GIMPEX LTD. Vs. COMMISSIONER OF CUSTOMS, HYDERABAD

JUDGEMENT

(1.) THE main appeals, No. C/249/09 & C/399/09 filed by M/s. Gimpex Ltd. (hereinafter referred to as GL) and M/s. Sree Enterprises (hereinafter referred to as SE) respectively, are directed against demands of duty confirmed against them under Section 28(2) of the Customs Act and penalties imposed on them under Section 114A of the Act. Appeal No. C/363/09 was filed by the Commissioner of Customs, Hyderabad -II praying for enhancement of the quantum of penalty imposed on GL under Section 114A of the Act. The appellant wants penalty equal to the sum of duty and interest, to be imposed on the assessee. The remaining appeals were filed by the persons aggrieved by the penalties which were imposed on them by the adjudicating authority under Section 112 of the Act. The particulars of the party -appeals are as tabulated below :

(2.) BOTH GL and SE had filed Writ Petitions against the direction of this Bench for pre -deposit, mainly on the ground that the relevant show -cause notices were issued without jurisdiction and consequently the orders passed in adjudication thereof were liable to be quashed. This challenge was based on the Honble Supreme Courts decision in Commr. v. Sayed Ali [2011 (265) E.L.T. 17 (S.C.)]. The Honble High Court of Andhra Pradesh disposed of the Writ Petitions [W.P. Nos. 15570 and 15571 of 2011 - 2011 (274) E.L.T. 12 (A.P.)] directing the CESTAT to reconsider the stay applications keeping in view the decision of the Supreme Court in Sayed Alis case. Subsequently, this Bench reheard the stay applications of the parties and disposed of the same granting waiver of pre -deposit and stay of recovery in respect of the adjudged dues. In the de novo proceedings, it was submitted on behalf of the Department that the above jurisdictional question did not survive after the issue of Notification No. 44/2011 -Cus. (N.T.) dated 6 -7 -2011 by the Central Government. It was also submitted that legislation was under way to give retrospective effect to the Notification. However, the benefit of waiver and stay was granted by this Bench not for any jurisdictional reason but in view of the prima facie case made out on merits by the appellants. When ultimately the appeals came up for hearing, the legislation referred to by the learned Special Consultant for the Department was in place. The newly enacted sub -section (11) of Section 28 of the Customs Act gave retrospective effect to the provisions of Notification No. 44/2011 -Cus. (N.T.) thereby removing any jurisdictional defect of show -cause notices issued by DRI authorities. Thus any jurisdictional question does not survive for consideration by this Bench.

(3.) M /s. Gimpex Ltd. are engaged in the export of industrial minerals like iron ore, bentonite, feldspar, granite slabs etc. The raw material/machinery required for export of the said goods are packing materials like PP bags and machines like dozers, dumpers, generators, excavators, tippers, crushing and screening systems, etc. GL had exported iron ore fines valued at Rs. 142.3 crores and other minerals valued at Rs. 31 crores totalling to Rs. 173.3 crores during the period from 1 -4 -2004 to 31 -3 -2005. These exports helped GL attain sufficient incremental growth when compared to the exports made in the previous year (2003 -04), to make them eligible for duty credit certificates under Target Plus Scheme (TPS) for a total amount of Rs. 7,08,12,793/ -. GL applied in the prescribed format to the Director -General of Foreign Trade (DGFT) for grant of such certificates and obtained 7 such certificates for a total amount of Rs. 7,08,12,793/ - in the month of May, 2006. These duty credit certificates/licences under TPS, which were granted by the Joint DGFT, Chennai, enabled GL to import canalized items as per para (3.2.5) of the Handbook of Procedures (Volume -I) 2004 -09 and subject to actual user condition. The Conditions Sheet attached to each certificate/licence specified two export product groups viz. CHEMICAL AND ALLIED PRODUCTS and ENGINEERING PRODUCTS and also carried an endorsement : Import will have broad nexus. As these licences were registered at Chennai Port Customs and GL wanted to make imports through ICD Hyderabad, they obtained Transfer Release Advices (TRAs) from Chennai Customs for imports through ICD Hyderabad. GL used these TRAs for importing continuous cast copper rods (a canalized item) (hereinafter, also, referred to as c.c. copper rods) in 14 consignments (total weight 427.383 MTs and value Rs. 13,53,94,741/ -) through ICD Hyderabad during the period from September, 2006 to April, 2007 [These imports were made under High Sea Sale Agreements concluded between GL and M/s. MMTC Ltd.], Notification No. 32/2005 -Cus., dated 8 -4 -2005 issued by the Central Government under the TPS in terms of paragraph (3.7) of the Foreign Trade Policy (FTP), 2004 -09 granted full exemption from payment of basic customs duty and additional customs duty (CVD) on goods imported into India against duty credit certificates/licences issued under the TPS. Any inputs, capital goods (including spares, office equipments etc.) and agricultural products, which were freely importable under the FTP, could be imported duty -free under the Notification subject to actual user condition. GL claimed this benefit of exemption in respect of the c.c. copper rods imported by them, and the relevant Bills of Entry were accordingly assessed and the goods allowed to be cleared without payment of duty. Subsequently, the DRI launched investigations into the manner in which GL had availed themselves of the benefit of TPS. The relevant documents related to the purchase of c.c. copper rods by GL from MMTC under High Sea Sale Agreements, import documents related to duty -free clearance of the goods under TPS, documents related to export of iron ore fines and other goods, correspondence between GL and MMTC and others, etc., were recovered and scrutinized by the DRI. Statements were recorded from functionaries of M/s. Gimpex Ltd., M/s. Mangalchand Alloys and Refineries Pvt. Ltd. (MARPL), M/s. Shah International Travels (CHA) and others under Section 108 of the Customs Act. The relevant provisions of the FTP, 2004 -09 and of the Handbook of Procedures (Volume -I) were examined. The provisions of Customs Notification No. 32/2005, dated 8 -4 -2005 were also examined. On the basis of the results of investigations, the Department issued a show -cause notice to GL and others (a) denying exemption under the above notification in respect of the imported copper rods and demanding duty under the proviso to Section 28(1) of the Customs Act, (b) holding the said goods liable to confiscation under Section 111(o) of the Act and holding GL liable to penalty under Section 114A of the Act, (c) demanding interest on duty under Section 28AB of the Act, and (d) proposing penalties on other noticees S/Shri Samir Goenka, Anil Goyal and Ranjit S. Chaudhari under Section 112 of the Act. The demands and other proposals were contested. In adjudication of the dispute, the Commissioner of Customs passed order -in -original No. 7/2009. The operative part of this order reads as follows :