Whether waiver from penalties admissible when urea exported in the guise of mud additive chemicals?

PJ-Case law-2013/14-1589

Case: - MANISH SINGHAL, PROP M/s SINGHAL TRADERS Vs COMMISSIONER OF CUSTOM, NEW DELHI

Citation: -2013-TIOL-596-CESTAT-DEL

Brief facts:- The facts of this case in brief are that the appellant exported urea in the guise of mud additive chemicals. Test report proved that the goods exported are 'urea in the form of white Granules' which is prohibited goods under Section 2(33) of Customs Act, 1962. The exporter admitted that similar consignments have been exported in the past. The suppliers of the exported goods were found to be non-existent. The burden to prove bonafide nature of past consignments had shifted to the exporter and he had done nothing in this regard. Prima facie it appears that fraud was committed against Revenue. The exporter has not made out a case for total waiver of the pre-deposit of penalties.

Appellant’s contention:- Ld. Counsel appearing on behalf of the appellant submits that when the appellant was in custody he was not aware of the contents of the test report issued by the CRCL. Past consignments have been brought to the scope of consideration in the adjudication to penalize the appellant to the extent of Rs.25 lakhs under Section 114 and 114AA of the Customs Act, 1962. There as no documentary evidence nor oral evidence against the appellant. In absence of evidence demonstrating appellant's involvement in breach of law, penalty to the extent of Rs.25 lakhs was uncalled for in view of the fact that the goods are in the custody of customs and no delivery has been taken.

Respondent contention:- Revenue's submission is that when the goods were found to be misdeclared causing prejudice to the interest of Revenue, on the basis of test report of CRCL appropriate adjudication was done ordering seizure and confiscation. The adjudicating authority in para-34 of his order has exhibited his mind as to the reason why he proceeded to examine the issue. Though the goods were "urea" but mis-declared as prepared Mud Additive Chemicals for oil well. Considering gravity of the matter in SP/669/2012 (In CA-69/2012) and SP/670/2012 in (CA-70/2012) this Bench took a view that prejudice has been caused to Revenue by misdeclaration - attempting to export urea for which there was a direction for pre-deposit by an elaborate order. All the earlier 25 consignments which is pleaded by the appellant has formed part of adjudication was one of the factors while imposing dose of penalty which were exported two months by the same party. The authority also noticed that the party claimed to have supplied the goods were not in existence for which Authority held that there was subterfuge to Revenue.

Reasoning of judgement:- The tribunal found thatwhen shipping bill No. 1163482 dated 19.4.2010 was presented, samples of the goods contained in the Container No. PMLU 2000540 and TEXU-2968846 were taken and sent to CRCL for testing. Although the goods were declared by the appellant as mud Additive Chemicals that was proved to be 'urea in the form of white Granules' which is prohibited goods under Section 2(33) of Customs Act, 1962. It appears from the adjudication order that the test report remained uncontroverted. Ld. Adjudicating authority had brought out the mis-declaration in para-2 to 6 where the background of mis-declaration has been discussed. Authority was quite aware of the character and nature of the goods with the classification of the goods under Customs Tariff Act, 1962. When he could know that there was a deliberate mis-declaration to willfully export urea from India for undue enrichment he proceeded on the basis of the outcome of the investigation and materials before him. When the appellant was examined under Section 108 he described about his deals and the proprietor appellant clearly stated in para-14 of the adjudication order that how the prohibited goods were escaping notice of the customs which called for the present adjudication. From the very statement recorded which is summarized by adjudicating authority it appears that seizure under customs law was warranted. In para-15 of the order, ld. Authority made reference to the modus operandi of the appellant in respect of earlier 25 consignments. But that was not the sole basis of adjudication. When the claimed purchases were investigated, as revealed by para-16 of the order there was foul game played against investigation and sellers were found to be non-existent. Investigations came with the following result which is summarized in para-19 of the order as re-produced below:-

Therefore, from the foregoing, it appears that:-

(i) All the goods exported as detailed in para-13 above have one description i.e. Mud Additive Chemical (Technical Grade) for oil well. All the exported goods have the similar quantity and have been supplied to same consignee. This has been accepted by the exporter and is conclusively suggestive of the fact that the same goods have been supplied in the past consignment by the exporter;

(ii) The party tried to willfully and fraudulently mis-declare the goods covered by Shipping Bill No. 1163482 dated 19.4.2010. The goods were intentionally misdeclared as Mud Additive Chemical (Technical Grade) for oil well. The sample drawn from the shipment upon testing by CRCL confirmed that the goods were different from the declaration given by the exporter and were in fact found to be UREA. Export of urea is subject matter of restriction imposed under SI.No. 127 of the Schedule-2 of the Export Policy and could only be exported on prior permission of the competent authority and certified to be issued by the proper office as is envisages under Sl. No. 127, Column-6 Nature of Restriction (Policy condition). Since the exporter was exporting subject consignment without fulfilling statutory requirement along with deliberately for declaration. These circumstances render the goods liable for confiscation under Section 113(d), 113(h) and 113(i) of the Customs Act, 1962.

(iii) The exporter admitted that the goods previously exported by him (As per Annexure-A) and the goods of present consignments are Urea and alike.

(iv) Shri Dinesh Bhardwaj, holder of G Card no. 71/2000 CHA, Shri R.P. Jindal has knowingly facilitated the exporter to carry out the export of restricted goods out of India without the requisite licence and undertaking.

(v) The suppliers M/s Amit Enterprises, Paras Enterprises and M/s Vansh Overseas have also knowingly and willfully supplied the restricted items to the exporter for exporting the same out of India illegally."

When the incriminating material came before investigation inculpating the appellant, there was no scope to adjudicate in favour of the appellant at the adjudication stage. Prima facie it appears that adjudication has not proceeded erroneously. Prima facie it also appears that fraud was committed against Revenue as is revealed from reasoned and speaking order. We are therefore unable to waive requirement of pre-deposit when the appellant failed to avail redemption option against prohibited goods and two years have already expired from the date of seizure and whether the goods are having any value by its nature is doubtful. To protect the interest of Revenue we consider that pre-deposit of Rs.10 lakhs (Rupees Ten lakhs) with four weeks would be justified. We make it clear that when we find prima facie that there was a misdeclaration in the present consignment and there was attempt to defraud Revenue and surrounding circumstances question conduct of appellant, we have not unmindfully passed above order since interest of revenue has been seriously jeopardized. We have tried to strike out a balance as an interim modality when the appellant stated that goods are under seizure but two years have been expired without exercise of option to redeem the goods by appellant on payment of very small under option fine of Rs.1,00,000/- (Rupees One lakh) levied. Mere custody of goods is not sufficient pleading for waiver unless quality of goods is proved to be good and yet having value with passage of time. So also the reason why option to redeem was not availed facie base on sound reason since goods confiscated is no more property of appellant. Keeping in view the financial hardship pleaded by the appellant but finding no merit at this prima facie stage, we have been guided by apex court judgement in the case of Dunlop India Ltd. Vs. CCE - 1985 (19) ELT 22 = (2002-TIOL-156-SC-CX), Benera Valves Vs. CCE – 2006 (204) ELT 513 = (2006-TIOL-156-SC-CX) and Ravi Gupta Vs. Commissioner of Sales Tax, Delhi - 2009 (237) ELT 3 (SC) = (2009-TIOL-47-SC-CT)to order as above.

It was vehemently argued by the Counsel that the test report in respect of goods covered by shipping bill No. 1163482 dated 19-04-2010, which report showed that the goods declared by the appellant as "Mud Additive Chemical (Technical Grade) for Oil Well" to be actually Urea, could not be extended to the past 25 consignments (totally valued at Rs. 1,13,46,980/-) in respect of which no tests were done. What we find is that the goods were declared with the same description in the past 25 consignments also. The goods were exported to the same buyer that is "Kaz Link Holding Malaysia". During investigations it was found that the goods were procured by the appellant from three traders namely M/s Amit Enterprises, M/s Para Enterprises and M/s Vansh Overseas. The first two suppliers could not be located. The proprietor of the third firm submitted that he had sold goods used as manure to the appellant. So it is clear that the description "mud additive chemical" was a subterfuge used for fertilizer only.

During investigation Shri Manish Singhal appellant admitted in a statement given under section 108 of the Customs Act that goods exported in the past were also of the same nature as the goods seized. Even now the appellant is not able to specify what exactly was the chemical exported in the past consignments and what was its use. He is also not able to identify two of the three suppliers of the goods. The statement of the third person supports the case of Revenue. Thus the burden to prove bonafide nature of past consignments had shifted to the appellant and he had done nothing in this regard. When all these facts are assessed together we are prima facie of the view that the finding of the adjudicating authority that the past consignments were also of urea is a reasoned conclusion and not perverse.

In view of the above, pre-deposit is ordered.

Decision: - Pre-deposit ordered.

Comment:- The gist of this case is that a strict approach is followed while deciding the stay application for penalties when it is primarily clear that assessee was at fault and had a malafide intention to defraud the revenue.

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PJ-Case law-2013/14-1589

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