TMI Blog2019 (6) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... putes at the appellate stage. In the present dispute, we find that the discharge of onus to establish mis-declaration is only peripheral as a presumed relationship between the exporter and the importer was held to suffice for indulging in re-valuation. Though such has not been argued before us, we are of the opinion that even this relationship between the two has not been tested against the touchstone of rule 2(2) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and has, instead, relied upon certain presumptions derived from the enunciation in the report of the investigation agency. The argument of Revenue in defence of the order herein was that detrimental consequence of overvaluation and creation of a purported cross-border transaction could be visited upon importers with the penal provisions in section 112 of Customs Act, 1962 and section 114AA of Customs Act, 1962. It was posited that section 111(m) of Customs Act, 1962 was specifically endowed with the provision pertaining to value in order to check overvaluation. We have no doubt that this was so. However, the Tribunal did not find it justifiable for that provision to be invoked when the alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-Cus dated 17 March 2012 (or the predecessor exemption) or the exemption governing goods of Indian origin, there is no duty implication. The declaration, acceptable or otherwise, in the bill of entry is, therefore, of no consequence. In these circumstances, the scope for imposition of penalty under section 112 of Customs Act, 1962 does not arise. Penalties set aside - appeal allowed - decided in favor of appellant. - Customs Appeal No: 86215, 86222, 86223, 86224/2017 And Customs Misc. Application No. 86676 of 2018 - A/86083-86086/2019 - Dated:- 6-6-2019 - MR C J MATHEW, MEMBER (TECHNICAL) And DR SUVENDU KUMAR PATI, MEMBER (JUDICIAL) Shri Vipin Jain, Shri Akshit Malhotra, Shri JC Patel, Shri Krishna Kumar and Shri Ramnath Prabhu, Advocates for the appellants Ms PV Sekhar, Joint Commissioner (AR) for the respondent ORDER PER: C J MATHEW These four appellants, S/Shri NR Jayant, S Muthusamy, DN Mathur and Dhananjay Datar, all full-time employees of M/s ABG Shipyard Ltd, are before us seeking to quash the penalties imposed on them under section 112 and section 114AA of Customs Act, 1962 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g - more particularly, for reasons disclosed in the order directing early hearing - to await the convenience, or even the contingency, of appeal by the importer. Understandably, we shall not be ruling on the confiscation itself and intend to restrict ourselves to the role of the present appellants in relation to the import of the goods that came to be confiscated in order-in-original no. 13/KVSS(13)ADG(ADJ)/DRI, MUMBAI/2016-17 dated 27th February 2017 of Additional Director General (Adjudication), Directorate of Revenue Intelligence, Mumbai. Not unnaturally, we may, in the course of disposal of these appeals against penalties, which are inextricably linked to the confiscability of the goods, refer to the legal and procedural aspects of import that may well throw light on the manner in which the imported goods should have been dealt with. 3. A brief narration of the facts may not be out of place. It would appear that M/s ABG Shipyard Ltd had imported consignments of drawing for ship/yard along with the invoices, and other documents, issued by M/s Norcrane Winch Holdings Pte Ltd, Singapore for a value of US $ 104.62 million claiming classification under heading no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to justify the imposition of penalties, on the boundaries that are erected within the administrative structure and, at times, legislated into statute books. In the unreported decision of the Tribunal in Knowledge Infrastructure Systems Private Limited others v. Additional Director General, Directorate of Revenue Intelligence, Mumbai [order no. A/86617-86619/2018 dated 31st May 2018 in appeal no. C/85234 to 85236/2017], while considering the submission on behalf of Revenue for perpetual, and overarching, authority was conferred, it was held that 43. Learned Special Counsel for Revenue was at pains to submit that section 111(m) of Customs Act, 1962 had been amended to overcome the impediment in the expression dutiable or prohibited to proceed against overvalued goods that did not entail recovery of duty and, not coincidentally, with the enactment of Foreign Exchange Regulation Act, 1973. Judicial interpretation does not support this proposition; in Rib Tapes (India) Pvt Ltd v. Union of India others [1986 AIR 2014], the Hon ble Supreme Court examined the original and amended versions of section 111 (m) of Customs Act, 1962 before holding that misdeclaration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequence of contrived enforcement of a law, intended for a particular purpose, in situations of patent unenforceability of that law. We do not wish to tarry further on this aspect as we merely intend to caution that the superimposition of moral outrage and sanctimonious adjurements that may appeal to recipients of bundled governance over fragile logic is, nonetheless, not an embargo on exposing the situation to the proper law for testing the propriety of enforcement. 5. It would appear from this narration 1.12.2 Facts revealed during investigation the syndicated that M/s Norcrane were neither in the business of nor are known to be offering to design Vessels, Rigs plant machinery and supply drawings for their construction/ installation. It appeared that the impugned drawings designs were not supplied by Norcrane group directly, but the same name sounding firm, namely NWHPL, was floated for the purpose (maybe with or without the knowledge and approval of Norcrane group) to affect those sham imports for siphoning money abroad. In order to ascertain the Association of NWHPL with Norcrane, this office mailed a letter dated 19.0 6.20152 Norcrane group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord with the designs imported from various other entities and at stages of development that obviated the need for more drawings. Likewise, eleven imports of drawings for ship lift transfer systems with the declared value of ₹1,37,69,75,389, including four consignments invoiced at ₹67,28,73,615, as yet pending clearance at Nhava Sheva were also held to be of no use to the importer. The ten consignments, pertaining to panel production line , invoiced at ₹55,04,50,000, yet to be claimed for clearance against bills of entry were also similarly found to be related to work that was either being undertaken or had been completed by resort to expertise provided by other entities. On these bases, it was concluded by the adjudicating authority that the imports of ₹582.18 crores 1.15.4.... had no commercial or functional utility for ABG. The import of these drawings was a sham-a mere cover for enabling to fraudulently obtain Letters of Credit from their banks and thereby fraudulently remit forex overseas in the guise of such imports. 9. It would thus appear that the conclusion of nil commercial value was not a reflection of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms Act, 1962, the impugned order has imposed penalty of ₹10,00,000 on S/Shri Dhananjay Datar, S Muthusamy, DN Mathur and NR Jayanth. For a clearer understanding of the justification, it may be worthwhile to recollect the other provision invoked, viz., 13. 114 AA Penalty for use of false and incorrect material.-If a person knowingly or intentionally makes, signs or uses, or causes to be made, sign or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purposes of this Act, shall be liable to a penalty not exceeding five times the value of the goods. for imposition of separate penalty of ₹ 5,00,000 each on S/Shri Dhananjay Datar, S Muthusamy, DN Mathur and NR Jayanth. The latter, doubtlessly, stands on its own and is applicable to documentation utilised for the business of transacting in relation to customs law. The former, however, cannot be separated from the provisions for confiscating of imported goods. 14. The facts narrated supra are a summation of the submissions made by Mr JC Patel and Mr Vipin Kumar Jain with Mr Krishnak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle, and they undertake to give effect to such principles, in respect of all products subject to duties or other charges or restrictions on importation and exportation based upon a regulated in any manner by value. and that Article I in the Brussels Definition of Value has also similarly limited the Agreement to the levying of ad valorem duties of customs, reference was invited to Article 15, dealing with various expressions in the Agreement, which assigns the description the value of goods for the purposes of levying ad valorem duties of customs on imported goods; to customs value of imported goods , for sustaining the cavil against resort to the valuation provisions for confiscating goods that are not liable to duty. 18. The competence to impose penalty when duty is not leviable is assailed by relying upon the decision of the Tribunal in Lalitpur Power Generation Co. Ltd v. Commissioner of Customs, New Delhi [2017 (356) ELT 82 (Tri-Del)] which discountenanced confiscation and penalty thus 45. We further note that admittedly the imported drawings and designs is exempted in terms of Notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch finding of the adjudicating authority are based upon his own assumptive surmises and conjectures and not upon any legal and valid evidence on record. 19. Incidentally, the decision of the Tribunal in Sahil Diamonds Pvt Ltd v. Commissioner of Customs, Ahmedabad [2010 (250) ELT 310 (Tri-Ahmd)], relied upon in re Lalitpur Power Generation Co Ltd as having been approved by the Hon ble Supreme Court, was no less strident in observing that 26. As regards penalty, we take note of the Tribunal s decision in case of Suraj Diamonds (India) Ltd. v. CC (Airport) Mumbai, 2008 (227) ELT 471 (Tribunal) = 2008 (86) RLT 400 wherein Tribunal by taking note of the precedent decisions in case of M/s. Nalakath Spices Trading Co., 2007 (213) ELT 283 (Tribunal) = 2007 (80) RLT 797 (CESTAT-Bang.), Shree Subhadra Industries v. CCE Chennai, 2001 (137) ELT 1405 (Tri.-Chennai) and M/s. Jay AR Enterprises, 2007 (210) ELT 459 (Tribunal) = 2007 (79) RLT 291 (CESTAT-Chennai) has held that inasmuch as import of rough diamonds were exempted from payment of duty and were not dutiable, no penalty can be imposed under the provisions of Section 112 of the Customs Act, 1962. By f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the case against importer was that drawings in their possession were manipulated for sending outside the country to enable bringing them back with the purpose of providing a legal cover for remitting money abroad. It is her submission that the confiscation, for which the prerogative of appeal vested only in the importer, should remain intact in the absence of an appeal by the aggrieved entity. It is further contended that it may be premature for the Tribunal decide upon the confiscability when that was pending before the jurisdictional High Court. She also objected to the fresh grounds that are being argued now before the Tribunal as the adjudicating authority did not have an opportunity to render a finding on those for which reliance is placed upon the decision of the Hon ble Supreme Court in Commissioner of Customs Central Excise, Goa v. Dempo Engineering Works Ltd [2015 (319) ELT 359 (SC)]. It is further contended that grounds that were not embodied in the appeal could also not be raised during the oral arguments and relied upon the decision in re Dempo Engineering Works Ltd for remand of the matter back the adjudicating authority even if confiscation was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms Act, 1962 is not established. In the absence of goods that are yet to be cleared for home consumption, there is no scope for invoking jurisdiction to hold the goods liable for confiscation. of the Tribunal in re Knowledge Infrastructure Systems Private Limited to contend that valuation could yet be re-determined in the present dispute. 24. There can be no doubt that arguments have been advanced on behalf of the appellants that were not before the adjudicating authority or did find a place in the grounds as preferred at the time of filing of the appeal. The submissions that are now put forth arise from questions of law that have been settled subsequently and which was not available when the impugned order was issued. Moreover, there is a substantial difference between raising fresh grounds of law and fresh grounds of fact at the appellate stage; as the latter must needs be verified before being accepted and such verification is not normally feasible for an appellate authority to undertake, fresh factual grounds are not admitted for settlement of disputes at the appellate stage. We, therefore, do not think that the decision in re Dempo Engineeri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to both sides, it is necessary for us to devote some space to an elaboration of its applicability. In the normal course, it would be considered proper for us to extract the relevant portions of the cited decision but we may, instead, be permitted the privilege of summing those for our benefit here as one of us was a constituent of the bench which rendered that decision. 27. In that dispute, the adjudicating authority had substituted the declared transaction value, with what, according to his finding, was the original transaction value. It was not rendered in the context of rejection of declared value under rule 12 (or rule 10 A in the predecessor Rules of 1988) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 with attendant re-determination under one of the sequentially applicable methods prescribed in the Rules. The controversy pertained to the alleged attempt by the importer therein to pass off allegedly sub-standard goods as that of prime quality with alleged intent to deceive the ultimate consumer and to whisk away the unearned consideration out of the country. Therein lies the nub in the structured exposition of the scheme of valuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powers to authorities under Customs Act, 1962. It was thus concluded that this submission of Revenue fell within the Kelsen categorization as jurisprudential interpretation which, without nexus, would not succeed as an acceptable proposition. Indeed, as pointed out in the decision, the adjudicating authority did not essay in that direction at all. 30. Therefore, the decision in re Knowledge Infrastructure Systems Private Limited, with its emphasis on the ineffaceable nexus with collection of duty and enforcement of prohibition, places a limiting framework on the invoking of the detriment contained therein only to such aspects of any show cause notice to the exclusion of all others. There is no perpetual jurisdiction to re-visit an assessment except for the twin objectives, enshrined in Customs Act, 1962, for levy of duty and enforcement of any prohibition. It is for the State to acknowledge the threats to its existence for establishing the means to survive these. The State does not, without express intention in a statute, expect its various organs to delude themselves into believing that only one law and one agency is necessary, or can, guard the interests of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such evidence, goods that are burdened with re-valuation, conceived from comparison with other imports, should not be further burdened by confiscation which was intended as a definitive consequence of the committing of an offence. We dare say that it is in these circumstances, re-valuation of imported goods, as existing then, that the overvaluation, referred to in amending of section 111 (m) of Customs Act, 1962, was contemplated by the sovereign legislative organ of the Union for incorporation as justifying the detriment of confiscation. That this was the interpretation of Revenue too is apparent in the adjudication of the dispute, that was eventually set aside by the Tribunal in re Knowledge Infrastructure Systems Private Limited, by refusing to indulge in resort to the Rules though in the oral submissions such a possibility was argued at length. The penalties under section 112 of Customs Act, 1962 in this dispute, a consequence of finding of overvaluation that assigns a proximate value after resorting to rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 without any record evincing that the importer was the beneficiary of any money flows exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l justice, as has been argued, supported by judicial decisions, on behalf of the appellants. In addition to the inexplicability of resort to the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 discussed supra, we find that the penalties have been imposed under section 114AA of Customs Act, 1962 with reference to the value adopted for the purposes of redemption of the confiscated goods and that penalty under section 112 of Customs Act, 1962 has stemmed from confiscation for alleged misdeclaration of value. It is only logical and rational to expect the equal application of value, assuming that adoption of such value is sanctified by law, for all purposes under the Act; we find here that while the value has been determined as nil for assessment of the bills of entry, a different value has been insinuated for redemption with the ostensible justification of the goods being scrap in which we find a fundamental contradiction. If the goods are redeemable, for being scrap , the nature of the scrap should have been determined with reference to the heading in the First Schedule to the Customs Tariff Act, 1975 as duty liability should inevitably be discharged ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted goods. Though facts have been collated to consider the impugned goods as re-imported, there is no evidence on record of exports having taken place. It would be reasonable to presume that re-import must be evidenced by the factum of export or, in the absence of such, by allegation of wrongful export. In the clear absence of record of export, no credence can be given to this assumption, without invoking the consequence of illicit export, and which has then gone on to attribute responsibility for such to the appellants herein. The penalties must fail on that flimsiness too. 37. If the proper officer was not in doubt about the origin of the impugned drawings and intended that the consequence of that origin, whether favourable or detrimental to the importer, be visited on the goods, it was incumbent upon that authority to proceed under that provision of the law. We see no manifestation of such application. Whether on a claim for exemption under notification no. 12/2012-Cus dated 17 March 2012 (or the predecessor exemption) or the exemption governing goods of Indian origin, there is no duty implication. The declaration, acceptable or otherwise, in the bill of entr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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