Custom, Excise & Service Tax Tribunal
Kamlesh Khicha vs Airport, Mumbai on 24 November, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI APPEAL NO: C/629, 634, 721 & 831 to 838/2003 (Arising out of Order-in-Original No: COMMR/MCT/10/2003 dated 11/07/2003 passed by the Commissioner of Customs, Airport, Mumbai.) For approval and signature: Hon'ble Shri P.G. Chacko, Member (Judicial) and Hon'ble Shri S.K. Gaule, Member (Technical) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? : No 2. Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? : Yes 3. Whether Their Lordships wish to see the fair copy of the Order? : Seen 4. Whether Order is to be circulated to the Departmental authorities? : Yes 1. Munjani Brothers 2. Kiran Exports 3. D S Brothers 4. Vijaybhav 5. Gyan Chand Jain 6. Deepali Exports 7. Rajesh Jain 8. Vaibhav Exports 9. Hiralal Jain 10. Pushpak Impex 11. Kamlesh Khicha ...Appellants Vs Commissioner of Customs Airport, Mumbai ...Respondent
Appearance:
None for appellants Sr. No. 1 to 3Shri V.M. Advani, Advocate for appellants Sr. Nos. 4 & 5 Shri A.K. Chatterjee, Advocate for appellants Sr. Nos. 6 to 11 Shri W.L. Hangshing, Authorised Representative (JCDR) for the respondent CORAM:
Hon'ble Shri P.G. Chacko, Member (Judicial) and Hon'ble Shri S.K. Gaule, Member (Technical) Date of hearing: 24/11/2010 Date of decision: 24/11/2010 ORDER NO: ....................................................
Per: P.G. Chacko:
In this batch of appeals, there is no representation for M/s. Munjani Brothers (C/629/2003), Kiran Exports (C/634/2003) and DS Brothers (C/721/2003) despite notice, nor any request of theirs for adjournment. All other appellants are represented by counsel. JCDR represents the respondent in these appeals.
2. This case is coming up before us pursuant to a remand order of the Hon'ble High Court viz: common order dated 25/08/2010 passed in Writ Petition No. 7516 of 2006 [M/s. Deepali Exports and Another vs. Union of India and Others] and seven Customs Appeals of the department. We have perused the Hon'ble High Court's order.
3. After hearing both sides, we realise the need to examine the background to some extent. These appeals were disposed of by this Bench by order dated 10/02/2006, wherein the Commissioner's order was set aside in so far as it related to the goods (rough diamonds) in respect of which no Bills of Entry had been filed but the confiscation ordered by the Commissioner in respect of the consignments of diamonds for which Bills of Entry had been filed was upheld with option for redemption thereof against payment of fine @ 3% of the CIF value. This bench had also reduced the quanta of penalties imposed on the appellants. Two of these appellants (importers of rough diamonds) moved the Hon'ble High Court for implementation of the Tribunal's order dated 10/02/2006, while the department filed appeals against the adverse part of the Tribunal's order. The department challenged the Tribunal's decision relating to the diamonds not covered by Bills of Entry. They also wanted the quantum of redemption fine to be increased. The Writ Petition filed by the parties and the appeals filed by the Revenue came to be disposed of by a common order dated 31/07/2009 wherein: (a) the penalties imposed on the importers by the adjudicating authority were restored; (b) they were given liberty to redeem the goods by paying redemption fine @ 20% of the value of the goods; (c) the Tribunal's order in respect of the diamonds for which no Bills of Entry had been filed was sustained; and (d) the quanta of penalties imposed on some of the parties were enhanced. Subsequently, a review petition filed by the writ petitioners was disposed by the Hon'ble High Court by order dated 30/04/2010 whereby the earlier order dated 31/07/2009 was recalled and the writ petition and appeals were restored for fresh disposal on merits. This fresh disposal of the case came about on 25/08/2010 when the Hon'ble High Court issued the remand order directing the Tribunal to take fresh decision in the case by following the principles of natural justice and taking into account the subsequent information acquired by the parties. All rival contentions on merits were kept open. It is in pursuance of this remand order that we are taking up this batch of appeals.
4. Learned counsel for the appellants in appeal Nos. C/833 - 838/2003 has extensively referred to the facts of the case and has endeavoured to make out a case for setting aside the Commissioner's order against his clients. The gist of submissions is that, insofar as the rough diamonds in respect of which no Bill of Entry was filed are concerned, the order of confiscation and penalties is not sustainable in law and that, as regards the rest of the diamonds for which Bills of Entry were filed, the learned Commissioner ought to have allowed its clearance under the substituted licences (Replenishment Licences) which were subsequently produced by the importers. In this connection, the learned counsel has claimed support from the Tribunal's decision in H. Kumar Gems vs. Commissioner of Customs, Ahmedabad 2001 (137) ELT 61 (Tri.) wherein the importer produced free SIL (Special Import Licence) (valid on the date of importation of silver bars) purchased from the market at a later date than the date of importation, with a request to accept the same as substitute for the defective SIL which was produced along with the Bill of Entry. In the cited case, the Tribunal took the view that such request of the importer could be accepted in terms of the DGFT's clarification that the consignment could be cleared against freely acquired SIL provided that the licence presented for clearance is valid on the date of import in terms of para 4.15 of the Handbook of Procedures 1997-2002. Contextually, the learned counsel has also fairly pointed out that the decision in H. Kumar Gems (supra) is under challenge by the department. He has also pointed out that the appellate court has not granted stay of operation of the said decision. In the present case, it is submitted, Replenishment Licences worth Rs. 32 crores, which were valid on the date of importation of the diamonds in question, were produced by the importers before the department. The Tribunal's decision in H Kumar Gems case was also cited before the adjudicating authority. It is submitted that the learned Commissioner did not state valid reasons for rejecting the plea for clearance of the goods under the Replenishment Licences. It is also submitted that the CPUs and office records (including debit notes) seized from the appellants' premises were not returned to them and consequently they were not able to counter effectively the allegations raised in the show-cause notice. It is further submitted that the goods were disposed of by the department illegally during the pendency of these appeals and, therefore, the appellants are entitled to get the sale proceeds.
5. The learned counsel for the appellants in appeal Nos. C/831 & 832/2003 has adopted the above submissions of the learned advocate for other appellants. He has also relied on the following decisions:
(i) Northern Plastics Ltd. vs. Collector 1999 (113) ELT 3 (SC);
(ii) Kailash Rubber Factory Ltd. vs. Commissioner 2002 (143) ELT 60 (Del.) The learned counsel has submitted that, in view of the above case law, his clients are entitled to return of the sale proceeds of the diamonds auctioned off by the department in breach of relevant instructions of the Board vide CBEC Circular No. 711/4/2006-Cus dated 14/02/2006. It is submitted that all the diamonds were disposed of after 14/02/2006 in contravention of the above circular and, therefore, the department should be made to pay penal interest on the sale proceeds when refunded.
6. The learned JCDR submits that the scope of the remand order of the Hon'ble High Court is limited to the issue on which the subsequent development noted by the High Court (which is that the diamonds which were absolutely confiscated by the Commissioner were eventually disposed of by the department through auction even while the appeals were pending before the Tribunal) has a bearing. According to the JCDR, the views expressed by the Hon'ble High Court in its judgment dated 31/07/2009 on all other issues on which the question whether the goods were physically available for confiscation or not did not have any bearing will continue to hold good. The said question is relevant only to the imposability of redemption fine and to its quantum. It is not even relevant to penalty. It is, therefore, urged that the decision of the Hon'ble High Court on other issues, as recorded in the judgment dated 31/07/2009, be followed by the Tribunal. Insofar as redemption fine and penalties are concerned, it is submitted that these aspects are liable to be examined afresh in terms of the High Court's remand order.
7. In their rejoinder, the learned counsel for all the appellants barring the first three (who are not represented today) have fairly submitted that the remand order of the Hon'ble High Court can be carried into effect by rendering a decision on the issues relating to redemption fine. In other words, the views expressed and the findings recorded by the Hon'ble High Court in its earlier judgment dated 31/07/2009 on other issues, not affected by the physical presence or absence of the confiscated diamonds, are acceptable as binding. The concern of the appellants, at present, is that those diamonds for which no Bill of Entry had been filed were also disposed of by the department along with other diamonds which were covered by Bills of Entry. At this stage, the prayer of the appellants is that the sale proceeds at appropriate value be ordered to be returned to them. Insofar as the diamonds for which no Bill of Entry was filed are concerned, the importers must at least get the CIF value as on the date of seizure. As regards the other diamonds which were covered by Bills of Entry, the importers must at least receive the CIF value declared in the Bills of Entry. According to the counsel, the importers are also entitled to get interest on these amounts at reasonable rate from the relevant date to the date of refund. In this connection, once again, it is pointed out that, in the case of Northern Plastics (supra), the Supreme Court granted interest @ 12%, and in the case of Kailash Ribbon Factory (supra), the High Court allowed interest @ 9%.
8. After giving careful consideration to the submissions, we find that, at this stage, it is not in dispute that the Commissioner's order is bad in law insofar as the goods, in respect of which no Bill of Entry was filed, are concerned. Again, it is not in dispute that the Commissioner's order confiscating the remaining goods, in respect of which Bills of Entry were filed, is liable to be sustained. On both these issues, we note that the Hon'ble High Court sustained the Tribunal's view on merits. The point in issue at present is in relation to redemption fine. The Hon'ble High Court, after 31/07/2007, noted that the diamonds had since been auctioned off by the department. Therefore, the Hon'ble High Court found that it was appropriate to remand the case to this Tribunal to consider the question whether any redemption fine was liable to be imposed in lieu of confiscation of the goods and, if so, to what extent?
9. The learned counsel have prayed against imposition of redemption fine inasmuch as the goods are not physically available. We are unable to accept this plea. Physical presence of the goods is not always determinative of fine. There are factual situations in which a fine could be imposed in lieu of confiscation of goods which are not available for confiscation. Where the goods imported by a party was allowed to be cleared under bond or against an undertaking and where such goods were eventually found to be liable to confiscation under Section 111 of the Customs Act, it would be open to the adjudicating authority to impose fine in lieu of confiscation even in the absence of the goods. If, on the other hand, the imported goods were unconditionally allowed to be cleared, the adjudicating authority would not be justified in imposing fine in lieu of confiscation of the goods not physically available. In the instant case, the live consignments were confiscated and there was no permission to the importers for clearing the goods. The stigma of offence committed by the importers remained with these goods. However, a part of these goods were not covered by any Bills of Entry and, therefore, the benefit given by the Hon'ble High Court in its judgment dated 31/07/2009 should be available to them. In respect of the rest of the goods (rough diamonds) covered by Bills of Entry filed by the importers, there is an order of confiscation under Section 111(d) of the Customs Act which was affirmed by the Hon'ble High Court in judgment dated 31/07/2009. At this stage, the appellants have not pressed their grievance against such confiscation of the goods. The question before us is whether, in lieu of confiscation, a redemption fine should be imposed and, if so, to what extent. We find that the Hon'ble High Court, after detailed examination of the circumstances of the case, held that 20% of the value of the goods would be a reasonable redemption fine under Section 125 of the Act. Learned counsel have pleaded for reduction of the quantum of fine on the ground that the disposal of the goods by the department virtually denied to the appellants an opportunity to make profit out of sale of the goods in the market. This argument is specious and not acceptable. Section 125 of the Customs Act lays down the contours for determination of the quantum of fine to be imposed in lieu of confiscation of any goods imported into India. These contours are not based on the premise that the goods will physically be available to the importer for sale in the market. On the other hand, this Tribunal and appellate courts have imposed redemption fine in very many cases where the imported goods were not physically available for confiscation after their clearance under bond. We are of the considered view that the fine determined by the Hon'ble High Court would be appropriate to the facts and circumstances of this case. Accordingly, we hold that the importer-appellants are liable to pay redemption fine @ 20% of the value of the goods.
10. In this context, the question arises as to how to quantify the fine to a precise amount. We note that the rough diamonds in respect of which no Bills of Entry had been filed were valued at over Rs. 2.81 crores and the rough diamonds for which Bills of Entry had been filed were valued at over Rs. 2.87 crores. The total value comes to Rs. 5.68 crores. All the goods were admittedly disposed of by the department through auction, wherein they obtained sale proceeds amounting to over Rs. 4.95 crores. We have already found that there can be no confiscation and, for that matter, no redemption fine in relation to the diamonds in respect of which no Bill of Entry was filed. Confiscation with redemption fine would be applicable only to the other diamonds covered by Bills of Entry, and the share of these goods in the sale proceeds would be approximately 50% of Rs. 4.95 crores. The importer-appellants (namely, M/s. Vijaybhav and M/s. Deepali Exports) will share the fine proportionately.
11. Case law cited before us by the learned counsel supports their plea for return of the sale proceeds of the goods. It is not in dispute that the diamonds were disposed of by the department during the pendency of these appeals in violation of the instructions of the Board contained in the circular dated 14/02/2006. We are, therefore, of the view that the above appellants are entitled to get back their share of the sale proceeds after adjustment of the respective amounts of redemption fine and penalty. Penalties of Rs. 1 crore and Rs. 70 lakhs were imposed on M/s. Deepali Exports and M/s. Vijaybhav respectively by the Hon'ble High Court, but this was on the premise that the entire goods were liable to confiscation under Section 111 of the Customs Act. Now that we have found that the diamonds without Bill of Entry were not liable to confiscation at all, the quanta of penalties require to be reduced proportionately. In other words, the above importers will be held liable to be penalised only to the extent they imported diamonds and sought clearance by filing Bills of Entry without valid licence. On this basis, the penalties on M/s. Deepali Exports and M/s. Vijaybhav should proportionately stand reduced to Rs. 50 lakhs and Rs. 35 lakhs respectively. But the facts and circumstances of the other appellants are different. The penalties on M/s. Kiran Exports, M/s. Munjani Brothers and M/s. DS Brothers will be Rs. 2 lakhs each as determined by the Commissioner. The penalties imposed on M/s. Vaibhav Exports and M/s. Pushpak Impex shall remain the same as those imposed by the Hon'ble High Court, Rs. 36 lakhs and Rs. 42 lakhs respectively. The proprietors of the importer-firms cannot be penalised for the reason that, where there is a penalty on a proprietorship, there cannot be a similar penalty on its proprietor on the same facts.
12. We have, now, to consider the plea for interest raised by the learned counsel for the importer-appellants. As we have already noted, the goods were disposed of by the department in violation of instructions of the Board during the pendency of these appeals. In similar circumstances, the Hon'ble Supreme Court allowed interest on sale proceeds of the goods to the importers in the case of Northern Plastics Ltd. (supra) @ 12%. In the case of Kailash Ribbon Factory Ltd. (supra), the Hon'ble High Court allowed interest @ 9%. On this basis, we hold that M/s. Vijaybhav and M/s. Deepali Exports will be entitled to claim interest on their respective shares of the sale proceeds less the amounts of redemption fine and penalty, @ 9% from the date of seizure in the case of goods without Bill of Entry and from the date of Bills of Entry in the case of other goods, to the date of refund. Needless to say that the net amounts should be paid to the parties without undue delay. It is made clear that the interest shall be calculated on the seizure value of the goods not covered by any Bill of Entry and on the declared value of other goods covered by Bills of Entry.
13. The appeals are disposed of in the above terms.
(Dictated in Court) (S.K. Gaule) Member (Technical) (P.G. Chacko) Member (Judicial) */as 14 2