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2021 (5) TMI 1078
Classification of goods intended to be imported - preparation/product of betel nut (API supari, Chikni supari, unflavoured supari and boiled supari) commonly known as Supari, which does not contain lime or katha (catechu) or tobacco but may or may not contain any other ingredients such as food starch, cardamom, copra, mulethi, menthol (flavours), perfume etc. - classifiable under the CTH 2106 90 30 as food preparation or not? - HELD THAT:- In these cases, one set of processes are found to be intended for cleaning; the second set for enhancing preservation; and third set for enhancing appearance or presentation, Addition of starch would be included under such process. It is found that these processes are clearly covered by the Chapter Note 3 to Chapter 8. It is also noted that during the personal hearings the learned advocate requested to consider the distinction arising out of moderate and heavy boiling. In this regard, it is also submitted in the application that with the process of boiling, betel nut loses the character of being fresh & dried nut therefore the item will not be covered under Chapter 8.
It is found in the instant case, betel nuts after being boiled are dried; and this fact per se would not exclude the end-products from the scope of "dried nuts". Further, it is equally obvious to me that boiling or mere addition of certain additives for the limited purpose of enhancing preservation or appearance or ease of consumption per se does not result in obtaining a preparation of betel nut. Speaking more generally, in view of the design of the Schedule to the CTA, HSN and plethora of judgements, besides common understanding and parlance, every irreversible process docs not result in obtaining a new product with a distinct classification even at the eight or ten-digit level; and every irreversible process does not result in coming into being of a "preparation of the raw material".
The processes to which raw betel nuts have been subjected to obtain API supari, Chikni supari, unflavoured supari and boiled supari are squarely in the nature of processes referred to in the Chapter Note 3 to Chapter 8 and HSN Note. Therefore, at the end of the said processes, the betel nuts retain the character of betel nut and do not qualify to be considered as "preparations" of betel nut, which is sine qua non for a good to be classifiable under Chapter 21.
Flavoured supari - whether the addition of special flavouring agents would render the betel nuts into preparations of betel nuts, classifiable under Chapter 21? - HELD THAT:- Hon'ble Supreme Court of India in the case of CRANE BETEL NUT POWDER WORKS VERSUS COMMR. OF CUS. & C. EX., TIRUPATHI [2007 (3) TMI 6 - SUPREME COURT] in the case of AZAM LAMINATORS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, TRICHY (VICE-VERSA) [2019 (3) TMI 782 - CESTAT CHENNAI] [where scented betel nut was being manufactured by cracking of dried betel nut into small pieces, and thereafter, gently heating it with addition of vanaspati oil, sweetening and flavouring agents and marketed in small pouches as Nizam Pakku (in Tamil)/Betel Nut (in English), the Hon'ble CES TAT held the resultant product classifiable under sub-heading 08029019 of Central Excise Tariff and not under 21069030 as supari for period after 07.07.2009] are relevant.
Put simply, these decisions clearly imply that addition of flavouring agents do not change the character of the good, meaning in the present case betel nut would continue to remain betel nut and not become preparation of betel nut.
Thus, all the five goods placed before me for consideration, i.e., API supari, chikni supari, boiled supari, unflavoured supari, and flavoured supari, merit classification under Chapter 8 of the First Schedule to the Customs Tariff Act, and more precisely, under the heading 0802. This is so in view of the fact that the processes to which raw green fresh betel nuts have been subjected to obtain the said five goods are squarely in the nature of processes mentioned in Note 3 to Chapter 85 and have not materially changed the essential character of betel nuts, as held by the Hon'ble Supreme Court in the M/S Crane Betel Nuts case. Further, the said five goods are not classifiable under sub-heading 21069030, as contended by the applicant, since they have not attained the character of "preparations" of betel nut, which is sine qua non for a good to be so considered.
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2021 (5) TMI 1066
Classification of goods proposed to be imported - API supari - Chikni supari - unflavoured supari - Boiled supari - to be classifiable under chapter 8 or chapter 21? - HELD THAT:- In the instant case, betel nuts after being boiled are dried; and this fact per se would not exclude the end-products from the scope of "dried nuts". Further, it is equally obvious to me that boiling or mere addition of certain additives for the limited purpose of enhancing preservation or appearance or ease of consumption per se does not result in obtaining a preparation of betel nut. Speaking more generally, in view of the design of the Schedule to the CTA, HSN and plethora of judgements, besides common understanding and parlance, every irreversible process does not result in obtaining a new product with a distinct classification even at the eight or ten-digit level; and every process does not result in coming into being of a "preparation of the raw material".
The processes to which raw betel nuts have been subjected to obtain API supari, Chikni supari, unflavoured supari and boiled supari are squarely in the nature of processes referred to in the Chapter Note 3 to Chapter 8 and HSN Note. Therefore, at the end of the said processes, the betel nuts retain the character of betel nut and do not qualify to be considered as "preparations" of betel nut, which is sine qua non for a good to be classifiable under Chapter 21.
Flavoured supari - whether the addition of special flavouring agents would render the betel nuts into preparations of betel nuts, classifiable under Chapter 21? - HELD THAT:- The addition of flavouring agents do not change the character of the good, meaning in the present case betel nut would continue to remain betel nut and not become preparation of betel nut.
The conclusion that all the five goods placed before me for consideration, i.e., API supari, chikni supari, boiled supari, unflavoured supari, and flavoured supari, merit classification under Chapter 8 of the First Schedule to the Customs Tariff Act, and more precisely, under the heading 0802. This is so in view of the fact that the processes to which raw green fresh betel nuts have been subjected to obtain the said five goods are squarely in the nature of processes mentioned in Note 3 to Chapter 8, and have not materially changed the essential character of betel nuts.
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2021 (5) TMI 1063
Recovery of duty drawback - rejection of appeal of the Applicant on the ground that the Applicant had not realized the export proceeds in the stipulated time period or such extended period - Rule 16A of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 - HELD THAT:- Government observes that, in terms of Rule 16A(1) ibid, the drawback is recoverable if the export proceeds are not realized within the period allowed under the Foreign Exchange Management Act, 1999, including any extension of such period. Admittedly, in the instant case, the export proceeds have not been realized within the period allowed nor has the extension been granted by the competent authority under FEMA.
Further, the provisions of rule 16A(1) enabling recovery of drawback if the export proceeds are not realized within the period allowed under FEMA, including any extension of such period, is not merely a procedural requirement. It is to be observed that drawback is paid before realization of export proceeds and recovery thereof is initiated if such proceeds are not realized within the period prescribed, including any extension of such period. If the requirement of realization within prescribed period is not treated as a mandatory condition, the process of recovery shall remain an unending exercise and thereby render the provisions of Rule 16A(1) otiose. As such, the contentions of the applicant, on this count, are not acceptable.
Government do not find any infirmity in the impugned Order-in-Appeal, in so far as it relates to the Applicant herein - revision application is rejected.
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2021 (5) TMI 1036
Classification of goods - API/boiled supari - Chikani supari - Unflavoured supari - Flavoured supari - merits classification under Chapter 8 of the Customs Tariff or not? - HELD THAT:- No ruling can be given in respect of classification of API/boiled supari, which, according to both the applications, undergo the same processes on the raw/green nut.
The arguments of the Learned Counsel for the applicants that the products intended for import by them undergo roasting and boiling and therefore do not merit classification under Chapter 8 of the Customs Tariff need to be rejected when the notes to Chapter 8 are read together with the relevant HSN Explanatory Notes. In view of the relevant Chapter Notes and HSN Explanatory Notes, the processes of roasting and boiling alone are not sufficient to take the products under consideration here out of the purview of Chapter 8. So far as the argument that Supplementary Note 2 to Chapter 21 shouldn’t be made redundant is concerned, it is very clear that so far as chikni supari and unflavoured supari are concerned, there is no doubt regarding inapplicability of the said note to these products.
Hon’ble Calcutta High Court in the case of Killing Valley Tea Co. v. Secretary to State [1920 (5) TMI 1 - CALCUTTA HIGH COURT] has held that a tea leaf remains the same even after being subjected to mechanical processes like withering, crushing, roasting, fermenting, etc., is a definite pointer to the principle that need to be applied for classification in such matters.
Hon’ble Supreme Court’s in their decision dated 11-9-1979 in the case of D.S. Bist and Ors. [1979 (9) TMI 168 - SUPREME COURT] has held that all agricultural produce undergoes some processing on or outside the farm in order to make it non-perishable, transportable, and marketable and just because processing is a bit longer or complicated wouldn’t rob the produce of its agricultural character. The observations of the Hon’ble Supreme Court in the case of M/s. Crane Betel Nut Powder Works [2007 (3) TMI 6 - SUPREME COURT], that the process of cutting betel nuts into small pieces and addition of essential/non-essential oils, menthol, sweetening agent, etc., did not result in a new and distinct product having a different character and use is also an extension of the same line of reasoning. This decision of the Hon’ble Supreme Court has been subsequently followed by the Chennai Bench of the Hon’ble Tribunal in the case of Azam Laminators [2019 (3) TMI 782 - CESTAT CHENNAI] where scented betel nut was being manufactured by cracking of dried betel nut into small pieces, and thereafter, gently heating it with addition of vanaspati oil, sweetening and flavouring agents and this product classifiable under sub-heading 0802 90 19 of Central Excise Tariff which is aligned with customs tariff.
Thus, even flavoured supari merits classification under Heading 0802 of the Customs Tariff and not under Heading 2106 as argued by the applicants - ruling in respect of API/boiled supari - application disposed off.
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2021 (5) TMI 1032
Waiver of Demurrage Charges levied by ICDs/CFSs/Port/Terminal Operators during lockdown - HELD THAT:- Hearing is concluded - Whichsoever counsel wants to say anything in addition to what has already been argued/stated in the written arguments filed, may, within one week file a note of arguments of not more than three pages.
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2021 (5) TMI 1000
Waiver of demurrage and detention charges on the goods - one time relaxation, as per Article 14 of the Plant Quarantine (Regulations of Import into India) Order, 2003 - HELD THAT:- Since the issue is pending with the first respondent on the entitlement of the petitioner for one time relaxation, as per Article 14 of the Plant Quarantine (Regulations of Import into India) Order, 2003 and the order passed by this Court in M/S. DIAMOND NUTS, VERSUS THE PLANT PROTECTION OFFICER (E) DEPUTY COMMISSIONER OF CUSTOMS (GROUP I) TUTICORIN, CENTRAL WAREHOUSING CORPORATION [2021 (6) TMI 265 - MADRAS HIGH COURT], directing to the first respondent to fumigate the goods through an accredited treatment provider, by providing one time relaxation to the petitioner under Article 14 of the Plant Quarantine (Regulations of Import into India) Order, 2003, this writ petition is closed at present, with liberty to the petitioner to renew this application, pursuant to the orders of the first respondent in M/S. DIAMOND NUTS.
Petition closed.
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2021 (5) TMI 985
There is neither an appearance on behalf of the respondents, nor have the respondents filed a counter-affidavit - Counter-affidavit, if any, will be filed within the next five weeks, albeit, subject to payment of cost.
Proof of cost will be placed on record - List the matter on 25.08.2021.
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2021 (5) TMI 979
Refund of IGST - principles of natural justice - HELD THAT:- As the Respondents have not taken any final decision on the refund sought, it is directed the concerned Respondents to decide the claim of the Petitioner for refund of the aforesaid amount under the Integrated Goods and Service Tax Act, 2017 as expeditiously as possible and practicable in accordance with law, rules, regulations, Government policies including principles of unjust enrichment as propounded by Hon’ble Supreme Court in MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [1996 (12) TMI 50 - SUPREME COURT] and on the basis of evidence on record.
Petition disposed off.
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2021 (5) TMI 976
Smuggling - Gold - It is the case of the petitioner that since the respondent appeared to have committed offences punishable under Sections 132 and 135 of the Customs Act, 1962 - HELD THAT:- Perusal of the record shows that the respondent is a native of Afghanistan and there is every possibility that he would abscond and fail to return to India in case he is permitted to go to his country at this stage and thus misuse his liberty. The investigation in the present case is still underway and charge sheet is yet to be filed. In case, the petitioner is allowed to leave the country, the same will hamper further investigation of this case and the filing of the charge sheet. Moreover, keeping in view the nature and gravity of the allegations, it is not a fit case where permission to go abroad should be granted.
The petition stands allowed.
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2021 (5) TMI 932
Time Limitation period for filing a suit for malicious prosecution, against the customs authorities/officials - Section 155(2) of the Customs Act, 1962 - HELD THAT:- A reading of Section 155(2) of the Customs Act, 1962, shows that the earlier Section (in the Sea Customs Act, 1878), has simply been merged and set out in continuity. The side headings of the provision have also been omitted. A cause for confusion has thus arisen, leading to varying interpretations of this provision by different Courts - A perusal of the provisions of The Limitation Act, 1963, shows that the period of limitation for filing of a suit for malicious prosecution is one year, from the date when the Plaintiff is acquitted or when the prosecution against the Plaintiff is otherwise terminated.
In the present case, the Plaintiff was acquitted on 11th April 2007. Parallelly, however, show-cause proceedings were commenced against the Petitioner and the show-cause notice, issued by the Customs Authorities, was quashed on 13th September, 2006. The quashing of the said show-cause notice was upheld by the ld. Supreme Court on 18th August, 2017. Considering the fact that the show-cause notice had also raised issues which were overlapping in nature, it is possible to take a view that until and unless this show cause notice finally terminated, with the judgment of the Supreme Court, the limitation does not begin for the Plaintiff to avail her remedy to file a civil suit - In the present case, however, the Court need not even venture so far. The date of the acquittal of the Plaintiff/Respondent is 11th April 2007 and the suit for malicious prosecution was instituted by her on 11th April 2008. As per Section 12(1) of the Limitation Act, the date from which the period of limitation is to be reckoned, is to be excluded while calculating the said period. This would clearly mean that the date, as on which the order of acquittal of the Plaintiff was pronounced by the ld. Sessions Judge, would have to be excluded for the purpose of calculating the limitation of one year for filing of the suit for malicious prosecution. Thus, the limitation, under Section 3 of the Limitation Act r/w Entry 74 of the Schedule would commence only on 12th April 2008. The suit for malicious prosecution in the present case, having been filed on 11th April 2008 which is within the period of one year, is therefore well within the limitation prescribed under The Limitation Act, 1963.
This court is of the opinion that the suit is well within limitation, as the period of limitation under Section 3 and Section 12 of the Limitation Act, 1962, r/w Entry 74 of the Schedule of the Limitation Act, would have ended only on 12th April 2008, which is one day after the date when the suit for malicious prosecution was presented by the Plaintiff/Respondent. The suit is thus within limitation.
Petition dismissed.
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2021 (5) TMI 909
Rectification of Mistake - waiver of penalty under Section 114AA of the Customs Act - reduction of penalty under Section 112 (a) of the Customs Act - HELD THAT:- The scope of an application under Rules 41 for Rectification of Mistakes is only to rectify any mistake apparent on record and not to review any decision already taken even, if any party feels that the decision is not correct. The aggrieved party can take recourse to appellate remedies if it is not satisfied with the Final Order.
The first alleged mistake pointed out by the applicant is that in paragraph 5 of the Final Order, it has been recorded that all the ETAs submitted were fake, while, in fact, as recorded in paragraph 6 of the impugned order in original passed by the Learned Commissioner, only two ETAs were fake and the rest 14 ETAs were issued by DOT but were held to be invalid in the OIO because they were meant for Fitbits manufactured in USA while the Fitbits which were imported were manufactured in China - As clarified in paragraph 2(ii) of the Minutes of the meeting held by Chief Commissioner on 24-11-2016 a copy of which was enclosed as Annexure 20 to the Appeal, the ETAs are valid even if they are of a different country of origin. The two fake ETAs accounted for goods worth ₹ 1,26,69,14/- while the remaining 14 FTAs accounted for goods worth ₹ 1,39,45,581/-. We find that this mistake needs to be rectified in the Final Order.
The second alleged mistake is that they had obtained fresh ETAs in lieu of the fake ones which they had initially submitted, therefore, the goods imported were not liable for confiscation. We find that this submission was made and was recorded in paragraph 3 and the decision was recorded in paragraph 7 of the Final order - this submission was considered and in the Final Order, the appellant was still considered liable to penalty. There is no error apparent on record.
The third submission is that there is no prohibition on import of wireless devices which was not considered by Tribunal in the Final Order - in paragraph 3 of the Final Order, the argument of the appellant that the goods were not liable for confiscation as they were not imported contrary to any prohibition under the Customs Act or any other law for the time being in force was recorded and the submissions by the DR were recorded in paragraph 4 - In the present case, the entire case is built upon this National Treatment under paragraph 2.03. Therefore, we find no force in the argument of the applicant that their import was not in violation of any law and hence the imported goods were not liable for confiscation nor were they liable to penalty.
Penalty imposed on the applicant under Section 112 (a) (ii) of the Customs Act, 1962 - HELD THAT:- The argument of the learned Counsel that the penalty cannot be more than the duty sought to be evaded under Section 112(a)(ii) is untenable since there was neither any allegation of attempt to evade payment of duty by the department nor any arguments were made on this point. We therefore, find that there is no force in this argument. The quantum of penalty, however, needs to be reconsidered, since 14 of the 16 ETAs were genuine with only wrong Country of Origin, which, according to the final clarification of the DOT does not matter and the ETAs are valid.
The application for rectification of mistake is disposed off.
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2021 (5) TMI 908
Confiscation - short payment of Customs Duty - valuation of this remnant ATF - cost of transportation - rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - HELD THAT:- An amount should actually be agreed to be paid and a liability created is for such payment, irrespective of actual payment. The use of the word ‘paid’ or ‘payable’ means that it would cover those cases also where actual payment of the agreed amount for cost and services is deferred to be paid on a subsequent date - Even under rule 10(2) of the 2007 Rules, the cost of transport incurred in respect of the imported goods is required to be added to the value of imported goods only if the same has been incurred and does not already form part of the value of the goods that are imported. The first proviso to rule 10(2) of the 2007 Rules contemplates of a situation where the cost of transportation is not ascertainable and it is only in such a situation that 20% of the FOB value of imported goods can be added.
It, therefore, follows that where transportation of goods is involved and cost is actually incurred or is liable to be incurred for such transportation, such cost has to be added to the transaction value, but where there is no transportation of goods nor there is any liability to incur the cost of such transport, the first proviso to section 14(1) of the Customs Act and rule 10(2) of the 2007 Rules would not be attracted.
Transportation - whether the ATF which is filled in the fuel tank of an aircraft is actually being transported through an aircraft? - HELD THAT:- The answer clearly is that the airlines are not transporting ATF for delivery to India. ATF which is filled in the fuel tank of the aircraft is actually required to fly the aircraft and is a consumable for the airlines. It cannot, in such circumstances, be urged that ATF is being transported through the aircraft. A different situation would, however, arise if an oil company specifically imports ATF in large containers/tanker as ‘goods’ or as cargo, for the purpose of selling the same to airlines. There can be no doubt that in such a situation the cost of transportation for import of ATF would have to be included in the transaction value for the purpose of determining the customs duty liability - Thus, if there is no transportation of remnant ATF, the notional cost of freight cannot be included in the value of remnant ATF.
Cost For Transportation - HELD THAT:- If no cost of transportation is incurred/suffered by the airlines, no amount as “cost” is payable in towards transportation of the remnant ATF - In the instant case, it has been found as a fact that neither the ATF is transported nor any cost is incurred. The notional value of transportation under the proviso to rule 10(2) of the 2007 Rules cannot, therefore, be added to the transaction value. The transaction value has to be determined strictly in accordance with section 14(1) of the Customs Act and rule 10(2) of the 2007 Rules.
Notional charges have to be included only in cases where actual invoice price for the remnant ATF is not available or such invoice price does not include the cost of transportation when actually incurred but the amount incurred is not ascertainable. The Instructions further provide that in the absence of such invoice price, the price at which Indian Airlines/ Air India purchase the ATF at the Mumbai Airport i.e. IOCL price for International flights should be taken into consideration. The Instructions do not mandate further addition of insurance charges when IOCL price is to be adapted, even when such charges are not incurred - thus, the inclusion of the cost of insurance or the cost of transport is dependent on the provision of section 14(1) of the Customs Act and rule 10(2) of the 2007 Rules and not on any practice followed by the Customs Authorities/Airlines.
No amount towards alleged transportation cost is required to be included in the value of remnant ATF under rule 10(2) of the 2007 Rules for determining the transaction value under section 14(1) of the Customs Act - reference answered.
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2021 (5) TMI 905
Quantum of Redemption Fine and Penalty - misdeclaration of imported goods - goods declared as heavy melting scrap but was found to be re-rollable scrap - HELD THAT:- Nowhere, the Revenue has come with the evidence that prior to the physical examination of the goods in question, the appellant was having any knowledge of the description of the goods that they are not heavy melting scrap and are re-rollable scrap. In this circumstance, although the goods are liable for confiscation as they were not found as declared but redemption fine imposed is on higher side, accordingly the same is reduced to ₹ 40,000/- and penalty is also reduced to ₹ 10,000/-.
Appeal allowed.
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2021 (5) TMI 902
Levy of redemption fine and penalty - provisional release of goods - goods declared as as heavy melting scrap but was found to be secondary and defected MS Sheets - HELD THAT:- On detection of the goods on being mis-declared by the appellant, the appellant sought provisional release of the goods which was allowed and at that time, the appellant paid differential duty alongwith interest and 15% of duty as penalty in terms of Section 28(5) of the Customs Act, 1962. Later on, the show cause notice has been issued to the appellant to adjust the duty paid by the appellant under Section 18(2) of the Customs Act, 1962.
The provision of Section 18(2) speaks that “when the duty leviable on such goods is assessed finally (or re-assessed by the proper officer) in accordance with the provisions of this Act, then the amount paid by the assessee at the time of clearance shall be adjusted.” On going through the records placed, there is no final assessment order has been placed which means the provisional release of the goods has been treated as final and the duty paid by the appellant has been adjusted under Section 18(2) of the Act. It is very strange that without finalization of the assessment, re-assessment of the bill of entry, how the duty paid by the appellant has been adjusted under section 18(2) of the Act and demanded the interest and imposed the penalty on the appellant.
Without demanding duty under Section 28(1) of the Act, how can it be adjusted under section 18(2) of the Act. Technically speaking the demand of differential duty is also not sustainable in the circumstances till finalization of the assessment; as the appellant has not contested the payment of duty and sought conclusion of the matter under Section 28(5) of the Act. Moreover, when the demand of interest has been made under Section 28 AA of the Act, naturally or consequentially the provisions of Section 28(5) of the Customs Act, 1962 have been attracted in the facts and circumstances of the case. Therefore, the duty, interest and penalty paid by the appellant at the time of clearance of the goods shall amounts to be concluded under Section 28(5) of the Customs Act, 1962 Instead of doing so, the officers of the Revenue has gone beyond that, which is not permissible in law.
The duty, interest and 15% penalty in terms of Section 28(5) of the Customs Act, 1962 paid by the appellant is sufficient - appeal allowed.
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2021 (5) TMI 876
Maintainability of petition - association can file appeal or not - Levy of interest for delayed payment under the DEPB Scheme - difference between the DEEC and DEPB schemes - HELD THAT:- In view of the dictum laid down by the Hon’ble Supreme Court of India in MAHINDER KUMAR GUPTA AND ORS. VERSUS UNION OF INDIA (UOI) AND ORS. [1994 (9) TMI 369 - SUPREME COURT] holding the an Association cannot file writ petition seeking relief espousing the cause of its individual members and does not affect any legal right of that Association, it is also not possible to entertain these writ petitions for that reason.
Petition dismissed.
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2021 (5) TMI 867
Valuation of imported goods - related persons - Subvention payments by a parent company to its loss making subsidiary - capital receipts - impugned order has been passed after an inordinate delay of more than one year after hearing - submissions made before the first appellate authority were not considered.
Delay in passing the impugned order and allegations of pre- meditated order - HELD THAT:- It is not a healthy practice to pass an order after such a long time. However, no legal provision has been brought on record to show that the delay renders the impugned order invalid. The delay, though, highly undesirable, does not invalidate the impugned order in the absence of any such legal provisions - appellant argues that the impugned order is pre-meditated. This is an allegation in the appeal but this imputation against the learned first appellate authority is not backed by any evidence and needs to be dismissed.
Arguments that the earlier SVB order stops the department from opening up the issues in the second SVB order - HELD THAT:- Legally speaking nothing stops the officer from examining each import made by an importer from a related person to see if the relationship affected the price. As it will be rather cumbersome to do so, the investigation done once and an SVB order issued is normally applied for imports for a period of three years assuming that in all these years, the price is not affected by the relationship. Both the SVB orders issued in this case clearly indicate that they are subject to occasional review and also a final review after three years - there are no no force in the argument of the appellant that since the first SVB order had found that their relationship with the foreign supplier had not affected the prices at that time, the department cannot examine if such is the case in all subsequent imports.
True Up payments - HELD THAT:- True Up is an arrangement between the appellant and the parent company. No law requires such a payment nor can it influence the transaction prices. Let us say, the appellant has suffered a loss of $ 10,000. The shareholders suffer this loss in proportion to the shares held by them. Since the parent company owns 99.99% of the shares of the appellant, it suffers a loss of $9,999 on their investment in the appellant. Alternatively, the parent company can transfer to the appellant to cover some or all of the loss as True Up payment to keep the appellant company afloat. The parent company need not pay as True Up any of this loss or may pay as True Up some or all of the loss. The losses incurred by the appellant have no bearing on the invoice value whether the losses are recouped by the parent company in the form of True Up payments or not.
Expenses on marketing and advertisement, etc. - HELD THAT:- Rule 10 (1) (e) requires that any payment made as a condition for sale to either the seller or to a third party to satisfy the obligations of the seller is to be included in the value. We find that if the appellant is responsible for certain activities such as customs, taxability, inventory costs, distribution and sales promotions including advertising and marketing for its entire business in India, it cannot be called a payment to their foreign supplier but would be managing affairs related to its own business. It would have been a different case, if the appellant was required, as per the agreement to promote, at its cost, the sales by the foreign suppliers to other customers in India or make some payment on behalf of the seller to a third party. In such a case, some expense would have been incurred by the appellant which could have been examined to see if it formed an additional consideration for the sale of the goods to the appellant - The appellant is a distributor and is in the business of selling the cars which necessarily requires them to deal with imports, pay taxes, promote sales, advertise, etc. These, in our considered view, cannot be termed as expenses incurred on behalf of the foreign supplier although the foreign supplier would also indirectly benefit if the appellant’s business improves. The foreign supplier is also independently selling the goods (cars) to embassies, etc. and there is nothing on record to show that the appellant has incurred any expenses to promote such sales.
Comparison with prices of sales to independent buyers - HELD THAT:- The premium for the additional features and customisation is decided by the manufacturer and paid for by those independent customers. The difference between sale in retail and sale in bulk also must be accounted for. There is nothing in the impugned order that the Commissioner (Appeals) has come to prima facie conclusion based on some data that the additional features and the difference in quantities do not account for the price difference. It is not also indicated how the original authority is expected to achieve this quantification. We, therefore, find no substance in such a direction in the impugned order for re-examination.
Another finding in the impugned order is that the adjudicating authority has not verified the balance sheets to conclude that no amount is paid or payable directly or indirectly to or on behalf of the supplier of the imported goods for engineering, development, art work, design work and plans and sketches undertaken elsewhere than in India - there are nothing in the order to show that some payments were noticed by the Commissioner (Appeals) towards engineering, development, art work, etc. If the Commissioner (Appeals) could not, after considering the department’s appeal for one year after concluding the hearing, find that some payments were made towards these, it is not justifiable to brush aside the order of the original authority on some suspicion without any basis.
The last of the findings in the impugned order is that the original authority had come to a conclusion that the relationship has not affected the price merely on the importer’s statements. We find that original authority had given findings based on analysis. If the Commissioner (Appeals) found some reason to conclude otherwise, he could have so decided after pointing out how the relationship affected the invoice price and what elements should be added to the invoice price to arrive at the value but he did not.
The order dated 12.04.2018 passed by the Commissioner (Appeals) allowing the appeal filed by the Department and setting aside the order-in-original cannot be sustained - Appeal allowed - decided in favor of appellant.
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2021 (5) TMI 866
Levy of penalty on shipping line u/s 112 of the Customs Act, 1962 - mis-declaration of goods in description as well as in quantity in bills of landing - HELD THAT:- It was asked by the ld. AR “please let me know whether the seal of the container was intact or not?” This was answered in affirmative. As the fact has not been disputed by the Revenue and the mis-declaration of weight and description of the goods was found at the time of physical examination of the goods.
Reliance placed in the case of M/s M S C Agency India Pvt Ltd [2013 (11) TMI 1230 - CESTAT CHENNAI] where it was held that when the seal of the container was intact, in that circumstance, penalty on the shipping line cannot be imposed - The said decision is based on the decision of Hon’ble Bombay High Court in the case of Shaw Wallace & Co. Ltd. v. Asstt. Collector [1986 (7) TMI 106 - HIGH COURT OF JUDICATURE AT BOMBAY].
The penalty on the appellant cannot be imposed - appeal allowed - decided in favor of appellant.
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2021 (5) TMI 837
Smuggling - Foreign marked Gold - burden of proving the non-smuggled nature of the seized goods - gold jewellery confiscated covered by section 123 of the Customs Act or not - cash seized as sale proceeds of smuggled goods confiscated under section 121 covered by Section 123 of the Customs Act or not - reasonable belief that the goods/cash seized were smuggled so as to shift the burden under section 123 upon the appellants or not - discharge of responsibility of proving non-smuggled nature of the seized goods/cash - Confiscation - penalty - HELD THAT:- The burden of proof shifts under Section 123, when (a) there must be goods to which the section applies; (b) the goods must have been seized; and (c) the seizure must be under a reasonable belief that they are smuggled goods.
Whether the goods seized in the case are covered under section 123? - HELD THAT:- There is also no allegation that the currency is smuggled. It has been confiscated as sale proceeds of smuggled goods, and not as smuggled goods. Such currency (being fruit of a poisonous tree), is liable to confiscation under section 121. A plain reading of section 123, which shifts the burden of proof, does not show it covers sale proceeds of smuggled goods. Therefore, while gold and manufactures thereof (jewellery in this case) are covered by section 123, currency is not covered at all. Thus, as far as currency is concerned, the burden of proof is on the department and not on the person from whom it is seized.
Confiscation of Jewellery - HELD THAT:- The case of the Revenue is NOT that it is smuggled but that it is made from smuggled gold. Therefore, notwithstanding this change of form (from primary gold to ornaments), jewellery would be liable to confiscation under section 120. If the jewellery was allegedly smuggled and was seized under such a reasonable belief, section 123 would apply. Since jewellery is not even alleged to be smuggled, section 123 does not apply unless it can be shown that it has been made out of smuggled gold.
Whether the officers had a reasonable belief, as required under Section 123, that the seized goods were smuggled goods - HELD THAT:- When searched, the gold was seized not only from their bags but also from concealed in shoes and from specially made pockets of the backpack. When asked, they could not produce any document to show legitimate import. The seized goods included 9 gold bars with foreign markings with purity of 99.5%, five cut pieces of gold and also of 99.5% purity and 120 foreign marked gold coins with a purity of 91.6%. The rest of the goods were jewellery and miscellaneous gold items of 87.5% purity. In our considered view, in this factual matrix, the officers had a reasonable belief that they were smuggled goods. Therefore, the condition of reasonable belief is fulfilled insofar as the alleged smuggled goods are concerned. - Similarly, the gold coins seized in the Jammu based businesses of Deepak were also of foreign origin and therefore, the officers had a reasonable belief that they were smuggled gold.
The confiscation of these goods under sections 111(d) and section 111(i) are sustainable and confiscation under section 111(p) needs to be set aside.
Gold jewellery weighing 4.687 kg and miscellaneous items of gold weighing 0.742 kg with a purity of 87.5% seized - HELD THAT:- The jewellery is not liable to confiscation in the absence of any evidence that it is smuggled or it has been made by converting smuggled gold. The mere fact that the jewellery was found along with the smuggled gold bars and gold coins makes no difference.
Foreign origin gold coins weighing 1118.24 grams in all seized from the business premises of M/s. Radhika Jewellers and M/s. Baibhav Ornaments, Jammu seized on 24.8. 2017 - HELD THAT:- Import of gold was permitted during the relevant period only by authorized agencies and the appellants were not so authorized. If they had purchased the gold from some authorized agency, they would have the documents to establish this fact. From the records of the case, it is evident that the appellants could not produce any such documents to show that these were not smuggled. Therefore, the presumption is that these are smuggled gold. As discussed above, these coins are liable for confiscation under section 111(d) of the customs Act.
Indian currency amounting to ₹ 9,64,000 seized from Baibhav Ornaments and ₹ 3,64,500 seized from Radhika Jewellers - HELD THAT:- The currency was seized under section 121 as ‘sale proceeds of smuggled goods’. This section states that ‘Where any smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled goods, the sale-proceeds thereof shall be liable to confiscation’. This section does not shift the burden of proof to the person(s) from whom the cash is seized. It is for the Revenue to establish that the cash which was seized was (a) the sale proceeds; (b) the goods sold were smuggled goods; and (c) the person who has so sold the goods had either the knowledge or the reason to believe that the goods were smuggled. Merely because some unaccounted for cash is lying, it cannot be confiscated unless the three conditions in Section 121 are fulfilled - From the records of this case, it is not found that the Revenue has established any of these factors or even identified which were the smuggled goods which were sold by the person from whom the cash is seized.
Penalty of ₹ 50,00,000 imposed on Deepak Handa under Section 112 - HELD THAT:- It is not in doubt that Deepak was in possession of and was found carrying smuggled gold bars and gold coins which we have held were correctly confiscated under Section 111(d) and 111(p) of the Customs Act. Therefore, Deepak had rendered himself liable to penalty under section 112. A penalty of ₹ 50,00,000/- was imposed upon him. Considering that we had set aside some of the confiscations (jewellery and currency) as not sustainable, we reduce the penalty on Deepak Handa to ₹ 20,00,000/-.
Penalty of ₹ 10,00,000 imposed on Ravi Handa under Section 112 - HELD THAT:- Ravi Handa, brother of Deepak Handa was managing the Baibhav ornaments in Jammu where 1118 grams of the confiscated foreign marked gold coins recovered. Indian currency recovered from him was also confiscated which we have set aside. Considering these factors, it is found that Ravi Handa has rendered himself liable to penalty under Section 112 but the penalty needs to be reduced. Accordingly, we reduce the penalty imposed on Ravi Handa to ₹ 2,00,000/-.
Appeal allowed in part.
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2021 (5) TMI 835
Suspension or revocation of registration of authorised courier - failure in exercising due diligence - receipt of bills of entry under the cover of letters - case of appellant is that appellant was only a courier agent who filed bills of entry of the importers - HELD THAT:- The job of an authorized courier agent is somewhat similar to the job of a customs broker. He is required to file declarations before the customs officers in respect of all the consignments, which were imported by him based on the documents. He has no authority to open the consignment. Further he is also required to verify the identity of the importers through KYC documents. In other words, he needs to verify whether the importer actually exists or otherwise which is part of the due diligence process. In this case, the appellant received the KYC documents of all the three alleged importers under the cover of their letters but they were received through Balvinder Singh. Having received the documents, the appellant verified the KYC documents and found the importers to be genuine - The second set of documents which the appellant received is in the form of invoices along with the consignments. These are received from the overseas exporter. Based on these documents, the appellant filed declarations with the customs. On investigation, customs officers found that the shoes which were imported were counterfeit Nike shoes. The fact that they were counterfeit was ascertained after an expert evaluation by Nike Creations, the brand holder.
The appellant, as an authorized courier, is prohibited from opening the packages. It would have been a difference case, if there was sufficient evidence that the appellant was aware that the goods were counterfeit shoes or if the appellant had a role to play in the scheme to import them - The only fault of the appellant is that instead of receiving the KYC documents directly from the hands of the owners of M/s Legend Creations and M/s. Personal Creations, it received the documents with covering letters handed over by Balvinder Singh. This action of the appellant does not constitute not exercising due diligence to ascertain the correctness and completeness of any information which he submitted to the proper officer with reference to any work related to the clearance of imported goods as required under Regulation 12(1)(v).
The appellant has not violated Regulation 12(1)(v) and therefore, revocation of the registration and forfeiture of security deposit under Regulation 13(1) and imposition of penalty under Regulation 14 cannot be sustained - Appeal allowed - decided in favor of appellant.
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2021 (5) TMI 742
Levy of IGST on oxygen concentrators - right to health and affordable treatment - Whether the State's action, of imposing IGST on oxygen concentrators, which were directly imported by individuals, albeit free of cost, without the aid of a canalising agency runs afoul of Article 14 of the Constitution? - HELD THAT:- On the day, when the instant petition was served on the Standing Counsel for the State, i.e., 03.052021, yet another notification bearing no. 4/2021-Customs, dated 03.05.2021, was issued by the State; this time, by exercising powers under Section 25(2)5 of the Customs Act. Through this notification, the State, inter alia, exempted the imposition of IGST on oxygen concentrators subject to the conditions provided in the annexure appended to the said notification - The conditions prescribed in the notification dated 03.05.2021, prevent the petitioner from claiming exemption from imposition of IGST, although, the oxygen concentrator imported by him is gifted [i.e., has been received free of cost] and is for personal use. Condition no. 1, which exempts from the imposition of IGST only those oxygen concentrators that are imported, for COVID relief through a canalizing agency creates, to our minds, a manifestly arbitrary and unreasonable distinction between two identically circumstanced users depending on how the oxygen concentrator has been imported. Imposition of IGST is, thus, as per notification dated 03.05.2021, completely waived, i.e., exempted, if the oxygen concentrator is imported through a canalizing agency.
The exclusion of individuals, such as the petitioner, from the benefits of the 03.05.2021 notification only because they chose to receive the oxygen concentrators as a gift, albeit directly, without going through a canalizing agency is, in our opinion, violative of Article 14 of the Constitution - There is no justification whatsoever in excluding individuals from the purview of notification dated 03.05.2021 only on the ground that they received oxygen concentrators directly as gifts from their friends and/or relatives located outside the country. It is the petitioner’s case that the oxygen concentrator was shipped to him by his nephew who is located in New York, United States of America.
What is, to be borne in mind, is not the benefits the State has granted up until now. What is instead, required to be judicially reviewed is the action of the State, in not treating, even-handedly, persons, who ordinarily should fall in the same class users. The distinction, drawn, as noted above, is manifestly arbitrary, unreasonable, unfair and wholly unsustainable.
Whether Article 21 of the Constitution, which includes the right to health and affordable treatment, would require the State to demonstrate that levy and collection of the impugned tax in times of pandemic, war, famine, floods, and such like conditions would subserve public interest? - Whether Article 21 of the Constitution, imposes on the State, a positive obligation to provide adequate resources for protecting and preserving the health and well-being of persons residing within its jurisdiction? - HELD THAT:- If the State expected its action to be sustained, in the instant case, it ought to have demonstrated, that the revenue, it would possibly garner, as IGST, in respect of oxygen concentrators which are imported in the circumstances, in which, the petitioner is put, would be appreciably more than the cost incurred to administer the collection of IGST on such transactions. These details need not have borne mathematical precision; a broad-brush approach would have sufficed-so that we could be persuaded to hold that denying relief to the petitioner and persons similarly circumstanced would be in public weal. The counter-affidavit filed by the State gives us no clue whatsoever concerning this vital issue - the petitioner has demonstrated, by adverting to his circumstances, that IGST involves “distinct and noticeable burdensomeness”, which is, directly attributable to its imposition.
A bare perusal of the IGST Act would show that the Government can exempt, generally, either absolutely or subject to such conditions as it may specify, inter alia, goods or services or both of any specified description from whole or any part of tax leviable thereof with effect from such date as it may indicate provided that it is satisfied that it is necessary in the public interest to do so based on a recommendation received from the GST Council in that behalf - The said provision does not bind the Government to issue an exemption notification even if a recommendation in that regard is made by the GST Council. Furthermore, a perusal of the notification dated 01.05.2021 and 03.05.2021, would show that the State has exercised its powers for grant of exemption by relying upon Section 25(1) and 25(2) of the Customs Act in respect of so much of IGST that was leviable under Section 3(7) of the CTA read with Section 5 of the IGST Act. There is no reference in these two notifications to Section 6(1) of the IGST Act.
There is weight in Mr. Datar’s argument that the power to grant exemption from IGST is relatable to Section 3(12) of the CTA.
The compliance of clause (a) of condition no. 104 appended to entry no. 607A of the General Exemption No. 190, should suffice, in our opinion. Thus, it would be sufficient if the persons, who are similarly circumstanced as the petitioner, furnish a letter of undertaking, to the officer designated by the State which would, inter alia, state that the oxygen concentrator would not be put to commercial use. Till such time an officer is designated by the State, it would be in order, if the importer were to address the letter of undertaking to the Joint Secretary, Customs and/or his/her nominee and handover the same to the officer detailed at the customs barrier.
The imposition of IGST on oxygen concentrators which are imported by individuals and are received by them as gifts [i.e. free of cost] for personal use, is unconstitutional - the declaration notification no. 30/2021 dated 01.05.2021 is quashed.
Petition disposed off.
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