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TMI Blog2023 (1) TMI 696X X X X Extracts X X X X X X X X Extracts X X X X ..... t of mandatory pre-deposit under Section 129E, therefore, deserve dismissal. Jurisdiction - whether any substantial question of law arises for determination in the instant appeal? - HELD THAT:- In view of the admitted fact that the confiscated gold jewellery from the factory and residential premises of M/s Ajit Exports and factory premises of M/s Vee Ess Jewellers two SEZ units were exported by M/s Deepu Jewellers and M/s Samrah Gold Factory, the Managing Director and the Director of whom was Sri Kishore Ratilal Dhakan at the relevant point of time, we are required to examine as to whether the penalty imposed upon the appellants herein under Sections 112, 114, 114AA is without jurisdiction - A conjoint reading of Sections 112 and 114 of the Customs Act which deal with penalty for ''improper import' and ''improper export' or attempt to export goods improperly clearly shows that the penalty can be imposed on any person , not only such person who does or omits to do any act in relation to any goods liable to confiscation under Section 111 or 113, but would also include such person who abets the doing or omission of such an act. The penalty, thus, can be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited Through Its Director, Kishore Ratilal Dhakan Versus The Commissioner Of Customs; M/S Deepu Jewellers Llc Versus The Commissioner Of Customs And 2 Others HON'BLE JUSTICE MRS. SUNITA AGARWAL AND HON'BLE JUSTICE VIPIN CHANDRA DIXIT FOR THE APPELLANT :- SANDEEP SRIVASTAVA,ARVIND SRIVASTAVA FOR THE RESPONDENT :- AMIT MAHAJAN ORDER (Delivered by Justice Sunita Agarwal) 1. Heard Sri Arvind Srivastava learned Advocate for the appellants, Sri Amit Mahajan and Sri Gaurav Mahajan learned counsels for the respondent Revenue. 2. Out of the abovenoted five connected appeals, Custom Appeal No. 1 of 2022, Custom Appeal No. 2 of 2022 and Custom Appeal No. 3 of 2022 filed by M/s Deepu Jewellers Llc Dubai, Kishore Ratilal Dhakan and M/s Samrah Gold Factory Limited; respectively, are arising out of the order dated 29.8.2019 passed in three defective Custom Appeals filed by the aforesaid appellants, by the Customs, Excise Service Tax Appellate Tribunal (CESTAT), Allahabad, whereby the appeals have been dismissed as non-maintainable being defective. The defect in three appeals was with respect to the mandatory pre-deposit in terms of Section 129E of the Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dhakan (24% shares). Both the companies were manufacturers and exporters of jewellery made of gold and the Director of both the companies was Kishore Ratilal Dhakan son of Sri Ratilal Dhakan, an Indian National. 6. The above noted two companies were doing business with M/s Ajit Exports and M/s Vee Ess Jewellers Private Limited who were two Indian companies working in the Special Economic Zone (SEZ), NOIDA and the jewellery items made of gold were sent to M/s Ajit Exports and M/s Vss Jewellers for refurbishing, repair, remaking and finishing and after the said exercise, these companies were required to send the jewellery items back to the appellants namely M/s Deepu Jewellers and M/s Samrah Gold Factory Limited, by following the procedure prescribed in law. It is an admitted fact of the matter that the entire confiscated quantity of gold items were exported by two appellant companies herein namely M/s Deepu Jewellers and M/s Samrah Gold Factory to M/s Ajit Exports at NOIDA having its factory at Special Economic Zone and the goods (gold jewellery) were cleared from Customs, New Delhi in favour of M/s Ajit Exports, the importer, without payment of Customs duty. 7. It is sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose in the year 2007-08 as the confiscated goods were exported during the said period by the appellants. The show cause notices were issued on 12.11.2013 and the order of the adjudicating authority was passed on 18.10.2018 pursuant to the said show cause notices. It was argued that the Customs Act as it then was, i.e. prior to the amendment in Section 1(2) by Act 13 of 2018 w.e.f. 29.3.2018 was applicable only within the territory of India and the subsequent applicability (extension) of the provisions of the Customs Act beyond the territory of India would have no relevance, inasmuch as, the period of transactions, i.e. alleged offence has to be seen. 10. The submission, thus, is that neither the goods exported by the appellants could be confiscated by the Customs Authority for any violation in the importation of the same by M/s Ajit Exports nor penalty can be levied upon the exporters namely the appellants herein under the provisions of the Customs Act. Section 1 of the Customs Act, 1962 which provided for the territorial jurisdiction of the Act has been placed before us to argue that a Foreign National or a Non-resident Indian cannot be held liable for any offence or contrav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pacific Impex Pvt. Ltd. Hong Kong vs. Principal Commissioner, Inland Container Depot, Tughlakabad, New Delhi Customs Appeal No. 50079 of 2020 dated 18th February, 2022 has further been placed before us to assert that it was held therein that the appellant therein being a resident of Dubai for the last 20 years, the provisions of the Customs Act, 1962 which only extend to the whole of India, cannot be invoked. The proceedings against a company incorporated abroad cannot be sustained as the Customs Authorities had no jurisdiction over a company incorporated abroad. It was, thus, held that the Customs Act prior to 29.3.2018 was applicable only to the whole of India and not beyond its territorial jurisdiction. The penalty, therefore, could not have been imposed upon the appellant therein under Section 112(a) of the Customs Act. 13. In the second limb of arguments to challenge the order passed by the CESTAT, Allahabad in dismissing the appeals as not maintainable, for non-compliance of the condition of mandatory pre-deposit under Section 129E of the Customs Act, it was argued by the learned counsel for the appellants that once the appellants herein made out a case of lack of jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res. The Dubai National who was holding 51% share was in fact a sleeping partner which is apparent from the Memorandum of Association of both the companies placed on record. Moreover, the offence having been committed within the territory of India, no immunity can be claimed by even a foreign company. The penalty imposed on the companies and its Director, the person who was Incharge of the business of the companies cannot be said to be illegal. 17. The submission is that the object and purpose of the Customs Act is to deal with ''smuggled goods' and ''loss of revenue', which is proved for the illegal import of gold jewellery without payment of Customs duty in SEZ unit, NOIDA. The material on record clearly indicated that the appellants herein had been benefited illegally from the import made by M/s Ajit Exports and M/s Vee ESS Jewellers Private Limited, two Indian companies located in the Special Economic Zone, NOIDA. The sale proceeds of the transactions made by Indian SEZ units were transmitted to the appellant companies and its Director Kishore Ratilal Dhakan. In case the appellant companies are spared only because of being incorporated abroad, i.e. in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt (Allahabad High Court) in Ganesh Yadav vs. Union of India 2015 (320) E.L.T. 71 (All.) to substantiate the above point of argument. 19. On the issue of territorial jurisdiction, reliance is placed on the decision of CESTAT, Mumbai in Prerna Singh vs. Commission of Customs 2020 (372) E.L.T. 610 (Tri. - Mumbai) to submit that the acts of the appellants herein are of abetment of such wrong doing which had its effect within the Mumbai Customs jurisdiction and the appellants herein who had aided importer in such wrong doing and later subjected themselves to the jurisdiction of Customs Act upon notice sent to them under Section 108 of the Customs Act, cannot challenge the penalty imposed under the Act. 20. Having heard learned counsels for the parties and perused the record, it is pertinent to note at this juncture that the main challenge by three appellants herein is to the order of the CESTAT, Allahabad in dismissing their appeals as non-maintainable on account of the defect, for non-compliance of mandatory pre-deposit in terms of Section 129E of the Customs Act. Three appeals filed by the appellants herein namely M/s Samrah Gold Factory Limited and M/s Deepu Jewellers and Ki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viso to dispense with such deposit, subject to condition as it deemed fit to impose, to safeguard the interest of the revenue. The question whether the deposit of duty and interest demanded or penalty levied would cause undue hardship to such person was relevant in the previous regime. It is in the sharp departure from the previous regime that the new provision has been enacted. Under the new regime, on the one hand, the amount to be deposited to maintain the appeal has been reduced from 100% to 7.5% but, on the other, the discretion which was made available to the Appellate Tribunal to scale down the pre-deposit has been taken away. The argument of the appellant therein that he must be given the benefit of powers available under the unamended Section 129E for the incident having taken place in the year 2013, prior to the amendment, was turned down. It was held therein that the legislative intention clearly was not to allow the appellant therein to avail the benefit of discretionary power available under the first proviso to the unamended provision of Section 129E as the order was passed by the Commissioner in levying duty/penalty was subsequent to the amendment and the appeal was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice to show cause was issued prior to enforcement of the amended provision was turned down. The Delhi High Court in Anjani Technoplast Ltd. (supra) has relied upon the decision of this Court (Allahabad High Court) in Ganesh Yadav (supra) in holding that the CESTAT had to apply the amended Section 129E of the Customs Act since the appeal before it was filed after the amendment was brought into force. While concurring with the decision of this Court in Ganesh Yadav (supra) as regards the interpretation of the amended Section 129E of the Act, it was held that as the pre-deposit made by the appellant therein was not 7.5% of the demanded duty as per the order of the Commissioner of Customs (Export), the dismissal of appeal by the CESTAT cannot be interfered. 23. In light of the above discussion, we are of the considered view that as the appellants herein have failed to fulfill the pre-condition of 7.5% of the demanded duty/penalty as per the order of the Commissioner of Customs, NOIDA dated 18.10.2018, this had to necessarily result in dismissal of their appeals by the CESTAT. There was no discretion with the tribunal to condone the pre-condition of mandatory deposits on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd foreign made branded, fully furnished and new gold jewellery into India through the above mentioned companies located in Dubai, Sharjah and Singapore. To evade Customs duty and other taxes in India, the appellant Sri Kishore Ratilal Dhakan had conspired to export the said jewellery to SEZ units in the guise of old/outdated gold jewellery for carrying out the processes of assembling, refinishing, plating and remaking with the preconceived motive to remove the said jewellery clandestinely from the SEZ units, without payment of Customs duty and Cess, for delivering/selling the same to the customers in the local market, domestic market in India, whose identify was conveyed by the appellants to the SEZ units in coded form through Fax messages, SMS and telephonically. The sale proceeds of such high end foreign gold jewellery sold in the India were sent to the appellants Sri Kishore Ratilal Dhakan and another person namely Mahesh Kumar through illegal channels as well as through SEZ units in the form of primary gold/gold bar/Indian made jewellery processed locally by misdirecting it as refurbished foreign made gold jewellery. The appellants were found to be the direct beneficiarie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ratilal Dhakan at the relevant point of time, we are required to examine as to whether the penalty imposed upon the appellants herein under Sections 112, 114, 114AA is without jurisdiction. 27. While examining the said question, it is pertinent to note that the offence of diversion of gold jewellery imported by the SEZ units without payment of Customs duty and Cess, for delivering/selling the same to the customers in the local market/DTA (Domestic Market), had been committed within the territory of India. Section 1(2) of the Customs Act, 1962, even prior to its amendment/insertion by Act No. 13 of 2018 was extended to the whole of India. The addition of words with the amendment that the provisions of the Act applies also to any offence or contravention under the Act committed outside India by any person, makes it clear that Section 1(2) of the Customs Act, 1962 as it originally stood, talks of commission of offence by any person within the territory of India . The Customs Act, 1962 is principally an enactment to consolidate and amend the law relating to Customs. It provides for the levy of duties of Customs. Amendment Act No. 13 of 2018 only extended the scope of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prohibition is in force under this Act or any other law for the time being in force, to a penalty [not exceeding three times the value of the goods as declared by the exporter or the value as determined under this Act], whichever is the greater; [(ii) in the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding ten per cent. of the duty sought to be evaded or fivethousand rupees, whichever is higher: Provided that where such duty as determined under sub-section (8) of section 28 and the interest payable thereon under section 28AA is paid within thirty days from the date of communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent. of the penalty so determined;] [(iii) in the case of any other goods, to a penalty not exceeding the value of the goods, as declared by the exporter or the value as determined under this Act, whichever is the greater.] Section 114AA. Penalty for use of false and incorrect material:- If a person knowingly or intentionally makes, signs or uses, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss, for delivering/selling the same to the customers in the local market/DTA. The finding in the order-in-question is that the identify of the customers in the local market/DTA, was conveyed to SEZ units by the appellants/exporters through Fax messages/SMS/Telephone etc. in coded form. Sri Kishore Ratilal Dhakan, the Managing Director of M/s Deepu Jewellers and Director of M/s Samrah Gold Factory had preferred the SEZ units to avail the benefit of duty free Customs clearance of import consignments and, thereafter, the imported gold jewellery was clandestinely removed from the SEZ units without carrying out any process as per the condition of exemptions from payment of Customs duty and Cess and delivered/sold to the respective buyers domestically. The sale proceeds were sent to Sri Kishore Ratilal Dhakan through SEZ units in the form of primary gold/gold bar/Indian made jewellery processed locally by misdeclaring it as refurbished foreign made gold jewellery in the export documents under ''self-certification'. The appellant Sri Kishore Ratilal Dhakan was found to be the direct beneficiary of evasion of Customs duty and Cess besides the additional amount collected by h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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