TaxTMI 
TaxTMI 
2017 (11) TMI 495
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....ion 58 (1) of the Customs Act, 1962 by the Assistant Commissioner of Customs (Bonds), Vishakhapatnam. 3. A Show Cause Notice dated 21.7.08 was issued to the Appellant and others for seizure of goods which were allegedly found outside the bonded lockers of the vessels. The demand was for Rs. 26,931/-. A reply dated 18.10.2008 was filed. 4. Thereafter another Show Cause Notice dated 19.1.2009 was issued proposing demand of Rs. 2,09,45,632 towards duty under various heads for the period October 2005 to 20.7.2008. The duty demand was proposed for the following allegations- S. NO ALLEGATION IN THE SCN DUTY DEMAND IN SCN 1 Sales not covered by sale voucher but debited in stock and sale register 6,646 2 Bonded goods not carried forward from one stock & sale register to next 28,490 3 Bonded goods diverted to local market by forging additional entries in duplicate & triplicate sale vouchers 9,031 4 Sales allegedly made to crew members of vessels in coastal run 3,86,141 5 Sales allegedly made to crew members of vessels not arrived or already sailed on the date of sale voucher 6,18,650 6 Sales allegedly made to crew members ....
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....rder-in-Original dated 30.09.2010 was set aside and the matter remanded for de-novo adjudication, the said Appeal C/66 of 2011 has admittedly been rendered infructuous. The same is accordingly being dismissed as infructuous. 8. The impugned Order-in-Original dated 30.11.2011 is passed in de-novo adjudication confirming all the proposals in the two show cause notices and the adjudicating authority has: (i) confirmed the confiscation and demands proposed vide first show cause notice dated 21.7.2008; (ii) confirmed total demand of Rs. 2,09,45,632/- under various heads under second show cause notice dated 19.01.2009, and (iii) cancelled the Private Bonded Warehouse License dated 10.9.2005 issued to the Appellant Company as proposed in second show cause notice dated 19.01.2009. 9. Aggrieved thereby Appellant Company filed the Appeal No. C/142 of 2012. Since penalties were imposed under Section 112(a) and 114 of the Act, on Mr Ajay Thoria, Operational Manager and Mr V Prasad Rao, Location Manager, of the Appellant Company, they have preferred Appeal Nos. C/143 of 2012 and C/246 of 2012. 10.1 The Ld. Advocate appearing for the Appellant Company and indi....
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.... having knowledge or reason to believe that the goods are smuggled goods. The Impugned Order thus fails on this count because the goods were not smuggled and as a natural consequence only if smuggled goods are sold, which onus to establish the initial smuggled nature having not being discharged and the goods being legally imported and stored in the DFS, Section 121 of the Customs Act, 1962 read with provision of FEMA, 1999 vitiates the order due to non-application of mind and the confiscation of amount USD 7142 and INR 18,100 allegedly being sale proceeds of duty free goods diverted allegedly into the local market is an unsustainable finding on surmises which deserves to be set aside. The mandatory condition of invocation and sustainability of Section 121 of the Customs Act, 1962 is not evident from the Impugned Order as there is no evidence brought on record to show any seizure and evidence of sale in the local market and thus the finding that the currency is allegedly sale proceeds of smuggled goods is not established beyond reasonable doubt. He relies upon the judgment of Ramchandra versus Collector of Customs reported in 1992 (60) E.L.T. 277 (T). 10.4 As far as the confiscat....
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....ting authority in compliance with Section 138B, nor was thus cross-examination offered before adjudication of the case. Mr. V Prasad Rao has subsequently stated on record that the statement of admission were taken under threat and coercion. 10.7 He also relied upon the judgment of Hon'ble Supreme Court in Hari Charan Kurmi, AIR 1964 SC 1184, to argue that even otherwise the statement of a co-accused can only be considered for corroboration of any tangible evidence. 10.8. He submitted that statements of various Customs officers were before the adjudicating authority. The Bond Officers admitted that they did not escort goods sold from DFS to individuals crew members as it was physically impossible. Apparently being satisfied that such escort was not required, these officers were not made co-noticees. However, the Respondent conveniently ignored the same. He submitted that even assuming for sake of arguments, that in this case, there is contributory default on part of both, as to how and on what basis only DFS and its officers were singled out to be made Noticees and not a single officer, which conveniently escaped the attention of the Respondent. He relied upon the judgment of ....
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....t the Appellant's duty-free shops at all times and were aware of the transactions in the shop. The invoices would show that the concerned officers had signed and affixed their seal. The Department was thus fully aware of the functioning of the DFS and their transactions. 13. Adjudicating Authority has not appreciated the conditions and procedures contemplated in the licence as Annexure A and Annexure B in the proper perspective. The Adjudicating Authority has made reference to Para 14 and 15 of the Annexure A. A perusal of conditions 14 and 15 of Annexure A and condition 4.3 of Condition B clearly shows that the licencee cannot enter the items bought by the outgoing crew member in the store list of the vessel and place it in the board under preventive escort. Similarly, as per condition No.15 of Annexure A once again duty is cast on the Master of the vessel to keep the items mentioned therein in the bonded locker of the vessel. These are undoubtedly the duty of the Master of the Vessel. Even if there was any lapse of the aforesaid conditions, the Appellant cannot be held in anyway responsible and in any event this cannot be shown as violation on the part of the Appellant to ....
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..../ passengers from their respective ships to the shop and back, the staff was given tips of small denomination. As regards the sum of Rs. 18,100/- the same was kept for meeting the expenses. In support of this it was also pointed out that the Appellant had issued a cheque for Rs. 25,000/- to the local Manager on 27.12.2007 which was cleared on 3.1.2008. However, the Adjudicating Authority without taking into consideration the reply in this regard, erroneously proceeded to presume that goods were diverted to local market. Neither the Show Cause Notice nor the adjudication order gives details of goods alleged diverted to the local market. The burden is on the department to clearly prove that the goods were diverted to the local market, which the department has failed to prove. Further the finding at Para 42.6 also imputes that there was recovery of USD 7,889/- and Rs. 18,100/- when searches were conducted in the DFS and the residential premises of the local manager and the staff. However, the said amounts were not seized from the residence of the staff. The finding arrived is only based on conjectures and surmises and is not sustainable in law. Hence the order of confiscation of USD 7....
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....eign passengers and therefore these are deemed exports. Hence the question of demanding duty does not arise, in absence of any intention to remove them for sale in domestic market, and any positive evidence of their clandestine removal beyond the customs barriers. 17.2 Serial No.2 bonded goods not carried forward from one stock and sale register to next - Duty proposed and confirmed: Rs. 28,490/- : This allegation is not substantiated in the Show Cause Notice. In any event, there would be no question of paying any import duty unless it is proved by the Customs Department that the goods have been removed outside the bonded warehouse. The Show Cause Notice refers to a DLink Camera under this category. However, the Appellant demonstrated before the Department that the said camera was still lying in the shop, which fact was also verified by the officers at that point of time. Further, as stated in the grounds of Appeal, this fact was again pointed out at the time of personal hearing on 29-08-2011. There is no denial even at this stage. But the adjudicating authority mechanically confirmed the demand based on the earlier order without any application of mind. Technical/ acco....
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....EGM register, but gave incomplete details in so far as it did not reflect the port of final destination or origin of the port for the voyage. Hence, in the absence of material particulars the allegation is not proved. On the other hand the Appellant in their reply dated 18.10.2009 has demonstrated that the ship's final destination was a foreign port and accordingly categorized so by the port authorities. Annexure I & X of the Show Cause Notice were reconciled with the data provided by the port trust and a concise chart was prepared and the same was filed. The Board's Circular No.15/2002 dated 25.02.2002 clarified the status of the foreign going vessel as defined in section 2(21) of the Customs Act 1962. Similarly the Board vide letter No 55 (16-Cus. 1/54 dated 11.10.1954) also clarified that what was to be seen was the final destination and if the final destination was a foreign port then it is irrelevant if the vessels touch Indian port's on the way to final destination. The condition attached to the license only stipulates that duty free goods are to be sold only to eligible crew members /Passengers. However, it never casts a duty on the Appellant to investigate any s....
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....not only beyond the scope of the show cause notice, but it also ignores the statements of the bond officers that the requirement to place on board under preventive escort will not apply to individual sales. It is settled law that the order of adjudication cannot travel beyond the Show Cause Notice and the order is liable to be set aside on this ground also, as held in: (i) (1998) 1 SCC 198 M.A. Jackson Vs Collector of Customs. (ii) (2005) 7 SCC 159 SACI Allied Product Ltd. U.P Vs Commissioner of Central Excise, Meerut. Hence, even this demand is not sustainable. 17.5 Sl. No.5 - sales allegedly made to crew members of vessel not arrived or already sailed Duty proposed -Rs. 6,18,650/-, Duty confirmed Rs. 55,130/-. The allegations made are vague without giving details of the ships. In most of the cases the invoice has been raised on the same day of the sailing of ship and hence it cannot be said the goods have been sold to ships which have not arrived. Annexure II & XI of the Show Cause Notice were reconciled with the data provided by the port trust and a concise chart was prepared and the same was filed. It cannot be ascertained as to on what basis th....
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....y the duty. Neither under Section 28 nor under Section 72, the alleged demand is sustainable. Section 28 will be applicable only when the duty is not levied, short levied or short paid in respect of imported goods. As far as Section 72 is concerned, none of the provisions of Section 72 are attracted. Section 72 (a) deals with goods improperly removed from warehouse in contravention of section 71. Section 71 only says that the goods should not be taken out of warehouse except on clearance for home consumption or re exportation or for removal to another warehouse. Though Section 72 has been invoked it has not been stated which clause of 72 is violated. Section 72(b)& (c) are not applicable and clause (d) refers to goods for which bond is executed under section 59 and which have not been cleared for home consumption or exportation or not duly accounted for to the satisfaction of the proper officer. Section 72 (d) is not applicable as the goods have been cleared for export. There is no dispute that the alleged excess sales are only for exportation. Once the goods pass into the custody of crew member / passenger he becomes the owner and only he is liable to pay duty, if he takes the goo....
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....rom the Appellant would even otherwise is unsustainable. The adjudicating authority has not given any benefit and confirmed even the balance amount of Rs. 3,06,577/- on the ground of not escorting the goods to vessel, which is again beyond the scope of the show cause notice, and even this demand is therefore unsustainable. 17.9. Sl.9 - excess sales allegedly made to crew members of the vessel proceeding to a coastal port Duty demanded Rs. 15,43,918/-, Duty confirmed- Rs. Nil: Show Cause Notice alleged that the ship were not foreign going ship, without ascertaining what the ultimate destination is. The Appellant has produced a letter from Port Trust authority showing the details of each ship, which describes them as foreign run vessel, which is as per Section 2(21) of the Customs Act which defines foreign going vessel as follows: "foreign going vessel or air craft, means any vessel or aircraft for the time being engaged in the carriage of goods or passenger between any port or airport in India and any port or airport outside India, whether touching any intermediate port or airport in India or not and includes, (i) Any naval vessel of a foreign governmen....
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.... Duty demanded Rs. 1,19,14,950/-, Duty confirmed- Rs. 1,67,03,863/- [Rs. 1,19,14,950/- + Rs. 47,88,913/- (duty befit denied for Sr. No. 4,5,6,7,8,9 and 10): Show Cause Notice did not substantiate with particulars as to how the proposed demand of duty amounting to Rs. 1,19,14,950/- was arrived at. The Appellant denied that duty was leviable on this ground. It is admitted that the sale is permissible to crew members who are embarking. There is no reason to deny direct sales to the crew members who are in transit. Sale of non-duty paid bonded goods from DFS is permissible to individual crew members who are embarking or disembarking. Placing them on ship with preventive escort is not necessary. If the passengers /crew are disembarking there is no question of the goods being taken on ship under preventive escort and placing them on board the ship. The show cause notice does not state as to how many crew members had disembarked or embarked. It is neither possible not practical that every individual sale of goods is to be taken on ship under preventive escort. According to the practice followed and as admitted by the Customs officers in their statements it is only when the Master....