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Maldhari Sales Corporation & Others, Subhash Gupta, Janki Ram Versus Union of India & Others

2016 (2) TMI 309 - DELHI HIGH COURT

Mis-declaration of goods and value thereof - period of limitation - relevant date - principles of res judicata - import of low/high carbon steel wire rods and electrolytes zinc free of duty under the Duty Exemption Entitlement Certificate (DEEC) Scheme by mis-declaring and undervaluing the goods and then disposing of the said imported goods in the local market for profit instead of using them in the manufacture of steel wire ropes for export. - Held that:- In the present case the relevant da .....

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of the Act for issuance of SCN will begin to run from the date of knowledge of the mis-declaration or undervaluation of the goods is contrary to the express language of clause (a) of Explanation 1 which makes it clear that limitation begins to run from the 'relevant date' which in the present case will be the date on which the goods were cleared by the Customs. - Further, there can be no manner of doubt that the subject matter of the two SCNs were two different sets of B/Es. Each B/E is sep .....

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Mr Rajesh Rawal, Adv For the Respondent : Mr Kamal Nijhawan, Adv ORDER 1. Writ Petition (C) No. 861 of 1998 is by Maldhari Sales Corporation (Petitioner No.1) through its Sole Proprietor Mr. Kumud J. Dharaya (Petitioner No. 3), Maldhari Steel Pvt. Ltd (Petitioner No.2) and Mek International (Petitioner No.4). W.P.(C) No. 1526 of 1998 has been filed by Mr. Subhash Gupta and W.P.(C) No. 2634 of 1998 by Mr. Janki Ram. The challenge in all three writ petitions is to a common order dated 29th Octobe .....

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high carbon steel wire rods and electrolytes zinc free of duty under the Duty Exemption Entitlement Certificate (DEEC) Scheme by mis-declaring and undervaluing the goods and then disposing of the said imported goods in the local market for profit instead of using them in the manufacture of steel wire ropes for export. 3. Based on the said information, the residential, office and factory premises of AWRL and persons connected with it were searched in Bombay and Thane on 15th February 1989. Search .....

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also resulted in recovery of certain quantities of steel wire ropes from the various locations that were searched. When the goods that were seized were examined, it conformed to EN-1A British specifications relating to leaded free cutting steel wire ropes. These were declared as steel wire ropes of Belgium origin with carbon content over 0.60% and had been assessed on that basis and allowed for clearance free of customs duty. Since the description of the goods was found not matching with the des .....

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scation. 5. The first SCN dated 8th August 1989 issued by the DRI to nineteen entities and persons including the Petitioners in these three petitions, concerned import of three consignments of steel wire ropes weighing 732.390 MT, 146.570 MT and 343.340 MT of declared CIF value of ₹ 52,99,324, ₹ 10,21,717 and ₹ 24,28,707 respectively. The first SCN specifically referred to bills of entry ('B/E') Nos. 3239/81 and 3239/84 both dated 27th December 1988 and IGM/Item No. 661 .....

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ch statements were also set out. Of these the significant statements were that of Mr. Janki Ram, Managing Director ('MD') of AWRL and Mr. Subhash Gupta, Director of AWRL. The statements of Mr. Kumud Dharia, Agent of AWRL, Mr. T.N. Prahlad, Accounts Manager of AWRL and Mr. K. Satyanarayana, Import and Export Manager of AWRL were also recorded. In para 90 of the first SCN it was stated that the ascertained CIF value of the consignments imported under the B/E worked out to ₹ 77,55,278 .....

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was stated that AWL deliberately attempted to make a mockery of the DEEC Scheme by indulging not only in blatant mis-declaration of the correct and real value of the goods but also by "wholesale falsification of the records and accounts to show that the goods after clearance free of duty through the Customs were taken to their factory at Hyderabad." Further Mr. Kumud Dharia had been appointed an Agent of AWRL and he was permitted to sell the duty free material at a premium in the mark .....

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, were neither used as input by the importer in the manufacture of steel wire ropes, i.e., the exported product, nor could such free cutting steel be used at all for the manufacture of steel wire ropes. It was stated that no evidence had been produced by the noticees to prove that they had in fact used the imported steel wire rods for the manufacture of steel wire ropes. Further the evidence brought on record by the Department proved that the imported steel rods had been sold in the open market .....

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them liable for confiscation under Section 111 (o) of the Act. However, "some of the goods sold like this are not available for confiscation, only the quantity which has been seized is available for confiscation."As far as penalty was concerned, detailed findings were recorded as regards the following noticees and penalties were imposed as indicated below: (i) AWRL ₹ 25 lakhs (ii) Mr. Jankiram ₹ 25 lakhs (iii) Mr. Subhash Gupta ₹ 20 lakhs (iv) Mr. Kumud Dharia ₹ .....

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ount be paid by AWRL. Except for AWRL, Mr. Janakiram, Mr. Subhash Gupta and Mr. Kumum Dharia, the penal proceedings initiated in the first SCN against the other noticees were dropped. 9. The second SCN was issued on 11th March 1992. The subject matter mentioned the following B/Es in relation to the import of steel wire rods and import of high grade zinc: "(1) Import of Steel Wire Rods vide Bills of Entry Nos. (i) 610/49 dated 12th March 1987 (570.870 MT ₹ 23,49,638 CIF) (ii) 1049/1 da .....

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5th January 1988 (186.761 MT ₹ 19,65,332 CIF under DEEC Scheme by M/s. Ashish Wire Ropes Ltd., Hyderabad" 10. A reference was made in the second SCN to the fact that during the course of investigation into the unauthorized import of leaded cutting steel under the DEEC Scheme by AWRL, statements of various persons were recorded in which it was inter alia mentioned that Mr. Janakiram, MD of AWRL, explained that "in the past, for import of wire rods of approximately 1000 MT (covered .....

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not useful for their products. Reference was made to the statements of Mr. Subhash Gupta and Mr. K. Subramanyam, both Directors of AWRL, Mr. M.R.N. Rao, the Chief Executive of AWRL, Mr. T.N. Prahlad, Accounts Manager of AWRL. Reference was also made to the statement of Mr. K. Satyanarayan, Import & Export Manager of AWRL and Mr. P.C. Pantulu, Finance Manager of AWRL. 11. Interestingly, whereas the first SCN was issued to 19 noticees, the second SCN was issued to 43 entities. The second SCN .....

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aid 28 noticees were accordingly dropped. The goods imported by AWRL weighing 186.761 MT valued at ₹ 19,65,332 CIF under B/E 3454/32 dated 25th January 1988 as well as the goods covered by the B/E enumerated hereinbefore were held liable for confiscation under Section 111 (d), (m) and (o) of the Act. A penalty of ₹ 1 crore was levied on AWRL under Section 112(a) of the Act. Apart from AWRL being asked by an order to pay duty amounting to ₹ 2,19,01,589 along with interest @ 18% .....

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issions of Mr. Rajesh Rawal, learned counsel for the Petitioners and Mr. Kamal Nijhawan, learned counsel for the Respondents. 14. The first submission made by Mr. Rajesh Rawal, learned counsel for the Petitioners, is that the second SCN was barred by limitation as well as the principles of res judicata. According to him, the entire facts regarding the B/E which is the subject matter of second SCN was already in the knowledge of the Department at the time of issuance of the first SCN. The very sa .....

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he Act by the Petitioner. According to him, therefore, second SCN could not be said to within the limitation period. He submitted that the same set of facts could not be split up into two SCNs for the purpose of availing the extended period of limitation under Section 28 of the Act. Mr. Rawal placed reliance upon the decisions in Nizam Sugar Factory v. Collector of Central Excise, A.P. 2006 (197) ELT 465 (SC), M. Nagabhushana v. State of Karnataka 2011 (27) ELT 481 (SC) and CCE v. Damnet Chemica .....

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od of limitation would begin from the 'relevant date' which would be the actual date of clearance of imported consignments by mis-declaration or undervaluation. He pointed out that the principle of res judicata would not apply as the subject matter of the two SCNs was different. 16. The Court finds no merit in the submission of learned counsel for the Petitioner for the reasons that follow. At the outset it requires to be noticed that Section 28 (4) of the Act provides for an extended pe .....

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te on which the proper officer makes an order for the clearance of goods; (b) in a case where duty is provisionally assessed under Section 18, the date of adjustment of duty after the final assessment or reassessment, as the case may be, thereof; (c) in a case where duty or interest has been erroneously refunded, the date of refund; (d) in any other case, the date of payment of duty or interest. 17. Even prior to the amendment to Section 28 of the Act by the Finance Act, 2011 (8 of 2011), the ex .....

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a B/E. The mis-declaration or under valuation of the goods in the B/E would, therefore, relate back to the date of the clearance of the goods under a particular B/E. 18. In the present case the relevant date for the purpose of limitation would be the clearance of the B/E in question. The earliest of the B/Es forming the subject matter of the second SCN is 12th March 1987 and the second SCN was issued on 11th March 1992 which was within five years from the date of such B/E. The date of clearance .....

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present case will be the date on which the goods were cleared by the Customs. For the purpose of Explanation 1 (a) to Section 28 of the Act, it is not the date of knowledge of the misdeclaration that is relevant but the date of clearance of the goods under a B/E which contained such mis-declaration and/or undervaluation. Consequently, the second SCN in the present case was issued within the extended period of limitation in terms of Section 28 (4) of the Act. 19. Further, there can be no manner .....

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