Customs, Excise and Gold Tribunal - Bangalore
Kozy Silks Pvt. Ltd. vs Commissioner Of Customs (Exports) on 26 August, 2005
Equivalent citations: 2005(190)ELT28(TRI-BANG)
ORDER T.K. Jayaraman, Member (T)
1. This is an appeal against Order-in-Original dated 10-11-2004 passed by the Commissioner of Customs Exports Chennai consequent to remand order dated 18-2-2003 of CESTAT.
2. The brief facts of the case are as follows :
3. The DRI conducted certain investigations which revealed that the appellants imported mulberry raw silk yarn under DEEC scheme. Under the scheme, the imported goods are supposed to have been used for the manufacture of goods to be exported. The main charge against the appellant is that they disposed of certain quantity of the imported yarn in the local market. The proceedings initiated against the importer culminated in the issue of Order-in-original dated 19-2-1998 by the Commissioner of Customs. The Commissioner confirmed the duty demanded in the show cause notice and imposed penalties on Shri Mangilal Shah and Shri Jitender Shah Directors of M/s. Kozy Silks Pvt Ltd. The appellants approached this Bench for relief. While remanding the case to the Original Authority, the CESTAT gave the following directions.
"On going through the facts of the case, we find that the party has taken the specific plea before the authority below about stock position pledged with the Bank, but the same has not been considered while passing the impugned order. In view of this discrepancy, we are of the view that the matter will have to go back for reconsideration. In the view we have taken, the matter is remanded to the concerned adjudicating authority to examine the issue afresh and to pass an appropriate order in accordance with law on providing an opportunity to the party. All the connected issues are kept open. Thus these three appeals are disposed of in the above terms".
4. After the de novo proceedings, the Commissioner held that the charge of disposal of the imported material in the local market has been established. He did not accept the plea of the appellants that the imported goods were same as those hypothecated to the bank. Hence, he confirmed the duty demanded. He imposed equal penalty on M/s. Kozy Silks Pvt. Ltd. Further he imposed personal penalty of Rs. 50,000/- each on Shri Mangilal Shah and Shri Jitendra Shah under Section 112(a)(ii) of the Customs Act 1962. The appellants have come before this Tribunal for relief.
5. Shri B.V. Kumar learned advocate appeared for the appellants and Shri R.N. Viswanath learned SDR for the Revenue.
6. The learned advocate urged the following points.
(i) Even though documentary evidence was produced before the Commissioner to show that the imported goods were hypothecated to the State Bank of Mysore, the Commissioner erred in totally ignoring the claim of the appellant. The learned Commissioner erred in observing that "it is quite possible that the stock was available as on 31-7-1996, but was not available as on the date of Mohazar. Further why no hypothecation statement for the subsequent period have not been forthcoming."
(ii) The investigating officers of the DRI did not verify the stock lying in the godown of the State Bank of Mysore despite the fact that this was brought to their notice and they took possession of the said godown.
(iii) The learned advocate furnished details of hypothecation deeds dated 22-7-1996, 25-9-1996, 30-9-1996 and 31-10-1996 and said at the time of search on 29-8-1996 by the DRI or even later, the impugned Mulberry raw silk yarn was lying in the bank's godown. Even though this fact was brought to the notice of the investigating officers of the DRI, the same was totally ignored.
(iv) The appellants rely on the following records namely, stock note book, file containing details of yarn issued for dying and twisting, file containing yarn issue challans cum-weaving production book, production register etc., which establish the fact that the appellants had the impugned goods as stock during the period. The appellants requested the learned Commissioner to call for the documents from the DRI for verification but the Commissioner ignored the request of the appellants to give copies of all the documents seized under the mohazar dated 29-8-1996. This amounts to gross violation of principles of natural justice.
(v) The appellants gave a part of the imported goods to the weavers for conversion to fabrics. These details were available in the files seized by the DRI on 20-9-1986. These facts were brought to the notice of the DRI but no investigation or verification was done by them.
(vi) The various statements of Shri Mangilal Shah and Shri Jitender Shah, the Directors of the appellant-company have been obtained under threat and duress.
(vii) The charge against the appellant is entirely on the basis of the statement. There is no corroborative evidence at all. No incriminating evidence in the form of sale invoice. Delivery challan/transportation documents have been found by the DRI Officers during the course of investigations.
(viii)The DRI have not established the complete chain of events namely from the time of the import of the impugned goods to the alleged disposal.
(ix) The learned advocate relied on the decision of the Hon'ble Supreme Court in the case of Kailash v. State of UP - and said that in the absence of corroborative evidence, duty liability cannot be fastened on them.
(x) In the present case, when the advance licences were seized, the same were still valid and the appellants could have discharged the export obligation but DRI acted high handedly by seizing valid advance licences and preventing the appellants from fulfilling the export obligation. Hence, the appellants cannot be blamed for violation of notification No. 80/95-Cus., dated 31-3-1995 and consequently demand of duty is not sustainable.
(xi) During the investigation, the DRI Officers took away 19 transferable licences and returned them after their validity expired. This action of the DRI has caused severe financial hardship to the appellant. It was prayed that the Tribunal takes into consideration this particular fact while deciding the issue.
(xii) In the present case, the impugned goods were imported during the period from 11-8-1995 to 26-4-1996. Hence, provisions of Section 114A and Section 28AB of the Customs Act are not applicable to the facts of the present case.
(xiii) It is settled law that for imports made prior to 28-9-1996, penalty under Section 114A is not leviable. The learned DR reiterated the points in the OIO.
7. We have gone through the records of the case carefully. The appellants imported mulberry raw silk yarn under the DEEC Scheme after obtaining advance licences from the JDGFT, Bangalore. As per the scheme, the appellants should fulfil export obligation, in respect of each advance licence. The DRI officers visited the appellants premises on 29-8-1996. They conducted thorough search and recovered certain documents. Subsequently, they took the statement of Shri Mangilal Shah and other Directors. Even though the total quantity of import under the advance licence was 30,623.930 per Kg of mulberry raw silk yarn, they completed the export obligation of 1242 Kgs. only. At the time of investigation, the imported goods were not available. It is the contention of the appellant that the stock was available and the same was hypothecated to the State Bank of Mysore. In order to examine this issue only, the case was remanded by the CESTAT to the Commissioner. The Commissioner has given a very detailed finding to justify why he could not accept the contention of the appellant that the goods imported under advance license were the same as those hypothecated to the bank. When the DRI officers visited the appellants unit on 29-8-1996, the appellants did not state that the goods were hypothecated to the Bank. In fact Shri Mangilal Shah in his statement has said that the goods were disposed of locally. No mention of existence of huge stock in the bank was mentioned. That is why, the Commissioner in his order has observed "it is quite possible that the stock was available as on 31-7-1996 but was not available as on the date of mahazar". The date of mahazar is 29-8-1996. The appellants produced a statement of stock as on 31-7-1996, as evidence to show that this stock was available even on the date of mahazar. If it were available, what is the thing which prevented the appellants from clarifying the same to the investigating officers? It is also seen that the statements given under Section 168 of the Customs Act, 1962 of Shri Mangilal Shah and Shri Jitender Shah have not been retracted at all. The goods have been imported duty free under customs notification No. 80/95 dated 31-3-1995. As per condition No. (vi) "exempt materials was not to be disposed of or utilized in any manner except for utilization in discharge of export obligation before the export obligation under the said licence has been discharged in full." We agree with the finding of the Commissioner that the imported stock was not in existence on the date of mahazar. There is also no evidence that they have been utilized in the discharge of export obligation. Hence, condition (vi) of the above notification has been violated. In these circumstance, it is not necessary to show the complete chain of activity, right from the procurement of the imported goods to their ultimate disposal. The burden of showing that the imported goods have not been disposed of is clearly on the appellants who have availed the notification. Their contention that the goods are in existence under hypothecation to the bank cannot be accepted in the light of the Commissioner's findings. The appellant is liable to pay the duty amount of Rs. 26,90,940/- only. It is seen that the amount had already paid during the course of investigation. However, Sections 114A and 28A cannot be invoked for the period prior to 28-9-1996. Hence, penalty under Section 114A of the Customs Act is liable to be set aside. Interest under Section 28AB is also not leviable. The penalties under Section 112 imposed on S/Shri Mangilal and Jitender Shah are very reasonable. The same are upheld. With these modification, we partially allow the appeal and uphold the OIO in respect of demand of duty and penalties on Shri Mangilal Shah and Shri Jitender Shah.
(Pronounced in open Court on 26-8-2005)