2009 (12) TMI 232 - HC - Customs

Court upholds Settlement Commission's duty liability order, dismissing writ petition

The court upheld the Settlement Commission's order dated 4-6-2007, settling duty liability at Rs. 82,25,502.45 against a demand of Rs. 3,87,63,211. The ... Warehoused goods- Respondent is a company, operating a Duty Free Shop within the premises of Chennai Port. It has been granted a private bonded warehouse by the Commissioner of Customs for storing goods imported without payment of duty and permitted to sell such goods to international passengers and to members of the crew. On 8-7-2006, Central Industrial Security Force (CISF) personnel intercepted an army vehicle found to be carrying cigarette cartons and liquor bottles in bulk quantities. Accordingly, a show cause notice was issued, demanding a duty of Rs. 3,87,63,211/- on the entire goods sold to unauthorised persons. Interest on the duty amount was also demanded. It was also proposed to impose penalty on the respondents 1 to 7 in addition to revoking the licence to operate the duty free shop inside the harbour. Held that- show cause notice not to be issued without tangible evidences. Signature in bills for goods sold in duty free shop presumed as forged based on mere visual examination. Presumption vitiates proceedings unless reinforced with evidence. SCN alleging escort officers not accompanying goods to ship. Escorts officers posted on cost recovery basis and respondent duty free shop not liable for failure of Department. Issues Involved:1. Legality of the Settlement Commission's order dated 4-6-2007.2. Allegations of unauthorized sales by the respondent company.3. Verification of buyers' signatures on sales bills.4. Compliance with customs regulations.5. Burden of proof and evidence requirements.6. Role and findings of the Settlement Commission.Detailed Analysis:1. Legality of the Settlement Commission's Order:The petitioner challenged the Settlement Commission's order dated 4-6-2007, which settled the duty liability at Rs. 82,25,502.45 against a demand of Rs. 3,87,63,211. The court upheld the Commission's order, stating it was valid and did not suffer from any infirmity. The court referenced the discretionary powers granted to the Settlement Commission under the statute, as upheld in previous judgments (New Bharat Rice Mills and Alluminium Profiles Limited), emphasizing that such powers, when exercised diligently and reasonably, should not be interfered with by a writ court.2. Allegations of Unauthorized Sales:The first respondent, operating a Duty Free Shop, was accused of selling goods to unauthorized persons, based on an investigation following the interception of an army vehicle carrying bulk quantities of cigarettes and liquor. The customs officers alleged that the first respondent made unauthorized sales amounting to Rs. 1,72,30,568 through about 5000 bills, demanding a duty of Rs. 3,87,63,211 and proposing penalties and revocation of the shop's license.3. Verification of Buyers' Signatures:A key dispute was the allegation that the signatures on 3004 sales bills did not tally with those available with the customs department. The respondents contended that verifying each customer's signature was not feasible and not required by the regulations. They argued that they complied with all regulatory requirements, including noting down particulars and ensuring bills were signed by crew members. The court noted that the department's allegation was based on visual comparison without expert verification, which was insufficient to substantiate the claim of forgery.4. Compliance with Customs Regulations:The respondents maintained that they complied with all customs regulations, including those in Facility Circular No. 6. They argued that the duty free shop personnel had no means to verify signatures as the declaration forms were solely with the customs department. The court acknowledged that all required details were mentioned in the bills, and the amounts were collected in foreign exchange and remitted as required, indicating compliance with the regulations.5. Burden of Proof and Evidence Requirements:The court emphasized that the burden of proof lies with the party making the allegation. In this case, the department failed to provide concrete evidence or expert opinion to prove the signatures were forged. The court highlighted that allegations based on presumption without supporting documents or expert opinion cannot be sustained. The absence of statements from buyers or expert verification further weakened the department's case.6. Role and Findings of the Settlement Commission:The Settlement Commission, after considering the respondents' admissions and the evidence presented, determined the duty liability to be Rs. 82,25,502.45 with interest at 10% p.a. The Commission's decision was based on the lack of concrete evidence from the department and the respondents' compliance with regulatory requirements. The court upheld the Commission's order, noting that the audit department did not find any defects in the duty free shop's records, and there was no evidence of departure from regulations warranting the demanded duty.Conclusion:The court dismissed the writ petition, affirming the Settlement Commission's order as valid and free from infirmity. The allegations of unauthorized sales and forgery were not substantiated with concrete evidence or expert opinion, and the respondents' compliance with customs regulations was recognized. The discretionary powers of the Settlement Commission were upheld, and the court refrained from interfering with its decision.