imported goods can be cleared duty free under notification 80/95-Cus dated 31.3.95 under the DEEC scheme and penalty can be imposed to the person who subscribes his signature on the bill of entry in case of import ?

PJ/Case Laws/2010-11/1180

Case: BIMAL KUMAR MEHRA v/s COMMISSIONER OF CUSTUMS (IMPORT), MUMBAI

Citation: 2011-TIOL-641-CESTAT-MUM

Issue: - Whether the imported goods can be cleared duty free under notification 80/95-Cus dated 31.3.95 under the DEEC scheme, which granted exemption from payment of Customs duty on the imported goods, and whether the penalty can be imposed to the person who subscribes his signature on the bill of entry in case of import?

Brief Facts: - Appellant is proprietor of “M/s Global Art” and imported some consignments of Mulberry Raw Silk under a quantity based advance license. One of these consignments was imported from Mumbai and the other were imported at Chennai. The imports at Chennai port were made on the strength of “Transfer Release Advises” issued from new Customs house Mumbai. At the time of import, the appellant had executed a bond with the Mumbai Customs and also furnished a bank guarantee. The imported goods were cleared duty free under Notification no. 80/95-Cus dated 31.3.95 under the DEEC scheme, which granted exemption from payment of customs duty on the imported raw material subject to certain conditions, in which the main condition was that, the imported goods should be used in the manufacture of product to be exported under the scheme. Further the appellant was liable to use the imported raw material cleared at Mumbai and Chennai, in the manufacture of silk garments and to export the product in discharge of their export obligation under the scheme.

Afterwards, DRI started investigations into the post import conduct of the appellant. On the basis of the results of these investigations, two show cause notices were issued to the appellant, one by the Commissioner of Customs, Mumbai and another by the Commissioner of Customs, Chennai. These show-cause notices were demanded customs duty under the proviso to Section 28(1) of the Customs Act along with interest thereon under Notification no. 80/95-Cus, and proposed penalties under Section 114A and Section 112 of the Act.

In each show-cause notice, there was also a proposal to impose penalty on one Shri Javed Alam under section 112 of the Customs Act. The assertion against him was that he had played active role in the import of the goods under the DEEC scheme. And in the misuse of the exemption notification through the appellant in whose name the bills of entry were filled. It was also supposed that the bank guarantee was, in fact financed by Mr. Javed Alam. On this basis the penalties were proposed on Mr. Javed Alam, but he neither replied to the show cause notices, nor appeared before the adjudicating authority.

In both the proceedings, demand was confirmed and penalties were imposed. Against the said order, appellant-assessee is in appeal.

Appellant’s Contention: - Appellant raised jurisdictional objection that it was not open to the Commissioner of Customs, Mumbai to pass separate orders in adjudication of the two show cause notices. It was submitted that Notification No. 93/98-Cus(NT) dated 16.11.98 had appointed a common adjudicating authority for joint adjudication in October 2001. Thus, the Commissioner, Mumbai was required to adjudicate both the cases.

It was submitted that “person chargeable with the duty” was required to be identified before invoking Section 28 of the Customs Act. It was argued that in a case like this, wherein the Bills of Entry are filed by a front man of the real importer, the latter should be identified as the person chargeable with the duty. That the appellant had only acted as a front man of Mr. Javed Alam who had actually taken all the necessary steps for importing “Mulberry Raw Silk” and cleared the same duty-free. It was Mr. Javed Alam who had actually financed appellant for obtaining bank gurantee in his name. The appellant only subscribed his signatures to the Bills of Entry and undertook other Customs formalities for the benefit of Mr. Javed Alam. The goods after clearance were also handled by Mr. Javed Aam. In these circumstances, Mr. Javed Alam should be held to be the owner of the goods and for that matter to be the importer of the goods. The SCNs should have been directed mainly against Mr. Javed Alam for recovery of “the person chargeable with the duty” under the said section.

It was submitted that the encashment of bank guarantee was to be treated as payment of duty on goods imported by the appellant. Where duty was paid prior to issuance of the SCN, there could be no redemption fine or penalty. Reliance was placed on judgment in Pattu Exports Pvt Ltd v/s Commissioner of Customs, Chennai [2007 (213) ELT 545 (Tri-Chennai)] and Royal Embroideries Pvt Ltd v/s Commissioner [2008 (84) RLT 84 (CESTAT-Ban)].

It was further contended that Section 114A of the Customs Act, which was invoked by the Commissioner for imposing penalty on M/s Global Art in the Mumbai case, was not applicable as the provision was not in existence when the import took place. A similar argument had been advanced against the demand of interest on duty under section 28 AB of the Act, raised by the Commissioner in the Mumbai case. Both the provisions of the Customs Act came into force on 28.9.96 only and neither of them had any retrospective effect as all the said date.

With regard to Mumbai case, the appellant said that the Adjudicating Authority invoked both the sections 114A and 112 (a) of the Customs Act for penalizing to the assessee, which was not permissible in law. In the eye of law M/s Global Art and its proprietor Mr. Bimal Kumar Mehra are one and the same therefore there could be no separate penalties on them.

Respondent’s Contention: - Revenue argued that encashment of the bank guarantee could not be associated to voluntary payment of duty by the assessee. Therefore, the decisions cited by the appellant were not applicable. Further, in any case it was not in dispute that the substantive condition of notification no. 80/95-Cus was violated by the appellant who failed to discharge export obligation in relation to the raw materials imported duty free under the DEEC scheme thereby violating condition (v) of the said notification. It was contended that such breach of a condition of the exemption notification would ipso facto render the goods liable to confiscation under Section 111 (o) of the Act and consequently the importer would be liable to penalty under Section 112 of the Act. Reliance was placed on Order No. A-170-171/10/CSTB/CII dated 08.06.2010 in Appeal No. C/1393-1394/02 Mum in the case of Munilal Mehra v/s Commissioner of Customs (Adjudication), New Delhi.

Revenue referred to Section 28 and submitted that the person who files the Bills of entry is the importer of the goods and “the person chargeable with the duty” under the said section.

Reasoning of Judgment: - The Tribunal held that the jurisdictional objection was not maintainable as the said objection was not raised before the lower authorities.

The Tribunal held that the person who files the Bills of entry is the importer of the goods and “the person chargeable with the duty” under the said section. It was held that “Importer” as defined under Section 2(26) of the Customs Act includes any owner or any person holding himself out to be the importer of goods, and therefore he is the importer for purpose of Section 28. Where the taxable event is “import”, the tax has to be paid by the importer. Therefore, the importer is the person chargeable with the duty on the goods imported and presented under the Bill of Entry. It was held that the liability to pay duty is on the appellant in this case.

Further, the Tribunal held that the bank guarantee was encashed but the same was not at the instance of the appellant. The Revenue had rightly submitted that the encashment of bank guarantee cannot be deemed to be a voluntary payment of duty by the appellant. Therefore, the appellant cannot claim immunity from penalty or fine on the alleged ground of payment of duty prior to issuance of SCNs. It was held that the decisions cited by the Appellant were not helpful to them.

It was held that breach of the condition (v) of the Notification 80/95-Cus by the appellant attracted section 111 of the Customs Act, and consequently the goods imported by him were liable to confiscation.

It was held that the non-availability of the goods would not stand in the way of the adjudicating authority imposing redemption fine under Section 125 of the Act. Reliance was placed on Weston Components Ltd v/s Commissioner [2000 (115) ELT 278 (SC)] wherein the goods imported by the assessee were released on execution of bond and on, the basis of this fact, it was held by the apex court that Customs authorities were entitled to confiscate the goods with option for redemption against payment of fine under Section 125.

However, redemption fine imposed in Chennai case was vacated on the ground that in the Mumbai case, no redemption fine was imposed by the Commissioner and the Revenue was not aggrieved by the same.

It was held that however no valid case against penalties imposed under Section 112 of the Act in both cases. It was held that appellant had cleared goods duty free under the exemption notification and diverted the same in gross breach of condition thereof. The appellant by his act has rendered themselves liable to penalty. However, penalty was reduced on the consideration that it was harsh. It is held that there is no penalty on M/s Global Art was at that time Section 114A was not sustainable as the said provision was not in force when the import of goods by the appellant took place at Mumbai and the said provision had no retrospective operation.

The Tribunal held that separate penalty imposed in Mumbai SCN and Chennai SCN under Section 112 were not sustainable so far as Chennai case is concerned, wherein separate penalties under Section 112 were imposed on appellant and M/s Global Art. The Adjudicating Authority could not have imposed two penalties of the same kind on the same person for the same offence. M/s Global Art and appellant represented same person. Penalty imposed on appellant in Chennai case set aside.

In Mumbai case, the Tribunal upheld the penalty imposed on the appellant under Section 112 as no penalty was imposed on M/s Global Art. However, penalty under Section 114A was liable to be set aside.

The Tribunal set aside the demand of interest under Section 28AB in both cases on the ground that this provision of law was not in force at the material time. However, it was held that though Section 28AB of the Customs Act was not applicable, the Exemption Notification was certainly invokable for levy of interest. It appears that the bond executed by the appellant at the time of import of the goods made him liable to pay, on demand, duty with interest @ 24% pa from the date of clearance of the raw material. Breach of conditions of the notification made the appellant liable to pay the duty with interest in terms of the bond. Therefore, the demand of interest on duty confirmed against the appellant in Chennai case has to be upheld.

Decision: Appeal disposed of accordingly.

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PJ/Case Laws/2010-11/1180

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