2019 (1) TMI 622 - AT - Customs

Validity of Show Cause Notice (SCN) - Misdeclaration of imported goods - refrigerant - it was alleged that appellant mis-declared the refrigerant as R-32 which actually is R-22 and also mis-declared about weight, size and price - whether when the appellant has paid the entire duty amount alongwith the interest and the penalties, the proceedings would have been concluded? - Held that - The bare perusal of sub-section 5 and sub-section 6 of Section 28 of the Customs Act makes it clear that the same is a beneficial piece of legislation with an intention to reduce the litigation proceedings where the assesse satisfies the condition of the said Section. The language makes it clear that the provisions provide for deemed conclusion of the proceedings against the assesses if the payment as regard the duty, interest and 15% penalty thereof stands made by the assesse within a period of 30 days of the receipt of Show Cause Notice. The appellant herein has made the payment against the impugned bill of entry dated 29.09.2015 even prior the issuance of Show Cause Notice dated 30.01.2016 alongwith the payment towards the penalty interest on 01.12.2015, 07.01.2016 and 18.02.2016 respectively. The requisite TR-6/GAR-7 Challans are attached with the Appeal papers. As per the above provision, the appellant had the time to make the deposit till 01.03.2016 but the payment stands made by 18.02.2016. It is also apparent from the Show Cause Notice that the said payment of the differential duty and that of the penalty was brought to the notice of the Department vide letter dated 08.01.2016. The said acknowledgment is very much recorded in the Show Cause Notice itself - In the given circumstances, it can be concluded that the Department has committed an error even while issuing the Show Cause Notice. No doubt Sections 28(5) and 28(6) are applicable without prejudice to the provisions of Sections 135, 135A and 140 of the Customs Act but perusal of Show Cause Notice makes it clear that none of these provisions have been invoked at the time of issuing Show Cause Notice - It is well settled law that the legislative intent, extending certain beneficial provision to the assessee, should not be made frivolous by interpreting the provision in a particular manner other than the one which reflects upon such intent. The present is opined to be a clear case of presumed and assumed interpretation of Section 28(5) and 28(6) by the Adjudicating Authorities below. The Commissioner(Appeals) is held to have committed an error while giving more emphasis to a clarificatory Circular than to the settled provision of the statute - appeal allowed.

Summary

Issues Involved:
1. Mis-declaration of imported goods.
2. Demand of differential duty and interest.
3. Confiscation of goods.
4. Imposition of penalty.
5. Applicability of Section 28(5) and 28(6) of the Customs Act, 1962.
6. Relevance of Circular No. 11/2016.

Detailed Analysis:

1. Mis-declaration of Imported Goods:
The Directorate General of Revenue Intelligence (DRI) received information that M/s Krishna Capital was importing Split/Window Air Conditioners of 1.5 ton cooling capacity by mis-declaring them as 1.0 ton to undervalue the goods and evade Customs Duty. Upon examination, discrepancies were found in the weight, dimensions, and refrigerant declaration, leading to the detention of 240 pieces of Window Air Conditioners for further verification. It was concluded that M/s Krishna Capital mis-declared the refrigerant and other details.

2. Demand of Differential Duty and Interest:
A Show Cause Notice (SCN) was issued on 30.01.2016, calling upon the appellants to explain why the declared transaction value should not be rejected and re-determined, and why the differential duty amounting to ?3,07,991/- should not be demanded and recovered under Section 28(4) of the Customs Act, 1962. The appellants argued that they had paid the entire duty amount along with interest and penalties before the issuance of the SCN, and thus the proceedings should have been concluded as per Section 28(5) and (6) of the Customs Act.

3. Confiscation of Goods:
The SCN also questioned why the goods should not be held liable to confiscation under Section 111(m) of the Customs Act, 1962, due to mis-declaration of description and suppression of actual transaction value. The Department argued that the case involved confiscation of goods, which excluded it from the purview of Section 28 as per Circular No. 11/2016.

4. Imposition of Penalty:
Penalties were proposed under Sections 112(a), 112(b), 114A, and 114AA of the Customs Act, 1962, for rendering the goods liable to confiscation under Section 111(m). The appellants contended that they had already paid the penalties along with the duty and interest, and thus the proceedings should be deemed concluded.

5. Applicability of Section 28(5) and 28(6) of the Customs Act, 1962:
The Tribunal opined that Section 28(5) and (6) are beneficial provisions intended to reduce litigation if the assesse satisfies the conditions of paying the duty, interest, and 15% penalty within 30 days of receiving the SCN. The Tribunal noted that the appellant had made the required payments even before the SCN was issued, and thus the proceedings should be deemed concluded. The Department's failure to follow the prescribed procedure was highlighted.

6. Relevance of Circular No. 11/2016:
The Department relied on Circular No. 11/2016 to argue that cases involving confiscation are excluded from the purview of Section 28(5) and (6). However, the Tribunal held that the Circular is merely clarificatory and cannot supersede the legislative provisions. The Tribunal emphasized that the legislative intent should not be defeated by an artificial interpretation of the provisions.

Conclusion:
The Tribunal concluded that the appellant had complied with the conditions of Section 28(5) and (6) by making the necessary payments before the issuance of the SCN. Therefore, the proceedings should be deemed concluded. The Orders under challenge were set aside, and the appeals were allowed, extending the benefit of deemed conclusion of proceedings to the appellants. The Tribunal also noted that the Circular relied upon by the Department was not applicable in this case.

Pronouncement:
The judgment was pronounced in the open Court on 10.01.2019, allowing both appeals and granting consequential benefits to the appellants.