Madras High Court
The Commissioner Of Customs (Sea) vs Baburam Premchand on 19 September, 2014
Bench: R.Sudhakar, G.M.Akbar Ali
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 19.9.2014
CORAM
THE HON'BLE MR.JUSTICE R.SUDHAKAR
AND
THE HON'BLE MR.JUSTICE G.M.AKBAR ALI
C.M.A.No.2326 of 2005
The Commissioner of Customs (Sea)
Custom House
Chennai 1. .. Appellant
Vs.
1. Baburam Premchand
52, Vaidhyanatha Street
Tondiarpet
Chennai 600 052.
2. Customs, Excise and Service Tax
Appellate Tribunal
South Zonal Bench
Shastri Bhavan Annexe
First Floor, 26, Haddows Road
Chennai 600 006. .. Respondents
Prayer: Appeal under Section 130 of the Customs Act, 1962 against the Final Order No.1091/2003, dated 19.12.2003 passed by the Customs, Excise and Service Tax Appellate Tribunal.
For Appellant : Mr.P.Mahaadevan
Standing Counsel
For Respondents : Mr.K.Jayachandran
for 1st respondent
J U D G M E N T
(Delivered by R.SUDHAKAR,J.) The Department has filed this appeal challenging the Final Order No.1091/2003, dated 19.12.2003 passed by the Customs, Excise and Service Tax Appellate Tribunal (for brevity, the Tribunal).
2.1. The brief facts of the case are as under: On the basis of an information that the first respondent M/s.Baburam Premchand (for brevity, the importer) imported a consignment declaring the same as secondary/ defective Tin Free Sheets (TFS) vide Bill of Entry No.404351, dated 20.6.2002, whereas the actual goods were Tin Sheets (TS), the Directorate of Revenue Intelligence (DRI) searched the factory premises of the importer and seized coils/sheets weighing 68.4 Mts. The live consignment imported under the Bill of Entry No.404351, dated 20.6.2002 was also examined and found to be containing Tin Sheets and not Tin Free Sheets.
2.2. Based on further information, the Bill of Lading No.SENURTMD84166103, dated 2.6.2002 was taken up for investigation. The further investigation made by the Directorate of Revenue Intelligence revealed that the importer has also imported further consignments of Tin Sheets under the guise of Tin Free Sheets in five containers and they are lying at the port for clearance. For this five containers, no bill of entry was filed. The Bill of Lading and other documents revealed that the goods are Tin Free Sheets and the total weight was declared as 117.846 MTs. These goods were identified and detained. The goods imported by the five containers are the subject matter of the present proceedings.
2.3. A statement was recorded from Prem Gupta, partner of the importing firm, on 28.6.2002 and he, inter alia, stated as follows:
.. Shri Prem Gupta inter alia stated that the consignment was imported from M/s.Nicomet, Belgium; that he had requested the overseas supplier to declare the goods as TFS sheets and had done this specifically to evade customs duty; that the Customs floor price for tin sheets of width above 600 mm is US$ 465 PMT and that the price of TFS sheets is around US$260 PMT; that the Bill of Lading, invoice, packing list were received by them through their bank, namely, Corporation Bank, Chennai 14; that the declared invoice value was US$240 PMIT and the description was TFS second; that meanwhile DRI had registered misdeclaration for different consignments against their company and hence they apprehended that more penalty may be imposed on them; immediately they contacted overseas supplier and requested them to send the revised Bill of Lading declaring the actual cargo i.e. Tin sheets. When two sets of bills of lading and other related documents for the subject consignment was shown to him Shri Prem Gupta admitted that the same was done by the overseas supplier and the steamer agents on his instruction and accepted that the actual weight was misdeclared in the first set of bill of lading; that the actual weight of the consignment is 138.930 MTs as against the initial declaration of 117.846 MTs; that the first set of import documents under bill of lading was SENURTMD 84166103, dated 2.6.2002 and the second set of import documents under bill of lading was SENURTMD-84166002, dated 2.6.2002. On a specific enquiry about the payment of differential amount to the overseas supplier, Shri Prem Gupta admitted that he was giving the differential amount to a person at Chennai, as when instructed by the overseas supplier; that the person receiving cash payment will change from consignment to consignment; that they had not filed any amendment in customs with regard to description, quantity and value of the goods in question deliberately to evade customs duty. As he is not in a position to clear the subject consignment imported in 5 containers covered under the subject bill of lading, he is abandoning the consignment. 2.4. M/s.Senator Lines, who had filed the bill of lading with Customs Department, stated that the overseas counterpart at load port Rotterdam had issued correction-advice without notifying them and they have sent a message to the loading port regarding discrepancy in the bill of lading and they had not issued amendment to Customs Department.
2.5. A statement was also recorded from J.Saravanan, Import Executive of M/s.O.S.A.Shipping Private Limited, Chennai, Steamer Agent of M/s.Senator Lines, on 16.8.2002. He stated that they filed import general manifest on behalf of the importer based on the details forwarded by their overseas agent and the relevant bills of lading were (i) SENURTMD84166002 (Container Nos.CATU 2884858, FSCU 3081957, TRLU 3610112; (ii) SENURTMD84166103 (Container Nos.GESU 2020382, INBU 3140330). He further stated that two sets of bills of lading were prepared by their company based on the information from their overseas agent in their computer system and admitted that the description and weight were changed in the second set of bill of lading. However, he stated that he is not aware of the corrections and he did not get prior concurrence from the overseas agent for change of description and weight in the bills of lading.
2.6. The subject consignment was examined on 10.7.2002 in the presence of independent witnesses, representative of the Steamer Agent and Viking CGS, Shri Prem Gupta of the importing firm and Metallurgical Experts from National Metallurgical Laboratory. After drawal of the samples by the Metallurgical Experts, the goods were seized. The National Metallurgical Laboratory, vide report dated 9.8.2002, certified that the goods were tin sheets of width above 600mm.
2.7. The department noticing that as per EXIM Policy 2002-2007, the import of tin sheets of width above 600 mm should be accompanied by preshipment certificate issued by the Port of loading, came to the conclusion that the value of goods declared by the importer cannot be treated as transaction value. Since the goods were misdeclared with the intent to evade payment of duty, the valuation of the goods was proposed under Rule 6 of the Customs Valuation Rules, 1988 and accordingly, a show cause notice was issued in the following manner:
8. Based on the above, Show Cause Notice was issued to the importers calling upon them to show cause as to why:
(i)the goods under seizure should not be treated as tin sheets secondary/ defective of width above 600mm.
(ii)The value of the consignment should not be fixed at Rs.31,10,931/- CIF on the basis of unit price of US$465 PMT C&F.
(iii)The seized goods imported and abandoned by the importer should not be confiscated under Sec.111(d) and (f) of the Customs Act, 1962.
(iv)Penalty should not be imposed on the importer under Sec.112(a) of the Customs Act, 1962. 2.8. The importer submitted reply to the above said show cause notice on 24.10.2002 and pleaded for dropping of the proceedings. The main plea taken in the reply is that:
(i)though they ordered for the supply of the goods, they have abandoned the goods due to financial constraints;
(ii)since they have neither filed bill of entry nor took possession of the goods, confiscation or otherwise need not be apprised to them; and
(iii)penalty could be imposed only on the owner of the goods and not on Baburam Premchand, as they are not the owner of the goods.
2.9. A personal hearing was granted to the importer. Written statements were filed. The primary objection was that the Directorate of Revenue Intelligence is not authorised to issue show cause notice in terms of Section 28 of the Customs Act, 1962 (for brevity, the Act) 2.10. The Commissioner of Customs, prima facie, held that the notice has been issued by the Directorate of Revenue Intelligence under Section 124 of the Act and not under Section 28 of the Act and thereafter proceeded to consider the matter on merits.
2.11. The Commissioner of Customs, after considering the records, found that the importer had earlier imported several consignments of Tin Sheets under the guise of Tin Free Sheets. He observed that in one case, the importer has filed bill of entry and taking note of the misdeclaration, the goods were seized and action has been taken separately for confiscation and imposition of penalty. Insofar as the present five consignments are concerned, the finding of the Commissioner is that as the earlier consignment was taken up for investigation by the Directorate of Revenue Intelligence and seized, the importer fearing similar seizure of the goods with consequential proceedings has not filed bill of entry and has abandoned the goods. The specific finding of the Commissioner is that the importer has not retracted the statement. Therefore, it is a clear case of admission of improper import with intention to evade payment of duty.
2.12. In paragraph (15) of the order, the Commissioner of Customs observed that the Directorate of Revenue Intelligence has seized two bills of lading, namely, (i) first set filed with the Customs based on the corrected one received by the importer; and (ii) second set of bill of lading, wherein description has been corrected as Electrolytic Tin Sheets defective/secondary waste as against the initial declaration of Tin Free Sheets defective/secondary sheets. The weight has also been corrected to read as 139.930 MTs against the initial declaration of 117.846 MTs. He, therefore, held that the importer has willfully misdeclared the goods as tin free sheets in order to evade payment of customs duty and to circumvent EXIM Policy provisions. As this modus operandi was brought to light by the Directorate of Revenue Intelligence, the importer fearing imposition of penalty for the subject consignments had intentionally instructed their supplier to forward them a revised set of documents so that the same can be submitted to the Customs for clearance of the goods and escape from the penal action.
2.13. It is also the finding of the Commissioner of Customs that but for the intervention of the Directorate of Revenue Intelligence, the importer would have cleared the consignment of Tin Sheets, which is of higher value and liable to higher duty, by showing it as Tin Free Sheets. This is evident from the statement of Prem Gupta, partner of the importing firm, recorded on 28.6.2002, wherein he clearly states that the price of Tin Free Sheets is around US$240 PMT, whereas the Customs floor price for tin sheets of width above 600mm is US$ 465 PMT and that they misdeclared the value with an intent to evade payment of duty. This statement, as stated earlier, has not been retracted. Therefore, the intention to evade payment of duty on the imported goods which have been imported contrary to EXIM Policy 2002-2007, clearly attracts the provisions of Section 111 of the Customs Act.
2.14. The Commissioner of Customs was not inclined to accept the explanation of the importer with regard to abandonment of goods due to financial hardship. On the contrary, he gives a specific finding that the intention of the importer is to evade payment of duty by misdeclaring the subject consignment and to import the same contrary to law. The finding of the Commissioner of Customs in this regard and the operative portion of the order passed by him read as under:
18. In this connection, I would like to take into account the submissions of the importers that as they have abandoned the goods, they have nothing to do with the subject show cause notice and that they need not be apprised about the confiscation or otherwise of the consignment. In this case, I find that the real intention of the importers, as discussed above, is to evade customs duty by mis-declaring the subject consignment. However, as the same was detected by DRI, they had no other option, but to abandon the goods for fear of heavy fine and penalty. As such I hold them responsible for the import of the consignment. I find that the importers had abandoned the goods only after the detection of the goods by DRI. Although they have abandoned the goods, in view of the production of two sets of bills of lading and other documents for a single consignment and the acceptance of the importers that the same had been done under their instruction to evade customs duty and later on to avoid fine and penalty, I find that the importers are responsible for this import. The importers have also held the subject consignment liable for confiscation. Coming to case law of Commissioner of Customs, ICD, TKD, New Delhi v. Sewa Ram Brothers, I find that in the case under reference they had imported servicable rags and abandoned the goods and intimated the same on 17.11.2000. However, after this a show cause notice was issued to the importers proposing confiscation under Sec.111(d) and penalty under Sec.112(a) of the Customs Act, 1962. The Adjudicating Authority after ordering absolute confiscation of the goods did not impose any penalty on the noticee. The same was appealed against by the department and the revenue appeal was rejected by the Hon'ble Tribunal. This case cannot be compared with the subject proceedings, as this is a case of absolute misdeclaration and the importer is also an habitual offender. In this case I find that the importers had abandoned the goods not because of any other reasons, but because the modus operandi adopted by the importer was detected by the DRI. When the importer was cornered and he had no other option the importer had chosen to abandon the goods. Hence, I find that this case is different from the one cited by the importer. As this is a case of calculated and clear cut misdeclaration, I find that the importers are liable for penalty under Sec.112(a) of the Customs Act, 1962. However, a lenient view is taken since the goods are abandoned by the importers.
19. In view of the above findings, I pass the following order:
ORDER
1.I order that the goods under seizure should be treated as Tin Sheets (secondary/defective) of width above 600 mm.
2.I fix the value of the subject consignment at Rs.31,10,931/- CIF based on the unit price of US% 465 PMT.
3.I order confiscation of the subject goods under Section 111(d) and (f) of the Customs Act, 1962. As the importers have abandoned the goods I do not allow redemption of the goods. Hence the goods in question are confiscated absolutely.
4.I impose a penalty of Rs.2,00,000/- (Rupees Two Lakhs Only) on the importers under Sec.112(a) of the Customs Act, 1962. (emphasis supplied) 2.15. The importer pursued the matter before the Tribunal only with regard to imposition of penalty of Rs.2,00,000/- on the ground that they did not file a bill of entry in respect of the five consignments and the goods have been abandoned and, therefore, no penalty is leviable. The Tribunal, after consider the plea of the importer that statement was obtained from the partner under duress and no actual import has taken place and that they have abandoned the goods and therefore no penalty is leviable as per the decision of the Tribunal in Commissioner of Customs, New Delhi v. Sewa Ram & Bros., 2003 (151) ELT 344 (Tri-Del.), held that since the appellant did not file bill of entry and had abandoned the goods, the case of Seva Ram and Bros, referred supra, squarely applies and, therefore, no penalty is imposable under Sections 23(2) and 112 of the Customs Act.
2.16. Aggrieved by the said order, the Department has filed this appeal on the following substantial question of law:
Whether the act of the importer in abandoning the goods landed at the harbour for clearance would not attract penalty on such importer as provided for under Sections 23(2) and 112 of the Customs Act?
3. We have heard Mr.P.Mahaadevan, learned Standing Counsel appearing for the appellant and Mr.K.Jayachandran, learned counsel appearing for the first respondent.
4. Before adverting to the merits of the case, it would be apposite to refer to Sections 23, 111(d) and 112 of the Customs Act, which read as under:
Section 23. Remission of duty on lost, destroyed or abandoned goods. (1) Without prejudice to the provisions of section 13, where it is shown to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs that any imported goods have been lost otherwise than as a result of pilferage or destroyed, at any time before clearance for home consumption, the Assistant Commissioner of Customs or Deputy Commissioner of Customs shall remit the duty on such goods.
(2) The owner of any imported goods may, at any time before an order for clearance of goods for home consumption under section 47 or an order for permitting the deposit of goods in a warehouse under section 60 has been made, relinquish his title to the goods and thereupon he shall not be liable to pay the duty thereon.
Provided that the owner of any such imported goods shall not be allowed to relinquish his title to such goods regarding which an offence appears to have been committed under this Act or any other law for the time being in force.
Section 111. Confiscation of improperly imported goods, etc. The following goods brought from a place outside India shall be liable to confiscation:
(a) to (c) ***
(d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force.
Section 112. Penalty for improper importation of goods, etc. Any person, -
(a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, or
(b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111, shall be liable, -
(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding the value of the goods or five thousand rupees, whichever is the greater;
(ii) in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding the duty sought to be evaded on such goods or five thousand rupees, whichever is the greater;
(iii) in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty not exceeding the difference between the declared value and the value thereof or five thousand rupees, whichever is the greater;
(iv) in the case of goods falling both under clauses (i)and (iii), to a penalty not exceeding the value of the goods or the difference between the declared value and the value thereof or five thousand rupees, whichever is the highest;
(v) in the case of goods falling both under clauses (ii) and (iii), to a penalty not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the value thereof or five thousand rupees, whichever is the highest.
5. Here is a case where the importer attempts to import goods one after the other and the investigation revealed that there is a clear intent to evade payment of duty. The importer realizing that he would suffer not only the consequences of confiscation, but penalty, has chosen not to file bill of entry for subsequent consignments and has proceeded to abandon the goods. From a reading of the statement recorded at the time of investigation, it is evident that the import was made with an intention to evade duty by clearing Tin Sheets of higher value by declaring them as Tin Free Sheets of lower value. There is also a clear admission that differential price was paid through other than banking channels. There is a clear admission that only on investigation, the importer tried to cover up the imports by seeking amendment to import documents.
6. In these circumstances, we find that there is not only an admission regarding misdeclaration of goods, but the investigation reveals that the goods are attempted to be imported contrary to EXIM Policy 2002-2007. Accordingly, on the ground of misdeclaration and improper import contrary to the EXIM Policy, there has been a violation of the Customs Law and, in our considered opinion, show cause notice issued invoking Section 111(d) and 111(f) of the Act is proper.
7. Inasmuch as dutiable goods required to be mentioned under the Import General Manifest have not been mentioned as Tin Sheets and in the shipping documents it has been wrongly stated as Tin Free Sheets, the contention of the department that there was case for confiscation of improperly imported goods is justified. We find that the provisions of Section 111(d) and 111(f) of the Act have been clearly breached by the importer, inasmuch as there has been an attempt to import goods contrary to the prohibition imposed by or under the Act or other law for the time being in force. In Sheikh Mohd. Omer v. Collector of Customs Calcutta and others, AIR 1971 SC 293, it has been held as under:
14. ..... It was urged on behalf of the appellant that expression 'prohibition' in Section 111(d) must be considered as a total prohibition and that expression does not bring within its fold the restrictions imposed by clause (3) of the Imports Control Order, 1955. According to the learned counsel for the appellant clause (3) of that Order deals with the restrictions of import of certain goods. Such a restriction cannot be considered as a prohibition under Section 111(d) of the Act. While elaborating his argument the learned counsel invited our attention to the fact that while Section 111(d) of the Act uses the word 'prohibition'. Section 3 of the Imports and Exports (Control) Act, 1947, takes in not merely prohibition of imports and exports, it also includes 'restrictions or otherwise controlling' all imports and exports. According to him restrictions cannot be considered as prohibition more particularly under the Imports and Exports (Control) Act, 1947, as that statute deals with 'restrictions or otherwise controlling' separately from prohibitions. We are not impressed with this argument. What clause (d) of Section 111 says is that any goods which are imported or attempted to be imported contrary to 'any prohibition imposed by any law for the time being in force in this country' is liable to be confiscated. 'Any prohibition' referred to in that section applies to every type of 'prohibition'. That prohibition may be complete or partial. Any restriction on import or export is to an extent a prohibition. The expression 'any prohibition' in Section 111(d) of the Customs Act, 1962 includes restrictions. Merely because Section 3 of the Imports and Exports (Control) Act, 1947, uses three different expressions 'prohibiting', 'restricting' or 'otherwise controlling', we cannot cut down the amplitude of the word 'any prohibition' in Section 111(d) of the Act. 'Any prohibition' means every prohibition. In other words all types of prohibitions. Restriction is one type of prohibition. From Item (I) of Schedule I, Part IV to Import Control Order, 1955, it is clear that import of living animals of all sorts is prohibited. But certain exceptions are provided for. But nonetheless the prohibition continues. (emphasis supplied)
8. Section 23(2) of the Act provides that when the goods are abandoned, no duty is payable. We find that the order of the Commissioner of Customs is one of absolute confiscation consequent to abandonment and there is no demand for duty. To that extent the importer has no grievance. The only plea taken by the importer is whether penalty can be imposed when they have abandoned the goods and have not filed bill of entry.
9. Section 112(a) of the Act provides that in relation to any goods when any person does or omits to do any act, which act or omission would render the goods liable to confiscation under Section 111 of the Act, he shall be liable to penalty not exceeding the value of the goods or five thousand rupees, whichever is greater in the following manner:
(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding the value of the goods or five thousand rupees, whichever is the greater;
(ii) in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding the duty sought to be evaded on such goods or five thousand rupees, whichever is the greater.
10. Since the goods are attempted to be improperly imported and that has been admitted by the importer, the consequence by way of penalty would follow. The Tribunal fell into error by stating that merely because the goods have been abandoned and bill of entry has not been filed, it is not a case for imposition of penalty. The right of a person to abandon the goods and seek exemption from payment of duty is under Section 23(2) of the Act, but that does not absolve him of his liability to be proceeded against under the provisions of the Act for any violation which renders the goods improperly imported liable for confiscation. The penalty under Section 112(a) of the Act is in relation to such conduct of improper importation of goods.
11. The plea of the importer that he is not the owner of the goods also appears to be a fallacy. If he is not the owner, as stated by him, there is no question of seeking abandonment under Section 23(2) of the Act, where a right is given to the owner to abandon the goods. At the first instance, as an importer, the first respondent chooses to abandon the goods as owner and thereafter pleads that he is not the owner. In the statement recorded by the Customs authority, he has accepted that he is the owner of the goods and the reason for misdeclaration has also been stated. The statement is not retracted. The complicity of the importer in the improper import is, therefore, evident from the narration of facts as above.
12. Section 112 of the Act stands clearly attracted to the case of improper importation of goods by any person. The key words of Section 112(a) of the Act are that in relation to any goods, if any person does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111 of the Act, he shall be liable to pay penalty. In this case, the importer did not make a proper declaration in respect of the goods with an intent to evade payment of customs duty and, therefore, the consequence of penalty will flow automatically. In our firm view, the Commissioner was justified in imposing penalty, though we find it is meager in the facts of the present case. We, therefore, answer the question of law in favour of the Revenue and against the importer.
13. We are not inclined to refer to the various decisions of the Tribunal relied on by the learned counsel for the importer, as in none of those decisions the issue of penalty has been considered in the manner in which we have decided based on the facts and circumstances of the case. The decision of the Tribunal which is contrary to what we have held can be of no assistance to the importer.
For the foregoing reasons, this appeal is allowed. No costs.
(R.S.J.) (G.M.A.J.)
19.9.2014
Index : Yes
Internet : Yes
sasi
To:
The Assistant Registrar,
Customs, Excise and Service Tax
Appellate Tribunal, South Zonal Bench
First Floor, No.27, Haddows Road
Chennai 600 006.
R.SUDHAKAR,J.
and
G.M.AKBAR ALI,J.
(sasi)
C.M.A.No.2326 of 2005
19.9.2014