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TMI Blog2017 (9) TMI 1787X X X X Extracts X X X X X X X X Extracts X X X X ..... ector General, DRI, Zonal Unit, Chennai answerable to the Additional/Joint Commissioner of Customs, Customs Commissionerate-II, Customs House, Chennai-600001. 1.2 The subject matter of the SCN is that the applicant imported 8 consignments of garment accessories at Nil rates of Customs duty and additional duty by irregularly availing the benefit of Notification No. 21/2002-Cus., dated 1-3-2002. The garment accessories imported vide 8 Bills of entry were neither brought to the factory premises of the applicant nor used in export production as mandated in the said Notification. Instead the imported garment accessories were sold in the domestic market. The SCN demanded differential Customs duty of Rs. 23,19,372/- and interest thereon. Shri Gupta and Shri P.R. Subramanian are also co-noticees in the SCN but are not Co-applicants in this case. 1.3 The applicant, imported garment accessories against the Import Certificate (IC) issued by the Apparel Export Promotion Council (AEPC) during the period from 15-6-2011 to 19-1-2012 from China, through Chennai Seaport vide 8 bills of Entry as detailed below : Sl. No B/E Number/Date Duty involved (in Rs) 1. 3802084/15-6-2011 6900 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation mentioned supra and have rendered the impugned goods liable for confiscation. Shri S. Kannan, Incharge, Imports, of the applicant company had played an active role in the said conspiracy and had actively colluded with Shri P.R. Subramanian to give the ICs of the applicant company enabling Shri P.R. Subramanian to import garment accessories for others, misusing the benefit of Notification No. 21/2002-Cus., dated 1-3-2002 and evade Customs Duties. 1.7 Hence, a Show Cause Notice in file F. No. VIII/26/2013 DRI-CBE, dated 31-3-2015 was issued to the M/s. Danavarshini Exports Pvt. Ltd. (main applicant) and Shri K. Tamizharasan, Director, Shri N. Sridhar, Managing Director and Shri S. Ramachandran, Director jointly and/or severally to show cause to the Additional/Joint Commissioner of Customs, Customs Commissionerate-II, Customs House, Chennai as to why : (a) the exemption benefit claimed and availed under the Customs Notification No. 21/2002-Cus., dated 1-3-2002 (Sl. No. 167 or 167A as the case may be) in respect of 8 Bills of Entry, as detailed in Annexure 'A' of the show cause notice, should not be denied; (b) the different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut their knowledge to third parties and they imported garment accessories at Nil rate of Customs duty by misusing the Customs Notification; * they had no deliberate intention to evade payment of duty; * they admitted that it was wrong on their part in being careless which enables their staff to indulge in such acts of misuse and wrong availment of the benefit of customs Notification No. 21/2002, dated 1-3-2002; * the applicant requested for immunity from penalty and prosecution. Admissibility of the application : 3.1 The applications were filed in the Settlement Commission on 19-6-2015. The applicant vides a letter F. No. S.A. Cus./62-65/2015 S.C., dated 25-6-2015 was asked to explain as to why his application should be allowed to be proceeded under Section 127C(1) of CA, 1962 as items imported under Bill of entry No. 4572044, dated 7-9-2011 predominantly were zip fasteners which is a notified item covered under Section 123 of the CA, 1962. As per third proviso to sub-section (1) of Section 127B of CA, 1962, no application shall be made to the Settlement Commission in relation to goods to which Section 123 applies. 3.2 The applicant vide his reply dated 30-6-2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 27-10-2015 reiterated their earlier submissions made vide their letter dated 30-6-2015 and emphasized that there was no attempt to smuggle any goods and there was no seizure of goods. They further submitted that there was no proposal in the SCN invoking the provisions of Section 123(1) of the Customs Act, 1962 and SCN was not issued for recovery of Customs duties on grounds of clandestine imports. The demand of duty arose purely due to non-fulfilment of end use requirements as stipulated in condition No. 21 of Notification No. 21/2002-Cus., dated 1-3-2002 and not due to any smuggling/clandestine imports. Submissions by DRI dated 18-11-2015 & 20-11-2015 : 4.1 DRI vide its letter F.No. VIII/26/12/2013 DRI CBE, dated 18-11-2015 submitted that : * The importer/petitioner i.e. M/s. Danavarshini Exports Pvt. Ltd., Tirupur had imported 8 consignments of garment accessories at Nil rate of duty, sold the same in the domestic market and had wrongly availed the benefit of Customs Notification No. 21/2002-Cus., dated 1-3-2002. * The importer sold the imported goods in the domestic market and had violated the "Actual User" condition of the said notification. Due to such misuse an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imports of snap fasteners, elastic tape, lace, slider tags, hooks, fusible, plastic button, velcro takes, etc. Hence the major parts of the impugned goods, items are not covered under Section 123 of the Customs Act, 1962. * In view of the above, was submitted that the party's petition before the Settlement Commission under Section 127 may be considered for admission. Alternatively the Hon'ble Commission if deems fit may consider remanding that part of the notice pertaining to import under B/E No. 4572044, dated 7-9-2011 to the adjudicating authority for necessary action. Record of personal hearing held on 19-11-2015 : 5.1 This case was heard on 19-11-2015. Shri S. Ramachandran, Consultant appeared on behalf of the applicant and co-applicants and Shri S. Karunakaran, Senior Intelligence Officer, DRI, Chennai appeared on behalf of the jurisdictional Commissioner. 5.2 The Learned Consultant appearing on behalf of the applicant and the co-applicants stated that he was arguing the case both on its maintainability as well as on merits. 5.3 As regards the maintainability of the application, the Learned Consultant stated that in terms of third proviso to Sec. 127B(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect that the application is not hit by the prohibitions in terms of third proviso to Sec. 127B(1) of the Customs Act, 1962. 5.7 As regards merits of the case, he stated that the applicant has confessed to the charges in the show cause notice, he left it to the discretion of the Bench to pass appropriate orders on the immunities claimed. He further stated that as regards the applicant's claim regarding full discharge of the interest liability, the revenue will verify the claim and file its report in two days' time. Jurisdicitional Commissioner's report dated 9-2-2016 : 6.1 The jurisdictional Commissioner vide his letter C1/Misc.08/2015-Legal (Sea), dated 9-2-2016 has stated as follows : * The applicant had imported 8 consignments of garment accessories at Nil rate of duty, sold the same in the domestic market and had wrongly availed the benefit of Customs Notification No. 21/2002-Cus., dated 1-3-2002 and also Notification No. 12/2012, dated 17-3-2012. * The applicant sold the imported goods in the domestic market and had violated the Actual User condition of the said notification. * Due to such misuse and wrong availment, the total duty evaded on the goods impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2014 & CM 17221/2014, dated 25-8-2015 in the case of Shri Ram Niwas Verma wherein the Hon'ble High Court concluded that it is not required to examine the provisions of Section 123 and its applicability while considering admissibility of a case under Section 127B of the Customs Act and that the mere fact goods are notified under Section 123 of Act is suffice to attract the prohibition contemplated under Section 127B ibid. Though the orders of the Hon'ble Court is in the context of gold that was concealed and smuggled into India, the law laid down by the Court will apply to all goods notified under Section 123 as what has been observed by the Hon'ble High Court is on a principle of interpretation. Possibly the argument of the applicant as well as revenue would have stood ground if the wordings in Section 127B is interpreted to mean the applicability of provisions of Section 123 of the Customs Act is the factor to be reckoned with for admitting an application in terms of Section 127B of the Act. But the Hon'ble High Court has categorically negated such a line of argument. The above High Court's order was maintained by the Hon'ble Supreme Court reported in 2016 (331) E.L.T. A127 (Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings were initiated in this case and hearing was held on 21-9-2017. Record of hearing held on 21-9-2017 : 9.1 The applicant was represented by Shri S. Ramachandran, Shri P. Kannabiran, SIO, DRI Coimbatore represented the jurisdictional Commissioner. 9.2 It was submitted by the Learned Consultant that the show cause notice is relating to misuse of import garment accessories duty free, and diversion of the same in contravention of actual user conditions as stipulated in Customs Notification No. 21/2002-Cus., dated 1-3-2002; that one of their staff without their knowledge has done this; however, they paid the entire Customs duty and the interest thereof even before the issue of SCN; that the current proceedings are in pursuant to the Hon'ble High Court of Madras's Order dated 15-11-2016, against the final order 11/2016, dated 29-2-2016 of the Hon'ble Settlement Commission, whereby the application filed by the applicant and co-applicants were sent back to the adjudicating authority as the Bench was of the view that the same were not maintainable on the ground that one of the consignments contained Zip fasteners, an item covered under Section 123 of the Customs Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest thereon for the imports made vide 8 Bills of Entry. 10.3 The applications filed on 19-6-2015 were sent back to the adjudicating authority under Section 127-I(1) of the Customs Act, 1962 as not maintainable vide Final Order No. 11/2016, dated 29-2-2016 as "Zip Fasteners" one of the notified items under Section 123 of the Customs Act, 1962 was a part of the Bill of Entry 4572044, dated 7-9-2011. The applicant challenged the above order in the Hon'ble High Court of Madras and the Court vide Order dated 15-11-2016 ordered fresh consideration by considering the conduct of the petitioner to proceed to settle the case by exercising the discretion and pass appropriate orders on the immunities claimed by the petitioner. Hence the same was taken up for decision. 10.4 The jurisdictional Commissioner vide his report dated 19-2-2016 reported that the Bill of Entry No. 4572044/7-9-2011 would be hit by the bar of Section 127B of the Customs Act as the goods in respect of this Bill of Entry, viz., Zip Fasteners are notified under Section 123 of the Customs Act. He had further submitted that that the applicants have preferred this Settlement Application only with regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted with the investigation and discharged their duty liability along with interest immediately on commencement of investigation (Rs. 15,89,544/- vide MCM 0300821, dated 8-3-2013, Rs. 7,29,828/- vide MCM 0500865, dated 8-5-2013 and Rs. 6,35,309/- vide MCM 0700871, dated 8-7-2013) i.e., over one year before issuance of SCN dated 31-3-2015. Accordingly, the Bench considers it as a fit case to settle the differential duty liability at Rs. 23,19,372/- along with interest amounting to Rs. 6,35,309/-. Fine : 10.8 In the impugned Show Cause Notice, there is a proposal for confiscation of the imported goods cleared vide the said 8 Bills of Entry with a total assessable value of Rs. 86,38,679/- under Section 111(d) and 111(o) of the Customs Act, 1962. The Bench holds that the Commission/Omission as discussed in detail above on part of the applicant have rendered the goods liable for confiscation. However, as the goods had not been seized at any point of time in this case, the question of imposition of any fine on the goods in lieu of confiscation does not arise. Penalty on the applicant : 10.9 The Bench finds that the applicant had deliberately misused the ICs of the exporters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Director - "the Co-applicant I", Shri N. Sridhar, Managing Director -"the Co-applicant II" and Shri S. Ramachandran, Director -"the Co-applicant III" have rendered the impugned goods liable for confiscation. But for the painstaking investigations carried out by the Officers of DRI, Coimbatore Regional Unit the fact of the matter would not have surfaced the act of the applicant attracts penalty under Section 114A and also under Section 114AA of the Customs Act, 1962 separately for having rendered the goods liable for confiscation under Section 111(d) and 111(o) of the Customs Act, 1962 as they have not fulfiled the conditions stipulated under Notification No. 21/2002, dated 1-3-2002 as they have not used the exempted goods for export and instead sold it in the domestic market. As discussed above, the co-applicants are liable for penalty under the provisions of the Customs Act invoked in the SCN. However, keeping in view the full and true disclosure of additional duty liability, co-operation extended during the proceedings, the Bench considers this as a fit case for extending partial immunity from penalty to the co-applicants. Prosecution : 10.11 Considering the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order and compliance reported to the jurisdictional Commissioner. vi. Taking into account the facts and circumstances of the case, the Bench imposes a penalty of Rs. 10,000/- (Rupees ten thousand only) on Shri N. Sridhar, Managing Director - "the Co-applicant II"- under the provisions invoked in the show cause notice and grants immunity to the applicant in excess of the above amount. The penalty should be paid within 30 days from the date of receipt of this Order and compliance reported to the jurisdictional Commissioner. vii. Taking into account the facts and circumstances of the case, the Bench imposes a penalty of Rs. 10,000/- (Rupees ten thousand only) on Shri S. Ramachandran, Director - "the Co-applicant III"- under the provisions invoked in the show cause notice and grants immunity to the applicant in excess of the above amount. The penalty should be paid within 30 days from the date of receipt of this Order and compliance reported to the jurisdictional Commissioner. viii. PROSECUTION : Subject to payment of the penalty imposed as above within 30 days from the date of receipt of this Order, the applicant and the co-applicants ..... X X X X Extracts X X X X X X X X Extracts X X X X
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