2021 (11) TMI 665 - AT - Customs

Demand of differential customs duty - Confiscation - penalty - Jurisdiction - power of Additional Director General, DRI to issue the notice - HELD THAT - This precise issue was examined by the Supreme Court in M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS 2021 (3) TMI 384 - SUPREME COURT . The Supreme Court observed that the nature of the power to recover the duty, not paid or short paid after the goods have been assessed and cleared for import is a power that has been conferred to review the earlier decision for assessment. This power which has been conferred under section 28 of the Customs Act on the proper officer, must necessarily mean the proper officer who, in the first instance, assessed and cleared the goods. Thus, the Additional Director General, DRI did not have the jurisdiction to issue the show cause notice - It would thus be seen that the Supreme Court in Canon India held that the entire proceedings initiated by the Additional Director General, DRI by issuance of a show cause notice was without any authority of law and was, therefore, liable to be set aside. Confiscation - penalty - HELD THAT - In BAKEMAN S HOME PRODUCTS PVT. LTD. VERSUS COLLECTOR OF CUS., BOMBAY 1997 (6) TMI 178 - CEGAT, NEW DELHI , the Tribunal held that the proposal for confiscation and penalty cannot be segregated from duty demand and, therefore, the proceedings for confiscation and imposition of penalty cannot be sustained. The order dated 29.03.2019 passed by the Commissioner of Customs (Import) cannot be sustained and is set aside - Appeal allowed.

Issues Involved:
1. Jurisdiction of the Additional Director General, Directorate of Revenue Intelligence (DRI) to issue the show cause notice.
2. Validity of the demand of differential customs duty, penalty, and interest.
3. Confiscation of goods and imposition of redemption fine.
4. Imposition of penalties under sections 114A and 114AA of the Customs Act.
5. Appropriation of the amount paid by the appellant during the investigation.
6. Imposition of penalty on the Regional Marketing and Sales Manager under sections 112(a)(b) and 114AA of the Customs Act.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Additional Director General, DRI to issue the show cause notice:

The primary issue was whether the Additional Director General, DRI had the jurisdiction to issue the show cause notice under section 28 of the Customs Act. The Supreme Court in Canon India Pvt. Ltd. vs. Commissioner of Customs and Commissioner of Customs, Kandla vs. M/s. Agarwal Metals and Alloys clarified that the power to recover duties not paid or short paid after goods have been assessed and cleared for import is vested in the "proper officer" who initially assessed and cleared the goods. The Supreme Court held that the Additional Director General, DRI is not the proper officer to issue such notices. The Tribunal reiterated this position, stating that the proceedings initiated by the Additional Director General, DRI were without jurisdiction and thus invalid.

2. Validity of the demand of differential customs duty, penalty, and interest:

Since the show cause notice issued by the Additional Director General, DRI was deemed without jurisdiction, the demand for differential customs duty along with penalties and interest was also invalid. The Tribunal set aside the order dated 29.03.2019 passed by the Commissioner of Customs (Import) confirming the demand.

3. Confiscation of goods and imposition of redemption fine:

The Tribunal noted that the proposal for confiscation of goods and imposition of redemption fine under section 111 of the Customs Act was intrinsically linked to the demand of differential customs duty. Since the demand was invalid, the confiscation and redemption fine could not survive. This position was supported by the Tribunal's decision in Bakeman’s Home Products Pvt. Ltd. vs. Collector of Cus., Bombay, which held that confiscation and penalty cannot be segregated from the duty demand.

4. Imposition of penalties under sections 114A and 114AA of the Customs Act:

The penalties imposed under sections 114A and 114AA of the Customs Act were also set aside, as they were based on the invalid demand of differential customs duty. The Tribunal emphasized that penalties could not be sustained if the foundational demand itself was without jurisdiction.

5. Appropriation of the amount paid by the appellant during the investigation:

The Tribunal did not specifically address the appropriation of the ?6 crores paid by the appellant during the investigation. However, since the entire proceedings were set aside, the appropriation of this amount towards the duty liability would also be invalid.

6. Imposition of penalty on the Regional Marketing and Sales Manager under sections 112(a)(b) and 114AA of the Customs Act:

The penalty of ?50 lakhs each under sections 112(a)(b) and 114AA of the Customs Act imposed on the Regional Marketing and Sales Manager was also invalidated. The Tribunal's reasoning was consistent with its stance that penalties linked to an invalid demand could not be sustained.

Conclusion:

The Tribunal allowed the appeals, setting aside the order dated 29.03.2019 passed by the Commissioner of Customs (Import). The show cause notice issued by the Additional Director General, DRI was declared without jurisdiction, rendering the subsequent demand for differential customs duty, penalties, interest, and confiscation of goods invalid. The Tribunal emphasized that the proceedings for confiscation and penalty could not be segregated from the duty demand, and thus, they too were set aside.

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