Custom, Excise & Service Tax Tribunal
M/S. Varalakshmi Exports vs Commissioner Of Customs on 2 December, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
C/238 to 241/2007
(Arising out of Order-in-Original No. 5988/2007 dated 14.3.2007 passed by the Commissioner of Customs (Seaport Export), Chennai)
For approval and signature:
Honble Shri P.K. Das, Judicial Member
Honble Shri Mathew John, Technical Member
1. Whether Press Reporters may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether the Members wish to see the fair copy of the Order?
4. Whether order is to be circulated to the Departmental authorities?
1. M/s. Varalakshmi Exports
2. M/s. Varalakshmi Silk House
3. M/s. Varalakshmi Handlooms
4. M/s. K.H. Subramani Appellants
Vs.
Commissioner of Customs
(Seaport Export), Chennai Respondent
Appearance Shri T. Ramesh, Advocate, for the Appellants Shri M. Rammohan Rao, DC (AR) for the Respondent CORAM Honble Shri P.K. Das, Judicial Member Honble Shri Mathew John, Technical Member Date of Hearing : 30.09.2013 Date of Pronouncement:
Final Order No. 40601 40604/2013 Per P.K. Das All the appeals are arising out of a common order and therefore, all are taken up together for disposal.
2. M/s. Varalakshmi Exports, Appellant No. 1 are manufacturers and exporters of silk sarees. They obtained 8 Advance Licenses issued by Joint Director General of Foreign Trade (JDGFT), Bangalore for import of Malbury Raw Silk without payment of customs duty with an obligation to export finished goods silk sarees, which would be duly recorded in Duty Exemption Entitlement Certificate (DEEC) Book. The exemption of customs duty is covered under Notification No. 203/92-Cus. dated 19.5.1992 for Value Based Advance Licenses (VABAL) and 204/92-Cus. dated 19.5.1992 for Quantity Based Advance Licence (QBAL). The present appeals relate to duty free import of raw silk under Advance Licence No. 2310212 dated 25.1.93 under Notification No. 203/92 and Advance Licence No. 3035148 dated 14.5.94 under Notification No. 204/92.
2.1 By the impugned order, it has been held that Appellant No.1 has failed to fulfill the export obligation and the imported duty-free materials were utilized for manufacture of silk sarees and sold locally through their sister unit M/s. Varalakshmi Handlooms and M/s. Varalakshmi Silk House, Appellant No. 2 and 3 herein. Shri K.H. Subramani, Appellant No. 4 is the managing partner of appellant No.1 and also partner of Appellant No. 2 & 3, who was looking after the import and utilization of goods.
2.2 The adjudicating authority confirmed the demand of Rs.83,00,745/- payable on mulberry raw silk imported under advance licence No. 2310212 dated 25.1.1993 and 3035148 dated 16.5.1994 in terms of undertaking furnished under the conditions of the notification read with proviso to Section 28(1) of the Customs Act, 1962 along with interest and imposed penalty equal amount of duty under Section 114A of the Customs Act, 1962 on Appellant No.1. A penalty of Rs. 10 lakhs was imposed on appellant No. 4 under Section 112(a)(ii) of the said Act. Further a penalty of Rs. 5 lakhs each was imposed on Appellant No.2 and 3 under Section 112(a)(ii) of the said Act. The amount of Rs. 17 lakhs paid by Appellant No. 1 vide challan dated 3.2.1999 and 17.2.1999 were appropriated. The goods cleared under the advance licences were confiscated and as the goods were not physically available for confiscation a fine of Rs.20 lakhs in lieu of confiscation was imposed under Section 125 of the Customs Act, 1962. Hence, the appellants have filed these appeals before the Tribunal against the impugned order.
3. The learned Advocate on behalf of the appellants submits that it is a second round of litigation insofar as the Tribunal by Final Order dated 25.4.2003 earlier remanded the matter to the adjudicating authority for denovo adjudication. The appellant No. 1 got eight advance licences and out of that the export obligation in respect of five licences were fulfilled and licences cancelled and the other one they made export partly, which is related to Mumbai Customs. The balance two licences are under present dispute, where they made negligible export and failed to fulfill the export obligation due to global market recession. The submissions of the learned Advocate in brief, are, as under:-
(a) Show-cause notice dated 10.3.1999 was issued demanding duty against the said two advance licences in terms of undertaking furnished under the condition to the notification and provisions to Section 28(1) of the said Act. The imports were done during the period 12.4.93 to 28.2.94 and 17.3.94 to 4.10.95 and the entire demand of duty is barred by limitation under Section 28(1) of the said Act.
(b) Demand of duty of Rs.48,03,968/-, Bills of Entry were filed during the period 12.4.93 to 28.2.1994 which is beyond the period of five years of Show Cause Notice dated 10.3.1999. Relied upon the decision of the Tribunal in the case of Shilchar Electronics Ltd. Vs. Commissioner of Customs 2006 (205) ELT 529.
(c) The demand in respect of balance amount of Rs.34,96,777/- is also barred by normal period of limitation. The goods were imported by filing Bills of Entry during the period 17.3.94 to 4.10.1995 and demand of duty under Show Cause Notice dated 10.3.1999, beyond normal period of limitation. There is no allegation of suppression of facts at the time of import and the period of licence expired on 30.6.97 and therefore the extended period of limitation under proviso to Section 28(1) of Act, 1962 would not apply. Relied upon the decision of the Tribunal in the case of AMC Coated Fabrics Pvt. Ltd. Vs. Commissioner of Customs 2007 (218) ELT 707 (Tri. Mum) which was upheld by the Honble Madras High Court and also the case of Granules India Ltd. Vs. Commissioner of Customs 2005 (191) ELT 1118 (Tribunal).
(d) The imposition of penalty under Section 114A of the said Act on Appellant No. 1 and demand of interest under Section 28AB are not sustainable as the imports involved in the present case are much before introduction of the said Section. It is submitted that Section 114A and Section 28AB were introduced on 20.8.1996. He relied upon the decision of the Tribunal in the case of Ram Khazana Electronic Vs. Commissioner of Customs 2003 (156) ELT 122 (Tribunal).
(e) The imposition of redemption fine under Section 125 of the Customs Act and confiscation of goods are not sustainable. In the earlier Adjudication Order, there was no order of confiscation of goods and imposition of fine, against which Revenue has not filed any appeal. In denovo adjudication order, adjudicating authority cannot impose fine and confiscate the goods. Further, the goods are not available and no bond was furnished and therefore, confiscation of goods and imposition of fine are bad in law. Relied on the decision of the Larger Bench in the case of Shiv Kripa Ispat Pvt. Ltd. Vs. Commissioner of Customs 2009 (235) ELT 623 (Tri. LB).
(f) The penalty imposed on Appellant Nos. 2 and 3 under Section 112(a)(ii) of the said Act is not sustainable as they are not involved in the import of goods. The penalty imposed on Appellant No. 4 is also not warranted as he is a partner of the firm and the demand of duty and the penalty were imposed on partnership firm.
(g) The adjudicating authority in the earlier adjudication order imposed penalty of Rs.25,000/- each on Appellant No. 2 & 3 and Rs. One lakh on Appellant No. 4 under Section 112(a)(ii) of the Act. It is well settled that penalty cannot be enhanced in denovo adjudication order. In other way, the appellants cannot be further penalized in denovo adjudication, when Revenue has not filed any appeal against earlier adjudication order.
(h) The goods were imported and duly assessed vide various Bills of Entry under DEEC scheme extending the benefit of Notification No. 203/1992 and 204/1992, the demand cannot be raised without revising or modifying the assessment orders of the Bills of Entry. Relied upon the decision of the Tribunal in the case of Brakes India Ltd. Vs. Commissioner of Customs 2008 (221) ELT 300 and CCE Vs. Videocon Appliances 2009 (235) ELT 513.
(i) The quantification of demand of duty is erroneous insofar as the quantity of export of final product under the DEEC scheme has not been taken into consideration. The appellant acted in a bonafide manner and therefore, the demand of duty and penalties are liable to be set aside.
4. The learned Authorized Representative on behalf of the Revenue reiterates the findings of the adjudicating authority. He submits that there is no dispute regarding the non-fulfillment of export obligation under DEEC scheme in respect of imported duty-free raw materials. The duty-free raw silk was used in the manufacture of silk sarees and sold locally. It is submitted that the appellant imported duty-free materials and filed an undertaking in terms of the Notifications and the demand was raised in terms of undertaking and demand of duty is not barred by limitation. He submits that in the present case, the relevant date under Section 28(1) is the date on which infringement of the condition of the notification has been noticed by the Department and not the date of clearance. The DRI officers visited the appellants premises on 12.1.1999 and noticed the diversion of the duty-free materials. He relied upon the following decisions of the Honble Supreme Court, High Courts and Tribunal:-
(i) Commissioner of Customs Vs. Jagdish Cancer & Research Centre 2001 (132) ELT 257 (SC)
(ii) Shesshank Sea Foods Pvt. Ltd. Vs. Union of India 1996 (88) ELT 626 (SC)
(iii) Bombay Hospital Trust Vs. Commissioner of Customs 2006 (201) ELT 555 (Bom.)
(iv) Lady Amphthil Nurses Institutions Vs. Commissioner of Customs 2002 (150) ELT 776 (Tri. LB).
4.1 It is submitted that the appellant imported the goods without payment of duty and filed undertaking as per exemption notification and the goods were not physically available for confiscation. The adjudicating authority rightly imposed redemption fine in lieu of confiscation. He relied upon the decision of the Honble Supreme Court in the case of Weston Components Ltd. vs. Commissioner of Customs 2000 (115) ELT 278 (SC).
4.2 It is also submitted that the appellant filed a writ petition against the imposition of penalty on the appellants under Section 11 of the Foreign Trade (Development and Regulation) Act, 1992 before the Honble Karnataka High Court and the writ petition was dismissed reported as Varalakshmi Exports Vs. Union of India - 2010 (259) ELT 344 (Kar.) holding that all the partners and firm are jointly liable for paying penalty and no partner can escape the liability on any technicalities.
5. After hearing both sides and on perusal of the records, we find that the learned counsel on behalf of appellants resisted the demand of duty mainly on the ground that the demand of duty is hit by limitation under proviso to Section 28(1) of the Customs Act. Section 28 of the said Act provides Notice for payment of duties, interest etc. Sub-section (1) of Section 28 of the said Act provides when any duty has not been levied or has been short-levied, the proper officer may issue notice on the person chargeable with the duty or interest, which has not levied or charged within six months, provided that where duty has not been levied or has been short levied by reason of collusion or any willful mis-statement or suppression of facts etc. by the importer or the exporter, notice would be served within five years.
5.1 The contention of the learned Advocate of the appellant is that admittedly demand of duty was confirmed under Section 28(1) of the Act, which has permitted to serve the notice within the maximum period of five years as per proviso to Section 28(1). In respect of Advance Licence No. 2310212 dated 25.1.93, goods were imported during the period 12.4.1993 to 28.2.1994 and the notice was issued on 10.3.1999, which is beyond five years. He relied upon the case of Shilchar Electronics Ltd.(supra). In that case, demand of duty was raised for violation of condition No. (v)(a) of exemption notification No.203/92-Cus. dated 19.5.1992 inasmuch as the appellant had availed input stage MODVAT credit in respect of goods exported in discharge of its export obligation under DEEC. In the present case also the demand of duty is for violation of condition of Notification No. 203/92 and 204/92. In the case of Shilchar Electronics Ltd. (supra), the Tribunal held as under:-
Appreciation of facts on record, show that the bill of Entry was filed on 2-8-1993 and was cleared on 12-8-1993. Show Cause Notice demanding duty in respect of the said imports was issued on 14-10-1998 i.e. after a period of more than five years from the date of imports. In terms of the provisions of Section 28 of the Customs Act, 1962, the demand, even in case of suppression of facts, misstatement, etc can be issued within the maximum period of five years. The demand raised after a period of five years is clearly beyond the scope of the said section. As such we set aside the impugned demand on the said issue alone.
6. In the impugned order before us, the appellant contended that the date of clearance of the goods under relevant Bills of Entry as provided under Section 28(1) of the said Act would be reckoned relevant date. The adjudicating authority rejected the plea by relying on the decision of Larger Bench of the Tribunal in the case of Lady Amphthil Nurses Institute (supra), wherein it was observed At the point of import no duty was collected. Duty became payable only when infringement of the obligation was observed. Having regard to this aspect the date for raising demand cannot be counted from the date when the proper officer had made the order originally for the clearance of the goods but it should be counted only from the date of show cause notice when infringement is alleged. The Tribunal in the case of Dewan Chand Satyapal Agarwal Imaging Research Centre had not followed the judgment of the Apex Court in the case of Mediwell Hospital & Healthcare Pvt. in which the Apex Court had held, Obligations cast on the importer was a continuing obligation. Needless to say that in a continuing obligation the date of clearance of the goods cannot be the date for determining limitation 6.1 It is well settled that the observations made in a judgment/decision are to be understood in the context in which they are made. The Honble Supreme Court in the case of CCE, Delhi Vs. Allied Air Conditioning Corporation 2006 (202) ELT 209 (SC) observed as under:-
A judgment should be understood in the light of facts of the case and no more should be read into it than what it actually says. It is neither desirable nor permissible to pick out a word or a sentence from the judgment divorced from the context of the question under consideration and treat it to be complete law decided by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. [See Mehboob Dawood Shaikh v. State of Maharashtra, 2004 (2) SCC 362] 6.2 In view of the decision of the Honble Supreme Court as above mentioned, it is appropriate to see what are the facts in which the decision was given and the observations made by the Larger Bench of the Tribunal. The case of Lady Amphthil Nurses Institute (supra), deals with Notification No. 64/88-Cus. dated 1.3.1988. The learned Authorized Representative on behalf of the Revenue drew our attention to the decision of the Honble Supreme Court in the case of Jagdish Cancer Research Centre (supra), which came before the decision of Lady Amphthil Nurses (supra) on the identical facts. So, it is required to examine the case laws relied upon by the learned AR as under:-
(a) In the case of Jagdish Cancer & Research Centre (supra), the respondent cleared the imported goods namely, apparatus and appliances etc. as hospital equipments essential for use in any hospital without payment of customs duty under Notification No. 64/88-Cus. dated 1.3.1988. The exemption from duty was allowed subject to conditions, as specified in the said notification, free treatment to the patients where income was below Rs.500/- per month and reservation of 10% beds in the hospitals for them as in-patients and for providing free treatment to 40% of out-patients, amongst others. A proceeding was initiated for violation of the conditions of the said notification as under:-
5. The Adjudicating Authority held that installation certificate in terms of Clause 4(iii) was not required to be submitted by the Centre but it failed to comply with other two conditions about providing free treatment as required and reservation of 10% beds in the hospital. It was also found that the Centre did not have inpatient facility at all. Placing reliance upon a decision of this Court in M/s. Mediwell Hospital and Healths Care Pvt. Ltd. v. Union of India, 1997 (89) E.L.T. 425 (S.C.) = (1997) 1 SCC 759, it has been found that providing free treatment in terms of the Notification is a continuing obligation, therefore, limitation as provided under Section 28(1) of the Customs Act would not come into play. By order of the Adjudicating Authority the goods imported were confiscated under Section 111(o) of the Customs Act with an option to the Centre to redeem the same under Section 125(2) of the Customs Act on payment of fine of Rs. 50,000/-. A penalty of Rs. 5,000/- was also imposed on taking a lenient view, since it was found that full duty had become payable by the importer.
xxx xxx xxx xxx xxx
8. On behalf of the appellant, it has been? vehemently urged that the show cause notice has not been issued under Section 28(1) of the Customs Act. Therefore, question of notice having not been issued by a proper officer does not arise nor the question of limitation. It is submitted that the copy of the notice, as annexed, does not mention Section 28(1) of the Customs Act, in any case if it is taken to be there, as contended, that would make no difference. The submission is that sub-section (2) of Section 125 of the Customs Act provides that where any fine in lieu of confiscation of goods is imposed, the importer shall also, in addition, be liable to any duty and charges payable in respect of such goods. The Honble Supreme Court held as under:-
Whenever an order confiscating the imported goods is passed, an? option, as provided under sub-section (1) of Section 125 of the Customs Act, is to be given to the person to pay fine in lieu of the confiscation and on such an order being passed according to sub-section (2) of Section 125, the person shall in addition be liable to any duty and charges payable in respect of such goods. A reading of sub-sections (1) and (2) of Section 125 together makes it clear that liability to pay duty arises under sub-section (2) in addition to the fine under sub-section (1). Therefore, where an order is passed for payment of customs duty along with an order of imposition of fine in lieu of confiscation of goods, it shall only be referable to sub-section (2) of Section 125 of the Customs Act. It would not attract Section 28(1) of the Customs Act which covers the cases of duty not levied, short levied or erroneously refunded etc.
(b) In the case of Lady Amphthil Nurses Institutions (supra), on the identical facts as above, various issues where raised for consideration relating to alleged violation of the conditions as laid down in Notification No. 64/83-Cus. The issues before the Larger Bench of Three Member of the Tribunal were as to the jurisdiction, whether it is Ministry of Health/DGHS or the customs to check the violation of the conditions of the notification, what was the scope of Section 111(o) and what is the effect of violations of the conditions, what would be violation post-1994 (Notification No. 64/88 repealed in 1994) and what is the scope of violation qua enforceability of conditions when no mechanism is laid down for its enforcement. It has been held that the customs authorities had power to confiscate the equipment and allow it to be redeemed on payment of fine, duty etc. under Section 125 of the Act, 1962. In a continuing obligation, date for raising demand cannot be counted from the date of order of clearance of the goods had been made by the proper officer, but it should be counted only from the date of show-cause notice when infringement is alleged. Following the decision of the Honble Supreme Court in the case of Sheshank Sea Foods Pvt. Ltd. (supra), it has been held that the customs authorities had power to take action under the provisions of Section 111(o) of the Act, 1962.
(c) A Division Bench of the Tribunal in the case of Bombay Hospital Trust Vs. Commissioner of Customs by referral order dated 1.7.2005 requested the Honble President of the Tribunal to reconsider the decision of Three Member Bench in the case of Lady Amphthil Nurses Institutions (supra). A Five Member Bench was constituted and in its order as reported in Bombay Hospital Trust Vs. Commissioner of Customs 2005 (188) ELT 374 (Tri. LB) held that they do not agree with the observation in Lady Amphthil Nurses Institution (supra) that period of limitation in such cases will commence from the date of issue of notice. Since time limit prescribed under Section 28 has been held not to be applicable to such cases and since there is no other specific time limit prescribed under the Customs law to cover such cases the notice of the demand will not be subject to any limitation of time in such cases of non-fulfillment of post-importations casting a continuing obligation.
(d) The assessee filed appeal before the Honble Bombay High Court against the Five Member Bench order in the case of Bombay Hospital Trust (supra). The learned Senior Advocate on behalf of the assessee before the Honble High Court submitted that the issues involved in this appeal are covered by the judgment of the said Court in the case of Commissioner of Customs Vs. Wockhardt Hospital And Heart Institute 2006 (200) ELT 15 (Bom.). In the case of Bombay Hospital Trust (supra), the Honble Bombay High Court held as under:-
10.?In cases, where the goods are confiscated before clearance, the duty and charges become payable when clearance of the goods for home consumption are sought for under Section 47 of the Customs Act. In such cases, the duty on the confiscated goods become payable only when clearance of the confiscated goods is sought by exercising the option given under Section 125(1). Therefore, the legislature has appropriately used the word payable in Section 125(2) so that the duty which becomes due and payable on confiscation, has to be paid on imposition of fine in lieu of confiscation and in all other cases duty and charges have to be paid as and when they become due and payable.
11.?As in the case of Wockhardt Hospital in the present case also the goods were cleared for home consumption under Section 47 of the Customs Act without payment of duty subject to fulfilment of the conditions set out in the exemption notification. As in the case of Wockhardt Hospital, in the present case also it is not in dispute that the post clearance conditions of the exemption notification have been violated. Therefore, the goods have been confiscated under Section 110(o) with an option to redeem the same by imposing fine in lieu of confiscation under Section 125(1). In such a case, the duty becomes payable on confiscation and in terms of Section 125(2) the assessee who is admittedly the owner of the goods is liable to discharge the duty liability on imposition of fine in lieu of confiscation, even if the assessee chooses not to redeem the confiscated goods.
12.?It is pertinent to note that the duty liability under Section 47 is on the importer, whereas, the duty liability under Section 125(2) is on the owner of the goods. This distinction is made by the legislature because once the goods are cleared under Section 47, there is every possibility that the goods may change hands. To obviate any difficulty in recovering duty payable on such goods, the legislature has provided that, where the goods are confiscated with an option to redeem the goods by imposing fine in lieu of confiscation, then on imposition of fine in lieu of confiscation the duty and charges payable have to be paid by the owner of such goods.
13.?Thus, we do not find any merit in the argument of the petitioner that the judgment delivered in the case of Wockhardt Hospital needs reconsideration. Since the issues raised in this appeal are squarely covered by the judgment delivered in the case of Wockhardt Hospital (Customs Appeal No. 22 of 2004) dated 28th April, 2006, we answer the questions raised in this appeal by holding that in the facts and circumstances of the customs authorities are justified in seeking to recover duty from the assessee under Section 125 of the Customs Act even though the assessee has not opted to redeem the goods by paying fine in lieu of confiscation. 6.3 It is seen that all the decisions as discussed above are related to Notification No. 67/86-Cus. dated 1.3.1988. In Jagdish Cancer & Research Centre (supra), Revenue urged that no show-cause notice was issued under Section 28(1) of the said Act and therefore question of limitation does not arise. The facts of the case are mostly similar insofar as to whether the duty free imported medical equipment can be confiscated under Section 111(o) for non-fulfillment of obligation of the said notification and allowed to be redeemed on payment of fine, duty etc. under Section 125 of the said Act. It was answered in favour of the Revenue. The Honble Bombay High Court in Bombay Hospital Trust (supra) against the order of Five Member Bench held that the customs can recover duty from the owner of the goods under Section 125 of the Act even though the same was not opted to redeem the goods. So, there was no issue of period of limitation under Section 28(1) of the Act.
6.4 In the present case before us, the show-cause notice proposed demand of duty in terms of undertaking as per notification and proviso to Section 28(1) of the said Act. The adjudicating authority also confirmed demand of duty under Section 28(1) of the said Act. The adjudicating authority relying on the decision of Lady Amphthil Nurses (supra) held that relevant date should be counted only from the date of show-cause notice when infringement is alleged. But, the Larger Bench of the Tribunal of Five Member in the case of Bombay Hospital Trust (supra) did not agree with the observation of the Three Member Bench decision of Lady Amphthil Nurses (supra). So, the finding of the adjudicating authority in the instant case on the issue of limitation is not sustainable.
6.5 None of the case laws relied upon by the learned Authorized Representative for the Revenue would apply in the present case, for the reasons in those cases, Notification No. 64/88-Cus. casts a continuing obligation. In the present cases, the duty-free imported materials were cleared under Advance Licence accompanied with DEEC Book vide exemption Notification No. 203/92 and 204/92. DEEC book is part of the exemption notification, wherein the information would be recorded for monitoring the clearance of duty free import material, export of resultant product, name and address of the factories and its ancillaries when resultant products are manufactured and details of materials on which condition of notification are not complied with etc. It is pertinent to note that there is a time limit prescribed for fulfillment of export obligation in Advance Licences. Incidentally, in the present case, the adjudicating authority also observed that Licence No. 2310212 dated 25.1.93, was expired on 24.1.94, no export under the said Licence were made. As regards Licence No. 3035148 dated 16.5.94 also they did not make any export although the licence had expired on 30.6.97. Thus, the import of duty-free material under DEEC scheme is not a continuing obligation and each import under Bill of Entry is discharged a fresh cause of action for export obligation within a certain period.
6.6 In view of that the Tribunal in the case of Shilchar Electronics (supra) in the context of Notification No. 203/92-Cus. rightly observed that no demand of duty can be raised after five years from the date of import under Section 28(1) of the said Act. So, the demand of duty of Rs.48,03,968/- in respect of Bills of Entry cleared during the period 12.4.1993 to 28.2.1994 vide Show Cause Notice dated 10.3.1999, which are beyond five years, are liable to be dropped.
7. The demand of duty of Rs.34,96,777/-, we do not find any force in the submission of the learned counsel. The DRI officers during their visit on 12.1.1999 detected that the appellant manufactured silk sarees by utilizing the duty-free import material and sold in local markets through their sister units Appellant Nos. 2 and 3. This fact was admitted by Appellant No.4 in his statement. The submission of the learned counsel that the appellant acted in a bonafide manner cannot be accepted because the appellant had not disclosed the utilization and clearances of duty-free material in local market, which is a clear case of suppression of facts and proviso to Section 28(1) of the said Act would be invoked. The case laws relied upon by the learned Advocate is not applicable in the facts and circumstances of the case. We find that the Commissioner had given detail finding on quantification of duty at para 20 of the adjudication order, and this fact was not disputed by the appellant. So, the demand of duty of Rs.34,96,777/- is liable to be upheld.
8. The learned counsel for the appellants submits that penalty imposed on Appellant No. 1 under Section 114A of the said Act and demand of interest is not sustainable as the goods were imported during the period 12.4.1993 to 28.2.1994 and 17.3.1994 to 4.10.1995 and Section 114A and Section 28AB were inserted in the said Act on 20.8.1996. The Tribunal in the case of Ram Khazana Electronics (supra) set aside the penalty imposed under Section 114A and demand of interest under Section 28AB. The relevant portion of the said decision of the Tribunal is reproduced below:-
The contention raised by the appellant regarding applicability of Section 114A and Section 28AB is only to be accepted. Since these sections came into force only on 20-8-96 no penalty could have been imposed under Section 114A and no interest could have been demanded under Section 28AB. We find merit in the contention of the Revenue that the penalty on the firm could be sustained under Section 112 of the Customs Act. But in the facts and circumstances we hold that the firm will be liable to pay penalty to the extent of 50% of the duty demanded. The penalty imposed on the partners are vacated. In view of the above decision, we find that the penalty imposed under Section 114A and demand of interest under Section 28AB are liable to be set aside. But, penalty to the extent of 50% of the duty demanded is liable to be imposed under Section 112 of the Act on Appellant No. 1.
9. The adjudicating authority imposed fine of Rs.20,00,000/- in lieu of confiscation under Section 125 of the said Act, as the goods are not available physically for confiscation. We find that in earlier adjudication order dated 1.11.2000 the adjudicating authority had not ordered for confiscation and imposition of redemption fine under Section 125 of the said Act. Revenue also had not filed any appeal before the Tribunal. So, the adjudicating authority cannot impose fine under Section 125 of the Act in denovo adjudication and the fine imposed under Section 125 of the Act is liable to be set aside.
9.1 The Tribunal in a series of decisions consistently held that in denovo proceedings, neither quantum of penalty can be enhanced nor any new order of confiscation and imposition of fine can be imposed by the Commissioner. Relied on in the case Goenka Impex Pvt. Ltd. Vs. Commissioner of Customs, Lucknow 2009 (233) ELT 102 (Tri. Del.), MRF Ltd. Vs. CCE 2007 (210) ELT 96 (Tri. Mumbai), HC Infosystems Ltd. Vs. CCE, Meerut 2005 (192) ELT 740. In the case of HCL Infosystems (supra), it has been held that:-
We agree that in remand proceedings on appeal filed by the appellants, neither the amount of penalty imposed initially can be enhanced nor any new Order regarding confiscation of land, building, machinery, etc. can be passed by the Commissioner. This issue stands settled by the Tribunal in the case of Atul Glass Industries Ltd. (supra) wherein it has been held that amount of duty or penalty cannot be enhanced during the remand proceedings. Accordingly, we set aside the confiscation of land, building, machinery, etc. ordered by the Commissioner in the impugned order. 9.2 The learned counsel also submitted that admittedly the goods are not available for confiscation and redemption fine cannot be imposed under Section 125 of the Act. It is seen that the Honble Bombay High Court in the case of Bombay Hospital Trust (supra), as reproduced in para 6.1 (d) in this order, made a distinction between the duty liability under Section 47 is on the importer and duty liability under Section 125(2) is on the owner of the goods. In the present case, the appellant is an importer and admittedly goods were not available with them and the goods had been changed hands and therefore, imposition of fine under Section 125 of the Act is not sustainable.
9.3 The learned AR for the Revenue relied on the decision of the Honble Supreme Court in the case of Weston Components (supra). The Tribunal in the case of Ram Khazana Electronic (supra), distinguished the decision of Weston Components (supra) as under:-
We now consider whether the ratio of the above decisions of the Tribunal is against what has been held by the Supreme Court in Weston Components Ltd. The order of the Apex Court reads as follows: -
Order - It is contended by the learned Counsel for the appellant that redemption fine could not be imposed because the goods were no longer in the custody of the respondent-authority. It is an admitted fact that the goods were released to the appellant on an application made by it and on the appellant executing a bond. Under these circumstances if subsequently it is found that the import was not valid or that there was any other irregularity which would entitle the customs authorities to confiscate the said goods, then the mere fact that the goods were released on the bond being executed, would not take away the power of the customs authorities to levy redemption fine.
2. The appeal is dismissed.
10. A reading of the above order would show that? the Apex Court has taken the view that redemption fine can be imposed even in the absence of the goods as the goods were released to the appellant on an application made by it and on the appellant executing a bond. Since the goods were released on a bond the position is as if the goods were available. The ratio of the above decision cannot be understood that in all cases the goods were permitted to be cleared initially and later proceedings were taken for under-valuation or other irregularity, even then redemption fine could be imposed. We are, therefore, inclined to accept the contention raised by the appellant on this issue and set aside the redemption fine.
11. We, therefore, sustain the duty demand affirmed in the order impugned. Penalty imposed on the firm under Section 114A is set aside, but such penalty is sustained under Section 112 of the Customs Act, the quantum is reduced to 50%. Penalty imposed on the partners are set aside. The redemption fine as well as the demand of interest under Section 28AB are set aside. The appeals stand partly allowed as above.
10. Now, on the imposition of penalty of Rs. 5 lakhs each on Appellant Nos. 2 and 3 and Rs. 10 lakhs on Appellant No. 4, we agree with the submission of the learned AR for the Revenue that the Honble Karnataka High Court in the appellants own case against the adjudication order under Foreign Trade (Development and Regulation) Act, 1992 held that penalty is imposable on the firm and partners. It is seen that in earlier adjudication order, the adjudicating authority imposed penalty of Rs.1,00,000/- on Appellant No. 4 and Rs.25,000/- each on Appellant Nos. 2 and 3 under Section 112(a)(2) of the said Act and no appeal was filed by the Revenue for enhancement of the penalty and therefore, in denovo adjudication order, enhancement of penalty is not sustainable. So, the amount of penalty imposed on the Appellant Nos. 2, 3 and 4 is liable to be reduced to Rs. 1,00,000/- (Rupees one lakh only) on Appellant No. 4 and Rs.25,000/- (Rupees twenty five thousand only) each on Appellant Nos. 2 and 3.
11. In view of the above discussion, we modify the impugned adjudication order as under:-
(a) Demand of duty of Rs.34,96,777/- on Appellant No. 1 is upheld. Demand of duty of Rs.48,03,968/- and levy of interest are set aside.
(b) Penalty imposed under Section 114A of the said Act is set aside, but such penalty of 50% of duty demanded is sustainable under Section 112 of the Act on Appellant No. 1.
(c) Confiscation and imposition of fine are set aside.
(d) Penalty imposed on Appellant No. 2 and 3 is reduced to Rs.25,000/- (Rupees twenty five thousand only) each and Rs.1,00,000/- (Rupees one lakh only) on Appellant No. 4.
12. The appeals filed by the appellants are partly allowed on the above terms.
(Pronounced in open court on ___________)
(Mathew John) (P.K. Das)
Technical Member Judicial Member
Rex
23 C/238 to 241/2007