2024 (8) TMI 330 - AT - Customs

Denial of benefit of concessional rate of duty under notification no. 21/2002-Cus dated 1st March 2002 - import of waste paper which, instead of having been used in manufacturing of newsprint , was found to have been deployed in production of paper - non-maintenance of separate books, was concealed from central excise authorities to obtain the end use certificate - proceedings under the Insolvency and Bankruptcy Code, 2016 - penalties u/s 112 of CA - HELD THAT - There is no doubt that the Insolvency and Bankruptcy Code, 2016 has stipulated its dominance over the other laws in the event of inconsistency. Not even a glimmer of inconsistency is perceptible as the issue before us is not recovery of unpaid levies but determination of duty liability on past clearances being legal and proper. The consequence of such order may be recovery of dues, interest and penalty which could well be barred by operation of the Insolvency and Bankruptcy Code, 2016; that, however, arises in a different jurisdiction and not that of chapter XV of Customs Act, 1962 governing appeals. It was always open to the appellant to withdraw its appeal or allow it to be dismissed for non-prosecution. Penalties u/s 112 of CA, imposed on Shri Murli Shobhagamal Maloo and Shri Nandlal B Maloo arising in consequence of confiscation of goods of appellant-importer ordered by the lower authorities - HELD THAT - It is on record that the importer-appellant had furnished the und-use certificate issued by the central excise authorities and that the findings against the individual-appellants in the impugned order does not specify the manner in which they had contributed to the furnishing of the end-use certificate as it is the unacceptability of evidence of end use that prompted invoking of section 111 of Customs Act, 1962. It is only their overall role in the managerial team of the importer-appellant that appears to have influenced the imposition of penalty on the two individuals. It is observed that the goods have been held liable for confiscation under section 111 (m) of Customs Act, 1962 and that the original authority had held them liable to confiscation under section 111(d) of Customs Act, 1962. Fastening of liability to penalty under section 112 should, therefore, have been a consequence of determination of the manner in which the two individuals were responsible for import and filing of the bill of entry. No exercise has been undertaken to that end by the lower authorities. Consequently, imposition of penalty under section 112 of Customs Act, 1962 on Shri Murli Shobhagamal Maloo and Shri Nandlal B Maloo are not legal and, therefore, set aside. Appeal disposed off.

Summary

Issues:
1. Appeal against order upholding demands and penalties under notification no. 21/2002-Cus dated 1st March 2002.
2. Impact of proceedings under Insolvency and Bankruptcy Code, 2016 on the appeal.
3. Challenge to confiscation and duty liability not pressed by the counsel.
4. Penalties imposed on individuals under section 112 of Customs Act, 1962.

Analysis:
1. The appeal before the Tribunal involved M/s Murli Industries Ltd and two individuals challenging the orders of the Commissioner of Central Excise & Customs upholding demands and penalties related to the concessional rate of duty under notification no. 21/2002-Cus. The issue arose from the use of 'waste paper' in the production of 'paper' instead of 'newsprint,' leading to concealment from authorities. The appellant had also been involved in proceedings under the Insolvency and Bankruptcy Code, 2016, culminating in approval for takeover by another company.

2. The appellant's counsel argued for setting aside the impugned order due to the Insolvency and Bankruptcy proceedings. However, the Tribunal rejected this argument, stating that the appeal could not be annulled solely due to the operation of an unrelated law. The Insolvency and Bankruptcy Code's dominance did not affect the duty liability determination under the Customs Act, 1962. The appellant could have withdrawn the appeal or allowed it to be dismissed, but they chose not to.

3. Due to the Insolvency and Bankruptcy proceedings and the lack of challenge to confiscation and duty liability, the Tribunal abated the proceedings concerning M/s Murli Industries Ltd. The penalties imposed under section 112 of the Customs Act, 1962 on the two individuals were upheld by the first appellate authority. However, the Tribunal found that the penalties were not legally imposed as the individuals' roles in the import process were not adequately determined.

4. The penalties on the individuals were based on their managerial roles and knowledge of the import details, but the specific contribution to the fraudulent activities was not established. As a result, the penalties were set aside. The Tribunal highlighted the necessity of a clear link between the individuals' actions and the import-related offenses for imposing penalties under section 112 of the Customs Act, 1962.

Overall, the Tribunal disposed of the appeals, abating the proceedings for M/s Murli Industries Ltd and setting aside the penalties imposed on the two individuals due to insufficient evidence of their direct involvement in the import-related offenses.