Custom, Excise & Service Tax Tribunal
Bimal Kumar Mehra vs Commissioner Of Customs (Import), ... on 22 March, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal Nos. C/1279/01 and C/84/03 (Arising out of Order-in-Original CAO No. 290/2001/CAC/CC.ASS dated 17.9.2001 passed by Commissioner of Customs (Adjudication), Mumbai and Order-in-Original C. No.S/10-92/1998-ADJ/DRI/BZU/F/20 (2)/97/9102 dated 13.11.02 passed by the Commissioner of Customs (Adjudication, New Customs House, Mumbai at New Custom House, New Delhi).) For approval and signature: Honble Mr.P.G. Chacko, Member (Judicial) Honble Mr. Sahab Singh, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No 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 :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Bimal Kumar Mehra Appellant (Represented by: Mr. Anil Balani, Advocate) Vs Commissioner of Customs (Import), Mumbai Respondent (Represented by: Mr. Manish Mohan, SDR) CORAM:
Honble Mr.P.G. Chacko, Member (Judicial) Honble Mr. Sahab Singh, Member (Technical) Date of Hearing : 22.03.2011 Date of Decision: 22.03.2011 ORDER NO..
Per: P.G. Chacko
1. Mr. Bimal Kumar Mehra (appellant) as proprietor of M/s Global Art imported a few consignments of Mulberry Raw Silk under a Quantity-Based Advance Licence registered at Mumbai and issued on 4.7.1995. One of these consignments was imported at Mumbai vide Bill of Entry No. 653 dated 19.1.96 and other consignments were imported at Chennai vide Bills of Entry No 61162 dated 13.12.95, 61547 dated 15.12.95 and 32237 dated 28.6.96. The imports at Chennai port were made on the strength of Transfer Release Advices (TRAs) issued from the New Customs House Mumbai. Out of the total quantity (5280 Kgs) of Mulberry Raw Silk allowed to be imported under the above advance licence, 3971.43 kgs were imported at Chennai port and 1280 kgs at Mumbai port. At the time of import, the appellant had executed a bond with the Mumbai Customs and furnished bank guarantee for Rs 11,66,545/-. The imported goods were cleared duty-free in terms of Notification No. 80/95-Cus dated 31.3.95 which, under the DEEC Scheme, granted exemption from payment of Customs duty on the imported raw material subject to certain conditions, the chief condition being that the imported goods should be used in the manufacture of product to be exported in discharge of the export obligation of the importer under the scheme. Accordingly, the appellant was liable to use the imported raw material cleared at Mumbai and Chennai, in the manufacture of silk garments and to export the product in discharge of their export obligation under the above scheme.
2. The DRI launched investigations into the post-import conduct of the appellant. On the basis of the results of these investigations, two show-cause notices were issued to the appellant, one by the Commissioner of Customs (Mumbai) on 2.7.98 and the other by the Commissioner of Customs, Chennai on 30.6.98. These show-cause notices demanded Customs duty from the appellant under the proviso to Section 28 (1) of the Customs Act together with interest thereon under Notification No. 80/95-Cus and proposed to confiscate the goods under Section 111 (o) of the Act, proposed penalties under Section 114A and Section 112 of the Act. The notices invoked the extended period of limitation on the ground that the appellant had willfully suppressed the factum of non-utilization of the duty-free goods with mala fide intention to evade duty of Customs. The bank guarantee had been encashed by the department way back in Mach 1997. The amount so encashed (Rs 11,66,545/-) was proposed, in the show-cause notices, to be adjusted against the duty and interest demanded and penalty, if any, imposed.
3. The amount of duty demanded in the Mumbai show-cause notice was Rs 2,24,618/- on a quantity of 1280 kgs of Mulberry Raw Silk of CIF value of Rs 7,41,312/-. The Chennai show-cause notice demanded duty of Rs 9,08,157/- on a quantity of 3971.43 kgs of Mulberry Raw Silk of CIF value of Rs 29,90,740/-.
4. In each show-cause notice, there was also a proposal to impose penalty on one Shri Javed Alam under Section 112 of the Customs Act. The allegation against him was that he had played active role in the import of the goods under the DEEC Scheme and in the misuse of the exemption Notification through Mr. Bimal Kumar Mehra (appellant) in whose name the Bills of Entry were filed. It was also alleged that the bank guarantee was, in fact, financed by Mr. Javed Alam. On this basis, the above show-cause notices proposed penalties on Mr. Javed Alam, but he did not reply to the show-cause notices, nor did he appear before the adjudicating authority.
5. The appellant filed replies to the show-cause notices denying the allegations and contesting the demand of duty and other proposals raised therein.
6. Both show-cause notices were adjudicated upon by the Commissioner of Customs (Adjudication), Mumbai. In adjudication of the Mumbai show-cause notice, the Commissioner passed the following order:
(i) I demand customs duty of Rs 2,24,618/- from M/s Global Art in terms of Notification no. 80/95-Cus dated 31.3.95 under Section28 of the Customs Act, 1962. I also demand interest on the duty under Section 28AB of the Customs Act, 1962;
(ii) I order that above amount be adjusted against the bank guarantee executed by M/s Global Art and enforced for Rs 11,.66,545/-. The balance amount left shall be adjusted towards penalty imposed on M/s Global Art;
(iii) I order confiscation of 1280 kg of MRS imported by M/s Global Art having total CIF value of Rs 7,41,312/- under Section 111 (o) of the Customs Act, 1962. However goods are not available for confiscation;
(iv) Penalty is imposed on the following persons/firms:
(a) M/s Global Art - Rs 2,24,618/- under Section 114 A of the Customs Act, 1962.
(b) Shri Bimal Kumar Mehra Rs 2,00,000/- under Section 112 (a) of the Customs Act, 1962.
(c) Shri Javed Alam Rs 5,00,000/- under Section 112 (b) of the Customs Act, 1962.
7. In adjudication of the Chennai show-cause notice, the Commissioner passed the following order:
(a) In view of the above findings, the demand of Rs 9,08,157/- and interest of rs 2,57,716/- against M/s Global Art is confirmed. I order to adjust the same against the amount received from encashment of bank guarantee.
(b) Since the goods are not available for confiscation, I hold the goods liable for confiscation, therefore, I impose a fine of Rs 25,00,000/- on M/s Global Art in lieu of confiscation of the goods.
(c) Having regard to the facts and the circumstances of the case, the legal provisions, the case laws and the role played by different parties, the following penalties are also imposed:
(i) M/s Global Art Rs 15,00,000/-.
(ii) Sh. Javed Alam Rs 10,00,000/-
(iii) Sh. Bimal Kumar Mehra alias Sh. Rajkumar Seth Rs 8,00,000/-.
8. The present appeals are against the above orders of the learned Commissioner of Customs.
9. Heard both sides. The learned counsel for the appellant, at the outset, raises a jurisdictional objection of sorts by submitting that it was not open to the Commissioner of Customs (Adjudication), Mumbai to pass separate orders in adjudication of the two show-cause notices. Referring to para 6 of the Order-in-Original passed by the Commissioner in adjudication of the Chennai show-cause notice, the learned counsel submits that, when the Commissioner took up the Mumbai case for adjudication in October 2001, he was aware of Notification No. 93/98-Cus (NT) dated 16.11.98 whereby the Government had appointed a common adjudicating authority for joint adjudication of both the show-cause notices. According to the learned counsel, the Commissioner of Customs (Adjudication), Mumbai should have taken up both the cases for joint adjudication as per Notification No. 54/01-Cus (NT) dated 19.10.01. The learned counsel has also pointed out certain anomalies between the two impugned orders, which arose out of separate adjudication of the two show-cause notices. The learned SDR points out that the jurisdiction of the Commissioner was never challenged by the appellant at any earlier stage. We have found this submission to be factually true. A jurisdictional objection should be raised at the earliest stage of quasi-judicial proceedings. The appellant could have raised the objection in his replies to the show-cause notices. He has not chosen to raise it even in the present appeals. Such an objection raised by the counsel for the appellant, at this late stage, is only liable to be over-ruled.
10. Adverting to the facts of the case, the learned counsel submits that the bank guarantee was encashed as early as in March 1997 towards duty leviable on the goods by reason of violation of conditions of Notification No. 80/95-Cus. He submits that the entire amount of duty on the goods imported by the appellant should be held to have been paid on the date of encashment of the bank guarantee. Where duty was paid prior to issuance of the show-cause notices, counsel argues, there could be no redemption fine or penalty. In this connection, he has relied on two decisions of this Tribunal viz (i) Pattu Exports Pvt Ltd vs Commissioner of Customs, Chennai 2007 (213) ELT 545 (Tri-Chennai); and (ii) Royal Embroideries Pvt Ltd vs Commissioner 2008 (84) RLT 84 (CESTAT-Ban). In the first case, the assessee had imported Mulberry raw silk and Dupion silk under an advance licence and cleared the goods duty-free under Notification No. 80/95-Cus after executing a bond as required by the assessing authority. The assessee, however, failed to discharge export obligation in relation to the imported raw materials, thereby committing breach of one of the conditions of the said notification. At the instance of the department, they paid duty on the imported goods with interest @24% p.a. from the date of clearance of the goods. Subsequently, the department issued a show-cause notice to confiscate the goods under Section 111 (o) of the Customs Act and to impose a penalty on the importer under Section 112 (a) of the Act. These proposals were contested by the assessee. The dispute ultimately arose before the Tribunal. The question before the Tribunal was whether the importer attracted penal liability under Section 112 (a) of the Act. The Tribunal held that the assessee complied with condition (ii) of the notification by discharging duty liability under the bond. It was further held that, when the said condition was complied with, its cause of action viz breach of condition (v) did not survive. In this view, it was held that the assessee was not liable to be penalized under Section 112 of the Act. In the second case, the bank guarantee furnished by the importer/assessee was encashed by the department towards the duty payable on the raw material imported under an advance licence. This happened when the importer failed to discharge export obligation under the scheme. When the dispute between the assessee and the Revenue eventually arose before the Tribunal, it was held that any fine or penalty was not leviable from the assessee inasmuch as the duty had already been recovered by invoking the bank guarantee. Claiming support from the two decisions, the learned counsel prays for setting aside the penalties imposed by the Commissioner in both Mumbai and Chennai cases and the fine imposed by him in the Chennai case.
11. It is further contended that Section 114A of the Customs Act, which was invoked by the learned Commissioner for imposing penalty on M/s Global Art in the Mumbai case, is not applicable at all as the provision was not in existence when the import took place. A similar argument has been advanced against the demand of interest on duty under Section 28 AB of the Act, raised by the learned Commissioner in the Mumbai case. Both the provisions of the Customs Act came into force on 28.9.1996 only and neither of them had any retrospective effect. All the imports were made prior to the said date.
12. With reference to the Mumbai case, the learned counsel submits that the adjudicating authority invoked both Sections 114A and 112 (a) of the Customs Act for penalizing the appellant, which, according to the counsel, was not permissible in law. It is submitted that, in the eye of law, M/s Global Art and its proprietor (Mr. Bimal Kumar Mehra) are one and the same and, therefore, there could be no separate penalties on them.
13. According to the learned SDR, encashment of the bank guarantee cannot be equated to voluntary payment of duty by the assessee. Therefore, the decisions cited by the learned counsel are not applicable. In any case, it is not in dispute that the substantive condition of Notification No. 80/95-Cus was violated by the appellant who failed to discharge export obligation in relation to the raw materials imported duty-free under the DEEC Scheme thereby violating condition (v) of the Notification. It is argued that such breach of a condition of the exemption notification would ipso facto render the goods liable to confiscation under Section 111 (o) of the Act and consequently the importer would be liable to penalty under Section 112 of the Act. In this connection, the learned SDR relies on Order No. A-170-171/10/CSTB/CII dated 08.06.10 passed by this Bench in Appeal No. C/1393-1394/02 Mum (Munilal Mehra vs Commissioner of Customs (Adjudication), New Delhi). It is, incidentally, pointed out that this Mr. Munilal Mehra is the father of the appellant Mr. Bimal Kumar Mehra. In the cited case, Mr. Munilal Mehra was found to have associated himself with diversion of raw materials imported under DEEC Scheme by Mr. Javed Alam. The raw materials, which were imported duty-free, were diverted by the importer instead of being brought to his factory for use in the manufacture of finished goods for export under the said Scheme. On these facts, the diverted goods were held to be liable to confiscation under Section 111 (o) of the Act and Mr. Munilal Mehra liable to be penalized under Section 112 of the Act. The learned SDR claimed strong support from this decision of this Bench rendered in the present appellants fathers case.
14. We have given careful consideration to the submissions. Having already over-ruled the jurisdictional objection raised by the learned counsel, we have now to deal with another argument advanced by the counsel. It was submitted that the person chargeable with the duty in the present case has to be identified first before invoking Section 28 of the Customs Act. It was argued that, in a case like this, wherein the Bills of Entry are filed by a front man of the real importer, the latter should be identified as the person chargeable with the duty. Mr. Bimal Kumar Mehra had acted only as a front man of Mr. Javed Alam who had actually taken all the necessary steps for importing Mulberry Raw Silk and cleared the same duty-free. It was Mr. Javed Alam who had actually financed Mr. Bimal Kumar Mehra for obtaining bank guarantee in his name. Mr. Bimal Kumar Mehra only subscribed his signatures to the Bills of Entry and undertook other Customs formalities for the benefit of Mr. Javed Alam. The goods after clearance were also handled by Mr. Javed Alam. In these circumstances, according to the learned counsel, Mr. Javed Alam should be held to be the owner of the goods and, for that matter to be the importer of the goods. The show-cause notices should have been directed mainly against Mr. Javed Alam for recovery of duty from him under Section 28 of the Act inasmuch as such demand of duty could be raised only on the person chargeable with the duty. This view, according to the counsel, would largely benefit the department in similar cases. The learned SDR has also referred to Section 28 of the Act and has submitted that the person who files the Bills of Entry is the importer of the goods and the person chargeable with the duty under the said section. We have no reason to disagree. Importer as defined under Section 2 (26) of the Customs Act includes any owner or any person holding himself out to be the importer. In the present case, the appellant, by filing the Bills of Entry, held himself out to be the importer of the goods and, therefore, he is the importer for purposes of Section 28 of the Customs Act. Where the taxable event is import, the tax has to be paid by the importer. Therefore, the importer is the person chargeable with the duty on the goods imported and presented under the Bill of Entry. Accordingly, we hold that the liability to pay duty, in the present case, is on the appellant.
15. It is not in dispute that the bank guarantee was encashed by the department way back in 1997. There is nothing on record to show that it was encashed at the instance of the appellant. As rightly submitted by the learned SDR, the encashment of bank guarantee cannot be deemed to be a voluntary payment of duty by the appellant. Therefore, the appellant cannot claim immunity from penalty or fine on the alleged ground of payment of duty prior to issuance of show-cause notices. In this context, we have studied the decisions cited by the learned counsel viz Royal Embroidery (supra) and Pattu Exports (supra). In the case of Royal Embroidery (supra), wherein the department invoked the bank guarantee, apparently the amount encashed was instantly adjusted towards duty payable by the assessee. It is also found that the Tribunal in the case of Royal Embroidery followed earlier decisions to the effect that, once the normal rate of duty had been paid by the appellant, there was no question of invoking non-fulfilment of post-import condition of the exemption notification for imposition of fine and penalty. Obviously, the payment of duty at normal rate of duty by M/s Royal Embroidery before issuance of the show-cause notice was a voluntary payment of duty. Thus, we find that the decisions cited by the learned counsel are not applicable to the present case.
16. As rightly pointed out by the learned SDR, breach of condition (v) of Notification No. 80/95-Cus by the appellant attracted Section 111 (o) of the Customs Act and, consequently, the goods imported by him were liable to confiscation. That the goods were diverted after duty-free clearance, in stead of being used in the manufacture of products to be exported in discharge of export obligation under DEEC Scheme, is not in dispute. Hence there can be no resistance to the Commissioners orders holding the goods liable to confiscation. The goods were, no doubt, not physically available for confiscation as they had been cleared duty-free and diverted long back. However, it is not in dispute that the clearance of the goods at Customs was allowed against bond and bank guarantee. That being so, the non-availability of the goods would not stand in the way of the adjudicating authority imposing redemption fine under Section 125 of the Act. This view is supported by the Honble Supreme Courts judgment in Weston Components Ltd vs Commissioner 2000 (115) ELT 278 (SC), wherein the goods imported by the assessee were released on execution of bond and, on the basis of this fact, it was held by the apex court that the Customs authorities were entitled to confiscate the goods with option for redemption against payment of fine under Section 125 of the Act.
17. In the Mumbai case, no fine was imposed by the learned Commissioner apparently on the ground that the goods were not available for confiscation. This part of the Commissioners order was not challenged by the Revenue. In the Chennai case, on the other hand, the learned Commissioner imposed a redemption fine under Section 125 of the Act in lieu of confiscation of the goods, quite justifiably, on the facts of the case. This part of the Commissioners order in the Chennai case is under challenge by the appellant and this challenge cannot succeed in view of the decision in Weston Components (supra). The learned counsel has argued that the bond executed by the assessee in the case of Weston Components (supra) was a different kind of bond and, therefore, that decision cannot be made applicable to the instant case. The counsel has not produced a copy of the bond to establish the point. However, he has fairly admitted that the bond was executed under Notification No. 80/95-Cus whereunder the appellant cleared the goods duty-free.
18. As we have already indicated, in the Mumbai case, no redemption fine was imposed by the Commissioner, but the Revenue is not aggrieved. The learned SDR has not been able to offer a satisfactory explanation, nor has he showed a copy of the bond executed by the appellant to enable us to ascertain the purposes for which the bond was executed. In this scenario, we are of the considered view that the redemption fine imposed by the learned Commissioner in the Chennai case should be vacated. It is ordered accordingly.
19. Nevertheless, the appellant can have no valid case against the penalties imposed under Section 112 of the Act in the Mumbai and Chennai cases. The appellant, as importer, cannot claim immunity from penalty after having cleared the goods duty-free under the exemption notification and diverted the same in gross breach of a condition thereof. The appellant, by his conduct, rendered the goods liable to confiscation and rendered himself liable to penalty. Hence the penalty imposed on M/s Global Art under Section 112 of the Act in the Chennai case is, therefore, liable to be sustained in principle. The quantum of penalty so imposed is Rs 15 lakhs. Considering the circumstances of this case, we are of the view that this penalty is harsh. Given the assessable value of the goods to be approximately at Rs 30 lakhs, we reduce the penalty to Rs 1,00,000/- (Rupees One lakh only). There is no penalty on M/s Global Art under Section 112 of the Act in the Mumbai case, but there is a penalty on them under Section 114A of the Act, which cannot be sustained for the reason correctly stated by the learned counsel. Section 114A of the Act was not in force when the import of goods by the appellant took place at Mumbai and this provision of law has no retrospective operation.
20. The learned counsel has argued against a separate penalty imposed on the appellant Mr. Bimal Kumar Mehra under Section 112 of the Act both at Mumbai and Chennai. This submission is true insofar as the Chennai case is concerned, wherein separate penalties under Section 112 of the Act were imposed on M/s Global Art and Mr. Bimal Kumar Mehra (proprietor). The adjudicating authority could not have imposed two penalties of the same kind on the same person for the same offence. M/s Global Art and Mr. Bimal Kumar Mehra represent the same person. Therefore, the penalty imposed on Mr. Bimal Kumar Mehra in the Chennai case is set aside.
21. In the Mumbai case, there is a penalty of Rs 2 lakhs under Section 112 of the Customs Act on Mr. Bimal Kumar Mehra. There is no such penalty on M/s Global Art. Therefore, the penalty on Mr. Bimal Kumar Mehra is not liable to be vacated though it calls for reduction, in the circumstances of the case, to Rs 10,000/- (Rupees Ten thousand only). It is ordered accordingly.
22. Needless to say that the penalty imposed on M/s Global Art under Section 114A of the Act is liable to be set aside. It is ordered accordingly.
23. The demand of interest on duty under Section 28 AB of the Customs Act in the Mumbai and Chennai cases is liable to be set aside and it is ordered accordingly for the reason that this provision of law was not in force at the material time. In the Chennai case, the learned Commissioner confirmed demand of interest of Rs 2,57,716/- against the appellant and ordered it to be adjusted against the amount encashed from bank guarantee. Though, in the operative part of the Commissioners order there is no mention of the legal provision covering the demand of interest, the body of his order indicates that this demand is in terms of Notification No. 80/95-Cus (as amended) and Section 28AB of the Customs Act. Though Section 28AB of the Customs Act is not applicable, the Exemption Notification is certainly invocable for levy of interest. It appears, the bond executed by the appellant at the time of import of the goods made him liable to pay, on demand, duty with interest @24% p.a. from the date of clearance of the raw material. Breach of conditions of the notification made the appellant liable to pay the duty with interest in terms of the bond. Therefore, the demand of interest on duty confirmed against the appellant, in the Chennai case, has to be upheld and it is ordered accordingly.
24. In the result:
(i) appeal No C/1279/01 is disposed of in the following terms:
(a) The demand of duty is upheld;
(b) Order holding the goods to be liable to confiscation is sustained;
(c) The penalty imposed under Section 114A of the Act is set aside; and
(d) The quantum of penalty imposed on the appellant under Section 112 (a) of the Customs Act is reduced to Rs 10,000 (Rupees Ten thousand only).
(ii) Appeal No. C/84/03 is disposed of in the following terms:
(a) The demand of duty with interest thereon is upheld;
(b) The order holding the goods liable to confiscation is upheld, but the redemption fine is set aside;
(c) The quantum of penalty imposed on M/s Global Art under Section 112 of the Act is reduced to Rs 1,00,000/- (Rupees One lakh only); and
(d) The penalty imposed on Mr. Bimal Kumar Mehra under the same provision of law is set aside.
(Dictated in Court.) (Sahab Singh) Member (Technical) (P.G. Chacko) Member (Judicial) rk 19