2017 (5) TMI 1068 - AT - Customs

Confiscation - redemption fine - penalty - import of jack-up drilling rigs - unauthorised import - clandestine clearance - The impugned order held that the duty liability of ₹ 85,90,07,461 crystallised upon entry of the rigs in designated areas, that these had been wrongly declared as cargo in the manifest, that the customs procedures had not been complied with, that the certificates furnished by the importers were forged, that, in the light of questionability of the certificate, there was no necessity to carry out verification of handwriting, that the failure of witness to appear for cross-examination would not vitiate the proceedings - impugned order challenged on three grounds, jurisdictional incompetence, the applicability of bar of limitation in section 28 of Customs Act, 1962 and the dutiability of rigs at the time of import. Held that - None other than Commissioner of Customs, Mumbai or any authority vested with all-India jurisdiction is empowered to exercise powers under section 111 or to assess and recover duty in relation the goods that were imported and deployed in the designated areas. Amenability of section 12 of Customs Act, 1962 for recovery of short-paid or unpaid duty - Held that - There can be no doubt that decisions of courts are precedents that may lay the foundation for demand of duty in adjudication orders but it is, indeed, doubtful if a show cause notice can rely upon judicial decisions as authority for demanding duty. The reasons are not far to seek the peculiarities, singularities and angularities that characterise a particular dispute which may find judicial settlement that may not necessarily be replicated in another; it is only upon hearing the person served with the notice, and upon taking note of the defence, that a reasonable conclusion can be drawn of similarity with or distinction from another dispute. It is, therefore, inappropriate to cite the authority of an order or decision to raise a demand. There could be no more weighty evidence of pre-judgement, prejudice and bias - The adjudicating authority is, therefore, on a footing that is entirely unsound in seeking to invoke section 12 of Customs Act, 1962; section 28 is the only perceptible provision for recovery of duty that has not been paid or has been short-paid on imported goods - The demand for duty is, therefore, without authority of law and is liable to be set aside. Scope for recovery of duty by recourse to section 125 of Customs Act, 1962 - Held that - In view of the specific prescription in section 125 that the person redeeming the confiscated goods was also liable to pay the duty, the liability crystallises as a condition of redemption. It needs noting that neither does section 125 of Customs Act specify the authority to determine the duty nor does it vest the obligation in a proper officer ; consequently, section 125 of Customs Act, 1962 does not empower determination or assessment and cannot be resorted except when duty has been already been assessed but foregone at the time of import. Needless to state, the liability to pay the duty is a condition of redemption and is not enforceable when the goods are, themselves, not available for confiscation. It is acknowledged that the imported platform rigs was no longer available at the time of commencement of investigations and was never seized; nor was it available for confiscation. Naturally, redemption on payment of fine was beyond the realm of the possible and no longer is it possible to insist upon liability to pay the duty. The confiscation and demand of duty set aside as having been exercised without authority of law - penalties also fail - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Jurisdictional competence of Commissioner of Customs (Preventive), Mumbai.
2. Applicability of bar of limitation under section 28 of Customs Act, 1962.
3. Dutiability of rigs at the time of import.
4. Legality of invoking section 12 of Customs Act, 1962 for recovery of duty.
5. Scope for recovery of duty under section 125 of Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Jurisdictional Competence:
The primary ground of appeal was that the Commissioner of Customs (Preventive), Mumbai lacked jurisdictional competence to initiate proceedings against the importer and the imported goods. It was argued that the rigs operated only in the designated area of the Exclusive Economic Zone (EEZ) without entering the territorial waters. The jurisdiction of the Commissioner of Customs (Preventive), Mumbai is restricted to the districts of Mumbai, Thane, and Raigad, and does not extend to the EEZ. The Tribunal emphasized that the inclusion of waters in the definition of India does not extend to the states composing the Union, as settled by the Supreme Court in Republic of Italy & others v. Union of India & others. Consequently, the jurisdiction claimed for the adjudicating authority by derivation was found untenable.

2. Applicability of Bar of Limitation:
The Tribunal considered the applicability of the bar of limitation under section 28 of Customs Act, 1962. The adjudicating authority had issued show cause notices well beyond the period of five years preceding the date of notice, which is the outer limit prescribed under section 28. The adjudicating authority attempted to bypass this limitation by invoking section 12 of Customs Act, 1962, citing the Supreme Court decision in Commissioner of Customs, Mumbai v. Virgo Steels Ltd. However, the Tribunal found that section 28 is the only provision for recovery of duty that has not been paid or has been short-paid, and the adjudicating authority's reliance on section 12 was unsound.

3. Dutiability of Rigs at the Time of Import:
The Tribunal examined the dutiability of the rigs at the time of import. It was noted that the rigs were imported under a 'bare boat charter' and were transported from Brazil without entering the territorial waters of India. The adjudicating authority had held that the duty liability crystallized upon entry of the rigs in designated areas and that the customs procedures had not been complied with. However, the Tribunal found that the adjudicating authority's actions were without authority of law, as the proper procedure for recovery of duty under section 28 had not been followed.

4. Legality of Invoking Section 12 of Customs Act, 1962:
The adjudicating authority had invoked section 12 of Customs Act, 1962 for recovery of duty, relying on the Supreme Court decision in Virgo Steels Ltd. The Tribunal clarified that section 28 is the procedural provision for recovery of duty, and any irregularity in following this procedure does not denude the proper officer of jurisdiction to initiate action for recovery of escaped duty. However, the Tribunal found that the adjudicating authority's reliance on section 12 was inappropriate, as section 28 is the only perceptible provision for recovery of duty.

5. Scope for Recovery of Duty under Section 125 of Customs Act, 1962:
The Tribunal examined the scope for recovery of duty under section 125 of Customs Act, 1962, which pertains to the option to pay a fine in lieu of confiscation. The adjudicating authority had referred to section 125 to claim that recourse to section 12 is not hindered by any bar of limitation. However, the Tribunal found that section 125 does not empower determination or assessment of duty and can only be resorted to when duty has already been assessed but foregone at the time of import. Since the imported rigs were no longer available for confiscation, the liability to pay the duty was not enforceable.

Conclusion:
The Tribunal set aside the confiscation and demand of duty as having been exercised without authority of law. The penalties imposed on M/s Jagson International Ltd and its Chairman were also set aside. The appeals were allowed.