2021 (3) TMI 775 - AT - Customs

Customs Act's Territorial Scope: Exporter in Dubai not liable pre-2018 amendment. Larger Bench clarified.

The Tribunal held that prior to the amendment on 29.03.2018, the Customs Act did not extend beyond India's territorial jurisdiction. Consequently, ... Extraterritorial jurisdiction of the Customs Act - penalty under Section 112(a) for acts committed outside India - binding effect of Division Bench decisions on a Member of the Tribunal - amendment to territorial application of the Customs Act with effect from 29.03.2018 - proper constitution of a Larger Bench reference from a Member of the TribunalExtraterritorial jurisdiction of the Customs Act - penalty under Section 112(a) for acts committed outside India - amendment to territorial application of the Customs Act with effect from 29.03.2018 - Whether, for the period 2012-13, the Customs Act extended beyond the territory of India so as to permit imposition of penalty under Section 112(a) for mis-declaration of goods located in Dubai, UAE. - HELD THAT: - The Tribunal recorded that Division Benches have repeatedly held that prior to the amendment effected on 29.03.2018 the Customs Act extended only to the whole of India and did not have extraterritorial operation; that the amendment of Section 1(2) on 29.03.2018 expressly made the Act applicable to offences committed outside India; and that therefore, for the period 2012-13 the Customs Act could not be applied extraterritorially to impose penalty under Section 112(a) on persons or entities situated outside India. The learned Member's contrary conclusion in Prerna Singh was noted to have overlooked binding Division Bench precedent and the subsequent amendment. The determinative legal principle applied is that municipal penal provisions do not have extra-territorial operation unless the statute clearly provides for it, and therefore prior to 29.03.2018 penalties under Section 112(a) could not be validly imposed for acts committed outside India. [Paras 11, 12, 13, 15, 16]For the period 2012-13 the Customs Act did not extend beyond India and penalty under Section 112(a) could not be imposed for mis-declaration of goods located in Dubai; the 29.03.2018 amendment alone extended extraterritorial application.Binding effect of Division Bench decisions on a Member of the Tribunal - proper constitution of a Larger Bench reference from a Member of the Tribunal - Whether the reference made by the learned Member to a Larger Bench was maintainable and what should be the proper constitution of any Larger Bench when a Member of the Tribunal refers a question. - HELD THAT: - The Tribunal held that the learned Member was bound by existing Division Bench decisions and, having regard to judicial discipline as expounded by the Supreme Court, could not disregard such binding precedents; if unwilling to follow a Division Bench view the Member should have referred the matter to a Division Bench (two Members) rather than to a Larger Bench of three Members. The Tribunal emphasised that a reference by a single Member should lead to consideration by two Members of the Tribunal, and only thereafter (if required) a larger Bench could be constituted. Consequently the reference to a Larger Bench was unnecessary and not maintainable in the circumstances. [Paras 19, 20, 21, 22, 23]The reference to a Larger Bench by the learned Member was not maintainable; a Member should have placed the matter before a Bench of two Members to test the Division Bench precedent, and only thereafter could further reference be contemplated.Final Conclusion: The reference to a Larger Bench is set aside as unnecessary and the papers are directed to be placed before the Member to decide the appeal on merits; for the period 2012-13 the Customs Act did not have extraterritorial operation and penalties under Section 112(a) could not be imposed for acts occurring in Dubai prior to the 29.03.2018 amendment. Issues Involved:1. Applicability of Section 112(a) of the Customs Act, 1962 to an exporter who mis-declared goods located in Dubai, UAE during the period 2012-13.2. Territorial jurisdiction of the Customs Act, 1962 prior to its amendment on 29.03.2018.3. Judicial discipline and propriety in following precedent decisions.Detailed Analysis:1. Applicability of Section 112(a) of the Customs Act, 1962:Section 112(a) of the Customs Act, 1962 imposes penalties on any person who, in relation to any goods, does or omits to do any act which would render such goods liable to confiscation under Section 111, or abets such actions. The core issue is whether this penalty can be imposed on an exporter who mis-declared goods located in Dubai, UAE during 2012-13. The Tribunal examined various decisions to determine if the Customs Act was applicable beyond the territorial jurisdiction of India during this period.2. Territorial Jurisdiction of the Customs Act, 1962:Prior to its amendment on 29.03.2018, Section 1(2) of the Customs Act stated that the Act extended to the whole of India. The amendment expanded its applicability to include any offence or contravention committed outside India by any person. The Tribunal cited multiple decisions to support the view that, before the amendment, the Act did not extend beyond India’s territorial jurisdiction:- Shafeek P.K. vs Commissioner of Customs, Cochin (2015): The Tribunal held that the Customs Act extended only to the whole of India and could not be applied to a resident of Dubai.- Guru Electronics Singapore Pte Ltd. vs Commissioner of Customs, Bangalore (2009): The Tribunal observed that proceedings against a company incorporated abroad could not be sustained due to lack of jurisdiction.- Commissioner of Customs, Central Excise & Service Tax, Hyderabad-II vs G.M.K. Products Pvt. Ltd. (2020): The Tribunal reaffirmed that the Customs Act extended only to the whole of India at the relevant time.- Relax Safety Industries vs. Commissioner of Customs, Mumbai (2002): The Tribunal concluded that the Customs Act did not have extraterritorial jurisdiction.3. Judicial Discipline and Propriety:The Tribunal emphasized the importance of judicial discipline and propriety in following precedent decisions. It highlighted that the learned Member, who referred the matter to a Larger Bench, should have adhered to the binding decisions of Division Benches. The Tribunal noted that if the learned Member disagreed with the Division Bench decisions, the proper course would have been to refer the matter to a Division Bench for reconsideration, rather than making a direct reference to a Larger Bench. This approach aligns with the principles set out in several Supreme Court judgments, including:- Bharat Petroleum Corpn. Ltd.: A decision of a Constitution Bench binds a Bench of two learned Judges, and judicial discipline obliges them to follow it.- Pradip Chandra Parija and others vs Pramod Chandra Patnaik and others: Judicial discipline demands that a Bench of two learned Judges should follow a decision of a Bench of three learned Judges.- Union of India and another vs Hansoli Devi and others: Reiterated the importance of judicial discipline and propriety in following precedent decisions.The Tribunal concluded that the reference made by the learned Member was not maintainable and directed that the Appeal should be decided on merits by the learned Member. It also clarified that the Larger Bench for deciding the reference should consist of two Members of the Tribunal, not three.Conclusion:The Tribunal determined that prior to the amendment on 29.03.2018, the Customs Act did not extend beyond India’s territorial jurisdiction. Therefore, penalties under Section 112(a) could not be imposed on an exporter for mis-declaration of goods located in Dubai, UAE during 2012-13. The Tribunal also emphasized the necessity of judicial discipline in following precedent decisions and directed the learned Member to decide the Appeal on merits.