Commissioner of Customs vs J.N. Textiles

T.S. Sivagnanam, J.—This appeal by the Revenue is directed against the Final Order No. 1214/2008, dated 24-10-2008 [2009 (238) E.L.T. 168 (Tribunal)] on the file of Customs, Excise and Service Tax Appellant Tribunal, South Zonal Bench, Chennai. The appeal has been admitted on the following substantial question of law:-

Whether in the facts and circumstances of the cases the conclusion arrived by the Tribunal that the goods imported are Mulberries Silk Grade IV A which did not attract Anti-dumping duties and as such the issuance of the show cause notice after the period prescribed cannot be legally sustainable as there is no intention on part of the importer to evade duty is correct or not?

The facts are that the respondent/assessee filed bill of entry No. 641711, dated 15-6-2004 declaring the goods as Mulberry Raw Silk of 20/22 4A Grade, 1197.98 kgs, unit price USD 18.50 per kg CIF and sought for clearance under DFRC scheme vide Notification No. 46/2002-Cus. , dated 22-4-2002. On Examination, samples were drawn in the presence of Customs House Agent of the respondent and were sent for testing and forwarded to the Central Silk Techno-logical Research Institute, Central Silk Board, Bangalore. The said authority certified that the goods were Mulberry Law Silk of 2A Grade. Based on the request made by the respondent, the bill was assessed by way of enhancing the value of US$ 18.50 per kg to US$ 21.40 per kg on 7-7-2004 and out of charge was given on 13-7-2004. Subsequently, the Special Intelligence and Investigation Branch received information pertaining to importation of Mulberry Raw Silk-2A grade by misdeclaring it as grade 4A. A statement was recorded from the partner of the respondent, who appears to have stated that he was aware of Notification No. 106/2003-Customs, dated 10-7-2003 and importation of Mulberry Raw Silk of grade 2A attracts anti-dumping duty. Thus, the department based on the statement recorded under Section 108 of the Act, stated that the partner of the respondent had accepted the misdeclaration. In the light of the above, a show cause notice dated 10-1-2005 was issued to the respondent calling upon the respondent to explain as to why the customs duty amounting to Rs. 1,99,825/- as applicable under Customs Notification No. 106/2003-Cus., dated 10-7-2003 should not be demanded under proviso to Section 28(1) of Customs Act, 1962 (hereinafter called as the "Act") along with interest as applicable; as to why the goods should not be confiscated under Section 111(m) of the Customs Act, 1962; why penalty should not be imposed under Section 112(a) of the Customs Act, 1962 and penalty equivalent to the duty evaded in respect of the Bill of Entry dated 15-6-2004 should not be imposed on the importer under Section 114(a) of Customs Act, 1962 as the duty evasion has occurred on account of willful misstatement and suppression of facts.

The respondent/importer submitted that their reply dated 21-2-2005 stating that show cause notice issued was void and that the enhancement of value as against the declared value is not relevant for determining value in terms of the Customs Law and as such enhancement of value done is deemed to have been done only at the level of an Asst./Deputy Commissioner of Customs in terms of Section 14 of the Act. Therefore, it was contended that the attempt of the Department is clearly a back door method to undo the "evaluation" done at the level of Asst./Deputy Commissioner of Customs. Further, it was contended that the demand is barred by limitation under Section 28 of the Act and the question of levying penalty and interest does not arise. Further it was contended that provisions of Section 112 of the Customs Act are not attracted where the only dispute is "anti-dumping duty". Likewise, the invocation of Section 114 of the Act was also opposed stating that there was no short levy of anti-dumping duty in the instant case and Section 28 of the Act itself does not come into play and therefore, question of invoking Section 114A of the Act does not arise.

The Adjudicating Authority, after considering the reply to the show cause notice, by order dated 13-10-2005, confirmed the demand of duty. So far as the levy of penalty and interest, the Authority observed that Sub Section 8 of Section 9A of the Customs Tariff Act, 1975 was not made applicable relating to charging of anti-dumping duty since the provision relating to interest, offences and penalty as applicable in the Customs Act, 1962 were made applicable to Section 9A of the Customs Tariff Act only from 10-9-2004 and in the case of the respondent, the bill of entry is dated 15-6-2004; therefore, the goods are not liable for confiscation and levy of penalty or interest does not arise.

The respondent/importer being aggrieved, preferred appeal before the Commissioner (Appeals) contending that the demand is time barred; it was a question of short levy and not non-levy and hence Clause (a) of Section 28(3) is not applicable and the certificate issued and the classification of the goods based on the certificate issued by the Government Agency of China cannot be termed as misdeclaration.

The Department submitted that it is a clear case or non-levy of duty and not short levy of duty; the additional duty equal to the Central Excise Duty is leviable under Section 3 of the Customs Tariff Act and anti-dumping duty is leviable under Section 9A of the Customs Tariff Act and therefore, it is a case of non levy of duty and the demand was not hit by limitation in terms of Section 28(3)(a) of the Act. Further it was stated that "Out of Customs Charge" was given on 12-9-2004 and the show cause notice has been issued on 12-9-2004 and the show cause notice had been received by the assessee on 12-1-2005 and hence, the demand is not barred by limitation. Further it was contended that the consignment had been tested and misdeclaration had been established.

The First Appellate Authority, elaborately considered the materials and confirmed the order of the Adjudication Authority and held that the demand is not hit by limitation and the appeal was dismissed. Aggrieved by the same, the respondent/assessee preferred appeal before the Customs, Excise and Service Tax Appellate Tribunal. The assessee reiterated the contentions raised before the First Appellate Authority.

The Tribunal, by order dated 24-10-2008 observed that the demand notice was issued beyond six months from the dated of payment of duty, unless the larger period is invocable, the demand is barred by limitation. Further it was pointed out the importer himself came forward to pay the differential duty compared to the declared value even before the test results were received showing that the goods were of 2A grade. The Tribunal, by relying upon the certificate given by Chinese supplier held that there is no evidence that the assessee had deliberately misdeclared the description to evade the anti-dumping duty found due on the imported goods and therefore, cannot be taken as case of misdeclaration intentionally to evade payment of anti-dumping duty on the imported goods. Further the Tribunal held that the conclusion arrived at by the First Appellate Authority that it was a case of non-levy on the goods. The Tribunal pointed out that any short levy on the goods including non levy under a particular act will be covered by clause (d) of Section 28(3) of the Act; the respondent, having paid the duty on 8-7-2004, the show cause notice issued on 12-1-2005 is beyond six months and barred by limitation and therefore, determined that Section 28(3)(a) of the Act could not be invoked as it is not a case of non levy; hence, it was held that the notice was barred by limitation. Aggrieved by the same, the Revenue has come on appeal raising the substantial question of law referred supra.

We have heard Mr. P. Mahadevn, learned Standing Counsel for Revenue and Mr. B. Hari Radha Krishnan, learned counsel for the assessee.

From a reading of the order passed by the Tribunal, we find that the Tribunal has over-looked the facts which has been recorded by the Original Authority as well as the First Appellate Authority. At this stage, it is to be pointed out that the importer/respondent did not dispute the test report of the Central Authority, which held that the product is of 2A grade. Furthermore, in the statement recorded under Section 108 of the Act, the partner of the respondent had accepted that he was aware of the Notification No. 106/2003-Customs , dated 10-7-2003 that the import of Mulberry Silk of 2A grade attracts anti-dumping duty. The Tribunal rendered a finding that it cannot be taken as a intentional misdeclaration since the certificate was given by the supplier that the product is of 4A grade and the same quality of the product was mentioned in all the import documents.

We do not agree with the reasons assigned by the Tribunal. In fact, the First Appellate Authority pointed out that the information furnished in the certificate given by the supplier itself was found to be false and investigation was initiated. Moreover, when the respondent themselves requested the assessment to be done at the enhance value, even before test report, it clearly shows that the assessee was aware of the aware of the quality/grade of the imported goods and trying to escape the rigour of anti-dumping duty. Further more, the respondent themselves accepted that the certificate produced from the Republic of China was rejected in preference to the certificate issued by the Central Silk Board and further more, the respondent did not question the certificate issued by the Central Silk Board classifying the product as 2A grade in the appeal filed before the Tribunal.

The next question which has to be considered is a to whether it is a case where the Department was justified in invoking the larger period of limitation and the effect of Section 28(3)(a) of the Act. Section 28(3)(a) of the Act covers the situation where levy and assessment has taken place, but, Sub Clause (d) of Section 28(3) of the Act covers the situation where levy and assessment and collection has been completed. The case on hand is the case where the Department, after obtaining the test report, from the Central Authority came to the conclusion that it is a case of misdeclaration of the imported goods due to which antidumping duty is payable. It is a separate levy by itself. The First Appellate Authority, in his order has clearly assigned reasons in this regard by pointing out that the comparison of Clause (a) and (d) of Section 28(3) of the Act would indicate that, for a situation to fall under clause (a), it is imperative that the duty or interest be not charged, and an order of clearance be made, as that is the date relevant here, however in respect of cases falling under clause (d), the expression used is "in any other case" which would indicate that where the circumstances do not fit any of the other clauses preceding it and the only event which can be relevant would be the date of actual payment of duty or interest. In the case on hand, Section 9A of the Customs Tariff Act, 1975 was not invoked at all and the goods were given an order of clearance after assessment of the goods. Therefore, it is a clear case, where Section 28(3)(a) of the Customs Act, 1962 is invokable and the relevant date for determination of limitation would be the date of clearance of the goods and therefore, the demand is not hit by limitation.

The learned counsel appearing for the respondent/importer contended that the findings rendered by the Tribunal have not been questioned by the Revenue in this appeal.

We do not agree with the said line of reasoning, more so, when the respondent itself had not challenged the test report in the grounds of appeal before the Tribunal. On the other hand, it merely contended that the certificate issued by the competent agency of the Republic of China could not be rejected on the sole ground of the certificate issued by the Central Silk Board.

For the reasons that we have assigned, in the absence of specific challenge to the certificate issued by the Central Silk Board or to the findings of the Tribunal, on this aspect of the bonafideness of the assessee/importer, the reasoning of the Tribunal is perverse, hence, the order of the Tribunal is liable to be interfered. In the result, the Civil Miscellaneous Appeal is allowed and the order passed by the Tribunal is set aside and the order passed by the Commissioner (Appeals) stands restored. No costs.