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TMI Blog2002 (7) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... of Entry involving utilisation of DEPB in question as mentioned in Annexure-VII. The proceedings relating to the aforesaid SCN are pending before the Commissioner of Customs, ICD, New Delhi (hereinafter referred to as the Commissioner). The applicant has accepted an amount of Rs. 2,03,69,587/- as payable by them. The SCN demands an amount of Rs. 19,44,83,561/- towards customs duty involved in goods imported by utilization of the DEPB licences in question and an amount of Rs. 1,39,91,998/- towards customs duty on import of capital goods against an EPCG licence. 2. The applications have been registered in the Commission as SA(C) 245-246/2002, dated 6-5-2002. 3. The brief facts of the case are that on receipt of an intelligence, DRI initiated inquiries in April, 1999 in the exports of CD Roms under DEPB Scheme by the applicant. Various statements were recorded and investigation carried out with the buyers of the exported goods abroad. Inquiries were also extended into the remittances of export values by the applicant. It appears from the investigation carried out that : (i) M/s. PPL exported 11,95,250 pcs of CD ROMs at grossly inflated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CD ROMs were being bought individually. The CD titles exported by M/s. Harshita Ltd. were similar and identical to the CD titles exported by M/s. PPL and had been manufactured and supplied by M/s. PPL to M/s. Harshita Ltd. (vi) There was huge difference in export price of individual CD titles by M/s. PPL. The CD title "Torcher" was exported at US $ 29.00 per pc. as well as at US $ 39 per pc. Similarly CD title 'Yellow Star' was exported at US $ 22.50 per pc as well as US $ 29.50 per pc. It was not understandable as to how M/s. PPL was able to export the same CD titles at such different prices to the same buyer in USA at about same time. (vii) The replication cost of CD ROMs of another well established company namely M/s. Super Cassettes Industries Ltd., Noida was as low as Rs. 12/- to Rs. 15/- per pc. Mr. Vince Webb, President, CD Micro, Mr. Wayne Sun, President M/s. Rainbow Technology, Mr. Bob Lewis, President M/s. Modern Media Ventures Inc. and M/s. Warner Brothers denied that M/s. PPL had any copyright to replicate or export their titles. Modern Media Ventures, USA, the Copyright holder of most of CD ROMs exported by M/s. PPL, ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o that these funds could be utilized for realisation of proceeds against over-valued exports. (xii) The contention of M/s. PPL in respect of higher domestic price for the CD ROMs was not tenable. (xiii) The export transactions of M/s. PPL were not bona fide, genuine or based on objective market conditions. The CD ROMs had only been 'transferred' to the US and the remittances were being arranged. No attempt was being made to sell/dispose huge quantity of CD ROMs lodged in a Public Warehouse as they had no worthwhile value. No market existed for the CD Titles exported in the US. The firms which imported the goods from M/s. PPL had been propped up by M/s. PPL at one stage or the others and the persons running these firms were also party to the fraud. (xiv) M/s. PPL had fraudulently obtained 33 DEPB Licences of total credit value of Rs. 19,44,93,767/- even without realising substantial portion of export proceeds and transferred these DEPB licences to various importers. (xv) These DEPB licences were utilized by various importers for importation of Duty free goods which led to the evasion of Customs duty. (xvi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be held liable for confiscation under Section 113(d) of the Customs Act, 1962 (hereinafter referred to as the Act). (ii) Penalty should not be imposed upon them under Section 114 of the Act for their various offences, omissions and commissions as aforesaid. (iii) Customs duty as mentioned against the name of each importer in the Annexure-VII of the SCN evaded by importing goods without payment of appropriate Customs duty against fraudulently obtained DEPB licences should not be demanded and recovered from them under Section 28(1) of the Act by invoking the first proviso to the said Section of the said Act. (iv) The said goods imported vide Bills of Entry as mentioned in Annexure-VII of the SCN should not be held liable for confiscation under Section 111(o) of the Act, 1962, and on their being not available for confiscation, why appropriate redemption fine should not be imposed under Section 125 of the Act. (v) Penalty under Section 114A of the Act should not be imposed upon them for their various offences, omissions and commissions as aforesaid. (vi) &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugust, 2001 canceling the DEPB licenses in question and further the applicant had filed an appeal against the said cancellation order to the Additional Director General of Foreign Trade in October, 2001. 7. The DRI submitted further report under Section 127C(1) of the Act on 21-6-2002. 8. The case was heard for admission on 21-6-2002. During this hearing, the advocate informed the Bench that the applicants are manufacturers of CD Roms and Audio CDs and export these products. The applicants are exporting the goods under DEPB scheme and were claiming credit after the exports have been made. According to circular issued by Ministry of Commerce if a product is entitled to credit @ 15% or more than the amount of credit shall not exceed 50% of the present market value of the export products. The applicant had made such declaration on the shipping bill in accordance with the requirement of Ministry of Commerce. The Advocate further informed the Bench that prosecution in this case has been launched against the applicant and the applicant is on bail and thus they are not seeking immunity from prosecution under the Customs Act as the Settlement Commission is not empowered to gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unity from prosecution under the Act but were asking for only immunity from fine, penalty, interest and also from prosecution under other Central Acts. 8.4 In re-submission, the Advocate of the applicant drew the attention of the Bench to the proviso to sub-section (1) of Section 127H and the definition of the term 'case' in the Section 127A(b) of the Act pointing out that these provisions clearly reflect that applications can be made even where complaints of prosecution has been filed and the proviso in Section 127B of the Act refers to cases pending in the court regarding levy, assessment and collection of duty i.e. where the SCN demanding duty has been challenged in a Court of Law. The Advocate also cited a judgment in the case of Shri Aggarwal Trading Company as reported in 2001 (131) E.L.T. 711 wherein the Commission after examining various judgments of the Courts have come to the conclusion that the proviso in Section 127B does not cover cases of prosecution complaints. 8.5 As Revenue requested for sometime to examine this issue and present their arguments, the Bench directed that the case be heard again on 25-6-2002 at 11.30 AM. 9. DRI submitted further rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Excise Act. 10.2 The Bench drew the attention of the Advocate for Revenue to Section 127B of the Act which defines the parameters for admission of a case. The Bench stated that at this stage they were only concerned whether the provisions of Section 127B are satisfied and the applicant has made a true and complete disclosure of their duty liability and indicated the manner in which the accepted duty liability has been arrived at. 10.3 The Advocate for the applicant argued for the admission of the application and stated that the allegations in the show cause notice regarding wilful suppression and mis-declaration are yet to be proved. He further stated that the Department is not legally empowered to question the transfer/sale of DEPB licences to other persons by the applicant and to deny the imports by such persons under the DEPB licences. The applicant have come before the Commission to admit their liability and as the applicant satisfy all the conditions for admission, the application should be admitted. The Advocate for the applicant also countered the argument of Revenue that no immunity can be granted from interest, fine and penalty in cases where prosecutions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt obligation. 10.8 On a further query by the Bench in relation to Clause (a) of the first proviso to sub-section (1) of Section 127B of the Act, the Advocate of the applicant clarified that they have filed shipping bills in respect of their exports and they have also filed bills of entry in respect of imports effected by them by utilising the DEPB issued to them. Further, the other persons to whom the DEPB was sold have also filed bills of entry while effecting their imports. It is also clarified that the show cause notice issued to them is in respect of the shipping bills and the bills of entry filed by them as also by other persons who effected imports under DEPB issued to the applicant and the show cause notice has the effect of demanding duty jointly and severally from each of them. The Advocate submitted before the Bench that he fully satisfied Clause (a) of the first proviso. The Advocate also clarified that the applicant had not accepted the cut-off date adopted by RBI in arriving at the amount of export proceeds which have not been received in the country and that they had calculated their duty liability on the basis of whatever export proceeds have been received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1985 (61 of 1985) has been committed : Provided also that no application under this sub-section shall be made for the interpretation of the classification of the goods under the Customs Tariff Act, 1975 (51 of 1975). (2) Where any dutiable goods, books of account, other documents or any sale proceeds of the goods have been seized under Section 110, the applicant shall not be entitled to make an application under sub-section (1) before the expiry of one hundred and eighty days from the date of the seizure. (3) Every application made under sub-section (1) shall be accompanied by such fees as may be specified by rules. (4) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant. SECTION 127A. Definitions. - In this Chapter, unless the context otherwise requires, - (b) "case" means any proceeding under this Act or any other Act for the levy, assessment and collection of customs duty, or any proceeding by way of appeal or revision in connection with such levy, assessment or collection, which may be pending before a proper officer or the Central Government on the date on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to be payable by him including the particulars of such dutiable goods in respect of which he admits short-levy on account of mis-classification or otherwise of goods. Under the law the Settlement Commission can proceed with such an application provided it is not hit by any of the provisos of sub-section (1) of Section 127B. The Commission, on receipt of an application, is required to call for a report from the Jurisdictional Commissioner of Customs and on the basis of the material contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Commission may allow the application to be proceeded with or reject it. The application shall not be rejected unless the applicant has been heard by the Commission. Similarly if the Jurisdictional Commissioner of Customs does not furnish the required report within the stipulated period, it shall be presumed that the Commissioner of Customs has no objection to such application. The Commissioner, however, has the right to raise objection, if any, at the time of hearing fixed by the Commission for Admission of the application. The law also requires that the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to levy, assessment or collection of duty or mis-classification of goods, and, therefore, the case is beyond the jurisdiction of the Commission as held by the Hon'ble Madras High Court in the judgment cited above. (iii) The acts of commissions and omissions of the applicant are malicious and wilful and the applicant is not an un-intending defaulter or a one-time tax-evader and, therefore, the application should not be allowed to be admitted. Reliance in this respect is placed on the observations of Justice Wanchoo Committee and also on para 14 of the Hon'ble Supreme Court's judgment in the case of CIT v. Express Newspapers reported in 1994 (206) ITR 443 and paras 15 and 16 of the Hon'ble Supreme Court's judgment in the case of Kuldeep Industrial Corporation v. ITO and others as reported in 1997 (223) ITR 840. (iv) The admission of additional duty liability of Rs. 2,03,69,587/- by the applicant is not a full and true disclosure of their liability as there is : (a) over invoicing of exports; (b) non-grant of extension by RBI for realisation of export proceeds beyond January, 2000; (c) & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue are merely relying on certain show cause notices issued to the applicant company. We find that none of these SCNs have been adjudicated upon establishing the guilt of the applicant. The applicant have approached the Commission by filing two separate applications demanding customs duty in respect of the DEPB imports and imports under Advance Licences on the basis of allegation that the export goods in all these cases have been over-valued and consequently the duty free imports are not in order. We do not find any authority in law to deny admission of such cases. Revenue's reliance on the observations of Justice Wanchoo Committee and the judgments of the Hon'ble Supreme Court referred to above do not sustain their objection. The Wanchoo Committee in para 32 (Chapter-II) of its report stated that : "This, however, does not mean that the door for compromise with an errant taxpayer should for ever remain closed. In the administration of fiscal laws, whose primary objective is to raise revenue, there has to be room for compromise and settlement. A rigid attitude would not only inhibit a one time tax evader or an unintending defaulter from making a clean breast of his affairs, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is relevant for the purpose of this case. We may, however, mention that sub-section (1A) has since been deleted and a proviso introduced in sub-section (1) as the second proviso, which reads as follows :- "Provided further that the Commissioner shall furnish the report within a period of one hundred and twenty days of the receipt of communication from the Settlement Commission in case of all applications made under section 245C on or after the date on which the Finance (No. 2) Act, 1991, receives the assent of the President and if the Commissioner fails to furnish the report within the said period, the Settlement Commission may make the order without such report." The effect of the above legislative change brought about in 1991 is material. 19. Similar is the position in the second case referred to above. At the relevant time, the aforesaid provision required that an application shall not be proceeded if the Commissioner objects to the application being proceeded with on the ground that concealment of particulars of income or perpetration of fraud by the applicant for evading any tax has been established or is likely to be established by any income-tax authority in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequent duty liability arising therefrom. It is not proper for us to comment at this stage on the nature or adequacy of Revenue's evidence as contained in the SCN since the Commission would deal with that aspect while passing an order under sub-section (7) of Section 127C of the Act. In view of this, we do not find any substance in this objection of Revenue. We are, however, satisfied that the disclosure made by the applicant of his duty liability and the manner in which he has arrived at the same is reasonable, particularly since it is not in dispute that remittances of the full declared export values have been received through the Banking channels and there is no allegation of any hawala payment or any evidence that the proceeds received are in respect of anything other than the export goods in question. 21. In view of our findings above, we allow the applications to be proceeded with under Section 127C(1) of the Act. The accepted duty liability of Rs. 2,03,69,587/- shall be appropriated from the deposit of Rs. 10 crores with the DRI and compliance thereof submitted to the Commission within two weeks of the receipt of this order. 22. DRI shall submit all original reco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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