JINDAL PHOTO FILMS LTD. AND Vs. CC

JUDGEMENT

(1.) These appeals are against an order of the Commissioner of Customs (Import), Mumbai, the operative part whereof reads as under: "Accordingly, I order as:

(2.) M/s. Consolidated Photo and Finvest Ltd. (CPFL, for short) are a Public Limited Company engaged in trading activities. M/s. Jindal Photo Films Ltd. (JPFL, for short) are also a Public Limited Company having both trading and manufacturing activities. Both the companies have their corporate offices in the same premises at New Delhi. The manufacturing unit of JPFL is engaged in the conversion into finished products, of Jumbo Rolls (Bulk Rolls) of various kinds of photographic films and papers imported from M/s. FUJI Photo Film Co., Ltd., Japan (hereinafter referred to as 'FUJI'). It is situate at Silvassa within the Union Territory of Dadra and Nagar Haveli. On 6th June, 1998, CPFL opened a Branch Office in the factory premises of JPFL at Silvassa and subsequently obtained Import Export Code Number from the Customs authorities. The Branch Office was also got registered with the Sales Tax Department of Dadra and Nagar Haveli under Section 12 of the Dadra and Nagar Haveli Sales Tax Regulations 1978 (hereinafter referred to as 'DNHST Regulations' or 'the Regulations') w.e.f. 17th June, 1998. CPFL and JPFL are sister concerns. During the period of dispute, one Shri B.R. Gupta was Director (Imports) of JPFL as well as Authorised Signatory of CPFL. He used to pursue the Purchase Orders placed on FUJI by JPFL for import of Jumbo Rolls of photographic films and papers. He used to advise the foreign supplier as to what quantities of Jumbo Rolls, covered by JPFL's Purchase Orders, should be separately consigned to JPFL and CPFL. As per his oral advice, FUJI used to issue separate Proforma Invoices to the two companies. Insofar as the imports made by CPFL were concerned, they used to open Letters of Credit in favour of FUJI and, on the basis thereof, FUJI used to send the goods and negotiate Bills of Lading, Insurance documents, Invoices, etc. through bankers. CPFL used to obtain these documents from the Bank by making payment for the goods on the basis of the shipping documents of FUJI. Thereafter, CPFL used to file Bills of Entry at Nhava Sheva (Mumbai) for customs clearance of the goods. After taking delivery of the goods, against payment of customs duty as assessed by the authorities, the goods were transported to Silvassa where they were sold to JPFL under Sale Invoices. CPFL imported Jumbo Rolls of various kinds of photographic films and paper from FUJI (Japan) in the above modus operandi during the period of dispute (18th Sept., 1998 to 30th June, 1999). The goods were cleared without payment of Special Additional Duty (SAD) by claiming the benefit of exemption Notification Nos. 56/98 -Cus dated 1.8.98 and 22/99 -Cus dated 28.2.99. The claims was in terms of Sl. No. 12 in the Table annexed to Notification No. 56/98 ibid and Sl. No. 5 in the Table annexed to Notification No. 22/99 ibid for the relevant periods. The entries at Sl. No. 12 under Notification No. 56/98 and Sl. No. 5 under Notification No. 22/99 were identically worded. The entry at Sl. No. 12 ibid reads as under:

(3.) The Commissioner found that, prior to the issue of Notification No. 34/98 -Cus. dated 13.6.98 (which had contained a provision identical to the entry at Sl. No. 12 of Notification No. 56/98 -Cus. ibid), the imports of Jumbo Rolls were exclusively in the name of JPFL; that all such imports were meant for conversion into finished products of film and paper in terms of specific agreements entered into between them and FUJI (Japan); that the imports were not for sale as such; that, after 13.6.98, any imports by JPFL (other than imports under DEPB Scheme) had to suffer SAD as the imports were not for sale as such as required under the Notification; that their sister company viz. CPFL got themselves registered with the Sales Tax Department from 17.6.98 as a dealer and, subsequently, made it appear that a part of the jumbo rolls purchased from FUJI by JPFL in terms of the agreements between the two were imported in their (CPFL's) name and sold to JPFL for the purpose of conversion into finished products so as to escape liability to pay SAD on the imported goods; that there was no agreement whatsoever between CPFL and FUJI and no purchase orders were ever placed oh FUJI by CPFL; that CPFL had no infrastructure or technical expertise to convert the Jumbo Rolls into finished products; that a part of the goods for which purchase orders were placed on FUJI by JPFL was supplied to CPFL by FUJI as per instructions of JPFL; that CPFL merely acted as a conduit for supply of jumbo rolls by FUJI to JPFL; that the imports made in the name of CPFL as per instructions of JPFL were strictly governed by the agreements between JPFL and FUJI; that the agreements prohibited the supply of jumbo rolls by FUJI to any party other the JPFL and, therefore, CPFL, in making imports of jumbo rolls from FUJI, were only acting as an agent of JPFL; and that, since JPFL and to pay SAD on jumbo rolls directly imported by them, they imported the same indirectly through CPFL with the sole intention to evade payment of SAD. Ld. Commissioner, thus, examined the nature of transactions between JPFL, FUJI and CPFL, and invoked the principle of "lifting of corporate veil" to come to the conclusion that the real importer of the goods was JPFL. Since, in terms of the agreements between JPFL and FUJI, all imports of jumbo rolls had to be converted into finished products of film and paper, JPFL had no authority to sell the imported goods as such and hence there was no question of claiming exemption from payment of SAD, which was applicable only in respect of sale of imported goods as such. Ld. Commissioner further held that the sale of jumbo rolls by CPFL to JPFL was a pre -determined transaction which could be nothing more than a High Sea Sale, for which reason also the exemption under the Notifications was not admissible to CPFL in respect of the goods so sold by them to JPFL. Ld. Commissioner further noted that Silvassa was a place located in an area where no tax was chargeable on sale or purchase of goods. Accordingly, he found that CPFL's sale of the imported goods from Silvassa attracted the proviso under Sl. No. 12 of Notification No. 56/98 and the corresponding proviso under Sl. No. 5 of Notification No. 22/99. This finding was recorded after examining the provisions of the DNHST Regulations 1978 and considering case law. On the basis of his findings, Ld. Commissioner denied the benefit of exemption to CPFL and confirmed the demand of duty on them. After finding deliberate mis -declaration and suppression of facts, against CPFL, the adjudicating authority held them liable for penalty under Section 114 A of the Customs Act, apart from ordering confiscation of the goods under Section 111 of the Act. It also found both CPFL and JPFL liable for penalty under Section 112(b) of the Act.