LAKSHMI VILAS BANK LIMITED Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THE above appeal is directed against the Final order No.397 of 2004 dated 22.4.2004 passed by the Customs, Excise and Service Tax Appellate Tribunal, (hereinafter referred to as 'the CESTAT'), confirming the order of the Commissioner of Customs, Chennai, dated 6.3.98 holding that the appellant herein is not a person aggrieved to prefer an appeal under Section 129 A of the Customs Act (for short 'the Act'), in a matter that arises against the confiscation proceedings initiated under Section 124 of the Act, raising the following substantial questions of law, under the facts and circumstances of the case stated below:-

(2.) 1. The detailed facts that are relevant for the disposal of this appeal are: 249.4. Metric Tonnes of what was declared as "Stainless Steel Defective Circles" were imported from Korea in May - June 1982 in the name of M/s.Indian Steel Corporation (hereinafter referred to as 'the Corporation') claiming that the same were covered by ten import licenses issued during the period 1981-82. The declared value of the goods was Rs.18,19,102/-. The import licenses relied on by the importer are: 1.P/L/2899510/31.3.81 2.P/L/2902451/1.1.82 3. P/L/2902519/14.1.82 4.P/L/2902163/28.12.81 5.P/L/2902509/12.1.82 6. P/L/2902510/12.1.82 7. P/L/2902454/1.1.82 8.P/L/2902453/1.1.82 9. P/L/2902180/30.12.81 10.P/L/0456336/11.9.81 2. 2. On inspection by the Customs Authorities (hereinafter referred to as 'the Department'), the goods were found to be non-magnetic stainless steel circles and that they were not defective stainless steel circles. The Metallurgical expert opined that the goods were of prime quality. Samples of the consignment were also tested in Salem Steel Plant and the test report confirmed that the goods were of prime quality. On the basis of the expert's opinion and the test report as well as the invoice issued by the Korean supplier of the goods, the Department inferred that the prime quality stainless steel circles had been mis-declared as defective circles and heavily undervalued. The value of the said prime quality goods imported was assessed at Rs.59,96,414/- as against the declared value of Rs.18,19,102/-, which obviously indicated undervaluation to the extent of over and above Rs.41 lakhs. 2.3. It was also noticed that the import licenses produced before the Department pertain only with respect to the defective circles whereas the imported one were stainless steel circles of prime quality. Hence, the Department issued a show cause notice dated 15.10.1982 to the importer as well as to its proprietor one by name Mr.A.Kumar invoking Section 124 of the Act to confiscate the said goods on the ground of mis-declaration of the description of the property as well as for undervaluation of the goods attracting Section 111 of the Act and also proposed to impose penalty under Section 112 of the Act. 2.4. When the Income-tax authorities proposed to seize the goods lying with the customs authorities at Madras invoking Section 132-A of the Income Tax Act by order dated 19th June, 1982, the same was challenged by the proprietor, A.Kumar by way of Writ Petition (C) NO.2689 of 1982 before the Delhi High Court and he also filed another Writ Petition (C) No.1812 of 1982 questioning the rate of customs duty and valuation of goods imported. Since both the writ petitions were dismissed by the Delhi High Court, the proprietor, A.Kumar, preferred Civil Appeal Nos.1693 and 1694 of 1982 before the Apex Court. 2.5. In the meanwhile, the proprietor of the Corporation, A. Kumar, also approached the Apex Court in Writ Petition (C) No.8168 of 1982 for a declaration that the "scale of rates" prescribed by the Madras Port Trust are unconstitutional and to restrain the Port Trust from collecting the charges in accordance with the said scale of rates and also for issuance of detention certificate. After the receipt of the show cause notice dated 15.10.1982 issued under Section 124 of the Act, he filed another Writ Petition (C) NO.2 of 1983 invoking Article 32 of the Constitution of India questioning the validity of the show cause notice. 2.6. All the above mentioned writ petitions, viz., Writ Petition (C) No.8168 of 1982 and Writ Petition (C) No.2 of 1983 as well as the Civil Appeals Nos.1693 and 1694 of 1984 were heard together by the Apex Court and were disposed of by a common order dated 11.10.1996. 2.7. The Apex Court while disposing of the above writ petitions and the civil appeals, observed that the department had a huge claim of arrears of income tax and the Madras Port Trust also claimed for demurrage charges, as well as the appellant herein, viz., the Lakshmi Vilas Bank Limited, also put forward a claim contending that inasmuch as it had financed the said importer, the appellant Bank is entitled to be repaid. In the face of these rival claims, the Apex Court, by an order dated 21.6.1983 directed the sale of the imported goods by appointing three joint receivers, viz., Sri.Jayaraman, Additional Collector of Customs, Madras, Sri.Sridharan, Deputy General Manager, Lakshmi Vilas Bank, Madras and Sri.Rajsekharan, Deputy Traffic Manager (Commercial), Madras Port Trust. 2.8. The Joint Receivers sold the goods by auction on 27.7.1983 and deposited the sale proceeds, viz., Rs.1 crore and 27 lakhs, in the State Bank of India, Main Branch, Madras, in a Fixed Deposit and the said amount is still lying with the State Bank of India. Unfortunately, when the matters were taken up for final hearing before the Apex Court, the learned counsel appearing for the said A.Kumar, the proprietor of the Corporation, reported no instructions, as there was no response from the said A.Kumar in spite of several reminders by his counsel. Hence, the Apex Court heard the Department, viz., the custom authorities, the appellant herein, viz., Lakshmi Vilas Bank Limited, and also the purchaser of the goods in the public auction and disposed of the matters finally by an order dated 11.10.1996. 2.9.1. In this connection, it is relevant to refer the three statements of A.Kumar, which were brought to the notice of the Apex Court while disposing of the writ petitions and the civil appeals, referred to above, by an order dated 11.10.1996. The first one is the statement recorded under Section 131 of the Income-tax Act on 10.6.1983, in which the said Kumar had stated that he was only an employee of Vinod Kumar Didwania on a salary of Rs.1,000/- and that he was a man of humble origins and practically of no means. It was further stated that he was the national of Sri Lanka and that he had no connection with Indian Steel Corporation. He also denied that he is the proprietor of the Indian Steel Corporation and his knowledge of certain accounts maintained in his name in the Lakshmi Vilas Bank. More interestingly, he also denied signing of any documents in connection with the imported goods and that he has nothing to do with the said import at all. According to the said statement of A.Kumar, everything was done by Vinod Kumar Didwania and Deen Dayal Didwania using his name. 2.9.2. In the second statement dated 2.12.1983 recorded by the Income-tax authorities, the said Kumar denied being the proprietor of the said concern and disowned any connection with the import of the said goods and further stated that he had no claim to the said goods. 2.9.3. In the third statement, which is an affidavit dated 24.2.1984, the same stand denying his connection with the Corporation as well as the import of the goods in question and added that, whatever the affidavits he had signed and filed in the impugned proceedings therein were made at the instance of his employers, Didwanias. 2.10. In the light of the averments stated in the above statements, the Department came up with a petition in C.M.P.No.27299 of 1983 in Special Leave Petition (C) NO.8780 of 1982, which was subsequently re-numbered as Civil Appeal No.1693 of 1984 for prosecuting the members of Didwania group together with certain officials of Lakhsmi Vilas Bank for various offences under the Indian Penal Code. 2.11. On the other hand, the appellant herein represented by his counsel Mr.A.T.M.Sampath, stated that the bank had already filed a suit against the said Kumar, Didwanias and the Department for recovery of the amount due to them. The Madras Agencies, who is the purchaser of the imported goods, contended before the Apex Court that since there was an inordinate delay in confirming the sale and the delivery of the goods, the purchaser is entitled to the interest on the earnest money paid and also sought to reimburse the demurrage charges to the tune of Rs.52,582/- and to reimburse the sales tax he was made to pay after the purchase of the goods to the tune of Rs.5,47,719/-. 2.12. The Apex Court, in the said order dated 11.10.1996, clearly rendered a decision on the claim of the appellant herein that the bank has to work out its right in the suit, which they had already filed. Since there was also a claim by the Madras Port Trust for demurrage charges, the Apex Court also made it clear that after passing the final order in the confiscation proceedings, the balance amount lying in the fixed deposit with the State Bank of India, Main Branch, Madras, after settling the claim of the Madras Port Trust for demurrage charges, shall be paid over to the department. 2.13. The Apex Court, in the said order dated 11.10.1996, also observed that it was rather strange that the Lakshmi Vilas Bank, the appellant herein, chose to issue letters of credit on behalf of A.Kumar, a mere low paid employee and a person of no means and that there are also allegations of collusion and fraud against certain officials of the appellant/Bank in this matter levelled by the Income-tax Department. Not satisfied with the records produced by the learned counsel who appeared on behalf of the appellant Bank before the Apex Court with regard to the circumstances under which the letters of credit were issued by the appellant Bank in favour of A.Kumar (Ashok Kumar), the Apex Court further observed that the matter appeared to be strange and unusual. However, the Apex Court left the matter for the Reserve Bank of India to look into it since it involves loss of depositors money with a further direction that in case if the Reserve Bank of India finds any officials of the appellant Bank had acted outside their authority or adverse to the interest of the Bank, the Reserve Bank of India shall direct the management of the appellant Bank to take necessary disciplinary proceedings against them. The Apex Court, accordingly disposed of the above writ petitions and the civil appeals by order dated 11.10.1996, as referred to above.

(3.) SINCE both the substantial questions of law referred to above are inter-related, viz., on the point whether the appellant Bank is a person aggrieved by the order of the Commissioner of Customs dated 6.3.1998 to prefer an appeal under Section 129A of the Act before the CESTAT, they are considered and disposed of jointly as hereunder.