2024 (7) TMI 201 - AT - Customs

Demand of Differential duty - Certificate of Origin of the goods - warehousing during transit in the UAE - Denial of benefit of N/N. 12/2012-Cus dated 17th March 2012 - inability of the importer either to furnish documentation evincing direct dispatch from Zanzibar or, in terms of the said rules, deemed direct dispatch from Zanzibar - identity of the person chargeable to duty or interest lacking - HELD THAT - From the facts and circumstances of documentation flow, as well as physical movement of the impugned goods, it is observed that it is the conclusion of the goods having, for a time, been out of customs control that is at the core of the dispute. There are no evidence on record that the procedures of customs control in the United Arab Emirates, and in particular at Jebel Ali, had been ascertained for determination that the warehousing during transit was in contravention of prescription in the impugned Rules. It would also appears to us that customs control of India has been sought to be emplaced over the flow of goods in the United Arab Emirates to arrive at the conclusion. This is not appropriate exercise of adjudicatory responsibility as well as treaty obligation. The appellant have also raised certain technical issues such as show cause notice having referred to the individual appellant herein for recovery of differential duty as well as for imposition of penalty under section 114A of Customs Act, 1962 which is contrary to the provisions of section 28 of Customs Act, 1962 intended to place person chargeable with duty or interest on notice and that the time-frame stipulated in section 28(9) of Customs Act, 1962 have not been complied with. The lower authorities have justified the apparent breach of section 28(9) of Customs Act, 1962 by drawing attention to the change of adjudicating authority as adequate explanation. It must be noted here that it was consequent upon parliamentary deliberation that the said expression came to be incorporated in section 28 of Customs Act, 1962, making it incumbent upon the adjudicating authority to identify the said person. Likewise, section 114A of Customs Act, 1962 renders it obligatory on the part of the person liable to duty or interest which is a consequence of finding on the applicability of section 28 of Customs Act, 1962 to comply with the adjudication order. That this is lacking in the impugned order and, though pointed out by the appellants herein to the first appellate authority, remained unanswered places a question mark on the legality of the impugned order - As the identity of the person chargeable to duty or interest is crucial to the fastening of duty liability and interest as well as penalty, the impugned order is in error. It would be appropriate to set aside the impugned order and remand the matter back to the original authority for fresh decision - Appeal allowed by way of remand.

Summary

Issues:
- Non-compliance with Rule 7 of Customs Tariff Rules in import and clearance of cloves from Zanzibar
- Denial of benefit of notification 12/2012-Cus
- Imposition of penalties under Customs Act, 1962

Analysis:
1. The issue in these appeals pertains to the non-compliance with Rule 7 of Customs Tariff Rules in the import and clearance of cloves from Zanzibar, leading to the denial of the benefit of notification 12/2012-Cus. The appellant-company and its director challenged the order of the Commissioner of Customs upholding the demand of differential duty and imposing penalties under the Customs Act, 1962. The customs authorities raised doubts regarding the origin of the cloves, as they arrived at Nhava Sheva from Jebel Ali, UAE, not directly from Zanzibar as claimed for the concessional duty. The original authority held that the goods did not meet the conditions of Rule 7, thus rejecting the benefit of concessional duty and confirming the demand of short-levied duty.

2. The first appellate authority concurred with the original authority's findings, emphasizing the lack of documentation to establish the direct importation of goods from Zanzibar as required by the Customs Tariff Rules. The goods not remaining under customs control during transit further led to the conclusion that the benefit of the notification was not available. The core dispute centered on the goods allegedly being out of customs control at Jebel Ali, affecting their eligibility for the concessional duty under the Rules.

3. The Tribunal observed that there was no evidence regarding the procedures of customs control in the UAE, specifically at Jebel Ali, to determine if the warehousing during transit violated the Rules. The imposition of Indian customs control over the goods in the UAE was deemed inappropriate. The Tribunal highlighted the importance of adherence to the conditions stipulated in the proviso to Rule 7 of the Customs Tariff Rules for availing the benefit of the notification.

4. The appellant raised technical issues regarding the show cause notice and the identification of the person chargeable with duty or interest under the Customs Act, 1962. The Tribunal noted discrepancies in the adjudication process, particularly in identifying the person liable for duty and interest, which is crucial for compliance with the Customs Act. The lack of clarity in the original authority's order regarding the duty liability and penalties raised concerns about the legality of the decision.

5. Due to the errors and omissions in the lower authorities' orders, the Tribunal decided to set aside the impugned order and remand the matter back to the original authority for a fresh decision. The appellants were to be given an opportunity to present their submissions in light of the Tribunal's observations. Both appeals were allowed by way of remand, emphasizing the importance of proper identification of the person chargeable with duty or interest for compliance with the Customs Act.