Custom, Excise & Service Tax Tribunal
D.H. Patkar & Co vs Commissioner Of Customs (Prev), Mumbai on 25 February, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Applications Nos. C/S/1745, 1888, 1917 to 1922/09 and Appeal Nos. C/1075, 1220, 1241 to 1246/09 (Arising out of Order-in-Original CAO No. 128/2009/CAC/CC/MS dated 31.8.2009 passed by Commissioner of Customs (Adjudication), Mumbai.) 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 : Yes 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?
====================================================== D.H. Patkar & Co Banaswara Syntex Ltd Mangtani Exports (India) Pvt Ltd Kabirdas Kewalram Mangtani Rajesh Kabirdas Mangtani Sunil Asnani Jairam Mangtani Gul Kabirdas Mangtani Appellant (Represented by: Mr. Anil Balani, Mr. A.V. Naik, Miss Lakshmi Menon, Mr. G.B. Yadav, Advocates) Vs Commissioner of Customs (Prev), Mumbai Respondent (Represented by: Mr. S.S. Katiyar, SDR ) CORAM:
Honble Mr.P.G. Chacko, Member (Judicial) Honble Mr. Sahab Singh, Member (Technical) Date of Hearing : 25.02.2011 Date of Decision: 25.02.2011 ORDER NO..
Per: P.G. Chacko
1. The appellants have prayed for waiver of pre-deposit and stay of recovery in respect of the amounts adjudged against them. After examining the records and hearing both sides, we are convinced of the need to set aside the learned Commissioners order and direct de novo adjudication in accordance with law and the principles of natural justice. Accordingly, after dispensing with pre-deposit, we take up the appeals.
2. All the appeals are directed against an order passed by the Commissioner of Customs in pursuance of a remand order passed by this Bench viz Order No. A/635-640/CSTB/2007 dated 17.10.2007 which was passed in a batch of appeals filed against Order-in-Original No. 55/2007 dated 30.3.2007 of the Commissioner of Customs. Having found that the said order dated 30.3.2007 had been passed without following the principles of natural justice, this Bench set aside that order and remanded the case to the Commissioner for fresh decision. The order impugned in the present batch of appeals was passed by the Commissioner in the second round.
3. In these appeals also, the main grievance raised by the appellants is that natural justice was denied to them. The learned counsel representing M/s Mangtani Exports (India) Pvt Ltd (MEPL for short) and their co-appellants has given an account of the facts of the case. MEPL are merchant-exporters. They exported blended fabrics during the period January 1992 to May 1994 under DEEC Scheme, in anticipation of Quantity-Based Advance Licences, for which they had submitted applications to the Director-General of Foreign Trade (DGFT). In the relevant Shipping Bills, they described the goods as DYED/PRINTED POLYESTER BLENDED FABRICS and also furnished the percentage composition of the goods which were manufactured out of Polyester Filament Yarn (PFY) and/or Viscose Staple Fibre (VSF) besides minor inputs like dyes. MEPL obtained seven Advance Licences from DGFT during May 1993 to February 1994 on which transferability was got endorsed by DGFT on the basis of particulars of exports logged in DEEC Book by the proper officer of Customs. These licences were subsequently transferred to third parties including Banaswara Syntex Ltd, who imported raw material duty-free under the relevant notifications coupled with the Advance Licences.
4. The assessments on the Shipping Bills were provisional for DEEC purposes, apparently because (a) when the Shipping Bills were filed, the exporters applications for Advance Licences were pending; and/or (b) samples of the export goods were under analysis by The Silk and Art Silk Mills Research Association (SASMIRA) linked to the Ministry of Commerce, Government of India. When the test reports were received by the Customs authorities, it was found that, in some cases, the sample of export goods contained a certain percentage of PFY as against nil PFY content declared in Shipping Bills. In few cases, the PFY content in the sample was found to be lower than what was declared in the Shipping Bill. In other cases, it was found that the PFY content in the sample was higher than what was declared in the Shipping Bills. Upon receipt of these test reports from SASMIRA, the Customs authorities held further investigations including scrutiny of documents, and statements of some Directors of MEPL and Customs House Agents were recorded under Section 108 of the Customs Act. One or two persons, who were associated one way or another with the exporter-company, admitted misdeclaration of composition of the exported goods. After completing the investigations, the Commissioner of Customs (Preventive), New Customs House, Mumbai, issued show-cause notice dated 10.3.1997 to the appellants and others for (a) recovery of duty on raw materials imported under the subject advance licences; (b) confiscation of such materials; (c) confiscation of the exported fabrics and (d) imposition of penalties. One of the noticees, namely, Shri Kabirdas Kewalram Mangtani expired during the course of adjudication proceedings and this fact was notified to the adjudicating authority by the other parties. The noticees filed replies to the show-cause notices. In adjudication, the learned Commissioner passed the order but without following the principles of natural justice. It was that order which was set aside by this Tribunal in the first stage of litigation. Pursuant to our remand order, the learned Commissioner passed the impugned order.
5. The learned counsel has clarified that MEPL also made some imports under a few of the advance licences. It is submitted that, as permitted under para 127 of the Handbook of Procedures (Vol I) 1992-97 under the relevant Exim Policy, such licences were only partly transferred to others for import of PFY (raw material) and the same were retained by MEPL for the purpose of import of other goods. It is further pointed out that the demand of duty on MEPL and others is in respect of the raw materials imported under all the seven advance licences. This demand of duty is based on the erroneous finding that MEPL had obtained the advance licences fraudulently on the basis of E.P. copies of Shipping Bills wherein the percentage composition of the export goods had been misdeclared. The learned counsel further points out that, while quantifying such demand of duty, the learned Commissioner lost sight of the fact that there was no discrepancy, in regard to the composition of the goods, between many of the Shipping Bills and the corresponding Central Excise documents. It is also submitted that it was not open to the adjudicating authority to demand duty of Customs from MEPL in respect of the raw material not imported by them. In this connection, reliance has been placed on Commissioner of Customs (EP) vs Jupiter Exports 2007 (213) ELT 641 (Bom (para 23). It is further submitted that none of the licences was cancelled by the licensing authority and that all the imports were made under valid licences. In this scenario, according to the learned counsel, exemption from payment of duty on the imported material was not liable to be denied to the importers including MEPL. In this connection also, reliance is placed on the above judgment of the Honble High Court (para 22).
6. It is submitted that the samples of the export consignments were drawn behind the back of the exporter, that such samples were tested by the agency (SASMIRA) after nearly three years, that the request for re-test of the samples was rejected without valid reasons, that the Chemists/Analysts of SASMIRA were not allowed to be cross-examined, that copies of the relevant test memos were not supplied, that no reason whatsoever was stated by the Commissioner for rejecting the request made by MEPL and that a final order was passed hurriedly by the Commissioner even before communicating the decision on the said request. It is also submitted that no opportunity of being personally heard was given to the appellants after rejecting the above request and before passing the final order. In this manner, according to the learned counsel, natural justice was denied to the appellants.
7. The learned counsel for M/s Banaswara Syntex Ltd submits that nothing was brought out in the show-cause notice against her client for invoking the extended period of limitation for recovery of duty or for imposing penalty on them under Section 114A of the Act. There is no finding in the Commissioners order to support the demand of duty or penalty against M/s Banaswara Syntex Ltd (transferees of advance licence No. 313995 dated 20.5.1993). In this connection, reliance is placed on MMK Jewellers vs Commissioner 2003 (156) ELT 722 (Tri-Mum) affirmed by the Supreme Court in Commissioner of Customs, Mumbai vs MMK Jewellers 2008 (225) ELT 3 (SC). Referring to the relevant features of the DEEC Scheme, the learned counsel submits that, in the facts of this case, the burden to establish compliance with the conditions of Notification No. 204/92-Cus cannot be imposed on M/s Banaswara Syntex Ltd, who are only transferee of the aforesaid licence. The company imported the raw material under the above advance licence bearing DGFTs endorsement of transferability. It is not the case of the Revenue that any material not authorized for import was actually imported by the company. In the circumstances, according to the learned counsel, the demand of duty on her client is unsustainable. In this connection, she relies on the decision in Goodluck Industries vs Commissioner of Customs, Calcutta 1999 (108) ELT 818 (Tri) affirmed by the Supreme Court in 2000 (120) ELT A-66 (SC). She has also adverted to an apparent contradiction of findings in the impugned order. It is submitted that, in the context of considering the question whether a penalty should be imposed on the company, the learned Commissioner held that they had no role in the manipulation of export documents. There is no adverse finding against the company in relation to the exports in question. Therefore, the extended period of limitation is not invocable for recovery of duty from M/s Banaswara Syntex Ltd, nor can any penalty be imposed on them under Section 114A of the Customs Act.
8. The learned counsel for M/s D.H. Patkar (CHA) submits that, for whatever role played by them in relation to the exports in question, proceedings were taken against them under the Customs House Agents Licensing Regulations (CHALR) and ultimately the CHA licence was revoked. In the circumstances, according to the learned counsel, there was no warrant for imposing any penalty under Section 114 (i) of the Customs Act on the CHA. It is further submitted that none of the submissions contained in the CHAs reply to the show-cause notice was considered by the adjudicating authority. It is also pointed out that the written brief submitted by the CHA was also not considered. The learned counsel has emphatically submitted that the adjudicating authority chose to impose a penalty on the CHA under Section 112 (a) as well despite the fact that they had nothing to do with any import. There is a serious grievance against the demand of duty raised on the CHA also.
9. We have heard the learned SDR and considered his submissions also.
10. The learned SDR has mainly reiterated the findings of the Commissioner. It is particularly submitted that MEPL admitted their offence of misdeclaration in their statements given under Section 108 of the Customs Act and, therefore, all objections raised on behalf of the appellant are irrelevant. Yet another submission of the learned SDR is that the objections raised by the appellant with regard to the test reports are untenable. It is submitted that the sampling of the goods for test was done in their presence and in accordance with the established procedure. Nothing was done behind their back. The analysis of the samples was undertaken by approved agency. The results of analysis are scientific truths which are not deniable. The objection raised on behalf of MEPL that the test reports should be rejected on the ground of delay is also untenable inasmuch as they themselves asked for retest of the same samples. According to the learned SDR, the correct percentage- composition of the export goods reported by SASMIRA, coupled with the confessional statements of MEPL, would go a long way to establish a good case for the Revenue. The learned SDR has also submitted, albeit feebly, that the rules of natural justice were substantially complied with by the Commissioner.
11. It is on record that the case was apparently heard by the predecessor-in-office of the Commissioner who passed the impugned order. The record of personal hearing maintained by the predecessor-in-office was apparently not carefully considered by the respondent-Commissioner. We are surprised to note that the learned Commissioner imposed a hefty personal penalty on a dead person (Kabir Kewalram Mangtani) even though the death of Kabir Kewalram Mangtani was intimated by the other noticees. This is one glaring instance of non-application of mind. We have also found that, though no discrepancy in respect of percentage composition of export goods was found between Shipping Bills and the corresponding excise documents, in many cases, the learned Commissioner proceeded to demand duty on the input related to such Shipping Bills also, and, that too, not only from the importers but from CHAs and others also another instance of non-application of mind. The learned Commissioner clearly noted that the importers had no role in the manipulation of export documents and, on this basis, he refrained from imposing penalties on them. The allegation in the show-cause notice for the purpose of invoking the extended period of limitation under Section 28 of the Customs Act was that export documents had been manipulated by MEPL with fraudulent intent to obtain advance licences and that the transferees of the licences were also liable to be penalized under Section 114A of the Customs Act on account of willful misdeclaration of the export goods by MEPL. It was alleged that MEPL had forged export promotion (EP) and copies of Shipping Bills for indicating higher quantity of exports as proof of fulfilment of export obligation. The show-cause notice purported to make the transferees of advance licences also liable for payment of duty and penalty on account of alleged forgery of E.P. copies of Shipping Bills/misdeclaration of the export goods therein. On the same ground, the show-cause notice invoked the extended period of limitation against the transferees of advance licences also. The learned Commissioner upheld the above allegations and ordered for recovery of duties from the transferees by invoking the extended period of limitation. At the same time, he categorically held that the transferees did not have any role in the manipulation of export documents. A glaring contradiction is inbuilt in these findings of the Commissioner, which apparently has resulted from non-application of mind.
12. The denial of natural justice to the appellants cannot be underplayed. MEPL requested for retest of samples and also for opportunity to cross-examine the Chemists/Analysts who tested/analyzed the said samples. These requests were made in the reply to the show-cause notice and the same was reiterated before the adjudicating authority on 19.8.09 and 26.8.09. The impugned order indicates that these requests were turned down on 26.8.09 itself. MEPL has claimed that the Commissioners decision on their requests was communicated to them only on 1.9.09. Anyway, the impugned order does not indicate that the Commissioners decision dated 26.8.09 was instantly communicated to MEPLs advocate. Apparently, his letter dated 26.8.09 was sent to the advocate and the latter received it on 1.9.09. Obviously, the impugned order was passed on 31.8.09 without waiting for MEPLs reaction to the Commissioners decision dated 26.8.09. It is also on record that, in a letter dated 28.8.09, MEPLs advocate requested the Commissioner for opportunity of being heard. This letter reads thus:
Kindly refer hearing in the above matter held on 26th August 2009.
After the issues regarding cross-examination and re-test are decided, kindly grant a personal hearing to enable me to address you on the merits of the case with reference to copies of Shipping Bills and Test Reports which are relied upon in the Notice. This letter carries dated seal of the Commissioners office indicating that it was received by the Commissioner on 26.8.09. Obviously, the adjudicating authority chose to pass the final order on 31.8.09 without heeding the above request of the counsel for MEPL. Thus, the manner in which the case was adjudicated by the Commissioner clearly shows that rules of natural justices were flouted.
13. The learned counsel for MEPL has also contended that the non-supply of copies of test memos amounted to negation of natural justice. We do not agree. The samples of the export consignments were drawn in the presence of the party/their CHA and in accordance with the established procedure. The sampling was done for test/analysis by SASMIRA. Each test report was drawn in response to the query made by the department. Where party or their CHA witnessed the process of sampling they must have noticed the query in the test memo as well. At this length of time, they cannot complain that copies of the test memos were not supplied. The learned counsel has also submitted that the test reports are liable to be rejected on the ground that the tests were conducted after nearly three years. He has, however, not satisfactorily answered our query as to whether the samples were perishable. The samples were textile fabrics manufactured out of synthetic textile filaments/fibres and the same were not perishable. MEPL themselves have acquiesced in this fact by asking for retest of the samples. Therefore, at this length of time, they cannot raise a grievance against the test reports on the stated ground. Yet another plea made by the learned counsel is that MEPL was not permitted to cross-examine the Chemists of SASMIRA who analyzed the samples. It is on record that they offered to furnish the names and other particulars of the Chemists, which apparently they have not been able to do. Nevertheless, it is open to them to furnish the names and other particulars of the witnesses to the Commissioner and also state valid reason why they should be cross-examined.
14. We have stated sufficient reasons for remand of the case. The impugned order is set aside and all the appeals, barring appeal C/1242/09, are allowed by way of remand with a request to the Commissioner of Customs for taking fresh decision on all the issues in accordance with law after giving the parties a reasonable opportunity of adducing evidence and of being personally heard. It is made clear that this opportunity to adduce evidence will include an opportunity to cross-examine any witness if MEPL can make out a valid case before the Commissioner for such cross-examination. Considering the fact that this case is being sent back to the Commissioner in a third round, we would like de novo adjudication to be completed within a reasonable time, at any rate, within six months from the date of receipt of a certified copy of this order.
15. Appeal C/1242/09 filed by late Kabirdas Kewalram Mangtani is allowed.
(Dictated in Court.) (Sahab Singh) Member (Technical) (P.G. Chacko) Member (Judicial) rk 14