Commissioner of Cus. vs Jindal Vijayanagar Steel Ltd.

V.G. Sabhahit, J.—This appeal is filed by the Revenue being aggrieved by the order passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bangalore (hereinafter called as CESTAT) in Appeal No. 197/2004, dated 27-7-2004 [2004 (177) E.L.T. 937 (Tri.-Bang.)] wherein the Tribunal having confirmed the confiscation, has set aside the order of penalty imposed upon the respondent on the ground that the duty has been paid before show cause notice was issued and therefore no penalty could be imposed. The appeal has been admitted on 10-3-2006 for consideration of the following questions of law.

(1) Whether the Tribunal has committed an error in setting aside the order, imposing penalty despite confirming the order of confiscation?

(2) Whether the Tribunal has committed an error in setting aside the order of penalty and interest contrary to the provisions of Sections 72 and 112 of the Customs Act?

(3) Whether the Tribunal has committed an error in holding that the penalty is not imposable merely on payment of money before issue of show cause notice?

(4) Whether the Tribunal is competent to waive penalty and interest payable and order confiscation under Section 111 of the Customs Act?

(5) Whether the Tribunal has committed an error in holding that the payment of amount by the respondent-company is voluntary?

(6) Whether the Tribunal has committed an error in directing waiver of penalty and interest notwithstanding the fact that the respondent-company are disputing their liability to make the payment of duty on the goods clandestinely removed, which they claimed had been voluntarily paid?

(7) Whether the order of the Tribunal is perverse and fails to lake into consideration the well established principles laid down by the Hon''ble Supreme Court regarding levy of penalty?

The material facts necessary for answering the above substantial questions of law, the substance pertains to the question of law is, as to whether the finding of the Tribunal on the facts and circumstances of the case, that no penalty can be imposed, as the duty has been paid before issuance of show cause notice, is justified or contrary to law, are as follows :

The assessee have a public bonded warehouse in their premises operated by Central Warehousing Corporation where machinery and spares imported are warehoused pending clearance. On receiving credible information of intelligence of irregularities, officers of DRI Bangalore visited their premises, took stock of material in the warehouse, verified all the records of import under FPCG scheme by the appellants and noticed that bearing covered by Bond No. 10/95-96 and 2/96-97 had been used in machinery erected before the month of November, 1996. The Chief General Manager of the appellant company identified the bearings and the machinery on which they had been mounted. He gave the details of the bearings mounted on the main equipment and stated that the bearings covered by the above said two bonds had been utilized in implementation of the project before they were debonded from the CWC warehouse. Since it was found the warehoused goods were removed clandestinely and the bills of entry were subsequently filed to regularize the clearances after removing the goods clandestinely. A show cause notice was issued on 21-5-1998 to the assessee and their officers. The Adjudicating Authority, Commissioner of Customs, Bangalore, by its order dated 5/7-5-1999 confiscated the goods valued at Rs. 15,88,375/- but allowed these goods to be redeemed on a fine of Rs. 12 lakhs. He also demanded duty of Rs. 43,18,783/- along with interest of Rs. 14,12,988/- and imposed a penalty of Rs. 60 lakhs on the appellants.

The order of the Commissioner was challenged before the CESTAT and the CESTAT by order dated 31-8-1999 remanded the case for readjudication. After considering the appellant''s arguments and the observations of the Tribunal in its order No. 1/2001, dated 30-3-2001, the Adjudicating Authority found that statement and letter of Shri Sarogar contain clear and categorical admission of the allegations and by order dated 5/7-5-1999 confirmed the order of confiscation. Appeal was filed before the Commissioner of Customs, Mangalore and the appeal was disposed of wherein the assessee failed and thereafter appeal was filed before the Tribunal in Appeal No. 197/2004. The Tribunal by order dated 23-2-2002 remanded the matter for de novo adjudication with certain directions. Against the said order of the Tribunal and Order-in-Original No. 1/2001, dated 3-3-2001 the assessee approached this Court in W.P. No. 22391-22392/2002. This Court by order dated 18-2-2003 has set aside the Order No. 1/2001, dated 30-3-2001 of the Adjudicating Authority, and Order No. 419/2002, dated 23-3-2002 of the Tribunal. The Commissioner was directed to follow the direction of the Tribunal contained in Paragraph 6 of the order dated 31-8-1999 passed by the Tribunal and to complete the proceeding by 30-6-2003. Accordingly the Commissioner of Customs, Mangalore passed the order which was again challenged in W.P. No. 32291/2003. The said Writ Petition was disposed of by relegating the petition to the Tribunal and the Tribunal was directed to consider the appeal without insisting on limitation and to complete the proceedings within four months from the date of filing the appeal. Thereafter the Adjudicating Authority by order in No. 2/2003, dated 9-5-2003 upheld the confiscation proceedings and imposition of penalty.

Being aggrieved by the same an appeal was filed before the Tribunal by the assessee in Order-in-Original No. 2/2003, dated 9-5-2003 and the Tribunal by order dated 27-7-2004 confirmed the confiscation proceedings. However, held that in view of the statements which was prevailing at the time of decision since duty had been remitted before issuance of show cause notice imposition of penalty was liable to be set aside. Accordingly passed the impugned order as referred to above by setting aside the penalty imposed on the assessee and the interest demanded and rest of the order of the Commissioner was upheld. Being aggrieved by the said order of the CESTAT dated 27-7-2004 this appeal is filed, which had been admitted for consideration of the above said substantial questions of law.

We have heard the learned counsel appearing for Revenue.

Learned counsel appearing for the appellants submitted that in the judgment of the Hon''ble Supreme Court in the case of Union of India and Others v. Dharamendra Textile Processors and Others reported in (2008) 306 ITR 277 (SC) : 2008 (231) E.L.T. 3 (S.C.); and in the case of Union of India v. Rajasthan Spinning and Weaving Mills reported in (2009) 13 Supreme Court Cases 448 : 2009 (238) E.L.T. 3 (S.C.). it was held that mere fact that assessee who deposited duty before issuance of show cause notice would not absolve the assessee of paying penalty and interest. Therefore order of the Tribunal is liable to be set aside by answering the substantial question of law in the affirmative.

We have given careful consideration to the contentions of the learned counsel appearing for the appellant and scrutinized the materials on record.

In all, seven substantial questions of law have been framed at the time of admission. It is clear from the substance of the said substantial questions of law that, if the question as to whether the assessee who has deposited the duty before issuance of show cause notice is absolved of his liability to pay penalty. If that question is answered, the same would answer all the substantial questions of law. The answer to the said question is no more res integra as it has been clearly held in Union of India v. Rajasthan Spinning and Weaving Mills reported in (2009) 13 Supreme Court Cases 448, that payment of differential duty made by the assessee before or after issuance of show cause notice does not alter liability for penalty and the imposition of penalty is mandatory if the conditions are satisfied.

Accordingly the order of the Tribunal having confirmed the order of confiscation setting aside the order of penalty on the ground that duty has been paid before issuance of notice, cannot be sustained and the same is contrary to the decision of the Supreme Court. Hence we answer the substantial question of law in favour of the Revenue and against the assessee and pass the following order.

ORDER

Appeal is allowed. Impugned order of the CESTAT in C/197/2004, dated 27-7-2004 setting aside the order of penalty imposed upon the assessee, is hereby set aside.