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TMI Blog2017 (11) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistant Commissioner of Customs (Bonds), Vishakhapatnam. 3. A Show Cause Notice dated 21.7.08 was issued to the Appellant and others for seizure of goods which were allegedly found outside the bonded lockers of the vessels. The demand was for Rs. 26,931/-. A reply dated 18.10.2008 was filed. 4. Thereafter another Show Cause Notice dated 19.1.2009 was issued proposing demand of Rs. 2,09,45,632 towards duty under various heads for the period October 2005 to 20.7.2008. The duty demand was proposed for the following allegations- S. NO ALLEGATION IN THE SCN DUTY DEMAND IN SCN 1 Sales not covered by sale voucher but debited in stock and sale register 6,646 2 Bonded goods not carried forward from one stock & sale register to next 28,490 3 Bonded goods diverted to local market by forging additional entries in duplicate & triplicate sale vouchers 9,031 4 Sales allegedly made to crew members of vessels in coastal run 3,86,141 5 Sales allegedly made to crew members of vessels not arrived or already sailed on the date of sale voucher 6,18,650 6 Sales allegedly made to crew members of non-existing vessels 1,53,301 7 Excess sale in one transaction 2,36,0410 8 Repea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmittedly been rendered infructuous. The same is accordingly being dismissed as infructuous. 8. The impugned Order-in-Original dated 30.11.2011 is passed in de-novo adjudication confirming all the proposals in the two show cause notices and the adjudicating authority has: (i) confirmed the confiscation and demands proposed vide first show cause notice dated 21.7.2008; (ii) confirmed total demand of Rs. 2,09,45,632/- under various heads under second show cause notice dated 19.01.2009, and (iii) cancelled the Private Bonded Warehouse License dated 10.9.2005 issued to the Appellant Company as proposed in second show cause notice dated 19.01.2009. 9. Aggrieved thereby Appellant Company filed the Appeal No. C/142 of 2012. Since penalties were imposed under Section 112(a) and 114 of the Act, on Mr Ajay Thoria, Operational Manager and Mr V Prasad Rao, Location Manager, of the Appellant Company, they have preferred Appeal Nos. C/143 of 2012 and C/246 of 2012. 10.1 The Ld. Advocate appearing for the Appellant Company and individuals relied upon the written submissions dated 06.08.2012 and the replies filed, and took us through the SCNs, impugned Order-in-Original and the grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsequence only if smuggled goods are sold, which onus to establish the initial smuggled nature having not being discharged and the goods being legally imported and stored in the DFS, Section 121 of the Customs Act, 1962 read with provision of FEMA, 1999 vitiates the order due to non-application of mind and the confiscation of amount USD 7142 and INR 18,100 allegedly being sale proceeds of duty free goods diverted allegedly into the local market is an unsustainable finding on surmises which deserves to be set aside. The mandatory condition of invocation and sustainability of Section 121 of the Customs Act, 1962 is not evident from the Impugned Order as there is no evidence brought on record to show any seizure and evidence of sale in the local market and thus the finding that the currency is allegedly sale proceeds of smuggled goods is not established beyond reasonable doubt. He relies upon the judgment of Ramchandra versus Collector of Customs reported in 1992 (60) E.L.T. 277 (T). 10.4 As far as the confiscation of goods valued at INR 6,042/- which were found in excess of the balance as per the bond register and the bill book under the provision of Section 111 (j) and (o) of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement of admission were taken under threat and coercion. 10.7 He also relied upon the judgment of Hon'ble Supreme Court in Hari Charan Kurmi, AIR 1964 SC 1184, to argue that even otherwise the statement of a co-accused can only be considered for corroboration of any tangible evidence. 10.8. He submitted that statements of various Customs officers were before the adjudicating authority. The Bond Officers admitted that they did not escort goods sold from DFS to individuals crew members as it was physically impossible. Apparently being satisfied that such escort was not required, these officers were not made co-noticees. However, the Respondent conveniently ignored the same. He submitted that even assuming for sake of arguments, that in this case, there is contributory default on part of both, as to how and on what basis only DFS and its officers were singled out to be made Noticees and not a single officer, which conveniently escaped the attention of the Respondent. He relied upon the judgment of the Hon'ble Bombay High Court in the case of C.C. (General) versus S.S. Clearing & Forwarding Agency P. Ltd. reported in 2011 (263) E.L.T. 353 (Bom.). 10.9. He submitted that the Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was thus fully aware of the functioning of the DFS and their transactions. 13. Adjudicating Authority has not appreciated the conditions and procedures contemplated in the licence as Annexure A and Annexure B in the proper perspective. The Adjudicating Authority has made reference to Para 14 and 15 of the Annexure A. A perusal of conditions 14 and 15 of Annexure A and condition 4.3 of Condition B clearly shows that the licencee cannot enter the items bought by the outgoing crew member in the store list of the vessel and place it in the board under preventive escort. Similarly, as per condition No.15 of Annexure A once again duty is cast on the Master of the vessel to keep the items mentioned therein in the bonded locker of the vessel. These are undoubtedly the duty of the Master of the Vessel. Even if there was any lapse of the aforesaid conditions, the Appellant cannot be held in anyway responsible and in any event this cannot be shown as violation on the part of the Appellant to subject him to penalty or duty demand. In the licence with the annexures, wherever the licensee has to fulfill the obligations, the words licensee/ DFS/ Firm are used to show that it would be his respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this it was also pointed out that the Appellant had issued a cheque for Rs. 25,000/- to the local Manager on 27.12.2007 which was cleared on 3.1.2008. However, the Adjudicating Authority without taking into consideration the reply in this regard, erroneously proceeded to presume that goods were diverted to local market. Neither the Show Cause Notice nor the adjudication order gives details of goods alleged diverted to the local market. The burden is on the department to clearly prove that the goods were diverted to the local market, which the department has failed to prove. Further the finding at Para 42.6 also imputes that there was recovery of USD 7,889/- and Rs. 18,100/- when searches were conducted in the DFS and the residential premises of the local manager and the staff. However, the said amounts were not seized from the residence of the staff. The finding arrived is only based on conjectures and surmises and is not sustainable in law. Hence the order of confiscation of USD 7,142/- along with Rs. 18,100/-, and demand of duty of Rs. 26,931/- under section 28(1) r/w section 72(1)(a) & 72(1)(b)(b) of the Customs Act along with interest, are unsustainable and therefore set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clandestine removal beyond the customs barriers. 17.2 Serial No.2 bonded goods not carried forward from one stock and sale register to next - Duty proposed and confirmed: Rs. 28,490/- : This allegation is not substantiated in the Show Cause Notice. In any event, there would be no question of paying any import duty unless it is proved by the Customs Department that the goods have been removed outside the bonded warehouse. The Show Cause Notice refers to a DLink Camera under this category. However, the Appellant demonstrated before the Department that the said camera was still lying in the shop, which fact was also verified by the officers at that point of time. Further, as stated in the grounds of Appeal, this fact was again pointed out at the time of personal hearing on 29-08-2011. There is no denial even at this stage. But the adjudicating authority mechanically confirmed the demand based on the earlier order without any application of mind. Technical/ accounting error if any, which was not noticed even by the audit department which necessarily audits the sales registers as per the procedure set out in Annexure B of the licence, cannot lead to any adverse inference or duty dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant in their reply dated 18.10.2009 has demonstrated that the ship's final destination was a foreign port and accordingly categorized so by the port authorities. Annexure I & X of the Show Cause Notice were reconciled with the data provided by the port trust and a concise chart was prepared and the same was filed. The Board's Circular No.15/2002 dated 25.02.2002 clarified the status of the foreign going vessel as defined in section 2(21) of the Customs Act 1962. Similarly the Board vide letter No 55 (16-Cus. 1/54 dated 11.10.1954) also clarified that what was to be seen was the final destination and if the final destination was a foreign port then it is irrelevant if the vessels touch Indian port's on the way to final destination. The condition attached to the license only stipulates that duty free goods are to be sold only to eligible crew members /Passengers. However, it never casts a duty on the Appellant to investigate any subsequent conversion of the inbound foreign vessel to the costal converted vessel. It also pertinent to point out that the Respondent admits that all sales made by the Appellant were attested by the bond officer. When this is the position and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudication cannot travel beyond the Show Cause Notice and the order is liable to be set aside on this ground also, as held in: (i) (1998) 1 SCC 198 M.A. Jackson Vs Collector of Customs. (ii) (2005) 7 SCC 159 SACI Allied Product Ltd. U.P Vs Commissioner of Central Excise, Meerut. Hence, even this demand is not sustainable. 17.5 Sl. No.5 - sales allegedly made to crew members of vessel not arrived or already sailed Duty proposed -Rs. 6,18,650/-, Duty confirmed Rs. 55,130/-. The allegations made are vague without giving details of the ships. In most of the cases the invoice has been raised on the same day of the sailing of ship and hence it cannot be said the goods have been sold to ships which have not arrived. Annexure II & XI of the Show Cause Notice were reconciled with the data provided by the port trust and a concise chart was prepared and the same was filed. It cannot be ascertained as to on what basis the adjudicating authority has arrived at a finding that the Appellant was liable to pay duty of Rs. 55,130/- under this category. No duty liability can be fastened on the Appellant in such vague manner. The adjudicating authority found merit in the contentions of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are attracted. Section 72 (a) deals with goods improperly removed from warehouse in contravention of section 71. Section 71 only says that the goods should not be taken out of warehouse except on clearance for home consumption or re exportation or for removal to another warehouse. Though Section 72 has been invoked it has not been stated which clause of 72 is violated. Section 72(b)& (c) are not applicable and clause (d) refers to goods for which bond is executed under section 59 and which have not been cleared for home consumption or exportation or not duly accounted for to the satisfaction of the proper officer. Section 72 (d) is not applicable as the goods have been cleared for export. There is no dispute that the alleged excess sales are only for exportation. Once the goods pass into the custody of crew member / passenger he becomes the owner and only he is liable to pay duty, if he takes the goods beyond the customs barriers. Further no penalty can be levied under section 112, in respect of exports. A concise chart was prepared reconciling the details shown in Annexure IV and XIII of the Show Cause Notice which was filed by the Appellant. Even though the Adjudicating Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is therefore unsustainable. 17.9. Sl.9 - excess sales allegedly made to crew members of the vessel proceeding to a coastal port Duty demanded Rs. 15,43,918/-, Duty confirmed- Rs. Nil: Show Cause Notice alleged that the ship were not foreign going ship, without ascertaining what the ultimate destination is. The Appellant has produced a letter from Port Trust authority showing the details of each ship, which describes them as foreign run vessel, which is as per Section 2(21) of the Customs Act which defines foreign going vessel as follows: "foreign going vessel or air craft, means any vessel or aircraft for the time being engaged in the carriage of goods or passenger between any port or airport in India and any port or airport outside India, whether touching any intermediate port or airport in India or not and includes, (i) Any naval vessel of a foreign government taking part in any naval exercises; (ii) Any vessel engaged in fishing or any other operations outside the territorial waters of India (iii) Any vessel or aircraft proceeding to a place outside India for any purpose whatsoever" Thus, even if the ship touches any intermediate port in India, if its destination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ground. It is admitted that the sale is permissible to crew members who are embarking. There is no reason to deny direct sales to the crew members who are in transit. Sale of non-duty paid bonded goods from DFS is permissible to individual crew members who are embarking or disembarking. Placing them on ship with preventive escort is not necessary. If the passengers /crew are disembarking there is no question of the goods being taken on ship under preventive escort and placing them on board the ship. The show cause notice does not state as to how many crew members had disembarked or embarked. It is neither possible not practical that every individual sale of goods is to be taken on ship under preventive escort. According to the practice followed and as admitted by the Customs officers in their statements it is only when the Master places an order, the goods are to be placed on board the ship under preventive escort. Condition 14 of the license only refers to items for which orders have been placed on behalf of the crew members by the Master. Only when the Master places an order with the Appellant that the goods are to be placed on board the vessel under preventive escort. As per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every sale even to individual crew member was to be taken to ship under customs preventive escort. Hence, the entire demand on this count fails. 18. In the result we find that the revenue has failed to discharge the requisite burden to saddle the Appellants with liability to confiscation and penalty. Import Duty is payable only when goods are imported into the customs barriers of India. There is no tangible evidence that goods have been improperly imported into the customs barriers of India. No tangible evidence is produced to show that the goods were removed for home consumption and crossed the customs barriers of India. There is also no tangible evidence produced to show that the goods were sold in domestic market. Further there is no liability to pay duty on goods which were sold at DFS after being cleared by the Customs and exported thereafter. Hence, on these facts the demand of duty is even otherwise erroneous. 19. Based on above unsubstantiated allegations, which are not sustainable even on the test of preponderance of probability, the adjudicating authority issued an order cancelling the license. Therefore, this harsh action is also set aside. 20. In the result, the App ..... X X X X Extracts X X X X X X X X Extracts X X X X
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