By TIOL News Service

CHENNAI, MAY 28, 2013: THE petitioner is in the business of providing logistic support like arranging the transport for movement of export and import cargo from in and out of the Custom House, Tuticorin, including all the container freight stations attached to it and providing transport, men and materials for loading and unloading of cargo in and out of Tuticorin Port and its attached CFSs.

The DRI Officers of the Tuticorin Unit intercepted a container pertaining to 10 shipping bills and booked a case. The main allegation against the exporters in respect of the said said shipping bills was that the goods did not possess the basic shape of the shoe upper and more than 50% of the consignment was unusable/used waste and the actual value in respect of the said 10 shipping bills was only Rs.1 lakh as against the declared FOB value of Rs.97,63,256/- with a drawback involvement of Rs.9,27,511/-. Since the petitioner had provided logistic support for the above consignments, SCN was issued for imposition of penalty under the Customs Act in respect of 154 shipping bills. The adjudicating authority vide Order-in-Original dated 29.6.2012 imposed a sum of Rs.50 lakhs as penalty in addition to the recovery of Rs.1.37 crores, jointly and severally from the petitioner.

The petitioner had moved the CESTAT along with stay application and the Bench had passed an order dated 11.12.2012 holding as follows:

"8. ..... The penalty imposed on him is to the extent of Rs.50 lakhs. The learned Consultant has submitted inter alia that his client received an amount of Rs.3,000/- per transaction totalling to Rs.6 lakhs. This itself would prima facie indicate a deliberate involvement of Shri Vijay Anand in the fraudulent transactions. In the facts and circumstances of this case, we are inclined to direct Shri Vijay Anand to predeposit an amount of Rs.20 lakhs towards the penalty imposed on him. In respect of the "joint and several liability" fastened on him, there shall be waiver and stay. In the result, Shri Vijay Anand shall deposit Rs.20,00,000/- (Rupees twenty lakhs only) within four weeks and report compliance to DR/AR on 16.1.2013. DR/AR to report to the Bench on 30.1.2013. In the event of due compliance, there will be waiver and stay in respect of the balance amount of penalty as well as the balance amount of the drawback amount."

Challenging the said order of the CESTAT, the petitioner has filed a Writ Petition seeking to quash the same and for consequential direction to the first respondent-CESTAT to hear the main appeal of the petitioner without insistence of pre-deposit as ordered.

The Revenue submitted that the order of the CESTAT is required to be upheld on account of the following -

+ To keep a check on fraudulent operations which resulted in the Government exchequer getting drained of Crores of Rupees, severe and deterrent penal action is warranted. If left unchecked, more persons may follow the same kind of modus-operandi to defraud the Government. Hence, imposition of penalty is just and legal in respect of persons involved in such kind of nefarious activities. The position that the Government Treasury getting filled by genuine tax payers on the one hand and getting drained by way of such fraudulent activities on the other hand does not augur well with the system.

+ There is no finding by the CESTAT on the financial position of the petitioner, because he has not pleaded any such hardship before the CESTAT and he stated so only in the Writ Petition, which is an after-thought, in order to seek the waiver of pre-deposit.

+ Since the petitioner failed to pay the penalty imposed on him as per the order of the CESTAT, dated 11.12.2012, a detention notice, dated 24.1.2013 was issued by the Assistant Commissioner of Customs u/s 142 of the Customs Act and the said detention notice is issued as per the CBEC's Circular No.967/01/2013-CX, dated 1.1.2013.

The High Court inter alia observed -

“10. It is to be noted that when once an appeal is filed by an aggrieved person against the original order, it is mandatory requirement under the provisions of the Customs Act to pay the amount ordered by the original authority, as a condition precedent for taking up the appeal.

11. Law is well settled that the capacity of a party to pay the pre-deposit amount had to be noticed and the financial burden and undue hardship for the party to resort to claim waiver of the pre-deposit, have also to be considered. In this regard, it is worthwhile to notice a decision of a Division Bench of this Court reported in 2009 (235) ELT 231 (Trendy Moods Vs. Customs, Excise and Gold (Control) = (2009-TIOL-22-HC-MAD-CUS) Appellate Tribunal, Chennai), wherein, the Division Bench, after taking into account the various decisions of the Supreme Court, for and against, ultimately came to the conclusion that the capacity of the appellant therein to pay the amount having been noticed and in the absence of any financial burden, it cannot be construed that there is an undue hardship for the appellant therein to resort to claim waiver of pre-deposit.

12. The cardinal principle of consideration of the waiver of pre-deposit is based on undue hardship, prima-facie case, balance of convenience, financial burden and other difficulties expressed by the party before taking the matter on appeal and these factors have to be weighed in relevant circumstances, taking into account all the material factors, which alone can come to the wisdom of the authority to give certain waiver of pre-deposit to the party who is on appeal.

13. In this case, the CESTAT took into account all the above legal principles and was lenient in ordering only Rs.20 lakhs as pre-deposit as against Rs.50 lakhs, by waiving the balance penalty and the drawback amount. Hence, it is not proper for the petitioner to approach this Court and challenge the impugned order of the CESTAT and the attitude of the petitioner in filing this Writ Petition cannot be appreciated and the same is not sustainable.”

Holding that the order of the CESTAT cannot be interfered with, the same was confirmed and the Writ Petition was disposed of.

(See 2013-TIOL-442-HC-MAD-CUS)