2015 (5) TMI 52 - HC - Customs

Waiver of pre deposit - quantum of amount of pre-deposit ordered by the tribunal - Export benefit by way of Duty Entitlement Pass Book - Whether the Tribunal ought to have waived the predeposit of duty and penalty under Section 129E of the Act as calling upon the Appellant to deposit the same or part of the same would cause undue hardship to the Appellant in view of financial difficulty of the Appellant - Held that - case of the Revenue in nutshell is that the appellants have inflated the value of the products which were exported for obtaining a higher export value so that they can get an inflated DEPB credit which can be sold in the market. The material on record would reveal that while authorities were considering the cases of similar units namely M/s S.S. Enterprises, M/s Neel Impex and M/s Agarwal Traders, it was found that the exported goods were overvalued to get undue DEPB benefit. It was further found that the appellants-firms were having transactions with the aforesaid three firms. Though the appellants had specifically denied the relationship with the said three firms, it was found from the material on record that there were various bank transactions between the appellants and/or their subsidiaries and the said three firms. From the samples taken from the consignments of the said three firms and the market enquiry, it was found that the Exporter had declared inflated value of motor parts and availed undue DEPB credit and on the said basis DEPB Scripts were obtained and were sold in the open market. - Tribunal has taken into consideration all the three factors i.e. prima facie case, undue hardship and interest of the Revenue. The learned Tribunal has not rejected the application in toto , but out of total duty payable only 50% has been directed to be deposited , so also out of penalty payable only 10% penalty has been directed to be deposited. As such it cannot be said that the discretion exercised by the CESTAT is exercised in a perverse or impossible manner. In that view of the matter, we find no error could be found in the view taken by the learned Tribunal. - Decided against assessee.

Issues Involved:
1. Jurisdiction of Customs Authorities under Section 28 of the Customs Act.
2. Procedure followed by the Customs Authorities.
3. Requirement of pre-deposit as directed by CESTAT.
4. Alleged undue hardship due to financial difficulty.
5. Compliance with principles of natural justice.
6. Validity of the show cause notice and timeline for enquiry.

Issue-wise Detailed Analysis:

1. Jurisdiction of Customs Authorities under Section 28 of the Customs Act:
The appellants argued that the Customs Authorities did not have jurisdiction under Section 28 of the Customs Act to recover the duty from the exporters. They cited the case of Commissioner of Customs (EP) Vs. Jupiter Exports, where it was held that duty cannot be recovered from an exporter. However, the court found that the Revenue's case was based on the allegation that the DEPB credit was obtained by fraud. The court noted that the Division Bench in Jupiter Exports upheld that the department could proceed against a person who obtained a license by fraud or misdeclaration.

2. Procedure followed by the Customs Authorities:
The appellants contended that the procedure adopted by the Original Authority violated the Circular dated 8th December 1997 issued by the Government of India. They claimed that no show cause notice was issued, and the enquiry was not completed within the stipulated period. The court found that show cause notices were indeed issued, and summons were issued under Section 108 of the Customs Act. The court also noted that under Section 28(4) of the Customs Act, the show cause notice could be issued within five years in cases of collusion, wilful misstatement, or suppression of facts.

3. Requirement of pre-deposit as directed by CESTAT:
The appellants challenged the CESTAT's order directing them to deposit 50% of the duty and 10% of the penalty as a pre-condition for hearing the appeals. The court referred to the factors laid down by the Apex Court in Benara Valves Ltd Vs. Commissioner of Central Excise and Indu Nissan Oxo Chemicals Industries Vs. Union of India, which include prima facie case, undue hardship, and interest of the Revenue. The court found that the CESTAT had considered these factors and exercised its discretion appropriately.

4. Alleged undue hardship due to financial difficulty:
The appellants argued that the pre-deposit would cause undue hardship due to their financial difficulties. The court noted that the burden of proving undue hardship lies with the applicant and that a mere assertion is insufficient. The court found that the CESTAT had considered the financial difficulty and had directed a partial deposit, which was not perverse or impossible.

5. Compliance with principles of natural justice:
The appellants claimed that the order was in breach of principles of natural justice as various documents were not supplied to them. The court refrained from making any observations on the merits of this contention, noting that it would be inappropriate at the stage of considering the pre-deposit order.

6. Validity of the show cause notice and timeline for enquiry:
The appellants argued that the matter was re-opened after four-to-five years, which was not permissible. The court referred to Section 28(4) of the Customs Act, which allows the issuance of a show cause notice within five years in cases of collusion, wilful misstatement, or suppression of facts. The court found no merit in the contention that the enquiry should have been completed within 30 or 90 days as per the Circular.

Conclusion:
The court concluded that the CESTAT had considered all relevant factors and exercised its discretion appropriately in directing the pre-deposit. The appeals were dismissed, and the notices of motion were disposed of. The court found no error in the view taken by the CESTAT.

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