2017 (10) TMI 762 - AT - Customs

Penalty u/s 112(a) of Customs Act, 1962 - cross examination sought for by appellant, which was not provided - Principles of Natural Justice - Held that - appellants have not received hearing notice of the said dates - principle of natural justice was not adhered to by the adjudicating authority - the adjudicating authority to allow cross examination of the witnesses - appeal allowed by way of remand.

Issues:
Violation of natural justice in passing ex parte order, Allegation of issuing solvency certificate without verification, Allegation of diversion of goods under advance license scheme, Imposition of penalty under Section 112(a) of Customs Act, 1962.

Violation of Natural Justice:
The appellant contended that an ex parte order was passed against them without considering their reply or granting a personal hearing. They argued that the request for cross-examination of witnesses was denied, which they believed violated the principle of natural justice. The appellant highlighted that they had responded to the show cause notice and attended some hearings, where they requested cross-examination, but it was rejected. The Tribunal agreed that the adjudicating authority did not adhere to the principle of natural justice and directed for cross-examination of witnesses, submission of arguments, and a speaking order to be passed, keeping all issues open.

Allegation of Issuing Solvency Certificate without Verification:
The case revolved around the appellant, a Chartered Accountant, who allegedly issued a solvency certificate without verifying the books of account of a firm, which led to the firm obtaining an advance license. The goods imported under this license were purportedly diverted into the domestic market, breaching the advance license scheme and actual user condition. As a result, a penalty of ?50 lakhs was imposed on the appellant under Section 112(a) of the Customs Act, 1962. The appellant maintained that they acted in good faith while issuing the certificate and were unaware of the misuse of the license by the firm. They argued that they should not be held accountable for the customs duty evasion by the said firm.

Allegation of Diversion of Goods under Advance License Scheme:
The Tribunal noted that the goods imported under the advance license were allegedly diverted into the domestic market in violation of the advance license scheme and actual user condition. This diversion was a key aspect of the case, leading to the imposition of penalties and the legal proceedings against the appellant. The appellant denied involvement in the diversion and emphasized issuing the solvency certificate in good faith, distancing themselves from any knowledge or participation in the misuse of the license by the firm.

Imposition of Penalty under Section 112(a) of Customs Act, 1962:
The appellant was penalized under Section 112(a) of the Customs Act, 1962, for their alleged role in facilitating the diversion of goods under the advance license scheme. The penalty of ?50 lakhs was a significant consequence of the findings against the appellant. However, the appellant argued that they were not complicit in the diversion and should not be held accountable for the actions of the firm that misused the advance license. The Tribunal's decision to remand the case back to the adjudicating authority for proper adherence to natural justice principles impacted the penalty imposition and the overall resolution of the matter.

This comprehensive analysis of the judgment delves into the issues of violation of natural justice, the allegations of issuing a solvency certificate without verification, the diversion of goods under the advance license scheme, and the imposition of penalties under the Customs Act, providing a detailed understanding of the case and the Tribunal's decision.

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