2011 (3) TMI 1192 - AT - Customs

Customs Tribunal Decision: Duty upheld, interest set aside. Penalties adjusted based on representation. Confiscation upheld, redemption fine set aside.

The Tribunal upheld the demand of duty in both the Mumbai and Chennai cases but set aside the demand for interest under Section 28AB of the Customs Act. ... Liability of importer - encashment of bank guarantee not voluntary payment - confiscation under Section 111(o) - redemption fine under Section 125 of the Customs Act - penalty under Section 112 of the Customs Act - penalty under Section 114A of the Customs Act not retrospective - interest liability in terms of bond - inapplicability of Section 28AB retrospectivelyLiability of importer - Appellant who filed the Bills of Entry is the importer and the person chargeable with duty. - HELD THAT: - The Tribunal accepted that 'importer' under the Customs Act includes a person holding himself out to be the importer; by filing the Bills of Entry the appellant held himself out as importer and is therefore the person chargeable with duty for the imported goods. The Court rejected the contention that a behind-the-scenes financier should be treated as the person chargeable where the front man filed the Bills of Entry. [Paras 14]Liability to pay duty rests on the appellant as importer.Encashment of bank guarantee not voluntary payment - Encashment of the bank guarantee by the department does not amount to voluntary payment of duty by the appellant and cannot immunise him from penalties or fines. - HELD THAT: - The Tribunal held that there is no material to show the appellant voluntarily paid duty; the department's invocation of the bank guarantee in 1997 was not a voluntary payment by the appellant and therefore authorities could still proceed with confiscation, penalty and other consequences for breach of the exemption condition. Decisions relied on by the appellant were distinguished on the basis that those cases involved voluntary payment of duty prior to show-cause notices. [Paras 15]Encashment of bank guarantee is not voluntary payment and does not preclude imposition of penalty or fine.Confiscation under Section 111(o) - redemption fine under Section 125 of the Customs Act - Breach of condition of the exemption notification rendered the goods liable to confiscation; where goods are not available, a redemption fine under Section 125 is an appropriate alternative, but in the present appeals the Chennai redemption fine was vacated. - HELD THAT: - The Tribunal upheld that diversion of imported raw material in violation of Notification No.80/95-Cus attracted confiscation under Section 111(o). Citing precedent, the Court observed that release against bond allows imposition of confiscation with option of redemption fine under Section 125. On facts, the Commissioner correctly held goods liable to confiscation; however, because the Revenue in the Mumbai adjudication had not imposed a redemption fine and the bench could not verify the bond terms, the redemption fine imposed in the Chennai order was vacated notwithstanding that the liability to confiscation was sustained. [Paras 16, 17, 18]Goods liable to confiscation affirmed; Chennai redemption fine set aside.Penalty under Section 112 of the Customs Act - penalty under Section 114A of the Customs Act not retrospective - Penalties under Section 112 are sustainable in principle for diversion of duty-free goods, but the Section 114A penalty and any imposition under provisions not in force at the time of import are unsustainable; consequential reductions and set-asides of penalties were ordered. - HELD THAT: - The Tribunal held that the appellant, having cleared goods duty-free and diverted them in breach of the notification, is liable to penalty under Section 112. However Section 114A (and Section 28AB) were not in force at the time of import and therefore penalties or interest under those provisions cannot be sustained. Applying proportionality, the Tribunal reduced the penalty on 'M/s Global Art' under Section 112 in the Chennai case to Rs 1,00,000 and reduced the personal penalty on the proprietor in the Mumbai case to Rs 10,000. The separate penalty imposed on the proprietor in the Chennai case was set aside because the firm and proprietor represent the same person and two penalties for the same offence could not be imposed. [Paras 19, 20, 21, 22]Section 112 penalties sustained but substantially reduced; Section 114A penalty set aside; duplicate penalty on proprietor in Chennai set aside; proprietor's penalty in Mumbai reduced.Interest liability in terms of bond - inapplicability of Section 28AB retrospectively - Demand of interest under Section 28AB is not sustainable as the provision was not in force at the material time; nevertheless interest in terms of the bond (24% p.a.) is recoverable on breach of the exemption notification. - HELD THAT: - The Tribunal set aside demands framed under Section 28AB because it came into force after the imports. Noting that the exemption notification and the bond terms render the importer liable to pay duty with interest on demand, the Tribunal sustained the demand of interest in the Chennai adjudication insofar as it arises under the bond and the notification (interest at the rate stipulated in the bond). [Paras 11, 23]Interest demand under Section 28AB set aside; interest recoverable under bond/notification is upheld (Chennai).Final Conclusion: The Tribunal held that the appellant, as the importer who filed the Bills of Entry, is chargeable with duty; diversion of duty-free raw silk attracted confiscation under Section 111(o) (liability to confiscation sustained) though the Chennai redemption fine was vacated; encashment of the bank guarantee did not amount to voluntary payment and did not bar penalties; penalties under Section 112 were sustained in principle but reduced (M/s Global Art in Chennai reduced to Rs 1,00,000; proprietor's penalty in Mumbai reduced to Rs 10,000; duplicate proprietor penalty in Chennai set aside); penalty under Section 114A and interest under Section 28AB were set aside as those provisions were not in force at the material time; interest in terms of the bond/notification is maintainable and the duty demands were otherwise upheld. Issues Involved:1. Jurisdictional Objection2. Demand of Duty and Interest3. Imposition of Penalties4. Confiscation and Redemption Fine5. Applicability of Section 114A and Section 28AB of the Customs ActIssue-wise Detailed Analysis:1. Jurisdictional Objection:The appellant raised a jurisdictional objection, arguing that the Commissioner of Customs (Adjudication), Mumbai should have jointly adjudicated both show-cause notices as per Notification No. 93/98-Cus (NT) dated 16.11.98. The Tribunal overruled this objection, noting that it was not raised at the earliest stage of proceedings and was not included in the appellant's replies to the show-cause notices or in the present appeals.2. Demand of Duty and Interest:The appellant contended that the duty was effectively paid when the bank guarantee was encashed in March 1997, implying no further duty, fine, or penalty should be levied. The Tribunal rejected this argument, stating that encashment of the bank guarantee was not voluntary payment of duty by the appellant. The Tribunal upheld the demand of duty in both the Mumbai and Chennai cases but set aside the demand for interest under Section 28AB of the Customs Act, as it was not in force at the time of import.3. Imposition of Penalties:The penalties imposed under Section 112 and Section 114A were contested. The Tribunal found that separate penalties on 'M/s Global Art' and Mr. Bimal Kumar Mehra in the Chennai case were not permissible as they represented the same entity. The penalty on 'M/s Global Art' under Section 112 in the Chennai case was reduced to Rs 1,00,000, and the penalty on Mr. Bimal Kumar Mehra was set aside. In the Mumbai case, the penalty under Section 114A was set aside, and the penalty on Mr. Bimal Kumar Mehra under Section 112 was reduced to Rs 10,000.4. Confiscation and Redemption Fine:The Tribunal upheld the confiscation of goods under Section 111(o) due to the breach of conditions of Notification No. 80/95-Cus. However, since the goods were not available for confiscation, the redemption fine imposed in the Chennai case was set aside. The Tribunal noted that the non-availability of goods would not prevent the imposition of redemption fine, supported by the Supreme Court's judgment in Weston Components Ltd vs Commissioner.5. Applicability of Section 114A and Section 28AB of the Customs Act:The Tribunal agreed with the appellant that Section 114A and Section 28AB, which came into force on 28.09.1996, were not applicable to imports made before this date. Consequently, the penalties under Section 114A and the interest under Section 28AB were set aside.Conclusion:The appeals were disposed of with the following orders:- Mumbai Case (Appeal No C/1279/01):- Demand of duty upheld.- Goods held liable to confiscation.- Penalty under Section 114A set aside.- Penalty under Section 112 reduced to Rs 10,000.- Chennai Case (Appeal No. C/84/03):- Demand of duty with interest upheld.- Goods held liable to confiscation, but redemption fine set aside.- Penalty under Section 112 reduced to Rs 1,00,000.- Penalty on Mr. Bimal Kumar Mehra under Section 112 set aside.