M/s Seville Products Limited vs Commissioner Of Customs

Appeal No.,C/51953/2019,C/52105/2019

Period,2012-13,2012-13

Order-in-Appeal,"CC(A)CUS/D-II/ICD-

TKDExp./134/2019-20 dt. 02.05.2019","CC(A)CUS/D-II/ICD-

TKDExp./134/2019-20 dt. 08.05.2019

Order-in-original

No.","28/2016/R.R./J.C./Exp./ICD/TKD dt.

29.04.2016","31/2016/R.R./J.C./Exp./ICD/T KD dt.

06.05.2016

Show cause notice

F. No.","DRI/MZU/F/60/2013-14/7629

dt.11.08.2014 by ADG, DRI, Mumbai.","DRI/MZU/F/54/2013-14/5600

dt.16.06.2014 by ADG, DRI, Mumbai.

Penalties,"Rs.13,00,000/- u/s 112(a) of the

Customs Act, 1962.","Rs.23,00,000/- u/s 112(a) of the

Customs Act, 1962.

representative in cash from the importers. Further, in the course of investigation M/s Seville Products Limited submitted two sets of invoices and also",,

submitted the statement of account of M/s SRI as existing in their books through their representative in India Shri Prakash Menon. Similarly, M/s",,

Kelsen Group A/S, Denmark which also includes Repensa A/S, Denmark (Group company) have also made similar admission of colluding in",,

suppressing the transaction value for exporting goods to India imported by M/s SRI and others. Further, they have admitted the similar role in",,

collecting the differential value in cash from the importer(s) and have similarly submitted the copies of the invoices and statement of account through,,

their Indian representative - Shri Kaivan Balsara and Srikant Panda. Accordingly, show cause notice dated 16.06.2014 was issued proposing to reject",,

the transaction value and for re-determination of value as per the actual transaction value and further demand of differential customs duty alongwith,,

interest and proposal to impose penalty on M/s S.R. International. Further, penalty was also proposed under Section 112(a) of the Act on M/s Seville",,

Products Limited (appellant), M/s Kelsen Group A/S, Denmark and Shri Kaivan Balsara, and others.",,

Under similar facts and circumstances in the other appeal, show cause notice dated 11.08.2014 was issued by the DRI, Mumbai Zonal Unit,",,

Mumbai proposing to reject transaction value and re-valuing the same as per the actual value. Further, demand of differential duty alongwith interest",,

and also proposal for confiscation. Further, penalty was also proposed under Section 112(a) and (b), Section 114A, 114AA of the Act, on this",,

appellant and others.,,

The exporter â€" shipper M/s Seville Products Limited, Dubai was also required to show cause why penalty be not imposed under Section 112(a) of",,

the Act.,,

The show cause notice dated 16.06.2014 was adjudicated vide order-in-original dated 06.05.2016 on contest. The appellant M/s Seville Products,,

Limited, Dubai inter alia, among other grounds urged that no penalty was imposable on them as the Customs Act, 1962 does not have extra territorial",,

jurisdiction/application. They also placed reliance on the following rulings-,,

i) British India Steam Navigation Co. Ltd. vs. Shanmughavilas Cashew Indus.-1990 (3) SCC 481,,

ii) Hi Lingos Co. Ltd. vs. Collector of Customs -1994 (72) ELT 392, which have been affirmed by Hon’ble Supreme Court at 1997 (95) ELT",,

A147,",,

iii) C. K. Kunhammed vs. Collector of Central Excise & Customs - 1992 (62) ELT 147.,,

iv) Bussa overseas & Properties Pvt. Ltd. Vs. C. L. Mahar -2004 (163) ELT 304, which is confirmed by the Apex Court, reported at 2004 (163) ELT",,

A160 (SC).,,

It was further urged that no penalty is imposable on M/s Seville Products Ltd., as they have not done any act which rendered goods liable to",,

confiscation under Section 111 of the Customs Act, 1962.",,

The Adjudicating Authority took notice that M/s SRI (importer) have admitted the allegation and have settled their dispute before the Settlement,,

Commission, which include M/s SRI and its Partners, as well as Shri Kaivan Balsara, being Settlement Commission Final Order No. F-2568-",,

2577/Cus./2015-SC (DB) dated 30.10.2015.,,

As regards this appellant, the finding has been recorded that the appellant have violated the provisions of the Customs Act, 1962, through their",,

representative in India - Shri Prakash Menon. The said representative has produced documentary evidences, produced or forged by the appellant",,

exporter. Further, the exporting company have colluded with the importers in India through their Indian representative and have further collected the",,

differential amount of suppressed transaction value in cash, through their representative. Further, the representative has transmitted such amount",,

collected in cash from the importer through non-banking channel (hawala). Thus, the appellant company have played an active role by colluding with",,

the importers in India in evasion of customs duty, payable in India. Further, the appellant company have knowingly colluded and thus abetted with the",,

importers in India in suppressing the transaction value for evasion of custom duty. The appellant have knowingly provided two sets of invoices and,,

thus have abetted in violation of the provisions of Section 111 and other provisions of the Customs Act, rendering the goods liable for confiscation and",,

thus penalty under Section 112(a) of the Customs Act was attracted.,,

So far the issue of jurisdiction raised by the appellant, it is held in the impugned order that the appellant was having their representative in India -",,

Sh. Prakash Menon, and the appellant was actively present in India through the said agent, and have colluded with the importers in evading the",,

customs duty. The appellant company booked orders from the Indian importers and further co-ordinated with the exporting company in Dubai right,,

from the stage of booking orders and thereafter collecting the differential amount of transaction value. It has been further found that the appellant,,

company was active in India through its representative Sh. Prakash Menon, in the whole modus-operandi for evading the customs duty. Further, in",,

terms of Section 147(3) of the Customs Act, which stipulates that “when any person is expressly or impliedly authorised by the owner, importer or",,

exporter of any goods to be his agent in respect of such goods for all or any of the purposes of this Act, such person shall, without prejudice to the",,

liability of the owner, importer or exporter, be deemed to be the owner, importer or exporter of such goods for such purposes including liability therefor",,

under this Actâ€. Thus, penalty can be imposed on the foreign company through their Indian representative, Sh. Prakash Menon. Accordingly, the",,

Joint Commissioner imposed penalty of Rs. 23 lakhs on the appellant company through their Indian representative Sh. Prakash Menon under Section,,

112(a) of the Customs Act, 1962.",,

Being aggrieved, the appellant filed the appeals before the ld. Commissioner (Appeals) who vide the impugned orders-in-appeal dated 08.05.2019",,

& 02.05.2019 have been pleased to dismiss the appeal upholding the orders-in-original.,,

Being aggrieved, the appellant is before this Tribunal inter alia on the ground that imposition of penalty is bad as the Customs Act, 1962, during the",,

relevant period did not have extra territorial application. It is further urged that as the importer - M/s SRI have settled the dispute of differential duty,,

etc. before the Settlement Commission, this appellant being a co-noticee is also entitled to the benefit, and their case is deemed to have been settled.",,

For this proposition, reliance is placed on the ruling of this Tribunal in the case of S.K. Colombowala vs. CC -2007 (220) ELT 492 (Tri. Mum.)",,

wherein this Tribunal held, once the case is settled before the Settlement Commission in its entirety, then such a case cannot be adjudicated qua other",,

co-noticee. This Tribunal observed that for the reason that once the case/ dispute is settled by the Settlement Commission it is settled in its entirely the,,

case against all the co-noticees once the order of settlement is passed in respect of the person entitled to file an application before the Settlement,,

Commission and accordingly penalty imposed on the co-noticees cannot be sustained and set aside. This ruling was further followed by the Tribunal in,,

Windoors (India) vs. CC -2009 (246) ELT 345 (Tri. Mumbai). It is also urged that the Commissioner (Appeals) have erred in not following the Larger,,

Bench ruling in the case of S.K. Colombowala (supra) but have erroneously relied on the ruling in K.I. International vs. CC - 2012 (282) ELT 67,,

relying on the ruling of Hon’ble Supreme Court in S.P. Chengalvaraya Naidu vs. Jagannath (1994) 1 SCC 1. Further reliance is placed on,,

subsequent ruling in the case of CC vs. Mahendra Kumar Dharewala -2016 (340) ELT 727. Further, urges that penalty cannot be imposed on the",,

appellant in terms of Section 147(3) of the Customs Act. Reliance is placed on the ruling of this Tribunal in Collector vs. Jain Exports -1990 (46) ELT,,

147 (Tri.), wherein it has been held that the scope of Section 147 cannot be extended beyond the Customs Act. Further, urged that penalty is not",,

imposable on the appellant under Section 112(a) of the Customs Act as the goods have already been cleared for home consumption. Further, urges",,

that imposition of penalty under Section 112(a) is incorrect since the appellant did not do any act or omission in respect of the goods rendering them,,

liable to confiscation under Section 111 of the Customs Act. Further, reliance is placed on the ruling of Mumbai Bench of this Tribunal in the case of",,

Prerna Singh and Ors. vs. Commissioner of Customs and the other appellant Seville Products Ltd., vs. CCE reported in 2020 (1) TMI 905, wherein",,

the issue was initially referred to Larger Bench, the Larger Bench held that when Division Bench decision of the Tribunal was placed before the ld.",,

Single Member Bench, the Single Member was bound by the Division Bench decision and the decision of Prerna Singh (supra) could not have been",,

ignored. Further, the binding ruling of the Division Bench in the case of Shafeek P.K. could not have been ignored. Reliance is also placed on the",,

Single member ruling in the appellant’s own case reported in 2021-TIOLâ€"2015-CESTAT-CHD.,,

14.1 It is further urged that the Customs Act, 1962 did not have extra territorial jurisdiction prior to 2018 amendment. It is urged that the appellant is a",,

foreign company incorporated in Dubai, UAE. They do not have any business operation in India and is not undertaking any commercial activity within",,

India at any point of time. None of the alleged acts have been committed by the appellant company in the Indian Territory. The entire amount received,,

by the appellant company from the Indian importers have been shown in their books of accounts. It is further urged that the CEO of the appellant,,

company (Prerna Singh) who appeared before the Customs Department â€"DRI during investigation and tendered her statement, is also a non-",,

resident Indian. It is urged that Indian statutes / laws are ineffective against the foreign property and foreigners.,,

14.2 It is further urged that the show cause notices are bad as the same are issued by the DRI who do not have any jurisdiction to issue show cause,,

notice as they are not the proper Officer under the provisions of the Customs Act. Reliance is placed on the ruling of the Hon’ble Supreme Court,,

in the case of Canon India Pvt. Ltd., vs. Commissioner of Customs- 2021 (3) TMI 384, wherein it has been held that the power to issue a show cause",,

notice under Section 28 (4) of the Customs Act is on the ‘Proper Officer’, which means the jurisdictional officer who has earlier assessed the",,

goods. It was further observed that the DRI Officers are not the proper officer as the original assessment was not done by them. Further relies on the,,

ruling of Madras High Court in the case of Quantum Coal Energy (P) Ltd., vs. CC-2021 (3) TMI-1034 (Mad.) and also some other judgements. It is",,

further urged that in any view of the matter the case of conspiracy and collusion is not made out and hence penalty for abetment is not imposable,,

under Section 112(a) of the Customs Act.,,

Opposing the appeal, learned Authorised Representative for the Revenue urges as follows:-",,

i) The submissions made by the appellant that the appellant does not have any business operations in India and is not undertaking any,,

commercial activity within India at any point of time is factually incorrect. Though the appellant company is registered in Dubai, it is",,

operating its business through its agent, an employee (Market Development Manager) Sh. Prakash Menon by attracting customers through",,

various schemes including larger profits in the form of short levy of customs duty by submitting forged invoices and remitting of the balance,,

payment through hawala transactions.,,

ii) Another submission that none of the alleged acts have been committed by the appellant within the Indian territory is a misleading,,

statement, as the offence has been done in the territorial jurisdiction of India, one in the form of abetment by act of collusion by submitting",,

forged invoices before the Customs Authority and secondly by arranging hawala agent to the importer under the supervision of its,,

Marketing agent Sh. Prakash Menon, an employee of the appellant company getting regular salary from the appellant company, officially",,

located in Mumbai to ensure that the balance payment is made to them.,,

iii) One of the submissions of the appellant that the entire amount received by them from Indian exporters has been shown in its books of,,

account to substantiate that they are not involved in the conspiracy is absurd, as the appellant company had knowingly and intentially lured",,

such importers with making larger profits if involved with import from the appellant company, by submitting two types of invoices and by",,

arranging hawala agent for the Indian importers to send the balance payment, thereby abetting in evasion of customs duty in India. Non",,

imposition of any corporate tax in Dubai and strict penal provisions as per laws and regulations may be the reason for them to show the full,,

amount in its books of account. Had there been any corporate tax they might have shown the payment only through banking channels and,,

would have omitted the payment through hawala channels in their books of account.,,

iv) On the submissions by the appellant as per para 4 that Customs Act did have extra â€" territorial jurisdiction, the headlines itself speaks",,

volume.,,

1A) During the relevant period Section 1(2) of the Customs Act, 1962 was applicable which reads as below:",,

1) This Act may be called the Customs Act, 1962",,

2) It extends to the whole of India,,

3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.",,

B) It extends to whole of India. i.e. offence committed in the territorial jurisdiction of India. The offence in this case has been committed the moment,,

the forged documents were submitted before the Indian Customs authority with an intention to defraud India Govt. of its legitimate Customs duties.,,

Thus, the offence was committed in the territory of India once the forged documents were submitted before the customs authorities. Further, the",,

importer had received the forged invoice from the employee of appellant, namely Sh. Prakash Menon, having his office at Mumbai (India) who, in",,

turn, received the same from his Head office at Dubai through electronic data/ message transfer mode. Thus, the appellant, through her employee,",,

who are in relation of the Principal and Agent, had committed an offence of abetment/ collusion with the importer within the territory of India by way",,

of supplying forged invoices an Indian soil to help the importer in evading customs duty. The appellant and the aforesaid employee were also involved,,

hawala transaction for the balance payment to them, apart from the one made by banking channels, with the aid and support of their agent,",,

(employee), Sh. Prakash Menon, officially located in Mumbai, India.",,

C) To clarify the above the Finance Act, 2018 has amended Section 1(2) w.e.f. 29.03.2018, which is reproduced as below: Section 1. Short title,",,

extend and commencement-,,

“(1) This Act may be called the Customs Act, 1962.",,

(2) It extends to the whole of India [and, save as otherwise provided in this Act, it applies also to any offence or contravention thereunder",,

committed outside India by any person.],,

(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.",,

D) Sub section 2 reads as it applies also to any offence or contravention thereunder committed outside India by any person.],,

- Thus after the amendment it is categorically clear that the Customs Act, 1962 applies also to any offence committed outside India. It also",,

appears that the words “it applies also†reflects that the legislature had inserted an enabling provision even though in the present,,

matter the offence was committed in India itself.,,

- In this case the offence has been committed in India through the employee of the Company registered in Dubai. Preparing two types at,,

invoices of Dubai was not offence, till it was submitted before the Customs Authority in India, through the Computer of its employee Sh.",,

Prakash Menon (stationed in India). Thus the offence was committed in India itself and the jurisdictional applicability of the Customs Act is,,

there as it extends to whole of India, as per Sec. of the Customs Act, 1962.",,

It is further urged that admittedly the appellant was present in India through its representative/ agent and thus for their various acts of omission and,,

commission which include fraud and forgery for evading the Customs duty to the Government of India, is liable for penalty under Section 112(a) as",,

they have aided and abetted the Indian importers in violating the various provisions of the Customs Act, rendering the goods liable for confiscation. It",,

is further urged that the rulings cited are not applicable in the instant case. Further, reliance was placed in the case of Prerna Singh, CEO (supra) of",,

the appellant company, wherein imposition of penalty was held to be correct and under proper jurisdiction being guilty of aiding and abetting as",,

prescribed under Section 112(a) of the Act. Further, reliance is placed on the ruling of the Apex Court in SEBI vs. Pan Asia Advisors Ltd. and Ors.:",,

MANU/SC/0761/2015.,,

Having considered the rival contentions, I find that the charge of aiding and abetting have been established against the appellant company. I further",,

find that the appellant company, though it was registered having Head Office in Dubai, but it was very much present in India through its Indian",,

Representative - Sh. Prakash Menon. I further find that through its Indian Representative, the appellant company have actively colluded and abetted",,

with the Indian importers by various acts of commission and accordingly penalty has been rightly imposed under Section 112(a) of the Act.,,

17.1 I further find that the facts before the Hon’ble Supreme Court in the ruling of Canon India Pvt. Ltd., (supra) are very different, inasmuch as",,

there was no case of fraud and the original Bill of Entry was assessed on first check basis. Wherein in the present case there is admitted case of,,

collusion and forgery plus concoction of documents, including presenting and filing of false and incorrect documents (invoice), to evade Customs duty",,

by the importer and the appellant company. Further, the present proceedings are for imposition of penalty and not for demand of duty under Section",,

28(4). The show cause notice on this appellant is not under Section 28(4) of the Customs Act. Fraud vitiates everything. Accordingly, I uphold the",,

impugned orders and dismiss the appeals.,,

Both the appeals are dismissed.,,

(Pronounced on 07.12.2021).,,