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TMI Blog2013 (9) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... analysis reports maintained by the assesses indicated the purity of the imported raw cane sugar only as 98.1% to 98.32% as duly noted by the Commissioner - This also gives credence to the fact that the sucrose content as per the customs lab report was only 98.1% which was tampered to read as 98.9% - The internal reports maintained by the assessee-company indicated the sucrose content as 98.1% to 98.3% - All these taken together along with other circumstantial evidences, clearly prove that the entries in the lab report and the sample register were tampered with by overwriting to make them read as 98.9%. Liability for manipulation - Who was the person or persons who were responsible for the manipulation of the Report - Held that:- The beneficiary of the tampering of the lab report on sucrose content was clearly the assessee and the consequences were to be faced by them - notwithstanding the fact that the actual person/persons had not been identified. Whether a demand under Section 28 can be made without the department challenging the finalization of provisional assessment - Held that:- Tampering of documents with intent to evade duty was involved, show-cause notice could be iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mports), Customs House, Karwar challenging the penalty of Rs.2,00,000/- imposed on him under Section 112 (a) of the Customs Act, 1962. 1.9 All these appeals arise out of a common order and involve common facts and issues and are accordingly disposed of by this common order. 2. Heard Shri Ravi Shankar, Advocate for the assessee and the three officials of the assessee-company. Heard Shri K.P. Kumar, Sr. Advocate for M/s J. M. Baxi Co. and three officials of M/s J.M. Baxi Co. Heard Shri B. V. Kumar, Advocate for appellant, Shri D. V. Daivajna. Heard Shri Ganesh Havanur, learned Addl. Commissioner (AR) for the respondent. Hearing was held extensively on 20/3/12, 21/3/12, 22/3/12, 26/3/12 28/3/12. 3. The relevant facts are as follows : (a) Assessee is engaged in the manufacture of sugar from sugar cane. They are also regular importer of Raw Cane Sugar (RCS) for processing the same into white sugar in their factory. (b) The assessee imported 25,750 MTs of RCS per vessel M-V-MANDARIN through Karwar Port and filed three Bills of Entry bearing Nos. 76, 77 78 of 2004 all dated 13.2.2004. The Bill of Entry No. 76 dated 13.2.2004 was filed for clearance of 10545 MTs of RCS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d documents. On investigation, they found that the sucrose content of sugar was only 98.1% as per Chemical Examiner s Report and the same was overwritten to read as 98.9%, that the manipulation was done with a view to enable the assessee to avail the benefit of exemptions which was available only if the sucrose content was more than 98.5%. As per the investigation, the assessee-company and their officials and M/s J.M. Baxi Co., CHA and their officials and the Superintendent, Shri D.V. Daviajna were found to have been involved in the manipulation. The Customs Lab Report recovered from the Customs Department was also sent to State Forensic Science Laboratory, Bangalore who vide report dated 12.7.2007 gave their opinion that decimal 1 at figure 98.1% was completely overwritten to read as 98.9%. Statements of officials of the assesee-company, officials of M/s JM Baxi Co. and the officials of the Customs department were taken. (j) On completion of the investigation, show-cause notice dated 31.12.2007 was issued to the appellants and in adjudication of the said show-cause notice, the Commissioner has passed the impugned order and each of the appellants have challenged the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no reliable evidence that the figure of sucrose contents in the report of the Chemical Laboratory was manipulated. The alleged overwriting to make 98.1% as 98.9% is not conclusively proved. The Customs House Lab records contained several overwritings and the department has referred only about alleged overwriting in respect of figures on sucrose contents in the said report. Since the reference to the Forensic Lab has been made by sending only selected documents omitting other documents which also contained overwriting, the said report should not be relied upon. (e) Even if the test result was found to be 98.1%, the same is not reliable for various reasons. The polarimeter testing by the Chemical Examiner was done at 34 degree C, using very old equipment. The equipment should have been maintained at 20 degrees centigrade and test should have been normally carried out at 20 degrees centigrade. If this was not possible, the testing should have been done at a maximum temperature of 30 degrees C and the adjustments for variation in temperature as per the formula should have been done. This is a clear requirement of BIS (Bureau of Indian Standards). (f) The Load Port report on the suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligation has already been fulfilled by the said parties who were the licence holders. The Commissioner has also clearly held that the export obligation stands discharged. Under these circumstances, the Customs authorities have no jurisdiction to demand duty when the licensing authority has not taken any adverse action against them or cancelled the licence but has certified the fulfillment of export obligation. In this regard, reliance was placed on the decision of the Hon ble Supreme Court in the case of Titan Medical Systems Pvt. Ltd. vs. CC [2003 (161) ELT 254 (S.C.)] 5. The learned advocate, Shri K. S. Ravi Shankar, on behalf of the officials of the assessee company, after adopting the arguments on behalf of the assessee-company, adds that there is no evidence that the said officials Shri Frederick D souza, Shri Nandan Vithal Yalgi are directly involved in any tampering or that they are in any way benefitted by the alleged tampering and therefore no penalties are warranted on them. 6. The learned Sr. Advocate, Shri K. P. Kumar appearing for M/s JM Baxi Co. and its officials took us through the relevant findings of the Commissioner leading to imposition of the penalties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d tampered or concerned himself with the tampering of the test report. The finding is only to the effect that, by delaying the finalization of provisional assessment, the appellant has provided an opportunity for the test report to be tampered with. Such a finding does not take into account the relevant fact that the Assistant Commissioner/Deputy Commissioner is the competent authority for finalization of provisional assessment. Therefore, the delay in finalization of provisional assessment cannot be solely attributed to the appellant. Even if there was delay, that alone cannot lead to the conclusion that the appellant has tampered with the test report or abetted the tampering and therefore no penalty can be imposed. In this regard, he relies on the following decisions: (i) A.P. Sales vs. CC, Hyderabad [2006 (198) ELT 309 (Tri.-Bang.)] (ii) P.N. Ram vs. CCE,Kanpur [2008 (225) ELT 294 (Tri.-Del.)] (iii) CC, New Delhi vs. Hargovind Export [2003 (158) ELT 496 (Tri.-Del.)] (iv) CC, Mumbai vs. M. Vasi [2003 (151) ELT 312 (Tri.-Mum)] 8. The learned Additional Commissioner (AR), Shri Ganesh Havanur, reiterating the findings and reasoning of the Commissioner, supports the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved in March 2004 itself. (d) The copy of the tampered report was found in the records of the CHA also. (e) The evidences of the officials of the assesee-company and CHA clearly indicate knowledge on the part of all the appellants about the problem on the aspect of sucrose content and the effort to sort out the problem. Since tampering is clearly established, the attempt to solve the problem was obviously by means which are not legal. Therefore, enough circumstantial evidences exist to show that the appellants have caused the manipulation and therefore penalties have been rightly imposed. (f) The submission that the accuracy of the test report is questionable as the equipment was old and the tests were conducted at 340C should not be accepted. The test report has been calibrated using scientific formula to make adjustment for having tested at 340C. Undisputedly, the test report given by Cochin Lab in respect of another consignment cleared by the appellant-assessee in April/May 2005, on retest stands upheld by the Chief Chemist, Delhi. This goes to show the veracity of test reports given by the Cochin Lab. As regards testing at 340C, though Chemical Examiner was offered for cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .)] [SLP against the said decision was dismissed as reported in 2007(209) ELT A61 (S.C.)] (iii)Titanide Coating (P) Ltd. vs. Assistant Collector of Customs [1993 (67) ELT 260 (Kar.)] (m) The Customs authorities are empowered to investigate and adjudicate cases of violation of conditions of notification and violations under the Customs Act notwithstanding the fact that the JDGFT authorities have granted EOD certificates. In this regard, he relies on the following decisions: (i) South India Exports vs. Joint Director of Foreign Trade [2004 (177) ELT 57 (Mad.)] (ii) Pooja Exporters vs. Asst. Director, D.R.I. [1989 (41) E.L.T. 21 (Kar.)] (iii) Sravani Impex P. Ltd. vs. Addl. Dir. Genera, D.R.I., Chennai [2010 (252) E.L.T. 19 (A.P.)] (iv) Kamath Packaging Ltd. vs. Union of India [1991 (55) E.L.T. 304 (Kar.)] (n) Relying on the decision of the Hon ble Supreme Court in the case of Commissioner of Customs (Preventive) vs. Aafloat Textiles (P) Ltd. [2009 (235) E.L.T. 587 (S.C.)], he submits that the burden of proof to establish that they are eligible for the concession and the exemption notification is on the assessee-company Regarding Schemes under which imports have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the said licence shall be of the same quality, technical characteristics and specifications as the materials under in the said resultant product: Provided further that in respect of said resultant products the exporter shall give declaration with regard to technical characteristics, quality and specification of materials used in the shipping bill; (iii) that the said licence and/or materials shall be freely transferable; (iv) . . . . Explanation.- In this notification, - (i) Export and Import Policy, means Export and Import Policy 2002-2007, notified by the Government of India in the Ministry of Commerce vide notification No. 1/2002-2007, dated the 31st March, 2002; (ii) Licensing Authority means the Director General of Foreign Trade appointed under section 6 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) or an officer authorised by him to grant a licence under the said Act; (iii) Materials means - (a) raw materials, components, intermediates, consumables and parts used in the manufacture of resultant product; (b) packing materials used in the packaging of resultant product. 9.3 Goods (in this case raw cane sugar) can also be importe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is discharged within the period specified in the said licence or within such extended period as may be granted by the licensing Authority by exporting resultant products, manufactured in India which are specified in the said licence and in respect of which facility under rule 18 or rule 19 of the Central Excise Rules, 2002 has not been availed: Provided that an Advance Intermediate Licence holder shall discharge export obligation by supplying the resultant products to ultimate exporter in terms of sub-para (b) of para 4.1.1 of the said Export and Import Policy; (vi) that the importer produces evidence of discharge of export obligation to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs within a period of 30 days of the expiry of period allowed for fulfilment of export obligation, or within such extended period as the said Assistant Commissioner of Customs or Deputy Commissioner of Customs may allow; (vii) that the said licence and the materials shall not be transferred or sold; (viii) . Explanation. - In this notification,- (i) Export Import Policy means the Export and Import Policy 2002-2007, published vide notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefit of notifications irregularly. 11. Based on elaborate submissions from both sides, the following main issues arise for consideration: (a) If sucrose content was less than 98.5% in the imported raw cane sugar, whether the goods would be eligible to the benefit of Notifications No. 43/2002 - Cus. and 46/2002-Cus.? (b) Whether the lab report was containing 98.1% sucrose content and the same was manipulated to read as 98.9%? (c) If the lab report dated 11.3.2004 was manipulated, who is the person or persons who are responsible for the manipulation of the same? (d) Whether a demand under Section 28 can be made without the department challenging the finalization of provisional assessment done on 29.08.2006 If the sucrose content was less than 98.5%, whether the benefit of Notification No. 43/2002 - Cus. and 46/2002-Cus available 12.1. As already noted, DFRC licences are issued by the DGFT authorities as export benefits to replenish the inputs/packing materials used in the manufacture of goods already exported. While giving such licences obviously the licensing authority has taken into account the norms prescribed for the concerned export product and the inputs p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he resultant product. When SION E-52 governing the impugned licences has permitted import of raw sugar of sucrose content only in a narrow range of 98.5% to 99.5%, the said conditions are required to be fulfilled. The understanding of the Commissioner (para 45 of the impugned order) that the SION norms in the present case served the twin purposes of protecting domestic cane growers as well as preventing dumping of substandard raw sugar into the country has to be approved. Therefore, import of sugar below 98.5% of sucrose content being in violation of SION cannot be treated as fulfilling the condition of the exemption notification 46/2002-Cus. 12.2. The Advance Licences are also issued based on SION. In respect of import prior to export, there is a condition that that the said licence and the materials shall not be transferred or sold. Therefore, the imported materials require to be used for the manufacture of export product and hence compliance of specification regarding sucrose content in SION is a must. Otherwise, the purpose of restriction imposed by Public Notice dated 29/12/2002 will be defeated. 12.3. Heavy reliance is placed on behalf of the assessee on the communication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t DGFT Bangalore referring to the minutes and decision of the ALC meeting held on 02.02.2006 has chosen to give the following clarifications vide his letter dated 25.06.2008. GOVERNMENT OF INDIA MINISTRY OF COMMERCE AND INDUSTRY DEPARTMENT OF COMMERCE Office of the Joint director General of Foreign Trade KNEDRIYA SADAN, 6th Floor, C E Wing, 17th Main Road, Koramangala, 2nd Block, Bangalore 560 034. 07/24/040/00330/AM03 25.06.2008 To, M/s. Shree renuka Sugars Ltd. B.C. 105, Havelock Road, Contonment, Belgaum - 590 001. Sirs, Sub: Clarification regarding Polarimeter reading - Sucrose content in Raw Sugar Advance Licence No. 0710023972 dt. 16.09.2003 reg. Ref.: Your letters dated 15.05.2008 and 21.06.2008. With reference to the above cited letters seeking endorsement/amendment of the licence, it is hereby clarified that as per the Advance Licencing Committee, New Delhi Meeting No. 43/2005 dated 02.02.2006 the licnece issued under SIOM S.No. E-52 is valid for import of Raw Sugar with Polarimeter reading below 995% without insisting for the lower limit of 98.5% prescribed in the foot note. If the sucrose content is lower than 98.5%, licencee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same was so entered in the sample register maintained in the office as well. In view of the above overwhelming evidence, we have no doubt in concluding that the report of the chemical examiner was to the effect that the sucrose content was 98.1% and the same has been overwritten after the same was received by Karwar Customs authorities. 13.2. Submission was made that there were overwriting in other files/records of Chemical Examiner, Cochin and the same were not sent for the purpose of forensic examination and therefore, the test results by the forensic department could not be relied upon. In view of the cogent evidences in the form of office copy of the Customs Laboratory Report, the submissions in the statement of concerned inspectors of Karwar Customs and the other evidences, we have discussed below, we have no reason to disregard the forensic report. 13.3. In addition, we also find that the daily analysis reports maintained by the appellants indicated the purity of the imported raw cane sugar only as 98.1% to 98.32% as duly noted by the Commissioner. This also gives credence to the fact that the sucrose content as per the customs lab report was only 98.1% which was tamper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of examination was sent to the Chemical Examiner, Customs House Laboratory, Cochin Vide Test Memo No. 16/2004 dated 20-2-2004. The Test Report No. L. 282 (KW) S.10/11/2003-2004 Lab Cus. dated 11.3.2004 was received in Karwar Customs on 29.3.2004 and the Test results was entered in the sample register as Sl. No. 16/04 on 31.3.2004. The statement of Shri V.M. Prasad, Inspector confirms that the report was indicating the sucrose content as 98.1% and it was so recorded in the sample register. According to Supdt. Shri D.V. Daivajna, the test report and the sample register were not in his exclusive custody but were kept in the cupboard which was accessible to others. The evidence given by Shri Dayananda M. Nayak, Inspector Customs was also to the effect that many people had access to the customs documents/files/records. In particular, it was claimed that the test report was sent outside Customs House for taking photocopy, immediately on receipt, through sepoy/contingents. In this regard, the Commissioner has recorded the following findings: 34. While the fact of tampering has been established, the DRI investigation has not identified this person who actually carried out tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in terms of the entry E-52 of SION and the DFRCs and Advance Licences produced. Instead of bringing this problem to the notice of customs at Karwar, they tried to find ways in which to solve it by altering the sucrose content as recorded in the test report Capt. A.R.B. Dsouza and Shri B.N. Malli both employees of the CHA, were also aware of this problem and have colluded with their junior employees to wrongly avail of customs duty exemption on goods which did not satisfy the required conditions. 14.3. While we have already concluded that there were tampering with the Customs Lab report and sample register, the beneficiary of such tampering is obviously the assessee. The assessee as a juridical person has to necessarily get it done through some human agent/person. Needle of suspicion may point to any of the six persons (two officials of assessee-company, three officials of CHA and the Supdt. of Customs). 14.4. The Commissioner has found that the Supdt. has delayed the finalization proceedings. This finding cannot be upheld without reservation. Undisputedly the Assistnat commissioner/Deputy Commissioner in-charge of Karwar Division is the competent authority for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be permissible. As rightly pointed out by the senior advocate Shri K. P. Kumar, the level of evidence required for penal action under adjudication proceedings is higher than those required in the assessment/reassessment leading to enhanced demand of duty. Therefore, even on the yardstick of preponderance of probability, it is not possible to pinpoint the person/persons who are responsible for the manipulation except to hold that the assessee-company as the beneficiary is clearly responsible. The evidence available as per the show-cause notice do not justify penalties on all of them except the assessee-company. If new evidence is gathered during the investigation by CBI, that could be relevant for the proceedings that may be initiated by them. Whether a demand under Section 28 can be made without the department challenging the finalization of provisional assessment done on 29.08.2006 15.1. In the present case, the goods were allowed on the basis of provisional assessments made on two grounds. One of the grounds relates to non-production of relevant documents by the assessee-company and other ground is that the imported goods were required to be tested and samples have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority regarding the classification of the product. In the said case, it was held that an order which was appealable under the Act, if not challenged then the order was not liable to be questioned and the matter could not be reopened in a proceeding for refund as the same was in the nature of execution of the order. 15.4. The department, on the other hand, has relied on the decision in the case of Union of India Vs. Jain Shudh Vanaspati Ltd. wherein it has been held that issuance of show cause notice for confiscation of goods under Section 124 was not barred on the ground that the order of clearance passed under Section 47 of the Customs Act was not set aside. The department also relied on the judgment of the Hon ble High Court of Madras in the case of Venus Enterprises Vs. Commissioner of Customs, Chennai wherein the question whether the Tribunal was right in holding that the order of assessment on which no appeal was preferred, could be reopened by issue of a fresh show-cause notice under Section 28(1) of the Customs Act, in the light of the Apex Court s decision reported in 2004 (172) E.L.T. 145 (S.C.) in the case of Priya Blue Industries Ltd. Vs. CC was considered. It was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e test report found in the customs laboratory, the report originally received by the Karwar Customs and the entry made in the sample register indicated the sucrose content as 98.1%. The internal reports maintained by the assessee-company indicated the sucrose content as 98.1% to 98.3%. All these taken together along with other circumstantial evidences, clearly prove that the entries in the lab report and the sample register were tampered with by overwriting to make them read as 98.9%. The manipulation of figures 98.1% to 98.3% was done with malafide intention and to benefit the assessee-company. (b) DFRC licences are being issued on post-export basis and the question of certifying export obligation in respect of such licences does not arise. As DFRC licences are issued after the export, the licences take into account whatever wastages are allowable on raw materials. Similarly advance licences which are issued only as per SION norms take these factors into account. (c) In respect of raw sugar imported, under DFRC and DEEC licences, the condition of sucrose content prescribed under PN 50 LRE-027 2002-07 dated 29.11.2002 has to be fulfilled for the purpose of availing the benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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