TMI Blog2012 (7) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... enge the extended period of limitation - Held that:- The extended period of limitation under the proviso to Section 28(1) was not invokable as duty credit certificates used by the assessee under the TPS to secure duty-free clearance of the imported goods, the assessee can hardly be said to have done so with any intent to evade payment of duty and non-production of copies of Shipping Bills, which documents were already in the Department's possession, cannot amount to suppression of the documents by the assessee - consequently, the demands of duty on GL and SE are entirely time-barred. Consequent to demand being quashed the penalties imposed on GL and SE u/s 114A are liable to be set aside and that the penalties imposed on other appellants u/s 112 are also liable to be set aside. - C/249 to 252/2009; C/399 to 402/2009; C/363/2009 - - - Dated:- 6-6-2012 - Mr. P.G. Chacko, Mr. M. Veeraiyan, JJ. Mr. V.S. Nankani, Sr. Advocate, Mr. Satish Sunder, Advocate and Mr. Krishnanandh, Advocates for the appellants. Mr. P.R.V. Ramanan, Special Consultant for the Revenue. [Order per: P.G. Chacko] The main appeals, No.C/249/09 C/399/09 filed by M/s. Gimpex Ltd. (h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt s decision in Commr. Vs. Sayed Ali [2011(265) ELT 17 (SC)]. The Hon ble High Court of Andhra Pradesh disposed of the Writ Petitions ( WP Nos.15570 and 15571 of 2011) directing the CESTAT to reconsider the stay applications keeping in view the decision of the Supreme Court in Sayed Ali s case. Subsequently, this Bench reheard the stay applications of the parties and disposed of the same granting waiver of predeposit and stay of recovery in respect of the adjudged dues. In the de novo proceedings, it was submitted on behalf of the Department that the above jurisdictional question did not survive after the issue of Notification No.44/2011-Cus(N.T.) dt. 6/7/2011 by the Central Government. It was also submitted that legislation was under way to give retrospective effect to the Notification. However, the benefit of waiver and stay was granted by this Bench not for any jurisdictional reason but in view of the prima facie case made out on merits by the appellants. When ultimately the appeals came up for hearing, the legislation referred to by the learned Special Consultant for the Department was in place. The newly enacted sub-section (11) of Section 28 of the Customs Act gave retrospec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn Trade Policy (FTP), 2004-09 granted full exemption from payment of basic customs duty and additional customs duty (CVD) on goods imported into India against duty credit certificates/licences issued under the TPS. Any inputs, capital goods (including spares, office equipments etc.) and agricultural products, which were freely importable under the FTP, could be imported duty-free under the Notification subject to actual user condition. GL claimed this benefit of exemption in respect of the c.c. copper rods imported by them, and the relevant Bills of Entry were accordingly assessed and the goods allowed to be cleared without payment of duty. Subsequently, the DRI launched investigations into the manner in which GL had availed themselves of the benefit of TPS. The relevant documents related to the purchase of c.c. copper rods by GL from MMTC under High Sea Sale Agreements, import documents related to duty-free clearance of the goods under TPS, documents related to export of iron ore fines and other goods, correspondence between GL and MMTC and others, etc., were recovered and scrutinized by the DRI. Statements were recorded from functionaries of M/s. Gimpex Ltd., M/s. Mangalchand Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (v) Penalty of Rs.3,95,68,820/- (Rupees ninety five lakhs sixty eight thousands eight hundred and twenty only) is imposed on M/s. Gimpex Ltd. in terms of Section 114A of the Customs Act, 1962. (vi) In terms of Section 112(a) of the Customs Act, 1962, I impose a penalty of Rs.20 lakhs (Rupees twenty lakhs only) on Sri Samir Goenka, Joint Managing Director, M/s. Gimpex Ltd. and Rs.15 lakhs (Rupees fifteen lakhs only) on Sir Anil Goyal, General Manager, Metal Copper Division of M/s. Gimpex Ltd. (vii) In tersm of Section 112(b) of the Customs Act, 1962, I impose a penalty of Rs.7,50,000/- (Rupees seven lakhs and fifty thousand only) on Sri Ranjit Chaudhari, Managing Director of M/s. Mangalchand Alloys and Refineries Pvt. Ltd., Hyderabad. The first four appeals are directed against this order of the Commissioner. The Department s appeal, C/363/09, seeks enhancement of penalty on GL. 4. M/s. Sree Enterprises (SE) were engaged in the manufacture and export of articles of mild steel, articles of alloy steel such as ferro-silicon, etc. They obtained 11 duty credit certificates/licences in February, 2006 from the Joint DGFT, New Delhi by showing sufficient incremental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.15 lakhs (Rupees fifteen lakhs only) on Sri Anil Goyal, Authorised Signatory, M/s. Sree Enterprises. (vii) In terms of Section 112(b) of the Customs Act, 1962, I impose a penalty of Rs.10 lakhs (Rupees ten lakhs only) on Sri Ranjit Chaudhari, Managing Director of M/s. Mangalchand Alloys and Refineries Pvt. Ltd., Hyderabad. Appeals C/399-402/09 are directed against this order of the Commissioner. 5. Heard both sides. The learned counsel for GL and co-appellants referred to the relevant provisions of the Target Plus Scheme under the Foreign Trade Policy, 2004-09 and submitted that the imports made by GL were in accordance with the Policy provisions as interpreted by the Hon ble High Courts of Delhi and Mumbai and hence the benefit of Notification No.32/05-Cus. dt. 8/4/2005 was not deniable to the importer. In this connection, the learned counsel referred to the following judgments: i. Judgment dt. 5/8/2010 passed by a learned Single Judge of the Hon ble Delhi High Court in W.P.(C) No.2497 of 2008 (Indian Exporters Grievance Forum anr. vs. UOI and ors.). ii. Judgment dt. 24/2/2012 passed by a Division Bench of the Hon ble Delhi High Court in LPA No.755 of 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned order passed by the learned Commissioner by placing heavy reliance on the Board s Circular dt. 8/5/2007 and the DGFT s Public Notice dt. 21/6/2007 was liable to be set aside. 7. It was further submitted by the learned counsel that the entire demand of duty was beyond the normal period. The extended period of limitation was invoked on the alleged ground of suppression/wilful misstatement of facts by the assessee. In fact, GL had placed all the necessary materials including the duty credit certificates before the proper officer at the time of clearance of the goods imported by them. Nothing was misstated, misdeclared or suppressed in the Bills of Entry. On the basis of the particulars declared and the documents produced by GL, the proper officer assessed the Bills of Entry granting the benefit of Notification No.32/2005-Cus. to the assessee and, accordingly, the imported goods were cleared for home consumption. In such circumstances, the extended period of limitation could not have been invoked on the alleged ground of suppression or wilful misstatement of facts. The learned counsel submitted that the demand of duty was based on a misunderstanding of the relevant provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of provisions of the FTP. In any case, both Shri Sanjay Bansal and SE (his proprietorship) could not have been penalized at the same time for the same offence if any. 9. The learned Special Consultant for the Department argued that any goods to be imported under the TPS should have nexus/relation with the goods exported in the sense that the imported goods could have been useful for the processing/manufacture /packing of the export goods. Even as per the Standard Input-Output Norms (SION), c.c. copper rods were specified inputs for the manufacture of copper wire, conductors and equipments such as stators/motors, but the goods exported by GL were none of these but industrial minerals like iron ore fines, bentonite etc. The imported goods did not have even a broad nexus with the goods exported by GL. Similarly, there was no nexus between the goods exported by SE (articles of mild steel, articles of alloy steel etc.) and the c.c. copper rods imported by them. 10. The learned consultant also referred to the judgments passed by the Hon ble High Courts of Delhi and Bombay in the cases of Indian Exporters Grievance Forum (supra) and Essel Mining and Industries Ltd. (supra). Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch nexus could be better ascertained with reference to the provisions of ITC(HS) Schedule. 11. The learned Special Consultant for the Department also contested the assessees challenge against the invocation of Section 28 of the Customs Act. While admitting that all the assessments of the Bills of Entry were final, he submitted that the Customs Department had power to invoke Section 28 to recover the duty forgone. In this connection, he relied on the Supreme Court s judgment in UOI vs. Jain Shudh Vanaspati [1996(86) ELT 460 (SC)]. In another context, the learned Consultant submitted that the Customs Department was only examining the importer s claim for duty exemption under Notification No.32/2005-Cus. and was not sitting in judgment over any action of the DGFT. In this connection, he claimed support from the Supreme Court s judgment in Sheshank Sea Foods Pvt. Ltd. vs. UOI [1996(88) ELT 626 (SC)]. 12. We have given careful consideration to the submissions. At the outset, we shall deal with one basic issue raised by the assessee-appellants. It was submitted that Section 28 of the Customs Act should not have been invoked to demand the duty forgone, without a successful challe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act for recovery of further amount of duty of over Rs. 24 lakhs from them as also for confiscation of the goods and imposition of penalty on the importer. One of the questions of law framed by the Hon ble High Court reads thus :- Whether the Tribunal was right in holding that the order of assessment on which no Appeal was preferred, can be reopened by issue of a fresh show-cause notice under Section 28A(sic) of the Customs Act, in the light of the apex court s decision reported in 2004 (172) E.L.T. 145 (S.C.) in the case of Priya Blue Industries Ltd. v. Commissioner of Customs ? The Hon ble High Court answered the above question in favour of the Revenue in paragraph 6 of its judgment, which is reproduced below :- 6.?With regard to question No. 1, the law is well settled that a show-cause notice under the provisions of Section 28 of the Act for payment of customs duties not levied or short-levied or erroneously refunded can be issued only subsequent to the clearance of the goods under Section 47 of the Act vide Union of India v. Jain Shudh Vanaspati Ltd. [1996 (86) E.L.T. 460 (S.C.)]. Therefore, as rightly held by the Tribunal, if the contention of the appellant s counsel that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the assessees, GL and SE, satisfied the requirements of the TPS under the FTP, 2004-09 to claim the benefit of Notification No.32/2005-Cus. dt. 8/4/2005 in respect of continuous cast copper rods imported by them during the relevant period under the duty credit certificates/licences granted by the DGFT. GL had obtained such certificates/licences from the DGFT after exporting iron ore fines etc. of Engineering Products Group and bentonite and certain other items of Chemicals and Allied Products Group. SE had obtained such certificates/licences after exporting articles of mild steel and alloy steels of the Engineering Products Group. All the licences required the importers to establish a broad nexus between the imported goods and the goods exported for obtaining the above certificates/licences from the DGFT. The Bills of Entry filed by the importers were assessed duty-free in terms of Notification No.32/2005-Cus. dt. 08/04/2005, which exempted goods when imported into India against a duty credit certificate issued under the TPS in accordance with para (3.7.) of the FTP, from basic customs duty and additional customs duty (CVD) subject to certain conditions including actual user co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in the goods exported. It is not possible to read para (3.7.6.) restrictively. (Delhi HC) ii. Given the objective of providing an incentive to exporters, para (3.7.6.) of the FTP can reasonably be interpreted to require an exporter to show that the goods imported should have broad nexus with reference to any product group of the exported groups within the overall value of the entitlement certificate. The word nexus obviously refers to a larger group of similar goods and not the very exported goods itself. (Delhi HC) iii. Reading paragraph (3.7.6.) of the FTP, it is evident that an eligible exporter is entitled to utilize duty credit in the import of any inputs, provided (i) they are freely importable and (ii) they are imported by importers for their own use. Para (3.7.6.) does not stipulate that the goods which are imported must be inputs for the manufacture of the export product in relation to which the benefit of the TPS is claimed. What para (3.7.6.) requires is that the goods which are imported by the eligible exporter must be inputs and the inputs must be imported for their own use , meaning thereby the use of the importer himself. (Bombay HC) iv. Para (3.7.6.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... steel(sleeves, collors etc.) and articles of alloy steels (ferro-silicon etc.) through ICD, Patparganj during 2003-04 and 2004-05. The TPS certificates were registered at ICD, Tuglakabad and the TRAs obtained from there were used by SE for duty-free import of c.c. copper rods through ICD, Hyderabad. It cannot be in dispute that both the exported and imported goods (steel articles and copper rods respectively) belonged to the same group viz. Engineering Products as per SION. The broad nexus which was required to be established between the imported and exported goods under the FTP provisions as construed by the Hon ble High Courts was established by SE. 18.1. GL had obtained their TPS certificates/licences from the DGFT after exporting iron ore fines falling under SION s Engineering Products Group and also exporting items such as bentonite falling under SION s Chemicals and Allied Products Group, through Chennai and other ports during 2003-04 and 2004-05. The TPS certificates were registered at Chennai Seaport Customs and the TRAs obtained from there were used for duty-free import of c.c. copper rods under the TPS through ICD, Hyderabad. Though it is not in dispute that the c.c. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of this sort was considered by the Hon ble High Courts in the cited cases of Indian Exporters Grievance Forum (Delhi) and Essel Mining and Industries Ltd. (Bombay) and, therefore, in our view, GL (whose case resembles the hypothetical case supra) cannot claim support from the Hon ble High Courts judgments to the plea that a broad nexus was established in terms of para (3.2.5.) ibid between the c.c. copper rods imported by them and the products exported by them. 18.3. We do not find it prudent to think that para (3.2.5.) ibid implied that a person having obtained a TPS certificate by exporting goods of two or more different product groups could, under the scheme, import inputs with a broad nexus with any of the exported products within the overall value of the certificate. The expression any of the product groups of the exported goods within the overall value cannot be so liberally construed as to mean that, where two or more goods of different product groups are exported by a person for the purpose of obtaining TPS certificate from the licensing authority, he need not establish any nexus between some of the exported goods and the inputs imported under the TPS and that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e detriment of the licensees by the licensing authority at the instance of the Customs authorities or otherwise. Where such certificates were used by the assessees under the TPS to secure duty-free clearance of the imported goods, the assessees can hardly be said to have done so with any intent to evade payment of duty. One has to presume that the TPS certificates were issued to them by the DGFT after due verification of the relevant Shipping Bills and allied export documents. Obviously, the Shipping Bills filed under the Target Plus Scheme had been duly assessed and all the exports cleared by the Customs authorities for shipment. Copies of such Shipping Bills must be part of the Customs record. If that be so, non-production of copies of Shipping Bills, which documents were already in the Department s possession, cannot amount to suppression of the documents by the assessees. Even if it be assumed that the assessees suppressed anything before the Department, they cannot be held to have done so with intent to evade payment of duty. 19.3. The Target Plus Scheme itself was short-lived when compared to other export promotion schemes. The clarificatory Circulars/Public Notices issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no proposal in the show-cause notices to impose any penalty on them under Section 112 of the Act and no such penalty was imposed on any of them by the adjudicating authority though the goods imported by them were held liable to confiscation in terms of Section 111(o) of the Act. The adjudicating authority, however, chose to impose penalties on the other appellants under Section 112 of the Act on the ground that they were instrumental in aiding and abetting the importers in misuse of Target Plus Scheme and evasion of Customs duty . In other words, according to the adjudicating authority, GL and SE are the main offenders and others are abettors. As no penalty was proposed or imposed on GL and SE under Section 112 of the Act, there can be no penalty under the said provision on the so-called abettors. In the result, all the penalties imposed under Section 112 are liable to be set aside. 21. For the reasons stated hereinbefore, we hold i. that, for claiming the benefit of exemption under Notification No.32/2005-Cus. dt. 08/04/2005 under the Target Plus Scheme, it was not necessary for the assessee-appellants to establish that the goods imported as input by them were usable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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