Custom, Excise & Service Tax Tribunal
Seville Products Ltd vs New Delhi(Icd Tkd) on 7 December, 2021
1
C. A. Nos. 51953 & 52105 2019-SM
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI.
PRINCIPAL BENCH - COURT NO. II
Customs Appeal No. 51953 2019-SM
(Arising out of order-in-appeal No. CC(A) CUS/D-II/ICD-TKD-Exp/134/2019-20
dated 02.05.2019 passed by the Commissioner of Customs (Appeals), New Custom
House, Near IGI Airport, New Delhi).
M/s Seville Products Limited Appellant
P.O. Box No. 54176
Dubai, UAE.
VERSUS
Commissioner of Customs Respondent
(ICD-TKD), Exports Tughlakabad, New Delhi.
AND Customs Appeal No. 52105 of 2019-SM (Arising out of order-in-appeal No. CC(A) CUS/D-II/ICD-TKD-Exp/137/2019-20 dated 08.05.2019 passed by the Commissioner of Customs (Appeals), New Custom House, Near IGI Airport, New Delhi).
M/s Seville Products Limited Appellant
P.O. Box No. 54176
Dubai, UAE.
VERSUS
Commissioner of Customs Respondent
(ICD-TKD), Exports
Tughlakabad, New Delhi.
APPEARANCE:
Shri Rachit Jain, Advocate for the appellant
Shri Y. Singh and Shri Rakesh Kumar, Authorised Representatives for the respondent CORAM:
HON'BLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) FINAL ORDER Nos. 52058-52059/2021 DATE OF HEARING: 09.06.2021 DATE OF DECISION: 07.12.2021 2 C. A. Nos. 51953 & 52105 2019-SM ANIL CHOUDHARY:
The issue in these appeals is whether the penalty under Section 112(a) of the Customs Act have been rightly imposed on the exporter company (appellant), registered in Dubai, for their mal- practices in India through their Agent located in India and working for them in India.
Appeal No. C/51953/2019 C/52105/2019
Period 2012-13 2012-13
Order-in-Appeal CC(A)CUS/D-II/ICD-TKD- CC(A)CUS/D-II/ICD-TKD-
Exp./134/2019-20 dt. Exp./134/2019-20 dt.
02.05.2019 08.05.2019
Order-in-original 28/2016/R.R./J.C./Exp./ICD/TK 31/2016/R.R./J.C./Exp./ICD/
No. D dt. 29.04.2016 TKD dt. 06.05.2016
Show cause DRI/MZU/F/60/2013-14/7629 DRI/MZU/F/54/2013-14/5600
notice F. No. dt.11.08.2014 by ADG, DRI, dt.16.06.2014 by ADG, DRI,
Mumbai. Mumbai.
Penalties Rs.13,00,000/- u/s 112(a) of Rs.23,00,000/- u/s 112(a) of
the Customs Act, 1962. the Customs Act, 1962.
2. Brief facts of the case are that several importers located in India were importing confectionary items from the appellant - M/s Seville Products Limited, Dubai and M/s Kelsen Group A/S, Denmark, were resorting to large scale under invoicing and mis-declaration of transaction value, as well as Retail Sale Price (RSP) of the goods to evade customs duty. The differential amount pertaining to the suppressed value was being remitted by the importers to the overseas suppliers through non-banking channels. As the issue in both the appeals is common and relates to the same appellant, these are taken up for hearing and disposal. For the sake of convenience, we take the facts of appeal No. C/A. No. 52105/2019.
3. Revenue took up investigation and inspected the premises of one M/s S.R. International (SRI in short) who are importing 3 C. A. Nos. 51953 & 52105 2019-SM confectionary from the appellant, having their office at Model Town, Delhi, a partnership firm having one of the Partners as Shri Kewal Takkar. Also the office premises of Shri Prakash Menon who was the Indian Representative of the exporter - M/s Seville Products Limited, Dubai and M/s Kelsen Group A/S, Denmark. Search was also at residential premises of one Shri Srikant Panda. Laptop/ computer hard disc and incriminating documents were seized. Statement of various persons were recorded under Section 108 of the Act.
4. Pursuant to investigation, it appeared to Revenue that SRI entered into a conspiracy with the overseas suppliers namely M/s Seville Products Limited (appellant), M/s Repensa A/S, Denmark and M/s Kelsen Group A/S, Denmark, to import food items namely confectionary by mis-declaring the value as well as the RSP of the goods with intention to clear the same without payment of appropriate customs duty. As part of the modus operandi the overseas suppliers have been raising two sets of invoices for each consignment - one of lower value, which was submitted to customs for clearance and the other showing the actual value (which was the basis of settling accounts between supplier and M/s SRI). While the lower amount as per the first invoice was remitted through banking channel, the differential duty as per the second invoice was handed over in cash to Shri Kaivan Balsara in the case of import from M/s Repensa A/S, Denmark and M/s Kelsen Group A/S, Denmark and to Shri Prakash Menon, the Indian Agent in the case of import from M/s Seville Products Limited, Dubai. However, the overseas suppliers 4 C. A. Nos. 51953 & 52105 2019-SM used to maintain statement of accounts (SoA) for supplies made to M/s SRI, which was as per the actual (higher) value. It appeared that M/s SRI have been mis-declaring the value of the items imported, in collusion with the suppliers with intention to evade payment of appropriate custom duty.
5. The value of the goods as declared in the Bills of Entry imported during the period from 2009 to 2013 and the differential duty was compiled in Annexure „A‟, differential duty, value etc. with respect to live consignment was compiled in Annexure „B‟, data was compiled in Annexure „C‟ for goods imported by M/s SRI on the allegation of mis-declaration and under valuation. The revaluation was done in terms of Section 14(1) read with Rule 3(1) of Customs Valuation Rules, 2007 on the basis of statement of account, maintained by the supplier companies showing the full and true invoice value. The said details of account have been submitted by the exporters namely M/s Seville Products Limited and M/s Kelsen Group A/S, Denmark. On being confronted with the statement of account, Shri Kewal Takkar in his statement recorded on 02.06.2014 admitted that the value reflected in the statement of account was actual value.
Thus, the actual value as per the statement of account is the transaction value of the goods imported by M/s SRI and others detailed in Annexure „A‟ to „C‟ to the show cause notice. 5.1 Further, it appeared that appropriate custom duty in respect of goods imported and cleared was short levied by reason of collusion, wilful mis-statement and suppression of facts and hence the 5 C. A. Nos. 51953 & 52105 2019-SM same was recoverable by invoking the extended period of limitation under Section 28 of the Customs Act, alongwith interest. It appeared that M/s SRI has suppressed the value resulting into short payment of custom duty of Rs. 42,69,464/-.
5.2. Further, it appeared that the importer - M/s SRI was required to declare and affix the correct RSP on the confectionary goods imported by them, in terms of Legal Metrology (Packaged Commodities) Rules, 2011 read with Export Import policy and ITC (HS) read with para 2.2 of the Foreign Trade Policy. However, admittedly, the RSP was not affixed on any of the packages of the goods imported, which have also been admitted by M/s SRI - Kewal Takkar. Such violation of the provision also rendered the goods liable to confiscation under Section 111(d) of the Customs Act. 5.3. Further, it appeared that M/s SRI entered into conspiracy with their overseas suppliers through the Representative of the suppliers in India namely - Shri Kaivan Balsara in case of import from M/s Repensa A/S, Denmark and M/s Kelsen Group A/S, Denmark and through Shri Prakash Menon in case of import from M/s Seville Products Ltd., Dubai. It has further come out in the investigation that invoice for suppressed value was received by the importers through normal channel and the second invoice for true value / transaction value was received by hand by M/s SRI through Shri Kaivan Balsara/ Shri Prakash Menon. On the conclusion of the transaction the second invoice / parallel invoice was destroyed by the parties to prevent detection. It was further admitted by Shri Kewal Takkar, Partner of 6 C. A. Nos. 51953 & 52105 2019-SM M/s SRI that the imported goods were undervalued by 65% to 75% of the actual value, and also admitted that the differential value was paid in cash to the Indian Representative. It further appeared that the parties in collusion with each other have forged and falsified documents to evade custom duty.
6. Shri Prakash Menon, Indian Representative of M/s Seville Products Limited, Dubai in his statement recorded on 14.05.2017 inter alia stated that he was looking after sales and marketing of M/s IFFCO, UAE, parent company of Tiffany Brand and for M/s Seville Products Limited, Dubai which was a group company of IFFCO. M/s Seville Products Limited have actually participated in the conspiracy for evading the custom duty payable to the Government of India by forging and fabricating two invoices for each consignment, one of lower value amount for custom clearances and the second with actual value for account settlement. Further, M/s Seville Products Limited and others have collected the differential duty through their Indian representative in cash from the importers. Further, in the course of investigation M/s Seville Products Limited submitted two sets of invoices and also submitted the statement of account of M/s SRI as existing in their books through their representative in India Shri Prakash Menon. Similarly, M/s Kelsen Group A/S, Denmark which also includes Repensa A/S, Denmark (Group company) have also made similar admission of colluding in suppressing the transaction value for exporting goods to India imported by M/s SRI and others. Further, they have admitted the similar role in collecting the 7 C. A. Nos. 51953 & 52105 2019-SM differential value in cash from the importer(s) and have similarly submitted the copies of the invoices and statement of account through their Indian representative - Shri Kaivan Balsara and Srikant Panda. Accordingly, show cause notice dated 16.06.2014 was issued proposing to reject the transaction value and for re-determination of value as per the actual transaction value and further demand of differential customs duty alongwith interest and proposal to impose penalty on M/s S.R. International. Further, penalty was also proposed under Section 112(a) of the Act on M/s Seville Products Limited (appellant), M/s Kelsen Group A/S, Denmark and Shri Kaivan Balsara, and others.
7. Under similar facts and circumstances in the other appeal, show cause notice dated 11.08.2014 was issued by the DRI, Mumbai Zonal Unit, Mumbai proposing to reject transaction value and re- valuing the same as per the actual value. Further, demand of differential duty alongwith interest and also proposal for confiscation. Further, penalty was also proposed under Section 112(a) and (b), Section 114A, 114AA of the Act, on this appellant and others.
8. The exporter - shipper M/s Seville Products Limited, Dubai was also required to show cause why penalty be not imposed under Section 112(a) of the Act.
9. The show cause notice dated 16.06.2014 was adjudicated vide order-in-original dated 06.05.2016 on contest. The appellant M/s Seville Products Limited, Dubai inter alia, among other grounds 8 C. A. Nos. 51953 & 52105 2019-SM urged that no penalty was imposable on them as the Customs Act, 1962 does not have extra territorial jurisdiction/application. They also placed reliance on the following rulings-
i) British India Steam Navigation Co. Ltd. vs. Shanmughavilas Cashew Indus.-1990 (3) SCC 481
ii) Hi Lingos Co. Ltd. vs. Collector of Customs -1994 (72) ELT 392, which have been affirmed by Hon‟ble Supreme Court at 1997 (95) ELT A147,
iii) C. K. Kunhammed vs. Collector of Central Excise & Customs - 1992 (62) ELT 147.
iv) Bussa overseas & Properties Pvt. Ltd. Vs. C. L. Mahar -2004 (163) ELT 304, which is confirmed by the Apex Court, reported at 2004 (163) ELT A160 (SC).
It was further urged that no penalty is imposable on M/s Seville Products Ltd., as they have not done any act which rendered goods liable to confiscation under Section 111 of the Customs Act, 1962.
10. The Adjudicating Authority took notice that M/s SRI (importer) have admitted the allegation and have settled their dispute before the Settlement Commission, which include M/s SRI and its Partners, as well as Shri Kaivan Balsara, being Settlement Commission Final Order No. F-2568-2577/Cus./2015-SC (DB) dated 30.10.2015.
11. As regards this appellant, the finding has been recorded that the appellant have violated the provisions of the Customs Act, 1962, through their representative in India - Shri Prakash Menon. The said representative has produced documentary evidences, produced or forged by the appellant exporter. Further, the exporting company have colluded with the importers in India through their 9 C. A. Nos. 51953 & 52105 2019-SM Indian representative and have further collected the differential amount of suppressed transaction value in cash, through their representative. Further, the representative has transmitted such amount collected in cash from the importer through non-banking channel (hawala). Thus, the appellant company have played an active role by colluding with the importers in India in evasion of customs duty, payable in India. Further, the appellant company have knowingly colluded and thus abetted with the importers in India in suppressing the transaction value for evasion of custom duty. The appellant have knowingly provided two sets of invoices and thus have abetted in violation of the provisions of Section 111 and other provisions of the Customs Act, rendering the goods liable for confiscation and thus penalty under Section 112(a) of the Customs Act was attracted.
12. So far the issue of jurisdiction raised by the appellant, it is held in the impugned order that the appellant was having their representative in India - Sh. Prakash Menon, and the appellant was actively present in India through the said agent, and have colluded with the importers in evading the customs duty. The appellant company booked orders from the Indian importers and further co- ordinated with the exporting company in Dubai right from the stage of booking orders and thereafter collecting the differential amount of transaction value. It has been further found that the appellant company was active in India through its representative Sh. Prakash Menon, in the whole modus-operandi for evading the customs duty. 10
C. A. Nos. 51953 & 52105 2019-SM Further, in terms of Section 147(3) of the Customs Act, which stipulates that "when any person is expressly or impliedly authorised by the owner, importer or exporter of any goods to be his agent in respect of such goods for all or any of the purposes of this Act, such person shall, without prejudice to the liability of the owner, importer or exporter, be deemed to be the owner, importer or exporter of such goods for such purposes including liability therefor under this Act". Thus, penalty can be imposed on the foreign company through their Indian representative, Sh. Prakash Menon. Accordingly, the Joint Commissioner imposed penalty of Rs. 23 lakhs on the appellant company through their Indian representative Sh. Prakash Menon under Section 112(a) of the Customs Act, 1962.
13. Being aggrieved, the appellant filed the appeals before the ld. Commissioner (Appeals) who vide the impugned orders-in- appeal dated 08.05.2019 & 02.05.2019 have been pleased to dismiss the appeal upholding the orders-in-original.
14. Being aggrieved, the appellant is before this Tribunal inter alia on the ground that imposition of penalty is bad as the Customs Act, 1962, during the relevant period did not have extra territorial application. It is further urged that as the importer - M/s SRI have settled the dispute of differential duty etc. before the Settlement Commission, this appellant being a co-noticee is also entitled to the benefit, and their case is deemed to have been settled. For this proposition, reliance is placed on the ruling of this Tribunal in the case of S.K. Colombowala vs. CC -2007 (220) ELT 492 (Tri. Mum.) 11 C. A. Nos. 51953 & 52105 2019-SM wherein this Tribunal held, once the case is settled before the Settlement Commission in its entirety, then such a case cannot be adjudicated qua other co-noticee. This Tribunal observed that for the reason that once the case/ dispute is settled by the Settlement Commission it is settled in its entirely the case against all the co- noticees once the order of settlement is passed in respect of the person entitled to file an application before the Settlement Commission and accordingly penalty imposed on the co-noticees cannot be sustained and set aside. This ruling was further followed by the Tribunal in Windoors (India) vs. CC -2009 (246) ELT 345 (Tri. Mumbai). It is also urged that the Commissioner (Appeals) have erred in not following the Larger Bench ruling in the case of S.K. Colombowala (supra) but have erroneously relied on the ruling in K.I. International vs. CC - 2012 (282) ELT 67 relying on the ruling of Hon‟ble Supreme Court in S.P. Chengalvaraya Naidu vs. Jagannath (1994) 1 SCC 1. Further reliance is placed on subsequent ruling in the case of CC vs. Mahendra Kumar Dharewala -2016 (340) ELT 727. Further, urges that penalty cannot be imposed on the appellant in terms of Section 147(3) of the Customs Act. Reliance is placed on the ruling of this Tribunal in Collector vs. Jain Exports -1990 (46) ELT 147 (Tri.), wherein it has been held that the scope of Section 147 cannot be extended beyond the Customs Act. Further, urged that penalty is not imposable on the appellant under Section 112(a) of the Customs Act as the goods have already been cleared for home consumption. Further, urges that imposition of penalty under Section 112(a) is 12 C. A. Nos. 51953 & 52105 2019-SM incorrect since the appellant did not do any act or omission in respect of the goods rendering them liable to confiscation under Section 111 of the Customs Act. Further, reliance is placed on the ruling of Mumbai Bench of this Tribunal in the case of Prerna Singh and Ors. vs. Commissioner of Customs and the other appellant Seville Products Ltd., vs. CCE reported in 2020 (1) TMI 905, wherein the issue was initially referred to Larger Bench, the Larger Bench held that when Division Bench decision of the Tribunal was placed before the ld. Single Member Bench, the Single Member was bound by the Division Bench decision and the decision of Prerna Singh (supra) could not have been ignored. Further, the binding ruling of the Division Bench in the case of Shafeek P.K. could not have been ignored. Reliance is also placed on the Single member ruling in the appellant‟s own case reported in 2021-TIOL-2015-CESTAT-CHD. 14.1 It is further urged that the Customs Act, 1962 did not have extra territorial jurisdiction prior to 2018 amendment. It is urged that the appellant is a foreign company incorporated in Dubai, UAE. They do not have any business operation in India and is not undertaking any commercial activity within India at any point of time. None of the alleged acts have been committed by the appellant company in the Indian Territory. The entire amount received by the appellant company from the Indian importers have been shown in their books of accounts. It is further urged that the CEO of the appellant company (Prerna Singh) who appeared before the Customs Department -DRI during investigation and tendered her statement, is 13 C. A. Nos. 51953 & 52105 2019-SM also a non-resident Indian. It is urged that Indian statutes / laws are ineffective against the foreign property and foreigners. 14.2 It is further urged that the show cause notices are bad as the same are issued by the DRI who do not have any jurisdiction to issue show cause notice as they are not the proper Officer under the provisions of the Customs Act. Reliance is placed on the ruling of the Hon‟ble Supreme Court in the case of Canon India Pvt. Ltd., vs. Commissioner of Customs- 2021 (3) TMI 384, wherein it has been held that the power to issue a show cause notice under Section 28 (4) of the Customs Act is on the „Proper Officer‟, which means the jurisdictional officer who has earlier assessed the goods. It was further observed that the DRI Officers are not the proper officer as the original assessment was not done by them. Further relies on the ruling of Madras High Court in the case of Quantum Coal Energy (P) Ltd., vs. CC-2021 (3) TMI-1034 (Mad.) and also some other judgements. It is further urged that in any view of the matter the case of conspiracy and collusion is not made out and hence penalty for abetment is not imposable under Section 112(a) of the Customs Act.
15. Opposing the appeal, learned Authorised Representative for the Revenue urges as follows:-
i) The submissions made by the appellant that the appellant does not have any business operations in India and is not undertaking any commercial activity within India at any point of time is factually incorrect. Though the appellant company is registered in Dubai, it is operating its business through its 14 C. A. Nos. 51953 & 52105 2019-SM agent, an employee (Market Development Manager) Sh.
Prakash Menon by attracting customers through various schemes including larger profits in the form of short levy of customs duty by submitting forged invoices and remitting of the balance payment through hawala transactions.
ii) Another submission that none of the alleged acts have been committed by the appellant within the Indian territory is a misleading statement, as the offence has been done in the territorial jurisdiction of India, one in the form of abetment by act of collusion by submitting forged invoices before the Customs Authority and secondly by arranging hawala agent to the importer under the supervision of its Marketing agent Sh. Prakash Menon, an employee of the appellant company getting regular salary from the appellant company, officially located in Mumbai to ensure that the balance payment is made to them.
iii) One of the submissions of the appellant that the entire amount received by them from Indian exporters has been shown in its books of account to substantiate that they are not involved in the conspiracy is absurd, as the appellant company had knowingly and intentially lured such importers with making larger profits if involved with import from the appellant company, by submitting two types of invoices and by arranging hawala agent for the Indian importers to send the balance payment, thereby abetting in evasion of customs duty in India. Non imposition of any corporate tax in Dubai and strict penal provisions as per laws and regulations may be the reason for them to show the full amount in its books of account. Had there been any corporate tax they might have shown the payment only through banking channels and would have omitted the payment through hawala channels in their books of account.
15
C. A. Nos. 51953 & 52105 2019-SM
iv) On the submissions by the appellant as per para 4 that Customs Act did have extra - territorial jurisdiction, the headlines itself speaks volume.
1A) During the relevant period Section 1(2) of the Customs Act, 1962 was applicable which reads as below:
1) This Act may be called the Customs Act, 1962
2) It extends to the whole of India
3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
B) It extends to whole of India. i.e. offence committed in the territorial jurisdiction of India. The offence in this case has been committed the moment the forged documents were submitted before the Indian Customs authority with an intention to defraud India Govt. of its legitimate Customs duties. Thus, the offence was committed in the territory of India once the forged documents were submitted before the customs authorities. Further, the importer had received the forged invoice from the employee of appellant, namely Sh. Prakash Menon, having his office at Mumbai (India) who, in turn, received the same from his Head office at Dubai through electronic data/ message transfer mode. Thus, the appellant, through her employee, who are in relation of the Principal and Agent, had committed an offence of abetment/ collusion with the importer within the territory of India by way of supplying forged invoices an Indian soil to help the importer in evading customs duty. The appellant and the aforesaid employee were also involved hawala transaction for the balance payment to them, apart from the one made by banking channels, with the aid and support of their agent, (employee), Sh. Prakash Menon, officially located in Mumbai, India.16
C. A. Nos. 51953 & 52105 2019-SM C) To clarify the above the Finance Act, 2018 has amended Section 1(2) w.e.f. 29.03.2018, which is reproduced as below:
Section 1. Short title, extend and commencement-
"(1) This Act may be called the Customs Act, 1962.
(2) It extends to the whole of India [and, save as otherwise provided in this Act, it applies also to any offence or contravention thereunder committed outside India by any person.] (3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. D) Sub section 2 reads as it applies also to any offence or contravention thereunder committed outside India by any person.]
- Thus after the amendment it is categorically clear that the Customs Act, 1962 applies also to any offence committed outside India. It also appears that the words "it applies also" reflects that the legislature had inserted an enabling provision even though in the present matter the offence was committed in India itself.
- In this case the offence has been committed in India through the employee of the Company registered in Dubai. Preparing two types at invoices of Dubai was not offence, till it was submitted before the Customs Authority in India, through the Computer of its employee Sh. Prakash Menon (stationed in India). Thus the offence was committed in India itself and the jurisdictional applicability of the Customs Act is there as it extends to whole of India, as per Sec. of the Customs Act, 1962.
16. It is further urged that admittedly the appellant was present in India through its representative/ agent and thus for their various acts of omission and commission which include fraud and forgery for evading the Customs duty to the Government of India, is liable for penalty under Section 112(a) as they have aided and abetted the Indian importers in violating the various provisions of the Customs Act, rendering the goods liable for confiscation. It is further urged that the rulings cited are not applicable in the instant case. 17
C. A. Nos. 51953 & 52105 2019-SM Further, reliance was placed in the case of Prerna Singh, CEO (supra) of the appellant company, wherein imposition of penalty was held to be correct and under proper jurisdiction being guilty of aiding and abetting as prescribed under Section 112(a) of the Act. Further, reliance is placed on the ruling of the Apex Court in SEBI vs. Pan Asia Advisors Ltd. and Ors.: MANU/SC/0761/2015.
17. Having considered the rival contentions, I find that the charge of aiding and abetting have been established against the appellant company. I further find that the appellant company, though it was registered having Head Office in Dubai, but it was very much present in India through its Indian Representative - Sh. Prakash Menon. I further find that through its Indian Representative, the appellant company have actively colluded and abetted with the Indian importers by various acts of commission and accordingly penalty has been rightly imposed under Section 112(a) of the Act. 17.1 I further find that the facts before the Hon‟ble Supreme Court in the ruling of Canon India Pvt. Ltd., (supra) are very different, inasmuch as there was no case of fraud and the original Bill of Entry was assessed on first check basis. Wherein in the present case there is admitted case of collusion and forgery plus concoction of documents, including presenting and filing of false and incorrect documents (invoice), to evade Customs duty by the importer and the appellant company. Further, the present proceedings are for imposition of penalty and not for demand of duty under Section 28(4). The show cause notice on this appellant is not under Section 18 C. A. Nos. 51953 & 52105 2019-SM 28(4) of the Customs Act. Fraud vitiates everything. Accordingly, I uphold the impugned orders and dismiss the appeals.
18. Both the appeals are dismissed.
(Pronounced on 07.12.2021).
(Anil Choudhary) Member (Judicial) Pant