By TIOL News Service

HYDERABAD, MAR 30, 2016: AGAINST the interim order of Tribunal reported in 2014-TIOL-1909-CESTAT-BANG, directing the appellants to pre-deposit entire amount of duty (not covered by the Bank Guarantees already given), the appellants filed appeals before the High Court under Sec 130 of the Customs Act, 1962.

The dispute, in the appeals filed before the CESTAT, related to the validity of the adjudication orders levying customs duty, interest and penalty on the import of dense wavelength division multiplex equipment (DWDM), and certain imported CDs allegedly used for its functioning. All the appellants are connected with these imports. While some of them are importers, some others are foreign suppliers. The principal importers were M/s Prithvi Information Solutions Ltd (PISL) and M/s VMC Systems Ltd (VMCL).

While disposing of the stay applications, the Tribunal directed the importers to deposit entire duty amount not covered by the Bank Guarantees and the co-applicants to deposit penalty @ 10%/5%/and 1% of the respective penalties imposed.

The appellants contended before the High Court that specific plea of financial hardship was not considered by the Tribunal and the appellants were ready to deposit Rs 10 crores and the Court should direct waiver of deposit of the balance amount.

After hearing both sides, the High Court held:

+ The right of appeal is a creature of a statute, and there is no reason why the legislature, while granting the right, cannot impose conditions for the exercise of such right so long as the conditions are not so onerous as to amount to unreasonable restrictions rendering the right almost illusory. The right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi-judicial adjudications. The right to appeal is a statutory right, and can be circumscribed by the conditions in the grant.

+ As the prima facie findings recorded by the CESTAT, in the order under appeal, disclose a systematic fraud having been committed by several companies and individuals, both within the country and abroad, to evade customs duty; the elaborate steps taken to disguise the software embedded in the imported equipment as customised software; and the conscious and deliberate efforts at misrepresentation only to deprive the Government of its legitimate revenues in the form of customs duty, can it be said that the order of CESTAT suffers from such an illegality as to necessitate interference in appeal by this Court?

+ It is not even contended that the prima facie findings of the CESTAT are perverse or are based on no evidence. The only contention urged is that the CESTAT did not consider the appellants plea of financial hardship. This contention does not merit acceptance as, on the appellants claim that they were in serious financial difficulties as BSNL did not pay them their dues of more than Rs.900 crores till date, the CESTAT observed that BSNL was also penalized to the extent of Rs.75,00,000/- by the original adjudicating authority, and were directed in appeal to deposit Rs.10,00,000/-; this showed that a prima facie case was also made out against them; according to the tender documents the duty element was required to be shown separately by the bidders and, if there was any change, BSNL was liable to pay the same; the appellants could have easily recovered the duty paid by them since, according to the tender documents, it could have been shown separately and collected; the appellants had put themselves in a situation where they had committed an offence, to reduce their customs duty liability, in their anxiety to become the lowest bidder; it would not be appropriate to lend them a helping hand waiving the requirement of pre-deposit of duty which, prima facie, they were liable to pay at the time of importation; the suppliers were also under the impression that duty was required to be paid on the embedded software; and for a financial situation created by the appellants own folly, as well as the purchasers decision not to pay, it would be unfair to waive pre-deposit and grant stay.

+ It is evident that the appellants plea of financial hardship was considered and rejected by the CESTAT. All that the CESTAT has directed the appellants to pay is the customs duty which they had, prima facie, evaded hoodwinking the authorities concerned into believing that the imported equipment did not contain software, and that customised software for such equipment was being imported separately. This elaborate ruse, the CESTAT prima facie held, involved several players both within the country and abroad including all the appellants herein. The facts, as noted in the order of the CESTAT, show that, though the software was embedded in the imported equipment, blank and useless CDs were imported in huge quantities to mislead the authorities into believing that these CDs contained customised software to be loaded into the imported equipment later. The invoices, for the imported equipment, were manipulated, and separate invoices for the alleged customised software were created only to evade customs duty. The prima facie findings recorded by the CESTAT are largely based on the admissions of various persons, and the statements recorded in this regard. Mere appreciation, of facts or the documentary evidence cannot be held to give rise to a substantial question of law. Where the Tribunal is shown to have exercised its discretion in a judicial manner, it cannot be termed to be an error either of law or of procedure requiring interference.

Accordingly, the High Court dismissed all the appeals.

(See 2016-TIOL-617-HC-AP-CUS)