S.S. Sekhon, Member (T)
1. Pursuant to the intelligence gathered by the Zonal unit of DRI, a show cause notice was issued on 13-2-97 to the appellant herein, the proprietor of M/s. Vinayaka Industries, Bangalore alleging that they have imported and disposed of raw silk yarn. This raw silk yarn was imported on six different advance licences under the DEEC Scheme. The show cause notice alleged that there was an admitted lapse and clear violation of the provisions of the DEEC Scheme and the licensing conditions governing duty free import of the raw silk yam in question and customs duty on an import of 6116.530 Kgs of raw silk amounting to Rs. 13,59,472/- became liable to be paid and the same was paid up by various demand drafts as detailed in the notice. The proprietor also indicated in his statement that the Bank Guarantee executed by him may be enforced to the extent of Rs. 97,825/- and the balance would be paid by him. After completion of the enquiries, a show cause notice was issued inter alia to the present appellant requiring to show cause as to why -
"Now THEREFORE Shri Praveen Kumar Dalmia and Shri Chaganmal Jain are hereby required to show cause to the Commissioner of Customs, Madras as to why :
(I) the benefit of Notification No. 204/92-Cus., dated 19-5-92 against which imports, as mentioned above are made duty free under Advance Licence Scheme should not be denied to them and in consequence thereon.
(II) the duty amount of Rs. 13,59,472/- involved in the duty free import of mulberry raw silk under two advance licences Nos. 2040494, dated 29-3-95 and No. 2296196, dated 7-4-95 along with 24% interest payable as per Para 128A(iii) of Hand Book of Procedure read with Import-Export Policy, 1992-97 should not be demanded read with proviso to Section 28 of the Customs Act, 1962.
(III) The amount of Rs. 12,25,000/- paid vide Demand draft No. 914095, dated 10-2-95 of Canara Bank, Avenue Road, Bangalore-2 should not be adjusted towards the duty liability of Rs. 13,59,472/- and interest at 24% per annum payable as per para 128A(iii) of Hand Book of Procedure read with Import-Export Policy, 1992-97.
(IV) The two Bank guarantees for Rs. 97,825/- executed by M/s. Vi-nayaka Industries, (No. GT: KGR: 1090595, dated 3-8-95 for Rs. 83,497/- and No. GT: KGR: 10906:95, dated 3-8-95 for Rs. 14,328/- for advance licence No. 2296196, dated 7-4-95 and DEEC Book No. 150731 should not be adjusted towards the duty liability of Rs. 13,59,472/- and interest @ 24% p.a. payable as per Para 128A(iii) of Hand Book of Procedures read with Import-Export Policy 1992-97.
(V) Penalty should not be imposed on both Shri Praveen Kumar Dalmia, proprietor of M/s. Vinayaka Industries and Shri Chaganmal Jain, Proprietor of M/s. Kaveri Silk & Jute (P) Ltd., Bangalore."
2. The Commissioner vide the impugned order came to a finding :
"18. I have carefully gone through the records of the case. The allegation against the party is that they had imported mulberry raw silk under the two advance licences, namely 2040494, dated 29-3-95 and 2296196, dated 7-4-95, duty free. The duty involved in the said two consignments worked out to Rs. 13,59,472/-. However, the party did not make any export in respect of the said advance licence commitments and therefore, this case.
19. In reply to the show cause notice and at the time of personal hearing it was argued that the party had made some exports against these two licences, namely, 1,010 Kgs valued at Rs. 12.6 lakhs in respect of one consignment and 412 Kgs valued at Rs. 8.7 lakhs in respect of the other. Therefore, it was requested that this quantity may be taken into consideration while deciding the case.
20. In his statement given on 9-5-96 Shri Praveen Kumar Dalmia, deposed that he had made few exports in respect of the said two licences for which the sale proceeds have not yet been realised. This statement has not been contravened or modified in the subsequent reply to the show cause notice in October 1997 or during the course of personal hearing. Therefore, it is evident that the so called exports for a quantity of 1422 Kgs valued totally at Rs, 21,30,938/- is a farce. In view of the fact that the sale proceeds have not been realised in respect of these exports, they cannot be taken into account for purposes of completing the obligations under the said two advance licences. Thus, there is no merit in the claim of the party that these exports may also be taken into account while deciding the case. In addition, the party had very clearly stated in unambiguous terms that the imported mulberry raw silk was sold to M/s. Kaveri Silks & Jute (P) Ltd., Bangalore. They have even mentioned the commission paid for each Kilogram of silk. Thus there is no doubt that the imported silk was diverted to home consumption for monetary consideration.
21. In sofar as M/s. Kaveri Silks & Jute (P) Ltd., are concerned, during the course of investigation Shri Chaganmal Jain had deposed that he knew Shri Praveen Kumar Dalmia and there was an agreement that mulberry raw silk will be imported by Shri Praveen Kumar Dalmia and sold to M/s. Kaveri Silks & Jute (P) Ltd. Shri Chaganmal Jain had also come forward to get over some financial problems to the tune of Rs. 12.25 lakhs. Thus, the nexus between both the persons are clearly identified and accepted. There has been a flow of funds in turn for imported consignments. Both the persons are in the same business. Thus, having regard to the facts and circumstances of the case, there is every reason to believe that M/s. Kaveri Silks & Jute (P) Ltd., had abetted in the act of importing mulberry raw silk and then consuming locally without using the same for export purposes.
22. It has been argued during the course of personal hearing that the statement of co-accused cannot be relied upon and therefore, the charges levelled against M/s. Kaveri Silks & Jute (P) Ltd. may be dropped. In support of this claim they had cited a number of decisions of the Tribunal. However, in a recent judgment the Hon'ble Supreme Court in the case of Naresh J. Sukhawani v. Union of India - 1996 (83) E.L.T. 258 (S.C.) upheld that the statement of the co-accused can be used as a substantive evidence in cases where statements are taken during the course of investigation under Section 108 of the Customs Act, 1962. In addition, as mentioned earlier, it is not only that both have given independent statements acknowledging each others existence, business and financial support, there was no retraction of the statement made by both of them. Therefore, 1 do not agree with the stand taken by Shri Chaganmal Jain now.
23. In view of the foregoing, I hold that the charges levelled against Shri Praveen Kumar Dalmia and Shri Chaganmal Jain stand proved in respect of the goods imported under the two advance licence Nos. 2040494 and 2296196. The benefit of Notification No. 204/92-Cus., dated 19-5-92, as amended, is denied in this case. The duty amount involved, Rs. 13,59,472/-is confirmed. The amount of Rs. 12,25,000/- voluntarily paid towards the duty liability and interest thereon is allowed to be adjusted against the duty amount confirmed. The two bank guarantees, namely for Rs. 97,825/- and Rs. 14,328/- are allowed to be adjusted against the duty liability and interest thereon. I impose a penalty of Rs. 50,000/- (Rupees fifty thousand only) each on Shri Praveen Kumar Dalmia, proprietor of M/s. Vinayaka Industries and Shri Chaganmal Jain, Proprietor of M/s. Kaveri Silks & Jute (P) Ltd., under Section 112(a)(ii) of the Customs Act, 1962."
2. (a) When the matter was called Shri Lakshmi Narayan learned advocate fairly conceded that he is not pressing the appeal, as regards the liability to pay the duty, as determined. He is contesting the levy and recovery of interests thereon and the penalty imposed under Section 112 of the Customs Act. He submits that the interest proposed was to be recovered under the provision of para 128A(iii) of the Exim Policy and not under Section 28AA or AB of the Customs Act, 1962 and this interest could not therefore be recovered by the Commissioner of Customs. As regards the penalty, he submits that no goods are held to be liable for confiscation under Section 111 of the Customs Act and therefore no penalty under Section 112 was called for.
(b) The learned DR submits that the provision of the para on a simple reading would indicate that interest was payable to the customs along with customs duty and the same has therefore been rightly recovered. The penalty and interest as levied be confirmed since large amount of duty was involved in this case which the appellants are not contesting.
3. After consideration of the matter we find :
(a) The penalty on the appellant has been imposed under Section 112(a)(ii) of the Customs Act, 1962. A perusal of this section reveals that any person who in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111 or abets the doing or the omission of such an act shall be liable for a penalty. From the notice issued, extracted supra it is observed, that no goods have been proposed as liable for confiscation under Section 111 of the Customs Act in this case. The plea of the learned SDR that the finding of the Commissioner "In view of the foregoing, I hold that the charges levelled against Shri Chaganmal Jain stand proved..." will not to our mind cause the visit of penalty under Section 112(a)(ii), especially -
(a) When no proposal for confiscation of any goods has been made in the show cause notice and or arrived at, as can be seen from the findings of the Commissioner extracted supra. Therefore, the penalty imposed is required to be set aside.
(b) We have considered the plea as regards the liability for interest on the amount of duty of Rs. 13,59,472/- confirmed by this order. The liability of duty is not in dispute before us substantial portion thereof has been deposited before the show cause notice was issued. There is no doubt that the Import Policy Para 128 thereof prescribes as follows :-
".......To the Customs authority, customs duty on the unutilised imported material alongwith interest at the rate of 24% per annum thereon; and........:"
However the recovery of the same by the Customs Authorities can be effected only under the Provisions of the Customs Act, 1962. That Act provides by Section 28(1) thereof, that a notice has to be served, for the recovery of interest payable. Under Section 28(AB) ibid it specified interest could be recovered in addition to duty on delayed payments of duty in special cases as per the rates prescribed thereunder. However this delay in payment of duty, should be as prescribed under Sections 28AA or/and 28AB. Section 28AB(2) prescribed that the provisions of that section was applicable to cases where duty became payable before the date on which Finance Bill 2001 received the assent of the President. In this case, the issue relates to clearance of goods much before 29-8-96, when the duty should have been paid. Therefore no interest under this Section can be charged. As regards the interest under Section 143A(2)(b) we find that Section 143(A) is a provision which is hibernating in the Customs Act, as no notification implementing the date from which it is effective has been shown to us. Therefore no interest under this Section can also be ordered to be recovered, though this section is the provision for recovery of duty and interest in cases of advance licences misused, as in this case. In this view, we are not able to confirm the order as regards the recovery of Interest under the provisions of the Customs Act.
4. In view of our findings the order as regards penalty under Section 112(a)(ii) of the Customs Act, 1962 as imposed on the present appellant and the order as regards the recovery of interest is set aside and appeal allowed with consequential relief if any.