Custom, Excise & Service Tax Tribunal
S. Rajiv & Co vs Commissioner Of Customs, Airport, ... on 30 March, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. C/87629/13 [Arising out of Order-in-Original No. COMMR /PMS/ ADJN/19/2012-13 dated 28/3/2013 passed by the Commissioner of Customs, Airport, Mumbai] For approval and signature: Honble Mr Ramesh Nair, Member(Judicial) =======================================================
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 :
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3. Whether Their Lordships wish to see the fair copy : seen
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4. Whether Order is to be circulated to the Departmental: Yes
authorities?
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S. Rajiv & Co.
:
Appellant
VS
Commissioner of Customs, Airport, Mumbai
:
Respondent
Appearance
Ms. Shamita J. Patel, Advocate with Shri. J.C. Patel, Advocate for the Appellants Shri. Kamal Puggal, Asstt. Commissioner(A.R.) for the Respondent CORAM:
Honble Mr. Ramesh Nair, Member (Judicial) Date of hearing: 30/3/2016 Date of decision: /2016 ORDER NO.
This appeal is directed against Order-in-Original No. COMMR /PMS/ ADJN/19/2012-13 dated 28/3/2013 passed by the Commissioner of Customs, Airport, Mumbai, whereby Ld. Commissioner had passed following order:
(1). I order confiscation of the consignment of Cut. and Polished Diamonds import weighing 709.61 Cts valued at Rs. 5,03,89,406/1 Five Cron; under Three Lakh Eighty Nine Thousand Four Hundred and Six) (CIF) under section 111 (1) & 111(m) of the Customs Act, 1962. However, I give the importer M/s S. Rajiv & Co. an option to redeem the said goods on the payment of Redemption Fine of Rs. 50,00,000/- ( Rs. Fifty Lakhs only) under section 125 of the Customs Act, 1962.
(ii). I impose a Penalty of Rs. 5,00,000/-( Rs. Five Lakhs only) on the importer, M/s S. Rajiv & Co. under Section112 (a) of the Customs Act, 1962.
(iii). I direct assessment of the declared quantity of the Cut & Polished Diamonds vide B/E No.00160 dtd 2.12.2011 under invoice no. 110546 dated 30.11.2011 with Assessable Value of Rs 3,54,82,085/(Rupees Three Crore Fifty Four Lakh Eighty Two Thousand and Eighty Five only) on merits as per law.
(iv). I allow re-export of the excess goods i.e. 214.88 Cts of Cut & Polished Diamond having CIF value USD 2,90,088/ equivalent to Rs.1, 52, 58,629/ to the supplier M/s. Jayam N. V. on payment of the above mentioned Redemption Fine and Penalty.
2. The fact of the case is that the officers of Air Intelligence Unit on 5.12.2011 retrieved an import Bill of Entry No. 000160 dated 2.12.2011 at PCCCC, Bandra-Kurla Complex, Bandra(E), Mumbai, on the basis of specific information with regard to under invoicing of Import of Diamonds. On enquiry from Examination officer on duty, it was known that the above mentioned Bill of Entry was not accompanied with packing list and hence, the consignment was not cleared on 2.12.2011 and the detailed packing list was asked for from the CHA and a remark was put to that effect on the reverse of the original copy of the said Bill of Entry. He had also put another remark on the reverse of the said Bill of Entry on 2.12.2011 stating that Goods found to be excess of 216.51 cts(approx) than cleared. In order to find out the exact quantity Carat wise, packing list was called for. The Importer for the goods under import was one M/s. S. Rajiv & Co.(IEC No. 0388052821), having office at 1403, Prasad Chambers, 14th Floor, Opera House, Mumbai- 400 004. The goods were being cleared through CHA, B.V. Chinai & Co. (I) Pvt. Ltd. The said bill of entry was filed for clearance of one parcel under Marks 589 9770 5403(MAWB No) and No. 3601-0255134(HAWB No.) containing Cut and Polished Diamonds and having a declared weight of 494.730 CTS under RITC 71023910. The Assessable Value was mentioned as Rs. 3,54,82,085/-. The Consignor of the goods was Jayam n.v. Schupstraat 18/20, 2018 Antwerp, Belgium as on Invoice No. 110546 dated 30/11/2011.
The said Invoice of Polised Diamonds had the following details:
1) CD-11RND N/SZ 287.54 Carats @ 1350 USD Amount 3,88,179 USD
2) CC2-11RND N 207.19 Carats @ 1350 USD Amount 2,79,706.50 USD The 494.73 Carats of CPD had invoice value of 6,67,885.50 USD.
3. The officers of AIU found another Invoice No. 110547 dated 30.11.2011 having the same description, value and quantity in all respect as mentioned in the invoice no. 110546 dated 30.11.2011. However, only the invoice no. 110546 dated 30.11.2011 was reflected on the B/E. The HAWB No. 3601-0255134 dated 30.11.2011/MAWB No. 589-9770 5403 dated 30.11.2011 was also showing the invoice No. 110546 dated 30.11.2011only. The officers of AIU conducted a detailed physical examination of the above said consignment under Panchnama on 5.12.2011 and found 710.10 carats of Cut and Polished Diamonds in the presence of CHA as per Annexure A to the panchanama. The details of the packages containing Diamonds are given in the show cause notice
(a) Packet No. 1:- CD/11/RNDN/SZ (Barcode No. 11014728) was having TWO(2) plastics pouches marked as CD-A& CD-B and both were having bar codes on them.
In CD-A there were Ten(10) small plastics pouches whose collective weight was 183.92 Cts. In CD-B there were Twelve(12) small plastics pouches whose collective weight was 103.64 Cts. Thus the weight of CPD 287.56 Cts in packet No. 1 was found to be approximately as per declaration (287.54 Cts) in the Invoices No. 110546.
(b) Packet No. 2 was marked as 'CC2 ALL. In this there were Nine(09) Plastics pouches which were having Bar Codes for Identification and contained further smaller plastics pouches as per the details given in the SCN. The declared weight for second packet was 207.17 cts in the invoice. However, the collective weight of the second packet was found to be 423.07 cts.
4. Thus on examination, 215.37Cts (approx) of Diamonds valued at Rs. Rs. 1,52,93,424/- were found in excess, which were not declared on the invoice and on the relevant bill of entry. Thereafter, the total quantity of the Cut and Polished diamonds totally weighed at 710.10 Cts (approx) Carats and valued at Rs. 5,07,75,509/- was seized under Panchanama in the reasonable belief that the same was under invoiced and mis-declared and hence liable for confiscation under the provisions of the Customs Act, 1962.
5. On the basis of above investigation, a show cause notice was issued proposing the confiscation of diamonds under seizure valued of Rs. 5,03,89,406/- under Section 111(1) and 111(m) of the Customs Act, 1962. It was also proposed in the show cause notice to impose penalty under Section 112 and 114AA of the Customs Act, 1962. The adjudicating authority has confiscated whole quantity of diamonds imported by the appellant and imposed redemption fine of Rs. 50 lacs under Section 125 of the Customs Act, 1962. A penalty of Rs. 5 lacs was imposed under Section 112(a). Excess diamonds i.e. 214.88 carats valued of Rs. 1,52,58,629/- was ordered allowed to be re-exported to the supplier after payment of redemption fine and penalty. Aggrieved by the impugned order, appellant filed this appeal.
6. Ms. Shamita J. Patel, Ld. Counsel with Shri. J.C. Patel, Advocate appearing on behalf of the Appellant submits that the excess shipped diamonds were made under bonafide mistake by the supplier. The appellant has neither ordered nor intended to import the excess found diamonds therefore there is no malafide intention on the part of the appellant in import of excess goods 214.88 carat cut and polished diamonds. She referred to various statements of partner of the appellant Shri. Shreyas Zaveri wherein he categorically stated that excess diamonds supplied by mistake was not ordered by them. The same was clarified by the foreign supplier that on account of mistake committed by the staff of foreign supplier. The mistake was occurred due to reason that the consignment wrongly supplied to the appellant was actual meant for some another consignment for Hong Kong which was shipped at the same time as their consignment. She submits that the appellant have correctly declared the quantity of diamonds ordered by them and imported as per the invoice. Since they were not aware of excess quantity supplied mistakenly by the supplier there is no mis-declaration on the part of the appellant. She submits that Ld. Commissioner also in the impugned order mentioned that there is no malafide intention of the importer as no duty is involved. For this reason only the excess imported goods were allowed to be rexported and remaining goods were allowed to be cleared for home consumption. In support of her submission, she placed reliance on the following judgments:
(a) Guru Ispat Ltd Vs. Commissioner of Customs(Port), Calcutta [2003(151) ELT 384]
(b) Commissioner Vs. Guru Ispat Ltd. [2003(157) ELT A 87(SC)]
(c) Aniketa Krishna International Vs. Commissioner of Customs, Jaipur[2012(280) ELT 131]
(d) Makali Metals Pvt ltd. Vs. Commissioner of Customs, Raigad, [2001(138) ELT 607]
(e) Oriental Containers Ltd.Vs. Union of India[2003(157) ELT 503]
(f) Shree Ganesh International Vs. Commissioner of C. Ex. Jaipur[2004(174) ELT 171]
(g) Vaibhav Textiles vs. Commissioner of C. Ex. & C. Kolkata[2007(214) ELT 408]
(h) Kirti Sales Corpn. Vs. Commissioner of Cus, Faridabad [2008(232) ELT 151]
(i) Allseas Marine Contractors S.A. Vs. Commr. Of Cus., Visakhapatnam[2011(272) ELT 619]
(j) Suraj Diamonds (India) Ltd Vs. Commr. Of Cus.(airport), Mumba[2008(227) ELT 471]
(k) Sahil Diamonds Pvt Ltd Vs. Commissioner of Customs, Ahmedabad[2010(250) ELT 310] She further submits that there is no duty on the import of diamonds therefore no malafide intension can be attributed in excess quantity shipped by the supplier. For this reasons also the goods were not liable for confiscation. Hence the redemption fine and penalty is not warranted.
7. Shri. Kamal Puggal, Ld. Asstt. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that for the charge of mis-declaration, malafide intention is not necessary. In the present case it is admitted fact that there is an excess quantity of diamonds shipped by the supplier. It is joint responsibility of the supplier and the importer that goods should be correctly shipped and imported as per the invoice therefore irrespective of anybodys mistake but the fact remained excess quantity involving huge amount more than Rs. 1.5 crore was supplied. He further submits that till the landing of the goods even supplier has not raised any issue as regard the mistake committed in excess quantity shipped therefore the explanation given subsequent to the detection of excess import is afterthought, therefore Ld. Adjudicating authority has rightly confiscated the goods. In support of his submission, he placed reliance on the following judgments:
(a) Shree Corporation Vs. Commissioner of Customs, Mumbai[2004(166) ELT 471(Tri. Mum)]
(b) Rosy Blue (India) Pvt Ltd. Vs. Commr. Of Customs, CSI, Airport, Mumbai[2015(317) ELT 331(Tri. Mumbai)]
8. I have carefully considered the submissions made by both sides and perused the record.
9. The fact is not under dispute that excess quantity of cut and polished diamonds were shipped by the supplier. The appellant heavily relied upon the explanation given by the supplier that excess shipped goods to appellant was meant for supply to Hong Kong as there was similar quantity short shipped to Hong Kong party. In this regard, I observed that if such serious mistake occurred the same should have been intimated to the appellant immediately whereas all the explanations brought before the department only when the excess quantity was detected, this shows that explanation and reason for excess shipped quantity given by the appellant appeared to be afterthought. Even if it is presumed that there is bonafide mistake in shipping excess quantity of diamonds, I am of the view that for the purpose of mis-declaration mens rea is not required. When the excess goods were found as compared to the declared quantity in the invoice, it amounts to mis-declaration and consequences follow. I have gone through the judgments relied upon by the Ld. Counsel, firstly every case is based on the independent fact of each case hence ratio of the judgments cannot be applied in the present case. Secondly there are contrary judgments also wherein it was held that if there is mis-declaration without any malafide intention also, the goods are liable for confiscation. Some of the judgments with its operative portion are reproduced below:
(a) VIJAYBHAV Versus COMMISSIONER OF CUSTOMS, AIRPORT, MUMBAI[2014 (313) E.L.T. 506 (Tri. - Mumbai)] 9.7?Section 111(d) of the Customs Act provides that any goods which are imported or attempted to be imported or are brought within the Indian Customs Waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force, shall be liable to confiscation. Thus prohibition could be imposed under the Customs Act or any other law for the time being in force and if prohibition is imposed on the import of any goods, such goods imported shall be liable to confiscation. The Customs Act itself did not prohibit import of diamonds at the relevant time in the case before us. However, there was a restriction on the import of rough diamonds under the Exim Policy at the relevant time and the policy prescribed that rough diamonds could be imported either under a Diamond Imprest Licence or under Replenishment Licence. If the diamonds are imported without such licence, then import would be in violation of the restriction. Section 2(33) of the Customs Act defines prohibited goods as follows :-
prohibited goods means any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with;
(b)COMMISSIONER OF CUSTOMS, NEW DELHI Versus ART ALIVE [2014 (314) E.L.T. 632 (Tri. - Del.)]
14.?I have also gone through grounds of appeals of Revenue at Sl. Nos. iv, v, vi and vii of memo of appeal where it has been brought that there is no requirement of mens rea or mala fides for confiscation and imposition of penalty. But violation attracts the provisions of law for penal action, Revenue relied on Supreme Court judgment in the case of 2006 (5) SCC 361, Chairman, SEBI v. Sriram Mutual Fund to support its contention of detection of violation warranting penal action. That is a case of misdeclaration of quantity and value. They have also relied on judgment Madras High Court reported in 2007 (207) E.L.T. 346 (Mad.) wherein it is held that in case of misdeclaration and undervaluation of goods mens rea is not required for imposition of punishment under Customs Act, 1962. Similarly Honble Supreme Court in the case of M/s. Pine Chemical Suppliers - 1993 (67) E.L.T. 25 (S.C.) has also held that in case of misdeclaration of description and value of imported goods, question of mens rea not relevant for liability to confiscation and penalty under Sections 111(m), 112 and 125 of the Customs Act. Therefore for invoking penal provisions under Customs law, mens rea is not pre-requisite.
(c)P. BHASKAR NAIDU Versus COMMISSIONER OF CUSTOMS, CHENNAI [2013 (298) E.L.T. 248 (Tri. - Chennai)]
8.?The details of the case as narrated in the show cause notice have been taken into account by the Adjudicating Commissioner as recorded in the adjudication order. The prohibition in respect of export of red sander logs under the Foreign Trade Policy provisions and the contravention of the same in this case has not been challenged by any one. Further, the goods entered for export and declared in the relevant shipping bill were granite cobble stones, whereas actual goods found in the container brought to the customs area for export was red sander logs. Hence, the contravention of Section 113(i) is established in view of the mis-declaration of description of goods as well as consequent mis-declaration of value etc. In such a case, it is not even necessary to establish mens rea for imposition of penalty on the exporter. Section 113(i) is pari materia with Section 111(m) which provides a similar provision for mis-declaration of imported goods. The Honble Supreme Court in the case of Pine Chemical Suppliers v. Collector of Customs - 1993 (67) E.L.T. 25 (S.C.), has squarely held that for mis-declaration in respect of imported goods resulting in contravention of Section 111(m), the question of mens rea is not relevant for liability to confiscation and penalty but, only for quantum of fine and penalty imposable. The ratio of the said decision of the Honble Supreme Court is squarely applicable for similar provisions in respect of export goods under Section 113(i) and 114 of the Customs Act, 1962. For the purpose of export, the exporter is required to truthfully declare the contents of the export cargo and not attempt to export something other than what is declared. It becomes even a more serious offence if, coupled with mis-declaration of the description, what is actually sought to be exported is also prohibited, as in this case.
9.?Mens rea is not required to be established in respect of mis-declared cargo is well settled also by a decision of the Honble jurisdictional High Court of Madras in the case of CC (Export), Chennai-1 v. Bansal Industries - 2007 (207) E.L.T. 346 (Mad.).
(d) DUNGARMAL PRUTHVIRAJ & CO. Versus COMMISSIONER OF CUS. (P), MUMBAI[2011 (272) E.L.T. 606 (Tri. - Mumbai)]
12.It is also on record that the? goods covered by Invoices No. 93288 and No. 93292, which were purchased by Dungarmal from ODC, were sold to Alfa at the high seas. The relevant Bills of Entry were filed by Alfa for clearance of the goods and the demand of duty is upon them. Though there has been no representation for Alfa before us, we have perused the relevant records and considered their grounds against the Commissioners order. Alfa did not produce any invoice issued by Dungarmal (high seas seller). They produced the aforesaid invoices issued by ODC to Dungarmal and the value mentioned in those invoices was declared in the Bs/E. Alfa has a case that they were not aware of what had transpired between Dungarmal and ODC or of the transactions between them except that the price mentioned by ODC in the above invoices was recovered from Dungarmal. In this circumstance, according to Alfa, it cannot be said that they misdeclared the value of the goods. On this ground, Alfa has resisted the confiscation and penalty. It is for the person filing the B/E to ensure the correctness of his declaration therein it was open to Alfa to produce invoices (if any) issued by Dungarmal (high seas seller). The Revenue has established that Dungarmal paid a higher price to ODC than what was mentioned in the aforesaid invoices. In the ordinary course of trade, Dungarmal would not sell the goods to Alfa at a price lower than what they paid to the onginal supplier (ODC). Looking from this angle, we have to hold that Alfa declared a lower value for the goods in the Bs/E than what they paid to Dungarmal at the high seas. In other words, Alfa should be held to have undervalued the goods with intent to evade payment of appropriate duty. Therefore, in the hands of Alfa, the goods became liable to confiscation under Sec. 111(m) of the Customs Act. By misdeclaring the value of the goods with intent to evade payment of appropriate duty, Alfa rendered themselves liable for penalty under Sec. 112 of the Act. The ld. SDR has rightly submitted that no mens rea requires to be established against an importer before impositon of penalty on him under Sec. 112 of the Act. He has, in this connection, relied on the High Courts judgment in Commissioner of Customs (Export), Chennai v. Bansal Industries [2007 (207) E.L.T. 346 (Mad.)], wherein the Honble High Court considered a case of import involving undervaluation of goods and held that a penalty on the importer under Sec. 112 of the Customs Act was justifiable even in the absence of mens rea. In other words, therefore, even if it be assumed that Alfa had no intention to evade duty, they were still liable to be penalized under Sec.112 of the Act on account of undervaluation of the goods. Again, as rightly stated by the ld. SDR, such penalty cannot be resisted on the ground that the goods were not physically confiscated. It is enough if the goods are found to be liable to confiscation under Sec. 111 of the Act. Misdeclaration of the value of the goods rendered it liable to confiscation and its importer liable to penalty. The only question to be considered is whether the quantum of penalty imposed on Alfa by the Commissioner is reasonable. It is pointed out by the ld. SDR that the enhanced value of the goods covered by the two invoices is over Rs. 29 lakhs. We find that a penalty of Rs. 2 lakhs on Alfa is disproportionate to the offence found against them. Considering the fact that the misdeclaration of the value of the goods was not without the involvement of Dungarmal and considering other attendant circumstances, we reduce the penalty on Alfa to Rs. One lakh. Proportionately, we reduce the penalty on Dungarmal also to Rs One lakh. In the result, Appeal Nos. E/468/02 and E/469/02 get disposed of.
(e)PRASHRAY OVERSEAS (P) LTD. Versus COMMISSIONER OF CUSTOMS, CHENNAI [2009 (237) E.L.T. 720 (Tri. - Chennai)] 3.3?As the offending goods are liable for confiscation, fine is justified in law. A fine for redemption of goods confiscated levies a monetary charge on the importer of the goods confiscated. Redemption fine also serves the same purpose as a penalty on the importer. Therefore, considerations that weigh against the penalty imposed under Section 112 of the Act should govern also the fine imposed. In the absence of a finding of wilful misdeclaration of the offending goods as falling under grade 4A to evade payment of ADD, a nominal fine should suffice. A fine of Rs. 25,000/-, I find, will more than meet the ends of justice in this case.
4.?I find that in the Akbar Badruddin Jiwani v. Collector of Customs reported in 1990 (47) E.L.T. 161 (S.C.), the Apex Court observed as under :
58.?In the present case, the Tribunal has itself specifically stated that the appellant has acted on the basis of bona fide belief that the goods were importable under OGL and that, therefore, the Appellant deserves lenient treatment. It is, therefore, to be considered whether in the light of this specific finding of the Customs, Excise & Gold (Control) Appellate Tribunal, the penalty and fine in lieu of confiscation required to be set aside and quashed. Moreover, the quantum of penalty and fine in lieu of confiscation are extremely harsh, excessive and unreasonable bearing in mind the bona fides of the Appellant, as specifically found by the Appellate Tribunal.
59.?We refer in this connection the decision in Merck Spares v. Collector of Central Excise & Customs, New Delhi - 1983 E.L.T. 1261, Shama Engine Valves Ltd. Bombay v. Collector of Customs, Bombay - 1984 (18) E.L.T. 533 and Madhusudan Gordhandas Co. v. Collector of Customs, Bombay - 1987 (29) E.L.T. 904 wherein it has been held that in imposing penalty the requisite mens rea has to be established. It has also been observed in Hindustan Steel Ltd. v. State of Orissa - 1978 (2) E.L.T. (J159) (S.C.) = 1970 (1) SCR 753 - by this Court that :-
The discretion to impose a penalty must be exercised judicially. A penalty will ordinarily be imposed in cases where the party acts deliberately in defiance of law, or is guilty of contumacious or dishonest conduct, or acts in conscious disregard of its obligation; but not, in cases where there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.
60.?In the instant case, even if it is assumed for arguments sake that the stone slabs imported for home consumption are marble still in view of the finding arrived at by the Appellate Tribunal that the said product was imported on a bona fide belief that it was not marble, the imposition of such a heavy fine is not at all warranted and justifiable.
61.?In the premises aforesaid, we allow the appeal and set aside the judgment and order passed by the Appellate Tribunal and directs the Tribunal to release the goods to the appellant forthwith. The above observations support the prayer of the appellants against the fine and penalty. The appellants shall be entitled to consequential relief.
In view of the above decisions even though the there is no mens-rea in the mis-declaration but if there is mis-declaration intentional or un-intentional, the goods are liable for confiscation. The element of mens-rea is only parameter to decide the quantum of find and penalty, therefore the confiscation of the goods in the present case is legal and correct. However, I find that excess found goods is valued approximately Rs. 1.5 crore which has been allowed to be re-exported, however remaining goods valued of Rs. 3,54,82,085/- were declared correctly. Therefore taking into consideration this vital fact, I am of the view that penalty of Rs. 50 lacs and corresponding penalty of Rs. 5 lacs are is on higher side which deserve reduction. I therefore reduce redemption fine from Rs. 50 lacs to Rs. 30 lacs and penalty from Rs. 5 lacs to 3 lacs. Appeal is partly allowed in the above terms.
(Order pronounced in Court on ___________________ ) Ramesh Nair Member (Judicial) sk 15 C/87629/13