Axiom Cordages Ltd. Vs Commissioner of Customs, Nhava Sheva-II (CESTAT Mumbai)
Summary: The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, in Axiom Cordages Ltd. Vs Commissioner of Customs, Nhava Sheva-II, set aside a customs adjudication order that had retrospectively changed the classification of exported ropes from tariff heading 56079090 to 56074900, resulting in recovery of ₹9,05,55,139 under Section 28AAA of the Customs Act, 1962, together with interest and a penalty of ₹1 crore. The Bench comprising Judicial Member S.K. Mohanty and Technical Member P. Anjani Kumar held that the Department had not challenged the original shipping-bill assessments through the statutory review and appellate procedure. Consequently, the completed assessments could not be reopened indirectly through subsequent show-cause proceedings. The Tribunal also found that collusion, wilful misstatement or suppression of facts—the statutory conditions material to the proposed recovery under Section 28AAA—had not been established. However, it separately remanded the dispute concerning confiscation and redemption fine for two shipping bills, directing the original authority to permit cross-examination of the chemical examiner and to reconsider the evidence in accordance with natural justice.
The appellant manufactured and exported different varieties of rope between April 2015 and December 2017. It declared the exports under RITC 56079090 and received scrips under the Merchandise Exports from India Scheme (MEIS). The Department alleged that polypropylene and polypropylene-polyester commercial ropes were properly classifiable under RITC 56074900, attracting a lower MEIS incentive than the 5% benefit claimed under RITC 56079090. It relied additionally on a laboratory report relating to Shipping Bill Nos. 7289261 and 7289281, both dated 12 July 2017. By Order-in-Original dated 20 November 2018, the Commissioner changed the classification, denied MEIS benefits for the period before September 2016, restricted subsequent benefits to 2%, ordered recovery of duty allegedly attributable to the scrips and imposed the penalty. The two identified consignments, valued at ₹48,80,681, were ordered confiscated with an option for redemption on payment of a fine of ₹2.5 lakh.
The exporter argued that the shipping bills had already been assessed and the proper officer had issued Let Export Orders under Section 51 of the Customs Act after receiving all relevant export particulars. According to the appellant, if the Department considered those assessments incorrect, the proper course was to initiate review under Section 129D(2) and pursue an appeal under Section 128. Since no such review or appeal was initiated, the export assessments attained finality. The appellant further argued that there was no evidence of fraudulent procurement of MEIS scrips and that the adjudicating authority itself had dropped the proposed penalties against its director and chief executive officer for want of sufficient evidence.
CESTAT accepted the preliminary legal objection even though it had not been specifically adjudicated at the original stage. The Tribunal considered the issue a substantial question of law directly affecting the validity of the duty demand and relied on Rule 10 of the CESTAT (Procedure) Rules, 1982 and the Supreme Court ruling in Assistant Collector of Central Excise Vs Ramdev Tobacco Company. It examined the review mechanism contained in Section 129D and found no evidence that the Commissioner had directed an appeal against the assessed shipping bills. Applying the principle recognised in Collector of Central Excise, Kanpur Vs Flock (India) Pvt. Ltd., the Tribunal held that an appealable assessment which is not challenged through the statutory mechanism cannot ordinarily be reopened collaterally. It also referred to Shabina Abraham Vs Collector of Central Excise and Customs, Collector of Estate Duty Vs M.A. Merchant and CIT Vs Vatika Township Private Limited concerning statutory authority, finality and limitations on reassessment.
On the proposed recovery under Section 28AAA, the Tribunal observed that there was no communication from the competent DGFT authority establishing that the export incentive instruments had been obtained by collusion, wilful misstatement or suppression of facts. Nor was there material demonstrating that the licensing authority had initiated proceedings alleging fraudulent procurement of the scrips. The Tribunal emphasised the institutional distinction between administration of MEIS benefits under the Foreign Trade Policy and the functions of the Customs authorities. It relied on Titan Medical Systems Pvt. Ltd. Vs Collector of Customs, which recognised the significance of action by the competent licensing authority before Customs could deny benefits on allegations of misrepresentation. It further applied the principle stated in Union of India Vs Ashok Kumar that serious allegations of mala fides demand credible proof.
The Tribunal also examined the findings concerning the appellant’s officers. The Commissioner had dropped the proposed individual penalties against the director and CEO because the evidence was considered insufficient. The Tribunal observed that an incorporated company acts through natural persons and criticised the attempt to impose liability upon the company on allegations of collusion or suppression without adequately establishing the underlying conduct. On the particular record before it, the Tribunal held that the conditions for invoking Section 28AAA had not been demonstrated. The ruling therefore turned on both the finality of the original assessments and the evidentiary deficiencies in the recovery proceedings.
The confiscation issue was treated separately. The Department had relied on a report dated 2 November 2017 suggesting that polypropylene was the principal ingredient in the two consignments covered by Shipping Bill Nos. 7289261 and 7289281. The appellant contested the report, relied on the presence of polypropylene, polyethylene, polyester and colour pigments, and sought consideration of a CIPET Hyderabad composition report. It also questioned the appropriate method for determining composition and requested cross-examination of the chemical examiner. CESTAT found that the original authority had failed to deal adequately with these objections, the alternative expert evidence and a communication dated 28 December 2017 suggesting classification under heading 56079090. The failure to consider the requested cross-examination and to give adequate reasons violated the principles of natural justice.
Accordingly, the Tribunal set aside the impugned order insofar as it changed the classification of exported goods and confirmed consequential duty, interest and penalty. The confiscation and redemption-fine portion was also set aside, but **that issue was remanded for fresh adjudication**, with an express direction to permit cross-examination of the chemical examiner and afford a reasonable opportunity of hearing. The decision is important for exporters facing retrospective challenges to already assessed shipping bills and demands involving MEIS scrips. It also highlights that customs classification, export incentive administration, allegations of fraud and the right to test scientific evidence must each be examined under the appropriate statutory framework rather than treated as interchangeable issues.
Cases Discussed
1. Collector of Estate Duty, Gujarat Vs M.A. Merchant (Supreme Court); 1989 Supp (1) SCC 499 — Relied upon for the proposition that a completed assessment cannot be reopened unless the governing statute authorises reassessment.
2. Assistant Collector of Central Excise Vs Ramdev Tobacco Company (Supreme Court); 1991 (51) E.L.T. 631 (SC) — Cited to support consideration of a pure question of law raised for the first time before the appellate Tribunal.
3. Northern Plastic Ltd. Vs Collector of Customs & Central Excise (Supreme Court); (1998) 6 SCC 443 — Relied upon by the exporter in support of its challenge to the demand and penalty proceedings.
4. Collector of Central Excise, Kanpur Vs Flock (India) Pvt. Ltd. (Supreme Court); 2000 (120) E.L.T. 285 (SC) — Followed for the finality of an appealable assessment not challenged through the prescribed appeal mechanism.
5. Titan Medical Systems Pvt. Ltd. Vs Collector of Customs, New Delhi (Supreme Court); 2003 (151) E.L.T. 254 (SC) — Applied to distinguish the functions of the licensing authority from those of Customs in matters concerning the validity of incentive instruments.
6. Union of India Vs Ashok Kumar & Others (Supreme Court); (2005) 8 SCC 760 — Followed regarding the high evidentiary burden for proving serious allegations of mala fides.
7. Shabina Abraham & Others Vs Collector of Central Excise and Customs (Supreme Court); (2015) 10 SCC 770 — Relied upon concerning interpretation of taxing statutes without importing assumptions or equitable considerations.
8. Commissioner of Income Tax Vs Vatika Township Private Limited (Supreme Court); (2015) 1 SCC 1 — Cited concerning statutory finality and the limited circumstances in which completed assessments may be reopened.
FULL TEXT OF THE ORDER OF CESTAT MUMBAI
This appeal is directed against the impugned order dated 20.11.2018 passed by the learned Commissioner of Customs, Jawaharlal Nehru Custom House, Nhava Sheva–II, Raigard.
2. Brief facts of the case are that during the period April’ 2015 to December’ 2017, the appellant had exported ropes of various types, classifying the same under RITC 56079090 and was being issued with the scrips under the Merchant Exports of India Scheme (for short, “MEIS”) against such exports by the competent authority; the Department initiated show cause proceedings vide Notice dated 08.01.2018, alleging that the appellant had exported Commercial Ropes made of PP (Polypropylene) and PP Polyester by declaring the same under RITC 56079090 for availing MEIS benefit of 5%, whereas, as per the ITC (HS) Code specified by DGFT, the Ropes made of Polyethylene or Polypropylene should be classifiable under RITC 56074900, attracting MEIS benefit of 2%. Further, in respect of two more shipping Bills being Nos. 7289261 and 7289281 both dated 12.07.2017, the show cause notice had relied upon the test report furnished by the DYCC, JNCH proposing classification of goods under heading 56074900 on the ground that composition of samples drawn mainly comprised of Polypropylene. Accordingly, the show cause notice alleged that the appellant had misclassified the goods in order to avail undue MEIS benefit available to the goods of heading 56079090. The issues arising out of the show cause notice was adjudicated vide the impugned order dated 20.11.2018. The learned adjudicating authority has classified the goods exported during the period April’ 2015 to Dec’ 2017 under Chapter sub-heading 56074900. He has held that no MEIS benefit is available till August’2016 and from September ‘2016, MEIS benefit of 2% is available to the Appellant. Accordingly, the impugned order has held that necessary communication is required to be sent to the competent authority in the office of DGFT to restrict the benefit to 2% of the value of exports, as opposed to 5% as issued earlier. The goods covered under Shipping Bill No.7289261 and 7289281 both dated 12.07.2017, valued at 48,80,681/- were ordered for confiscation, with option to redeem the same on payment of redemption fine of Rs. 2.5 lakhs. The duty relatable to utilization of the MEIS Scrips amounting to Rs. 9,05,55,139/- was ordered for recovery under Section 28AAA of the Customs Act, 1962 (for short, referred to as “the Act”) and a penalty of Rs. 1,00,00,000/- was also imposed on the Appellant company under Section 114(iii) of the Act. The impugned order has dropped the proposals made in show cause notice for imposition of penalties on the Director and CEO of the appellant company on the ground that sufficient evidence does not exist to penalize the individuals. Feeling aggrieved with the impugned order, this appeal was preferred before the Tribunal.
3. Heard both sides and perused the case records, including the written submission filed by the learned Advocate for the appellant.
4.1 The learned Advocate appearing for the appellant submitted that in respect of the subject goods, the Shipping Bills were assessed and ‘Let Export Order’ (LET) was issued by the proper officer based on the documents submitted by the appellant. He further submitted that since all the material particulars were available with the Department, the charges of ‘collusion’, ‘willful misstatement’ or ‘suppression of facts’ cannot be leveled, justifying confirmation of duty demand under Section 28AAA of the Act. He has referred to the impugned order at paragraph 11, wherein the proposals made in the show cause notice for imposition of penalties on the Director and the CEO were dropped by the adjudicating authority on the ground of lack of evidence of indulgent of those officials in the activities concerning suppression etc. The learned Advocate has referred to such findings in the impugned order to state that the Director of the appellant company vide his statement dated 27.09.2017, recorded under summon had deposed that he only decides the classification under CTH/CETH or RITC in respect of the goods exported by the appellant. Thus, the learned Advocate submitted that since the Director/authorized officer through whom the appellant company runs its day to day business affairs were exonerated from the proposed penal action, the appellant cannot be made to suffer as an artificial legal person by taking recourse to Section 28AAA of the Act.
4.2 The learned Advocate further submitted that upon finalization of Shipping Bills and issuance of Let Export Order under Section 51 of the Act, the appropriate course of action left to the Department was for reviewing the assessment order by the competent officer(s) under Section 129D(2) of the Act and thereafter for filing of appeal against the assessed Shipping Bills under Section 128 of the Act. He submitted that the Department had not complied with the said statutory mandates and as such, the issue arising out of exportation of subject goods covered under the assessed Shipping Bills have attained finality and cannot be re-opened by resorting to commencement of fresh adjudication proceedings. Thus, he submitted that the measures taken by the Department for confirmation of adjudged duty demand under Section 28AAA ibid is ex facie illegal and arbitrary. The learned Advocate has relied upon the judgment of Hon’ble Supreme Court in the case of Shabina Abraham and Ors. Vs. Collector of Central Excise and Customs [(2015) 10 SCC 770], Collector of Estate Duty, Gujarat Vs. M.A. Merchant [1989 Supp (1) SCC 499], Commissioner of Income Tax Vs. Vatika Township Private Limited [(2015) 1 SCC 1] and Northern Plastic Ltd. Vs. Collector of Customs & Central Excise [(1998) 6 SCC 443] to justify his above stand.
4.3 With regard to the consignments covered by the Shipping Bill Nos. 7289261 and 7289281 both dated 12.07.2017, the learned Advocate submitted that the issue of assessment is still open. Accordingly, he prayed for cross examining the Chemical Examiner on the ground that during the course of recording of statement dated 27.12.2017 (in response to question no.3), the test reports submitted by him were not accepted by Shri Rajesh Pandey, Director of appellant Company. He thus prayed for re-assessment of the above shipping Bills, after allowing cross examination of chemical examiner.
5. On the other hand, the Learned AR appearing for Revenue reiterated the finding recorded in the impugned order and further submitted that since the goods were not properly classified by the appellant, the Department has taken the correct stand in confirming the adjudged demands.
6. While examining the case records, we find that the submissions made during the course of hearing of appeal were not the issues addressed by the learned adjudicating authority in the impugned order. Accordingly, on a query from the Bench on such aspect, the learned Advocate submitted that the issue of finalization of assessment and re-opening of the same without challenging such order of assessment is a pure question of law, which can be raised for the first time before the Tribunal, even if the same was not the issue dealt with at the adjudication stage. He has relied upon the judgment of Hon’ble Supreme Court in the case of Assistant Collector of Central Excise Vs. Ramdev Tobacco Company, reported in 1991 (051) ELT 0631 (S.C.) to justify such stand. Further, he has also referred to Rule 10 of the CESTAT (Procedure) Rules, 1982 to submit that the Tribunal can permit consideration of new plea or grounds involving substantial question of law urged at the time of hearing of appeal. We are convinced with the submissions made by the learned Advocate that the issues raised before the Tribunal are pure question of law and have direct bearing on the ultimate confirmation of the adjudged demands. The learned AR appearing for Revenue has not particularly expressed any reservations regarding consideration of the said substantial question of law at this stage. Hence, the preliminary submissions made by the learned Advocate in respect of the new plea raised before the Tribunal is considered. Therefore, we proceed to decide the main appeal on the basis of the grounds of appeal urged in the appeal memorandum, including the additional grounds raised during the course of hearing of appeal.
7. The impugned order in paragraph 5 at the beginning has recorded the following observations of the learned adjudicating authority:
“The crux of the dispute is correct classification of ropes made of PP and Polyester. The MEIS benefits available and all other issues are ancillary to the determination of correct classification.”
8. It is an admitted fact on record that in compliance of Section 50 ibid, the appellant had submitted all the requisite particulars/information for assessment and ascertainment of the duty liability, if any, in respect of the Shipping Bills, which were accepted by the proper officer of Customs and the appellant was permitted by an order under Section 51 ibid for clearance of the subject goods for exportation. In so far, an order of assessment is concerned, Section 129D ibid provides for passing of certain orders by the competent authority(s). The statutory provisions are extracted herein below:
“129-D. Powers of Committee of Chief Commissioners of Customs or Commissioner of Customs to pass certain orders. –
(1)……………………………………………………………..
(2) The Commissioner of Customs may, of his own motion, call for and examine the record of any proceeding in which an adjudicating authority subordinate to him has passed any decision or order under this Act for the purpose of satisfying himself as to the legality or propriety of any such decision or order and may, by order, direct such authority or any officer of customs subordinate to him to apply to the Commissioner (Appeals) for the determination of such points arising out of the decision or order as may be specified by the Commissioner of Customs in his order.
(3) Every order under sub-section (1) or sub-section (2), as the case may be, shall be made within a period of three months from the date of communication of the decision or order of the adjudicating authority:
Provided that the Board may, on sufficient cause being shown, extend the said period by another thirty days.
(4)…………………………………………………………………
(5)………………………………………………………………”
9. Sub-sections (2) and (3) of Section 129D above are relevant for consideration of the issue involved in the present case. On careful reading of the above statutory provisions, it transpires that the Commissioner of Customs is empowered under the statute to determine the quality or state of being of any decision or order passed by a subordinate officer in accordance with the law; if he is satisfied that the same is not legal or proper, then he may pass an order, directing the subordinate officer for filing of appeal against such decision or order before the first appellate authority i.e. the Commissioner (Appeals) under Section 128 ibid. The above statutory provision has prescribed a time limit for filing of appeal before the Commissioner (Appeals).
10. In the present case, it is an undisputed fact on record that the order(s) passed by the proper officer of Customs during the relevant period 2015-2017, in permitting exportation of goods including classification and other aspects as per Section 51 ibid were considered as legal and proper by the Commissioner of Customs. This is evident from the fact that no specific order was passed by such competent authority in directing the officer subordinate to him for filing of appeal before the Commissioner (Appeals), as mandated in sub-section (2) of Section 129D of the Act. In fact, the materials available on records suggest that no appeals were filed by the Department against the assessment orders passed on the Shipping Bills before the Commissioner (Appeals) under Section 128 of the Act. Hence, the issue of classification and other facets concerning exportation of subject goods covered under the already assessed Shipping Bills was attained finality and any issues arising out of finalisation of such Shipping Bills cannot be questioned or agitated by the Department subsequently by initiating show cause proceedings against the exporter, the appellant herein. In other words, unless and until the order passed under Section 51 of the Act is dealt with in the manner prescribed by the appellate authorities, such order stands and the correctness or otherwise cannot be questioned subsequently by issuance of a show cause notice.
11. The issue with regard to the effect of non-filing of an appeal against the assessment order and denial/claim of benefit arising out of such assessment at a subsequent stage is no more open for any debate, as per the well settled principle of law laid down by the Hon’ble Supreme Court in the case of Collector of Central Excise, Kanpur Vs. Flock (India) Pvt. Ltd., reported in 2000 (120) ELT 285 (S.C.). The relevant paragraph in the said judgment is quoted below:
“10. Coming to the question that is raised there is little scope for doubt that in a case where an adjudicating authority has passed an order which is appealable under the statute and the party aggrieved did not choose to exercise the statutory right of filing an appeal, it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund on the ground that the adjudicating authority had committed an error in passing his order. If this position is accepted then the provisions for adjudication in the Act and the Rules, the provision for appeal in the Act and the Rules will lose their relevance and the entire exercise will be rendered redundant. This position in our view, will run counter to the scheme of the Act and will introduce an element of uncertainty in the entire process of levy and collection of excise duty. Such a position cannot, be countenanced. The view taken by us also gain support from the provision in sub-rule (3) of Rule 11 wherein it is laid down that where as a result of any order passed in appeal or revision under the Act, refund of any duty becomes due to any person, the proper officer, may refund, the amount to such person without his having to make any claim in that behalf. The provision indicates the importance attached to an order of the appellate or revisional authority under the Act therefore, an order which is appealable under the Act is not challenged then the order is not liable to be questioned and the matter is not to be reopened in a proceeding for refund which if we may term it so is in the nature of execution of a decree/order. ……………”
12. Though, the above judgment was delivered in context with refund claim under the Central Excise statute, but the principle decided therein is squarely applicable to the facts of the present case inasmuch as legality or propriety of a statutory order cannot be questioned or disturbed subsequently by passing an order on the issue, which has already been considered and dealt with on the previous occasion, while passing the order under Section 51 of the Act. Further, the issue with regard to filing of appeal against an order passed under the statute has also been dealt with by the Hon’ble Supreme Court in various occasions. In the case of Shabina Abraham (supra), the Hon’ble Supreme Court have held that “in interpreting a taxing statute, equitable consideration are entirely out of place and it cannot be interpreted on presumptions or assumptions; the taxing statute is to be interpreted in the light of what is expressly expressed and provisions cannot be imported so as to supply any assumed deficiency.” In the case of M.A. Merchant (supra), the Hon’ble Apex Court have ruled that “if an assessment has already been made and completed, the assessee cannot be subjected to re-assessment unless the statute permits that to be done.” Such view was also endorsed by the Hon’ble Apex Court in the case of Vatika Township (P) Ltd. (supra), holding that “assessment creates a vested right and an assessee cannot be subjected to reassessment unless a provision to that effect inserted by amendment is either expressly or by necessary implication retrospective.”In view of the above referred well laid principles of law enunciated by the Hon’ble Apex Court, we are of the considered opinion that change in classification of subject goods through the impugned proceedings, without challenging the assessed Shipping Bills, should not stand for judicial scrutiny.
13. In this case, the Department has initiated show cause proceedings and confirmed the adjudged duty demand under Section 28AAA of the Act on the appellant. The provisions contained therein for recovery of duties are applicable only in the eventuality, where an instrument issued to a person has been obtained by him by means of ‘collusion’; or ‘willful misstatement’; or ‘suppression of facts’. We find that the learned Commissioner has dealt with such statutory provisions and their application to the facts of the present case at paragraph 10 in the impugned order. He has not particularly referred to any communication addressed by the office of Development Commissioner functioning under the DGFT to hold that the appellant got the MEIS scrip issued by the said authority by means of collusion, willful misstatement or suppression of facts. Further, there is no material evidence available on record to prove that the competent licensing authority under the Foreign Trade Policy had initiated any proceedings against the appellant alleging acquisition of the scrips in a fraudulent manner. The allegation with regard to MEIS benefits wrongly availed by the appellant does not have an independent nexus to the Customs Act, 1962 inasmuch as such scheme designed for the Merchant Exporter are dealt with under the Foreign Trade Policy (2015-2020) and Foreign Trade (Development & Regulation) Act, 1992. Thus, the administration of MEIS squarely falls within the jurisdiction of the office of the DGFT and not the Customs authorities. The division of exercise of authority between the DGFT and Customs authorities is well recognized judicially and should be respected to prevent abuse of due process of law. The Hon’ble Supreme Court in the case of Titan Medical Systems Pvt. Ltd. Vs. Collector of Customs, New Delhi, reported in 2003 (151) ELT 254 (S.C.) have held that if the license issuing authority i.e. DGFT has not questioned the veracity of the transactions undertaken under the license, the customs authorities cannot refuse exemption on an allegation that there was any misrepresentation. It has also been held that if there was any misrepresentation, then it was the licensing authority which had to take steps to cancel the license. In the case in hand, the adjudicating authority has only referred to the DGFT Public Notice No. 30/2015-2020 dated 08.09.2016 to hypothetically conclude without any corroboration that the actual user condition has not been fulfilled and accordingly, the appellant is liable to pay the Customs duty. For arriving at such conclusion, the learned adjudicating authority has not discussed the issue with the licensing authorities, who are competent under the Licensing Policy to discover such wrongdoing, if any. Hence, it is evident that the Department has not brought on any credible evidence to prove that the appellant had indulged into fraudulent activities with the intent to defraud the Government revenue. In this context, the Hon’ble Supreme Court in the case of Union of India Vs. Ashok Kumar & Ors., reported in (2005) 8 SCC 760 have held that burden of establishing malafides is very heavy on the person who alleges it; that the allegations of malafides are often more easily made than proved, and the very seriousness of such allegations demand proof of high order of credibility.
14. The show cause notice dated 08.01.2018 in this case, was also issued by the Department to Shri Rajesh Pandey, Director and Shri Om Prakash Agarwal, CEO of the appellant company, proposing for imposition of penalties under Section 112(a), 114(iii), 114A and 114AA of the Act. However, while adjudicating the matter, the learned Commissioner vide the impugned order has held that sufficient evidence does not exist to penalized the individuals and accordingly, dropped the show cause proceedings initiated against those persons. The relevant paragraph in the impugned order is extracted herein below:
“11………… So far as penal proposals against the CEO and the director of the exporter is concerned, I find that these proposals have been advanced on the premise that the CEO was overall in-charge of the affairs of the company and the director was in-charge of the factory’s day to day functioning, production and export and also decides the classification of the ropes. In my considered opinion, sufficient evidence does not exist to the individuals and considering the nature and scope of the infractions of law, penalising the exporter company would meet the ends of justice and penalising the individuals is not required.”
15. The exporter-appellant is a private limited company, incorporated under the Companies Act, 1956. A public/private limited company is a legal entity, a juristic person established and recognized as such under the statute. It has its existence separate from its shareholders and directors. Since, it is an independent legal entity, it can sue and also be sued in its own name. But unlike a human being (a natural person), it lacks both body and mind. It cannot act just like a human being. Thus, it can act only through the living individuals as per the set-out rules contained in the Articles of Association, the charter of an incorporated company. Board of Directors are those individuals, through whom the company acts and does its business activities. For managing smooth day to day business of the company, the individual director(s) may be assigned with some task of performance or the power may be delegated upon certain officers of the company as per the resolution passed and approved in the meeting of the Board of Directors. In this case, while investigating into the mater, the Department had recorded statements from Shri Rajesh Pandey, Director of the appellant on 27.09.2017 and 27.12.2017 pursuant to summons issued under Section 108 of the Act. In the said statements, he had inter alia stated that he decides the Central Excise/Customs classification or RITC of export gods; the reason for change in classification/RITC of exportable goods; technical facets of the goods manufactured and exported by the appellant etc. Further, in the statement dated 07.11.2017, the CEO of the appellant company had also endorsed the statement of the Director furnished before the Department. The modus operandi adopted for conducting the business of the appellant company clearly depicts that the director/senior authorised officers in their individual capacity, on behalf of the company determine the mode and the manner for carrying out the business activities inasmuch as the company as an artificial person cannot think, act or perform of its own for the purpose of undertaking the practical business activities. Upon proper scrutiny of the available records, the learned adjudicating authority has absolved the said persons from the proposed penal action, holding that no sufficient evidence exists against those persons. On the contrary, the impugned order has fastened the duty liability and penalized the appellant, without specifically discussing the role played by it in contravening the statutory provisions. The adjudicating authority has lost sight of the fact that the appellant’s company is an artificial or non-human entity, cannot function or operate without involvement of the natural person i.e. the directors or the authorized persons. Therefore, we are of the considered view that the charges of guilt of ‘collusion’, ‘wilful mis-statement’ or ‘suppression of facts’ cannot be levelled against the appellant, justifying invocation of the provisions of Section 28AAA of the Act.
16. The impugned order in paragraph 12(ii) has confiscated the goods covered under Shipping Bill Nos. 7289261 and 7289281 both dated 12.07.2017 and imposed redemption fine on the appellant by relying upon the test report dated 02.11.2017 furnished by the DYCC/JNCH. The said report confirms that the Rope in question comprised of Polypropylene as the primary/major ingredient. We find that in the statement dated 27.12.2017 recorded under summon as well as in the reply to the show cause notice, the appellant had specifically contended that the exported rope was made of Polypropylene, Polyethylene, Polyester and colour pigment. However, such submissions of the appellants have not been discussed or counteracted in the impugned order. Further, we also find that the arguments advanced by the appellant that composition of rope is required to be ascertained on the basis of weight and not by percentage was also brushed aside in the impugned order without assigning any reason. Moreover, submission of composition/analysis report of ropes by CIPET, Hyderabad though was discussed in the impugned order at paragraph 5, but no convincing observations were made as to why such report cannot be accepted for adjudicating the dispute. We also find that the specific request made by the appellant for cross examining the concerned chemical examiner has not been considered by the adjudicating authority. Furthermore, it is also noticed that the adjudicating authority has not recorded any findings on the communication dated 28.12.2017 of the jurisdictional Assistant Commissioner of Central Excise, addressed to the Deputy Commissioner of Customs, Preventive, opining that the sample of goods drawn should be classifiable under CTH 56079090. Thus, it is evident that the integral part and parcel of the principles of natural justice has been violated in this case inasmuch as reasons are the soul of any judicial order and good and proper reasoning make its body strong, which admittedly is absent in the present case. Accordingly, we are of the considered view that the matter should be remanded to the original authority for grant of opportunity to the appellant for cross examining the chemical examiner and thereafter to address the issue in a just and fair manner.
17. In view of the foregoing discussions and analysis, we set aside the impugned order and allow the appeal, in so far as it has changed the classification of exported goods from CTH 56079090 to CTH 56074900, resulting in confirmation of duty demand along with interest and imposition of penalty on the appellant. As regards confiscation of goods and imposition of redemption fine, the impugned order is set aside and appeal is allowed by way of remand to the original authority for grant of permission to the appellant for cross examining the chemical examiner and thereafter to adjudicate the matter based on the outcome of such examination report. In deciding the matter in remand, the Original Authority should keep in mind the observations made by us in the preceding paragraphs. Needless to say, that reasonable opportunity should be granted to the appellant before deciding the remanded issue afresh.
18. The appeal is disposed of in above terms.
(Order pronounced in the open court on 11.09.2020)
