Custom, Excise & Service Tax Tribunal
Kpr Silks Ltd vs Kolkata(Admn Airport) on 16 August, 2023
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.2
Customs Appeal No.76240 of 2014
(Arising out of Order-In- Original No. KOL/CUS/AIRPORT/ADMN/02/2014 dated
28.02.2014 passed by Commissioner of Customs (Airport & Admn.), Kolkata)
M/s. KPR Silks Ltd.
(# 117, 1st Floor, 1st Croos RRMR Extension,
4th Cross Lalbagh Road,
Bangalore-560027)
Appellant
VERSUS
Commissioner of Customs (Port), Kolkata
(M. S. Building, 15/1, Strand Road, Kolkata-700001)
Respondent
APPEARANCE :
None for the Appellant Mr. S. Debnath, Authorized Representative for the Respondent CORAM:
HON'BLE MR. R. MURALIDHAR, MEMBER (JUDICIAL) HON'BLE MR. RAJEEV TANDON, MEMBER (TECHNI CAL) FINAL ORDER NO.76464/2023 Date of Hearing : 16 August 2023 Date of Decision : 16 August 2023 PER R. MURALIDHAR:
No one appeared on behalf of the Appellant. Since the matter pertains to year 2014, we have taken up the Appeal for disposal with the help of the Learned AR.
2. The Appellant is a trader and imports silk from time to time. In the course of his business, they have purchased a transferable DFIA licence No. 210100847 dated 16/05/2007 from M/s Gemini Overseas Ltd. Towards this purchase, they have made the payment to Gemini Overseas Ltd. through banking channels. The Appellant has imported Mulberry Raw silk vide Bill of Entry No. 861156 dated 17.10.2008 and vide Bill of Entry No. 922097 dated 30/12/2008 wherein the DFIA licence purchased by them were utilized towards the Customs Duty of 2 Customs Appeal No.76240 of 2014 Rs. 10,55,548.11. The DRI took up investigation on Gemini Overseas Ltd and their related companies. On 11/05/2012, the Appellant was issued Show Cause Notice on the ground that Gemini overseas has obtained the DFIA licence fraudulently. Therefore, the Appellant was directed to pay the Customs duty of Rs.10,55,548.11. After due process, the Adjudicating Authority confirmed the demand and held that the imported Mulberry Raw silk stands confiscated and the Appellants were given option to redeem the same on payment of Redemption Fine of Rs. 7,00,000/-. They were also imposed a penalty of Rs. 5,00,000/-. Being aggrieved, the Appellant is before the Tribunal.
3. The Appellant submits that the Show Cause Notice issued did not contain any ground or allegation as to how the Appellant was in any way responsible for the acts of seller of DFIA licence, M/s Gemini Overseas Ltd. He further submits that the reply filed by the Appellant through courier, which is duly acknowledged by the Office of the Additional Commissioner, Chennai for having been received on 16/07/2012, has not been taken as received by the Adjudicating Authority. In the OIO, he does not bring out the specific role of the Appellant in the alleged fraud committed by the Gemini overseas Ltd. Therefore non-accounting for the Appellant's reply as well as non- specifying of role of the Appellant in the entire episode, renders the OIO as a non-speaking order. Hence the same is required to be set aside on this count alone. He further submits that the DFIA licence was purchased by the Appellant in the normal course. For purchasing the same, they have made the payment to Gemini Overseas by cheque. As on the date of purchase as well as on the date of clearance of the two consignments, the licenses were very much active. The DGFT had not canceled these DFIA licence nor is there any allegation to this effect in the Show Cause Notice. Therefore, the 3 Customs Appeal No.76240 of 2014 Appellants were legally correct in purchasing the transferable DFIA licence and utilizing the same towards imports.
4. The Appellant further submits that the proceedings initiated by invoking the extended period provisons are legally not sustainable. Hence the confirmed demands are being contested even on account of limitation. He relies on the following case laws:-
(i) Commr. Of Customs, Amritsar Vs. M/s. Ajay Kumar & Co[2009 (238) ELT 387 (SC)]
(ii) DCW Ltd. Vs. Commr. Of Customs, Tuticorin [2009 (241) ELT 421 (Tri.-Chennai)
(iii) Leader Valves Ltd. Vs. Commisioner of Customs [2006 (193) ELT 459 (Tri.-Del)
(iv) Wadhwani Commodities Trading & Others vs. Commr. Of Customs (Port), Kolkata, (Final Order No. 75915-
75922/2023 dated 04.07.2023)
5. In all the above case, it is held that when the importer has purchased the scrip on genuine belief that they are legally valid and when such scrips have not been cancelled by DGFT and when the role of the purchaser in the alleged fraud is not forthcoming, the Tribunals and Courts have been consistently holding that the buyer of the scrip cannot be made liable to pay the duty foregone and no penalty can be imposed against them.
6. He relies on the following case laws on account of limitations:
(a) Collector of Central Excise Vs. H. M. M. Ltd. [1995 (76) ELT 497 (S. C.)]
(b) Motorola India Pvt. Ltd.Vs. Commr. Of Customs (AIR), Chennai [2009 (237) ELT 731 (Tri. Chennai)
7. In these cases, it has been held that Show Cause Notice has to specifically bring in the factual details to allege suppression on the part of the noticee to invoke the extended period. If such details are 4 Customs Appeal No.76240 of 2014 not forthcoming in the Show Cause Notice, the extended period demand cannot be sustained.
8. In the present case, as per the facts discussed above, the Appellant has bought the transferable DFIA licence in the course of their normal business transection. The Show Cause Notice does not allege any role played by the Appellant in the alleged fraud committed by Gemini Overseas Ltd. Therefore, relying on these case laws, he submits that the impugned Order is required to be set aside on account of limitation also.
9. The Learned AR reiterates the findings of the lower authorities.
10. Heard the Learned AR and perused the documents.
11. Admittedly the Appellant has purchased the transferable DFIA Lincence No. 210100847 dated 16/05/2007 from Gemini Overseas by making the payment through banking channels. From the Show Cause Notice, it is seen that the Department has not brought out any specific fact to link the allege fraud committed by Gemini Overseas with the role played by the present Appellant. As pointed out by the Learned Advocate, though the Appellant has filed the reply on 13/07/2012, the Adjudicating Authority has completely ignored this letter and has erroneously held that the reply was not received by the Department. It is observed that the Adjudicating Authority has not given any findings against the Appellant specifying the role played by him, rendering the OIO as a non-speaking Order.
12. The Hon'ble Supreme Court in the case of Commr. Of Customs Vs. M/s. Ajay kumar & Co,(cited supra) has held as under:-
2. Background facts in a nutshell are as follows :
Appellant acquired and/or purchased transferable Duty Entitlement Pass Book (in short the 'DEPB') including licenses dated 6-11-2000 and 20-11-2000 issued in the name of M/s. Parker Industries. By show cause notices dated 30-5-2002, 12-6-2002 and 26-7-2002 5 Customs Appeal No.76240 of 2014 appellant was called upon to show cause why an amount of Rs. 12,45,174/- could not be recovered and demanded in terms of proviso to Section 28(1) of the Customs Act, 1962 (in short the 'Act'). Noticee denied the allegations.
However, Commissioner of Customs, Amritsar confirmed the demand along with interest and penalty. Same was held to be jointly payable by the original license holder and licensee. It was held that goods were liable in confiscation under Section 111 of the Act.
The Tribunal allowed the appeal by respondent holding the demand to be barred by limitation. The High Court upheld the view.
4. It is seen that in view of the fact that in the show cause notices, there was no reference to the alleged infraction of M/s. Parker Industries, the transferor of the license in question. The judgments of the CESTAT and the High Court do not suffer from any infirmity to warrant interference. It is to be noted that in Commissioner of Customs (Import) Bombay v. M/s. HICO Enterprises [2008 (11) SCC 720] similar view was taken. The appeal is dismissed. [Emphasis supplied]
13. The Hon'ble Chennai Tribunal in the case of DCW Ltd. Vs Commr. Of Customs (cited supra) has held as under:-
2. We have heard both sides. We find that the appeal can be disposed of on the short ground of limitation. The demand has been confirmed under the proviso to Section 28(1) against the importers who are transferees of the licences. The demand can be sustained only if it is established that the transferees had knowledge that the licences purchased by them were fake/forged, that the importers were guilty of any suppression or wilful misstatement of facts with intention to evade payment of duty or they were guilty of collusion, in the light of decision of the Larger Bench of the Tribunal in Hico Enterprises v. CC Mumbai, 2005 (189) E.L.T. 135 (Tri.-LB) which has 6 Customs Appeal No.76240 of 2014 been followed in Aafloat Textiles (India) Ltd. v. CC, 2006 (201) E.L.T. 39 (Tri.-Mumbai) and Zenith Ltd. & Ors. v. CC Mumbai, 2006 (73) RLT 77 (CESTAT-Mum.) and the decision of the Hon'ble Bombay High Court in Taparia Overseas (P) Ltd. v. Union of India, 2003 (161) E.L.T. 47 (Bom.) and the Hon'ble Punjab and Haryana High Court in Commissioner of Customs v. Leader Valves Ltd., 2007 (218) E.L.T. 349 (P&H) and CC v. Vallabh Design Products, 2007 (219) E.L.T. 73 (P&H). Although the Commissioner has recorded a finding in para 5.22 of the impugned order that the importers had colluded with broker M/s. Somanathan & Co. in obtaining fake DEPB licences, we find that there was no such allegation in the SCN and further, the finding of collusion also cannot be sustained for the reason that the Commissioner holds that the importers had not taken necessary precaution including conducting proper verification of the DEPB scrips etc., which, certainly, cannot be held to amount to collusion with the broker. There is not even a whisper that the importer had knowledge or reason to believe that the licences purchased from the broker were fake/forged. In these circumstances, the extended period of limitation is not attracted against the appellants. We, therefore, set aside the impugned order on the ground of limitation and allow the appeal.
[Emphasis supplied]
14. The Hon'ble Delhi Tribunal in the case of Commr. Of Customs (cited supra) has held as under:-
2. I have heard both sides and gone through the record. The facts are not much in dispute The appellants purchased the DEPB scrips from M/s. Parker Industries and imported Gun Metal Scrap against the same vide Bill of Entry No. 109, dated 16-1-1998. The goods were cleared by the Customs authorities. However, later on it revealed that the transferor of the scraps, M/s. Parker Industries, had procured DEPB scrips from the office of the JDGFT Authority, Ludhiana by misrepresentation and fraud and the same were then cancelled vide order dated 16-1-2002. This cancellation did not have a retrospective effect.7
Customs Appeal No.76240 of 2014
3. XXXX In this context, the law laid down by the Hon'ble Bombay High Court in the case of Taparia Overseas (P) Ltd. v. Union of India reported in 2003 (161) E.L.T. 47 can be read with advantage. In that case the goods were imported by the transferee of the licence for consideration and without knowledge of commission of fraud by the original holder of the licence. But later on licence was cancelled for having obtained by fraud and duty was demanded from the transferee of the licence but the same was set aside by the Court by holding that import having been made under a licence which was valid at the relevant time, having been not suspended or cancelled, the transferee being for consideration, the goods could not be subjected to levy of customs duty. The case of the appellants squarely stands covered by the law laid down in that case, keeping in view the above referred facts and findings of the Commissioner reproduced above, in their favour. Therefore, the impugned order is set aside and the appeal of the appellants is allowed with consequential relief as per law. [Emphasis supplied]
15. This Tribunal in the case of Wadhwani Commidities Trading & Others vs. Commr. Of Customs (Port), Kolkata vide Final Order No. 75915-75922/2023 dated 04.07.2023 has held as under:-
19. From the above discussions, we find that the facts in this case, are similar to the case of M/s Neev Trading Company (supra) as at the time of importation, the DFIA license against which the appellants have affected the duty free import of betel nut (split) were valid and made transferrable by DGFT, therefore, relying on the decision in the case of M/s Neev Trading Company (supra), we found that the subsequent suspension cannot affect the duty free import made by the appellants as on the date of import license was valid and made transferable by DGFT. [Emphasis supplied]
16. The Hon'ble Supreme Court in the case of Collector of Central Excise Vs. H. M. M. Ltd. (cited supra) has held as under:-
8Customs Appeal No.76240 of 2014 Now in order to attract the proviso it must be shown that the excise duty escaped payment by reason of fraud, collusion or wilful mis- statement or suppression of fact or contravention of any provision of the Act or of the Rules made thereunder with intent to evade payment of duty. In that case the period of six months would stand extended to 5 years as provided by the said proviso. Therefore, in order to attract the proviso to Section 11A(1) it must be alleged in the show cause notice that the duty of excise had not been levied or paid by reason of fraud, collusion or wilful mis-statement or suppression of fact on the part of the assessee or by reason of contravention of any of the provisions of the Act or of the Rules made thereunder with intent to evade payment of duties by such person or his agent. There is no such averment to be found in the show cause notice. There is no averment that the duty of excise had been intentionally evaded or that fraud or collusion had been noticed or that the assessee was guilty of wilful mis-statement or suppression of fact. In the absence of such averments in the show cause notice it is difficult to understand how the Revenue could sustain the notice under the proviso to Section 11A(1) of the Act. The Additional Collector while conceding that the notice had been issued after the period of six months prescribed in Section 11A(1) of the Act had proceeded to observe that there was wilful action of withholding of vital information apparently for evasion of excise duty due on this waste/by-product but counsel for the assessee contended that in the absence of any such allegation in the show cause notice the assessee was not put to notice regarding the specific allegation under the proviso to that sub-section. Xxxxxxx If the Department proposes to invoke the proviso to Section 11A(1), the show cause notice must put the assessee to notice which of the various commissions or omissions stated in the proviso is committed to extend the period from six months to 5 years. Unless the assessee is put to notice, the assessee would have no opportunity to meet the case of the department. The defaults enumerated in the proviso to the said sub-section are more than one and if the excise department places reliance on the proviso 9 Customs Appeal No.76240 of 2014 it must be specifically stated in the show cause notice which is the allegation against the assessee falling within the four corners of the said proviso. In the instant case that having not been specifically stated the Additional Collector was not justified in inferring (merely because the assessee had failed to make a declaration in regard to waste or by-product) an intention to evade the payment of duty. The Additional Collector did not specifically deal with this contention of the assessee but merely drew the inference that since the classification list did not make any mention in regard to this waste product it could be inferred that the assessee had apparently tried to evade the payment of excise duty. [Emphasis supplied]
17. In view of the factual matrix discussed above, the cited case law are squarely applicable to the facts of the present case.
18. We hold that the OIO passed by the Adjudicating Authority is not legally sustainable. Accordingly, we allow the Appeal both on merits as well as on account of limitation.
19. The Appellant would be eligible for consequential relief, if any, as per law.
(Operative part of the Order was pronounced in the open court.) Sd/-
(R. Muralidhar) Member (Judicial) Sd/-
(Rajeev Tandon) Member (Technical) Pooja