ORDER
S.S. Sekhon, Member (T)
1. Heard both sides in this bunch of appeals against a common order of the Commissioner of Customs, Kandla.
2. The appellant M/s Rajnarain Jwalaprasad, was an Advance License holder under the DEEC Scheme. These Advance Licenses were transferred, as per the Exim Policy, to M/s AarVee Plastics who had actually filed the Bill of Entry and cleared the imported goods and sold them thereafter to M/s Kuppi Utpadan. The liability to import duty demanded from M/s Rajnarain Jwalaprasad, an Advance Licence holder cannot be upheld, as made under Section 28 of the Customs Act, 1962. following the decision in the case of Dharam exports v. CC, Nhava Sheva 2005 (192) ELT 503 (Tri-Mumbai), since no goods were imported by them.
3. The Advance Licence was transferred, as provided under the Exim Policy, to M/s AarVee. Plastics, same has not been suspended or cancelled and therefore the demand of duty is not justified in view of the decisions:
(i) Titan Medical Systems Pvt Ltd v. CC, New Delhi ;
(ii) Collector of Customs, Bombay v. Sneha Sales Corporation 2003 (121) ELT 577 (SC);
(iii) Taparia Overseas Pvt Ltd v. Union of India .
4. In para 61.11 of the impugned order, the Ld Commissioner holds that omissions and commissions have occurred at the point of export and these acts arc ascribed to the licence holder i.e. M/s Rajnarain Jwalaprasad at the point of exports. In para 45 (m) of the Show Cause Notice, the charge of willful misstatement, suppression of facts by M/s Rajnarain Jwalaprasad for obtaining the endorsement of transferability on the licence from the office of Jt DGFT, Mumbai had been made. In para 45 (p) one Shri Sailesh Agarwal, the main partner of this appellant is alleged to have made entries in para H of the DEEC book and bank certificate and submitted to the Jt DGFT for redemption of LUT and obtain endorsement of transferability and that such actions have resulted in endorsement of the transferability. However, the Show Cause Notice is silent as regards any contravention by this appellant or anyone else, of Section 113, and imposition of penalty under Section 114 which pertains to the commission and omission, if any, that occurred at the point of export at Chennai Port. Appellants submit that no action has been taken by Chennai Customs for the alleged irregular exports at that port, since this appellant i.e. M/s Rajnarain Jwalaprasad, even if they have made certain forged endorsement on the transferability of the licence, they cannot be held liable to penalty under Section 112 of the Customs Act. as arrived at by the Commissioner.
5. It is found that Shri Prakash Agarwal and Shri Brijesh Agarwal, the other partners of M/s Rajnarain Jwalaprasad have no role to play. Para 40 of the Show Cause Notice records their statements wherein they have categorically stated that they have no knowledge of DEEC Book and Import Export Procedures and they have not handled Import-Exports. The Commissioner has arrived at penalties on these two appellants, in para 66 of the impugned order, on the ground that these two partners were beneficiary of the fraud and they have omitted to keep check on the activities of the third partner. Even if that be a he fact, penalty is not called for on these two appellants, under the provisions of Section 112 of the Customs Act. 1962 for such said act suspected.
6. There is force in the submissions of the appellants before us about bias in that the Ld Commissioner in para 68.2 of the impugned order refers to a statement made by Shri H.R. Garg, Assistant Director of DRI and looking on the came for justifying imposition of penalty on the appellants The appellant says and submits that no such statement made during the hearing without giving an opportunity to the appellants can be relied upon by the Ld Commissioner.
7. The appellant Kuppi Utpadan, had obtained transferability. for valuable consideration Advance Licence No. P/K//2073568 dated 5.1.1995) hereinafter referred to as the said Licence) which was issued to M/s Rajnarain Jwalaprasad, which was valid for import of 132.30 MTs of HDPE for an amount of Rs. 7,50,000/-. After acquiring the said licence, instead of importing the HDPE, they agreed to purchase the same from one AarVee Plastics (hereinafter referred to as the importerseller) and entered into an agreement to purchase a consignment of 144 MTs of HDPE from their importer seller out of which they desired to clear 132.3 MTs against the said licence from the Customs-cum duty paid Warehouse where the said 144 MTs of HDPE were deposited after import by AarVee Plastics. Since high sea sale was not permissible on imported goods warehoused earlier, the import seller filed Ex-bond Bills of Entry for home consumption and cleared 132.3 MTs of the said goods against the said licence and the balance quantity of 144 MT was cleared from the warehouse on payment of Customs duty by the appellant M/s Kuppi Utpadan. For the said act, the Commissioner, after confiscating 132Ts of the said goods under the provisions of Section 111(o) and 111(m) of the said Act, imposed a penalty on M/s Kuppi Utpadan and Shri Balakrishna Devidayal after coming to the following finding in para 69.1 of the order:
69.1 M/s Kuppi Utpadan and Sh. Balkishan Devidayal purchased the goods cleared, duty free, under the licence from M/s AarVee Plastics. Debit Note for the consideration of Rs. 49.85 lakh, for quantity of 216 M. Tons (out of which 132.3 M. Tons was cleared, duty free under the licence and balance on payment of duty), was raised by AarVee and paid by M/s Kuppi Utpadan. An agreement for High Sea Sale of the goods was also created. Customs duty on part of the goods, out of the total quantity of 216 M. Tons, cleared on payment of duty, was also paid by M/s Kuppi Utpadan. The goods, on cleared, were delivered to M/s Kuppi Utpadan. Therefore, the assessable value of the goods has to be worked out on the basis of the value shown in the High Sea Sale Agreement. I do not accept the proposition that the High Sea Sale Agreement is not relevant for assessment of the goods in view of the following:
(a) During investigation, the High Sea Sale Agreement was submitted by Shri BalKishan Devidayal of M/s Kuppi Utpadan, himself.
(b) Creation of the Agreement and sale of the goods as per the Agreement was admitted by both the parties to the Agreement i.e. M/s Kuppi Utpadan and M/s AarVee Plastics, though after the SCN, M/s Kuppi Utpadan have claimed that they did not act on the Agreement.
(c) The advance licence purchased by M/s Kuppi Utpadan from M/s Rajnarain Jwalaprasad was transferred to M/s AarVee Plastics by M/s Kuppi Utpadan unilaterally, without any consideration and without the knowledge of M/s AarVee Plastics. The purpose was to clear the goods against the licence some how. Argument that the transfer was part of the consideration for purchase of the goods appeared to be an after thought on legal advice
(d) Even clearing charges for the goods were paid by M/s Kuppi Utpadan.
(e) In any case, for the sake of argument, if it is admitted that M/s Kuppi Utpadan purchased the goods after clearance, then there is no evidence of payment of sales tax on the alleged sale.
And holding that M/s Kuppi Utpadan and Balkishan Devidayal as the beneficiaries of the manipulation. The licence has been transferred to M/s Kuppi Utpadan and a transferee cannot be held liable to duty as held by the Larger Bench in the case of Hico Enterprise 2005 (71) RLT 225 (LB). In any case, duty demand has not been wisely made on M/s Kuppi Utpadan or Balkishan Devidayal who were found liable to penalty under the provisions of Section 112 (a) of the Customs Act, 1962. As they have not done any acts which rendered the goods liable to confiscation under the provisions of Section 111 (d) and (m), the question of imposition of penalty on them therefore did not arise.
8. As regards penalty on Act Shipping on the ground that (a) they knew about the High sea Sales Agreement, (b) they filed Exbond Bill of Entry without authorization of M/s AarVee Plastic and handed over the goods to Kuppi Utpadan which would confirm that M/s AarVee Plastics have nothing to do with the goods after they have entered into High Sea Sale Agreement with AarVee Plastics & thus they were held liable to penalty wider Section 112 of the Customs Act. 1962. After considering the plea of M/s Act Shipping and the reasons for penalty as arrived at, it is found:
(a) The High Sea Sales Agreement has no consequence whatsoever after the goods have landed and are warehoused. Maharashtra Sales Tax Tribunal in the case of Indo Tax Pvt Ltd v. State of Maharashtra 1996 (13) Maharashtra Tax Tribunal 147 settled the position that once the goods were deposited under the Customs warehouse, the High Sea Sales Agreement would not be effective and in this case was rightly returned by M/s Kuppi Utpadan. In this view of the matter, the valuation arrived at and the reasons for enhancing the valuation of the HDPE in question as held by the Ld Commissioner cannot be upheld along with a liability to confiscation under Section 111(m). The same is to be set aside.
(b) As soon as the seller has filed a Bill of Entry for warehousing in their own name and the goods were deposited in a Customs Bonded Warehouse under Section 60 of the Customs Act 1962, the High Sea Sales Agreement relied upon by the Commissioner would be redundant and the valuation as determined in the Into Bond Bill of Entry cannot be questioned and disturbed.
(c) Since the goods were being cleared ex-Bond on a document filed after due verification by the proper officer of the Customs, the liability of penalty on the Agent M/s ACT Shipping Company as arrived at in the facts of this case cannot arise especially under the provisions of Section 112 of the Customs Act, 1962, when the liability to confiscation of the said goods is not being upheld.
(d) There is no reason to uphold confiscation liability under Section 111(d) of the Customs act, 1962 on the goods imposed & cleared into Bond.
9. In view of the findings hereinabove, the duty demands on M/s Rajnarain Jwalaprasad and penalties on the other appellants are required to be set aside and appeals allowed, since no confiscation liability as arrived at are being upheld.
10. Ordered accordingly.
(Pronounced in Court on 24/3/2006)