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, ... Reference the matter to the larger bench of 3 members by the Single Member Bench - learned Member hearing this appeal found it difficult to accept the view taken by the Division Benches of the Tribunal - Levy of penalty u/s 112(a) of the Customs Act, 1962 - exporter who has mis-declared the goods is located in Dubai, UAE - period 2012-13 - offence committed outside India - whether during the relevant period i.e. 2012-13, the Customs Act was applicable only to the whole of India or whether it was applicable also beyond the territorial jurisdiction of India, in which case penalty could be imposed on companies incorporated abroad? HELD THAT:- It is clear from various Constitution Bench judgments of the Supreme Court [2002 (9) TMI 799 - SUPREME COURT] that judicial discipline and propriety demands that a Bench of two learned Judges should follow the decision of a Bench of three learned Judges, but if a Bench of two learned Judges concludes that an earlier judgment of three learned Judges is so very incorrect that in no circumstances can it be followed, the proper course for the Bench of two learned Judges to adopt is to refer the matter before it to a Bench of three learned Judges setting out the reasons why it could not agree with the judgment rendered by three Hon’ble Judges. It is only when the Bench of three learned judges also comes to a conclusion that the earlier judgment of a Bench of three learned Judges is incorrect, that a reference to a Bench of five learned Judges would be justified. The learned Member could not have ignored the binding decision of the Division Bench of the Tribunal in SHAFEEK P.K., KERALA VERSUS CC, COCHIN [2015 (9) TMI 1257 - CESTAT BANGALORE]. In case the learned Member was not inclined to accept the view taken by the Division Bench that the Customs Act was applicable only within the territory of India and not beyond the territory of India prior to 29.30.2018, judicial discipline and propriety required the learned Member to make a request for the matter to be placed before a Division Bench of the Tribunal, which could then have examined whether the Division Bench decision of the Tribunal in Shafeek P.K. required any reconsideration, but that was not done. Even if there was only a decision of a learned Member of the Tribunal, then too judicial discipline and propriety required the learned Member to make a reference to a Division Bench after framing the issue(s) for determination by the Division Bench. What should have been the constitution of the Bench for deciding the reference made by the learned Member? - HELD THAT:- The learned Member hearing this appeal could have made an observation for placing the matter before a Bench of two Members of the Tribunal. Even if the learned Member hearing this appeal found it difficult to accept the view taken by the Division Benches of the Tribunal, then too the matter could have been placed only before two Members of the Tribunal, who could then have examined whether the matter require re-consideration by a Larger Bench of three Members of the Tribunal. Thus, it was not necessary for the learned Member hearing this appeal to make a reference to a Larger Bench for the reason that the Division Benches of the Tribunal have already expressed views on the issue that has been referred - The papers may be placed before the learned Member to decide the Appeal on merits. 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.