2016 (5) TMI 669 - AT - Customs

Imposition of penalty - Section 112 of the Customs Act, 1962 - Confiscation of goods - Import of duty free goods under Import Passbook Scheme and diverted the same to local market - defrauding the Government of its legitimate revenue of Customs duty - Held that - the proceeding of demand of duty and confiscation was made against the main party M/s. Orient Arts & Crafts, wherein finally the demand of duty and confiscation was dropped, accordingly the present appellant is also not liable for penalty under Section 112 of the Customs Act, 1962. - Decided in favour of appellant

Issues Involved:
1. Validity of the Show Cause Notice (SCN) issued by the Assistant Collector.
2. Jurisdiction of the Commissioner of Customs (Preventive) to issue demands and determine assessments.
3. Consequential penalty under Section 112 of the Customs Act, 1962.

Detailed Analysis:

1. Validity of the Show Cause Notice (SCN) Issued by the Assistant Collector:
The appellant challenged the validity of the SCN dated 28.8.1991 issued by the Assistant Collector, arguing that it was not issued by the proper officer as required under the prevailing Section 28 of the Customs Act, 1962. The Tribunal noted that the SCN was indeed issued by the Assistant Collector, who was not the proper officer to issue such notice for the extended period. The proper officer, as per the clear wording of Section 28, was the Collector of Customs. The Tribunal referenced the Collector of Customs (Appeals) decision, which had already quashed the SCN on these grounds and provided the department liberty to issue a fresh SCN if permissible under the law. Consequently, the SCN dated 28.8.1991 was deemed nonest, and any proceedings based on it were invalid.

2. Jurisdiction of the Commissioner of Customs (Preventive) to Issue Demands and Determine Assessments:
The Tribunal examined whether the Commissioner of Customs (Preventive) had the jurisdiction to issue demands and determine assessments on the Bills of Entry filed and pending clearance. It was concluded that the Commissioner of Customs (Preventive) did not have the authority to take over goods covered by Bills of Entry and make assessments when these were pending before the proper officer of the Commissionerate of Customs, Mumbai Customs House. The Tribunal emphasized the "community of courts" principle, which prevents overlapping jurisdictions and ensures that once an authority takes cognizance of a matter, parallel authorities are ousted from jurisdiction unless a transfer order is issued by a higher authority. Since no such transfer order was produced, the Commissioner of Customs (Preventive) lacked jurisdiction in this case.

3. Consequential Penalty Under Section 112 of the Customs Act, 1962:
The Tribunal addressed the issue of the penalty imposed under Section 112 of the Customs Act, 1962. It was established that the penalty under this section is consequential to the demand of duty and confiscation of goods. Since the demand of duty and confiscation against M/s. Orient Arts & Crafts was dropped by the Tribunal and upheld by the High Court, the penalty imposed on the appellant, being consequential, could not survive. The Tribunal referenced several judgments to support this conclusion, including the decision in the case of M/s. Orient Arts & Crafts, which set aside the demand of duty, penalty, and confiscation. Therefore, the penalty on the appellant was also set aside.

Conclusion:
The Tribunal allowed the appeal, setting aside the penalty imposed on the appellant under Section 112 of the Customs Act, 1962. The decision was based on the invalidity of the SCN issued by the Assistant Collector, the lack of jurisdiction of the Commissioner of Customs (Preventive) to issue demands and determine assessments, and the consequential nature of the penalty, which could not survive once the demand of duty and confiscation were dropped against the main party. The appeal was pronounced in court on 27/04/2016.

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