By TIOL News Service

NEW DELHI, FEB 02, 2016: THE challenge in the Writ petitions is against the Tribunal order dated 29th October 1997 whereby inter alia the penalties levied on the Appellants by the orders-in-original of the Collector of Customs were upheld.

The facts are that the DRIreceived information that Asian Wire Ropes Limited ('AWRL'), Hyderabad was importing low/high carbon steel wire rods and electrolytes zinc free of duty under the Duty Exemption Entitlement Certificate (DEEC) Scheme by mis-declaring and undervaluing the goods and then disposing of the said imported goods in the local market for profit instead of using them in the manufacture of steel wire ropes for export.

Based on the said information, the residential, office and factory premises of AWRL and persons connected with it were searched. As a result of the searches, incriminating documents were seized. It transpired that the goods imported free of duty under the DEEC Scheme by AWRL were unauthorisedly disposed of through M/s. Maldhari Steels. Documents also showed the payment of the differential value and commission to Mr. Vipin Gupta, the brother of Mr. Subhash Gupta, one of the Directors of AWRL& also to Janki Ram, Managing Director of AWRL. The searches also resulted in recovery of certain quantities of steel wire ropes from the various locations that were searched. When the goods that were seized were examined, it conformed to EN-1A British specifications relating to leaded free cutting steel wire ropes. These were declared as steel wire ropes of Belgium origin and had been assessed on that basis and allowed for clearance free of customs duty. Since the description of the goods was found not matching with the description shown in the L/C and Licence, they were seized. Statements of various persons were also recorded during the course of investigation.

One SCN concerned goods that were mis-declared/undervalued and cleared by the Customs but were available for confiscation. The other SCN concerned goods that were mis-declared/undervalued and cleared but had already been diverted and sold in the market and, therefore, not available for confiscation.

The SCNs were adjudicated and the duties totaling in excess of Rs.2.60crores were confirmed along with imposition of penalties and interest.

By the impugned order dated 29th October 1997 the CEGAT dismissed the appeals concurring with the findings of the Collector of Customs.

As mentioned, the petitioners are before the CESTAT and submit that the second SCN(demanding Cus duty of Rs.2.19cr) was barred by limitation as well as the principles of res judicata since the entire facts regarding the B/E which is the subject matter of second SCN was already in the knowledge of the Department at the time of issuance of the first SCN. Reliance is placed upon the decisions in Nizam Sugar Factory - 2006-TIOL-56-SC-CX , Damnet Chemicals - 2007-TIOL-156-SC-CX .

The counsel for the Revenue pointed out that whereas the first SCN related to the three consignments only, the facts relating to other seven consignments, which form subject matter of the second SCN, came to light in the course of investigation into the three illegally imported consignments which formed the subject matter of the first SCN; that the extended period of limitation was rightly invoked and that the principle of res judicata would not apply as the subject matter of the two SCNs was different.

The High Court observed that there was no merit in the submission of the Petitioner. It was held -

++ In the present case the relevant date for the purpose of limitation would be the clearance of the B/E in question. The earliest of the B/Es forming the subject matter of the second SCN is 12th March 1987 and the second SCN was issued on 11th March 1992 which was within five years from the date of such B/E. The date of clearance of the consignment with reference to that B/E was obviously on a date after the date of such B/E.

++ The contention of learned counsel for the Petitioners that the limitation for the purpose of Section 28 (4) of the Act for issuance of SCN will begin to run from the date of knowledge of the mis-declaration or undervaluation of the goods is contrary to the express language of clause (a) of Explanation 1 which makes it clear that limitation begins to run from the 'relevant date' which in the present case will be the date on which the goods were cleared by the Customs. ++ For the purpose of Explanation 1 (a) to Section 28 of the Act, it is not the date of knowledge of the mis-declaration that is relevant but the date of clearance of the goods under a B/E which contained such mis-declaration and/or undervaluation. Consequently, the second SCN in the present case was issued within the extended period of limitation in terms of Section 28 (4) of the Act. ++ There can be no doubt that the subject matter of the two SCNs were two different sets of B/Es. Each B/E is separately assessed at the time of clearance of the imported goods. The B/Es mentioned in the first SCN are not the ones mentioned in the second SCN and vice versa. Therefore, the question of applicability of the principle of res judicata does not arise.

++ Both the adjudication orders of the Collector of Customs have discussed extensively the evidence gathered by the Department. These have again been discussed in the impugned order of the CEGAT which has upheld those orders. Counsel for the Petitioners was unable to show any error, legal or factual, in the said adjudication orders which calls for interference by this Court in exercise of its writ jurisdiction under Article 226 of the Constitution.

The case laws cited by the petitioners were held to be distinguishable on facts.

The Writ Petitions were dismissed.

(See 2016-TIOL-187-HC-DEL-CUS)