2017 (11) TMI 495 - AT - Customs

Tribunal overturns Revenue's appeal, restores company's license, emphasizing procedural fairness

M/s Flemingo (DFS) Pvt Ltd, Mr. Ajay Thoria, Mr. V. Prasad Rao Versus Commissioner of Customs, Visakhapatnam

The Tribunal dismissed the Revenue's appeal against the earlier Order-in-Original and allowed all three appeals of the Appellant Company, setting aside ... Warehousing of goods - goods found outside the bonded lockers of the vessels - seizure of goods - scope of SCN - principles of natural justice - revovation of license of appellant-company Held that: - the revenue has failed to discharge the requisite burden to saddle the Appellants with liability to confiscation and penalty. Import Duty is payable only when goods are imported into the customs barriers of India. There is no tangible evidence that goods have been improperly imported into the customs barriers of India. No tangible evidence is produced to show that the goods were removed for home consumption and crossed the customs barriers of India. There is also no tangible evidence produced to show that the goods were sold in domestic market. Further there is no liability to pay duty on goods which were sold at DFS after being cleared by the Customs and exported thereafter. Hence, on these facts the demand of duty is even otherwise erroneous. The substantiated allegations are not sustainable even on the test of preponderance of probability, the adjudicating authority issued an order cancelling the license. Therefore, this harsh action is also set aside. The license of the Appellant Company shall be restored within a period of one month - appeal allowed - decided in favor of appellant. Issues Involved:1. Confiscation and demand raised under the first Show Cause Notice (SCN) dated 21.7.2008.2. Confiscation and demand raised under the second SCN dated 19.1.2009.3. Procedural fairness and adherence to the principles of natural justice.4. Examination of evidence and statements under Section 138B of the Customs Act, 1962.5. Cancellation of the Private Bonded Warehouse License.Issue-wise Detailed Analysis:1. Confiscation and Demand Raised under the First SCN Dated 21.7.2008:- The confiscation of USD 7,142 and INR 18,100 was challenged on the grounds that these amounts were either tips received by the staff or change kept for transactions. The Tribunal found that Section 121 of the Customs Act, 1962, which pertains to smuggled goods, was not applicable as there was no evidence of smuggling.- The confiscation of goods valued at INR 6,042/- was also contested, with the Appellant arguing that these goods were left by crew members for safekeeping. The Tribunal found that the goods had not left the DFS and thus, Section 111(j) and (o) of the Customs Act, 1962, were not applicable.- The imposition of a fine of INR 2,500 for goods allegedly smuggled into the local market was set aside as goods cannot be confiscated in absentia, as confirmed by the Bombay High Court.- The reliance on unexamined statements under Section 138B of the Customs Act, 1962, was deemed erroneous. The Tribunal emphasized the need for cross-examination and found that the statements of co-accused could only be used for corroboration.2. Confiscation and Demand Raised under the Second SCN Dated 19.1.2009:- The Tribunal found that the DFS was not responsible for ensuring that goods sold to individual crew members were placed on board the ship under customs preventive escort. The adjudicating authority's contrary view was erroneous.- The demand of INR 2,09,45,632/- was broken down into various allegations, each of which was analyzed:- Sales Not Covered by Sale Voucher (INR 6,646/-): The Tribunal accepted that this could be a clerical mistake and deemed the sales as exports, thus no duty was payable.- Bonded Goods Not Carried Forward (INR 28,490/-): The allegation was not substantiated, and the Tribunal found no evidence of goods being removed outside the bonded warehouse.- Bonded Goods Diverted to Local Market (INR 9,031/-): The Tribunal found no tangible evidence to support this allegation.- Sales to Crew Members of Coastal Vessels (INR 3,61,047/-): The Tribunal found that the final destination of the ships was a foreign port, thus no duty was payable.- Sales to Crew Members of Non-Existing Vessels (INR 1,53,301/-): The Tribunal found that the adjudicating authority's basis for denying the benefit was beyond the scope of the SCN.- Excess Sales in One Transaction (INR 14,38,823/-): The Tribunal found that the adjudicating authority failed to provide details of the alleged violations, and thus the demand was unsustainable.- Repeat Sales within One Week (INR 3,51,037/-): The Tribunal found no evidence of repeat sales and deemed the demand unsustainable.- Excess Sales to Crew Members of Coastal Vessels (INR 15,43,918/-): The Tribunal found that the ships were foreign-going vessels, thus no duty was payable.- Sales without Quantitative Restrictions (INR 19,91,565/-): The Tribunal found that the adjudicating authority's interpretation was erroneous and the demand was unsustainable.- Sales to Crew Members without Preventive Escort (INR 1,67,03,863/-): The Tribunal found that the DFS was not required to ensure customs preventive escort for individual sales, thus the demand was unsustainable.3. Procedural Fairness and Adherence to the Principles of Natural Justice:- The Tribunal found that the adjudicating authority in the de-novo proceedings had a predetermined approach, leading to a miscarriage of justice. The authority failed to consider the arguments and evidence presented by the Appellant afresh.4. Examination of Evidence and Statements under Section 138B of the Customs Act, 1962:- The Tribunal emphasized the necessity of cross-examination and found that the reliance on unexamined statements was erroneous. The statements of co-accused could only be used for corroboration with tangible evidence.5. Cancellation of the Private Bonded Warehouse License:- The Tribunal found that the cancellation of the license was based on unsubstantiated allegations and was thus harsh and unsustainable.Conclusion:- The Tribunal dismissed the Revenue's appeal against the earlier Order-in-Original dated 30.09.2010 as infructuous.- The Tribunal allowed all three appeals of the Appellant Company and its representatives against the de-novo Order-in-Original dated 30.11.2011, with consequential reliefs.- The Tribunal ordered the restoration of the Appellant Company's license within one month from the date of receipt of the Order.Order Pronounced in Open Court on 06/11/2017.