2022 (9) TMI 227 - AT - Customs

Non-imposition of penalty under section 112 of CA - bogus firms used for sending advance remittances to counter-balance undervalued imports in the name of other firms - it is alleged that IEC holders and persons who helped in obtaining multiple IECs for use by others were not made parties to show cause notice despite being directly involved and being the beneficiaries - enhancement of value of goods - legality of Voluntary deposit - duty demand from appellants, valid or not - evidence on record to establish that K R Express, Shri Joginder Kumar and Shri Surinder Singh had prior knowledge that the impugned goods were undervalued or not - Confiscation - penalty - HELD THAT - During the relevant period there was no concept of beneficial owner as there was only one importer in respect to the goods. Admittedly in this case, the bill of entry was filed with M/s Samay International as the importer. The bills of lading, IGM etc., were in the name of M/s Samay International and the duty was assessed in the name of M/s Samay International and it was paid in the name of M/s Samay International. However, subsequent statements of Shri Pradeep Kumar, Shri Surinder Kumar, Shri Joginder Kumar and the owner of M/s Samay International show that duty was paid in cash by Shri Pradeep Kumar to K R Express who deposited it through TR-6 challans in the name of M/s Samay International. Shri Anil Kumar the proprietor of M/s Samay International claimed that he had no knowledge of the imports. It is not found that either Shri Surinder Kumar or Shri Joginder Kumar or K R Express have held themselves to being the importers . Shri Anil Kumar, the IEC holder, has consistently maintained that he had nothing to do with the imports. Thus, in this case, according to all the documents such as Bill of Entry, Bill of Lading, invoice, IGM, the importer is M/s Samay International. According to statement of Shri Pradeep Kumar, he was the importer. Further, according to another statement of Shri Pradeep Kumar, Shri Joginder Kumar and Shri Surinder Kumar are also the importers being equal beneficiaries in the imports - Commissioner has not followed the required process and hence the statements are not relevant, let alone admissible in this case. This becomes even more important in this case because of the contradictions between the statements of Shri Pradeep Kumar on the one hand and Shri Joginder Kumar and Shri Surinder Kumar on the other. Since the statements are not relevant, the importer is the one which all the documents state to be the importer viz, M/s Samay International. Demand of differential duty - HELD THAT - It can be recovered if duty is not levied, short levied or erroneously refunded, from the person chargeable to duty. In this case the goods were in the name of M/s Samay International which is the importer according to all the documents. Therefore, differential duty, if any, can be demanded from it only. The duty was originally also paid in the name of M/s Samay International - It is evident from the order that the goods have been confiscated under Section 111 (d) and section 111(m) by the Commissioner but since the goods were not available fine in view of confiscation was not imposed. As may be seen duties of customs are charged on the goods imported into or exported to India and this charge will apply to all goods belonging to Government as they apply to all goods not belonging to Government. This applies not only where goods were imported by the Government but also to cases where title of the goods gets transferred to the Government for any reason - It is a matter of practice when the goods which were confiscated are subsequently auctioned or sold by the Government the sale proceeds of such goods are taken as cum-duty price and the amount of duty is calculated backwards and to that extent it is credited to the consolidated fund of India as customs duties and the rest as sale proceeds of the goods. The differential duty has been demanded in this case from the customs broker, KR Express and Shri Pradeep Kumar along with interest - As per the documents, M/s Samay International is the importer. The statements made before the officer by various persons have not been subjected to Section 138 B and hence are not relevant. Redemption of the value itself - HELD THAT - It is true that if there is a reason to doubt the transaction values, they can be rejected and then valuation has to be done sequentially as per the Valuation Rules. In this case rule 9 of the Valuation Rules has been adopted ignoring the previous rules and without discussing the as to why the previous rules are not applicable. Further, the statements of Shri Pradeep Kumar, based on which the value was re- determined, is not relevant as the procedure under Section 138 B was not followed. The values indicated in the show cause notice were lowest values of the similar goods imported at that time. It is also found that NIDB data was equally available to the assessing officers at that time. The goods, having been assessed and cleared during the period by the assessing officer, there are no sufficient reason to enhance the value as per impugned order. At any rate, since it is found that the importer, as per the documents was M/s Samay International and the statements before officer to the contrary were not relevant in view of section 138 B, the demand of duty under section 28, if any, has to be made on the importer. The importer is not a noticee in this case. The enhancement of value and determination of duty is not sustainable. Consequently the penalties imposed upon the appellants are also not sustainable - As per all the relevant documents, M/s Samay International is the importer and the statements contradicting this are not relevant in view of section 138B - Differential duty can only be demanded from the importer and not from others - the term beneficial owner has been defined in the Customs Act and the term importer was enlarged to include beneficial owner only from 2017 and not during the relevant period. If the goods are confiscated and are either not allowed to be redeemed or are not redeemed despite an offer, the goods vest in the Central Government and the duty liability similarly vests in the Central Government. However, in this case, even the confiscation itself is not sustainable as the allegation of under-valuation itself is not sustainable - penalties imposed on all are not sustainable and need to be set aside - Commissioner is correct in refraining from imposition of penalties under section 112 of the Customs Act on Shri Joginder Kumar and Shri Surinder Kumar. Appeal disposed off.

Summary

Issues Involved:
1. Non-imposition of penalty under Section 112 on specific individuals.
2. Imposition of penalty on certain individuals and entities.
3. Recovery of differential duty and interest.
4. Legitimacy of the undervaluation of goods.
5. Validity of the statements made during the investigation.
6. Confiscation of goods and related penalties.
7. Determination of the actual importer.
8. Applicability of penalties under various sections of the Customs Act.
9. Role and responsibility of the customs broker.

Issue-wise Detailed Analysis:

1. Non-imposition of Penalty under Section 112:
The Revenue filed appeals (Customs Appeal No. 51192 and 51193 of 2019) against the non-imposition of penalties on Shri Joginder Kumar and Shri Surinder Kumar. The Tribunal upheld the Commissioner's decision not to impose penalties under Section 112, finding no grounds to disturb this part of the order.

2. Imposition of Penalty on Certain Individuals and Entities:
The Commissioner imposed penalties under various sections of the Customs Act on M/s K R Express Pvt. Ltd., Shri Joginder Kumar, Shri Surinder Kumar, and Shri Pradeep Kumar. The appellants contended that there was no evidence of their involvement or prior knowledge of the undervaluation, and the penalties were not sustainable. The Tribunal found that the penalties imposed were not justified and set them aside.

3. Recovery of Differential Duty and Interest:
The Commissioner ordered the recovery of differential duty amounting to Rs. 97,55,307/- and interest from M/s K R Express Pvt. Ltd. and Shri Pradeep Kumar. The Tribunal held that differential duty could only be demanded from the importer, which, according to the documents, was M/s Samay International. Since M/s Samay International was not a noticee, the demand for differential duty was not sustainable.

4. Legitimacy of the Undervaluation of Goods:
The investigation revealed that goods were undervalued, and the values were enhanced based on statements made by Shri Pradeep Kumar. The Tribunal found that the enhancement of values based on these statements was not permissible under the Valuation Rules, as the proper procedure was not followed. Therefore, the allegation of undervaluation was not sustainable.

5. Validity of the Statements Made During the Investigation:
Statements made by various individuals during the investigation were not subjected to the procedure under Section 138B of the Customs Act, making them irrelevant. The Tribunal emphasized that the statements could not be used as evidence against the appellants.

6. Confiscation of Goods and Related Penalties:
The goods were confiscated under Sections 111(d) and 111(m) of the Customs Act, but no redemption fine was imposed. The Tribunal noted that if the goods are confiscated and not redeemed, the duty liability vests in the Central Government. Since the confiscation itself was based on unsustainable allegations of undervaluation, the confiscation and related penalties were not upheld.

7. Determination of the Actual Importer:
The Tribunal concluded that M/s Samay International was the importer according to all relevant documents, and the statements contradicting this were not relevant. Consequently, any differential duty could only be demanded from M/s Samay International.

8. Applicability of Penalties under Various Sections of the Customs Act:
The penalties imposed under Sections 114A and 114AA were found to be unsustainable due to the lack of evidence and the improper procedure followed during the investigation. The Tribunal set aside these penalties.

9. Role and Responsibility of the Customs Broker:
The Tribunal found that M/s K R Express Pvt. Ltd. had followed the KYC norms and other requirements stipulated under the Board Circular and Customs Brokers Licensing Regulations, 2013. There was no evidence of prior knowledge of undervaluation by the customs broker, making the imposition of penalties unjustified.

Conclusion:
The Tribunal dismissed the Revenue's appeals and allowed the appeals filed by Shri Joginder Kumar, Shri Surinder Kumar, M/s K R Express Pvt. Ltd., and Shri Pradeep Kumar, setting aside the impugned order to the extent it was challenged by the appellants. The penalties and differential duty demands were found to be unsustainable, and the confiscation of goods was not upheld.