Delay of decade in proceeding makes entire proceeding vitiated

Namdev Exports Vs Commissioner of Customs (Port) (CESTAT Kolkata)

Held that if proceedings do not culminate within a reasonable period of time then they stand vitiated. The delay of over a decade truly violates the Appellant’s right to natural justice and vitiates the entire proceeding.

Facts-

The instant appeal challenges the OIO dated 29th June, 2018, whereby the respondent has confirmed the demand of Customs Duty of Rs.52,98,495/- with interest thereon under Section 28(8) and 28AB of the Customs Act, 1962 upon the appellant. The respondent has also imposed a penalty of the self-same amount by virtue of the impugned order under Section 114A of the said Act on the appellant.

The facts are that on completion of investigation, DRI issued notice dated 9th November 2004 to the appellant and its partners. The same was replied on 21st March 2005. However, impugned order was issued on 29th June 2018. It took 14 years to reach finality.

Conclusion-

Gujarat High Court in the case of Sunrise Remedies Pvt. Ltd. vs. UOI has held that if proceedings do not culminate within a reasonable period of time then they stand vitiated.

Held that the delay of over a decade here, especially when genuine efforts have been made by the Appellant to participate in them, truly violates the Appellant’s right to natural justice and vitiates the entire proceeding.

FULL TEXT OF THE CESTAT KOLKATA ORDER

1. The instant appeal challenges Order-in-Original dated 29^th June, 2018, being No.KOL/CUS/Commissioner/Port/53/2018, whereby the respondent has confirmed a demand of Customs Duty of Rs.52,98,495/- with interest thereon under Section 28(8) and 28AB of the Customs Act, 1962 upon the appellant. The respondent has also imposed a penalty of the self-same amount by virtue of the impugned order under Section 114A of the said Act on the appellant.

2. The case of the Directorate of Revenue Intelligence before the respondent was, so far as relevant, as follows:

(a) The Directorate of Revenue Intelligence (in short ‘D.R.I.’) had received specific intelligence that the appellant had availed Customs Duty exemption under the Notification No.21/2002-Cus dated 01^st March, 2002 on imports of Polyester lining material through Kolkata Port worth Rs.11,54,806/- but had diverted the same to the local market instead of using the same for manufacture of export garments.

(b) The officers of D.R.I, Jaipur searched the office-cum-factory premises of the appellant, PalliwalonKaBagh, Sanganer, Jaipur under Panchanama dated 25^th June, 2003, which revealed that a consignment of Polyester lining material had been imported through the Kolkata Port in 2003.

(c) The D.R.I. recorded the statement of one Kunj Bihari, one of the five partners of the Appellant firm on 25^th June, 2003 under Section 108 of the Customs Act. In the said statement, Mr. Bihari stated that the appellant had obtained an import certificate No.028000011 dated 12^th March, 2003 from the Apparel Export Promotion Council (in short ‘A.P.E.C.’) for duty free import of lining material. The appellant had then imported the lining material that is the subject-matter of these proceedings via the Kolkata Port, which was then transported to the appellant’s factory, after Customs clearance, in two trucks, bearing Nos. HR 38E 2545 and HR 38P 2525, by M/s. Shree Vishnu Freight Carriers and received on 26^th April, 2003. Mr. Bihari stated that Customs clearance was looked after by their Customs agent M/s. S. Goutam & Co., which had cleared the imported goods, placed the order for imports and loaded the goods onto the trucks. Mr. Bihari claimed that the stocks of the lining material had been exhausted and that he would produce details regarding quantity and manner of consumption of the imported goods.

(c) Bihari vide a letter dated 28^th July, 2003 to the D.R.I. submitted a statement of consumption and stock position of the imported lining material, which showed that the closing balance of Polyester lining stored in the appellant’s factory was 66,237.80 yds.

(d) Mr. R.I., Kolkata interrogated one Uday Shankar Pandey, the manager of M/s. Shree Vishnu Freight Carriers, who, in his voluntary statements dated 01^stJuly and 23^rd July, 2007 recorded under Section 108 of the Customs Act stated that he was instructed by one Mr. Sharma of the appellant firm, over the telephone, on the transportation of the imported lining material. Mr. Pandey submitted two consignment notes, bearing Nos. 1301 and 1302, both dated 19^th April, 2003 along with two bills dated 09^th May, 2003 as proof of transportation of the imported material. Mr. Pandey also stated that the goods were transported by two trucks, Nos. HR 38E 2545 and HR 38P 2525, and that he was yet to receive payment for them.

(e) R.I. traced the owner and manager of the said two trucks, i.e., one Sukhdev Singh, who was the manager of M/s. New Faridabad Road Lines, Faridabad. Mr. Singh, in his statement recorded under Section 108 on 02^nd September, 2003, stated that on 19^th April, 2003, he offloaded the imported material under the consignment note Nos.1301 and 1302 at Delhi on the instructions of M/s. Vishnu Freight. Mr. Singh submitted photocopies of the bills and ledger register along with sales tax permits, which indicated the transport of the imported goods from Kolkata to Delhi.

(f) Statement of one Sujit Chakraborthy, manager of M/s. S. Goutam was recorded under Section 108 on 10^th November, 2003 wherein he, inter alia, stated that he was directed via a letter dated 14^th April, 2003 of the appellant to deliver and dispatch the imported goods through M/s. Shree Vishnu.

(g) Enquiries made in the Delhi office of M/s. Vishnu Freight revealed that the Delhi office of the said carrier was being managed by one Vishnu Shankar Pandey and Inder Shankar Pandey, who were the brothers of Uday Shankar Pandey, and who claimed in their voluntary statement recorded u/s. 108 on 16^th July, 2022 that they were not aware of the transport of the imported goods. It was also found that Mr. I.P. Pandey was also the proprietor of M/s. Geetanjali Transport and Mr. V.P. Pandey was also the proprietor of M/s. Shree Balaji Cargo Movers.

(h) Uday Shankar Pandey of M/s. Vishnu Freight sent a letter dated 24^th November, 2003 to the D.R.I., stating that the imported goods were taken from Delhi to Jaipur in two trucks, bearing Nos.HR 38C 6024 and HR 51G A1619, of M/s. Sunny Transport. Mr. U.S. Pandey also submitted G.R. Nos.3533 and 3534, both dated 25^th April, 2003 of M/s. Sunny Transport which bore the rubber stamp of the Rajasthan Commercial Tax Dept. evidencing entry of the said two trucks through the Shahjahanpur check post. Mr. U.S. Pandey claimed in the said letter that Rs.39,320/- was collected by M/s. Sunny Transport from the appellant and that Rs.33,320/- was remitted toVishnu Freight after deducting freight of Rs.6,000/-.

(i) In his statement recorded under Section 108 dated 12^th December, 2003, one Gurpreet Singh, the proprietor of M/s. Sunny Transport, stated that he further transported the imported goods from Delhi to Jaipur in the said two trucks which were received on 26^th April, 2003. Mr. Gurpreet Singh stated that after deducting the freight for transport of the goods from Delhi to Jaipur, he sent the rest of the total freight collected to M/s. Vishnu Freights by bank draft. Mr. Gurpreet Singh submitted the G.R. book of M/s. Sunny Transports, which contained the office copies of the G.R.s for the month of April, 2003. Mr. Gurpreet Singh also stated that the supplier of the two trucks was M/s. Rasila Goods Carrier, Delhi.

(j) The proprietor of M/s. Rasila Goods on Surendra Khurana, in his statement recorded under Section 108 on 05^th February, 2004, stated that he had provided the said two trucks to M/s. Sunny Transports for transporting the goods from Delhi to Jaipur.

(k) Further voluntary statements of Mr. Bihari of the appellant were recorded on 16^th March, 2004. Mr. Bihari stated that his factory was located at A-4-5, Shiv Vihar Colony, Palliwal Garden, Sanganer, where the imported goods were transported to from Delhi by the said two trucks by Sunny Transportand received on 26^th April, 2003. Mr. Bihari claimed that the freight of M/s. Vishnu Exports was paid in cash to the drivers of the said two trucks. When asked as to why in his earlier statement, Mr. Bihari had given different truck numbers and the name of M/s. Vishnu Freights as the transporter, Mr. Bihari replied that his initially thought that the transporter was M/s. Vishnu Freights until he later found out that it was not after perusing the records. Mr. Bihari claimed to have personally received the goods, paid the freight, and issued a receipt on 26^th April, 2003. Mr. Bihari claimed that the appellant had a balance of 17,089.80 sq. yds. of lining material lying in their factory. When queried about his earlier claim of having nil lining material, Mr. Bihari claimed to have had no lining material on 25^th June, 2003 in his offices and factory.

(l) However, Mr. Bihari by a letter dated 17^th March, 2004 withdrew his statement of 16^th March, 2004 and claimed that the balance stock of imported lining was actually lying on the day of the search by the D.R.I. (25^th March, 2003) in one of his factories situated at 4-5 Shiv Vihar Colony, Ganesh Marg, PalliwalonkaBagh, Sanganer, Jaipur.And since the factory being searched on 25^th March, 2003 was situated in Palliwal Garden, Sanganer, Jaipur, which had no lining leftover, he had insisted that there was no lining lying in his factory.

(m) The D.R.I. sought to verify the L.R.s. of M/s. Sunny Transportto ascertain whether the goods were actually transported to Jaipur from Delhi in the two trucks, bearing Nos.HR 38C 6024 and HR 51G A1619, and whether the said trucks had actually crossed the check post at Shahjahanpur.

(n) The Commercial Tax Officer, Shahjahanpur vide letter dated 11^th March, 2004 to the D.R.I. certified that the said two trucks that were claimed to have transported the imported material from Delhi to Jaipur had not been found to be entered in the records maintained at the check post at Shahjahanpur.

(o) The Commercial Tax Headquarters, Jaipur, the nodal authority in respect of computer data inputs also stated to the D.R.I. vide its letter dated 09^th March, 2004 that the said two trucks that were claimed to have transported the imported material from Delhi to Jaipur had not been found to be entered in the records maintained at the check post.

(p) From the contradictions in the statements of Mr. Bihari and the aforesaid facts, there was no actual transportation of the goods from Delhi to Jaipur, but from Kolkata to Delhi only, where they were actually consigned. This was revealed from the freight receipt of M/s. New Faridabad Roadlines, where the name of the transporter was also mentioned as ‘Geetanjali Transport’. Moreover, the goods were offloaded at Delhi on the instructions of M/s. Vishnu Freight and payment was made to M/s. New Faridabad, as per the statement of its proprietor, by Geetanjali Transport, even though the proprietor of the latter stated that he was unaware of the transportation of the imported goods. Additionally, M/s. Sunny Transport made payment of freight to M/s. Shree Vishnu only in October, 2003, six months after the delivery of the goods, and Mr. U.S. Pandey never bothered to ask for the sameduring such time. However, Mr. Pandey did ask for payment of freight via letters dated 09^th May, 2003 and 30^th May, 2003 from the appellant.

(q) This would show that M/s. Sunny Transport never transported the goods from Delhi to Jaipur, and the other documents were a fabrication.

(r) The consignment note Nos.1301 and 1302 existed only in theL.R.s of M/s. Vishnu Freight but not M/s. Sunny Transports. The appellant did not receive the consignee’s copy of the G.R.s (when they should have received the same), but received an ‘extra copy’, and the receipt of the goods was shown on the ‘driver’s copy’. The original of the G.R.s under which the goods were transported from Delhi to Jaipur, produced by the appellant, showed that freight was ‘TO BE PAID’, while the office copies of the same showed that the freight was ‘PAID’.

(s) In light of all this evidence, it was clear that there was never any transportation of the imported material from Delhi. The appellant had, it was wholly apparent, diverted the Polyester lining imported by it to the local market in Delhi whilst claiming exemption on Customs Duty for the same for manufacturing of exported garments. The appellant had, inter alia, acted in contravention of s 111(d) and (o) of the Customs Act, 1962 and was liable to pay penalty u/ss. 112(a) and 114A of the said Act.

(t) On completion of investigation, D.R.I. issued show-cause notice against the appellant and its partners dated 09^th November, 2004, bearing F.No.840/JPR/19IX/2003/571-583, to explain to the respondent as to why, in essence, the appellant should not be held liable for confiscation u/s. 111 (d) and (o) or for payment of fine u/s. 125, and/or why penalty should not be imposed on the appellant u/ss. 112(a) and 114 of the Customs Act.

3. The Appellant replied to the said show-cause notice by a reply dated 21^st March, 2005 (as also revealed from their written notes of arguments dated 01^st June, 2005) before the respondent, which, so far as relevant, was as follows:-

(a) The appellant had been registered member of the A.P.E.C. with a factory at 4-5, Shiv Bihar Colony, PalliwalonKaBagh, Sanganer, Jaipur.

(b) The imported goods were cleared after filing bill of entry No.101831 dated 04^th March, 2003 on 04^th March, 2003 at the Kolkata Port under notification No.21/2002-Cus dated 01^st March, 2002. By a letter dated 14^th April, 2003, the clearing agent of the Appellant was instructed to dispatch the full consignment through M/s. Shree Vishnu to the address of the appellant. A copy of the said letter was also given to Shree Vishnu.

(c) M/s. Shree Vishnu dispatched the imported material via two trucks, bearing Nos. HR 38E 2545 and HR 38P 2525, under consignment note Nos.1301 and 1302 dated 19^th March, 2004. The goods were transshipped by two trucks, bearing Nos.HR 51 GA 1619 and HR 38C 6024, from Delhi to Jaipur by M/s. Sunny Transport via Shahjahanpur check post under G.R. Nos.3533 and 3534 dated 25^th April, 2004. The goods were received at the factory of the appellant at 4-5, Shiv Vihar Colony, Ganesh Marg, PalliwalonkaBagh, Jaipur.

(d) In the search of the offices of the Appellant by the D.R.I. on 26^th June, 2003 a sample wherein the said imported material was used was also seized. The statement of Mr. Bihari was also recorded on that date, wherein he claimed that the imported material had been exhausted in producing export material and that he would produce details of utilization the next day. By the letter of Mr. Bihari of the appellant dated 28^th July, 2003, the consumption and stock position of the Appellant from 26^th April, 2003 to 17^th July, 2003 was disclosed in regards the imported material was disclosed, which showed that 66,237.80 yds. of the same was lying stored at 4-5, Shiv Vihar Colony, Ganesh Marg, PalliwalonkaBagh, Jaipur. However, the D.R.I. did not seek to verify this at all.

(e) In the second statement of Mr. Bihari recorded on 16^th March, 2004, i.e., after eight months, he stated that the Customs agent of the appellant dispatched the goods via consignment note Nos.1301 and 1302 dated 19^th March, 2003, which were received on 26^th April, 2003 by the appellant at Jaipur. The goods were carried by M/s. Sunny Transport under G.R. Nos.3533 and 3534 dated 25^th April, 2003 by two trucks, bearing Nos.HR 38C 6024 and HR 51 GA 1619. Mr. Bihari claimed that he paid the freight charges as per the G.R.s of M/s. Shree Vishnu to the truck drivers in cash and also issued a receipt. The goods were used in the manufacture of readymade export garments and a balance of 17089.80 yds. was still stored with the appellant.

(f) Bihari then sent a letter dated 17^th March, 2004 to the D.R.I. clarifying that the stock of the imported Polyester lining material was lying at the factory of the appellant situated at 4­5, Shiv Vihar Colony, Ganesh Marg, PalliwalonKaBagh, Sanganer, Jaipur, a fact that had already been mentioned in the letter dated 28^th July, 2003 and the letter dated 15^th October, 2003. Mr. Bihari stated that officers on the day of the search wanted to see the goods in the factory/office of the Appellant situated near Palliwal Garden, Sanganer, Jaipur, where the lining material was not in stock since it was kept in the other factory. Mr. Bihari protested and stated that he had not been allowed to state the correct facts on 16^th March, 2004.

(g) The Appellant asserted that the entire investigation had been conducted in a haphazard manner and was based on the allegation that the imported material never reached the Appellant. However, there was no evidence to support this allegation and no evidence to support diversion of material to the local market. In contrast, the case of the appellant divulged through the comprehensive documentation of the transporters left no doubt of the delivery of goods on 26^th April, 2003 to the factory of the Appellant in Jaipur. The D.R.I. had failed to verify the fact that the stock of the imported material was still lying with the Appellant in their factory despite various communications informing them of the same.

(h) The appellant submitted a chart of the utilization of the imported material between 26^th April, 2003 and 27^th January, 2005 along with export invoices and shipping bills.

(i) The statement of Mr. Bihari of 26^th June, 2003 was a weak piece of evidence since it was not borne out by the documentary evidence. The Appellant cited a case reported in (2002) 146 E.L.T. 480 to support this contention.

4. The respondent sought the D.R.I.’s reply on (a) the point that the Appellant had its factory situated at 4-5, Shiv Vihar Colony, Palliwalon ka Bagh, Sanganer registered with the A.P.E.C. in support of which it had produced a membership/registration certificate; and (b) the utilization chart submitted by the Appellant.

5. The D.R.I. responded to point (a) by claiming that the certificate produced was dated 17^th March, 2004, which was after the investigation had begun against the Appellant, thus this was a cover-up and the fact the said factory had not been disclosed in the statement recorded on 25^th June, 2003. The earlier certificate stood in the name of the Appellant in respect of its factory at Boharonka Mohalla, Jaipur. In regards point (b), the D.R.I. claimed that the imported material was not basic raw material for the manufacture of the exported goods. It claimed that in 11 entries of the chart submitted by the Appellant, the total weight of the lining material shown to be consumed is much greater than the weight of the exported goods. It further claimed that in eight entries of the chart, the total weight of the lining material shown to be consumed is only just lower than the total weight of the exported goods, which is simply impossible. Hence, the D.R.I. asserted that this chart was forged and no lining material was received in Jaipur by the Appellant.

6. The respondent found that the A.E.P.C. registration certificate was issued on 17^th March, 2004 based on information given on 23^rd February, 2004, i.e., after the initiation of investigation by the D.R.I. on 26^th June, 2003. The respondent held that this was done to cover-up the diversion of goods which were claimed to have been received at 4-5, Shiv Vihar Colony, Ganesh Marg, Palliwalon Ka Bagh, Sanganer, Jaipur. The respondent held that the existence of the said factory had not been disclosed in the statement recorded on 25^th June, 2003. The earlier A.P.E.C. certificate was found by the D.R.I. to have been issued in the name of the Appellant in respect of the factory at Boharonka Mohalla, near Palliwalon ka Bagh, Sanganer, Jaipur.

7. The respondent found that 11 entries on the utilization chart of the total weight of the lining material shown to be consumed is much greater than the weight of the exported goods. This was found to be impossible since the weight of the exported goods would increase due to added buttons, tags, basic fabric, etc. The respondent found from the said chart that in eight entries of the chart, the total weight of the lining material shown to be consumed is only just lower than the total weight of the exported goods. The respondent stated that this was not possible for the same reason. Hence, the respondent held that this utilization chart was unreliable.

8. The respondent, therefore, held that there was diversion of the imported material to the local market after claiming exemption on Customs Duty in respect of the same. The respondent stated that there was a cover-up of this fact using fabricated documents and that the appellant had misled D.R.I. Hence, verification of the stock was not necessary. The factum of the second factory not being disclosed to the D.R.I. was itself another sure indicator of fraud by the appellant to cover-up the evasion of Customs Duty. The respondent held that the suppression and willful misstatements of the appellant meant that the invocation of the proviso to Section 28(1) of the Customs Act for extension of period of time for issuance of show-cause notice was justified. Consequently, the appellant passed the order in the terms referred to in paragraph 1 herein.

The Case of the Parties in Appeal

9. The grounds of appeal and the submissions advanced on behalf of the Appellant by Shri. HasmukhKundalia and Shri. Arnab Chakraborty, Advocates may be gainfully read together to get a thorough understanding of the Appellant’s case. On such a reading, the following sub-paragraphs are a holistic summary of the position advanced by the appellant in assailing the impugned order:

(a) The impugned order was passed after conducting five personal hearings on 01^st June, 2005, 17^th October, 2006, 03^rd December, 2014, 11^th October, 2017, and 9^th May, 2018. There was a delay of 14 years in the passing of the impugned order and the completion of proceedings. The Appellant has not contributed to delay and sent a letter dated 05^th May, 2015 requesting expeditious disposal. This violates natural justice and vitiates the order. Reliance is placed on decisions reported in 2022 (2) T.M.I. 783 (Bom.), (2019) 366 E.L.T. 994 (Guj.), 2018 (8) G.S.T.L. 361 (Guj.), 2018 (13) G.S.T.L.J. 143, (2021) 376 E.L.T. 403 (Guj.), (2010) 254 E.L.T. 259 (Bom.), (2009) 246 E.L.T. 141 (Del.).

(b) The A.E.P.C. certificate showing the address of 4-5, Shiv Vihar Colony, Palliwalon Ka Bagh, Sanganer issued on 17^th March, 2004 was merely issued afresh on that date. The original certificate dated 25^th August, 1999 (found at page nos.99 and 99A of the Paper Book, Vol. 1) was issued much prior to the investigation and was renewed from time-to-time and issued afresh on 17^th March, 2004. Sales Tax registration certificate dated 16^th August, 1999 as well as factory licence dated 24^th August, 1999 was issued in favour of the appellant with respect to the factory of the Appellant situated at 4-5, Shiv Vihar Colony, Palliwalon Ka Bagh, Sanganer (found at page nos.104 and 105 of the Paper Book, Vol. I). There was no cover-up occasioned by procuring the said certificate after the investigation against had begun. The said address has been acknowledged by the Textiles Committee, Govt. of India, Ministry of Textiles by its registration renewal certificate dated 09^th April, 2001. The Appellant got Customs exemption under the notification dated 01^st March, 2002 on the strength of the A.P.E.C. certificated dated 25^th August, 1999.

(c) The office address of the Appellant is at BoharonKaMohalla, Sanganer, Jaipur whereas the factory address is 4-5, Shiv Vihar Colony, Palliwalon Ka Bagh, Sanganer. The A.E.P.C. certificate contains both addresses. The former address is the correspondence address of the appellant. The factory address was never suppressed. In the letter of the appellant dated 28^th July, 2003, the factory address was disclosed and the stocks of the imported material were stated to be lying there. The material seized by the D.R.I. contains both addresses.

(d) The D.R.I. never visited the factory. The respondent’s holding that they did not need to do so was wrong, since the Panchanama dated 25^th June, 2003 shows that the factory of the appellant at Palliwal Garden, Sanganer was visited. The authorities were fully aware of the factory.

(e) In any event, presence of undisclosed factory does not justify the finding that the imported goods were diverted to Delhi. The Commissioner holding as such and stating that the stock position was manipulated is perverse, arbitrary and unfounded.

(f) The contention that no trucks passed through the Shahjahanpur check post carrying the appellant’s goods is unfounded since the letter dated 09^th March, 2004 of the Addl. Commr., C.T.D., Jaipur does not disclose the numbers of the trucks that were found by the Addl. Commr. to have not crossed the said check point. The letter of the D.R.I. requesting such information was not disclosed despite the written request of the appellant dated 19^th March, 2004 for the same.

(g) Furthermore, the Appellant by a letter dated 27^th January, 2005 had sought verification of the fact that two trucks, bearing Nos.HR 38C 6024 and HR 51 GA 1619, which were carrying the imported material had crossed the Shahjahanpur check post from the Addl. Commr. The Addl. Commr. issued a verification letter in such terms on 29^th January, 2005 (found at page no.461 of the Paper Book, Vol. II), a notarized and translated copy of which was placed before the respondent (found at page no.74 of the Compilation of Precedents and Records dated 23^rd March, 2002). However, the respondent has made no mention of that letter in the order. Cash vouchers dated 26^th April, 2003 confirming payment to the transporters (found at page nos.456-458 of the Paper Book, Vol. I), which had been seized on 25^th June, 2003, were placed before the respondent on 01^st June, 2005 and 17^th October, 2006 under the cover of the appellant’s written notes of argument. But these vouchers found no consideration in the impugned order.

(h) The respondent had failed to consider relevant records, thereby arriving at an erroneous finding that the goods were diverted to Delhi. There was also a violation of natural justice due to non-supply of the letter sent by the D.R.I. to the Addl. Commr. This made the impugned order illegal, invalid and bad ab initio. Reliance was placed on the decisions reported in 2009 (13) S.T.R. 225 (S.C.), (2021) 378 E.L.T. 193 (Tni.-Del.), (2021) 47 G.S.T.L. 20 (Bom.).

(i) The respondent had failed to account for the wastage of lining material and damage to lining material in the manufacturing of exported garments by the Appellant when returning the finding that it was impossible for the weight of the lining material to be greater than or similar to the weight of the finished products.

(j) Condition No.21(e) of the Notification No.21/2002-Cus dated 01^st March, 2002 provides for drawal of sample by a Commissioner of Customs to ascertain the usage of lining material in finished garments. But no such drawal of samples was carried out here by the Appraising Officer or Commissioner at the time of the export of the finished goods by the Appellant. There was no allegation regarding the weight of the material in the show-cause notice. No opportunity was afforded to the Appellant to make submissions in this regard or to respond to the comments of the D.R.I. claiming that the utilization chart was hypothetical. The respondent has lifted his findings in this regard directly from the submissions of the D.R.I. and has travelled outside the scope of the show-cause notice.

(k) The allegation of diversion of goods is a serious one, it cannot be based on presumptions and mere assumptions. Reliance was placed on judgments reported in (2014) 309 E.L.T. 411 (All.) at paragraph 12 and (2019) 367 E.L.T. 916 (Mad.) at paragraph 10.

(l) Statements and documents obtained from witnesses including the statements of Mr. Bihari dated 25^th June, 2003, of Mr. U.S. Pandey, proprietor of Shree Vishnu Freight, dated 1^st July and 23^rd July, 2003, of Sukhdev Singh, proprietor of New Faridabad Road Lines, dated 02^nd September, 2003 would firmly indicate transshipment from Delhi to Jaipur. The letter of U.S. Pandey dated 24^th November, 2003 along with the copies of G.R. Nos.3533 and 3543 dated 25^th April, 2003 for the two trucks, bearing Nos. HR 38C 6024 and HR 51 GA 1619, submitted by him to the D.R.I. prove transshipment from Delhi to the appellant’s factory. The statement of GurpeetSingh, proprietor of M/s. Sunny Transport, which was plying the said two trucks confirms this whilst also confirming payment to Shree Vishnu. Regardless of any contradictions, all documentary evidence and statements point to the factum of transshipment.

(m) There was no finding against the proprietors of the transporting agents for aiding and abetting diversion of the imported goods. But there is nothing to suggest the transporters and the Appellant were priorly in contact. As such, if the very individuals who actually transported the goods are found not to be culpable, then holding the Appellant responsible for the same is impossible.

(n) There is absolutely no proof of the local sale of goods and nothing placed on record to indicate sales in Delhi, thus nullifying the entire story of the diversion of such goods.

(o) With there being no diversion of goods and the proved usage of the same for manufacturing of goods, there has been no contravention of the notification dated 01^st March, 2002. There is no basis for confiscation under Section 111(d) and (o) of the Customs Act. There is no case for recovery under Section 28(8) of the said Act and ground for recovery of interest under Section 28AB and/or for imposition of penalty under Section 114A.

10. The case of the Department, simply put, supports the findings and the impugned order of the Appellant. Counsel for the Department emphasizes the non-recovery of the imported material by the search on 25^th June, 2003 and emphasizes the transport of the goods from Kolkata to Delhi by two trucks, bearing Nos.HR 38E 2545 and HR 38P 2525, with no subsequent transshipment to the factory of the Appellant in Jaipur. The contentions based on the consumption of lining material and remaining stocks were an after-thought strategy.

The documents showing transshipment to Jaipur were found to be false on verification by the D.R.I. The A.E.P.C. registration certificate was issued after the investigation by the D.R.I. had begun and was based on information given after the investigation had begun.

Discussion and Findings

11. Having heard the parties and having perused the record, the following issues fall for consideration and decision:

I. Whether there was an inordinate delay in completion of proceedings by the respondent and the passing of the impugned order.

II. Whether there actually was a transshipment of the imported material to the Appellant’s factory in Jaipur.

III. Whether the Appellant had received the imported material and utilized the same for manufacturing export goods. Alternatively, whether there was diversion of the imported goods.

IV. Whether the Appellant had disclosed the second factory to the D.R.I. where it claimed to have received the imported material and whether the A.P.E.C. registration certificate in respect of the second factory was issued after the initiation of the investigation by the D.R.I.

V. Whether the impugned order deserves to be set aside.

Issue I

12. In regards the first issue, it is found that show-cause notice was issued on 09^th November, 2004 and the reply was submitted on 21^st March, 2005. Five personal hearings were conducted on 01^st June, 2005, 17^th October, 2006, 03^rd December, 2014, 11^th October, 2017 and 09^th May, 2018. The impugned order was issued on 29^th June, 2018. The total proceeding as contended on behalf of the Appellant, indeed, took 14 long years to reach finality. The Appellant reminded the respondent on 05^th May, 2015 that written arguments had been submitted, the Appellant had been heard and that an order was awaited and requested. The respondent has acknowledged in paragraph 50 of the impugned order that there were multiple hearings, but there is no explanation for the delay of 14 years. There is nothing on record to attribute the delay to the Appellant, no defence or explanation has been given to this Tribunal for the delay by the Department.

13. Inordinate delay in taking the proceedings relating to a show-cause notice to its final conclusion has been held by the Bombay High Court in The Bombay Dyeing & Manufacturing Co. Ltd. v. D.C., C.G.S.T. & C.X., Mum., 2022 (2) TMI 783 at paragraph 9 to be violative of natural justice. Further, the Gujarat High Court in Sunrise Remedies Pvt. Ltd. v. U.o.I, (2019) 366 E.L.T. 994 (Guj.) has remarked at paragraph 6 that proceedings cannot be a hanging sword on an assessee without justifiable cause. If proceedings do not culminate within a reasonable period of time then they stand vitiated. Following these decisions, the answer to issue I should conclusively answer issue V and suffice for the admission of this appeal. The delay of over a decade here, especially when genuine efforts have been made by the Appellant to participate in them, truly violates the Appellant’s right to natural justice and vitiates the entire proceeding. However, for the sake of completeness, the matter cannot, of course, be left there.

Issue II

14. The Appellant would contend that the letter of the Additional Commissioner, C.T.D., Jaipur to the D.R.I. dated 09^th March, 2004 which is purported by the Department to show that no trucks crossed the check point at Shajahanpur makes no reference to the truck Nos. The Tribunal is persuaded by this contention on a perusal of the said letter which forms part of the record. Moreover, the letter which requested verification from the said Addl. Commr. has not been made a part of the R.U.D.s accompanying the show-cause notice. It was not supplied to the Appellant despite a request dated 19^th March, 2005 for the same. Hence, the said letter cannot be treated as dispositive proof of the fact that there was no transshipment of the imported material from Delhi to Jaipur.

15. On the other hand, as contended by the Appellant and as borne out by the record, a certificate was issued by the said Addl. Commr. on 29^th January, 2005 which verified the fact that two trucks, bearing Nos. HR 38C 6024 and HR 51 GA 1619, under G.R. Nos.3533 and 3543 dated 25^th April, 2003, had crossed the Shahjahanpur check post on 29^th April, 2003. Thus, there is satisfactory proof of the goods being transshipped. Moreover, other documentary proof submitted by U.S. Pandey, the proprietor of M/s. Vishnu Freight, under the cover of his letter dated 24^th November, 2003 to the D.R.I. which includes G.R. Nos.3533 and 3543 both dated 25^th April, 2003 which has been rubber stamped by the C.T.D., Rajasthan also evidences the transportation of the goods to Jaipur. Furthermore, under the cover of the same letter, U.S. Pandey had submitted receipts in respect of the goods issued by the Appellant; the Appellant also produced the cash vouchers dated 26^thApril, 2003 confirming payment to the transporters before the respondent on 1st June, 2005 and 17^th October, 2006. The Department has not been able to advance any counter to the implications of thesedocuments except the refrain of these documents being fake and forged. The respondent has not dealt with these documents at all. Finally, the statements of U.S. Pandey, of Gurpreet Singh, the proprietor of M/s. Sunny Transport, which are to the effect that trucks, bearing Nos.HR 38C 6024 and HR 51 GA 1619, have transported the imported goods from Delhi to Jaipur have not been contradicted by the Department with any level of sufficiency. Even if there are contradictions between the statements of the Appellant’s partner Mr. Bihari on 25^th June, 2003 and, later, on 16^thMarch, 2004, the story of the transportation of the goods from Delhi to Jaipur is consistent. There is simply nothing in the record or in the contentions advanced on behalf of the Department which would give sufficient reason for this Tribunal to disbelieve the evidence of the said persons.

Issue III

16. The discussion and conclusion arrived at in regards the previous issue should be a sufficient indicator of the finding of this Tribunal in regards this issue. The utilization chart submitted by the appellant before the respondent during the investigation and the chart submitted along with the letter of Mr. Bihari on 28^th July, 2003, both of which show the closing stocks of the imported material in respect of various periods, has been deemed to be insufficient evidence on flimsy grounds.

17. Firstly, no opportunity was given to the Appellant to answer the allegation of the D.R.I. that the entries in the utilization chart had no bearing in reality.

18. Secondly, it is entirely likely and quite believable that the in the 11 entries of the chart submitted by the Appellant, the total weight of the lining material shown to be consumed is much greater than the weight of the exported goods. It is also far from shocking or unusual that in eight entries of the chart, the total weight of the lining material shown to be consumed is only just lower than the total weight of the exported goods. As submitted by the appellant, there is substantial wastage of lining material in the manufacturing of garments. Also, lining material can get damaged in the process of cutting and stitching. Moreover, the condition No.21(e) of the notification that is alleged to have been violated by the appellant allows drawal of sample by the Commissioner to check the usage of lining material. However, exports have been carried out here without any objection whatsoever by the Appraising Officer or the Commr. of Customs.

19. The allegation that goods were diverted and did not reach the factory of the appellant is simply not made out here. There is no evidence whatsoever positively indicating diversion of the imported goods to Delhi. There is no evidence of where these allegedly diverted goods were sold locally. On the contrary, it is a finding of this tribunal that goods did arrive at the factory of the appellant and were utilized by him. The certificate issued by the Addl. Commr. dated 27^th January, 2005 would indicate firmly that goods were transshipped to Jaipur and received at the factory of the appellant and so would the vouchers dated 26^th April, 2003 when combined with all other evidence referred to in paragraph 16 herein.

20. In view of all these, there are mere assumptions and presumptions based on little to no evidence to buttress the allegation that the goods were diverted. This is simply not enough for the Tribunal to hold as such, following the decision of the Allahabad High Court in Continental Cement Co. v. U.o.I., (2014) 309 E.L.T. 411 at paragraph 12 and Honeywell Electrical Devices & Systems India Ltd. v. C.E.S.T.A.T., Chennai, (2019) 367 E.L.T. 916 (Mad.) at paragraph 10.

21. The A.P.E.C. certificate it is found was issued much prior to the date on which the investigation began as found from a perusal of the A.P.E.C. certificate dated 25^th August, 1999. The said certificate was renewed from time-to-time and issued afresh on 17^th March, 2004. Sales Tax registration certificate dated 16^th August, 1999 as well as factory licence dated 24^th August, 1999 was issued in favour of the appellant with respect to the factory of the appellant situated at 4-5, Shiv Vihar Colony, Palliwalon Ka Bagh, Sanganer In fact, the said address has been acknowledged by the Textiles Committee, Govt. of India, Ministry of Textiles by its registration renewal certificate dated 09^th April, 2001. The appellant got Customs exemption under the notification dated 01^st March, 2002 on the strength of the A.P.E.C. certificated dated 25^th August, 1999.

Issue IV

22. It would seem that there should be no doubt that the substance of the charge against the appellant is a building without a plinth. But, of course, it is not an insignificant question as to whether the address of the appellant’s factory where they claimed to have received the imported goods was suppressed or not. It is the view of this Tribunal that there was no suppression of this fact. First of all, the supposed ‘original sin’ of the appellant’s Mr. Bihari asserting that all of the stock of the imported material had been consumed in his statement dated 25^th June, 2003 is insufficient to persuade us that the existence of the other factory was suppressed. In the Panchanama of 25^th June, 2003, it is found that a search was carried out in and a sample was drawn from the factory of the appellant at Palliwal Garden Sanganer, Jaipur. Since the location of the factory is said to be PalliwalonkaBagh and not BoharonkaMohalla, Sanganer, the office address of the appellant, it is clear that D.R.I. had notice of the factory.

23. Secondly, the assertion that the A.P.E.C. certificate, where the address of the factory is stated to be 4-5, Shiv Vihar Colony, Palliwalon ka Bagh, Sanganer, was a contrived document is not borne out by the record. The certificate issued on 17^th March, 2004 was not the first certificate, nor was it procured after the investigation had begun. The factory address of the appellant had been incorporated in the A.E.P.C. certificate on 25^th August, 1999. The certificate of that was merely renewed from time-to-time and issued afresh on 17^th March, 2004. Hence, there was no attempt by the appellant to make the D.R.I. miss the wood for the trees and ‘invent’ a new factory belatedly. In fact, material seized by the D.R.I. under the Panchanama dated 25^th June, 2003 shows that the said factory at the said address was visited. Material seized on that date also contained both the office address and the factory address of the Appellant.

Issue V

24. Thus, with all other issues answered in favour of the Appellant and with the reasons given above, the appeal is allowed with consequential relief. The impugned order is set aside

(Order pronounced in the open court on 05 August 2022.)