Madras High Court
M/S.Nakoda Unique Gold Private Limited vs Union Of India on 10 June, 2013
Author: V.Dhanapalan
Bench: V.Dhanapalan
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 10.06.2013 CORAM: THE HONOURABLE MR.JUSTICE V.DHANAPALAN W.P.No.31842 of 2012 M/s.NAKODA UNIQUE GOLD PRIVATE LIMITED Rep. by its Managing Director K.Ramanlal, No.59, N.S.C.Bose Road, Chennai-600 079. .. Petitioner Vs. 1. Union of India represented by its Revenue Secretary Department of Revenue, Ministry of Finance, North Block, New Delhi-1. 2. The Additional Director General, Directorate-General of Revenue Intelligence, 25, Gopalakrishnan Road, T.Nagar, Chennai-600 017. 3. The Commissioner of Customs (Air) New Building, Air Cargo Complex, Meenambakkam, Chennai-600 027. .. Respondents Writ petition filed under Article 226 of the Constitution of India seeking to issue a Writ of Prohibition, prohibiting the respondents from proceeding with the adjudication in any manner with the Show Cause Notice dated 14.11.2012 in F.No.VIII/48/39/2012-DRI issued by the 2nd respondent. For Petitioner : Mr.V.T.Gopalan, Senior Counsel for M/s.M.Lakshmipathi For Respondents : Mr.E.Vijay Anand, for R1 to R3 Central Govt. Standing Counsel Mr.Velayutham Pichaiya, for R2 Central Govt. Standing Counsel O R D E R
Praying for the issuance of a Writ of mandamus prohibiting the respondents from proceeding with the adjudication in any manner with the Show Cause Notice dated 14.11.2012 in F.No.VIII/48/39/2012-DRI issued by the 2nd respondent, the petitioner has filed this Writ Petition.
2. Facts of the case as put forth in the affidavit would run thus:
2.1. The petitioner-Company is registered under the Companies Act, 1956 in No.U36911TN2006PTC059844 on the file of the Registrar of Companies, Chennai. From a Proprietary Concern, it was converted into a Private Limited Company in the year 2011. The petitioner-Company possesses Import Export Code (IEC) No.0411000721 granted by the Office of the Director General of Foreign Trade for import and export of unbranded gold jewellery. The petitioner Company is also registered with the Tamil Nadu VAT Department under TIN No.33140381370 and under CST No.921118. The petitioner is duly filing VAT returns and paying the Tamil Nadu Value Added Tax at the appropriate rates on all their sales of unbranded gold jewellery in India. All purchases of gold jewellery, sales and re-sales of gold jewellery are covered by proper documents of purchase and sale and they duly reported to Governmental authorities, such as Value Added Tax and Income Tax Departments.
2.2. The Governments of India and Thailand have entered into a Treaty called "Indo-Thailand Free Trade Agreement" under which certain specified goods can be imported from Thailand to India by Indian importers without having to pay the basic customs duty and countervailing duty. The 1st respondent has issued notifications under the Customs Act, 1962 to give effect to the above said Agreement by issuing Customs Notification No.85/2004 dated 31.08.2004 as amended from time to time read with Customs Non-Tariff Notification No.101-CUS (NT) dated 31.03.2004. The imports under the above said Agreement are liable only for levy of Special Additional Customs Duty of 1%. One of the products specified under the above said Free Trade Agreement is unbranded gold jewellery falling under the Customs tariff heading 7113 19. The import of specified goods under the said Indo-Thailand Free Trade Agreement is subject to the exporter in Thailand furnishing to the Indian Importer a Certificate of Origin of the specified goods as originating from Thailand under the conditions of change upto 4 digit level and local value added content being fulfilled either together or independently of each other, as the case may be, in terms of the Rule-6 (b) of the Interim Rules of Origin under the Indo-Thailand Free Trade Agreement. The Certificate of Origin is to be granted by the designated authority in Thailand. The importer in India has to submit, in addition to Bill of Entry, the Certificate of Origin in original issued by the designated authority in Thailand. The petitioner has been importing gold jewellery classified under the customs tariff heading 7113 19 from Thailand duly supported by the original Certificate of Origin issued by the designated authority in Thailand. Thus, the petitioner has been fully complying with all the statutory formalities required to import the specified goods, viz., unbranded gold jewellery from Thailand under the said Free Trade Agreement and to avail the duty concessions granted under the same.
2.3. The petitioner-Company has complied with all Customs statutory requirements as detailed under:-
(a) The petitioner has imported unbranded gold jewellery falling under the customs tariff heading 7113 19 from Thailand;
(b) The goods are covered under duty-free treatment under the Customs Notification No.85/2004, as amended;
(c) The exporter in Thailand has furnished the necessary Certificate of Origin issued by the designated Government authority in Thailand;
(d) The imported gold jewellery under the Indo-Thailand Free Trade Agreement was received by the petitioner-Company by Air Cargo at Chennai Airport and covered by duly filed Bills of Entry containing all the relevant details for customs assessment and facilitation of clearance;
(e) The necessary Certificate of Origin in original was also submitted to the appropriate customs authorities in support and evidence of duty-free import;
(f) The Customs Assessing Authority under the 3rd respondent verified the import documents, assessed the same and allowed clearance of the imported goods for home consumption. The additional customs duty at 1% was also duly paid;
(g) The import transactions are absolutely without any blemish or breach of the law concerned.
2.4. The petitioner-Company has filed the required Bill of Entry and the Certificate of Origin claiming duty concessions under the India-Thailand Free Trade Agreement and the imported goods have been duly assessed and permitted for clearance by the Customs Appraising Authority under Section 47 of The Customs Act, 1962 after satisfying himself that the imported goods are not prohibited goods and that the importer has paid appropriate import duty assessed. The order passed under Section 47 by the Customs Authority is an evidence of assessment of Customs duty and relevant duty exemption by the Customs Appraising Authority.
2.5. The Petitioner-Company had a stock of imported unbranded gold jewellery weighing about 12742.500 grams and valued at Rs.3,63,16,125/-, imported vide Bill of Entry No.8086795 dated 01.10.2012 for sale in the domestic market. The above goods were the remaining unsold stock of 32,672.38 gms. of gold jewellery (unbranded) imported under the above said Bill of Entry No.8086795 dated 01.10.2012, which was cleared by the jurisdictional customs authority on 03.10.2012 under Section 47 of the Customs Act, 1962. The officials of the 2nd respondent made a visit to the office premises of the petitioner on 15.10.2012 and searched the premises under Search Warrant contending that the Indo-Thailand Free Trade Agreement was not in the interest of public exchequer and that the officials would not go by it. The said officials seized the above said quantity of unbranded gold jewellery viz.,12742.500 Gms. and valued at Rs.3,63,16,125/- under Mahazar dated 15.10.2012. Copies of documents including the Bills of Entries and Certificates of Origin and Sales Bills were also seized from the petitioner Company under the same Mahazar. The documents and files were neither returned to the Petitioner-Company nor was the petitioner allowed to make copies of the same despite repeatedly representing for the same in the course of his rendering evidence in response to the Summons issued to him as well as by a separate representation.
2.6. The 2nd respondent did not accept the petitioner's plea that the unbranded gold jewellery seized by them was duly imported under Indo-Thailand Free Trade Agreement and permitted to be cleared by the jurisdictional Customs Authority after due verification and assessment. The 2nd respondent did not reveal as to what was the contravention of the customs provisions by the petitioner-Company in the course of the import concerned. The 2nd respondent thus kept the petitioner-Company totally in the dark as to the specific contravention of the customs provisions warranting the search and seizure by the officials of the 2nd respondent except that the officials of the 2nd respondent were contending that the Indo-Thailand Free Trade Agreement was not in the interest of Public Exchequer.
2.7. After the seizure, the officials of the 2nd respondent issued summons dated 15.10.2012 to the petitioner herein and Shri K.Goutham Kumar, the Co-Director of the petitioner-Company, to appear before him on 17.10.2012 at his T.Nagar Office. The petitioner-Company duly complied with the summons and appeared before the 2nd respondent and submitted his statement dated 17.10.2012. But, the said statement was not acknowledged by the 2nd respondent. The officials of the 2nd respondent put certain questions to the petitioner during the summon proceedings which were duly answered by the petitioner. The questions and answers were in writing under the hand of the petitioner. Despite the request of the petitioner, the 2nd respondent declined to give the copy of the statement of questions and answers taken from the petitioner. The petitioner-Company has addressed the 2nd respondent vide his representation dated 19.10.2012 inter alia to furnish the copies of statements submitted to the 2nd respondent. Another representation dated 17.11.2012 has also been submitted to the 2nd respondent. The officials of the 2nd respondent had also seized the petitioner's duly imported unbranded gold jewellery weighing 13,566.24 Gms, valued approximately at Rs.3,94,77,758/- covered under duly filed Bill of Entry and Original Certificate of Origin under Indo-Thailand Free Trade Agreement, when it was pending assessment and clearance by the Jurisdictional Customs Authorities, vide Mahazar dated 18.10.2012. A copy of the Mahazar was not given to the petitioner-Company at the time of seizure.
2.8. The 2nd respondent has proceeded to issue a Show Cause Notice dated 14.11.2012 on file F.No.VIII/48/39/2012-DRI stating that the Show Cause Notice is issued under Section 124 of the Customs Act, 1962, proposing to deny the Customs duty concessions under Indo-Thailand Free Trade Agreement in respect of 32 Bills of Entries detailed in Annexure 'A' to the Show Cause Notice, which were already assessed and cleared by the Jurisdictional Customs Authority, proposing to demand from the petitioner-Company a differential Customs Duty amounting to Rs.19,22,82,209/- (Rupees Nineteen Crores Twenty Two Lakhs Eighty Two Thousand Two Hundred and Nine Only) under Section 28(4) of the Customs Act, 1962, proposing to levy interest under Section 28AA of the Customs Act, 1962, and proposing to confiscate the seized gold jewellery weighing 13,566.240 grams, valued at Rs.3,89,13,000/- and gold jewellery weighing 12,742.50 grams valued at Rs. 3,63,16,125/- under Section 111(m) and Section 111(o) of the Customs Act, 1962 and also proposing the confiscation of gold jewellery imported and cleared vide 31 Bills of Entry, totally valued at Rs.176,07,92,212/- under Section 111(m) and Section 111(o) of the Customs Act. The 2nd respondent, in his above referred Show Cause Notice, has also proposed to impound the seized gold jewellery as referred above under the provisions of Rule 15 of Annexure B (Operational Certification Procedures for Interim Rules of Origin) of the Interim Rules of Origin. The 2nd respondent, vide his Show Cause Notice referred to above, has also proposed to impose a penalty on the Petitioner as well as on the Company of the Petitioner under Section 112(a) and Section 114A and Section 114AA of the Customs Act.
2.9. The petitioner-Company has approached this Court against the action of the 2nd respondent in W.P.No.29173 of 2012 and inter alia praying for the release of the seized gold jewellery. This Court has admitted the writ petition and posted the same for final hearing on 21.11.2012. The action of the 2nd respondent to issue the Show Cause Notice dated 14.11.2012 under Section 124 of the Customs Act, 1962 is illegal, without jurisdiction and violates the letter and spirit of the provisions of Indo-Thailand Free Trade Agreement.
Left with no other alternative remedy, the petitioner has approached this Court with the above Writ Petition seeking to prohibit the respondents from proceeding with the adjudication of the impugned Show Cause Notice.
3. The 2nd respondent has filed counter affidavit and has stated as follows:
3.1. On the basis of specific intelligence that the petitioner had been importing gold jewellery from Thailand by wrongly availing the benefit of exemption under the Custom's Notification No.85/2004-Cus. dated 31.08.2004 read with Custom's Notification No.101/204-Cus.(N.T.) dated 31.08.2004 and thereby had been evading the payment of appropriate duty, the 2nd respondent initiated investigation into the imports made by the petitioner. Pursuant to that, the Office cum business premises of the petitioner was searched under Mahazar proceedings on 15.10.2012 and gold jewellery imported, totally weighing 12742.5 gms and valued at Rs.3,63,16,125/- by wrongly availing exemption benefit under the above Notifications were seized under the provisions of the Customs Act, 1962 along with incriminating documents. Investigation has revealed that the petitioner has entered into a conspiratorial arrangement with suppliers in Thailand and has imported gold jewellery manufactured in Singapore and Dubai into India through Thailand by misusing the exemption provided under Notification No.85/2004 dated 31.08.2004 with respect to FTA between India and Thailand. The petitioner and one of the major suppliers, Shri. Praful Kumar Jain has admitted to the said illegal act in their voluntary statements. Further, corroborative evidences in the form of e-mail correspondences have also been recovered.
3.2. The petitioner, after obtaining the Import Export Code in April 2011, has been importing gold jewellery only from Thailand and has imported 32 consignments of gold jewellery from Thailand and in all the said 32 consignments, the respondent has availed basic customs duty exemption benefit extended under the said two customs notifications dated 31.08.2004 in terms of the Free Trade Agreement between India and Thailand. In pursuit of their claim to benefit under the said notifications, the appellant has submitted Certificate of Origin in which the origin criteria is mentioned as "4 digit + 22%", which means that the export product viz., gold jewellery is not wholly produced in Thailand and there has been a "change at 4 digit H.S. level and a value addition of 22%" i.e., there has been a local value addition of 22% to the non-originating material, which is accompanied by change in classification of final product exported from Thailand at 4-digit level.
3.3. Investigations have clearly revealed that in all imports of gold jewellery, the provisions of law as envisaged in the said two customs notifications dated 31.08.2004, have been contravened as Rule 4(b), Rule 6 and Rule 8(f) of the Interim Rule of Origin have not been complied inasmuch as (a) there is no change in the classification of the finished product; (b) final manufacturing process has not been admittedly carried out in the country of export in respect of the gold jewellery imported from Singapore/Dubai which was exported to India as such; (c) gold jewellery purported to have been made out of foreign-origin gold (non-originating material) has been simply mixed with gold jewellery imported from third-countries like Singapore and Dubai, which is not sufficient enough to confer the status of originating products; and (d) for argument sake, even if it is conceded that such simple mixing is to be considered, value addition to the foreign origin gold to make gold jewellery out of it, is very minimal as admitted by the supplier himself. Accordingly, all the imports are not eligible for duty-free importation in terms of the said two notifications.
3.4. Being aware of the fact that the gold jewellery imported from Thailand are actually jewellery manufactured in Singapore and other countries, obviously did not bring the same to the knowledge of the Customs Authorities in India and has deliberately and fraudulently been suppressed by the respondent from Customs in India at the time of import and bills of entry were filed with a claim under the said notifications knowing fully well that they are not eligible for the same. While doing so, they have willfully misstated the facts and fraudulently subscribed to truthfulness of the declaration made, as is required under Section 46 of the Customs Act.
3.5. Prima facie, a fraud has been committed by the respondent by orchestrating a premeditated Scheme in collusion with the suppliers in Thailand to misuse the benefit extended under the FTA between India and Thailand, a letter has been addressed to the Designated Authorities in Kingdom of Thailand, stating the facts of the investigation done and with a request to revoke the Certificates of Origin issued by them for all the consignments of gold jewellery imported by the respondent.
3.6. In terms of Rule 15(c) of Annexure B of the Interim Origin Rules, as mentioned in Notification No.101/2004 dated 31.08.2004, the gold jewellery imported under the FTA may be provisional release, only when there is no suspicion of fraud involved. However, in the present case, prima facie, there is strong case of fraud committed by the petitioner in connivance with the supplier. Hence, the adjudicating authority is well within the rights to impound the gold jewellery imported by the respondent in contravention of the applicable provisions of FTA between India and Thailand.
3.7. After unearthing the entire scheme of fraudulent imports made by the respondents, a show cause notice has been served on 14.11.2012, on the petitioner and others who have colluded with the petitioner in implementing such a devious scheme that resulted in evasion of duty legally due to the Union of India. The said show cause notice is a culmination of investigation proceedings so far carried out and it covers the gold jewellery seized as well as the gold jewellery imported by the respondents hitherto by mis-use of the FTA between India and Thailand.
4. Mr.V.T.Gopalan, learned Senior Counsel appearing for the petitioner would contend that once the goods have been cleared under Section 47 of the Customs Act, 1962, if the Revenue is aggrieved, the only recourse available is to initiate proceedings under Section 129D and they cannot again resort to initiation of original proceedings by issuing a Show Cause Notice under Section 124 of the Customs Act, 1962. He would further contend that the Show Cause Notice dated 14.11.2012 issued by the 2nd respondent is illegal and without jurisdiction, since the 2nd respondent himself has stated that he is issuing the Notice under Section 124 of the Customs Act, 1962, under which he has no authority to issue the Show Cause Notice in terms thereof.
4a. In support of his case, learned Senior Counsel appearing for the petitioner has relied on the following:
(i) 1987 (31) E.L.T. 400 (Tribunal) (Decor India And Ors. vs Collector of Customs, New Delhi)
"4. Shri R.R. Gupta, learned Counsel for the appellants at the outset submitted that the adjudication proceedings started by the Collector is illegal being without jurisdiction. While elaborating his submissions, he submitted that the goods in question were released by the Customs after the appellants had paid duty and the import licences were accepted. In other words, he submitted that the goods in question after import were cleared by the proper officer under Section 47 of the Customs Act and that amounts to an adjudication order. Therefore, it was not open to the Collector of Customs to recall or revise the previous order permitting clearance of imported goods and hence the seizure and confiscation of the goods or the imposition of the personal penalty is without any authority, To substantiate his contention, he cited the following authorities :
(i) Jain Shudh Vanaspati Ltd. v. Union of India, 1982 ELT 43 (Del.) (ii) Industrial Cables v. Union of India, 1986 (25) ELT 33 (P & H) (iii) Ajay Exports v. Collector, 1986 (26) ELT 873 (Tribunal) (iv) Parkar Leather Export Co. v. Collector, 1987 (29) ELT 53 (v) Union of India v. Popular Dyechem, 1987 (28) ELT 63 (Bom)
In reply, Smt. Nisha Chaturvedi, learned SDR submitted that in the case of Jain Shudh Vanaspati Ltd. v. Union of India, supra, it was also held that the finality attached to an order passed under Section 47 of the Customs Act, can be disturbed where the Department successfully shows that there was fraud or deliberate suppression."
(ii) 1995 (76) ELT 520 (Kar) (Devilog Systems India vs Collector Of Customs, Bangalore) "7. Be that as it may, even in the light of the aforesaid notification all that can be gathered is that instead of the Assistant Collector of Customs now even the Principal Appraisers could act as proper officers. But, still, the moot question remains whether he could be the proper officer for the concerned imports regarding which action has to be taken for non-levy and short-levy under Section 28(1) of the Act. So far as that question is concerned the answer is supplied by the section itself. A close look at the section shows that for a proper action under Section 28(1) the concerned officer must be in a position to find out whether there was non-levy, short-levy or erroneous refund. While issuing such notice the proper officer must be not a position to compute the extent of short-levy, non-levy or erroneous refund and that amount has to be specified in the notice. Therefore, he must be an officer who must have jurisdiction to compute the amount because the moment the amount is mentioned in the notice in the ultimate adjudication proceedings the concerned Collector should determine the amount due from such person but it should not be in excess of the amount specified in the notice meaning thereby the amount so mentioned in the notice acts as a ceiling beyond which even the adjudicating officer cannot (sic) while fixing the liability. It, therefore, stands to reason that proper officer must be an officer who must be functioning within the jurisdictional Collectorate where the import in question has been effected. Otherwise an anomalous situation would follow. The submission of learned counsel for the department is that any officer upto the rank of Principal Appraiser stationed anywhere in India can issue notice under Section 28(1) of the Act to any importer who may have imported articles attracting customs duty in any part of India. Accordingly even if such imports are made at Indira Gandhi Airport, New Delhi, notice can be issued by the Customs Officer at Madras. This is a little too far-fetched. It would in fact affect the very scheme of the Act. It cannot be forgotten that the object of issuing notice under Section 28(1) is to ensure that any evasion in the payment of customs duty is made good by the importer concerned. It is impossible and impractical to assume that an officer at Madras could effectively reckon the non-levy, short leavy or erroneous refund in respect of any import made at New Delhi. Therefore, the extreme contention canvassed by learned counsel for the revenue that any officer at Madras could issue such notices to any importer in any part of India and the jurisdictional Collector would be bound by such notice and he has to act on it, cannot be appreciated. Therefore, the notification issued on 14th May, 1963 will have to be held to mean that authorised officers working under the jurisdictional collectorate within whose jurisdiction the goods are imported can issue such notice and it is not necessary that only the Assistant Collector of Customs should issue such notice.
8. It was then contended by learned counsel for revenue that in any case the Madras Collectorate is entrusted with the work of auditing the imports at Bangalore and once in the audit it came out that there was a case of short-levy, non-levy or erroneous refund of duty collected, then the audit staff at Madras becomes competent to work as 'proper officers' for issuing the notice under Section 28(1) of the Act. It must be kept in view that for the purposes of auditing any other office of a nearby collectorate Madras staff may have been given the power of audit but so far as the adjudication machinery is concerned it has to be (sic) by the concerned Assistant Collector within whose local jurisdiction the imports were made. Learned Standing Counsel for the revenue submitted that in this case the goods arrived by ship at Madras and, thereafter, they were cleared at Bangalore, for home consumption and, therefore, it cannot be said that the goods were imported for home consumption at Bangalore and that the audit officers at Madras were total strangers to the imports in question and were incompetent to issue a valid notice under Section 28(1) of the Act. This argument of learned Standing Counsel would have required closer scrutiny and perhaps could have withstood the test for the purposes of issuing a valid notice under Section 28(1) if we were apprised of the fact as to whether the Board of Revenue while issuing the parent notification of 1st February, 1963 had clearly earmarked the jurisdiction of audit wing working at Madras as 'proper officers' for the purposes of issuing a valid notice under Section 28(1) so far as the imports at Bangalore are concerned. As that type of evidence is not brought before us, we are left guessing on this point. If the Madras audit wing while auditing the accounts of the Bangalore office had found anything calling for its interference under Section 28(1), the proper officer working in the jurisdictional collectorate at Bangalore should have been instructed to issue the notice under Section 28(1). But that has not been done in this case and the audit department at Madras had taken upon itself the job of issuing the notice. It is true that the man who issued the notice is the Assistant Collector of Customs. But, still, the moot question remains whether he could have issued that notice in the peculiar facts of this case.
9. In this context it would be useful to refer to Section 47 of the Act which governs the clearance of goods imported for home consumption. The said section reads :-
"Clearance of goods for home consumption :-
Where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption."
Learned Standing Counsel for the department fairly submitted that for the purposes of Section 47 the 'proper officer' would be the Assistant Collector of Customs, Bangalore. But according to him, for Section 28(1) it can be different. In our view on the facts of the present case, especially in the light of the absence of notification dated 1-2-1963, we cannot hold that the audit wing at Madras is competent to issue notice under Section 28(1) of the Act. Merely because the Madras audit office is given the power to audit the accounts of Bangalore office, it cannot be said that they are also competent to issue notice under Section 28(1) of the Act, more so when there is no material on record to show that they are competent to do so. Consequently, so far as the first point is concerned, on the facts of the present case it has to be held in favour of Assessee and against the revenue that the notices dated 10th February, 1994 and 28th May, 1994 were not issued by the 'proper officer' attached to the jurisdictional Collectorate at Bangalore where the goods were imported and are, therefore, invalid.
14. We make it clear that whatever we have observed while considering Point No. 2 is only for the purpose of this reference and would not come in the way of adjudicating authority in deciding the adjudication proceedings not only on merits but also on the question whether the notices dated 27-9-1994 are time-barred or not. The reference question is answered by holding that the first set of notices were without jurisdiction but question whether Assistant Collector's notice was barred by time or not is kept open at this stage. Answer to it will depend upon the evidence to be led in adjudication proceedings as indicated in this judgment. The Tribunal is, accordingly, directed to modify its remand order in the light of the answer given by us."
(iii) In Industrial Cables (India) Ltd. and another vs. Union of India and others reported in 1986 (25) E.L.T. 33 (P & H.), the High Court of Punjab and Haryana has held that the 2nd respondent could not exercise the powers under Clause 8 of the Control Order to pass the impugned order and the same is without jurisdiction.
(iv) In Ajay Exports and another vs. Collector of Customs, Madras reported in 1986 (26) E.L.T. 873 (Tribunal), it is held that the adjudication order passed by the authority subordinate to Collector is liable to revision or correction by Collector only under revisional powers under Section 129 D of the Customs Act, 1962 and not by issuance of show cause notice under Section 124.
(v) In Union of India and others vs. Popular Dyechem reported in 1987 (28) E.L.T. 63 (Bombay), the High Court of Bombay has held that when goods are cleared by the Customs Officer after physical verification under Section 47, such goods are not confiscable except in pursuance of an order passed in Revision under Section 129D of the Customs Act, 1962.
(vi) In Dicor India and others vs. Collector of Customs, New Delhi reported in 1987 (31) E.L.T. 400 (Tribunal), it is held that when goods are already assessed, seized on the ground of misdeclaration and adjudication proceedings initiated by the Collector instead of resorting to revisional or review powers, the proceedings initiated are without jurisdiction in view of Sections 47, 110, 111 and 129D of the Customs Act.
(vii) In 2001 (135) E.L.T. 896 (Tribunal-Chennai) in the case of Madras Electro Castings (P) Ltd. vs. Commissioner of Customs, Madras, it is held that goods legally cleared from Customs House after due examination and verification cannot be called as smuggled goods as per Section 123 of the Customs Act.
5. On the other hand, Mr.Velayutham Pitchaiya, learned Central Government Standing Counsel appearing for the 2nd respondent would contend that the act of the petitioner in clearing the consignment under Section 47 of the Act by fraudulent means, knowing fully well that the said consignment does not correspond to the material particulars stated in the Certificate of Origin, does not debar the issuance of Show Cause Notice for confiscation of goods under Section 124 of the Act. Therefore, an order under Section 47 obtained by means of employment of fraudulent methods does not have to be set aside by the exercise of revisional powers as contemplated under Section 129D.
6. Heard the learned counsel on either side, given careful consideration to the submissions made by them and perused the materials available on record.
7. A perusal of the facts would reveal that the petitioner has imported gold jewellery classified under the customs tariff heading 711319 from Thailand duly supported by the original Certificate of Origin issued by the designated authority in Thailand. It is given to understand that the Governments of India and Thailand have entered into a Treaty called "Indo-Thailand Free Trade Agreement" under which certain specified goods can be imported from Thailand into India by Indian importers without having to pay the basic customs duty and countervailing duty; the 1st respondent has issued notifications under the Customs Act, 1962 to give effect to the above said Agreement by issuing Customs Notification No.85/2004 dated 31.08.2004 as amended from time to time read with Customs Non-Tariff Notification No.101-CUS (NT) dated 31.03.2004; the imports under the above said Agreement are liable only for levy of Special Additional Customs Duty of 1%; one of the products specified under the above said Free Trade Agreement is unbranded gold jewellery falling under the Customs tariff heading 7113 19; the import of specified goods under the said Indo-Thailand Free Trade Agreement is subject to the exporter in Thailand furnishing to the Indian Importer a Certificate of Origin of the specified goods as originating from Thailand under the conditions of change upto 4 digit level and local value added content being fulfilled either together or independently of each other, as the case may be, in terms of Rule-6 (b) of the Interim Rules of Origin under the Indo-Thailand Free Trade Agreement; the Certificate of Origin is to be granted by the designated authority in Thailand and the importer in India has to submit, in addition to Bill of Entry, the Certificate of Origin in original issued by the designated authority in Thailand.
8. According to the petitioner, he has been fully complying with all the statutory formalities required to import the specified goods, viz., unbranded gold jewellery from Thailand under the said Free Trade Agreement and to avail the duty concessions granted under the same. He has filed the required Bill of Entry and the Certificate of Origin claiming duty concessions under the Indo-Thailand Free Trade Agreement and the imported goods have been duly assessed and permitted for clearance by the Customs Appraising Authority under Section 47 of the Customs Act, after satisfying himself that the imported goods are not prohibited goods. The petitioner would contend that the copies of documents including the Bills of Entries and Certificates of Origin and Sales Bills, which were seized from the petitioner Company under the same Mahazar were not returned to the petitioner-Company and the petitioner was not even allowed to make copies of the same, despite repeatedly representing for the same in the course of his rendering evidence in response to the Summons issued to him.
9. It is the case of the respondents that neither the Free-Trade Agreement nor the notifications dated 31.08.2004 have the provisions to restrain the respondents from issuing any show cause notice. They would contend that if the respondents have to wait till the entire matter is resolved and no duties can be demanded and no infringing goods should be held liable for confiscation, pending such resolution between two Sovereign Nations, then the law of limitation will come into force and the duty evaded by persons similar to that of the petitioner can never be demanded resulting in permanent loss to public exchequer, thereby vitiating the due process of law.
10. It is settled law that the goods cleared under Section 47 of the Customs Act, 1962 cannot be confiscated except in contemplation of an order or in pursuance of an order passed in revision under Section 129D of the Act. Such exercise of the revisional powers or correctional jurisdiction by a superior authority like the Collector of Customs can only be by calling for the records, examining the same on grounds of legality, propriety or correctness of the same and on examination of the same, giving directions to the subordinate authorities to apply to the Collector (Appeals) for determination of the points arising out of the decision or order, as may be specified by the Collector of Customs.
11. A perusal of the impugned Show Cause Notice would reveal that the respondents have proceeded against the petitioner on evading payment of Basic Customs Duty on the import made by the petitioner by wrongfully availing exemption on the basis of the Certificate issued by the Kingdom of Thailand. It is given to understand from the last paragraph of the impugned show cause notice that this matter is taken up with the appropriate government authorities of the Kingdom of Thailand and the reply of the government authorities of the Kingdom of Thailand is still awaited. The said paragraph would read thus:
"28. This notice is issued without prejudice to the investigation that has been instituted and is being taken up with the appropriate government authorities of Kingdom of Thailand and the outcome thereof, as also to any other action that may be taken under the Customs Act, 1962 or any other law for the time being in force.
12. Though the impugned Show Cause Notice is issued under Section 124 of the Customs Act, the relief sought by the petitioner is only for the issuance of a Writ of Prohibition prohibiting the respondents from proceeding with the adjudication of the said Show Cause Notice.
13. The stand of the respondents in the counter is that while initiating proceedings under Section 124 of the Act, the fraud committed by the person is established. In the instant case, it is admitted that the Government of India has written to the Kingdom of Thailand about the issuance of Certificate to the petitioner for availing exemption and the respondents are awaiting reply from the Kingdom of Thailand. Notwithstanding the outcome of the decision of the sovereign authority, namely, the Kingdom of Thailand, the respondents have got power to initiate proceedings against the petitioner. A reading of Section 124 of the Customs Act would make it clear that the respondents are empowered to issue show cause notice and proceed against the person alleged to have committed fraud, stating the ground on which they have initiated the proceedings. The respondents have substantiated that there was wrongful availment of exemption by the petitioner contrary to the law of our country and therefore, they have invoked Section 124 to issue the impugned show cause notice.
14. When such things are substantiated, as there is no prohibition in the said provision not to proceed against the importer, who has availed wrongful exemption of duty, this Court cannot restrain the respondents from proceedings further, unless there is anything contrary to law. Therefore, it is for the petitioner to go before the respondents, explain the case and request them to stall the proceedings, till a decision is taken by the government authorities of the Kingdom of Thailand.
15. Law has prescribed certain powers on the authorities empowering them to initiate action against the concerned in cases of violations and such a power has been exercised by the respondents herein in the manner as prescribed. Therefore, unless the respondents have acted contrarily, no Writ of Prohibition could be issued against them.
16. Section 124(a) of the Customs Act contemplates that no order confiscating any goods or imposing any penalty on any person shall be made under the Chapter unless the owner of the goods or such person is given a notice in writing with the prior approval of the Officer of Customs not below the rank of an Assistant Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty. Such a provision has been followed by the authorities in this case. Therefore, there is no scope to prohibit the respondents from proceeding further.
17. Moreover, pending reply of the government authorities of the Kingdom of Thailand, no prejudice would be caused to the petitioner in submitting a reply to the impugned show cause notice dated 14.11.2012, issued by the 2nd respondent.
18. Though the respondents have taken a specific stand that their action is subject to the outcome of the investigation that has been taken up with the appropriate authorities of the Kingdom of Thailand, the law of this country does not prevent the respondents from initiating any action against the petitioner. In other words, the law of this country is supreme and, as long as there is no conflict with the international agreement, the authorities of this country are well empowered to act in accordance with the law of this nation. As such, in the peculiar circumstances of this case, finding that the authorities have already initiated the investigation with the appropriate government and, without prejudice to the investigation, issued the impugned show cause notice under Section 124 of the Act, this Court is of the considered view that the said Show Cause Notice cannot be interfered with.
19. Accordingly, the petitioner is directed to submit his explanation to the impugned show cause notice, dated 14.11.2012, within a period of four (4) weeks from today, in which event, the respondents, viz., the authorities concerned shall look into the same, but not take any final decision thereon. Also, considering the peculiar circumstances, the respondents shall maintain status quo as on date till the conclusion of the proceedings. However, any final decision of the respondents is subject to the outcome of the investigation already taken up with the appropriate government and they shall not conclude anything until the position is made clear by the authorities of the Kingdom of Thailand.
Writ Petition is disposed of with the above direction and observation. No costs. Consequently, connected M.P.Nos.1 and 2 of 2012 are closed.
abe To :
1. The Revenue Secretary, Union of India, Department of Revenue, Ministry of Finance, North Block, New Delhi-1.
2. The Additional Director General Directorate-General of Revenue Intelligence, 25, Gopalakrishnan Road, T.Nagar, Chennai-600 017.
3. The Commissioner of Customs (Air) New Building, Air Cargo Complex, Meenambakkam, Chennai 600 027