2016 (2) TMI 309 - HC - Customs

Court validates customs penalties for mis-declaration and undervaluation, rejects limitation defense.

Maldhari Sales Corporation & Others, Subhash Gupta, Janki Ram Versus Union of India & Others

The Court upheld the validity of the second show cause notice (SCN), rejecting arguments of limitation and res judicata. Evidence supported charges of ... Mis-declaration of goods and value thereof - period of limitation - relevant date - principles of res judicata - import of low/high carbon steel wire rods and electrolytes zinc free of duty under the Duty Exemption Entitlement Certificate (DEEC) Scheme by mis-declaring and undervaluing the goods and then disposing of the said imported goods in the local market for profit instead of using them in the manufacture of steel wire ropes for export. Held that:- In the present case the relevant date for the purpose of limitation would be the clearance of the B/E in question. The earliest of the B/Es forming the subject matter of the second SCN is 12th March 1987 and the second SCN was issued on 11th March 1992 which was within five years from the date of such B/E. The date of clearance of the consignment with reference to that B/E was obviously on a date after the date of such B/E. The contention of learned counsel for the Petitioners that the limitation for the purpose of Section 28 (4) of the Act for issuance of SCN will begin to run from the date of knowledge of the mis-declaration or undervaluation of the goods is contrary to the express language of clause (a) of Explanation 1 which makes it clear that limitation begins to run from the 'relevant date' which in the present case will be the date on which the goods were cleared by the Customs. Further, there can be no manner of doubt that the subject matter of the two SCNs were two different sets of B/Es. Each B/E is separately assessed at the time of clearance of the imported goods. The B/Es mentioned in the first SCN are not the ones mentioned in the second SCN and vice versa. Therefore, the question of applicability of the principle of res judicata does not arise. Demand with levy of penalty confirmed - writ petitions dismissed - Decided against the appellant. Issues Involved:1. Validity of the second show cause notice (SCN) in terms of limitation and res judicata.2. Evidence supporting the charges of mis-declaration, undervaluation, and unauthorized sale of imported goods.3. Legitimacy of penalties and confiscations imposed by the Collector of Customs.Issue-wise Detailed Analysis:1. Validity of the Second SCN:The first issue concerns the validity of the second SCN dated 11th March 1992, which the Petitioners argued was barred by limitation and res judicata. The Petitioners contended that the facts pertaining to the Bills of Entry (B/E) in the second SCN were known to the Department at the time of issuing the first SCN, and thus, the second SCN was issued beyond the permissible period under Section 28 of the Customs Act, 1962.The Court rejected this argument, clarifying that the extended period of limitation under Section 28(4) of the Act is five years from the 'relevant date,' which is defined as the date of clearance of goods under a B/E. The second SCN was issued within this period, as the earliest B/E in question was dated 12th March 1987, and the SCN was issued on 11th March 1992. The Court also noted that the principle of res judicata did not apply because the two SCNs concerned different sets of B/Es.2. Evidence Supporting the Charges:The second issue revolves around the evidence supporting the charges of mis-declaration, undervaluation, and unauthorized sale of imported goods. The Directorate of Revenue Intelligence (DRI) had conducted searches and seized incriminating documents, which revealed that Asian Wire Ropes Limited (AWRL) was importing goods under the Duty Exemption Entitlement Certificate (DEEC) Scheme but disposing of them in the local market for profit instead of using them for manufacturing steel wire ropes for export.The Collector of Customs, in the adjudication orders, found that the imported goods were not used as inputs for manufacturing steel wire ropes and were sold in the open market. The goods were liable for confiscation under Sections 111(d), (m), and (o) of the Customs Act, 1962, due to mis-declaration and undervaluation. These findings were upheld by the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT), which dismissed the appeals.3. Legitimacy of Penalties and Confiscations:The third issue pertains to the legitimacy of the penalties and confiscations imposed by the Collector of Customs. The adjudication orders imposed penalties on various entities and individuals, including AWRL, its directors, and associated entities. The penalties ranged from Rs. 10 lakhs to Rs. 1 crore, and the confiscation of goods was ordered, with options for redemption fines in lieu of confiscation.The Court found no error in the adjudication orders or the impugned order of the CEGAT. The evidence was extensively discussed, and the findings were consistent with the charges of mis-declaration and unauthorized sale of imported goods. The Court dismissed the writ petitions, vacated the interim orders, and directed the release of deposited amounts to the Respondent Department.Conclusion:The Court upheld the validity of the second SCN, confirmed the evidence supporting the charges, and validated the penalties and confiscations imposed by the Collector of Customs. The writ petitions were dismissed, and the interim orders were vacated.