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TMI Blog2016 (4) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... penaltuy of Rs. 40 lakhs stand imposed on Shri Kulbhushan Goyal, son of Shri Ramesh Goyal and penalty of Rs. 6 lakhs stand imposed on Shri Ramesh Goyal in terms of provisions of section 114 of the Customs Act, 1962. 3. As per the facts on record, three units are engaged in the manufacture and export of various cycles parts. The dispute in the present appeal relates to forty one consignment of bicycle parts exported by the appellant to Iran, Tehran and Egpt under the claim of draw back. As per the appellants the said exports were made though Merchant brokers located in Dubai and the parts of the bicyle were either procured by them from indigenous manufacturers or from the various raw material required for manufacture of such bicylcle parts were procured from the local market and bicycles parts were manufactured by them. 4. Based upon some intelligence received by the DRI as regards, the fraudulent export of bicycle parts to various Dubai parties, under export executition scheme like draw back DEPB etc, search operations were conducted at the factory cum residential premises of the noticee on 22.1.04. Nothing incriminating was recovered and as neither Shri Ramesh Goyal nor Shri Ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that there were discrepancy in the two bills of lading. 7. When the bill of lading produced by Shri Navdeep Goyal Branch Manager of Shipping line was shown to Shri Kulbhashan Goyal, he deposed that inasmuch as the same was a photocopy, he doubted the authenticity of the same. The concerned shipping line should be called for verifying its authenticity 8. The DRI also conducted inquiries at Dubai port and procured a letter dated 10.12.03 from . Consulate General of India, wherein he reported that consignment covered by 5 bills of lading were auctioned by Dubai Customs for a meager amount of DHS 31,000 only. From the said report of the Consulate General of India, Dubai, Revenue entertained a view that the exports made by the appellants indicating Tehran as the port of despatch were actually deloaded at Dubai and inasmuch as same was auctioned at 31000 drums, the consignment was overvalued with a purpose to claim more draw back. 9. On the basis of investigation conducted by the Revenue and on the basis of overseas inquiries, Revenue entertained a view that the goods exported by the appellant had no buyers as is evident from the fact that same were abandoned at Dubai. Reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Middle East, it stand submitted that said company is a multi-national company having its office all over the world. The address of the M/s. Clarion Logistics was produced on record from the Internet in support of the submissions that said company is in existence. Reliance was also placed upon various decision of the judicial as also quasi judicial authorities. 11. The adjudicating authority however, did not find favour with the above submissions and passed the impugned orders. 12. We have heard Shri K K Anand, learned advocate appearing for the appellant and Shri R K Verma, learned AR for the Revenue. Shri Anand, learned advocate raised the issue of jurisdiction of ADG - DRI for the purpose of issuance of show cause notice. Referring to the Hon'ble Supreme Court decision in the case of Commissioner of Customs vs. Syed Ali reported in 2011 (265) ELT 17 SC, he submitted that the DRI was not the proper officer for issuance of the said show cause notice, in terms of provisions of Rule 16 of the Customs and Central Excise duty draw back Rules, 1995. He also assailed the impugned order on merits. Shri Verma appearing for the Revenue reiterated the reasoning of the adjudicating authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I can be considered to be proper officer to demand duty under Section 28 of the Customs Act came up before Hon'ble Supreme Court and the matter was remanded to Hon'ble High Court to decide such substantial question of law in the light of decision in the case of Syed Ali. Honble Punjab and Haryana High Court in the case of Era International vs. Union of India [ 2011 (274) ELT 6 (P&H)] and Hon'ble Andhra Pradesh High Court in the case of Sree Enterprises vs. CC [2011 (274) ELT 12 (AP)] while dealing with an identical issue held that in the light of decision of the Apex Court in the case of Syed Ali , the DRI officer cannot be held to be a proper officer for seizure of the goods or for issuing the show cause notices. In the light of the above decision, the appellants contention is that show cause notice issued by DRI cannot be held to have been issued by the proper officer in which case, the appeals are required to be allowed on said short ground itself. 14. It is seen that after the Honble Supreme Court decision in the case of Syed Ali and others, Government of India issued Notification No. 41/11-Cus (NT) dated 6.7.11 wherein the officers of DRI and Commissioner of Customs and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads as under: "5. Further, it has been decied that the proper officer for the issuance of show cause notice and adjudication of cases under the provisions of Rule 16 of the Customs, Central Excise and Service Tax Drawback Rules, 1995 shall, henceforth be as under:" 16. As is seen from the above said para of Circular, show cause notices are required to be issued in terms of provisions of Rule 16 of the Customs, Central Excise Duties and Service Tax Draw back Rules, 1995 within the monetary limit laid down in the said circular, before any recovery can be initiated. As such, we are of the view that though there is lacuna in the said Rule 16 inasmuch as the same does not specifically provide for issuance of show cause notice and only refers to the demand made by the proper officer, but we hold that said demand has to be made by the Proper Officer by way of issuance of show cause notice, as per the understanding of the Board also in the relevant portion of the Circular No. 24/11-Cus, as reproduced above. 17. As such, the only question required to be decided is as to whether the present show cause notice of the DRI officer for recovery of erroneously granted draw back in terms of Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Preventive). As such, by applying the ratio of law, declared by the Honble Supreme Court in the case of Syed Ali and subsequently followed by various other High Court, it has to be held that DRI officer was not the proper officer for issuance of show cause notice for the purpose of demand of allegedly erroneously granted excess draw back. Infact, we find that after the above point was raised by the learned advocate, the matter was adjourned so as to give an opportunity to the learned DR to find out as to whether there was any retrospective amendment in terms of Rule 16 of the draw back Rules, on the line of retrospective amendment in Rule 28. On the next date of hearing, learned DR very fairly agreed that there is no such amendment to Rule 16. As such, we are of the view that show cause notice having been issued by ADG, DRI Delhi, is without jurisdiction and consequently present impugned order become void ab initio and cannot be upheld. The same is liable to be set aside on the ground of jurisdiction itself. We order accordingly. 18. Though we have set aside the impugned order on the point of jurisdiction itself but for the sake of academic interest, we would like to consider t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lines who appeared for cross examination were not accepted by the appellants for the purpose of cross examination, the statement of Shri Navdeep Goyal can be adopted as an evidence. We find no justification in the above reasoning of the appellant. Admittedly, the revenue has relied upon the statement of Navdeep Goyal and not on the statement of Captain Anil Ratra or Shri Anil Sharma. The purpose of cross examination of any deponent is to test the veracity of the statement made by him during the course of investigation. It is the statement of Shri Navdeep Goyal made before the officer on which the Revenue has strongly relied upon. It was his cross examination which was required to be conducted, for the purpose of fair and just adjudication. Offering of the other officer of the same shipping line, who had not tendered any statement in lieu of Navdeep Goyal, cannot be held to be a sufficient and proper course of adjudication inasmuch as admittedly any other person cannot clarify on the statement given by Shri Navdeep Goyal. As such, we are of the view that Revenue reliance on the statement of Shri Navdeep Goyal, who was only 2-3 months old employee in the shipping line and was not eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said that the goods were not examined. When the goods were admittedly meant for export of Iron / Tehran and it is only later on that the Revenue makes an allegation of export to Dubai, examination of the goods conducted by the Superintendent and Inspector cannot be found fault with, especially when there is no other material or evidence to reflect upon the fact that exported goods were not cycle parts but was spurious junk material, even the examination of 5% of the goods gains importance. 23. The finding of the adjudicating authority that the appellants mis-declared as regards the value of the goods as also port of discharge are contrary to even the procedure adopted by the Customs authorities. The appellants had admittedly filed shipping bills where the discharge port was shown as Bandar Abbas, Tehran. The bills of lading are prepared as per the discharge port shown in the shipping bills. The said bills of lading are prepared by the shipping line, based upon the declaration made by the exporters on the shipping bills. The goods exported for Iran / Egypt or any middle east country are to be routed or transported through Dubai port only. Infact as per the appellants since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot ipso facto lead to the conclusion that the appellants exported their goods to Dubai instead of Iran / Tehran. Apart from the fact that said report is only in respect of 5 consignments whereas the draw back is sought to be denied in respect of 41 consignments, we note that once the goods left the territorial water of India, export is said to have been effective thus extending the exporter the export benefits. Apart from that we also take into consideration the appellants contention that draw back rate in respect of cycle parts was not linked to the value of same and the same was available as per piece.. As such, the value of the goods does not play much role in the grant of draw back. Inasmuch as the entire case of the Revenue is value linked, we find no justification for denial of draw back to the appellant especially in the light of evidence collected by the DRI itself as regards the supplier of the goods and realization of the banks certificate, the non receipt of any complaint by the recipient of the goods etc. To deny export benefits on the statement of Shri Navdeep Goyal which has been held to be of no evidentiary value and based upon the report of the Consulate General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the adjudicating authority relating to Hawala transaction and have allowed appeal on merits also even though merits have been discussed as academic interest only. 30. I do not agree with the findings recorded by learned Member (J) on jurisdiction as well as on merit. I intend to record my own order on jurisdiction issue as well as on merits. 31. Facts as discussed in Members draft order are taken on record. 31A. First I will discuss issue based on jurisdiction. Jurisdiction Issue 32. The Member (Judicial) has proposed to set aside recovery of the amount of drawback primarily on the ground of lack of jurisdiction on the part of the ADG, DRI, Delhi to issue show cause notice. It has been, referring to the judgment of the Hon'ble Supreme Court in the case of Commissioner v. Syed Ali - 2011 (274) ELT A109, observed by the Member (J) that though retrospective amendment has been made by inserting clause 11 to Section 28 of the Customs Act, 1962 Act with a view to protect the past demands issues under the said Section, no such retrospective amendment has been made in Rule 16 of the Customs and Central Excise Drawback Rules, 1995 under which recovery of drawback has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Additional Director General,Directorate General of Revenue, Intelligence posted at Headquarters and Zonal/regional units. Additional Directors, or Joint Directors, of Directorate of Revenue Intelligence posted at Headquarters and Zonal/regional units. Deputy Directors, or Assistant Directors, of Directorate of Revenue Intelligence posted at Headquarters and Zonal/regional units. [Notification No. 17/2002-Cus. (N.T.), dated 7-3-2002] 8.A clear reading of the Notification reveals that it is the Central Government which has given jurisdiction to the DRI officers to exercise the powers of officers of Customs for the whole of India. It is not the case of the appellants that the DRI officers have usurped the powers themselves. This Notification has been issued by the Central Government under Section 4(1) of the Customs Act. 9.As regards the objection raised by the appellants for the Commissioner to adjudicate the case, it is seen that under Section 5(2) of the Customs Act, An officer of Customs may exercise the powers and discharge the duties conferred or imposed under the Act on any other officer of Customs who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved as under in Para 5: "Therefore, the Director of Revenue Intelligence has been conferred with the power of the Commissioner of Customs. The power of such Officer to investigate and issue show cause notice calling upon the assessee to pay back the draw back is not disputed. What is disputed is the power of the said authority to adjudicate the dispute. Relying on the circular dated 15th February 1999, which is issued in pursuance of the Notification No. 19/90 conferring the similar power where it has been held, though they have been conferred the power to investigate and issue show cause notice, adjudication is to be done as per Rule 16-A by the jurisdictional Commissioners, Additional Commissioners, Deputy Commissioners or Assistant Commissioners of Customs. The said circular which is issued to explain the effect of the Notification No. 19/1990 has no legs to stand because the Notification No. 19/1990 is superceded by Notification No. 17/2002. Section 5 of the Act deals with powers of Officers of Customs. Sub-section (2) of Section 5 provides, an Officer of Customs may exercise the powers and discharge the duties conferred or imposed under this Act on any other Officer of Cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han Goyal. (c) Statement of so called suppliers of cycle parts, items of supply and items which were exported and its relevancy. (d) Receipt of money in advance through TT channel from Dubai. (e) Goods are consigned to Dubai in 36+5 consignments contained in 12 (7+5) containers (against reference of 5 consignments in draft order). In present proceedings 36 consignments (shipping bills) referred in 7 containers are involved. Remaining five consignments/shipping bills stuffed in five containers were also found in Dubai Customs records which were also auctioned. (f) Goods are sent to fictitious address and goods are not got released at Dubai port. (g) Report of the Consulate General of India at Dubai (h) Documents referred in DRI's letter addressed to Senior Departmental Representative. (i) Goods are later auctioned by Dubai Customs (j) If goods are not got released at Dubai and all containers are detained and auctioned at Dubai, how parallel sets of documents including bill of ladings were prepared showing good consigned to Egypt, Tehran etc. (k) It is on record that money has come in advance through TT throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved about statements made by Shri Kulbhushan Goel and Shri Navdeep Goyal as follow: "5.4 I find that the noticees had contended that the goods, in question, were physically examined by the officers of Customs at CFS, Ludhiana and the same were cleared by them as bicycle parts. In this regard, I find that Shri Kulbhushan Goyal was confronted with three lists marked as Annexure "A", "B" and "C" containing details of export consignments to Iran of his firms which were abandoned at Dubai and never reached Iran or the merchant brokers at Dubai. In his statement dated 30.03.2005 recorded under Section 108 of the Customs Act, 1962, Shri Kulbhushan Goyal had stated that he had received payments (for the export consignments) in advance and had accordingly supplied the goods and dispatched the original documents to their merchant brokers at Dubai. But he did not know why the goods had not reached its destination. 5.5 I find that the noticee Shri Kulbhushan Goyal had admitted having seen Bill of loading No. LUHJEA 1612724 dated 21.12.2002 in respect of Shipping Bills No. 6621, 6620 and 6619 in which the name of the shipper was M/s M.K. International Ludhiana, name of the notified party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for Bandar Abbas "BND" was used., c) that on the fourth B/L copy as per their record destination was jebel Ali and B/L No. LUH JEA-1612724 d) that notified party in their B/L copy differed from DRI record. e) that delivery agent shown on Bills of Lading No. LUH DXB-1612724, LUH DXB-1612724A, LUH DXB-1612724B was DXB (Dubai) agent's name whereas the three B/L copes mentioned Bandar Abbas as final destination; that B/L copy and other documents were submitted to the Customs by the shipper for claiming drawback and had nothing to do with the shipping line; that he again clarified that shipping line never submitted drawback copy of shipping bill to the customs; that there were similar discrepancies in three other B/L shown to him. He also stated that the words LUH on a Bill of Lading defined the point of origin i.e. Ludhiana, "JEA" defined port of discharge i.e. Jebel Ali and the digits 1612724 defined the Serial No. Further, the responsibility of the shipping line was to deliver the goods upto its final destination as agreed and mentioned on the Bill of Lading. The B/L was prepared on the basis of their surveyor report (stuffing report) and E.P. copy duly signed by Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned. This is further supported by the facts that no export contracts have been produced. No LCs were opened. Actually advance payments from Dubai have been organized. The fact remains that payments were not received from the consignee. Actually factum of export, as such, has not been completed. 43. I have perused the report dated 10.12.2003 sent by Indian Consulate General at Dubai to the Director General, DRI in pursuance of their letter dated 1.7.2003 which is eye opener. Both the letters are referred as below: Dated:01.07.2003 Sub: Fraudulent exports by Monte Group of Companies, Ludhiana under export incentive scheme-reg This is in receipt of an intelligence that several containers including container No.IALU2002750, IALU1202461, CRXU2258707, MLCU2552928, CRXU1307284,MLCU2898401 of M/s.IAL Container Lines (UK) Ltd., said to contain bicycle parts exported to Dubai by M/s.Monte International and M/s.Monte Metals, controlled by S/Shri Kulbhushan and Ramesh Goyal of Ludhiana, under Bills of Lading No.LuhDxb 01612516,01612581,01612601,0162550a, 0162489a, 0162554a, 0162479a from ICD, Ludhiana during October and November, 2002 have been abandoned and the goods contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icycle parts 5 LUHJEA1612731 M/s.M.k. International, Nirmal Market, Oswal Street, Miller Ganj, Ludhiana Clarion Logistics, PB No.17656, Dubai Bicycle parts 44. From the above report, it is evident that all the containers which were consigned out of India have landed at Dubai which were not got released. Buyers were non-existent. However, all containers were later auctioned as junk material was found which only fetched only 31,000 (dh) which is only Rs. 3,10,000/- in Indian rupees against total value of export amounting to Rs. 1,21,49,086/- 45. Interestingly advance payment for all these containers were organized and sent to India. Commissioner has rightly pointed out in his order that these were only hawala payments as no goods were got released by non -existent buyers. 46. To confirm the DRI-s findings, further interesting facts have come on record. DRI in a letter addressed to SDR CESTAT vide their letter DRI F.No.856(08) Ldh/2007/2175 dated 10.10.2007 enclosed a letter dated 15.9.2005 issued by M/s.IAL Shipping Line (New Delhi) Limited, New Delhi in favour of M/s.Monte International, M/s.Monte Metal and M/s.M.K. International, Ludhiana informing non delivery of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BL No.LUHDxB 1612724 Number of days= 267 Total charges 9449 Dhs = Rs.1,14,049/- (i) Invoice No. DN/LCL/546/2005 BL No.LUHDxB 162479A Number of days= 337 Total charges 14825 Dhs = Rs.1,78,938/- 49. Despite clear facts emerging out of investigation, appellant tried to confuse the matter by asking cross examination of Shri Navdeep Goyal Branch Manger of Shipping line. Shri Navdeep Goyal did not appear but another official namely Captain Anil Ratra, Branch Incharge M/s.IAL Shipping Line appeared. But appellants insisted on Shri Goyals cross examination only. From perusal of facts, it is observed that Mr.Navdeep Goyal has only confirmed about issue of parallel set of Bill of Ladings in the name of Cairo and Tehran importers though actual bill of ladings were for Dubai only. This fact emerged when all containers were put to auction by Dubai Customs and this fact was reported by Consulate General of India at Dubai. 50. Despite clear-cut fraudulent act emerging out of investigatons, appellant's insistence of cross examination of shipping line officials and departmental officers did not have any force. Mere insistence that goods were exported aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the export is illegal as spurious goods in the guise of bicycle parts were shipped to Dubai, deliberately to be abandoned there, just for the purpose of claiming drawback by fraudulent means. The overseas enquiry had revealed that there was no overseas claimant of the impugned goods and the same were auctioned for a meagre amount of Dhs 31000/- (Rs.3,10,000/- approximately). As realization of foreign proceeds is an essential requirement for the purpose of claiming drawback. I find that the advance payments of the impugned goods were arranged through hawala channels as is apparently clear from fact that the impugned goods had neither reached the buyer in Iran nor the merchant broker in Dubai. It is self explanatory that no prudent businessman would continue making advance payments without receiving the goods in return. Thus it is clear that the Noticees had availed drawback amount of Rs. 59,66,470/- by fraudulent means by misdeclaring the goods both in terms of description and value and by forging various documents. They had also abetted and knowingly participated in illegal transfer of money through hawala channels and suppression of the material facts. Thus they had violated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no jurisdiction with DRI officers to issue SCN and recovery of drawback is not sustainable on merits as held by Member (Judicial). ORDER PER: ASHOK JINDAL The following difference of opinion has been referred to me for consideration: Whether appeals against the Order-in-Original passed by Commissioner of Customs is to be rejected on the ground that there is lack of jurisdiction for issue of SCN and when there is fraudulent claim of drawback and evidenced from record requiring recovery on merit as held by Member (Technical) OR Whether appeals against the Order-in-Original passed by Commissioner of Customs is to be allowed in view of findings that there is no jurisdiction with DRI officers to issue SCN and recovery of drawback is not sustainable on merit as held by Member (Judicial). 2. The facts of the case are not in dispute, therefore, the same are not repeated for the sake of brevity. 3. As the issue of jurisdiction is a legal issue, therefore, first I deal with the issue whether the show cause notice issued without jurisdiction or not. 4. I have seen in this case that the show cause notice has been issued by DRI, Delhi unit and as per the provisions of Rule 16 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Collectorate of Customs (Imports) or the Preventive Collectorate, would be "proper officers". In our view therefore, it is only the officers of customs, who are assigned the functions of assessment, which of course, would include re-assessment, working under the jurisdictional Collectorate within whose jurisdiction the bills of entry or baggage declarations had been filed and the consignments had been cleared for home consumption, will have the jurisdiction to issue notice under Section 28 of the Act. 7. Thereafter Hon'ble Apex Court held that the Commissioner of Customs (Preventive), who is having territorial jurisdiction but not the jurisdiction to issue show cause notice under section 28 was held as not a proper officer in terms of said section. A review petition was filed by the Revenue against such decision of the Apex Court has been dismissed by the Apex Court reported in 2011 (274) A 109. 8. Further I find that in the case of Chandna Impex Pvt. Ltd. Vs. CC New Delhi (2011 (269) ELT 433 (SC)), the issue as to whether the officer of DRI can be considered to be proper officer to demand duty under section 28 of the Customs Act came up before Honble Supreme Court and the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the claimant fails to repay the amount it shall be recovered in the manner laid down in sub-section (1) of section 142 of the Customs Act, 1962 (52 of 1962). 11. I have gone through the said rule wherein the excess granted drawback has to be demanded by the proper officer of Customs and recipient of the same has to repay the same. Rule 16 does not, in clear terms, refers to issuance of show cause notice but the same refers to the demand. Definitely the demand can be made by issuance of show cause notice after giving an opportunity to personal hearing to concerned recipient of drawback to put forth his defence as against alleged excess erroneously granted. The CBEC Circular No.24/2011-Cus dated 31.5.2011 which reads as under: 2.Reference have received from the field formations for specifying the proper officer for issuance of show cause notice and adjudication of cases of export under the drawback and export promotion schemes. 5. Further, it has been decided that the proper officer for the issuance of show cause notice and adjudication of cases under the provisions of Rule 16 of the Customs and Central Excise and Service Tax Drawback Rules, 1995 shall, henceforth be as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and no single discrepancy was detected in regard to description, quality, quantity or value of the goods. All the consignments were examined found to be correct and the goods were assessed, thereafter let export order was issued. Further, I find that no incriminating documents found by DRI during the course of search at the residence of various partners or the officers of the appellants. The only allegation against the appellant is that the Consulate General of India at Dubai has given report dated 10.12.2003 showing that only small fraction of iron was auctioned by Dubai DHS 31000 equivalent to Rs. 3,10,000/-. It was also found that out of 3 merchants/financiers only one company was not found at the address. The allegation of the Revenue is that the good overvalued as the goods have been examined at the end of the supplier also. Therefore, it cannot be alleged that the goods were undervalued in the absence of contemporaneous price for the purpose of like kind of goods. I further find that the Revenue is heavily relied on the statement of Shri Navdeep Goyal representative of shipping agency but he was not made available for cross examination. Therefore, the said statement cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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