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2022 (2) TMI 1021 - AT - CustomsLevy of penalty u/s 112(a) of the Customs Act, 1962 and under section 114AA of the Customs Act - importers of Melamine - evasion of anti-dumping duty by over valuating the goods imported from China - HELD THAT - A Division Bench of the Tribunal in SHAFEEK P.K., KERALA VERSUS CC, COCHIN 2015 (9) TMI 1257 - CESTAT BANGALORE , after placing reliance upon a decision of a learned Member of the Tribunal in CK. KUNHAMMED VERSUS COLLECTOR OF CENTRAL EXCISE CUSTOMS 1992 (3) TMI 199 - CEGAT, MADRAS observed that the provisions of the Customs Act would extend only to the whole of India and could not be made applicable to a resident of Dubai - Division Bench of the Tribunal in GURU ELECTRONICS SINGAPORE PTE LTD. VERSUS COMMR. OF CUS., BANGALORE 2008 (9) TMI 808 - CESTAT, BANGALORE also observed that since the provisions of the Customs Act extend only to the whole of India, proceedings against a company which is incorporated abroad cannot be sustained. The learned Member also noted that the appellant had subjected to the jurisdiction of the Customs Act upon notice having been sent under section 108 of the Customs Act and concluded that penalty was rightly imposed - though the Division Bench decision of the Tribunal in Shafeek P.K. and the decision of a learned Member of the Tribunal in C.K. Kunhammed had been placed, which decisions clearly held that at the relevant time the Customs Act extended only to the whole of India and not beyond the territorial jurisdiction of India, but a contrary view was taken. It appears that the amendment made in section 1(2) of the Customs Act with effect from 29.03.2018 was not brought to the notice of the learned Member. The binding decision of the Division Bench of the Tribunal in Shafeek P.K. could not have ignored. In view of the Division Bench decision of the Tribunal, it has to be held that the Customs Act prior to 29.03.2018 was applicable only to the whole of India and not beyond the territorial jurisdiction of India. Penalty, therefore, could not have been imposed upon the appellant under section 112(a) of the Customs Act - Appeal allowed.
Issues Involved:
1. Jurisdiction of the Directorate of Revenue Intelligence (DRI) to issue the notice. 2. Applicability of Customs Act beyond the territorial jurisdiction of India. 3. Validity of transactions and allegations of paper transactions. 4. Imposition of penalties under sections 112(a) and 114AA of the Customs Act. 5. Principles of natural justice in the order passed by the Principal Commissioner. Comprehensive, Issue-Wise Detailed Analysis: 1. Jurisdiction of the Directorate of Revenue Intelligence (DRI) to Issue the Notice: The appellant contended that the DRI did not have the jurisdiction to issue the show cause notice, referencing the Supreme Court decision in Canon India Private vs. Commissioner of Customs. However, the department argued that the ratio of the Canon India judgment was not applicable in cases of penalty under section 112 of the Customs Act, as the notice was issued under section 124 of the Customs Act for imposition of penalty and not for duty demand under section 28(4). 2. Applicability of Customs Act Beyond the Territorial Jurisdiction of India: The appellant argued that the transactions in question occurred in Hong Kong, and thus, the Customs Act did not have jurisdiction beyond India. This argument was supported by several Tribunal decisions, such as Shafeek P.K. vs Commissioner of Customs, Cochin, and Guru Electronics Singapore Pte Ltd. vs Commissioner of Customs, Bangalore, which held that the Customs Act extended only to the whole of India and not beyond. The Tribunal noted that the Customs Act was amended on 29.03.2018 to apply to any offence or contravention outside India, but this amendment was not applicable to the case at hand, which involved transactions prior to this date. 3. Validity of Transactions and Allegations of Paper Transactions: The show cause notice alleged that the transactions between M/s Kay Petrochem Ltd., M/s Asia Pacific Impex Pvt. Ltd., and M/s Arinits Sales Pvt. Ltd. were only on paper to evade anti-dumping duty. The appellant argued that the transactions were legitimate and conducted in Hong Kong, with no restrictions under the laws of Hong Kong or India. The department maintained that these were paper transactions with the intent to evade duty, thus violating Customs Act provisions. 4. Imposition of Penalties Under Sections 112(a) and 114AA of the Customs Act: The appellant contended that no penalty could be imposed under section 112(a) as there was no abetment in the mis-declaration of goods, and no penalty under section 114AA as there was no intentional or knowing transaction to attract this provision. The department argued that penalties were correctly imposed as the appellant abetted in artificially inflating the transaction value of goods to evade anti-dumping duty. The Tribunal, however, concluded that penalties under section 112(a) could not be imposed as the Customs Act did not apply beyond India’s territorial jurisdiction before the 2018 amendment. 5. Principles of Natural Justice in the Order Passed by the Principal Commissioner: The appellant argued that the order dated 14.10.2019 was passed in violation of principles of natural justice, as the submissions made in response to the show cause notice were not considered. The Tribunal did not explicitly address this issue in the judgment but focused on the jurisdictional aspect and the applicability of the Customs Act. Conclusion: The Tribunal set aside the impugned order dated 14.10.2019, concluding that the Customs Act prior to its amendment on 29.03.2018 did not extend beyond the territorial jurisdiction of India. Consequently, penalties under section 112(a) could not be imposed on the appellant. The appeal was allowed with consequential relief.
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