2013 (5) TMI 787 - AT - Customs

Liability for payment of duty - Imposition of penalty u/s 112 - Held that - The consignment of yarn was imported by ICGTI and filed the bill of entry for warehousing the same. It is also undisputed that the said polyester filament yarn (PFY) was allowed to be imported under OGL. It is also undisputed that out of the consignment of 303 cartons of PFY ICGTI had cleared 80 cartons of the said yarn on execution of the bond and payment of duty. Balance remaining 223 cartons were lying in the bonded warehouse and period for storing such goods in the bonded warehouse was up to 18-10-1987 and subsequent applications for extension of time was rejected by the Revenue Authorities. It is also undisputed that the Revenue Authorities had served an auction notice on 18-10-1987 in terms of provisions of Section 72 of the Customs Act 1962 directing ICGTI to deposit the customs duty within a period of five days. It is also undisputed that the appellant had filed the ex-bond bill of entry for removal of 223 cartons. It is the claim of the appellant that the appellant had sold these consignments to M/s. Export India Overseas and said M/s. Export India Overseas had sought to clear the consignment by producing REP licences which was permitted to be done so by the authorities. It can be seen from the reproduced definition of importer that importer includes owner or any person holding himself out to be the importer. In the case in hand it is undisputed that the appellant ICGTI had in fact filed ex-bond bill of entry for 223 cartons to be cleared under REP licences of M/s. Export India Overseas. It cannot be said that the appellant is not an importer as he would get covered in the expression any person holding himself out to be the importer . The justification given by the ld. counsel for filing of the ex-bond bill of entry by ICGTI is that ICGTI being a person who had in-bonded the consignment is required to file the ex-bond bill of entry is unsubstantiated by pointing out any provision of law. If it is the case of ICGTI that they have sold the consignment to M/s. Export India Overseas they should have left it to the said purchaser to do the documentation and clear the consignment. Having themselves held out to be importer by filing the ex-bond bills of entry for whatsoever reason now ICGTI cannot come turn around and say that they are not the importers. This action of the appellant is trying to run away from the liabilities of duty which gets fastened for the reason that the REP licence which was produced by M/s. Export India Overseas were fake and forged. - ICGTI being an importer it needs to be held against the importer for not discharging the duty liability. If that the goods are to be held or rendered to be liable to confiscation under Section 111 or he abets in such Act or omission which would render the goods liable for confiscation. In the entire proceedings before the lower authorities I find that the adjudicating authority has not come to any conclusion that the goods which were cleared from the warehouse are liable for confiscation under the provisions of Section 111 of the Customs Act 1962. Since there are no findings that the goods are liable for confiscation under Section 111 of the Customs Act 1962 in my considered opinion penalties imposed by the adjudicating authority under Section 112(a) of the Customs Act 1962 does not stand the test of the law. There are various decisions which state that if goods are not held as liable for confiscation under Section 111 of the Customs Act 1962 penalty cannot be imposed under Section 112 of the Customs Act 1962. - there are no finding of imported goods are liable for confiscation in my considered view penalty under Section 112(b) of the Customs Act 1962 is unwarranted on the said ICGTI. Accordingly in the peculiar facts and circumstances of this case no penalties can be imposed under Section 112 of the Customs Act 1962. - Decided in favour of assessee.

Summary

Issues Involved:
1. Determination of the importer liable for duty.
2. Validity of penalties imposed under Section 112 of the Customs Act, 1962.
3. Ownership of goods at the time of filing the bill of entry.
4. Confirmation of duty demand and interest.
5. Validity of the Commissioner's observations in paras 47 & 48.

Issue-wise Detailed Analysis:

1. Determination of the importer liable for duty:
The primary issue was whether M/s. I.C. Gandhi Texturising Industries Ltd. (ICGTI) or M/s. Export India Overseas (EIO) should be considered the importer liable for customs duty. The Tribunal found that ICGTI, having filed the ex-bond bill of entry, held themselves out to be the importer. The Tribunal reasoned that the act of filing the ex-bond bill of entry by ICGTI indicated that they were holding themselves as the importer, as per Section 2(26) of the Customs Act, which defines an importer as any person holding himself out to be the importer. Therefore, ICGTI was deemed the importer liable for the duty.

2. Validity of penalties imposed under Section 112 of the Customs Act, 1962:
The Tribunal examined whether penalties under Section 112(a) of the Customs Act could be imposed without a finding that the goods were liable for confiscation under Section 111. The Tribunal concluded that since there were no findings that the goods were liable for confiscation, penalties under Section 112(a) could not be imposed. The Tribunal cited various decisions supporting this view, thus setting aside the penalties imposed on ICGTI and other appellants under Section 112.

3. Ownership of goods at the time of filing the bill of entry:
The Tribunal considered whether EIO could be considered the owner of the goods at the time of filing the bill of entry. It was found that ICGTI had filed the ex-bond bill of entry, and the transactions indicated that ICGTI financed the purchase, suggesting that ownership remained with ICGTI. The Tribunal held that ICGTI was the owner and importer, as they had not transferred ownership to EIO in a manner recognized by law.

4. Confirmation of duty demand and interest:
The Tribunal confirmed the demand for duty and interest against ICGTI. The decision was based on the finding that ICGTI was the importer and liable for the duty, as the REP licences produced by EIO were fake and forged. The duty demand was thus confirmed against ICGTI, along with the applicable interest.

5. Validity of the Commissioner's observations in paras 47 & 48:
The Tribunal reviewed the Commissioner's observations regarding the involvement of ICGTI and other parties in the conspiracy to evade duty. The Tribunal found that the Commissioner's findings were supported by evidence, including statements and financial transactions indicating that ICGTI orchestrated the fraudulent clearance of goods. However, the Tribunal noted that while the findings supported the duty demand, they did not justify the imposition of penalties under Section 112 without a finding of liability for confiscation.

Final Order:
The Tribunal, by majority order, confirmed the duty demand and interest against ICGTI but set aside the penalties imposed under Section 112 of the Customs Act. The appeals of M/s. Wadiwala Trading Company and Shri J.B. Wadiwala abated due to the death of Shri Jayantibhai Wadiwala.