2023 (5) TMI 1090 - HC - Customs

Levy of penalty under Section 112(a) of the Customs Act, 1962 - Import confectionary items - Evasion of customs duty by under-invoicing the goods and mis-declaring the transaction value and the retail sales price - clearance of goods on the basis of false invoices reflecting values, which were lower than the real consideration paid by the importer for the said goods - HELD THAT - The contention that no penalty can be levied against the appellant since other co-noticees have settled the liability before the Settlement Commission is insubstantial. The show cause notices were issued to several persons. The fact that other co-noticees had approached the Settlement Commission and had settled their liability cannot absolve the appellant of its liability under the Customs Act. The appellant had full opportunity to approach the Settlement Commission but it chose to contest the proceedings before the Adjudicating Authority. The learned counsel for the appellant has been unable to point out any provision in the Customs Act, which would automatically extend the benefit of an order passed by the Settlement Commission in respect of a party, to other noticees as well. Reliance placed by the appellant on the decision of the Supreme Court in Union of India v. Onkar S. Kanwar 2002 (9) TMI 101 - SUPREME COURT is misconceived. The said decision was rendered in the context of Kar Vivad Samadhan Scheme, 1998 for settlement of disputes. The Government of India had also passed Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998 on 08.12.1998 clarifying that in certain cases the settlement in favour of the declarant under sub-section (1) of Section 90 shall be deemed to be full and final in respect of such other person also on whom a show-cause notice was issued on the same matter covered under the declaration - there is no provision in the Customs Act, which extends the immunity available to a party that has successfully settled the case before the Settlement Commission, to other persons. Thus, the decision in Union of India v. Onkar S. Kanwar has no application in the facts of the present case. In A.M. Ahamed Co. v. Commissioner of Customs 2022 (11) TMI 639 - MADRAS HIGH COURT , the Madras High Court had referred to the decision of the Supreme Court in Union of India v. Onkar S. Kanwar and observed that the effect of the settlement mechanism, as provided under the Kar Vivad Samadhan Scheme, 1998, would be applicable where orders are passed by the Settlement Commission under Section 127C (5) of the Customs Act. In that case, the importer had approached the Settlement Commission and made a true and fair disclosure relating to the import of goods. Accordingly, the importer was granted immunity from prosecution and fine/penalty. The Madras High Court held that in the circumstances, it would be unfair to continue the proceedings against the Custom House Agent (CHA) in relation to the very same transaction - the said view cannot be agreed upon. In the present case, although the show cause notices were issued to various noticees, the proposal to impose penalties/liability were separate and severable. Discharge of liability of one of the noticees either by making payment without a contest, or by settlement before the Settlement Commission would not absolve the other noticees from their liability. The contention that the officers of DRI had no jurisdiction to issue show cause notices to the appellant, is also unmerited. It is material to note that penalty has been imposed on the appellant under Section 112(a) of the Customs Act. The question as to levy of penalties is required to be adjudicated under Section 122 of the Customs Act. In the present case, the order was adjudicated by the Joint Commissioner of Customs and there is no dispute that he had the jurisdiction to adjudicate the question of levy of penalty under Section 122 of the Customs Act - the question as to whether the officers of DRI are proper officers for issuance of notice under Section 28 of the Customs Act does not arise in the present case. The learned Tribunal has rightly rejected the said contention on the ground that the show cause notice issued to the appellant was not under Section 28(4) of the Customs Act. Appeal dismissed.

Summary

Issues Involved:
1. Levy of penalty under Section 112(a) of the Customs Act, 1962.
2. Jurisdiction of the Customs Act over an overseas supplier.
3. Impact of Settlement Commission proceedings on co-noticees.
4. Jurisdiction of DRI officers to issue show cause notices.

Summary:

Levy of Penalty under Section 112(a) of the Customs Act:
The appellant challenged the imposition of penalties under Section 112(a) of the Customs Act, 1962, by the Customs, Excise, and Service Tax Appellate Tribunal. The penalties were initially imposed by the Adjudicating Authority through orders-in-original dated 29.04.2016 and 06.05.2016. The Tribunal upheld the penalties, finding that the appellant had participated in a conspiracy to evade customs duty by under-invoicing and mis-declaring the value of imported goods.

Jurisdiction of the Customs Act over an Overseas Supplier:
The appellant contended that no penalty could be imposed under the Customs Act as it is an overseas entity and the Act does not have extra-territorial operation. The Court found this argument unmerited, stating that the appellant was complicit in the clearance of goods based on false invoices and had collected part of the consideration in India through hawala. Therefore, the alleged offenses were committed within Indian territory, making the levy of penalty under Section 112(a) valid.

Impact of Settlement Commission Proceedings on Co-noticees:
The appellant argued that since other co-noticees had settled their liability before the Settlement Commission, no proceedings could be maintained against it. The Court rejected this argument, noting that the Settlement Commission's orders do not automatically extend immunity to other noticees. Each noticee's liability is separate and severable, and the appellant had the opportunity to approach the Settlement Commission but chose not to.

Jurisdiction of DRI Officers to Issue Show Cause Notices:
The appellant claimed that the show cause notices issued by DRI officers were without jurisdiction as they are not "proper officers." The Court dismissed this contention, noting that the penalty was imposed under Section 112(a) and adjudicated by the Joint Commissioner of Customs, who had the jurisdiction to do so. The question of whether DRI officers are proper officers for issuing notices under Section 28 of the Customs Act did not arise in this case.

Conclusion:
The Court found no substantial question of law in the appellant's arguments and dismissed the appeals, upholding the penalties imposed under Section 112(a) of the Customs Act.