words, the margin of the trading houses based out of Dubai and/ or Singapore who have sold the goods originating in Bangladesh to FEL, has been factored in as part of the value of the non-originating material, which is clearly at odds with Rule 11 of the Rules of Origin as per which the value of the non-originating material is the CIF value at the time of importation of the materials, part or produced which go in the manufacture of the export product, and if such value is not available, the earliest ascertainable value in the country of export (Bangladesh in the present case) of the materials, part or produced used for manufacture of the export product. It is submitted that if the value of the non- originating material, as declared in the COO, could be revised, the same could be recalculated only in the manner prescribed in Rule 11 and not in any ad hoc manner, as has been done by the Adjudicating Authority.
(v)If the arbitrary basis for computing the value of the non-originating material, as applied by the Customs Authorities in India in the present case had been discarded, then with respect to Page 21 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB all 57 Bills of Entry, there could not have been any allegation that the value of non-originating material was more than 70% of the FOB value of export. Therefore, the proceedings in respect of 6 Bills of Entry, where demand has been confirmed by the Adjudicating Authority on the count that the value of the non-originating material by including the exporter's margin was more than 70%, was required to be terminated. Likewise, for the remaining 51 Bills of Entry in respect of which demand was dropped, by holding that even after including the exporter's margin, the value of the non-originating material did not exceed 70% of the FOB value of export (qua which Revenue is in appeal), was also required to be terminated. It is submitted that this Tribunal has, in the case of M / s . Kanpur Edibles Pvt. Ltd. & Ors. v. Commissioner of Customs (Preventive), Kolkata [2024 (5) TMI 576 - CESTAT KOLKATA], by endorsing other decisions of this Tribunal, referred to therein, has held that it is for the competent authority in the concerned exporting country alone to certify the correctness of the value addition worked out specified in the COO and that it was not open for the Customs Authority in India to arbitrarily arrive at the same.
(vi) It is also submitted that the ld. adjudicating authority has failed to appreciate that the COOs issued by EPB, Bangladesh had never been cancelled and therefore, continued to operate as valid certificates. Accordingly, it was not open for the Customs authorities in India to have disregarded such COOs and deny the legitimate benefit of the Exemption Notification to the Company, in the absence of Page 22 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB cancellation/ revocation of such COOs by EPB, Bangladesh. Reliance in this regard is placed on the decision of this Tribunal in the case of M/s. Kanpur Edibles Pvt. Ltd. (supra) wherein it was held that a COO cannot be disregarded until the same has been revoked/cancelled by the competent authority who had issued it. In the present case, it is undisputed that the COOs issued by EPB, Bangladesh have till date neither been revoked nor cancelled by the EPB, Bangladesh and therefore, the Adjudicating Authority ought not have disregarded such COOs.
(vii) In view of the above submissions, it is prayed that the penalties imposed upon the individual assessees vide the impugned Adjudication Order be set aside.
8. On the other hand, the Ld. Authorized Representatives of the Revenue reiterated the findings in the impugned order on merits, but challenged the said order wherein proceedings against the respondents-assessees have been dropped with regard to 51 Bills of Entry and only against 6 Bills of Entry proceedings were concluded and also challenged the non-imposition of penalty on Shri Pramod Nahata and also on the ground that joint and several penalties cannot be imposed.
9. Heard both sides.
10. We find that the subject matter of these appeals pertains to 57 Bills-of-Entry, whose details are as under: -
Page 23 of 35Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB Page 24 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB Page 25 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB Page 26 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB Page 27 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB Page 28 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB [ref. para 60.2.6, page 69 of the impugned order] 10.1. From the above, we find that the Revenue themselves have worked out the non-originating percentage to be within the threshold of 70% applicable to Bangladesh in terms of Rule 8 read with Rule 10 of the said Rules and the said percentage has been computed after considering the entire differential value between the FOB value declared as per the COO and the invoice value of the third-party vendor. In that case, Rule 8 read with Rule 10 of the said Rules has been fully complied with.
10.2. Further, we find that the bona fides of the Company have been established beyond doubt inasmuch as even after adopting the Department's own calculation, the percentage of non-originating goods remained the same. Thus, there could not have been any intention to evade payment of duty.Page 29 of 35
Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB
11. We further take note of the fact that as per the SAFTA Agreement read with the Rules of Origin, Bangladesh is identified as one of the 'Least Developed Contracting States'. Accordingly, as per Rule 10 of the Rules of Origin, the permissible content of non-originating material for goods being produced or manufactured in Bangladesh is a maximum of 70%. The ld. adjudicating authority has therefore failed to appreciate that the value mentioned in COO indicated the value at which goods have been supplied by the Bangladeshi supplier to the trading house in Dubai. Therefore, the COO has captured the details in respect of the goods manufactured in Bangladesh and the value of non-originating material that has been used by such Bangladeshi supplier in manufacturing of such goods. The value declared in the Bills of Entry in India was the value at which the trading house had supplied the goods to the Company. We find that there is no justification in terms of the Rules of Origin on the basis of which the Revenue has added to the value of the non-originating material declared in the COO, the difference between the FOB value at which goods had been supplied by the Bangladeshi supplier to the trading houses and the FOB value at which goods had been supplied by such trading houses to the Company, to arrive at the value of the non-originating material.
11.1. We find that the method for valuation of non-originating material, as provided under Rule 11 of the Rules of Origin, inserted vide Notification No. 75/2006-Cus.(N.T.) dated 30.06.2006, is as under:
"Rule 11 : Method for Valuation of non- originating materials
(a) The value of the non-originating materials, parts or produce shall be:Page 30 of 35
Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB
(i) The CIF value at the time of importation of the materials, parts or produce where this can be proven or
(ii) The earliest ascertainable price paid for the materials, parts or produce of undetermined origin in the territory of the Contracting States where the working or processing takes place.
(b) In order to determine whether or not a product originated in the territory of a Contracting State it shall not be necessary to establish whether the power and fuel, plant and equipment, and machines and tools used to obtain such products, originate in third countries."
11.2. In view of the above Rule, the calculation of the value of the non-originating material, as done by the Revenue in the present case, is on an ad hoc basis, which is contrary to the specified Rule in the Rules of Origin is incorrect and could not have been accepted by the ld. adjudicating authority. We find that it is trite law that when the law provides something to be done in a particular manner, it has to be done in that manner only. The same view was taken by the Hon'ble Apex Court in the case of M/s. J.K. Housing Board & Anr. (supra), wherein it has been held as under: -
"32. It is settled law that when any statutory provision provides a particular manner for doing a particular act, the said thing or act must be done in accordance with the manner prescribed therefor in the Act....."
11.3. Therefore, we hold that the onus was on the Revenue to establish that the value of the non- originating material, as declared in the COO, was not in consonance with the manner specified under the Rules of Origin, before seeking to recalculate such value, which in any case could not have been done by the Customs authorities in India and has to be necessarily referred to the Issuing Authority in Page 31 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB Bangladesh. In any case, such recalculation of value of non-originating material could not have been done on an ad hoc basis, which not only defies logic but is also contrary to the provisions under the said Rules.
12. We further find that the ld. adjudicating authority failed to appreciate the very object of the SAFTA Agreement and the Exemption Notification. The benefit of exemption from BCD has been extended to goods manufactured in SAFTA nations, imported to India to strengthen intra-SAARC economic cooperation to maximise the realisation of the region's potential for trade and development for the benefit of their people. Therefore, the Revenue cannot deny the benefit of the exemption Notification and the Company has rightly availed the benefit of the said Notification. In these terms, we find that no mala fide intentions have come out of the assessees in this case. Consequently, no penalty is imposable on the assessees.
13. We further find that the Revenue has disputed the extending of the benefit of SAFTA exemption by the ld. adjudicating authority in respect of 51 Bills-of- Entry. We find that in respect of these Bills-of-Entry, the value of non-originating material was found to be much less than 70%. Even as per the Revenue's calculation, had the said value been calculated as per Rule 11 of the Rules of Origin, it would have been evident that the actual value of the non-originating material was much lower as was declared in the COO. The contention in the Revenue's appeals that the ld. adjudicating authority erred in dropping the proceedings with respect to the 51 Bills of Entry after having confirmed the demand for 6 Bills of Entry on the same count, is unwarranted. We find that the ld. adjudicating authority, in the impugned order, has clearly observed that even at the time of assessment, Page 32 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB the mismatch of FOB values between the COO and the Bills of Entry had been noticed by the Customs authorities and a query had also been raised to that effect. However, the response of the Company that such mismatch was on account of the margins of the suppliers was accepted by the Customs authorities and the goods had been permitted to be cleared by allowing the benefit of the Exemption Notification.
13.1. We find that the contention of the Revenue in its appeals that certain COOs mentioned the origin criteria to be under category "B" and therefore the value of non-originating material could not have been more than 60%, is unwarranted. We find that as per the SAFTA Agreement read with the Rules of Origin, Bangladesh has been identified as one of the 'Least Developed Contracting States'. Accordingly, as per Rule 10 of the Rules of Origin, the permissible value of non-originating material for goods being produced/manufactured in Bangladesh is a maximum of 70%. Mere mentioning of "B" instead of "D" is a minor discrepancy as the COOs issued by the issuing authority in Bangladesh would always prevail.
13.2. Therefore, we find that the ld. adjudicating authority has rightly dropped the proceedings with regard to the 51 Bills-of-Entry.
14. In these circumstances, the role of the assessees for imposition of penalties has not come out.
15. Moreover, we find that in the case of M/s. Kanpur Edibles Pvt. Ltd. & ors. v. Commissioner of Customs (Preventive), Kolkata [2024 (5) TMI 576 - CESTAT, Kolkata], this Tribunal has observed that: -
"21. We further take note of the fact that it is not the case of the Revenue that the certificate issued by the exporter is not genuine or correct and the Page 33 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB verification report given by Deputy Director, EPB, Bangladesh is not correct. The certificate of country of origin and the verification report cannot be doubted unless and until, the same is proved fake by the Revenue. No such allegation in the show cause notice that the certificate of country of origin provided by the exporter and the verification report are fake, in that circumstances, the benefit of exemption Notification cannot be denied to the appellant.
22. Similar issue came up before this Tribunal in the case of BDB Exports Pvt.Ltd. vs. Commissioner of Customs (Prev.), Kolkata [2017 (347) E.L.T. 662 (Tri.-Kolkata)], wherein this Tribunal has observed as under:-
"4. Heard both sides and perused the records of the case. The issue involved in the present appeal is whether the main appellant is eligible to avail partial exemption under Notification No. 105/99-Cus., dated 10-8- 1999 when read with SAPTA Rules. As per the first proviso to this Notification, the Assistant Commissioner/Deputy Commissioner/Joint Commissioner has to be satisfied that imported goods are in accordance with the Customs Tariff (Determination of Origin of Goods under the Agreement on SAARC Preferential Trading Arrangement) Rules, 1955 (SAPTA Rules). As per Rule 4 of the SAPTA Rules read with its Schedule even products processed in the member countries are eligible for concessions under SAPTA Rules when the base goods are not produced/manufactured in the contracting countries. The only requirement under these Rules is that a certification of origin has to be produced for availing concessions as issued by the designated authority of Govt. of exporting contracting State and notified to the other contracting States in accordance with the certification procedures mentioned in the form annexed to SAPTA Rules. Required certificates of origin with respect to imported goods were furnished by the appellant where percentage of value addition as per SAPTA Rules was also indicated. Adjudicating authority has not accepted the value addition indicated in the certificate of origin but has gone with the investigation indigenously to allege that value addition cannot be to the extent claimed by the Appellant and also that Page 34 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB activities undertaken by the supplier of cloves does not amount to 'processing' of cloves. It is observed from various provisions of SAPTA Rules and Notification No. 105/99-Cus., dated 10-8-1999 that there is no discretion or power with the Customs authorities to reject the certificate of origin given by the concerned contracting State. Para 9 of the same Schedule does give power to the contracting States to review/modify the said Rules."
15.1. As the certificates of country of origin issued by the Bangladeshi authorities has not been disputed, in these circumstances, the Certificates of Origin produced by the assessees cannot be disputed.
16. We further take note of the fact that in this case, the Show Cause Notice has been issued to the assessees on 12.08.2019 whereas adjudication has taken place only on 03.09.2020. As per Section 28(9) of the Customs Act, 1962, the Proper Officer shall determine the amount of duty or interest under sub- section (8) within one year from the date of notice in respect of cases falling under sub-section (4) of Section 28. Admittedly, in this case, the Show Cause Notice has been adjudicated beyond the time-limit prescribed under the provisions of Section 28(9) of the Customs Act. We find that a similar issue has been decided by the Tribunal, New Delhi in the case of M/s. Kopertek Metals Pvt. Ltd. & ors. v. Commissioner of CGST (West), New Delhi [Final Order No. 59511- 59720 of 2024 dated 25.11.2024 in Excise Appeal No. 52178 of 2022 & ors. - CESTAT, New Delhi].
16.1. Further, the same view was taken by the Hon'ble High Court of Delhi in the case of M/s. VOS Technologies India Pvt. Ltd. v. The Principal Additional Director General & Anr. as reported in 2024-VIL- 1328-DEL-CU wherein the Hon'ble High Court held that the provisions of Section 28(9) of the Customs Page 35 of 35 Appeal No(s).: C/75643-75645/2020, C/75044/2021-DB & C/75127-75131/2021-DB Act, 1962 are to be adhered to strictly. Therefore, we hold that the proceedings initiated by way of the impugned Show Cause Notice against the assessees is bad in law. Consequently, the order passed by the ld. adjudicating authority is not sustainable in the eyes of law. In these circumstances, we hold that no penalty is imposable on the assessees. Consequently, the penalties imposed on the assessees are set aside.
17. Further, the appeals filed by the Revenue also deserve no merit. Accordingly, the same are dismissed.
18. In these terms, the appeals are disposed of.
(Order pronounced in the open court on 24.01.2025) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd