2010 (4) TMI 302 - HC - Customs

Export collusion with customs officers - goods which were actually exported were different from the goods from which the samples had been drawn - DRI drew an inference that since the live consignments seized in the above said case showed the material to be sub-standard, the past exports in the present case might not have been genuine - On the basis of the aforesaid assumptions and presumptions, show cause notices were issued to the appellants by the DRI. Held that - from the evidence collected during investigation, both oral and documentary, the geneses of the case i.e. export of scrap in place of Alloy Steel Forgings (Machined) and payment of bribe to the Customs officials to facilitate the clearance of such goods do not stand substantiated and no criminal case is made out against any of the accused persons. There is no dispute regarding the realization of export proceeds from the consignees through proper banking channels and consequent issuance of BRC s and DEPB licenses by the Ludhiana based banks and office of DGET (Licensing), New Delhi - As such the CBI proceeded to file a closure report. - , all the 14 appeals filed by the appellants are allowed and the impugned order dated 16.10.2008 passed by the Tribunal as well as the order Annexure A-11 passed by the Adjudicating Authority are set aside and the entire matter is remanded back to the Adjudicating Authority for a fresh adjudication

Issues Involved:
1. Legitimacy of the issuance of an addendum containing supplementary allegations.
2. Examination of witnesses and the validity of overseas enquiry reports.
3. Quality and description of goods in past exports versus live consignments.
4. Validity of the show cause notice based on inferences and suspicions.
5. Examination of vigilance and CBI reports.
6. Finality of the export process and realization of export proceeds.
7. Misdeclaration and over-invoicing allegations.

Issue-wise Detailed Analysis:

1. Legitimacy of the Issuance of an Addendum Containing Supplementary Allegations:
The appellants argued that the issuance of an addendum containing supplementary allegations during advanced stages of adjudication was not permissible. They cited the case of Mahindra & Mahindra Vs. CCE to support their claim. The court observed that the appellants were not afforded a proper opportunity to defend against the addendum or cross-examine the witnesses, which was a procedural lapse.

2. Examination of Witnesses and Validity of Overseas Enquiry Reports:
The appellants contended that the overseas enquiry report produced by the Revenue was not supported by corroborative evidence and that key witnesses were not allowed to be cross-examined. Specifically, the statement of Yogesh Patel, a crucial witness, was not subject to cross-examination, which undermined the validity of the allegations.

3. Quality and Description of Goods in Past Exports versus Live Consignments:
The court noted that the past exports had been scrutinized and verified by the Central Revenue Control Laboratory (CRCL) and found to be genuine. The CRCL reports did not reveal any anomalies in the quality and description of the goods. The court emphasized that past exports could not be challenged based on irregularities in subsequent exports.

4. Validity of the Show Cause Notice Based on Inferences and Suspicions:
The court found that the show cause notice was based on suspicions and inferences drawn from subsequent exports, which was not a valid basis for challenging past exports. The court held that the impugned show cause notice could not have been issued merely on the basis of inferences or suspicion.

5. Examination of Vigilance and CBI Reports:
The vigilance enquiry and CBI investigations found no substantive evidence against the appellants. The CBI conducted comprehensive investigations and filed closure reports, which were accepted by the Special Court. The court noted that these reports covered almost all issues raised in the show cause notice and had attained finality as they were not challenged in any higher forum.

6. Finality of the Export Process and Realization of Export Proceeds:
The court reiterated that the export process was complete as the goods had left the territorial waters of India, and export proceeds had been received through proper banking channels. The court referred to the Supreme Court's ruling in Collector of Customs, Calcutta Vs. M/s. Sun Industries, which held that export is complete when goods are taken out of India to a place outside India.

7. Misdeclaration and Over-invoicing Allegations:
The CBI's comprehensive report concluded that there was no evidence of misdeclaration or over-invoicing. The CRCL reports indicated that the exported goods were made of alloy steel, not scrap, as alleged. The court observed that the allegations of misdeclaration and over-invoicing were not substantiated by the evidence.

Conclusion:
The court found that the authorities below had failed to examine the entire matter, especially in light of the facts and evidence presented. The non-examination of these issues had caused prejudice to the appellants. Therefore, the court set aside the impugned orders and remanded the matter back to the Adjudicating Authority for fresh adjudication, ensuring that all relevant aspects and evidence are considered. The parties were directed to appear before the Adjudicating Authority on 8.6.2010.

Judgment Delivered by:
- (ASHUTOSH MOHUNTA) JUDGE
- (MEHINDER SINGH SULLAR) JUDGE

Date: April 6, 2010

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