Case Law Details
Commissioner of Customs Vs Ultracon Structural Systems Pvt Ltd (CESTAT Chennai)
Introduction: This case involves two appeals arising from the same order passed by the Commissioner (Appeals) concerning the demand of customs duty on wrongly availing a concessional rate of duty. The parties involved are referred to as the ‘assessee’ and ‘department’ for convenience.
Summary of Facts: The assessee filed two Bills of Entry in April 2008 for the clearance of goods, declaring them as ‘Non Alloy Steel Wire Rod’ imported from China. The importer claimed a concessional rate of duty under Customs Notification No. 21/2002. However, on examination, it was found that the goods were misdeclared as “Non Alloy Steel Wire Rod” to claim the concessional rate, whereas they were actually “Steel 7 ply Wire” classifiable under a different category and not eligible for the concessional rate. The department discovered that the assessee had previously cleared five Bills of Entry using the same modus operandi.
The matter was adjudicated, and the original authority passed an order confirming the duty demand and imposing penalties. The assessee appealed before the Tribunal, which set aside the duty demand for past consignments, directing the department to refund the duty. However, the Tribunal remanded the case to the adjudicating authority, stating that the waiver of show cause notice was only for the two live Bills of Entry and not for past consignments, and the department should issue an SCN for the differential duty on past consignments.
The department issued the SCN on 06.11.2009, proposing to classify the goods differently and demand differential duty on past consignments. After due process, the original authority confirmed the differential duty demand on past consignments, and the assessee appealed to the Commissioner (Appeals).
Analysis: The Commissioner (Appeals) modified the original authority’s order, confirming only the duty demand and setting aside the penalties. The Commissioner held that there were no grounds to invoke the extended period for issuance of SCN and that the goods were not liable for confiscation under Section 111(m) of the Customs Act, 1962. Consequently, no penalty was imposed.
The department filed an appeal challenging the Commissioner’s decision to set aside the penalty and not impose confiscation. On the other hand, the assessee filed an appeal against the confirmation of duty demand and interest.
The department argued that the SCN was issued within the limitation period based on the direction of the Tribunal in its earlier order. They claimed that the date of passing the Tribunal’s final order should be the relevant date for computing the limitation period.
The assessee contended that the SCN issued after the appeal stage was not sustainable and violated principles of natural justice. They argued that the issuance of SCN after the appellate stage was not provided for in the Customs Act and should not be considered valid.
Conclusion: The CESTAT Chennai allowed the assessee’s appeal, stating that the demand of duty with interest was time-barred and could not be sustained. The Tribunal held that the SCN issued after the appeal stage lacked validity and that the demand of duty and interest was not justified. The department’s appeal was dismissed.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Both the above appeals arise out of the same impugned order passed by the Commissioner (Appeals) who though confirmed the duty demand, however set aside the order of confiscation of goods and the penalties imposed. The parties herein are referred to as the ‘assessee’ and ‘department’ for the sake of convenience.
2. Brief facts are that the assssee filed Bill of Entry dated 07.04.2008 and 15.04.2008 seeking clearance of goods by declaring it as ‘Non Alloy Steel Wire Rod’. The goods were imported from M/s.Silvery Dragon PC Steel Products Group Co. Ltd., China and M/s.Wire and Wire Products, Malaysia respectively. The country of origin of both the goods was declared as China. The importer-assessee adopted the classification under CTH 72139990 and claimed concessional rate of duty under Customs Notification No. 21/2002.. On examination of the goods, it was found that the goods imported were misdeclared in order to claim the notification benefit and the goods actually were found to be “Steel 7 ply Wire” which are classifiable under CTH 73121090 and are not eligible for concessional rate of duty under Notification No. 21/2002.. It came to be noticed that, apart from the two live Bills of Entry, the assessee had earlier cleared 5 Bills of Entry with the same modus operandi by misdeclaring the goods as “Non Alloy Steel Wire Rod” as against the actual goods, “Steel 7 ply Wire”. As the description of the goods were found to be misdeclared, the matter was taken up for adjudication. The assessee vide their letter dt. 30.04.2008 waived the requirement of SCN but requested for personal hearing which was granted. The matter was adjudicated and the original authority passed order dt. 09.05.2008 which confirmed duty demand and penalties in regard to live Bills of Entry as well as the past consignments. Against such order, the assessee filed appeal before the Tribunal and vide Final Order No.1058/2008 dated 25.09.2008, the duty demand in respect of past consignments was set aside by the Tribunal and the department was directed to refund the duty amount barring the duty paid against the goods covered under two Bills of Entry dt. 07.4.2018 & 15.4.2018. The Tribunal however, remanded the matter to the adjudicating authority with the observation that the waiver of show cause notice sought by the party was only for the two live Bills of Entry and not for the past consignments. It was stated therein that it was incumbent upon the department to issue show cause notice in regard to demand of differential duty for the past consignments covered by 5 Bills of Entry.
3. Accordingly, show cause notice dt. 06.11.2009 was issued to the assessee proposing to classify the goods under CTH 73121090 as well as to demand differential duty on the past consignments vide five Bills of Entry. After due process of law, the original authority vide order dt. 26.10.2010 determined the classification of goods as CTH 73129090 and confirmed the differential duty of Rs.13,30,375/- along with interest and imposed penalty under Section 114A of the Customs Act, 1962 for the acts of omission and commission which rendered the goods liable for confiscation. It was observed by the adjudicating authority that since the goods are not physically available for confiscation, the same are not confiscated under Section 111 (m) of the Customs Act, 1962.
4. Against such order dt. 26.10.2010, an appeal was filed by the assessee before the Commissioner (Appeals). The order passed by the adjudicating authority was modified by the Commissioner (Appeals) to the extent of confirming only the duty demand and set aside the penalty imposed. It was held by the Commissioner (Appeals) that there are no grounds to invoke the larger period and that the goods are not liable to be confiscated under Section 111 (m) of the Act ibid and hence no penalty imposable. Aggrieved by the confirmation of duty demand along with interest, the assessee has filed Appeal C/41937/2013. The department has filed Appeal No.C/41927/2013 aggrieved by the order of holding that the goods are not liable for confiscation and also setting aside penalty.
5. Ld. A.R Sri Rudra Pratap Singh appeared and argued for the Department. It is submitted by him that the present appeal relates only to the 5 Bills of Entry which are relating to the past consignments. Ld. A.R adverted to paras 6 & 7 of the impugned order and submitted that the department had issued a show cause notice dt. 06.11.2009 pursuant to the remand order of the Tribunal. The Commissioner (Appeals) has observed that there are no grounds for invoking the extended period and therefore the goods cannot be confiscated under Section 111 (m). It is argued by the Ld. AR that when the SCN has been issued as per the direction of the final order of the Tribunal the relevant date for computing the period of limitation (six months) for issuance of the SCN would be the date of passing of the final order by CESTAT which is 25.09.2008. The SCN issued on 06.11.2009 would then be within time. It is also argued that the observation made by the Commissioner (Appeals) that there are no grounds in the nature of willful misstatement or suppression of facts with an intent to evade payment of duty on the part of the respondent is erroneous as the goods have been misdeclared. Ld. A.R argued that the SCN has been issued as per the orders of the Tribunal. The earlier error, if any, of not issuing SCN and not complying with the principles of natural justice has been rectified. It is submitted that the Commissioner (Appeals) ought to have held that the goods are liable for confiscation and also upheld the penalties imposed. Ld. A.R prayed that the Department appeal may be allowed and assessee appeal may be dismissed.
6. Ld. Consultant Sri V. Shankara Narayanan appeared and argued for the assessee. It is submitted by the Ld. Consultant that the present dispute is only with regard to confirmation of duty demand along with interest in respect of 5 Bills of Entry relating to past consignments. The respondent in earlier round of litigation had waived the requirement of SCN only in respect of 2 live Bills of Entry. This was noted by the Tribunal in its’ Final Order dt. 25.09.2008 and ordered for refund of differential duty collected in respect of past consignments (5 Bills of Entry). The Tribunal in Final Order No.1058/2008 dt. 25.09.2008 had categorically held that there is violation of principles of natural justice as the SCN was not issued to the appellant. It is argued by the Ld. Consultant that the issuance of the SCN subsequent to the final order is not sustainable as there is no provision for issuing a SCN after consideration of the appeal. The demand confirmed after issuance of such SCN cannot be justified in any manner. It is prayed that the assessee’s appeal may be allowed and Department appeal may be dismissed.
7. Heard both sides.
8. The appeal before us poses an interesting situation wherein the SCN in respect of past consignments have been issued after the appellate stage of the litigation. In the Final Order dt. 25.09.2008 passed by the Tribunal in the earlier round of litigation it has been categorically held by the Tribunal that department ought to have issued a SCN to the assessee before proceeding against the assessee for recovery of differential duty in respect of past consignments. Relevant para of the Tribunal order reads as under :
“6…. In respect of the imports made in April, 2008, the importer had waived show-cause notice vide their letter dated 30.04.2008. That letter, however, requested for an opportunity of personal hearing. In respect of the earlier imports, obviously, there was no waiver of show-cause notice and, therefore, it is incumbent on the department to issue a show-cause notice to the party if they want to proceed against them for recovery of differential duty and other allied purposes. Needless to say that the party should get effective opportunity of replying to such notice as also of being personally heard. In order to enable the Commissioner to afford these opportunities to the party in keeping with the principles of natural justice, we set aside his order and allow this appeal by way of remand. As the impugned proceedings have been found to be, ex facie, illegal the appellants are entitled to refund of the amount illegally collected from them. Therefore, it is directed that the amounts collected from the appellants, barring the amount of duty paid on the goods covered by the bills of entry dated 07.04.2008 and 15.04.2008, be refunded to the party at the earliest at any rate within 10 days from the date of receipt of a certified copy of this order.”
9. From the above discussion of the Tribunal, it can be seen that the department is directed to refund the duty collected from the assessee in respect of past consignments as the same has been collected illegally without issuing a SCN. However, it appears that Tribunal has also remanded the matter in order to enable the Commissioner to afford opportunities to the parties to keep up with the principles of natural justice. We have to say that there is no explicit or express direction to issue a SCN. The department has issued the SCN, by interpreting the remand as a direction to issue SCN. In our view, the genesis of a litigation is the issuance of show cause notice. The intention of such show cause notice is to inform the party about the allegations and also to give opportunity to the party to put forward any defence with regard to the allegations. The said requirement is the basic principle of natural justice. There is no provision in the Customs Act, 1962 which enables the Tribunal to direct the department to issue show cause notice to a party. A litigation has to move forward from the stage of adjudication to a higher forum and cannot certainly be considered to move in a reverse gear giving a jump start. We are unable to uphold a demand confirmed as per the SCN which has been issued subsequently after an appeal. Further, it is alleged in the SCN that the assessee has suppressed though not specifically alleged that the larger period is invoked. The imports have taken place (dt. of B/E 04.10.2007, 22.11.2007, 21.01.2008, 26.03.2008) in 2007, 2008. The earlier order of adjudication was passed on 09.05.2008. After the appeal before the Tribunal, the department cannot invoke the extended period alleging that assessee has suppressed facts with intention to evade payment of duty. The Commissioner (Appeals) has rightly held that there are no grounds for invoking extended period. Further, it is the case of department that description of the goods in invoice is ‘Steel 7 Ply Wire’ and assessee has misdeclared in the Bill of Entry as ‘Non Alloy Steel Wire’ for wrongly availing the concessional rate of duty. But the department has failed to produce the invoices relied by them to allege misdeclaration of goods. The goods are not also not available. The SCN is apparently time barred. Ld. A.R has put forward a plea that the date of passing of the Final Order by the Tribunal should be reckoned as the relevant date for computing the period of limitation in issuing the SCN. We are afraid that such argument cannot be accepted as it would result in a chaos and put all litigations in a situation of suspended animation taking away the finality to litigations.
10. Before parting with the order, we make it clear that we have not discussed the merits of the classification of goods.
11. From the foregoing, we hold that the demand of duty with interest is time barred and cannot sustain. The appeal filed by the assesee is allowed with consequential relief, if any. We find no merits in the appeal filed by the Department. The same is dismissed.
(Pronounced in court on 18.07.2023)
