Siddhnath Shipping Vs C C Kandla (CESTAT Ahmedabad)
Duty demand in clandestine clearance unsustainable as no physical movement/ diversion was established
Introduction: In the case of Siddhnath Shipping Vs C C Kandla, the CESTAT Ahmedabad addressed a duty demand issue related to clandestine clearance. The tribunal held that if there is no established physical movement or diversion of goods and the demand is based solely on documents, it cannot be sustained. Duty demands without conclusive evidence are not sustainable.
Analysis: Shri Shailesh B. Bhagat, the proprietor of M/s Siddhnath Shipping, filed a Shipping Bill on behalf of exporter M/s Siddhnath Shipping for the shipment of fancy scarves and fancy dupattas. However, upon examination, it was found that the goods were of inferior quality and the net weight was significantly lower than declared. A show cause notice was issued, demanding customs duty, proposing confiscation of the goods, and imposing penalties.
The case went through multiple appeals and remand proceedings. In the denovo adjudication, the original authority confirmed the customs duty demand, along with interest, and imposed penalties. The appellants approached the CESTAT, challenging the order.
The CESTAT concluded that the demand against the appellant was not based on evidence. Without conclusive evidence of clandestine clearance without payment of duty, liability cannot be imposed based on conjectures and surmises. The demand, which was reliant on assumptions and presumptions, was deemed unsustainable.
The tribunal further emphasized that the entire case was based on documents, and no physical movement or diversion could be established. Therefore, the customs duty demand and subsequent confiscation of goods were deemed incorrect and illegal.
Conclusion: The CESTAT Ahmedabad’s ruling highlights the importance of conclusive evidence in duty demand cases related to clandestine clearance. In this specific case, where no physical movement or diversion could be established, the demand based on assumptions and presumptions was deemed unsustainable. The decision reinforces the requirement for solid evidence before imposing liabilities on parties involved in customs clearance, ensuring fairness and justice in such matters.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
Both the appeals have been filed against Order-in-Original No. KDL/COMM2012-13 dated 28.08.2012 which is a denovo adjudication order passed by the Commissioner of Customs, Kandla.
02. Brief facts are that Shri Shailesh B. Bhagat, Proprietor of M/s Siddhnath Shipping who was also working as Power of Attorney holder of CHA in the name of M/s Shakti Enterprises, Customs House Agents, Gandhidham, had filed the Shipping Bill on behalf of exporter M/s Siddhnath Shipping, KASEZ, Gandhidham. The goods were declared and described as “Fancy Scarves Made from Polyester Knitted Fabrics and Fancy Dupattas made from 100% Polyester Filament Yarn” with declared value of US $1.00 and $1.6 per piece respectively in the Shipping Bill and invoice. The net weight of the cargo declared was 19002 Kgs. The consignment was consigned to M/s Saif Abu Al Maleh Trading, UAE. However on examination, the goods were found to be inferior quality and the net weight was only 1450 Kgs,, as against the declared net weight of 19002 Kgs, Thus it appeared to be a case of gross mis-declaration of the description as well as weight of the consignment. Further, investigation revealed that in fact M/s. Siddhnath Shipping received a consignment of goods containing Fancy Scarves (made from Polyester Knitted Fabrics) / Fancy Dupattas (made from 100% Polyester Filament Yarn) from M/s Cosmic Textiles Pvt. Ltd., 100% EOU, Jolwa, Surat under Cover of AR-3A all dated 21.01.2002. with corresponding excise invoices all dated 21.01.2002 describing goods as Fancy Dupattas (made from 100%PFY) and Fancy Scarves (made from Dyed Poly Knitted Fabrics). As per the documents, the subject consignment originating from the 100% EOU premises of M/s. Cosmic Textiles Pvt. Ltd. had been sent in full as per the details of AR-3As in the Kandla Special Economic Zone, which had been certified by the Preventive Officer of the Kandla SEZ. However this consignment was not available in the said premises, which suggested that the consignment covered by the AR-3As had been duly received by the trading unit of M/s Siddhnath Shipping and was clandestinely removed by them from their trading unit in the Kandla SEZ. Further, M/s Siddhnath Shipping had made a false declaration in the self – declared AR-4 dated 22.01.2022 and Shipping Bill to correspond with the description and weight of the goods covered by the above AR-3As, whereas on examination, the goods were found to be quite different and not in conformity with the goods re-warehoused as per the certificate of Superintendent (P&I), KASEZ. Hence it appeared that M/s Siddhnath Shipping, in collusion with M/s Cosmetic Textiles Pvt. Ltd. appeared to have willfully and consciously mis-utilized the facility by clandestinely diverting/ removing the final products viz. Fancy Scarves/ Fancy Dupatta and Committed offences under Section 111(d) and 111(j) of the Customs Act, 1962 is so far as removal of 19002 Kgs, disputed goods involving Custom duty of Rs. 57,24,210/- is concerned. Accordingly a show cause notice was issued demanding customs duty and proposing confiscation of the goods and penalties on the Appellants. The show cause notice was adjudicated vide Order-In-Original dated 29.09.2005 wherein Learned Commissioner confirmed customs duty, confiscated 1450 Kgs. of inferior quality goods attempted to be exported and imposed redemption fine in lieu thereof and imposed penalties on Appellants under Section 114(ii) ibid. The said order passed by the Commissioner was challenged before the Tribunal and vide Order dated 19-01-2016 the matter was remanded by the Tribunal to the adjudicating authority for re-adjudication with certain directions. The Commissioner of Customs, Customs House, Kandla vide Order-In-Original dated 27.09.2010 re-adjudicated the matter wherein he confirmed the duty demand and imposed the penalties on Appellants. Thereafter, being aggrieved with the OIO dated 27.09.2010 appellants again filed appeals before the CESTAT and CESTAT vide its order dated 21.12.2011 once again remanded the case to the original adjudicating authority to reconsider the issue after observing the principles of natural justice. In the denovo adjudication, the original authorityvide impugned order again confirmed customs duty demand along with interest and imposed penalties. Aggrieved by such impugned order, the appellants are now before this Tribunal.
03. Shri Devashish Trivedi, learned counsel appeared and argued on behalf of the appellants. He submits that Learned Commissioner wrongly held that Appellant had clandestinely removed the goods from the KASEZ after receipts of the same from M/s Cosmic. The unit was under physical control of the customs and other zonal /security agencies and the allegation of clandestine removal was merely based on assumption and presumption. Learned Commissioner failed to appreciate that the Appellant had in fact entered for export of the same goods which were received by them from M/s Cosmic within about 2.00 hours after the receipts of the same. These facts can be verified from the vehicle register of KASEZ. It is clearly established that same goods, and in the same packaging, having same marks and number, which were received from M/s Cosmic were loaded into the container and there was no clandestine removal or diversion. The Learned Commissioner failed to appreciate that the department has not brought on record the crucial evidence of the drivers of the trucks who have transported the goods from Surat to KASEZ. The statements of drivers Shri Madanlal Sharam and Shri Khimji Vishrambhai Charan which were recorded by the CBI who have confirmed that the goods brought by them were directly transferred into the container. The Learned Commissioner, though relied upon various other evidences collected by CBI, such as, Handwriting Expert’s Opinion but failed to take cognizance of crucial evidences confirming that there is no clandestine removal but in fact the same goods which were received from M/s Cosmic were entered for export. The Learned Commissioner also failed to take into consideration the evidence of Smt. Damini Lakhiya, Preventive Officer who had inspected the goods and also supervised unloading of the goods from trucks and stuffing of the same directly into the containers. The said preventive officer was present right from the time of reaching of the Trucks, unloading of the goods and stuffing of the same into the container. The Learned Commissioner passed the order without considering the evidence of the officer and mechanically held that the goods which were received by the appellant were clandestinely removed. In fact the statement of the officer recorded by the CBI confirms these facts that there was no clandestine removal. There is no seizure and investigation by the SIIB, Customs House, Kandla in respect of goods which were alleged to have removed clandestinely. The impugned order is totally contradictory to the documentary evidence, and thus the same is required to be set aside.
3.1 He also submits that Learned Commissioner ought to have appreciated that the CBI Charge Sheet supported with the documentary evidences and the statements of the drivers are clear evidence and the said statements of the drivers have categorically established that the goods were clandestinely changed by M/s Cosmic at the originating station itself and the goods which were received in the KASEZ and exported were goods which were loaded at Ambaji Market Surat and these findings are available at page 7 of the CBI charge sheet, and thus the Learned Commissioner’s finding that there is no indication in the CBI charge Sheet regarding the change of the goods by M/s Cosmic are totally erroneous. The SIIB has failed to conduct proper investigation in the present matter and they have not made any efforts to find out whether the goods were actually clandestinely removed, whether or not the goods were diverted or not? The SIIB has also ignored the facts that the goods were not actually diverted or clandestinely removed but the same goods were entered for export and thus any violation or evasion, if any, it was on the part of M/s Cosmic and Shri Natwar Malpani. The investigation conducted by the CBI has in fact confirmed that there was no clandestine removal as alleged in the show cause notice.
3.2 He argued that it has been confirmed by the investigation carried out by the CBI that in fact M/s Cosmic had not dispatched the goods from the 100% EOU of Cosmic, and Shri Malpani/Kulwant of M/s Cosmic had resorted to manipulations of weigh bridge slips and other documents to cover up their deeds. Learned Commissioner failed to appreciate that the mis-declaration of quantity, value and other particulars were resorted by M/s Cosmic / Shri Natwar Malpani in the Excise Invoices and their AR-3As so as to fulfill their export obligations and/or to evade duty without the knowledge of the appellant. The Learned Commissioner also failed to appreciate that M/s Cosmic was the beneficiary of exports. The goods were removed by M/s Cosmic from the 100% EOU against the Excise Invoices without payment of duty and they have not submitted any re-warehousing certificate in the division as is evident from the statement of Shri Malpani and thus M/s Cosmic were only liable to pay the duties/fine/ penalties in respects of the goods which were removed by them. In this regard the Learned Commissioner should have appreciated that the bank account at Surat was opened at the instance of M/s. Cosmic who were handling all operations relating to export right from procurement of export orders, supply of goods and receipts of remittances and thus nothing adverse can be viewed against the appellant merely because the bank account was opened at Surat and blank cheques were given to M/s Cosmic. Thus confirmation of the demand of duty from the appellant is totally illegal and erroneous and the same is require to be set aside.
3.3 He also submits that it is settled law that if the department alleges clandestine removal of goods then enquiry/ investigation must be conducted at the end of buyers of said clandestinely cleared goods, transporters, angadias, etc., No inquiry is conducted at the end of buyers or transporters. No positive evidence is found out by the officers during the investigation in regard to the alleged clandestine sales of goods from the premises of the Appellant. There is absolutely not tenable evidence found to indicate any clandestine clearance/ diversion of fancy scarves and dupattas from the premises of Appellant (KASEZ Unit). He placed reliance on the following decisions:-
