TaxTMI 
TaxTMI 
2016 (5) TMI 1192
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....ty of Rs. 40 lakhs stand imposed on Shri Kulbhushan Goyal, son of Shri Ramesh Goyal and penalty of Rs. 6 lakhs stand imposed on Shri Ramesh Goyal in terms of provisions of section 114 of the Customs Act, 1962. 3. As per the facts on record, three units are engaged in the manufacture and export of various cycles parts. The dispute in the present appeal relates to forty one consignment of bicycle parts exported by the appellant to Iran, Tehran and Egpt under the claim of drawback. As per the appellants the said exports were made though Merchant brokers located in Dubai and the parts of the bicycle were either procured by them from indigenous manufacturers or from the various raw material required for manufacture of such bicycle parts were procured from the local market and bicycles parts were manufactured by them. 4. Based upon some intelligence received by the DRI as regards, the fraudulent export of bicycle parts to various Dubai parties, under export execution (sic : promotion) scheme like drawback DEPB etc, search operations were conducted at the factory cum residential premises of the noticee on 22.1.04. Nothing incriminating was recovered and as neither Shri Ramesh Goyal ....
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....as Bandar Abbas (Iran), he admitted that there were discrepancy in the two bills of lading. 7. When the bill of lading produced by Shri Navdeep Goyal Branch Manager of Shipping line was shown to Shri Kulbhashan Goyal, he deposed that inasmuch as the same was a photocopy, he doubted the authenticity of the same. The concerned shipping line should be called for verifying its authenticity 8. The DRI also conducted inquiries at Dubai port and procured a letter dated 10.12.03 from. Consulate General of India, wherein he reported that consignment covered by 5 bills of lading were auctioned by Dubai Customs for a meagre amount of DHS 31,000 only. From the said report of the Consulate General of India, Dubai, Revenue entertained a view that the exports made by the appellants indicating Tehran as the port of despatch were actually deloaded at Dubai and inasmuch as same was auctioned at 31000 drums, the consignment was overvalued with a purpose to claim more drawback. 9. On the basis of investigation conducted by the Revenue and on the basis of overseas inquiries, Revenue entertained a view that the goods exported by the appellant had no buyers as is evident from the fact that same ....
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....regards non-existence of M/s. Clarion Logistics Middle East, it stand submitted that said company is a multi-national company having its office all over the world. The address of the M/s. Clarion Logistics was produced on record from the Internet in support of the submissions that said company is in existence. Reliance was also placed upon various decision of the judicial as also quasi-judicial authorities. 11. The adjudicating authority however, did not find favour with the above submissions and passed the impugned orders. 12. We have heard Shri K K Anand, learned advocate appearing for the appellant and Shri R K Verma, learned AR for the Revenue. Shri Anand, learned advocate raised the issue of jurisdiction of ADG - DRI for the purpose of issuance of show-cause notice. Referring to the Hon'ble Supreme Court decision in the case of Commissioner of Customs v. Sayed Ali 2011 (2) TMI 5 - Supreme Court, he submitted that the DRI was not the proper officer for issuance of the said show-cause notice, in terms of provisions of Rule 16 of the Customs and Central Excise duty drawback Rules, 1995. He also assailed the impugned order on merits. Shri Verma appearing for the Revenue ....
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....RT OF INDIA, the issue as to whether the officer of DRI can be considered to be proper officer to demand duty under Section 28 of the Customs Act came up before Hon'ble Supreme Court and the matter was remanded to Hon'ble High Court to decide such substantial question of law in the light of decision in the case of Syed Ali. Hon'ble Punjab and Haryana High Court in the case of Era International v. Union of India 2011 (274) ELT 6 and Hon'ble Andhra Pradesh High Court in the case of Sree Enterprises v. Commissioner of Customs 2011 (274) ELT 12 (AP) while dealing with an identical issue held that in the light of decision of the Apex Court in the case of Sayed Ali (supra) the DRI officer cannot be held to be a proper officer for seizure of the goods or for issuing the show-cause notices. In the light of the above decision, the appellants contention is that show-cause notice issued by DRI cannot be held to have been issued by the proper officer in which case, the appeals are required to be allowed on said short ground itself. 14. It is seen that after the Hon'ble Supreme Court decision in the case of Sayed Ali (supra), Government of India issued Notification ....
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....on of cases of export under the drawback and Export Promotion Schemes." Further para 5 of the said Circular reads as under: "5. Further, it has been decided that the proper officer for the issuance of show-cause notice and adjudication of cases under the provisions of Rule 16 of the Customs, Central Excise and Service Tax Drawback Rules, 1995 shall, henceforth be as under:" 16. As is seen from the abovesaid para of Circular, show-cause notices are required to be issued in terms of provisions of Rule 16 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 within the monetary limit laid down in the said circular, before any recovery can be initiated. As such, we are of the view that though there is lacuna in the said Rule 16 inasmuch as the same does not specifically provide for issuance of show-cause notice and only refers to the demand made by the proper officer, but we hold that said demand has to be made by the Proper Officer by way of issuance of show-cause notice, as per the understanding of the Board also in the relevant portion of the Circular No. 24/11-Cus, as reproduced above. 17. As such, the only question required to be decided is as to w....
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....he case. Accordingly, by following the Supreme Court decision in the case of Sayed Ali (supra), Tribunal struck down the show-cause notice issued by Commissioner (Preventive). As such, by applying the ratio of law, declared by the Hon'ble Supreme Court in the case of Sayed Ali (supra) and subsequently followed by various other High Court, it has to be held that DRI officer was not the proper officer for issuance of show-cause notice for the purpose of demand of allegedly erroneously granted excess drawback. Infact, we find that after the above point was raised by the learned advocate, the matter was adjourned so as to give an opportunity to the learned DR to find out as to whether there was any retrospective amendment in terms of Rule 16 of the drawback Rules, on the line of retrospective amendment in Rule 28. On the next date of hearing, learned DR very fairly agreed that there is no such amendment to Rule 16. As such, we are of the view that show-cause notice having been issued by ADG, DRI Delhi, is without jurisdiction and consequently present impugned order become void ab initio and cannot be upheld. The same is liable to be set aside on the ground of jurisdiction itself....
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....cross-examination but the appellants refused to cross-examine him. As such, he has found fault with the appellants and has held that inasmuch as the said two employees of shipping lines who appeared for cross-examination were not accepted by the appellants for the purpose of cross-examination, the statement of Shri Navdeep Goyal can be adopted as an evidence. We find no justification in the above reasoning of the appellant. Admittedly, the revenue has relied upon the statement of Navdeep Goyal and not on the statement of Captain Anil Ratra or Shri Anil Sharma. The purpose of cross examination of any deponent is to test the veracity of the statement made by him during the course of investigation. It is the statement of Shri Navdeep Goyal made before the officer on which the Revenue has strongly relied upon. It was his cross-examination which was required to be conducted, for the purpose of fair and just adjudication. Offering of the other officer of the same shipping line, who had not tendered any statement in lieu of Navdeep Goyal, cannot be held to be a sufficient and proper course of adjudication inasmuch as admittedly any other person cannot clarify on the statement given by Shr....
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....thorities on the sole ground that such an examination was only in respect of 5% of the goods whereas for the goods meant for export to Dubai at least 50% examination is required, it cannot be said that the goods were not examined. When the goods were admittedly meant for export of Iron/Tehran and it is only later on that the Revenue makes an allegation of export to Dubai, examination of the goods conducted by the Superintendent and Inspector cannot be found fault with, especially when there is no other material or evidence to reflect upon the fact that exported goods were not cycle parts but was spurious junk material, even the examination of 5% of the goods gains importance. 23. The finding of the adjudicating authority that the appellants misdeclared as regards the value of the goods as also port of discharge are contrary to even the procedure adopted by the Customs authorities. The appellants had admittedly filed shipping bills where the discharge port was shown as Bandar Abbas, Tehran. The bills of lading are prepared as per the discharge port shown in the shipping bills. The said bills of lading are prepared by the shipping line, based upon the declaration made by the expor....
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....r banking channels. 25. As regards the report of the consulate general of India at Dubai indicating that the goods covered by 5 consignment were auctioned at much less price in Dubai cannot ipso facto lead to the conclusion that the appellants exported their goods to Dubai instead of Iran/Tehran. Apart from the fact that said report is only in respect of 5 consignments whereas the drawback is sought to be denied in respect of 41 consignments, we note that once the goods left the territorial water of India, export is said to have been effective thus extending the exporter the export benefits. Apart from that we also take into consideration the appellants contention that drawback rate in respect of cycle parts was not linked to the value of same and the same was available as per piece.. As such, the value of the goods does not play much role in the grant of drawback. Inasmuch as the entire case of the Revenue is value linked, we find no justification for denial of drawback to the appellant especially in the light of evidence collected by the DRI itself as regards the supplier of the goods and realization of the banks certificate, the non-receipt of any complaint by the recipient o....
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....orted for Iran/Egypt or any Middle East country are to be routed or transported through Dubai port only. Learned Member has also not accepted observation of the adjudicating authority relating to Hawala transaction and have allowed appeal on merits also even though merits have been discussed as academic interest only. 30. I do not agree with the findings recorded by learned Member (J) on jurisdiction as well as on merit. I intend to record my own order on jurisdiction issue as well as on merits. 31. Facts as discussed in Members draft order are taken on record. 31A. First I will discuss issue based on jurisdiction. Jurisdiction Issue 32. The Member (Judicial) has proposed to set aside recovery of the amount of drawback primarily on the ground of lack of jurisdiction on the part of the ADG, DRI, Delhi to issue show-cause notice. It has been, referring to the judgment of the Hon'ble Supreme Court in the case of Commissioner v. Syed Ali - 2011 (274) ELT A109, observed by the Member (J) that though retrospective amendment has been made by inserting clause 11 to Section 28 of the Customs Act, 1962 act with a view to protect the past demands issues under the said Secti....
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....oms for the areas mentioned in the corresponding entry in column (1) of the said Table with effect from the date to be notified by the Central Government in the Official Gazette :- Area of Jurisdiction Designation of the officers (1) (2) (3) (4) Whole of India Additional Director General, Directorate General of Revenue Intelligence posted at Headquarters and Zonal/regional units. Additional Directors, or Joint Directors, of Directorate of Revenue Intelligence posted at Headquarters and Zonal/regional units. Deputy Directors, or Assistant Directors, of Directorate of Revenue Intelligence posted at Headquarters and Zonal/regional units. [Notification No. 17/2002-Cus. (N.T.), dated 7-3-2002] 8. A clear reading of the Notification reveals that it is the Central Government which has given jurisdiction to the DRI officers to exercise the powers of officers of Customs for the whole of India. It is not the case of the appellants that the DRI officers have usurped the powers themselves. This Notification has been issued by the Central Government under Section 4(1) of the Customs Act. 9. As regards the objection raised by the appellants for th....
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....and issue show-cause notices was not in dispute, also held that the Director of DRI also had the jurisdiction to adjudicate the said dispute. Referring to Notification No.17/2002-Cus (NT) dated 7.3.2002, the Hon'ble High Court observed as under in Para 5: "Therefore, the Director of Revenue Intelligence has been conferred with the power of the Commissioner of Customs. The power of such Officer to investigate and issue show-cause notice calling upon the assessee to pay back the drawback is not disputed. What is disputed is the power of the said authority to adjudicate the dispute. Relying on the circular dated 15th February 1999, which is issued in pursuance of the Notification No. 19/90 conferring the similar power where it has been held, though they have been conferred the power to investigate and issue show-cause notice, adjudication is to be done as per Rule 16-A by the jurisdictional Commissioners, Additional Commissioners, Deputy Commissioners or Assistant Commissioners of Customs. The said circular which is issued to explain the effect of the Notification No. 19/1990 has no legs to stand because the Notification No. 19/1990 is superseded by Notification No. 17/2002. Se....
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....atrix, remaining facts already on record are also examined such as:- (a) Statements of all the accused recorded on 19.8.04, 23.08.04, 25.08.04, 16.09.04 and 30.05.2004. (b) Recovery of documents at the residence of Shri Kulbhushan Goyal. (c) Statement of so-called suppliers of cycle parts, items of supply and items which were exported and its relevancy. (d) Receipt of money in advance through TT channel from Dubai. (e) Goods are consigned to Dubai in 36+5 consignments contained in 12 (7+5) containers (against reference of 5 consignments in draft order). In present proceedings 36 consignments (shipping bills) referred in 7 containers are involved. Remaining five consignments/shipping bills stuffed in five containers were also found in Dubai Customs records which were also auctioned. (f) Goods are sent to fictitious address and goods are not got released at Dubai port. (g) Report of the Consulate General of India at Dubai (h) Documents referred in DRI's letter addressed to Senior Departmental Representative. (i) Goods are later auctioned by Dubai Customs (j) If goods are not got released at Dubai and all containers are detained and auctioned at Dubai....
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....received in advance. 40. Para 5.4,5.5, 5.6 and 5.7 of adjudication order No. 02/Cus/07 dated 21.03.2007 passed by Commissioner of Customs throw light on department's investigation. It has been observed about statements made by Shri Kulbhushan Goel and Shri Navdeep Goyal as follow:- "5.4 I find that the noticees had contended that the goods, in question, were physically examined by the officers of Customs at CFS, Ludhiana and the same were cleared by them as bicycle parts. In this regard, I find that Shri Kulbhushan Goyal was confronted with three lists marked as Annexure 'A', 'B' and 'C' containing details of export consignments to Iran of his firms which were abandoned at Dubai and never reached Iran or the merchant brokers at Dubai. In his statement dated 30.03.2005 recorded under Section 108 of the Customs Act, 1962, Shri Kulbhushan Goyal had stated that he had received payments (for the export consignments) in advance and had accordingly supplied the goods and dispatched the original documents to their merchant brokers at Dubai. But he did not know why the goods had not reached its destination. 5.5 I find that the noticee Shri Kulbhushan Goy....
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....tated as under:- (a) The first three B/L NN copies seemed to be forged and prepared by the shipper himself showing final destination as Bandar Abbas and B/L prefix as DXB, (b) that normally term DXB was used for Dubai as destination and for Bandar Abbas 'BND' was used., (c) that on the fourth B/L copy as per their record destination was jebel Ali and B/L No. LUH JEA-1612724 (d) that notified party in their B/L copy differed from DRI record. (e) that delivery agent shown on Bills of Lading No. LUH DXB-1612724, LUH DXB-1612724A, LUH DXB-1612724B was DXB (Dubai) agent's name whereas the three B/L copies mentioned Bandar Abbas as final destination; that B/L copy and other documents were submitted to the Customs by the shipper for claiming drawback and had nothing to do with the shipping line; that he again clarified that shipping line never submitted drawback copy of shipping bill to the customs; that there were similar discrepancies in three other B/L shown to him. He also stated that the words 'LUH' on a Bill of Lading defined the point of origin i.e. Ludhiana, 'JEA' defined port of discharge i.e. Jebel Ali a....
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.... failed to give any cogent evidence that these containers were sent to Egypt or Tehran and received there. Plea that goods were sent to Tehran via transhipment at Dubai has no legs to stand in view of numerous evidences coming on record evidencing that all containers landed at Dubai which were not got released by anyone and later auctioned. This is further supported by the facts that no export contracts have been produced. No LCs were opened. Actually advance payments from Dubai have been organized. The fact remains that payments were not received from the consignee. Actually factum of export, as such, has not been completed. 43. I have perused the report dated 10.12.2003 sent by Indian Consulate General at Dubai to the Director General, DRI in pursuance of their letter dated 1.7.2003 which is eye-opener. Both the letters are referred as below: Dated:01.07.2003 Sub: Fraudulent exports by Monte Group of Companies, Ludhiana under export incentive scheme-reg This is in receipt of an intelligence that several containers including container No.IALU2002750, IALU1202461, CRXU2258707, MLCU2552928, CRXU1307284,MLCU2898401 of M/s.IAL Container Lines (UK) Ltd., said to contain bic....
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.... Building Material, PB No.12694 Dubai Bicycle Parts 3 LUHDXB162700A M/s.M.k. International, Nirmal Market, Oswal Street, Miller Ganj, Ludhiana Abbas Rostum Bld. Material Tdg. PB No.2590 Dubai Bicycle parts 4 LUHJEA1612731 M/s.M.k. International, Nirmal Market, Oswal Street, Miller Ganj, Ludhiana Clarion Logistics, PB No.17656 Dubai Bicycle parts 5 LUHJEA1612731 M/s.M.k. International, Nirmal Market, Oswal Street, Miller Ganj, Ludhiana Clarion Logistics, PB No.17656 Dubai Bicycle parts 44. From the above report, it is evident that all the containers which were consigned out of India have landed at Dubai which were not got released. Buyers were non-existent. However, all containers were later auctioned as junk material was found which only fetched only 31,000 (dh) which is only Rs. 3,10,000/- in Indian rupees against total value of export amounting to Rs. 1,21,49,086/- 45. Interestingly advance payment for all these containers were organized and sent to India. Commissioner has rightly pointed out in his order that these were only hawala payments as no goods were got released by non-existent buyers. 46. To confirm the ....
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....L No. LUHDxB 162550A Number of days=323 Total charges 10437 Dhs = Rs. 1,25,975/- (e) Invoice No. DN/LCL/547/2005 BL No. LUHDxB 1612601 Number of days=301 Total charges 12006 Dhs = Rs. 1,44,912/- (f) Invoice No. DN/LCL/535/2005 BL No. LUHDxB 162554A Number of days=287 Total charges 12774 Dhs = Rs. 1,54,152/- (g) Invoice No. DN/LCL/543/2005 BL No. LUHDxB 1612670 Number of days=288 Total charges 10283 Dhs = Rs. 1,24,116/- (h) Invoice No. DN/LCL/551/2005 BL No. LUHDxB 1612724 Number of days=267 Total charges 9449 Dhs = Rs. 1,14,049/- (i) Invoice No. DN/LCL/546/2005 BL No. LUHDxB 162479A Number of days=337 Total charges 14825 Dhs = Rs. 1,78,938/- 49. Despite clear facts emerging out of investigation, appellant tried to confuse the matter by asking cross-examination of Shri Navdeep Goyal Branch Manger of Shipping line. Shri Navdeep Goyal did not appear but another ....
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....le. Commissioner's findings at Para 5.14 quite relevant which are reproduced for ready reference. "I find that the Noticees had contended that as the payments of the goods in question has been realized by them in advance, they are not concerned with the further status of the goods. He had also contended that no enquiry under FEMA is pending against them which prove that payment was not realized through Hawala. They had further contended that the export was complete the moment the goods had left the territorial limits of the Indian waters. I find no merits in any of the above contentions of the Noticees. The above contentions are applicable where the export is legal and there is a genuine purchaser of the exported goods. In the instant case the export is illegal as spurious goods in the guise of bicycle parts were shipped to Dubai, deliberately to be abandoned there, just for the purpose of claiming drawback by fraudulent means. The overseas enquiry had revealed that there was no overseas claimant of the impugned goods and the same were auctioned for a meagre amount of Dhs 31000/- (Rs.3,10,000/- approximately). As realization of foreign proceeds is an essential requirement fo....
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....ional as well as penalties imposed on Shri Kulbhushal Goyal and Shri Ramesh Goyal is made. However, imposition of redemption fine is not confirmed as goods are not available for confiscation. Order of the Commissioner is modified to that extent only. Ordered accordingly. DIFFERENCE OF OPINION Whether appeals against the Order-in-Original passed by Commissioner of Customs is to be rejected on the ground that there is lack of jurisdiction for issue of SCN and when there is fraudulent claim of drawback and evidenced from record requiring recovery on merit as held by Member (Technical) OR Whether appeals against the Order-in-Original passed by Commissioner of Customs is to be allowed in view of findings that there is no jurisdiction with DRI officers to issue SCN and recovery of drawback is not sustainable on merits as held by Member (Judicial). THIRD MEMBER ORDER Ashok Jindal, Judicial Member (As a Third Member) - The following difference of opinion has been referred to me for consideration: 54.The following difference of opinion has been referred to me for consideration: "Whether appeals against the Order-in-Original passed by Commissioner of Customs is to ....
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....ly such a customs officer who has been assigned the specific functions of assessment and reassessment of duty in the jurisdictional area where the import concerned has been affected, by either the Board or the Commissioner of Customs, in terms of Section 2(34) of the Act is competent to issue notice under Section 28 of the Act. Any other reading of Section 28 would render the provisions of Section 2(34) of the Act otiose inasmuch as the test contemplated under Section 2(34) of the Act is that of specific conferment of such functions. Moreover, if the Revenue's contention that once territorial jurisdiction is conferred, the Collector of Customs (Preventive) becomes a "proper officer" in terms of Section 28 of the Act is accepted, it would lead to a situation of utter chaos and confusion, inasmuch as all officers of customs, in a particular area be it under the Collectorate of Customs (Imports) or the Preventive Collectorate, would be "proper officers". In our view therefore, it is only the officers of customs, who are assigned the functions of assessment, which of course, would include reassessment, working under the jurisdictional Collectorate within whose jurisdiction the bill....
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....the Act whereby all persons appointed as officers of Customs under sub-section (1) of section 4 before the 6th day of July, 2011 shall be deemed to have and always had the power of assessment under section 17 and shall be deemed to have been and always had been the proper officers for the purpose of this section. 63. However, in this case, the show-cause notice has been issued in terms of the provisions of Rule 16 Customs and Central Excise and Service Tax Drawback Rules, 1995. The said provisions of the Rule 16 are extracted below:- 'Rule 16. Repayment of erroneous or excess payment of drawback and interest-has been paid erroneously or the amount so paid is in excess of what the claimant is entitled to, the claimant shall, on demand by a proper officer of Customs repay the amount so paid erroneously or in excess, as the case may be, and where the claimant fails to repay the amount it shall be recovered in the manner laid down in sub-section (1) of section 142 of the Customs Act, 1962 (52 of 1962).' 64. I have gone through the said rule wherein the excess granted drawback has to be demanded by the proper officer of Customs and recipient of the same has to repay the....
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....entral Excise and Service Tax Drawback Rules, 1995. The said circular did not consider that the DRI officers are to be the proper officers under Rule 16 of Customs and Central Excise and Service Tax Drawback Rules, 1995 but as no retrospective amendment carried out in the said rule so far as conformation of jurisdiction by DRI officers for issuance of show-cause notice is concerned, therefore, I agree with the view taken by Hon'ble Member (Judicial) that the DRI officers have no jurisdiction to issue show-cause notice for recovery of erroneously drawback claim under Rule 16 of Customs and Central Excise and Service Tax Drawback Rules, 1995. 67. With these observations, I agree with the view taken by Hon'ble Member (Judicial). The issue No.1 is answered accordingly. 68. On merits of the case, I have seen that the impugned goods was examined at the port of shipment and no single discrepancy was detected in regard to description, quality, quantity or value of the goods. All the consignments were examined found to be correct and the goods were assessed, thereafter let export order was issued. Further, I find that no incriminating documents found by DRI during the course o....