Dismissed

Principal Commissioner of Customs, v. M/s. Edelweiss Commodities Services Limited

Telangana HC22 Dec 2022CEA/66/2019

Case brief

AI extract

What is this about?

This is an appeal challenging the CESTAT's order setting aside a penalty under Section 114A and reducing a penalty under Section 114AA of the Customs Act. The High Court found no willful suppression and upheld the CESTAT's judgment, dismissing the appeal.

What did the court decide?

The appeal was dismissed; the CESTAT order of 25.03.2019 stands unreversed; no costs.

Principal Commissioner of Customs, Vs M/s. Edelweiss… — Customs and Excise | Telangana HC (2022)

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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD

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THURSDAY ,THE TWENTY SECOND DAY OF DECEMBER TWO THOUSAND AND TWENTYTWO

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PRESENT

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THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HON'BLE SRIJUSTICE C.V. BHASKAR REDDY

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CENTRAL EXCISE APPEALS NO: 66 OF 2019

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Between:

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Principal Commissioner of Customs, Hyderabad, 7h Floor,L.B. Stadium Road, Basheerbagh,Hyderabad-500004. ...APPELLANT/Respondent AND

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M/s. Edelweiss Commodities Services Limited, 2nd Floor, M B Towers, Plot No. 5, Road No. 2. Banlara Hills, Hyderabad, Telangana - 500034.

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...RESPONDENT/ Appellant

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Appeal is filed under Section 130 of the Customs Act, 1962 against the order of the Customs Excise & Service Tax Appellate Tribunal, Regional Bench Hyderabad against the order in Customs Appeal No. C/ 31076 / 2018 in Final Order No. Al3O411l2O19 dated 25-03-2019 Preferred against the Order in Original in Original No. HYD-CUS -01-COM-18-19 daled 24-05-2018 on the file of the Principal Commissioner of Customs Hyderabad Customs, Commissionerate , Kendriya Shulk Bhavan, L.B. Stadium Road, Basheerbagh, Hyderabad.

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lA NO: 1 OF 2022

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Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to expedite the hearing in the appeal CEA No.66 of 2019 forfinal disposal by fixing any convenient date to this Hon'ble Court in the interest of^justice.

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Counsel for the Appellant: Ms. SAPNA REDDY FOR SRl. B NARASIMHA SARMA

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Counsel for the Respondent: SRI D. SRINIVAS, Senior Counsel for SRI ROHIT

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POGULA

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The Court made the following: ORDER

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,I'I{E ON'BLE'I'II CI IIEF IIISTICL L]IIAL BIIUY^AN

AND

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C.E. A.No.66 of²⁰⁷⁹

IIDGMENI,^{/P. r th I lan'bhttu ()liel JatneLljialBhttvan)}

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Fieard lMs. Sapna Reddy,^{leamed counsel rePresenting}

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Mr. B.Nanimha Sarma,^{leamed counsel for the appellant and}

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Mr. D.Srinivas, learned Senior^{Counselfor the respondent.}

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This appeal has been^{preferred by the Principal} C-ommissioner of G:stoms,^{Hlderabadunder Section130 of} the Gstoms Act,^{1962 (briefly'theCustoms Act' hereinafter)} against the order dated^{25.03.2019 passedby the Gstoms,} Excise and Service Tax^{AppellateTribunal, Regional Bench at} Hlderabad (briefly^{'CESTAT'hereinafter) in appeal} No.d31076/2018.

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Appellant has proposed the^{following questions as} substantial questions of^law:

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V&rether the CESTAT^{was corect in sening} aside the penalry on the^{respondents under} \ Section 1t4A and^{reducingthe penalry under}

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Sec:ion 114AA contrary ro rhe provisions o[ the C-u toms Lct, 1962,, by causing subsrantial loss to r he appellant in the faca and circumsmnces of the case and the ratio of the decisions ol-rhe Sup reme Court cited supra ?

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\ hedrer the CESTAT is right in allowing the app:al No.U3tO76/2018 filed 6y rhe resp f,ndent without appreciating the toralirr of the facts and circumstances of the case ar-rd with cut giving finding to this exrent cau;ing subs:antial loss to the appellant ?

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Respo; rdent is an importer engaged in the business of importing 5 old and gold jewellery from lrl/s. futer Crmmoditier DMCC, Dubai (briefly^.M /,: futer Commodities' hereinafter), u4rich is one of the group companies ol lvlls. Edelweiss group.

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ResponJent had imponed eight cons(nments o[ gold jewellery weq,hing U7.65 l<gs falling under Crstoms Tariff Heading 7L13L9IO during the months of December-, 2Ol3 and January,^{201, aide} erght bills of entry. Responclenr had imported the rforesaid goods at unfixed prices, soLl rhe safii

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to local customers under^{various invoices and on payment of} VAT/CST, the price of gold iewellery^{vas fixedbased on} agreed price of gold and^{invoice issued by M/s- Aster} Commodities. Accordingly,^{remittanceswere given to} IvI/s. Aster Commodities^{throughbanking challans.} Subsequently, value of the^{gold jewellerywas fixed at a higher} price leading to M/s. futer^{Commodities raisingfinalinvoices} on respondent on the basis of^{whichfunherremittances were} made bythe respondent to M/s.^{Aster C.ommodities.}

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Show car,se notice dated^{29.04.201'6 was issued by the} C.ommissioner of Grstoms^{to the respondent alleging that} there was suppression of^relation between M/s. Aster C.ommodities and^{lvlls.EdelweissgrouP besides} mis-declaration of value of the^{imported goods. Therefore,} respondent was called^{upon to show catrse on the following} asPects:

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\ t 0^{The transaction value declaredas} Rs.34,66,64,028/- in respect^{of 8 bills of entry listed} in Annexure C filed by M/s^{Edelweiss shouldnot}

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be ejecred under Rule 12 of Grstoms Valu.ri,.ln (De ermination of Value of Imponed Gc o,:ls) Ruk s, 2007 and the value should not rc be re-d :termined as Rs.41,20,45,262,/- (Rupees Iirrty thre, crore rwenry iakh forry five tholsand r -o hunr red and sixry seven onll) as detaile<l in Ann :xure C, in terms of Section 14(l) of rhe G-rst rnu Act, 1962 read with Rule 3 oi- Cusrtrrx Valu nion (Determination of value of impo n,:.d gooc s) Rules, 2007 for the purpose of assessmer r of cust( ms <luty. Consequently, why the diffcrerrtial dury of Rs.1,43,18,899/- (Rupees One crorc f x.y three lakh eighteen thousand eight hundred and ninet , nine only) (inclusive of Education cess SHE cess) should nor be demanded from NL/s. Edel, rciss, as detained in Annexure C and whv the amou nt of Rs.1,43,18,899l- paid bythem <luring the coun r of investigation roq/ards their dury liabi iry, in terns of Section 2S(a) of the Grstoms Act, 1,)62 shoul I not be appropriated hasmuch as the dutv has b ,en shon levied due to misstatement of vahr,: by tht imponer.

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(ii) Tl e interesr as applicable on the dug. arnormi mend, )ned in point (i! above shall not be recovei.t,,l under Section 28AA of the G:stoms Act, 1962 and r4ry a:r amormr of lts.24,45,025/- already paid br. them oward interest should not be ad.iusted their. iruere: c liabil.icy

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(ii! Penalcy should not be^imposed on^M/s. Edelweiss under Section 114.\ and 114AA of the Grstoms Act,1962

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(iv) Goods cannot be conficated under Section 111(m) of G.rstoms Act,1962.

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-7 It appears that respondent had submitted reply to the above show catse notice whereafteq Principal Commissioner initiated adjudication proceedings leading to order-in-original datedz+.0s.2018 wherein the following order was^passed:

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Now, therefore, in view of above discussion and findings, I pass the following:

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ORDER

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(i) I reject the transaction value declared as Rs.34,66,64,028/- in respect of 8 bills of entry listed in Annexure C to the show cause notice, filed by M/s. Edelweiss Commodities Services Ltd., under Rule 12 of Grtoms Valuation (Determination of Value of Imported Goods) Rules, 2007 and re-determine the same^as Rs.43,20,45267/- in terms of Rule 3 of Grtoms Valuation (Determination of Value of Imponed Goods) Rules, 2007 read with Section 14(1) of the Gstoms Act,1962;

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(if . demand dutyof Rs.1,41,18,899l- (inclusive of liducation cess and SFIE cess) from .U,/s E.de weiss Commodities Services Ltd. urrder Sect on 28(8) of rhe Customs Act,1962;

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(iif t appropriare rhe dury of Rs.1,43,1g,g!,,1,/paid by them towards the amount mentione,l rr (if a rcve;

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(iv) . demand interest at applicable rare ur der secti >n 28AA of the Gxtoms Act, 1962 on rhe amo rnr menrioned at (if above;

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(v) I appropriate inrerest of Rs.24,45,025/- p,;1f, by d ern towards the amount mentioned at (ir) abov :l

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("i I hold that the goods are liable for coni ;cation under Section 1 1 1(m) of rhe Cust.ms Act, 1962, however, I refrain fr,rm impo;ing redemption fine for the reasons cired suPrr;

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(vif J impose penalry equal to the duq, amounr ment oned at (if above under Section 1l4A ,rf the C,rstoms Act, 1962;

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(u0 impose a penalry of Rs.5O,OO,0OO/- un<ler Sectic n 114AA of the G.rstoms Act, 1962;

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\7e finrl that in addition to rejection of tlLe declared

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value of the ir nponed goods and redetermination c l the same

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at a much higher figure, Principal C-ommissioner^{had also} imposed penalty under Section 114A as well as^under Section 114AA of the Grstoms Act.^{V4rilepenaltyunder} Section 114A was to the tune of^{I1s.1.,43,18,899.00, v'hichis} the dury payable under Section²⁸⁽⁸⁾ of the^{C-r.rstomsAct,} penalry of Rs.SO lakhs was imposed under Section^114AA of the Gstoms Act. \X.4rile imposing the^above two^{sets of} penalties, the Principal C-ommissioner^recordedthat respondent had made wilful mis-statement, bysuppressing^the relevant facts, to the customs department. In the^process, respondent had made false declaration.

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In the appeal before the CESTAT, CESTAT^considered the penalty imposed under Section 114A of^{the GrstomsAct} and held that there was no mis-declaration of^{the value of the} imponed gold by the respondent. Therefore,^{imposition of} penalry under Section 114A of the Grstoms Act^was unwarranted and was accordingly set^{asidevide the order} dated25.03.20i9. It was held as follows:

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)

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Ib*i"g to the penaby imposed on the app:llrnt under Section 114,{ of the C,ustcrrx Act 1962, we find the provision of said Section pres Jpposes that there was a shon levy., rr,tnlevy by reason of collusion or any willful lisstat( ment or suppression of facts and has txx:n dete mined under Section 28 of the Grsr(xrs Lct, 1962, and has to be imposed by an equi^,alent amount of penaky. In the cas.: .ur han<, there is no dispute as to the fact -hat appr [ant themselves have come forwarrd arrd hfornred the Department on 22.12.2014 rnd 24.1. .2014 that there was a mis-declaration ,.rf the^,alue of the gold jewellery imported rnd paid ol the differential dury along with interest. We { nd that the explanation put fonh on behalf of th: appellant that they were confused by the mast.:r circular of the Reserve Bank of Indir is accel table and the penalry under Section 114r\ of tlr ' C-rrstoms Act, 1962, and there seems to be no st ppression of facts with intent to evade r a-x; in o, u' considered view, is unwarranted ::rd n.'edr to be set aside and we do so.

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CESTi 11' also considered the penalty imp,rsed under Section 114AA of the Grtorns Act. n7hile obs:rving that

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there was definitely lapse on the pan of the^{respondentfor} which Section 114AA of the Customs Act would get attracted, it was also noticed that respondent had come forward on its own and discharged the dury liability with interest.^Therefore, penalty imposed in the order-in-original was modified by reducing the same to Rs.5 lakhs uide the order dated25.03.2019.

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ll. Leamed counsel for the appellant submits that when there is mis-declaration of the value of the goods, penalties under Section 114A as well as under Section 1 14AA would get attracted automatically. In this connection, she has placed reliance on a decision of the Supreme C-ourt in Union of India v. Dharamendra Textile Processorsl.

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1,2. On the other hand, leamed Senior Counsel for the respondent submits that CESTAT had noticed that x I respondent itself had come forward and informed the customs department on 22.1,2.2at4 and 24.1,2.20t4 rhat there was^a \

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I (zooa; t: s.rp..mc Cou( Cases 369

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mis-declarati >n of the value of the imported ;pld due to misconcepti< n whereafter, respondent paid the differential duty along r ith interest. In the circumstances, quesrion of imposition c[ penalty under Section lL4A of the ,t\ct would not adse. Rr garding penalty under Section 114AA of the Act, he submis ,hat CESTAT had exercised its dis<:retion in a judicious ma rner. Therefore, no inter{erence is <:a[led for at the stage of iunher appeal under Section 130 of tre Grstoms Act.

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13.^lWe ha' e drrlyconsidered the rival submissior.s made at the bar.

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Secrion 28 of the Gstoms Act provides for recovery of duties not le.* ied or not paid or short-levied or stort-paid or erroneor-rsly r:funded. It sap that v{rere any drrq. has not been levied o'not paid or has been short-levied or.short-paid / or erroneoul 7 refunded or any interest palable hz-s not been paid, part-pai I or erroneously refunded for any rcason other

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r (

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than the reasons of collusion^{or willfulmis-statementor} suppression of facts, the proper^{officer shall within two} )'tars from the relevant date, serve a notice^{on the concernedpenon} requiring him to show cause as to^{why he should not pay the} amount specified in the notice.^{However,as per the proviso,} before issuing such notice, the^{properofficer is required to} hold pre-notice consultation with^the Person^{chargeable with} dury or interest. Further,^{the personchargeable with duty or} interest m y pay before service of^{notice,the differentialduty} as well as interest on the basis of^{his ownascertainmentor on} the basis of dury ascenained by^{the proper officer.}

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Section i i4-A of the Grstoms^{Act deals with penaltyfor} short-levy or non-lely of dwy^{in certaincases. Relevant} ponion of Section 114-A of the^{Grstoms Act reads as under:}

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114-A Penalty for shott-levy or^non-levy of duty in certain cases.-^{\Where the duryhas} not been levied or has been short-levied^{or the} interest has charged or paid or^{has been part} paid or the dury or interest has been erroneously

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rcfu rded by reason of collusion or ,,rn1, riUul rnis-;tatement or supprcssion of facts, the pers rn ll{ro is liable ro pay the dury or inte resr, as tl re case may be, as determined under [:;ubsecti rn (8) of Section 281 shall be liable to pa), a peru lry equal to the duty derermine or inrcrest so d, temrined:

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[?ror-ided^that where such ducy or inreresr, as tl e case may be, as determined under [strtr secti rn (8) of Section 281, and the interest paya, rle thereon under section [28-AA], is 1,aid u.ithi r thirry dap frorn the date of the comr nunication of the order of the proper offic, r determining such dury the amount of petty liable to be paid by such person under rhis secti< n shall be rwenry- five per cenr, of the duty or ifl:rest, as the case may be, so detemrined:

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P:ovided funher thar the benefit of redut:ed penal y under the first proviso shall be availa ble subje,:t to the condition that the amount of penal y so detennined has also been paid within the p eriod of thirry dap referred to in thar provi o:

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P ovided also that where the duty or inter,:sr. deten rined to be payable is reduced or ilcrease<l by th, Comrnissioner (Appeals), the AppelLLte

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Tribunal or, as the case maybe, the court, then, for the purposes of this section, the dury or interest as reduced or increased, as the case may be, shall be taken into account:

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Provided also that in a case where the duty or interest determined to be palable is increased by the C-ommissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, the benefit of reduced penalry under the first proviso shall be available if the amount of the duty or the interest so increased, along with the interest palable thereon under Section [28-AA], and twenty-five per cent, of the consequential increase in penalty have also been paid within thirty dap of the communication of the order by which such increase in the duy or interest takes effect:

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Provided also that where any penalry^has been levied under this section, no penalry shall be levied under Section 112 or Section^{1 14.}

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ExTlanatiott- For the removal of doubts, it^is hereby declared shall that--

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(f the provisions of this section shall also apply to cases in which the order determining the dury or interest under [sub-section^{(8) of Section28] relatesto}

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<br>

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notices issued prior to the date on uhi,:h the Finance Act, 2000 receives rhe ass(:nr of the President;

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(i) any amount paid to the crcdit ol tl're Crntral Govemment prior to the dare of communication of the order referred ro in the fint proviso or the founh provi:;o shall be adjusted against the roral amornt due from such person.]

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A ban perusal of Section 114,\ of the Cus:oms Act as extracted ab >ve would go to show that penalty thereunder wouid be auracted if there is shon payment of Juty etc.,by reason of col rsion or any willful mis-statemenr or suppression of facts byth: concemed person.

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Sectior 114AA which is a sub-classi:r.:arir>n of Section 114A of the Gstoms Act provides forperLa)tyl,oruse of false anc incorrecr material. Section 114.A.r\ of the Grstoms Act reads as under:

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1 t4-AA. Penalty for usc of false a rrrl incor rect material.- If a penon knorvingly or inten ionally makes, signs or uses, or causes t() L

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be made, signed or used, any^declaration, statement or document which is false or incorrect i, *y material panicular, in^the tmnsaction of any business for the^{pqposes of} this Act, shall be liable to a^{penalry not} exceeding five times the value of^goods.]

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From the above, it is evident that^{what Section114AA} of the Grstoms Act postulates^{is that if a penon knowingly or} intentionally makes, signs or uses or causes to^{be made,signed} or used any declaration, statement or^{documentwhichis false} or incorrect in any material particular,ⁱⁿ the^{transaction of any} business for the pulposes of Customs^{Act, he shall be liable to} a penalty not exceeding five times the^value of the^goods. or Here also, the percon concemed must^knowingly intentionally make a false or incorrect declaration^regarding any transaction under the Customs Act for^{applicabilityof} Section 114AAthereof.

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Adverting to the order passed by the^CESTAT, CESTAT noted that there is no dispute to the fact^that

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respondent i self had come forward and inforrned the customs department >n 22.12.2014 and 24.12.2014 that :here was a mis-declarati )n on the value of the imponed gold jewellery. Thereafter, r:spondent itself paid the differential clut1. along with interest In the explanation to the show cl$e nodce, respondent c arfied that it was confi.rsed bythe master circular of the Resen e Bank of India issued in this regard. '.lherefore, GSTAT toc k the view thar there was no suppress ir>n of facts by the respo; rdent for levy of penalry under Secti,rn 1i4A of the Act.

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\fle corcur with the view of the CESTAI' and on perusal of th: materials on record, we are of the vie.,,vthat it is not a case of willlul misstatement bythe responderu, to suffer penaltyunder Section 114Aof the Crutoms Act. Il.espondent itself came fc rward with the correct declaration vhereafter it paid the diffe ential dutyalong with interest.

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Insofar^{penaltyunder Section 114AA of the Act is} concemed, here^{also the condition precedentfor levy of} penalry is that^{the person liable to pay duty should knowingly} or intentionally^{make a false declaration'Thoughthere was a} lapse on the pan of^{the respondent,it could be ascribed to} oversight or^{confusion created by the master circularissued by} the Resewe^{Bank of India. Nonetheless,it is not a caseof} knowingly or^{intentionallymaking a false declaration by the} respondent. CESTAT^{had exercised its discretion in a} judicious lranner and modified the^{penalty imposedunder} Section 114AA of^{the GrstomsAct by reducingthe same} from Rs.50 lakhs to^{Rs.5 laktrs. Ve find no infirmity in the} exercise of discretion^{by the CESTAT to waffantinterference'}

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Lastly, we^{are of the view that the decisioncited by} Ieamed counsel^{for the appellant z'e', Union of India v'} Dharamendra^{Textile Processors (t"po) is not at all} applicable to the^{facts of the presentcaseinasmuch the said} decision was^{rendered in the context of levy of penaltyunder}

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Section 11AC of the Crnrral Excise Lct, \944, W.e have

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carefully gor e through the provisions of Section . 1AC of the crntral Exci' e Acr, 1944 and we do not find that rhe same is 'tn pari nateri r with the provisions of either Sectirn 114A or Secdon 114A A of the Gstoms Act.

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