TMI Blog2014 (2) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... of a concentration that rendered them fit for consumption. - Order set aside - Decided in favor of appellant. - CRL. A. 118 of 2008, CRL.A. 148 of 2008 - - - Dated:- 4-2-2014 - S. Muralidhar,JJ. For the Appellant : Mr. Rajeev K. Virmani, Senior Advocate with Mr. Ashish Kothari and Mr. Abhay Pratap Singh, Advocates For the Respondent : Mr. Subhash Bansal, Advocate JUDGMENT 1. Crl. A. 118 of 2008 by Pernod Ricard India Pvt. Ltd. ( PRIPL ) and Crl. A. 148 of 2008 by Sunil Mehdiratta are directed against the impugned common order dated 30th October 2007 passed by the Appellate Tribunal for Foreign Exchange ( AT ) dismissing their respective Appeal Nos.1116 and 1117 of 2004, thereby affirming the order dated 21st September 2004 passed by the Special Director ( SD ), Directorate of Enforcement ( DoE ) holding the Appellants to be in violation of Section 8(3) and (4) of the Foreign Exchange Regulation Act, 1973 ( FERA ) and levying a penalty of Rs. 2,00,00,000 on the company and Rs. 50,00,000 on Mr. Sunil Mehdiratta. 2. By an order dated 14th February 2008, the impugned order was stayed by this Court and thereafter the said interim order made absolute by order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionally assessed, as and when the final assessment took place. It is stated that in light of the PD bond furnished by SMPL, the bills of entry ( B/E ) filed by SMPL for further imports were also provisionally assessed during the years 1994-2000. 6. It is stated that, sometime in 1998, the Directorate of Revenue Intelligence ( DRI ) initiated an investigation into the imports of CAB by SMPL. On 19th December 2000, the DRI issued a show cause notice ( SCN ) to SMPL in which it was stated that SMPL had misdeclared the value and the description of the imported goods between the years 1994 to 2000. SMPL was asked to show cause to the Commissioner of Customs, New Delhi why the value of the imported goods be not determined as suggested therein and penalty be not imposed on it. A demand under Section 28 of the CA was also raised. Order of the High Court 7. Aggrieved by the aforementioned SCN, SMPL filed CWP No. 1348 of 2001 before this Court. The said writ petition was disposed of by the Division Bench by an order dated 27th August 2001, which reads as under: Heard. Notice issued under Section 28 and Section 111 of the Customs Act, 1962 (in short the Act) is assailed in this writ pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecutives. The Appellant has summarized the allegations in the SCN thus: (a) During December 1994 to April 2000, SMPL had imported three types of blend matured whiskies, namely, Something Crl. A. Nos. 118 of 2008 148 of 2008 Page 6 of 19 Special , Passport and 100 Pipers and vatted malts used in the production of admix whisky; (b) Value of such imports covered by 197 consignments from Chivas Brothers Ltd. and Joseph E. Seagram Sons was GBP 24,88,840; (c) The above items were supplied at lower prices as compared to the supplies to the other countries; (d) The said blend matured whisky and vatted malts were imported by declaring the same as concentrate of alcoholic beverages as against the actual description of scotch whisky; (e) That by declaring lower value than the actual value and by misdeclaring the description of the imported goods, SMPL have failed to utilize the foreign exchange of GBP 28,88,840 for the purpose for which it was so acquired and thereby appeared to have contravened the provisions of Section 8(3) read with Section 8(4) of FERA and (f) That by misdeclaring the value of the goods, SMPL have violated Section 8(1) of FERA. 11. The Memorandu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the comparative study of the prices of imports by other liquor manufacturers in India. It was noted that the other liquor manufacturers were importing the goods of the same quality at much higher rates. Accordingly, it was held that the charges against SMPL for contravention of Section 8(3) and (4) FERA had been established. However, it was held that the charge under Section 8(1) FERA had not been proved. 13. As regards Mr. Mehdiratta, the SD observed that he was actively involved in the import negotiations, fixation of prices, dealing with the suppliers etc. and, therefore, his involvement in the transactions which resulted in the commission of the offences stood proved. Consequently, the SD proceeded to levy penalties, as earlier mentioned, on the company as well as on Mr. Mehdiratta. The order of the Appellate Tribunal 14. Aggrieved by the aforementioned order of the SD, SIPL (with which SMPL had amalgamated during the pendency of the adjudication proceedings) and Mr. Mehdiratta filed Appeal Nos. 1116 of 2004 and 1117 of 2004 respectively. The AT dismissed the appeals and one more appeal by the Managing Director of SMPL by the common impugned order dated 30t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se than for that purpose or, as the case may be, fail to comply with any condition to which the permission granted to him is subject, and where any foreign exchange so acquired cannot be so used or the conditions cannot be complied with, the said person shall, within a period of thirty days from the date on which he comes to know that such foreign exchange cannot be so used or the conditions cannot be complied with, sell the foreign exchange to an authorised dealer or to a money-changer. (4) For the avoidance of doubt, it is hereby declared that where a person acquires foreign exchange for sending or bringing into India any goods but sends or brings no such goods or does not send or bring goods of a value representing the foreign exchange acquired, within a reasonable time, or sends or brings any goods of a kind, quality or quantity different from that specified by him at the time of acquisition of the foreign exchange, such person shall, unless the contrary is proved, be presumed not to have been able to use the foreign exchange for the purpose for which he acquired it or, as the case may be, to have used the foreign exchange so acquired otherwise than for the purposes for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning added flavouring and, in the case of liqueurs and cordials, usually certain amount of added sugar. C. All other spirituous beverages not falling in any proceeding heading of this Chapter. Provided that their alcoholic strength by volume is less than 80% vol, the heading also covers undenatured spirits (ethyl alcohol and neutral spirits) which, contrary to those at (A), (B) and (C) above are characterized by the absence of secondary constituents giving a flavor or aroma. These spirits remain in the heading whether intended for human consumption or for industrial purposes. 20. The HSN, therefore, makes it clear that undenatured ethyl alcohol is not the same as the spirits listed under A,B and C above. Consequently, heading 2208.90 covered undenatured ethyl alcohol of an alcoholic strength of less than 80%. What is apparent from the HSN is that compound alcoholic preparations are not intended to be consumed immediately. The CAB imported by SMPL was admittedly 60 to 63% V/V concentration. It was, therefore, not possible to be consumed immediately. It was also not imported in bottles, but in large wooden vats. It could not have been sold as such for consumption. It was mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as potable whisky or gin. 22. In that view of the matter, the order of the SD holding that there was misdeclaration of the goods, because what was imported was scotch whisky of 63% strength, is not sustainable in law. Interestingly, the SD notes that the imported CAB of 63% concentration was to be used for blending of Indian liquor at 42.8%. In other words, what was imported by SMPL could not be sold as such for consumption and answered the definition of CAB. The AT too appears to have overlooked the fact that CAB of a concentration higher than 42.8% V/V could not be sold as such and had to be diluted or blended to bring it to 42.8% V/V concentration. 23. Mr. Subhash Bansal, learned counsel for the DoE, referred to the information obtained from the exporters abroad. He referred to para 6 of SD s order dated 21st September 2004 which noted that while the goods were described by overseas suppliers as CAB in their invoices, in the export declarations they declared the goods to be wholly malt scotch whisky and scotch blend whisky and that in the export declaration, the commodity code number was declared which specifically covered for scotch whisky. He further submitted that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26. The third issue concerns the value declared in the invoices. The SD appears to have misinterpreted what was stated in the Memorandum dated 23rd May 2002. Page 2 of the SCN set out the rates at which the different brands of whisky were supplied by SCL to other countries and compared them with rates charged for the supplies to India. These were not invoice prices of imports of similar goods by other manufacturers of alcoholic beverages as was erroneously noted in the adjudication order of the SD. Consequently, the conclusion of the SD in para 44 that the goods supplied to SMPL were grossly under invoiced is not based on any material available to the SD. If there was such material, then it was not put to the Appellant and therefore could not have formed the basis of the order. No violation of Sections 8 (3) and 8 (4) FERA 27. The DoE has been unable to counter the submissions of the Appellants that the foreign exchange acquired was fully utilized for making payments against the import invoices. The language of Section 8 (3) read with Section (4) indicates that the said provisions would be attracted in three possible situations in the context of the import of goods. Fir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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