Custom, Excise & Service Tax Tribunal
Shri S.Jai Kumar, Advocate For vs Shri K.M.Mondal, Spl.Counsel For on 16 July, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO.II C/S/2182 , 2183/12-Mum & APPEAL NO. C/887, 888 & 978/12-Mum (Arising out of Order-in- Original No.30/2012/CAC/CC/BKS dtd. 29.5.2012 passed by the Commissioner of Customs (Adjudication), Mumbai ) For approval and signature: Honble Mr Ashok Jindal, Member(Judicial) Honble Mr.S.K.Gaule, 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?
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M/s.Air Trade International
Asian Exports
:
Appellants
VS
Commissioner of Customs (Prev) Mumbai
Commissioner of Customs(Prev.)Mumbai
vs
M/s. Air Trade International
Asian Exports
Shri Hakim Esmail Penwala
Shri Muffazal Hakim Penwala
Respondent
Appellant
Respondents
Appearance
Shri S.Jai Kumar, Advocate for Appellants
Shri K.M.Mondal, Spl.Counsel for Respondent (Department)
CORAM:
Mr. Ashok Jindal, Member(Judicial)
Mr. S.K.Gaule, Member(Technical)
Date of hearing: 16/07/2013
Date of decision 16/07/2013
ORDER NO.
Per : Ashok Jindal
The appellants are in appeals alongwith applications for stay against the impugned order.
2. Revenue has also filed appeals against the impugned order wherein recovery of DEPB credit alongwith interest was dropped by the ld.Commissioner.
3. As all the appeals before us are against the common order, therefore, the same are dealt with by this common order.
4. As the stay applications as well as appeals are listed before us today, therefore, stay applications and appeals are taken up together for disposal.
5. This is the second round of litigation. In earlier round of litigation vide Order No.A/204 to 209/09/CSTB/C.II dated 5.8.09 this tribunal passed the following order:-
7. In the result, we set aside the orders of the Commissioner and allow these appeals by way of remand directing the learned Commissioner of Customs :
(a) to allow the parties to have copies of all the documents listed in Annexure N to the show-cause notice dated 31.3.2001 as also the non-relied upon documents seized from them;
(b) to give them a reasonable opportunity to cross-examine at their own expense the two foreign nationals whose statements were recorded under Section 108 of the Customs Act and relied upon in the show-cause notices;
(c) to give the appellants a reasonable opportunity of being heard; and
(d) to pass a speaking order on all issues within six months from the date of receipt of a certified copy of this order
6. In pursuant to the remand proceedings the impugned order has been passed.
7. The brief facts of the case are that a show-cause notice dated 31.3.2001 and corrigendum dated 20.3.2002 were issued for recovery of draw back under Rule 16A of the Customs and Central Excise Duties (Drawback) Rules 1995 read with proviso to Section 28(1) of the Customs Act, 1962 and Sec. 8 of FERA, 1973 and recovery of interest under Sec. 75 A (2) of the Customs Act, recovery of DEPB credits (duty) under provisions of Sec.28(1) of Customs Act with interest under Sec.28 AB of the Customs Act, confiscation of the goods under Sec.113(i) and (ii) of the Customs Act and for imposition of penalties on the noticees under Sec.114(i), 114(ii) & 114 (iii) of the Customs Act and penalties under Sec. 112(a) and (b) of the Customs Act, 1962. Based on the specific information, the officers of Marine and Preventive Wing Customs (Prev.) Mumbai, apprehended one person on 26.11.1999 who introduced himself as Mohd. Hashim Abdulla. On being asked he accepted that he was carrying foreign currency in his person which was the sale proceeds of smuggled goods. The search of his person in the presence of independent witnesses before a gazetted officer resulted in recovery of US$ 10,100/- . As Shri Abdulla could not produce any licit documents for acquisition and possession of the foreign currency recovered from him, the said foreign currency was seized under panchanama in the reasonable belief that the said foreign currency was smuggled into India illicitly and was therefore liable for confiscation. The said seized foreign currency was deposited in the Reserve Bank of India. On 8.12.1999 from the appellant M/s. Air Trade International, a communication was received by the Commissioner of Customs(Prev.) Mumbai claiming the seized foreign currency and further claiming that the same was given to them by Shri Abbas Djaral Nabi Fadoul Al Maola and his partner Shri Aboubakar Adoum Iroby who were their customers from Chad. In the said letter Shri Hakim Esmail accepted that he had stated his name as Shri Mohammed Hashim Abdulla in his statement. To verify the details of the above claim of Shri Hakim Esmail Penwala, proprietor of the above firm, documents pertaining to deposit of cash foreign currency in their account, Union Bank of India at Abdul Rehman Street branch, Mumbai were called for. On scrutiny of the records obtained from the Union Bank of India and investigations carried out, prima facie, it was revealed that they were following discrepancies in the deposits of cash foreign currency by M/s. Air Trade International ie. The foreign national/passenger was not present in India when the foreign currency was deposited in cash in the bank under letter purportedly signed by such passenger on that date; in many cases, an amount in excess of US$ 5,000 has been deposited at a time without CDF which is in gross violation of Notification No.FERA/9/74-RB dtd.1.1.1974; there are instances where more than one deposit totaling more than US$ 5000 during single visit of the passenger. Thereafter, investigation further took place and statements of two passengers viz. Shri Mohd.Hussein Niazi and Shri Abbas Barkhordar Farid who had come to India for negotiation of their import were recorded on 9.3.2000. These investigations revealed that M/s. Air Trade International and M/s. Asian Exports ( appellants before us) had claimed excess draw back in respect of certain export consignment and excess DEPB credit in respect of certain other exports consignments. It was found that the draw back claimed by both the parties is based on sale proceeds recovered, not only through normal backing channel but also recovered otherwise. Both the claims were proposed to be rejected to the extent based on sale proceeds recovered otherwise than the normal banking channels. It further appeared to the department that the export goods were over invoiced for the purpose of undue draw back and DEPB benefits. The evidences which were relied upon were the statements of two foreign nationals viz. Mohd.Hussein Niazi and Shri Abbas Barkhordar Farid, panchanama and various documents, correspondences between the Indian exporters and foreign buyers and statements of the appellants. A case has been booked against the appellants and show-cause notice was issued which was adjudicated and drawback was denied to the extent the realization of payments of export goods other than the banking channels and also recovery of DEPB credit on the same and goods were held liable for confiscation and redemption fine was imposed and penalties on both the appellants and their proprietors were also imposed by order dated 30.5.2008. The said order was challenged before this tribunal and this tribunal set aside the said order and remanded back the matter for fresh adjudication with the direction to supply all the documents listed in Annexure-N to the show-cause notice as also the non-relied upon documents seized from them and to give them reasonable opportunity to cross-examine the foreign nationals whose statements have been relied upon in the adjudication order. In the remand proceedings, the demands on account of recovery of draw back were confirmed but recovery of DEPB credit was dropped although goods were held liable for confiscation but the same was not available, therefore, redemption fine was not imposed , penalty on both the appellants under Sec.114(i) and (ii) were confirmed. Aggrieved by the said order, the appellants are before us. The Revenue is also on appeals for dropping the recovery of DEPB credit and non imposition of penalties on the proprietors of the appellants firms.
8. Ld.counsel for the appellants submits that the department has made out a case on the basis of the statements of two foreign nationals on the ground that the supplier of the goods meant for export was found to be fictitious and non-existence and export goods have been overvalued to get higher draw back and DEPB benefit. The foreign exchange has been illegally acquired from local parties and there was no realization of foreign exchange in respect of the exports covered under the shipping bills. To controvert these allegations the ld.counsel submits that pens exported by them are mainly to customers from Iran, Pakistan, Sudan, Malawi, Ethiopia etc. The business practice and commercial nature of the business of pens and other stationary items is that, the buyers representatives used to visit India and conclude the export orders, after physically inspecting the samples kept in the shelf and then place the orders. If the order size is small, they pay the amount for the purchase in forex to the appellants and carry such consignment along with them. If the order size is huge and cannot be carried by hand, then they place the export order with the appellants and pay an advance amount in forex to the appellants. Upon receipt of the said forex from the customer, the appellants would carry such forex to their bankers and deposit the same along with the copy of the passport of the customer as well as a letter in the appellants letterhead requesting the bank to accept the deposit against the export order. The bank will also accept the same and shall issue the necessary FIRC / BRC to that extent. The said practice is well recognized by law as per the guidelines issued by Boards Circular No.17/95-Cus. dated 1.3.1995 pertaining to Instructions on Baggage-Export of commercial goods. The appellants, based on the amounts received from the eighty six foreign nationals during their course of visit to India have made the deposits with the Union Bank of India along with the documents given by them at the time of placing their orders. The appellants submit that at no point of time the bankers had raised any objection on the credibility of the transactions. It is further submits that in the instant case, the foreign currency deposited by them as attributable to advance towards export proceeds have never been questioned by the nodal agency viz. RBI or Enforcement Directorate. It is further submits that in the instant case, in the impugned order drawback is sought to be recovered from both the appellants holding the foreign exchange received by cash from the customers representative not attributable towards export proceeds. It is further submitted that the export proceeds received through banking channels have not been contested by the department as not attributable towards export or being overvalued for the purpose of gaining export benefit. This fact is evident from the impugned order wherein export benefits are denied only to the extent of the foreign currency received in cash. It is further submitted that the departments contention of the drawback and DEPB benefit not available to the amount of foreign exchange realized in cash as being not attributable to export proceeds is not justifiable as in the case of M/s Asian Exports it is seen that the entire export proceeds are realized in cash which has been duly accounted for and Bank realization certificates obtained for all the export transactions to the extent of the exports done by the Appellants. It is further submitted that the exports being under benefit schemes were subject to examination at the port of export, based on CBEC Circular No.90/98-Cus.IV dated 8.12.98 wherein norms have been specified for examination of cargo based on the benefits being claimed. According to the said circular, the export goods under various benefit schemes were examined at the time of export by the officers of customs for the purpose of ascertaining the entitlement of export promotion scheme i.e Drawback/DEPB claimed by the appellants. It is a fact that the verifications were carried out by the department in respect of certain export consignments accepting the value as mentioned in the Shipping Bill. Therefore instances where department have been able to establish overvaluation which has been accepted by the appellants. Therefore, in nutshell all the export consignments have been invariably examined by the Customs Authorities in respect of quantity, value and other aspects, and after due satisfaction, exports were allowed. The foreign currency remittances have also been received in each and every consignment and BRCs have been obtained and RBI has also accepted the genuiness of the transactions and no proceedings were initiated against the appellants under the provisions of Section 18(1) of FERA, 1973.
9. With regard to DEPB shipments, the Commissioner in the impugned order, based on the submissions made and prevalent provisions of the statute held that demand to recover DEPB credit under Section 28 is not sustainable. Exports covered under DEPB shipping bills were examined before export. It is further submitted that the department has not established that the currency has been illegally smuggled by the appellants. The department has also failed to prove the source of procurement of such currency. On the contrary, the appellants have demonstrated that the currency has been procured by them on account of the advance payment towards their export orders. Thus the department has failed to discharge the onus to prove that the currency is illicit whereas the appellants have proved the licit nature of the remittance of export goods by way of various documents. The whole case of the revenue is on the basis of the statements recorded from the two foreign nationals, who could not be produced for cross-examination. There is no other statements of the foreign nationals who had paid the advance towards export orders. Cross examination of these two foreign nationals could not be provided to the appellants in spite of the appellants expressing their willingness to bear the expenses of the two foreign nationals. Therefore, the statements of these two foreign nationals cannot be relied as a piece of evidence as held by the Honble Allahabad High Court in the case of Commissioner of Central Excise, Meerut-I Vs Parmarth Iron Pvt. Ltd. 2010(260)ELT 514(All.) Another ground for denying draw back as well as DEPB benefit is on account of overvaluation. It is submitted that neither the show cause notice nor the adjudication order has been able to bring out the quantum of overvaluation as alleged in the show cause notice. Therefore the said allegation of overvaluation is without any supporting documentary evidence and it is also submitted that as per Rule 8A of the Customs and Central Excise Duties Drawback Rules, 1995 which states that the drawback amount or rate determined under Rule 3 shall not exceed one-third of the market price of the export product. Further in respect of DEPB benefit the Appellants submit that Board has issued guidelines in its circular no.69/97-CUS dated 8/12/97 for determination/verification of the present market value under DEPB scheme. In the instant case department has not been able to either ascertain the present market value nor the market price for the drawback/DEPB benefit. Merely denying the benefit by alleging overvaluation without any justification is not correct. It is further submitted that there is glaring contradiction in the report received from the Office of the Inspector of Police Airport Branch, SB-II, CID CSI Airport, Mumbai dated 5.5.2000 with reference to the letter dated 17.7.2000 of D.C Customs(Prev.), SIU Mumbai regarding information sought in respect of sixty foreign nationals whose passport copies had been submitted by the appellants of having visited India and had given the appellants foreign currency towards export order placed by them. It is further submitted that the investigation has been able to only identify around six suppliers whose address was found to be not in existence. However there are sixty three suppliers. Assuming without admitting that the suppliers were not in existence, however the fact is not in dispute that the goods have been exported by the appellants after due examination as to the description, quantity and value of the export goods. It is further submitted that recovery of drawback is confirmed under Rule 16A of Customs and Central Excise, Duties Drawback Rules, 1995. It is not a case where the export proceeds have not been realized or the RBI has issued any notice in respect of credentials of the proceeds deposited by the appellants. On the contrary Bank Realization certificates have been issued in respect of all the exports as it is undisputed that the appellants have received the export benefits and no action has been initiated towards non-realization of export proceeds by the RBI in the instant case. It is further submitted that the action initiated by the department for recovery of drawback is not in accordance with the provisions of the statute prevalent during the relevant period in the light of the decision of the Honble Allahabad High Court in the case of Mayfair Leather Exports Pvt. Ltd. -2011 (272) ELT 193 (All.) It is further submitted that the penalty imposed as per provisions of Section 114(i) and (ii) of the Customs Act, 1962 is not correct as the period of export was 1996 to 2000 and Section 113 of the Customs Act applicable at the relevant time was applicable only in respect of dutiable or prohibited goods and there was no express prohibition on export of pens and pens were not dutiable, therefore, Section 113 does not apply and accordingly penalty could not be imposed under Section 114 because penalty could be imposed only if liability of confiscation arises under Section 113 of the Customs Act, 1962. It is further submitted that the provisions of Section 114(iii) as applicable during the relevant period ie prior to 14.5.2003 would be applicable and not the amended provisions after 14.5.2003 and as per the said provisions the penalty imposable under Sec. 114(iii) it would be limited to the extent of drawback claimed or five thousand rupees whichever is greater. The appellants also relied upon the decision of Honble Tribunal in the case of Ektara Exports Pvt. Ltd. Vs Commr. of Cus.(Airport & Administration), Kolkata 2007(218)ELT 562(Tri.-Kolkata). Therefore, it is prayed that the impugned order be set aside and appeals be allowed.
10. On the other hand, the ld. Special Counsel appearing on behalf of the Revenue strongly opposed the contention of the ld.counsel and submits that in this case the appellants have been procuring the foreign currency by way of illicit means as the passengers on behalf of the them the foreign currency deposited in the bank were not in India at the relevant time. Further, the statements of the two foreign nationals have corroborated this fact. It is further submitted that the suppliers of the export goods were non-existance. The goods were highly overvalued to get higher draw back and DEPB benefits. The foreign currency deposited in the bank in cash is therefore illegally obtained by the appellants from illicit means to show the realization of the overvalued goods. Therefore, the appellants have failed to prove the fact that the foreign currency deposited in cash is the amount realized from the export goods. Therefore, the benefit of DEPB credit and draw back of duty is not entitled. Accordingly, the impugned order to be modified to that extent and penalties on the proprietors alongwith penalties on the appellants are to be confirmed.
11. Heard both sides and considered the submissions in detail.
12. In this case, the facts which are not in dispute are as follows:
(a) It is not disputed that the goods have been exported.
(b) It is not disputed that the export goods have not been examined;
(c) The case of the department is based on the statements of two foreign nationals and suppliers of export goods were non existence and goods have been overvalued.
As the statements of two foreign nationals have been relied on but the cross examination of the same could not have been done in the matter, therefore, the credibility of the statements is doubtful in the light of the decision of the Honble Allahabad High Court in the case of CCE vs Parmarth Iron Pvt.Ltd. 2010(260)ELT 514(ALL). wherein the Honble High Court has held that there is no requirement in the Act or Rules, nor do the principles of natural justice and fair play require that the witnesses whose statements were recorded and relied upon to issue the show cause notice, are liable to be examined at that stage. If the Revenue choose not to examine any witnesses in adjudication, their statements cannot be considered as evidence. However, if the Revenue choose to rely on the statements, then, in that event, the persons whose statements are relied upon have to be made available for cross-examination for the evidence or statement to be considered. Therefore, as in the instant case, the cross examination of the two foreign nationals whose statements have been relied upon in the show-cause notices are not available, therefore, the statements of those two foreign nationals cannot be taken as evidence in this matter.
12. As per Circular No.17/95-Cus dated 1.3.1995, the CBEC has clarified that in the interest of the expeditious passenger clearance and the current liberalization scenario, such exports through passengers baggage may be allowed so long as proper proof of the goods having been procured against payment in foreign exchange is provided by the passengers. We further find that it is the claim of the Revenue that the appellants have not realized the remittance of the export goods except from the bank channel that is to be dealt with by Rule 16A which at the relevant time was as follows:-
16A - Recovery of Customs and Central Excise, Duties Drawback Rules, 1995 amount of Drawback where export proceeds not realized (1) Where an amount of drawback has been paid to an export or a person authorized by him (hereinafter referred to as the claimant but the sale proceeds in respect of such export goods have not been realized by on behalf of the export in India within the period allowed under the Foreign Exchange Regulation Act, 1973 (46 o 1973) including any extension of such period, such drawback shall be recovered in the manner specified below:
(2) On receipt of relevant information from the Reserve Bank of India the Assistant Commissioner of Customs or Deputy Commissioner of Customs shall cause notice to be issued to the exporter for production of evidence of realization of export proceeds within a period of thirty days from the date of receipt of such notice and where the exporter does not produce such evidence within the said period of thirty days, the Assistant Commissioner of Customs or Deputy Commissioner of Customs shall pass an order to recover the amount of drawback paid to the claimant and the exporter shall repay the amount so demanded within sixty days of the receipt of the said order:
Provided that where a part of the sale proceeds has been realized, the amount of drawback to be recovered shall be the amount equal to that portion of the amount of drawback paid which bears the same proportion as the portion of the sale proceeds not realized bears to the total amount of sale proceeds.
13. The Honble High Court of Allahabad in the case of Mayfair Leather Export (Pvt.)Ltd. has examined the said Rule and observed that sub-rule 2 opens with the words on receipt of relevant information from the Reserve Bank of India, the Assistant Commissioner of Customs or Deputy Commissioner of Customs, shall cause notice. Nowhere in the said Rule it is provided that the Assistant Commissioner or Deputy Commissioner of Customs can cause notice to be issued on receipt of relevant information from any other source or suo-motu. The conclusion arrived at by the Revenue is that if the department comes to know from any other source that export proceeds are not realized, it can very well initiate proceedings for recovery of draw back in the absence of XOB statement is wholly erroneous. Therefore, the conclusion is that the Asstt.Commissioner or Dy.Commissioner can initiate proceedings for non remittance of export proceeds only on receipt of the information from RBI. In this case, there is no such information received from RBI by the Asst.Commr./Dy.Commr. of Customs that the remittance of exports has not been realized. On the contrary the appellants have been able to produce BRCs for the remittance of the export goods. Therefore, it is held that the appellants have received the remittance of the export goods.
14. The allegation against the appellants is that the supplier of the export goods are non existence and export goods were highly over valued, but it is a fact that the goods have been exported. Therefore, it cannot be said that the goods have not been procured and have not been exported. The only question remains is of over valuation. In the case of M/s. Access Textiles & others , the Tribunal vide Order No.A/569-572/13-CSTB/C.I dated 28.2.13 in Appeal Nos.C/873 to 876/08 has observed as under:-
i) The impugned order relies on the judgement of this Tribunal in the case of M/s. Sidhachalam Exports 2007 (210) ELT 539 which was reversed by the Honble Apex Court in 2011 (267) ELT 3 (SC) with the following observations.
16. It is settled that the procedure? prescribed under Section 14(1) of the Act and particularized in Rule 4 of the 1988 Rules has to be adopted to determine the value of goods entered for exports, irrespective of the fact whether any duty is leviable or not. It is also trite that ordinarily, the price received by the exporter in the ordinary course of business shall be taken to be the transaction value for determination of value of goods under export, in absence of any special circumstances indicated under Section 14(1) of the Act and Rule 4(2) of the 1988 Rules. The initial burden to establish that the value mentioned by the exporter in the bill of export or the shipping bill, as the case may be, is incorrect lies on the Revenue. Therefore, once the transaction value under Rule 4 is rejected, the value must be determined by sequentially proceeding through Rules 5 to 8 of the 1988 Rules. (See : Commissioner of Customs (Gen), Mumbai v. Abdulla Koyloth - JT 2010 (12) SC 267 = 2010 (259) E.L.T. 481 (S.C.).).
19. In the present case, as stated? above, neither the adjudicating authority i.e., the Commissioner of Central Excise nor the CESTAT has dealt with the matter as per the procedure prescribed under the Act. At the threshold, instead of first determining the value of the goods on the basis of contemporaneous exports of identical goods, the Revenue erroneously resorted to a market enquiry. If for any reason, data of contemporaneous exports of identical goods was not available, the procedure laid down in Rules 5 to 8 of the 1988 Rules was required to be followed and market enquiry could be conducted only as a last resort. It is evident that no such exercise was undertaken by the Commissioner and interestingly he, acting as an appellate authority, proceeded to test the evidentiary value of the report submitted by M/s. Skipper International and rejected it on the ground that it does not depict if the identical garments had ever been purchased by the said concern. Observing that in the absence of any other independent evidence relating to market enquiry, there was no other corroborating evidence to support the allegation of inflation in FOB value, he dropped the proceedings initiated vide show cause notice dated 11th September 2003. Similarly, it is manifest from the CESTATs order that revenues appeal has been accepted mainly on the ground that report of M/s. Skipper International was worthy of credence and the exporter had failed to produce any evidence to establish that export value stated in the shipping bills was the true export value. In our opinion, both the said authorities have failed to apply the correct principles of law and therefore, their orders cannot be sustained.
20.Resultantly, for the reasons as? enumerated, the appeal is allowed; the orders passed by the CESTAT and the Commissioner are set aside and the matter is remitted back to the adjudicating authority for fresh consideration in accordance with law, after affording adequate opportunity of hearing to the exporter. The entire exercise, in terms of this order, shall be completed within six months from the date of receipt of a copy of this judgment. Needless to add that we have not expressed any opinion on the merits of the opinion rendered by M/s. Skipper International or on the conduct of the exporter in not adducing any evidence in support of the export value stated in the shipping bills in question.
j) It is seen that even in the instant case, there has not been any effort to establish as to what was the contemporaneous value of like goods exported at the relevant time as required under the provisions of Valuation Rules as well as Sec.14 of the Act.
15. In these circumstances, we remand back the matter to the adjudicating authority to determine the contemporaneous value of the export goods with supporting evidences to determine the claim of draw back as well as DEPB benefits under Rule 8A of the Customs and Central Excise, Duties Drawback Rules, 1995 on the basis of market value of the export goods at the relevant time.
16. The appeals as well as the stay applications of the appellants and the appeals of the Revenue are disposed of in the above terms.
17. It is pertinent to mention here that the adjudicating authority shall decide the issue within 90 days of the receipt of this order after giving a reasonable opportunity to the appellants to present their case.
(Dictated in chamber) S.K.Gaule Member(Technical) Ashok Jindal Member(Judicial) pv 5