2017 (4) TMI 581 - AT - Customs

Suppression and mis-declaration of value of goods - extended period of limitation - clearance of empty drums unit located in SEZ to DTA - the price at which appellant were selling the drums were higher than the price at which they were paying Customs duty - appellant case is that since the price was being fixed by the Custom and each Bill of Entry on clearance was approved by the Custom, there was no charge for suppression or misdeclaration, and extended period cannot be invoked on them - Held that - Leaving column of invoice value blank, failure to mention invoice number and declaration is also suppression. In these circumstances, there is a clear case of suppression and misdeclaration and therefore, the extended period of limitation has been rightly invoked. Invocation of Section 28 of the CA, 1962 - Held that - penalty has been rightly imposed as this is a clear case of suppression - option to pay penalty at the rate of 25% of duty has not been extended in the impugned order-in-original. The appellants would be given an option to pay penalty at the rate of 25% of duty subject to payment of entire amount of duty along with interest and the penalty within 30 days from the date of communication of this order. Imposition of penalties on buyers of materials - Held that - when the buyers were aware of the actual price at which the goods were being assessed and also the actual price at which they were purchasing the goods, their connivance in the evasion of tax cannot be denied - penalty upheld. Imposition of penalties on Factory Manager, Commercial Manager and Logistic Officer - Held that - it is apparent that the employees had nothing to gain from the practice. Though these employees were aware of the practice, their knowledge of any wrongdoing has not been brought out. In these circumstances, there is justification in imposing penalties on the employees - penalty withheld. Decided partly in favor of appellant.

Summary

Issues:
1. Demand of duty and imposition of penalties for clearance of empty drums from SEZ to DTA.
2. Applicability of Section 28 of the Customs Act, 1962 vs. Section 11AC of the CEA,1944.
3. Misdeclaration and suppression leading to the invocation of the extended period of limitation.
4. Imposition of penalties on buyers and employees.

Analysis:

Issue 1:
The appeals were filed against the confirmation of demand and penalties for clearing waste packing material from SEZ to DTA. The appellant argued that since the price was fixed by Customs and Bills of Entry were approved by Customs, there was no suppression or misdeclaration. The demand for the period beyond the normal limitation was contested. The tribunal found that the appellants had declared the value fixed by Customs in the Bills of Entry, but discrepancies in declarations and misrepresentations indicated suppression and misdeclaration.

Issue 2:
The appellant contended that demand should have been raised under Section 11AC of the CEA,1944 instead of Section 28 of the Customs Act, 1962. However, the tribunal held that the cases cited did not apply as there was no manufacturing activity involved, rendering Section 3 of the Central Excise Act, 1944 irrelevant. The appeals were dismissed, but the appellants were given an option to pay a penalty at a reduced rate.

Issue 3:
The tribunal noted that misdeclarations and suppression were evident from the Bills of Entry, leading to the invocation of the extended period of limitation. The appellants' failure to provide complete information in declarations and discrepancies in invoice values pointed to clear misrepresentation.

Issue 4:
Penalties were imposed on buyers and employees for their alleged connivance in tax evasion. The buyers were aware of the misdeclarations as they received the material along with Bills of Entry. However, the penalties imposed on employees were overturned as they were not found to have gained from the practice or had knowledge of any wrongdoing.

In conclusion, the tribunal dismissed the appeals of the appellants related to demand and penalties, but allowed the appeals of employees regarding penalty imposition.