Pradeep Jain - Chartered Accountant

PJ/Case Laws/2010-11/22

CASE LAWS

Prepared By:

Sukhvinder Kaur, LLB [FYIC]

and Mayank Palguata

Central Excise Section:

Case: Amchong Tea Estate v/s Union of India

Citation: 2010 (257) ELT 3 (SC)

Issue: - Whether Sec. 35 of the Central Excise Act, 1944 empowers the Commissioner (Appeal) to condone the delay of filing of Appeal which is of more than 30 days?

Brief Facts: - Against the order dated 09.07.2003 passed by the Adjudicating Authority, the appellant-assessee filed appeal before the Commissioner (Appeal) on 06.10.2004 i.e. after delay of more than 30 days. The Commissioner (Appeal) rejected the application for condonation of delay on the ground that appeal is barred under Section 35 of the Central Excise Act, 1944.

Against this order, appellant filed appeal before the Single member bench of the High Court. The Single member bench of the High Court held that sufficient ground is not made out for condonation of delay, even assuming that such a power is vested on the Commissioner (Appeals) to condone the delay beyond a period of 30 days. Appellant then filed appeal before the Division Bench of the High Curt.

The Division Bench dismissed the appeal by holding that the Commissioner (Appeals) did not have the power and jurisdiction to condone such delay beyond a maximum period of 30 days after expiry of the earlier 60 days as contemplated in the said provisions. Power to condone the delay vested only for a maximum period of 30 days in terms of the provisions of Section 35 of the Central Excise Act.

Against this order, Appellant has filed appeal before the Supreme Court.

Appellant’s Contention: - Appellant contended that in view of the language used in Section 35, it could be presumed there is power to condone the delay on showing of sufficient cause. Necessarily then, the provisions of Section 35 would apply and hence, the Commissioner (Appeal) would have the power and jurisdiction to condone the delay even beyond a period of 30 days as laid down in Section 35.

Reasoning of the Judgment: - The Supreme Court held that under the proviso to Section 35 a period of limitation was prescribed, which being a special law would override the general law as provided in Section 35. Reliance was placed on the judgment given in Singh Enterprises v/s Commissioner of Central Excise, Jamshedpur & Ors [(2008) 3 SCC 70] wherein it was held that the proviso to sub-section (1) of Section 35 makes the position crystal clear that the Appellate Authority has no power to condone the delay beyond the period of 30 days and that the language used makes the position clear that the Legislature intended to entertain the appeal by condoning the delay only upto the 30 days and not 60 days. Contentions of the appellants were not acceptable. No error in the decision of the High Court.

Decision: - Appeal dismissed.

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Case: Commissioner of Central Excise v/s Bhushan Steels and Strips Ltd

Citation: 2010 (257) ELT 5 (SC)

Issue: - Whether products like slitting, end cuttings, trimmings etc should not classifiable as ‘waste and scarp’ of iron and steel under heading 72.04 as they can be used as such.

Brief Facts: - Respondent-assessee was engaged in the manufacture of flat-rolled products (cold rolled) of non-alloy steel out of the duty paid HR/CR strips in coil form. They had filed classification list effectively from 15.03.1990 seeking classification of the flat-rolled products (cold-rolled products) attracting duty @ Rs. 10, 000/- per MT and also sought for classification of side slitting/cutting of HR and CR under the category of waste and scrap of non-alloy steel. The Respondent declared the side slitting/cutting of HR and CR as waste and scrap and as not usable as such, because of breakage, cutting up, ware and other reasons. They cleared the said items on payment of duty at lower rate by declaring them as re-melting scrap not usable as such. Their classification list was approved on 15.10.1990.

Thereafter, investigation was conducted by Excise Officers and it was found that the respondent was obtaining duty-paid HR coils/CR coils which were greater in width generally ranging from 1040 and 1600 mm. But the respondent could cold roll in their factory coils up to width of 1275 mm. On slitting of the input coils of greater width, the coils of smaller width were obtained and the side slits were also obtained. The said side slitting were being assessed to duty as waste and scrap but these were not in the form of re-melting scrap and could be used for other purposes.

Accordingly, several show cause notices were issued between September 1991 and March 1994 to the respondent demanding differential duty on side trimmings with a width of 10 mm by proposing to classify the same as flat-rolled products under heading 72.11.

The Adjudicating Authority confirmed part of the demand and dropped the rest of the demand by holding that side trimmings were waste and scrap. Revenue’s contention was rejected on the ground that they had not produced any evidence to show that the side trimmings having width of 45 mm were being out to reuse as such for some other purpose. It was held that the respondent had proved that the side trimmings were used by re-melting.

In appeal by both side, the Commissioner (Appeal) confirmed the order of the Adjudicating Authority. In further appeal, the Tribunal neither accepted the contention of the appellants nor of the Revenue. The Tribunal followed the judgment given in the case of LML Ltd v/s CCE [1997 (94) ELT 273 (SC)] and held that in view of the definition of “waste and scrap” given in Chapter 72 of the Tariff Act, the items in dispute would not fall under Heading 72.04 as the same are “usable as such”, that if iron and steel items were fit for any purpose other than recovery of metal or for use in the manufacture of chemicals, they could not be termed to be waste and scrap; that only the metals or metal goods definitely not usable as such, could fall under heading “waste and scrap” under heading 72.04. It was further held that though offcuts which are usable would be liable for payment of duty but the same would be under Heading 72.16 and not under heading 72.11 as contended by Revenue.

Respondent accepted the decision of the Tribunal however; Revenue has filed appeal against the said decision.

Appellant’s Contention: - Revenue contended that the slittings, end cuttings, roughly-shaped pieces and trimmings were classifiable under Tariff Headings 72.08, 72.09 and 72.11.

Respondent’s Contention: - Respondent contended that the products like slittings, end cuttings, trimmings etc were classifiable as waste and scarp of iron and steel under heading 72.04.

Reasoning of the Judgment: - The Supreme Court perused judgment given in LML limited’s case wherein it was held that cut sheets which were used in the manufacture of ancillary items cannot be regarded as waste and scrap as the same were used by the assessee. This was on the ground that these cut sheets could not be regarded as having been used for recovery of metal or for use in the manufacture of chemicals. It was held that the offcut of steel sheets being of different shapes and sizes would fall under Tariff entry 72.10 which after restructuring of the tariff have become equivalent to Entry 72.16.

The Supreme Court held that HSN Explanatory Notes in Chapter 72 provide that “waste and scrap” is generally used for the recovery of metal by re-melting or for the manufacture of chemicals. It further provides that heading 72.04 “excludes articles which, with or without repair or renovation, can be reused for their former purposes or can be adapted for other uses; it also excludes articles which can be re-fashioned into other goods without being recovered as metal”.

Thus, it was held that the reading of the HSN Explanatory Notes provided that the goods which can be reused without first are being re-melted is excluded from the purview of heading 72.04. They would also not fall under Tariff entries 72.08, 72.09 and 72.11 as the offcuts are of different shapes and sizes and would not fall under these tariff items.

Thus, the decision of the Tribunal was held to be correct. As no contention was raised regarding the finding of the Tribunal that no penalty is imposable therefore it is confirmed.

With regard to refund of duty payable as a result of this judgment, it was directed that the same shall be disposed of in terms of judgment given in Mafatlal Industries Ltd v/s Union of India.

Decision: - Appeals disposed off.

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Case: Modernova Plastyles Pvt Ltd v/s CCE, Raigad

Citation: 2008-TIOL-1771-CESTAT-MUM-LB

Issue: - Is reversal of Cenvat credit required for the assessee as and when any Capital good is removed from the factory irrespective of their utilization or unutilization stage.

Brief Facts: - On the issue that whether cenvat credit taken on capital goods which were removed after use from factory, was required to be reversed?; there were 2 conflicting views of the Division Benches of the Tribunal - Judgments given in Madura Coats Pvt Ltd [2005-TIOL-891-CESTAT-BANG] and Bilt Industrial Packaging Co. Ltd. Therefore, the matter was referred to the Larger Bench of the Tribunal.

Reasoning of the Judgment: - The Larger Bench of the Tribunal held that the expression “as such” has to be interpreted as commonly understood, which is in the “original for” and “without any addition, alteration or modification”. It does not have any connection with the goods (Capital goods) being new/unused or used. In Sarkar’s “Words & Phrases of Excise, Customs and Service Tax”, the expression “as such” has been defined as “in or by itself alone”. It does not distinguish between a new/unused and a used product.

It was held that in the case of Bilt Industrial Packaging Co. Ltd, the Tribunal has brought out how, in Rule 57S (2) as it earlier stood, the expressions “without being use” and “after being used” were mentioned, and subsequently these two clauses were merged into one by using the expression “as such” which clearly shows that the expression is intended to cover both capital goods, cleared without use and cleared after being out to use.

It was held that ever since the inception of the Modvat/Cenvat scheme, capital goods, whether used or unused, were allowed to be removed from a factory only on payment of duty or on reversal of cenvat credit taken.

It was further held that initially, used capital goods could be removed after reversing proportionate credit depending upon the period of use, as per Notification No. 23/94-CE(NT) dated 20.05.1994. This system was later on changed to charging of duty on used capital goods, cleared on transaction value as per Notification No. 6/2001-CE(NT) dated 01.03.2001 and w.e.f. 13.11.2007 vide Notification no. 39/2007-CE(NT) the concept of reversal of proportionate credit has been re-introduced.

It was held that the expression “as such” is held to cover only unused or new capital goods, manufacturers who wish to remove the used capital goods to job worker’s premises for testing, repairing and re-conditioning etc. would not be able to avail the facility under Rule 4(5) (a). Further, if the expression “as such” is interpreted to mean new or unused capital goods, then the question of testing, repairing and re-conditioning etc would become redundant, and any interpretation which resulted in rendering any portion of rule or legislation redundant, should be avoided as held by the Apex Court in Amrit Paper v/s CCE, Ludhiana [2006-TIOL-85-SC-CX].

It was held that judgment given in Cummins India Ltd c/s CCE, Pune-III [2007-TIOL-1620-CESTAT-MUM] did not cover the present issue as it did not deal with provisions of Rule 4(5) (a). However, in Max India Ltd v/s CCE, Chandigarh [2008 (228) ELT 328] the Tribunal had held that even used capital goods were covered by the expression “as such” occurring in Rule 3 (4) (c) and 4(5) (a).

In the end, it was held that reversal of credit availed on capital goods is required when capital goods are removed, whether used or not.

Decision: - Reference disposed of accordingly.

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Case: E. M. Electro Mechanicals Pvt Ltd v/s CCE, Bhopal

Citation: 2010 (100) RLTONLINE 153 (CESTAT-Del)

Issue: - Whether the question of imposition of penalty under Section 11AC arises in case where no mens rea is involved and the movement is from one registered unit of the appellants to another under challan system of Cenvat credit rules, 2004.

Brief Facts: - Appellant were manufacturers of transformer tanks, high pressure valves, pipe fittings. They had 2 units separated by a distance of 1Km which were registered with the Department. In Unit-I, they assembled columns using inputs on which credit was taken and transferred 18 columns to their Unit-II and 12 of them were erected there and 6 of them were lying for being erected. The same were transferred under Challans. During visit by Excise officers to both Units, 6 columns were seized. Appellant debited the duty involved on the 18 columns.

Department issued show cause notice. The Adjudicating Authority confiscated the 6 fabricated columns and allowed redemption of the same on payment of redemption fine of Rs. 1000/-. Demand of duty on 18 columns was confirmed. Penalties under Rule 25 and Rule 27 of the Central Excise Rules, 2002 were imposed. Both Revenue and appellant have filed appeal before the Commissioner (Appeal). The duty demand on 18 columns was upheld and confiscation of 6 columns and redemption fine imposed was also upheld. The Commissioner (Appeal) also imposed penalty under Section 11AC and set aside the penalties imposed under Rule 25 and 27.

Appellant is in appeal against this order.

Appellant’s Contention: - Appellants submitted that they were not contesting the demand of duty and interest. They submitted that the appellants removed the fabricated columns to Unit-II, which was a registered unit following challan procedure was prescribed for removal of Cenvatable inputs to Unit No. II, which was basically an expansion of Unit-I. There was no intention whatsoever in removing six fabricated columns for setting up the Unit-II. If there was any violation, it was technical in nature and question of imposition of penalty under Section 11AC did not arise.

Respondent’s Contention: - Revenue contended that columns fabricated in Unit-I should have been removed only on payment of duty and since they are getting erected in Unit-II, they were not being eligible for Cenvat credit also.

Reasoning of the Judgment: - The Tribunal held that the movement is between two registered units of the same appellants and they have removed the goods undisputedly under challans prescribed under Rule 4 of the Cenvat Credit Rules. Under these circumstances, the claim of the appellant that they were under bona fide belief that such inter-unit movement can be made without payment of duty deserves to be accepted. It is not a case that they have removed the same without preparing any document. Since no mens rea is involved and since the movement is from one registered unit of the appellants to another, the penalty under Section 11AC is not justified. Order confirming duty demand with interest is upheld and penalty imposed under Section 11AC is set aside. Redemption fine imposed on confiscated goods also set aside.

Decision: - Appeal disposed off.

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Case: The Commissioner of Central Excise & Customs v/s Kwality Tube Industries

Citation: 2009-TIOL-111-HC-AHM-CX

Issue: - Whether the Show cause notice issued after expiry of one year from the relevant date is considered to be valid even the amount of shorted itself is doubtful.

Brief Facts: - Respondent were engaged in the manufacture of Copper and Brass tubes. Excise officers visited the unit during the period from 05.03.2000 to 09.03.2000. Physical stock-taking was conducted of the goods lying in the store room in semi-finished and finished states. It was found that there was shortage of 37.36.7 kgs of Copper tubes and also that 25 kgs of Copper Tubes which had been sent to the jobworker under Challan were not received back. Show cause notice was issued on 31.01.2004. The Adjudicating Authority imposed penalty. The said order was upheld by the Commissioner (Appeal).

In further appeal, the Tribunal held that no Weighment slips and inventory were produced on record of the huge stock of raw material in finished and semi finished states. Therefore, it was doubtful that the shortages were genuine and it could not be inferred that the goods were clandestinely removed without payment of duty. Moreover, it was notice that the entire procedure of physical stock-taking was done without any panch witness and the request of the respondent for cross-examining the panch witness was turned down, if any, had been there. There was no evidence on record to prove that the goods were cleared without payment of duty. The search was conducted in March 2000 and the show cause notice was issued on 31.01.2004 and delay was not explained by the Revenue. Therefore, the notice was time barred. Accordingly, the Tribunal set aside the penalty while confirming the duty in respect of goods sent to the jobworker.

Against this order, Revenue is in appeal before the High Court.

Reasoning of the Judgment: - The High Court held that it cannot be said that the order of the Tribunal suffered from any legal infirmity. In the absence of Weighment slips, the amount of shortage itself is doubtful and finding to this effect arrived at by the Tribunal is neither unreasonable nor unjustified. The delay in issuance of show cause notice is a factual aspect and in the absence of any explanation, the show cause notice itself suffers from the vice of delay and laches. No interference required with the order of the Tribunal. No question of law arises.

Decision: - Appeal dismissed.

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Case: Suchitra Components Ltd v/s Commissioner of Central Excise, Guntur

Citation: 2007-TIOL-09-SC-CX

Issue cum Brief Facts: - In the appeal before the Supreme Court, the issue raised was - whether the duty demanded and confirmed against the appellant is to be paid from the date of issue of show cause notice i.e. 29.08.1990 or from the date 01.03.1990 as ordered by the Tribunal.

Reasoning of the Judgment: - The Apex Court considered the judgment given in the case of M/s Mysore Electricals Industries Ltd [2007 (204) ELT 517] wherein it was held that a beneficial circular has to be applied retrospectively while the oppressive circular has to be applied prospectively. Thus, when the circular is against the assessee, they have the right to claim enforcement of the same prospectively. Thus, the appellant will be liable to pay the duty from the date of issuance of show cause notice.

Decision: - Appeal allowed accordingly.

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Service Tax Section

Case: Commissioner of C. Ex. & Customs v/s Port Officer

Citation: 2010 (19) STR 641 (Guj)

Issue: - Whether penalty under Section 76 of the Finance Act, 1994 can be reduced by the commissioner (Appeals) below the limit prescribed by the said section?

Brief Facts: - Short payment of Tax was alleged against the respondent-assessee. The Original Authority confirmed the demand and imposed penalty of Rs. 20, 000 under Section 76 and penalty of Rs. 95,000 under Section 78 of the Finance Act, 1994. In appeal, the Commissioner (Appeal) set aside the entire penalty levied under Section 76 and reduced penalty under Section 78 by Rs. 1000/-. In further appeal, the Tribunal remanded the matter to the Original Authority.

In de-novo proceedings, the Original Authority confirmed the demand and imposed penalty of Rs. 93180/- under Section 78 and penalty of Rs. 93180/- under Section 76. In appeal, the Commissioner (Appeal) held that the Original Authority had increased the penalty of Rs. 20, 000 imposed in earlier order to Rs. 93180/- in de-novo proceedings for the same violation without any additional grounds. It was observed that the respondent had already deposited the service tax demanded with interest and it was not a case of failure on the part of the respondent to pay the service tax on monthly/quarterly basis. Accordingly, penalty was reduced to Rs. 10, 000/- by the Commissioner (Appeal).

Against this order, Revenue went in appeal before the Tribunal. The Tribunal held that penalty imposed under Section 76 can be reduced in exercise of the power under Section 80 of the Finance Act, 1994 and that benefit under Section 80 was rightly extended to the respondent.

Against this order, Revenue is in appeal before the High Court raising the question of law that “Whether penalty under Section 76 can be reduced below the limit prescribed by the section?”

Respondent’s Contentions: - Respondent contended that under Section76 the Authority has power to levy penalty but has discretion in so far as the quantum of penalty is concerned. When read with Section 80 the said discretion empowers the Authority to reduce the penalty to an amount below the limit stipulated in Section 76 because once there is discretion to delete the entire penalty such discretion can also be extended for reducing the penalty partially, if the facts so warrant. Reliance was placed on the judgment given in the cases of Union of India v/s Dial and Travels {[2007] 7 STT 372 (Raj)}, Commissioner of Central Excise & Customs, Nasik v/s DR Gade [2008 (9) STR 348 (Bom)], Commissioner of Service Tax, Mumbai v/s SR Enterprises [2008 (9) STR 123 (Bom)], Commissioner of Central Excise & Service Tax, Jalandhar v/s RK Associates [2009 (16) STR 135 (P&H)], Commissioner of Central Excise Commissionerate, Jalandhar v/s Darmania Telecom [2009 (14) STR 145 (P&H)], Commissioner of Central Excise, Mangalore v/s Vishwanatha Karkera [2009 (15) STR 9 (Kar)], Commissioner of Central Excise v/s Madhuri Travels [2009 (15) STR 241 (Bom)], Commissioner of Central Excise, Jalandhar v/s Batala Citi Cable (P) Ltd [2009 (16) STR 19 (P&H) and Commissioner of Central Excise, Jalandhar v/s Steel Craft (India) [2010 (17) STR 8 (P&H).

It was also submitted that the judgment passed by the various High Courts should not be deviated from. It was contended that in case the order of the Tribunal is found to be non-reasoned order, then it should be remanded back to the Tribunal leaving open to them to argue applicability of Section 80.

Reasoning of the Judgment: - The High Court perused the provisions of Section 76 and Section 80 and held that under Section 76 the quantum of penalty has been specified in the provision by laying down maximum and minimum limits with a further cap in so far as maximum penalty is concerned that the maximum penalty shall not exceed the amount of service tax demanded. It was held that no further discretion could be read to be vested in the Authority to as to reduce the penalty below the minimum limit of Rs. 100 per day on default. Reading further discretion would amount to re-writing the provision which is not permissible. Hence, Section 76 as it stands does not give any discretion to the authority to reduce the penalty below the minimum prescribed.

With regard to Section 80, the High Court held that it overrides the provision of Section 76, 77, 78, and 79 and provides that no penalty shall be imposable even if any one of the said provisions are attracted if the assessee proves that there was reasonable cause for failure stipulated by any of the said provisions. Whether a reasonable cause exists or not is primarily a question of fact. The provision indicates that the onus is on the assessee to establish reasonable cause. Once reasonable cause is established the authority has discretion to hold that no penalty is imposable. The provision does not say that even on that even upon establishment of reasonable cause a reduced quantum of penalty is imposable. The provision only says that no penalty is imposable. Reading the vesting of power to reduce the penalty in it would amount to rewriting the provision.

Thus, it was held that even a conjoint reading of Section 76 and Section 80 provides that it is not possible to envisage discretion as being vested in the authority to levy penalty below the minimum prescribed limit. If the authority imposing the penalty is not entitled to levy penalty below the minimum prescribed the appellate authority and the Tribunal cannot read the provision so being vested with such powers namely to reduce the penalty below the minimum prescribed.

Accordingly, the order of the Tribunal was perused and it was found that the provisions of Section 76 and Section 80 were not considered. The reasonable cause was not shown to exist by the respondent. The Tribunal has passed an unreasoned order which can only lead to multiplicity of proceedings. Further it was held that the judgments relied upon by the respondent were not applicable as the provisions of Section 76 and Section 80 were not analysed therein.

Accordingly, the matter was remanded back to the Tribunal. The question of law raised was answered in negative.

Decision: - Appeal disposed off.

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Case: M/s Em Jay Engineers v/s Commissioner of Central Excise, Mumbai

Citation: 2010-TIOL-2100-CESTAT-MUM

Issue: - Is rebate claim of service tax paid on services provided to foreign company is admissible to the service provider as the same is to be considered as Export of Service?

Brief facts: - Appellant were procuring purchase order from clients in India on behalf of the foreign company situated in Italy who had no office in India during the period from October 2005 to June 2007. The purchase orders were then sent to the foreign company and they directly supplied the goods to the Indian clients and received payments from them. Thereafter, commission for sales promotion was paid in foreign currency to the appellant. Appellant paid service tax to the Department under protest as pointed out by the Department. Thereafter they field rebate claim of the service tax deposited to the department on the ground that they were exporting the services which were exempted form payment of service tax.

Show cause notice was issued proposing rejection of refund claim. The Adjudicating Authority sanctioned part of the claim and rejected part of the claim which was not admissible as per Notification No. 2/2007-ST dated 01.03.2007 and rejected part of the claim as being time-barred. In appeal, the Commissioner (Appeal) upheld the order. Hence, appellant is before the Tribunal.

Appellant’s Contention: - Appellant contended that they had provided the service to their foreign principle, who used this service outside India and paid the commission in foreign currency. Hence, as per relevant provisions of service tax laws, they were not liable to pay service tax although they had paid it under protest. It was contended that when the service tax was collected by the department without any authority, the appellant is entitled to refund of the same. It was submitted that rejecting there refund claim on the ground of limitation was without any authority of law. It was submitted that merely saying that the provisions of Section 11B of the Central Excise Act, 1944 were applicable to the service tax refund is not a speaking order. It was not stated as to why the provisions of Section 11B were applicable. Reliance was placed on the judgment given in the case of KSH International Pvt Ltd v/s Commissioner of Central Excise, Belapur [2010-TIOL-805-CESTAT-MUM], Hexacom (I) Ltd v/s Commissioner of Central Excise, Jaipur [2003-TIOL-263-CESTAT-DEL] and Commissioner of central Excise v/s Jai Laxmi Finance Co. [2006-TIOL-397-CESTAT-DEL].

Respondent’s Contention: - Revenue contended that the appellant has provided their service in India and the same were being used in India and therefore, they were liable to pay the service tax. Reliance was placed on the judgment given in All India Fedn of Tax Practitioners v/s Union of India [2007-TIOL-149-SC-ST], Mirosoft Corpn. India Pvt Ltd v/s Commissioner of Service Tax [2009-TIOL-601-HC-DEL-ST].

Reasoning of the Judgment: - The Tribunal held that the relevant Notification prescribed mainly 2 conditions (a) that the service is delivered outside India and used in business outside India and (b) that the payment of such service is received by the service provider in convertible foreign currency. It was also observed that as per Rule 3 as amended w.e.f. 19.04.2006 Business Auxiliary service was considered as exported when provided in relation to the business or commerce to a recipient outside India.

The Tribunal held that on the facts of the case, denial of refund claim was contrary to the express provisions of law as clarified in CBEC Circular No. 11/5/2009-ST dated 24.02.2009. It was held that on facts the rendering of service was complete only when the purchase orders were canvasses by the appellant in India were received by the foreign companies. These purchase ordered were received outside India and were acted upon by the foreign companies abroad. This means that the benefit of the service accrued outside India. The judgment given in the case of KSH International Pvt Ltd v/s Commissioner of Central Excise, Belapur was applicable. The conditions prescribed by law were fulfilled by the appellant. They were entitled to refund claim. Impugned order set aside.

Decision: - Appeal allowed.

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Customs Section

Case: Commissioner of Central (Preventive), New Delhi v/s M/s National Star Goods Carriers and Ors

Citation: 2010-TIOL-1182-CESTAT-DEL

Issue: - Whether penalty under section 112 of the Customs Act, 1962 can be imposed on the assessee providing the rail transport agent service stating that the complete address of the consignee has not been mentioned on the parcel of imported goods and thus they held be of smuggled nature.

Brief Facts: - Respondent-company are railway agent and other respondents are the employees of Respondent No. 1. They have offices at Mumbai, Chennai and Delhi. They book parcel from different parties and hand over the bags containing the parcels to the railways for transportation and on reaching of the bags at their destination, their employee receive the same and distribute the parcels to the respective consignees. On 24.08.2005 2 parcel bags received by employee of respondent were intercepted by the Customs officers outside Delhi Station. On examination, it was found that the parcels which were sent from Chennai office were containing ICs, Capacitor, Motorola Talk about T5720, Seiko battery cells, digital video cameras, iPod mini, walkman, cameras, ac adaptor, vcds,MP3, Discman with remote and ear phones etc foreign origin. Goods were seized and Notices were issued to the consignors for producing the import documents, for two consignees no documents were produced for legal import.

Show cause notice was issued to the consignee as well as to respondent. The Adjudicating Authority passed the order confiscating the goods under Section 111(a), 111(b) and 111(d) of the Customs Act, 1962 and penalty under section 112 of Rs. 50, 000 each was imposed on respondent and respondent-employees. In appeal, the Commissioner (Appeal) set aside the order of penalty imposed on respondent-company and its employees. Against this order, Revenue has filed appeal.

Appellant’s Contention: - Revenue contended that respondent were involved in transportation of the imported goods which have been held to be of smuggled nature; that while booking the parcels at Chennai, the full addresses of the booking persons had not been recorded; that the respondent had not taken precaution to ensure that the goods accepted by them for transportation through railways were not smuggled goods and therefore, penalty should have been imposed on them. Reliance was placed on the judgment given in Commissioner of Customs (Preventive), WB, Kolkatta v/s Suresh Kumar Nyollywalla [2006 (204) ELT 525].

Respondent’s Contention: - Respondent contended that they were railway booking agents and other respondent were there employees. They were accepting parcels from different persons for delivery, that the parcels accepted for transportation through railways were put together in bigger bag and handed over to the railways for carriage, that on reaching of the parcels at the destination, the same were received by the staff who arranged the delivery of the same to the respective consignees, that they had no system of verification of the address of the consignors or verifying the contents; that in their case, there was no evidence that they had knowledge about the smuggled nature of the goods but still accepted the same for carriage and therefore, no penalty was imposable on them.

Reasoning of the Judgment: - The Tribunal held that there is no positive evidence indicating that the respondent had knowledge about the smuggled nature of goods which had been seized. In the absence of any evidence, it was not correct to impose penalty on them. It was further held that the judgment given in Commissioner of Customs (Preventive), WB, Kolkatta v/s Suresh Kumar Nyollywalla was not applicable as the facts of that case were different from the present case. In that case, the transporter had accepted a huge consignment of goods from one person living in border area and the consignor was found to be fictitious person. In the present case, respondent were taking parcels from large number of persons and in the normal course of business were not checking the contents of the parcels and even by checking they could not have known that the seized goods were smuggled. No infirmity in the impugned order.

Decision: - Appeals dismissed.

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