Custom, Excise & Service Tax Tribunal
Pradeep Master Batches Pvt. Ltd vs Commissioner Of Customs (Export), ... on 2 January, 2017
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL Nos. C/1025/04, C/170/06-Mum (Arising out of Order-in-Original No. 75/2004/CAC/RJM dated 29.7.2004 passed by Commissioner of Customs (Adjudication), Mumbai) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) and Honble Mr. Raju, 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 :
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?
====================================================== Pradeep Master Batches Pvt. Ltd. Appellant Pradeep K. Bhatnagar Vs. Commissioner of Customs (Export), Mumbai Respondent Appearance: S/Shri J.H. Motwani with Chirag Shetty, Advocates, for appellant Shri C. Singh, Assistant Commissioner (AR), for respondent CORAM: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical) Date of Hearing: 25.10.2016 Date of Decision: 2.1.2017 ORDER NO Per: Raju
These appeals have been filed by Pradeep Master Batches Pvt. Ltd. and Shri Pradeep Bhatnagar against confiscation of currency seized from the premises of the appellant under Section 121 of the Customs Act and imposition of penalty.
2. The appellant had exported certain goods under DEEC and had imported titanium dioxide as raw material for the same. On the basis of intelligence, the export containers were recalled and on examination, it was found that not only the said containers contained goods which were misdeclared during the export but also Indian currency. Consequently, searches were made and more currency was seized from the premises of Shri Pradeep Bhatnagar and a show cause notice was issued.
2.1 The appellant approached Settlement Commission and the Settlement Commission vide order dated 20.6.2001 gave its order in matters other than the case relating to confiscation of currency.
2.2 The Settlement Commission refrained from giving any finding in respect of Indian currency and observed as follows:-
It is noticed by the Revenue that the goods recalled in these shipping bills were misdeclared and different in description, value and quantity. There was also a seizure of Indian currency of Rs.66.99 lakhs in these three consignments. There was also a seizure of Indian currency of Rs.1,22,30,000/- from the residence-cum-office premises. The Commission observes that no duty liability has been occurred yet in the transaction covered by the licence No. 0310035809 dated 27.4.2000. The applicant has sought release of Indian currency seized. In this connection, the Commission finds that an application is made by an importer or any other person at any stage of the case relating to him. The case is defined to mean any proceeding under the Customs Act, or any other Act for the levy, assessment and collection of customs duty, or any proceeding by way of appeal or revision in connection with such levy, assessment or collection, which may be pending before a proper officer or the Central Government on the date on which an application under sub-section (1) of Section 127B is made.
The Commission is of the view that the seizure of the Indian currency does not fall with the definition of case and, therefore, is not in a position to consider the plea made by the applicant with regard to the release of Indian currency. The Revenue is at liberty to take action as provided for in Customs Act with regard to the Indian currency seized. (Emphasis supplied) 2.3 From the above, it is apparent that the Settlement Commission only settled the charges (a), (b), (c), (f) and (h) of the show cause notice pertaining to goods and kept the issues (d), (e) and (g) pertaining to cash recovered open for Revenue to take appropriate action as deemed fit in continuation to the show cause notice issued to the appellants. The show cause notice was thereafter adjudicated by the Commissioner.
Aggrieved by this order, Pradeep Masterbatches Pvt. Ltd. and Shri Pradeep Bhatnagar are in appeal before the Tribunal.
3. Learned counsel for the appellants had approached the Honble High Court of Bombay to challenge the order of the Settlement Commission. They had simultaneously filed an appeal before the Tribunal. Since they cannot pursue the remedy at two places, the appellants withdrew the petition made before the Honble High Court of Bombay, which was allowed by order dated 15.3.2016. Learned counsel for the appellants argued on the limited issue of confiscation of Indian currency amounting to Rs.30 lakhs (out of Rs.1.22 crores seized from the appellants premises) under Section 121 of the Customs Act, 1962. The appellants also contested the imposition of penalty under Section 114 of the Customs Act, 1962. It was argued that the appellants are not contesting the confiscation of currency amounting to Rs.66,99,000/- which was recovered from the export containers which was recalled by Revenue. It was argued that while in his statements dated 13.6.2000 and 7.7.2000, the co-appellant Shri Pradeep Bhatnagar has admitted that the said currency belonged to him, the said statements were retracted by letter dated 18.8.2000 addressed to the Additional Director General, DRI. He argued that in these circumstances, no reliance can be placed on the said statements. He argued that the impugned order wrongly relies on the said statements for imposing penalty under Section 114 of the Customs Act, 1962. The learned counsel relied on the decision of the Honble Apex Court in the case of Vinod Solanki vs. UOI 2009 (233) ELT 157 (SC), to assert that once the statements are retracted, the demand/penal action cannot be confirmed against an assessee in absence of corroboration of the facts mentioned in the said statements. He argued that in the present case, apart from statement there is no other evidence to show that the currency found in the containers exported by the appellants belonging to the co-appellant. He further argued that separate penalties cannot be imposed on the company and the director and for this he placed reliance on the decision of the Tribunal in the case of Jagannath Plastipacks (P) Ltd. vs. CCE, Bhubaneswar-I 2012 (278) ELT 120.
3.1 Learned counsel argued that the goods imported vide bill of entry No.7083 dated 29.3.2000, against the sale of which, the currency of Rs.30 lakhs has been confiscated under Section 121, cannot be called as smuggled goods. Learned counsel argued that it is not in dispute that Rs.30 lakhs was the sale proceeds of the goods which were imported duty free under bill of entry No.7083 dated 29.3.2000 by availing the benefit of advance licence No.031017072. Since they had contravened the actual user condition stipulated in the advance licence, the duty amount of Rs.13,52,419/- which was forgone was demanded from the appellant. He argued that the said duty amount in respect of titanium dioxide diverted to the local market has been paid by the appellant. Learned counsel argued that in these circumstances, the goods cannot be considered to be cleared in contravention of Notification No.30/97 dated 1.4.1997. In view of the above, he argued that the said goods do not remain liable to confiscation and hence Section 121 cannot be invoked in respect of currency seized against sale of such goods. Learned counsel argued that the Settlement Commission vide its order as regularized the non-fulfilment of condition of Notification 30/97 on the condition of paying duty and interest. Since the appellant had paid the duty and interest, the said goods cannot be considered as smuggled goods liable to confiscation. Learned counsel argued that since the appellant had paid duty along with interest on these goods, they could have freely disposed of the same in any manner.
3.2 Learned counsel further argued that the Settlement Commission has granted immunity from imposition of fine and penalty to the appellant. He argued that once immunity from fine and penalty has been granted, then it is not open to Revenue to re-confiscate the sale proceeds of the goods on which immunity from fine was specifically granted by Settlement Commission. He argued that the goods in the instant case were imported by filing a bill of entry and were assessed by the Customs. In these circumstances, the goods cannot be called as smuggled goods.
4. Learned AR relies on the impugned order. He relied on the decision of the Tribunal in the case of Kanha Vanaspati Ltd. vs. CC, Kandla 2003 (157) ELT 659. In the said case, he argued that, the Tribunal has in identical circumstances held the sale proceeds of goods imported against bogus and forged advance licences can be considered as smuggled goods and the sale proceeds can be confiscated under Section 121 of the Customs Act. Learned AR also relied on the decision of the Honble Supreme Court in the case of Sheshank Sea Foods Pvt. Ltd. vs. UOI 1996 (88) ELT 626 (SC), to assert that the goods which are exempted from customs duty subject to a condition and if the condition is not observed, the goods become liable to confiscation. He further relied on the decision of the Tribunal in the case of Laxmilal Chunilal Mehta vs. CC, Mumbai 2004 (175) ELT 135, wherein it has been held that if statements of various persons involved corroborate each other and there is a belated retraction of those statements, then the confiscation and imposition of penalty can be upheld.
5. We have gone through the rival submissions. We find that the show cause notice was issued on the following charges:-
(a) 47,975 kgs. of Masterbatches totally valued at Rs.39.90 lakhs, seized under panchanama dated 12.6.2000 and 29.6.2000, as covered in para 7 of the show cause notice should not be confiscated under Section 113 of the Customs Act, 1962;
(b) 80,000 kgs. of titanium dioxide totally valued at Rs.71,84,250/- and 26,053 kgs. of LLDPE valued at Rs.9,94,251/-, which were imported and cleared without payment of duty under cover of DEEC licence No.031017072 and Notification No.30/97-Cus., as detailed in Annexure A to this show cause notice, should not be confiscated under Section 111(d) and 111(o) of the Customs Act, 1962, since the goods imported under the above said licence are not available for confiscation, why suitable penalty should not be imposed on the above said goods in lieu of confiscation;
(c) The customs duty totally amounting to Rs.61,81,413/- as detailed in Annexure A to this show cause notice should not be recovered from them under proviso to provisions of Section 28 of the Customs Act, 1962;
(d) The Indian currency totally amounting to Rs.66.99 lakhs should not be confiscated under the provisions of Section 113(d) and Section 113(e) of the Customs Act, 1962, read with Section 13(2) and Section 67 of the FERA, 1973;
(e) The Indian currency totally amounting to Rs.1,22,30,000/- should not be confiscated under Section 121 of the Customs Act, 1962;
(f) Penalty should not be imposed under Section 114A and/or Section 112 of the Customs Act, 1962, for improper imports as covered in the foregoing paras;
(g) Penalty should not be imposed under Section 114 of the Customs Act, 1962, for improper exports as covered in the foregoing paras;
(h) Interest on the above customs duty from the date of clearance of the goods from the Customs department at the applicable rate should not be demanded and recovered from them in terms of Section 28AB of the Customs Act, 1962. 5.1 The Settlement Commission vide its order dated 20.6.2001 gave the following findings:-
The case of applicant is settled for an amount of Rs.25,23,107/- out of which an amount of Rs.13,52,419/- has already been paid and the balance amount of Rs.11,70,688/- is to be paid within 30 days from receipt of copy of this order under sub-section (7) of Section 127C of the Customs Act, 1962.
Fine and penalty The applicants have co-operated with the Settlement Commission and has made a full and true disclosure of their duty liability. This full and true disclosure of duty liability has been made at different stages including the stage of final hearing. In view of this, the Commission orders that immunity shall be given from imposition of fine and penalty to the applicants.
Interest The applicant has fraudulently sold the imported titanium dioxide instead of utilizing the same in the manufacture of final product, as per conditions imposed in the licences issued to him and notifications issued in this regard. In view of this, the Commission imposes an interest of 10 per cent on the admitted duty liability from the date of import till final payment thereof. This amount shall be paid within 30 days from receipt of copy of this order.
Prosecution The applicant is given immunity from prosecution under Customs Act, 1962 and the Indian Penal Code (45 of 1860).
Indian currency As regards the seized Indian currency, the Commission is of the opinion that the same is not a case as defined for the purpose of decision by Settlement Commission and as such, the Revenue shall take appropriate action as deemed fit in continuation to the show cause notice issued to the applicants.
Release of Bond with Bank Guarantee The Bond with Bank Guarantee executed by the applicant shall get discharged after the applicant has complied with this order in relation to payment of duty and interest.
This order of settlement shall be void if the Settlement Commission subsequently finds that it has been obtained by fraud or misrepresentation of facts. 5.2 Section 127J of the Customs Act reads as follows:-
Section 127J. Order of settlement to be conclusive.? Every order of settlement passed under sub-section [(5)] of section 127C shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force. The matters covered by such order cannot be reopened in any proceedings under this Act or under any other law for the time being in force.
5.3 The order of Settlement Commission does not settle the case so far as currency is concerned. The order of the Settlement Commission is limited to issues (a), (b), (c), (f) and (h) of the show cause notice. No orders have been passed in respect of charges (d), (e) and (g) of the show cause notice. In these circumstances, the benefit of Section 127J cannot be extended to the appellant in respect of charges (d), (e) and (g) of the show cause notice. In view of the above and the order of the Settlement Commission which clearly directed the Revenue to continue with the balance show cause notice, the Revenue was free to adjudicate the matter.
5.4 Section 121 of the Customs Act, 1962 reads as follows:-
Section 121. Confiscation of sale-proceeds of smuggled goods. Where any smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled goods, the sale-proceeds thereof shall be liable to confiscation. Section 121 allows confiscation of sale proceeds of any smuggled goods sold by a person having knowledge or reason to belief that the goods are smuggled goods. Smuggling has been defined under clause 39 of Section 2 of the Customs Act, which reads as follows:-
Section 2(39) - smuggling, in relation to any goods, means any act or omission which will render such goods liable to confiscation under section 111 or section 113. Smuggling has been defined to mean any act or omission which renders the goods liable to confiscation under Section 111 or 113. It can be seen that, to make an activity amount to smuggling, it is not necessary that the goods are confiscated. The definition makes any act which renders such goods liable to confiscation under Section 111 and 113, sufficient to make the activity smuggling. Moreover, Section 121 applies to sale proceeds of the smuggled goods sold by a person. In such circumstances, it is obvious that the goods are not available and therefore cannot be confiscated. Reading Section 121 harmoniously with the definition of smuggling as given in Section 2(39) of the Customs Act, it is clear that it is not necessary to confiscate the goods to enable invocation of Section 121. In fact, in most cases since the goods are already sold, no confiscation can be done. In the instant case, it is an admitted position that the goods imported by the appellant vide bill of entry No.7083 dated 29.3.2000 by availing the benefit of advance licence No.031017072 were sold in the market in violation of the policy and in terms of the licence. Such goods obviously become liable to confiscation under Section 111(o) of the Customs Act and in these circumstances, Section 121 can be invoked.
6. Learned counsel for the appellant has argued that the Settlement Commission has granted immunity from fine and penalty. It is obvious that the Settlement Commission has limited its order to charges (a), (b), (c), (f) and (h) of the show cause notice and therefore any immunity from fine and penalty can only be in respect of those charges. Such immunity does not extend to the charges made in clauses (d), (e) and (g) of the show cause notice. In these circumstances, we uphold the confiscation of Rs.30 lakhs seized from the premises of Shri Pradeep Bhatnagar under Section 121 of the Customs Act.
7. In respect of Indian currency amounting to Rs.66.99 lakhs recovered from the export consignment of the appellant, penalty has been imposed on Pradeep Master Batches Pvt. Ltd. amounting to Rs.7 lakhs and on Shri Pradeep Bhatnagar amounting to Rs.5 lakhs under Section 114 of the Customs Act. Section 114 of the Customs Act deals with any act or omission which renders goods liable to confiscation under Section 113. The section also permits imposition of penalty on anybody abetting such act or omission. In the instant case the containers exported by the appellant were recalled for examination. Indian currency amounting to Rs.66.99 lakhs was recovered from the containers. In his statements dated 13.6.2000 and 7.7.2000, Shri Pradeep Bhatnagar had admitted the knowledge of such currency. However, vide retraction dated 18.8.2000, the said statements were retracted. Shri Pradeep Bhatnagar has stated that
(i) On 12.6.2000, while the recalled containers were opened, he was threatened by an unknown person and asked to own up anything over and above the stated cargo found during the examination;
(ii) On 13.6.2000, he gave a statement as desired and directed by the DRI officer involuntarily under coercion;
(iii) He was arrested on 13.6.2000;
(iv) On 19.6.2000, in Arthur Road Jail, an inmate whose identity is not known, approached him and threatened him that he should own up the currency found in the containers. The said person also informed him that there will be Indian currency to the extent of Rs.19 lakhs. The said person also threatened him not to disclose to the Jailer or to DRI;
(v) On 29.6.2000, another container was recalled and Rs.19.5 lakhs was recovered from the said container;
(vi) On 30.6.2000, his wife was called by DRI and her statement was recorded under threat and coercion;
(viii) On 7.7.2000, again his statement was recorded under coercion and threat;
(ix) On 11.7.2000, he was released on bail but he was directed to report to DRI for 20 working days.
After about 37 days of release, the appellant filed the letter of retraction alleging coercion. He denied having any knowledge of the currency found in his export containers recalled for examination. In the retraction he argued that the export consignment was taken on pallets to Nhava Sheva port. He argued that it takes seven to eight days to complete the formalities of containers and loading, and during such period the bags are exposed to the public at large and therefore anybody could have played mischief.
8. We find that the retraction has numerous loopholes. First of all, when the containers were recalled, he claims to have been approached by an unknown person who threatened him. If that was true, he should have reported the same to DRI/police, which he failed to do. DRI has recorded his statement more than once. He could have retracted the same when he was produced before the Additional Chief Metropolitan Magistrate. If he was coerced to give statement, he should have clearly stated before the Additional CMM who is a judicial authority. He was again produced before the Magistrate on 11.7.2000 when he was released on bail, where he had another opportunity of placing on record the threat and coercion. It has been alleged that he was threatened by an inmate in the jail where he had the opportunity of informing the Jailer or DRI officers. It can be seen from the above that he had ample of opportunities to retract his statements but he did not do so. In these circumstances, the retraction made 37 days after his release from jail and more than two months after his first statement dated 13.6.2000 cannot be considered as true. In these circumstances, the Commissioner has rightly relied on these statements. It is difficult to believe that anybody in the dock would put currency in such large amounts in the pallet belonging to the appellant without his knowledge. Anybody putting such money would be interested in getting the same back when the container reaches its destination. It cannot be done without the connivance and the help of the exporter and the consignee. Moreover, the currency has been found on more than one occasions in the export consignments. In these circumstances, it cannot be said that there is not enough corroborative evidence to substantiate his statements. The Tribunal in the case of Laxmilal Chunilal Mehta (supra) has held as follows:-
5. We observe? that the Commissioner came to the conclusion that Rs. 8 lakhs for the sale proceeds were liable to confiscation under Section 121 of the Customs Act, on the basis of the statements made by all the persons concerned. It is a fact that the statements were later retracted. The Commissioner held that the retracted statements are belated and therefore no credence can be kept on such retractions. We observe that the present appellant himself in his statement admitted that the confiscated currency of Rs. 8 lakhs were sale proceeds. His partner was absconding and therefore his statement was not recorded. Suresh Jain as well as Kisanlal Jain admitted to the fact that they were keeping sale proceeds of foreign marked gold and foreign currency in question in Vinay D. Shahs premises. The later person himself admitted that it was the case. The facts peculiarly known to the various persons involved in the sale of smuggled gold and foreign currency came out from their own versions. The appellants argument that the entire case was built on the statements of various persons is true. But there is no reason as to why these statements cannot be taken cognizance of particularly when they are corroborated with the statements of others. The claim that Rs. 8 lakhs represented proceeds of satta business is also not backed by any evidence. The fact that the appellant informed the income-tax department that Rs. 8 lakhs, which belonged to him, were seized by the customs authorities does not prove anything at all. One of the gang members Shri Suresh Pukhraj Jain passed away before the adjudication proceedings were concluded. The department rightly relied on the statements given by the persons concerned to come to the conclusion that the said currency (Rs. 8 lakhs) were sale proceeds of foreign marked gold and foreign currency. The appellant has not brought any fresh evidence before us. His arguments were properly dealt with by the adjudicating authority before concluding that the said currency represented sale proceeds of smuggled gold and the foreign currency liable to confiscation under Section 121 of the Customs Act. He rightly imposed penalty under Section 112(b) of the Customs Act, 1962.
9. Learned counsel for the appellants has also asserted that penalty cannot be imposed on both the company and the director. For this assertion, he relied on the decision of the Tribunal in the case of Jagannath Plastipacks (P) Ltd. (supra). It is seen that in the said case the Tribunal has observed as follows:-
7.?I find that the Original Authority has imposed a penalty of Rs. 50,000.00 on the Appellant Assessee, which under the circumstances, requires to be reduced, and I accordingly reduce the same to Rs. 5,000.00 (Rupees Five Thousand) only, considering all facts and circumstances. I find that separately, penalties have been imposed both on the Appellant Managing Director and Appellant Executive Director of the Appellant Company, which are not warranted in view of the foregoing. Hence, the same are set aside. As regards the demand of duty and interest, the same are also set aside in view of the cited Larger Bench decision and cited decision of the Honble Bombay High Court holding that payment by CENVAT credit is as good as by cash. It can be seen that no ratio has been laid down by the Tribunal that separate penalties cannot be imposed on the company and the director. In the special facts of the said case, no penalties have been imposed on the managing director and executive director of the appellant company.
9.1 Learned counsel has also relied on the decision of the Tribunal in the case of Sanghi Industries Ltd. vs. CC(EP), Mumbai 2012 (277) ELT 365. In the said decision, the Tribunal has observed as follows:-
6.11?Coming to the penalty, we notice that a penalty of Rs. 1 crore has been imposed on the importer M/s. Sanghi Industries Ltd and penalties of Rs. 20 lakhs each have been imposed on the Managing Director and Director of the appellant firm. We are of the view that separate penalties - one on the importing firm and the other on the Directors of the company - are not warranted in the facts and circumstances of the instant case. Considering the totality of the facts and circumstances, we reduce the penalty on the appellant firm to Rs. Fifty lakhs (Rs. 50,00,000/-) and set aside the penalties on the Managing Director and Director of the appellant firm. Needless to say that the appellant is liable to discharge interest liability @ 24% starting from 15-11-1993 till the date on which the differential duty was discharged by the appellant firm. It can be seen from the above that the facts of the case are significantly different from the instant case. There is no bar on the imposition of separate penalty on the company and the director. In the case cited by the appellant, no penalty was imposed on the managing director and the director of the appellant firm in view of the facts and circumstances of the case. In the instant case, the director has played significant role and therefore penalty has been rightly imposed.
10. In view of the above, the appeals are rejected.
(Pronounced in Court on 2.1.2017) (M.V. Ravindran) Member (Judicial) (Raju) Member (Technical) tvu 1 9 C/1025/04, 170/06