2018 (1) TMI 831 - AT - Customs

Penalty u/s 112(a) of the CA, 1962 - scope of SCN - case of appellant is that there was no allegation in the notice to the effect that the appellant had abetted anybody else in violating the provisions of the Customs Act and the Import Trade (Control) Regulation - Held that - Deputy Commissioner has travelled beyond the scope of the SCN as there is no allegation in the notice that the appellant had abetted with anybody else in the alleged violation of the customs Act read with Import Trade (Control) Regulation. The main allegation in the Notice was that the Appellant was the real importer who had used Lakshan Electronics as a dummy and it is on this basis that the duty was sought to be demanded from the Appellant and not from the importer. The Revenue has not placed on record any credible evidence to prove Appellant s complicity in the ITC violation of the importer. It has already been held by the Commissioner (Appeals) in the appeal filed by the importer that a mere statement is not sufficient evidence to prove the charge of under-valuation. Since the Revenue had accepted this order of the Commissioner (Appeals) the statement of the Appellant cannot be relied upon as the sole basis for imposition of penalty - penalty set aside. Appeal allowed.

Issues Involved:
1. Imposition of penalty under Section 112(a) of the Customs Act, 1962.
2. Allegation of abetment in violation of Customs Act and Import Trade (Control) Regulation.
3. Determination of the real importer and the use of dummy fronts.
4. Allegation of undervaluation and its implications.
5. Confiscation of goods under various sections of the Customs Act, 1962.

Detailed Analysis:

1. Imposition of Penalty under Section 112(a) of the Customs Act, 1962:
The primary issue in this appeal is whether the penalty of ?5,00,000/- imposed on the appellant under Section 112(a) of the Customs Act, 1962, was justified. The Deputy Commissioner of Customs imposed this penalty on the appellant, who was a Director of a private limited company, for allegedly manipulating prices and committing fraud by using M/s Lakshan Electronics Pvt. Ltd. to under-value imported goods. The appellant contested this penalty, arguing that the adjudicating authority had gone beyond the scope of the show-cause notice and had made out a new case of abetment, which was not originally alleged.

2. Allegation of Abetment in Violation of Customs Act and Import Trade (Control) Regulation:
The show-cause notice issued in 1993 alleged that the appellant was causing the import of electronic items on a highly under-invoiced value by using dummy fronts like M/s Lakshan Electronics Pvt. Ltd. and M/s Maruti Enterprises. The appellant argued that the adjudicating authority wrongly concluded that he had abetted the violation of the Customs Act and Import Trade (Control) Regulation, despite the absence of such an allegation in the show-cause notice. The Tribunal found that there was no evidence to support the finding of abetment against the appellant.

3. Determination of the Real Importer and Use of Dummy Fronts:
The show-cause notice alleged that M/s Lakshan Electronics Pvt. Ltd. was a dummy front for the appellant's company, M/s Habs Electronics Pvt. Ltd. However, the Deputy Commissioner, in the adjudication, held that M/s Lakshan Electronics was not a dummy and confirmed the duty demand against M/s Lakshan Electronics. The Tribunal observed that the Deputy Commissioner should have dropped the case proceedings against the appellant in light of this finding. The Tribunal also noted that the appellant had only purchased the goods locally after they were cleared from customs by the importer and had no direct involvement with M/s Lakshan Electronics.

4. Allegation of Undervaluation and Its Implications:
The show-cause notice alleged that the transaction value declared in the Bills of Entry was not the correct value, leading to mis-declaration and rendering the goods liable to confiscation under Section 111(m) of the Customs Act, 1962. The Tribunal found that the allegation of undervaluation did not stand the test in appeal before the Commissioner (Appeals), who had set aside the issue of valuation and remanded it for de novo consideration. The Tribunal also noted that the Revenue had not provided any credible evidence to prove the appellant's complicity in the undervaluation.

5. Confiscation of Goods Under Various Sections of the Customs Act, 1962:
The show-cause notice alleged that the imported goods were liable for confiscation under Sections 111(d), 111(o), and 111(m) of the Customs Act, 1962, due to violations of the Import Trade (Control) Restriction and mis-declaration of value. The Tribunal found that the goods in question were freely importable until a specific notification in July 1992, and there was no active violation on the part of the appellant. The Tribunal also observed that the transactions between the appellant and Mr. Jatin Shah were bona fide and conducted through normal banking channels, and the Revenue failed to prove otherwise.

Conclusion:
The Tribunal concluded that the Deputy Commissioner had traveled beyond the scope of the show-cause notice and that there was no evidence to support the findings of abetment and undervaluation against the appellant. The appeal was allowed, and the penalty imposed on the appellant was set aside, with consequential benefits.

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