Custom, Excise & Service Tax Tribunal
Commissioner Of Customs (Imports), ... vs ) Ravi Enterprises on 27 June, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal Nos.C/S/28/11 & C/26/2011
C/S/31-35/2011 & C/36-40/2011
[Arising out of Order-in-Original No.13150/2010 dt. 8.10.2010 passed by the Commissioner of Customs(Seaport-Import), Chennai]
For approval and signature:
Honble Ms. JYOTI BALASUNDARAM, Vice-President
Honble Dr. CHITTARANJAN SATAPATHY, 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? :
Commissioner of Customs (Imports), Chennai
Appellant/s
Versus
1) Ravi Enterprises
2) Shreepal Silk & Sarees
3) Prachi Silks
4) Shubham Enterprises
5) Trimurthi International
6) Nupur Impex
Respondent/s
Appearance :
Shri C.Dhanasekaran, SDR Shri S.Murugappan, Adv.(for Sl.No.2-6) Shri B.Satish Sundar, Adv. (for Sl.No.1) For the Appellant/s For the Respondent/s CORAM:
Honble Ms. Jyoti Balasundaram, Vice-President Honble Dr. Chittaranjan Satapathy, Technical Member Date of hearing : 27.6.2011 Date of decision : 27.6.2011 Final Order No.____________ Per Jyoti Balasundaram For reasons recorded below, we grant the prayer of the Revenue for stay of operation of the impugned order and proceed to decide the appeals themselves at this stage with the consent of both sides, as it is a fit case for remand.
2. The brief facts of the case are that intelligence was gathered by the Surat DRI officers that M/s.Shree Maruti Impex and M/s.Ravi Enterprises, both Surat based firms, were indulging in import of Mulberry Raw Silk Yarn without payment of duty procured by them on High Seas Sales basis by availing the benefit of Advance Authorization Scheme without utilizing the yarn so imported at Chennai for its intended purpose viz. processing of such yarn, but diverting the same to the same High Seas sellers based at Bangalore. Investigation also revealed that the monetary consideration for the High Seas Sales was being sent to them from the High Seas seller through Angadias/Courier to show the sale of goods, and the money was then being deposited in cash in their respective banks and transferred back to the accounts of the High Seas sellers. It was clearly brought out that the yarn imported duty-free was being diverted without being put to use for the intended purpose, in contravention of provisions of Customs Act, 1962. Searches were made by DRI officers at different premises declared by M/s.Shree Maruti Impex and M/s.Ravi Enterprises and it was noticed that neither of the firms was functioning. Further, no records or documents pertaining to either of the above mentioned firms were recovered and it therefore appeared that the addresses declared by them for obtaining Advance Authorization Scheme were fake. Investigations revealed that five firms namely M/s.Nupur Impex, Prachi Silks, Shreepal Silk & Sarees, Subham Enterprises & Trimurti International sold the consignments covered under 10 Bills of Entry on High Seas Sales basis to M/s.Maruti Impex and M/s.Ravi Enterprises, neither of whom had any plant and machinery for processing the Mulberry Silk yarn imported duty-free. It was also found that all duty-free yarn imported prior to the present consignments was also diverted and sold by the above mentioned two importers. In view of the violation of the provisions of EXIM Policy and the conditions to Notification No.96/09-Cus. dt. 11.9.09, all the imported consignments presented for import clearance at Chennai were detained by DRI, Chennai Zonal unit on 19.3.2010 on a reasonable belief that they were liable to confiscation under Section 111 (o) of the Customs Act, 1962 read with Section 11 of the Foreign Trade (Development and Regulation) Act, 1992 and the said detention was converted into seizure under cover of mahazars. One consignment imported vide Bill of Entry dt. 17.3.2010 by M/s.Ravi Enterprises was given out of charge by customs on 18.3.2010.
3. Statements of Shri Bipinchandra S.Shah, Proprietor of M/s.Shree Maruti Impex were recorded on 26.5.2010 and 27.5.2010 wherein he inter alia stated that he had imported Mulberry/Dupion Raw Silk Yarn without payment of duty and sold the same to High Seas sellers at Bangalore; that he does not have manufacturing facility to process the imported yarn; that to finance the imports, they received money from bank through Angadia firm and that money was deposited in their bank account and then sent through RTGS to the account of the High Seas sellers to complete the transaction of purchase. During the course of investigation, the five High Seas sellers represented to the Commissioner of Customs (Imports) that Bills of Entry already filed by M/s.Ravi Enterprises and M/s.Shree Maruti Impex may be cancelled and requested permission to file fresh Bills of Entry after amendment of Import General Manifest (IGM) on the basis of request to be made by the steamer agent/liner agent and to allow clearance of goods on payment of appropriate duty. High Seas sellers then filed Writ Petition No.14735-39/2010 in the Honble Madras High Court requesting that their representations dt. 23.4.2010 before the Commissioner (Import) be considered within a time frame and the above writ petition was disposed of vide a common order dt. 13.8.2010 wherein the High Court directed the Commissioner of Customs (Imports), Chennai to consider the representation and pass orders on merits and in accordance with law, within a period of 6 weeks from the date of receipt of copy of the High Courts order. Prior to disposing of the representations of the High Seas sellers in compliance of the High Courts order, the Commissioner of Customs (Seaport-Exports) extended the period for issue of show cause notice in respect of seized goods under Section 110 (2) of the Customs Act, 1962 by another six months. Before the Commissioner (Imports), the High Seas sellers raised the plea that although they had sold the Mulberry Raw Silk Yarn to M/s.Shree Maruti Impex and M/s.Ravi Enterprises, they had not received payment from them; that they were still in possession of the original documents viz. Bill of Lading to prove their title to the goods; that they were eligible to claim the ownership of the goods and file Bills of Entry in their names and therefore they may be permitted to file Bills of Entry in their names after the amendment of IGM and after cancellation of the Bills of Entry already filed by High Seas buyers.
4. The adjudicating authority vide the impugned order has (a) allowed the prayer of the High Seas sellers by directing cancellation of the Bills of Entry filed by High Seas buyers and permitting High Seas sellers to file Bills of Entry in their names after amendment of IGM (b) held that after re-filing of the Bills of Entry, the goods be assessed at merit rate of duty and (c) ordered provisional release of goods subject to compliance of clauses (a) and (b) above. Hence these appeals by the Revenue on the following grounds :-
i) The subject Order-in-Original was issued pursuant to the order of the Honble High Court dated 13.8.2010 directing the Commissioner of Customs to decide the representation of five High Seas Sellers on merits and in accordance with law within 6 weeks. However, while adjudicating the case, in compliance with the above order of the Honble High Court, the adjudicating authority erred in not taking into consideration the submissions placed on record by Revenue vide DRI letter F.No.DRI/SRU/INV-2/2010 dt. 13.9.2010 requesting the adjudicating authority to consider the said submissions (which were made in connection with the subject writ petitions) while disposing of the representation of the petitioners/high seas sellers concerned, as per the Honble High Courts order. The adjudicating authority has also failed to note the various observations and evidence placed on record by the Commissioner of Customs (Seaport-Export) while passing the OIO Nos.12869/2010 and 12871/2010 both dated 13/14.09.2010 for extension of the period for issue of show cause notice for the seizure of the impugned consignments under Section 110 (2) of the Customs Act, 1962. The adjudicating authority has not assigned any reason in the impugned order-in-original as to why the submissions of the revenue should not be considered.
ii) The adjudicating authoritys order is a non-speaking order. There are no findings in the order-in-original for clauses (a) & (b) of the order portion. The only reason cited by the adjudicating authority is that the goods are likely to deteriorate on storage for long periods and that the goods therefore should be provisionally released. The adjudicating authority has, therefore, merely given a reason for early release of the goods but has failed to furnish any reason for conferring the title on the High Seas sellers vide clause (a) and (b) of the order portion. The Commissioner has erred in allowing the High Seas sellers to file fresh Bills of Entry in respect of the seized goods without giving proper justification as to why the Bills of Entry already filed by importers i.e. M/s.Shree Maruti Impex and M/s.Ravi Enterprises, should be cancelled. After purchasing the impugned goods on High Seas Sale basis under a valid sale agreement signed by both the parties and on the strength of the IGM filed in their name by the steamer agents, M/s.Ravi Enterprises and M/s.Shree Maruti Impex have filed the impugned Bills of Entry and thus claimed themselves to be the importers and owners of the impugned goods. Further, they have never disowned their title to the seized goods. When the title has not been relinquished by the importer on record nor they have been heard, the Commissioner grossly erred in ordering cancellation of the originally filed Bills of Entry and permitting the High Seas sellers to file revised Bills of Entry in their own name. The order-in-original is silent on all the above issues.
iii) The Order-in-Original suffers from non- application of mind by the adjudicating authority. While clause (a) of the order portion of the O-in-O orders that Bills of Entry (without quantifying the number of those Bills of Entry) already filed by both M/s.Ravi Enterprises and M/s.Shree Maruti Impex should be cancelled and High Seas sellers be allowed to file Bills of Entry in their name, clause (b) orders for refiling and reassessment of only 8 Bills of Entry pertaining to M/s.Ravi Enterprises, without discussing the status of the two Bills of Entry filed by M/s.Shree Maruti Impex viz No.422330 & 422331, both dated 02.02.2010 (the goods imported under which are also presently under seizure). Further Order-in-Original fails to correlate the Bills of Entry with the respective High Seas sellers.
iv) The adjudicating authority erred in not taking cognizance of the fact that one Bill of Entry No.458720 dated 17.3.2010 mentioned at S.No.1 of the table in para 3 of the impugned Order-in-Original, has already been assessed and the goods imported vide the said Bill of Entry have been given out of charge. The adjudicating authority failed to note that where goods have already been ordered out of charge, cancellation of Bill of Entry already filed and ordering to file Bill of Entry afresh is neither justified nor permissible. This issue has been dealt with elaborately by the Honble High Court of Gujarat in the case of Commissioner of Customs Vs Jhunjhunwala Vanaspati [2008 (232) ELT 600 (Guj.)] wherein it was held that CESTAT was not justified in permitting filing fresh Bill of Entry after an out of charge order was issued. The above decision has been upheld by the Honble Supreme Court [2009 (237 ELT A20 (SC)]. The adjudicating authority failed to take note of the above legal position.
v) The adjudicating authority erred in not appreciating the definition of the term Importer given under Section 2 (26) of Customs Act, 1962 in true spirit. Section 2 (26) states that importer, in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer. As M/s.Ravi Enterprises and M/s.Shree Maruti Impex have already held themselves out to be the importers by filing the Bills of Entry in their name on the strength of the High Seas Sales Agreement / Contract and the IGM entries noted in their name and have not disclaimed the goods, no other person can be substituted as importer in their place except on the ground that they are the real owners. However, the adjudicating authority erred in ordering for substitution of the notified importers by the High Seas sellers without giving any findings/reasons for conferring the ownership title on the High Seas sellers.
vi) The adjudicating authority has erred in ordering that the Bills of Entry already filed by M/s.Ravi Enterprises and M/s.Shree Maruti Impex may be cancelled. These two importers have never requested for cancellation of the Bills of Entry filed by them. There is no provision in law which authorizes the Commissioner to cancel the Bills of Entry suo motu, more so when the importer who filed Bills of Entry has not asked for the cancellation of the same.
vii) The adjudicating authority erred in not noting the payments made by M/s.Ravi Enterprises to the High Seas seller (vide RTGS payments dated 04.03.2010, 05.03.2010, 06.03.2010, 08.03.2010, 11.03.2010, 17.03.2010 for a total amount of Rs.99,11,502/- to M/s.Prachi Silks Mills, RTGS payments dated 08.03.2010, 09.03.2010 for a total amount of Rs.47,00,000/- to M/s.SR & Co., RTGS payment dated 18.03.2010 for an amount of Rs.15,00,000/- to M/s.Trimurti International, RTGS payment dated 19.03.2010 for an amount of Rs.9,00,000/- to M/s.Shreepal Silk Mills and payments made by M/s.Shree Maruti Impex to the High Seas seller M/s.Nupur Impex vide cheques dated 01.12.2009 to 26.2.2010 for a total amount of Rs.2,39,20,000/-) while noting the contention of the High Seas sellers vide para 18 of the OIO that they have not received the payment due from them. The OIO does not shed any light on the issue of either payment or non-payment in respect of any of the subject consignments.
viii). The adjudicating authority erred in not considering the confirmation of the fact of payments having been made to the High Seas sellers which was placed on record, vide Order-in-Original Nos. 12869 and 12871, both dated 13/14.09.2010 issued by the Commissioner of Customs (Seaport-Export), while deciding the issue of extension of seizure period for the impugned consignments under Section110(A) of the Customs Act, 1962.
ix) The adjudicating authority erred in not rejecting the contention of the High Seas sellers that M/s.Ravi Enterprises and M/s.Shree Maruti Impex had not paid them for purchase of the seized goods, as an issue between the High Seas sellers and the High Seas buyers. For recovery of the dues from the buyers, in respect of a sale executed on the basis of a High Seas Sale Agreement/contract, the High Seas sellers cannot coerce the Customs authorities to release the seized goods to them particularly when both the seller and buyer are located in India itself. The above legal position has duly been confirmed by the Honble High Court of Gujarat in the case of Commissioner of Customs Vs Jhunjhunwala Vanaspati Ltd. [2008 (232) ELT 600 (Guj.)] vide para 9.4 of their judgement which is reproduced below :
9.4. In the opinion of this Court, it is clear from the conduct of the respondent that instead of finding out M/s.Magpie, to whom they sold the goods under a High Seas Sale Agreement, for recovery of their dues they are trying to pressurise the authorities for allowing them to cancel the bills of entry filed by M/s.Magpie and allow the respondent to file fresh bills of entry and substitute the name of the respondent in place of M/s.Magpie.
x) The adjudicating authority has erred in allowing the High Seas sellers to file Bills of Entry after amendment to be carried out in the IGM on the basis of a request to be made by their steamer / liner agents without examining the fraud angle involved in the present case. This aspect was required to be examined before allowing any amendment of IGM as per Section 30 (3) of the Customs Act, 1962. The issue relating to amendment of IGM has been settled by the Tribunal in the case of Biren Shah Vs Collector of Customs, Bombay in 1994 (72) ELT 660 (Tri.) vide para 10.4 whereof, it is cleared held as follows : Section 30 (3) clearly envisages that only if the proper officer is satisfied that there was no fraudulent intention, he may permit the amendment. Here the undisputed factual position is that the goods were sought to be imported in the name of M/s.Vikram Overseas solely for duty benefit and the amendment is sought tobe moved for substituting Vikram Overseas by Shri Biren Shah, when the fraud was detected. Hence the officer is well within the provision of Section 30 (3) of the Customs Act to reject the request for amendment, even if it had moved by the Steamer Agent ---. The adjudicating authority erred in not following the above legal position.
xi) The adjudicating authority erred in not considering the fact that the judgement of the apex court in the case of Union of India Vs Sampath Raj Dugar [1992 (58) ELT 163 (SC)] which was relied upon by the High Seas sellers, cannot be made applicable to the present situation which involves an element of fraud. The Honble High Court of Gujarat has similarly distinguished the above judgement of the Apex court in the case of Commissioner of Customs Vs Jhunjhunwala Vanaspati [2008 (232) ELT 600 (Guj.), wherein it has been held that :
10. The foremost argument of the learned advocate for the respondent that the decision of the Honble Apex Court in the case of Union of India v. Sampat Raj Dugar is applicable to the facts of the present case, is found to be not well-founded. Even the Commissioner of Customs had considered the said decision of the Honble Apex court and observed as under :-
The ratio of Hon.Supreme Courts judgment in the case of Sampat Raj Dugar, 1992 (58) ELT 163 (SC) is with reference to an importation by a person who had an advance license issued in his name which got cancelled and as such, the foreign suppliers rights with reference to the goods were sought to be established for smooth functioning of foreign trade.
10.1 The Commissioner of Customs has considered the facts of the present case in the same paragraph as under :-
This case, however, as explained above, is with regard to a high sea sale effected by the noticee (present respondent) who has initially imported and then transferred it on high sea sale basis to a fictitious firm, with or without motive, and once that firm was investigated and vanished from the scene, seeks to substitute themselves as the importer. The bill of entry filed by M/s.Magpie which has been duly assessed by the department is still very much on record. As such, the element of fraud which is very much involved in the present case was not an issue before Hon. Supreme Court in the case of Sampat Raj Dugar. (emphasis supplied).
10.2 This Court, having perused the aforesaid judgment of the Honble apex court, is of the considered opinion that the facts of that case are different and therefore, the decision has no application to the facts of the present case. The facts of the present case are identical with the facts of the case law of Jhunjhunwala Vanaspathi Vs Commissioner of Customs. Further, compared to the Jhunjhunwala case, wherein the notified importer vanished (after assessment order / out of charge was given), the notified importer in the present case viz. M/s.Ravi Enterprises is still in existence and claiming the goods and in both the cases it is a dispute between High Seas buyer and High Seas seller. The adjudicating authority erred in not taking note of the above legal position.
xii) The adjudicating authority erred in not considering the findings given towards the existence of fraud/conspiracy to evade duty between the subject high seas sellers and high seas buyers and the findings in respect of money routing from the High Seas sellers themselves to the High Seas buyers and back from the High Seas buyers to the High Seas sellers which are noted in the Order-in-Original No.12869/2010 and 12871/2010, both dated 13/14.09.2010 issued by the Commissioner of Customs (Seaport-Export).
5. In the light of the above, we agree with the Revenue that the Commissioner ought to have taken into account the findings in the report of the DRI before passing the order permitting amendment of the IGM and filing of fresh Bills of Entry by the High Seas sellers and directing provisional release of the goods. Although the goods have only been provisionally released, permitting of the amendment of the IGM and filing of fresh Bills of Entry is not provisional in nature. We, therefore, set aside the impugned order and direct the Commissioner to pass fresh orders after consideration of the contents of the DRI report and after furnishing a copy of the same to the respondents. As the goods are stated to be perishable in nature, fresh orders shall be passed within 2 months from the date of receipt of this order, after extending a reasonable opportunity to the respondents of being heard in their defence.
6. The appeals are thus allowed by way of remand.
(Operative part of the order was pronounced
in open court on 27.6.2011)
(Dr. CHITTARANJAN SATAPATHY) (JYOTI BALASUNDARAM)
TECHNICAL MEMBER VICE-PRESIDENT
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