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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 ..... ty of Rs. 1,00,000/- imposed on him under Section 112 (a) of the Customs Act, 1962. 1.4 Appeal No. C/323/2009 is by M/s J. M. Baxi & Co. challenging the penalty of Rs. 50,00,000/- imposed on them under Section 112 (a) of the Customs Act, 1962. 1.5 Appeal No. C/376/2009 is by Capt. A.R.B. Dsouza, Vice President of M/s J.M. Baxi & Co. challenging the penalty of Rs. 1,00,000/- imposed on him under Section 112 (a) of the Customs Act, 1962. 1.6 Appeal No. C/375/2009 is by Shri Austin S.Fernandes, Assistant Manager, M/s J. M. Baxi & Co. challenging the penalty of Rs. 2,00,000/- imposed on him under Section 112 (a) of the Customs Act, 1962. 1.7 Appeal No. C/374/2009 is by Shri B. N. Malli, Manager (C&F), M/s J. M. Baxi & Co. challenging the penalty of Rs. 1,00,000/- imposed on him under Section 112 (a) of the Customs Act, 1962. 1.8 Appeal No. C/298/2009 is by Shri D. V. Daivajna, Superintendent of Customs (Imports), 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004. (g) The Bill of Entry No. 76/2004 dated 13.2.2004 relating to clearance of 10545 MTs which was originally assessed provisionally on 13.2.2004 was re-assessed provisionally on 27.5.2005 for the reason that Additional Customs Duty/Cess were found to be payable for the imports under Notification No. 46/2002 using DFRC Licences. Accordingly, an amount of Rs. 89,63,250/- towards the duty was paid by the assessee on 31.5.2005 and the interest due amounting to Rs. 17,45,992/- was also paid on 17.6.2005. (h) The assessments of three Bills of Entry were finalized on 29.8.2006 extending the benefits of exemptions under the Customs Notifications Nos. 43/2002 & 46/2002. (i) The officers of DRI, on the basis of specific intelligence, searched the Registered office, the Corporate office and the Factory all belonging to the assessee and also the premises of M/s J.M. Baxi & Co., the CHA and recovered 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 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of conditions of the Notification 43/2002-Cus and 46/2002-Cus are not justified. The Customs authorities are bound by the decision of the JDGFT authorities who are the competent authorities in matters relating to EXIM Policy. In this regard, he relies on the following decisions: (i) Autolite India Ltd. vs. UOI [2003 (157) ELT 13 (Bom)] (ii) Crystal Fashions vs. CC [2007 (211) ELT 580 (T)] (iii) Rajesh Exports Ltd. vs. CC [2006 (199) ELT 833 (T)] (iv) Sivshankar Tilakraj vs. UOI [1987 (28) ELT 342 (Bom.)] (c) The licences permit import of raw cane sugar and no specification on the sucrose content in respect sugar to be imported is in the said licences. SION E-52 cannot be treated as a mandatory condition. As per the Bureau of Indian Standards (BIS), the sucrose content is required to be only more than 96.5% and the said condition has been fulfilled by them. (d) There is 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 overwrit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icence holder would have to discharge the export obligation by procuring additional quantity of raw cane sugar so as to fulfill the export obligation as prescribed. In other words, they held that lower quality raw cane sugar might lead to low yield of export product but the licensee has to use more raw materials and fulfill the export obligation. The decision as above taken in the ALC Meeting held on 2.2.2006 was communicated vide letter dated 24.2.2006. JDGFT, Bangalore, in their subsequent communication dated 25.6.2008 has, also referred to the decision of the ALC Meeting held on 2.2.2006. Referring to Para 2.3 of Foreign Trade Policy, it was submitted that the decision of DGFT on interpretation of policy contained in Foreign Trade Policy and others was final and binding on the Customs authorities. (k) Some of the DFRC licences were procured from third parties. Export 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2007 (209) ELT 276] 7.1 The learned Advocate, Shri B.V. Kumar appearing for Shri Daivajna, at the outset submits that, in terms of Section 155 of the Customs Act no proceedings could be initiated against the appellant without issue of a month's previous notice in writing of the intended proceeding and of the cause thereof or after the expiry of three months from the accrual of such cause. In this regard, he relies on the following decisions : (i)C.C., New Delhi vs. M.I. Khan [2000 (12) E.L.T. 542 (T) (ii) Costao Fernandes vs State at the instance of D.S.P., C.B.I., Bombay [1996 (82) E.L.T. 433 (S.C.)] (iii) CC & C.Ex., Hyd.-II vs. Rajiv Kumar Agarwal [2007 (217) ELT 392 (Tri.-Bang.)] 7.2 Alternatively, he submits that there is no evidence that the manipulation of the Lab Report was done by the appellant. In fact, there is no finding that the appellant had 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd those of the CHA clearly indicate that the problem relating to sucrose content was attempted to be solved with the help of the Supdt. That being the case, the Supdt. and the officials of assessee-company and those of the CHA have to be jointly held responsible for tampering the lab report with a view to cause loss to the government revenue. Therefore, he submits that penalties have been rightly imposed on them. (c) The protection under Section 155 of the Customs Act can be invoked only in respect of action taken by an officer in good faith. The present case, involving deliberate tampering of test results with a view to cause loss to the Govt. revenue, cannot be treated as action in good faith. No valid reason has been adduced for the undue delay of about 2= years in taking up the finalization of provisional assessment when the test report was received 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 tamper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of this case. (j) E-mails dated 23.11.2005 exchanged between Shri Nandan Yalgi of the assessee-company and Capt. ARB D'souza of CHA-company clearly indicate the designs of the appellants. It talks about taking all precautions to avoid any problem with PHO or Cochin Lab. It also holds that it is the responsibility of the CHA to ensure that everything goes smoothly. (k) CBI has also filed FIR against the importer and the connected persons under Cr. PC. (l) The issue of show-cause notice under Section 28 of the Customs Act without resorting to challenging the order of final assessment is valid and as provided under the law. In this regard, he relies on the following decisions: (i) Union of India vs. Jain Shudh Vanaspati Ltd. [1996 (86) ELT 460 (S.C.)] (ii) Venus Enterprises vs. Commissioner of Customs, Chennai [2006 (199) ELT 405 (Mad.)] [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 not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id materials in terms of paragraph 4.2 of the Export and Import Policy (hereinafter referred to as the said licence ) and the said licence is produced at the time of clearance for debit by the proper officer of the customs; (ii) the said licence contains the endorsements specifying, inter alia; (a) the Standard Input Output Norm (SION) number, description and value of the resultant product exported on the reverse; (b) the shipping bill number(s) and date(s) FOB value in Indian Rupees of the resultant product, on the reverse; and (c) the description, value and quantity of the materials which are allowed to be imported : Provided that in respect of resultant products specified in the Sensitive List contained in paragraph 4.31 of the Hand Book of Procedure (Vol. 1) of the Export and Import Policy, the materials permitted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) that the importer at the time of clearance of the imported materials executes a bond with such surety or security and in such form and for such sum as may be specified by the Assistant Commissioner of Customs or Deputy Commissioner of Customs binding himself to pay on demand an amount equal to the duty leviable, but for the exemption, on the imported materials in respect of which the conditions specified in this notification have not been complied with, together with interest at the rate of twenty four per cent per annum from the date of clearance of the said materials. Provided that bond shall not be necessary in respect of imports made after the discharge of export obligation in full; (iv) . . . (v) that the export obligation as specified in the said licence (both in value and quantity terms) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red 10,545 MTs by producing 8 DFRC licences in terms of notification No. 46/2002-Cus. In respect of 3,446 MTs they claimed duty-free import in terms of Notification No. 43/2002 Cus on the basis of advance licence after the export has been fulfilled. For the balance of 11,759 MTs, duty-free clearance was sought for in terms of Notification No. 43/2002-Cus producing advance licence against which exports were yet to be made. 10.2 According to the department, the sucrose content of the above consignments were less than 98.1% and consequently the conditions in SION were violated and therefore, benefits of the said notifications are not available. However, the assessee and the other appellants concerned have conspired to manipulate the test report and the sample register maintained by the Karwar Customs to read the sucrose content as 98.9% and availed 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge and export of white sugar involves inflow of foreign exchange. It would not make sense to import very high quality raw sugar and export white sugar. The sucrose content of domestically produced sugar, in some cases, may be lower and if high quality raw sugar is imported indiscriminately, the same can have adverse impact on the domestic sugarcane growers and sugar factories. Therefore, intention of the Government is to restrict import of raw cane sugar with the sucrose content of not less than 98.5% and at the same time not to allow import of raw cane sugar with sucrose content exceeding 99.5%. The import has to be governed by the provisions of EXIM Policy as applicable at the time of import. Therefore, it is incumbent that the materials imported shall be of the same quality, technical characteristics and specifications as the materials used in the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is has been allowed on account of detention as well as comment from Directorate of Sugar that Pol content can get reduced on account of hygroscopic nature of Sugar and Lower Pol Content results in lower yield. The Committee felt that E.O. in quantity and value may not be lowered, although the lower limit of Pol content may be waived/deleted, if needed by RLA. Thus, it is seen that the above relaxation has been given only in respect of specific consignments imported by M.V. Lavent in April 2005 and the detained goods were ordered to be released making it clear that the same could not be treated as a precedent. The concerned advance licence was accordingly amended. The specific amendment permitted in a particular licence in the given facts and circumstances cannot be treated as guidelines applicable to all licences issued in the past. The Joint 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 Win ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by them to an advance licence which was used for clearing goods imported in May 2005 cannot come to the rescue of the assessee-appellant. Whether the lab report was containing 98.1% sucrose content and the same was manipulated to read as 98.9% 13.1. The Customs Laboratory Report found with the Customs at the time of search by the DRI officers and also the sample register with the Customs department were sent to Forensic Lab for examination. The report clearly indicates that the sucrose content of 98.1% was overwritten to read as 98.9%. The office copy of the Customs Lab Report at Cochin was also recovered and the same indicated the sucrose content as 98.1% only. In addition, the evidence given by Shri V.N. Prasad, Inspector goes to show that when the report was received from Customs Lab, the sucrose content mentioned therein was only 98.1% and the 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready noted, test reports maintained by the assessee themselves are against them. 13.6. A submission is being made that as per BIS, it is enough that the sucrose content of the sugar is more than 96.5%. It is to be appreciated that BIS is in respect of sugar produced/manufactured in India and obviously takes into account the varied conditions under which sugar cane is produced in India and sugar manufactured in India. The minimum stipulation of sucrose content in BIS cannot be the relevant factor to overlook the specific condition about sucrose content in respect of imported RCS which is prescribed under EXIM Policy by issue of Public Notice. If the Lab Report is held to be manipulated, then who is the person or persons who are responsible for the manipulation of the lab report 14.1. The representative samples drawn by Customs on 14.2.2004 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e MV Mandarin file to the concerned officers and this assertion is based on the general replies of the three officers concerned. However, as indicated earlier the custody of files with Shri Daivajna does not establish that he carried out the tampering. The fact that the employees of the importer and CHA were discussing among themselves as to how to solve the problem arising out of an unfavourable test report, clearly suggests that when the test report was received at Karwar, it showed sucrose content as 98.1%. By delaying finalization of provisional assessment, Shri Daivajna provided an opportunity for this crucial record to be tampered with. Both Shri Fredrick Dsouza, of M/s. SRSL and Shri Austin Fernandes of the CHA were aware that there was a problem relating to the polarimeter reading indicating a lower sucrose content than required 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be suspicion falling on the officials of CHA who were visiting the Karwar Customs office that they might have done that and that the same could have been done only at the instance of the officials of the assessee-company. All these are suspicions. The suspicion, however strong the same may be, cannot take the place of proof. As rightly held by the Commissioner in para 34, the investigation by DRI could not pinpoint the person who has committed the manipulation. The adjudication proceedings are based on evidences relied upon in the show-cause notice. In other words, as far as the department is concerned, the show-cause notice is the outer limit and a decision taken by the Commissioner cannot go beyond the evidences relied upon in the show-cause notice. Therefore, to charge all the six persons as responsible for the tampering may 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Assistant Commissioner. 15.2. The subsequent investigation by DRI has revealed that the Chemical Examiner's report dated 29.03.2004 relied upon for the purpose of finalisation was a tampered one. Therefore, the finalization was found vitiated as the same was based on tampered documents. 15.3 The decision of the Hon'ble Supreme Court in the case of Collector of Central Excise Vs. Flock (India) Pvt. Ltd., relied upon by the assessee related to a case where the assessee did not challenge the order dated 21.01.78 on classification but claimed a refund on 06.04.79 on the ground that the goods were wrongly classified. It was contended on behalf of the assessee that the jurisdiction to determine the validity and sustain the claim of refund was an independent jurisdiction and not fettered by any order passed by the authority 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 rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es made thereunder with intent to evade payment of duty. demand can be raised invoking the extended period of limitation of five years. In a Customs matter, when duty has not been levied or has been short-levied etc. by reason of collusion or any willful mis-statement or suppression of facts the extended period of limitation of five years can be invoked. It is not as if fraud cannot be there in relation to a customs evasion case. It only means that, even in the absence of fraud, five years period of limitation can be invoked in a customs case when the above conditions are satisfied. In other words, the provisions for invoking extended period in the Customs Act are stronger against the assessee than those under Section 11A of the Central Excise Act. 16. From the foregoing, the following emerges: (a) Office copy of the 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nications even if they are suspicious, may not be relevant for the impugned import which took place much earlier in February 2004 and therefore, cannot be of help to fix responsibility for manipulation done on the lab report received in March 2004. (i) The applicability of Section 155 of the customs Act, in respect of Shri D.V. Daivajna, need not be gone into, as we have held that there was no evidence for fixing the responsibility for the manipulation on Shri D.V. Daivajna. 17. In other words, the major issues framed for consideration require to be resolved as follows: (a) Sucrose content of less than 98.5% in the imported raw cane sugar disentitle the goods to the benefit of Notification No. 43/2002-Cus. and 46/2002-Cus. (b) The lab report was originally containing 98.1% as sucrose content and the same was manipulated to read as 98.9%. (c) On the basis of totality of evidences, the assessee-company, who is obviously the beneficiary of the manipulation, is clearly responsible for the manipulation and the person or persons who are responsible for the manipulation of the lab report could not be identified on the basis of evidence relied upon in the show-cause notice except the ..... 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