M/S. Terapanth Foods Limited vs Commissioner Of Customs, Kandla

(Arising out of OIO-KDL-COMMR-PVRR-27-2014-15 dated 31.03.2015, passed by Commissioner of Customs, Kandla.)

1. M/s. Terapanth Foods Limited : Appellant (s) 2. Shri Babulal Singhvi 3. M/s. The Kutch Salt & Allied Industries Limited

VERSUS

Commissioner of Customs, Kandla : Respondent (s)

Represented by :

For Appellant (s) : Shri V.M. Doiphode, Advocate For Respondent (s) : Shri J. Nagori, Authorised Representative

For approval and signature :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Hon'ble Member (Technical)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

NO 3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Hon'ble Member (Technical)

Date of Hearing / Decision : 20.10.2015

ORDER No. A/11529-11532/2015 Dated 20.10.2015

Per : Mr. P.K. Das;

Common issue is involved in these appeal and therefore, all are taken up together for disposal.

2. After hearing both the sides and on perusal of the records, we find that both the Appellant companies; namely M/s. Terapanth Foods Limited (in short M/s. Terapanth) and M/s. The Kutch Salt & Allied Industries Limited (in short M/s. The Kutch), filed shipping bills for export of Iron Ore Fines. Show cause notice dated 06.09.2013 was issued to M/s. Terapanth proposing for finalisation of assessment and demand of differential duty on finalisation of the assessment in respect of two shipping bills both dated 10.04.2012 under Section 18 (2) of the Customs Act, 1962. Further, it was proposed to demand of duty along with interest and to impose penalty, on undervaluation of goods in respect of other three shipping bills dated 27.09.2011, 25.07.2011 and 03.05.2011 under Section 28 of the said Act, 1962. In the case of M/s. The Kutch, a show cause notice dated 17.01.2014 was issued proposing finalisation of assessment and demand of differential duty along with interest and to impose penalty in respect of shipping bills dated 10.4.2012 and 07.04.2012 under Section 18(2) of the said Act, 1962 and to demand of duty on the undervaluation of the goods in respect of other three shipping bills dated 17.09.2011, 27.09.2011 and 07.10.2011 under Section 28 of the said Act.

3. The adjudicating authority confirmed the demand of duty alongwith interest and imposed penalties on both the appellant companies and the personal penalty was imposed on Shri Babulal Singhvi, Director of both the appellant Companies separately. Hence, both the companies filed appeals and Shri Babulal Singhvi filed two appeals against imposition of penalties.

4. Heard both sides and perused the records.

5. Learned Advocate on behalf of the appellants submits that the two Shipping Bills both dated 10.4.2012 in the appeal of M/s. Terapanth and Shipping Bills dated 09.04.2012 and 10.04.2012 in the case of M/s. The Kutuch, the assessments were finalised before issuance of show cause notices. It is also submitted that the show cause notice proposed finalisation of the assessment under the provisions of Section 18 (2) of the Customs Act, 1962 and demand of duty consequent to finalisation of assessment under Section 18(2) (a) of the said Act. The adjudicating authority confirmed the demand of duty by invoking proviso to Section 28 of the Act, which was not proposed in the show cause notices.

6. The matter was heard at length on 21.09.2015 and the learned Authorised Representative for the Revenue sought time to take instructions from the Commissionerate on this issue. Today, the learned Authorised Representative placed a copy of letter dated 13.10.2015, issued by the Principal Commissioner, Customs, Customs House, Kandla addressed to Additional Commissioner (AR), CESTAT, Ahmedabad. The relevant portion of the said letter dated 13.10.2015 is reproduced below:-

2. The status of Shipping Bills have been checked online and the EDI System shows the status of all the Shipping Bills (involved in the matter in respect of M/s Terapanth Food Pvt. Ltd & M/s The Kutch Salt & Allied Industries Ltd) as F which implies that all these Shipping Bills, detailed as under, were finally assessed at the material time. As regards the date on which these shipping bills were finalized, the details are furnished as under on the basis of Screen Shots obtained from the EDI System.

Sr. No Shipping Bill No. & Date Name of Exporter Status of the S/B (Whether Provisional/Final) Date of finalization of S/B, as per assessment by the AC(APR) appearing on the screen shot of the S/B 1 8410415 dated 10.04.2012 M/s Terapanth Food Pvt. Limited

FINAL 10.04.2012 2 8412947 dated 10.04.2012

FINAL 10.04.2012 3 8374036 dated 07.04.2012 M/s The Kutch Salt & Allied Industries Limited FINAL 09.04.2012 4 8412749 dated 10.04.2012

FINAL 10.04.2012

3. A Letter issued to the Deputy Director, DRI Regional Unit, Goa from this office F.No. S/14-21/Exp/2012-13 dated 08.07.2013 by the Additional Commissioner (Export), CH, Kandla also speaks on the same line. A copy of the same letter as well as screen shots of above Shipping Bills are enclosed herewith for your ready reference.

7. On perusal of the show cause notices, we find that it has been proposed to assess two Shipping Bills in each case, finally under Section 18(2) of the Customs Act, 1962. It has also been proposed demand of differential export duty, subsequent to such final assessment under the provisions of Section 18(2) (a) of the said Act, 1962. In this context, show cause notice dated 06.09.2013 in the case of M/s. Terapanth, may be referred, as under:-

The Shipping Bill Nos. 8410415 and 8412947 both dated 10.04.2012, wherein the assessment is provisional, should not be assessed finally, by charging the export goods to appropriate duty @ 30% ad valorem, under the provisions of Section 18(2) of the Customs Act, 1962, read with Section 17, ibid.

8. Section 18 of the Customs Act, 1962 provides provisional assessment of duty. In terms of sub-Section (1) of Section 18 of the said Act, the proper officer may direct that the duty leviable on the such goods be assessed provisionally, if the exporter furnishes such security for the payment of deficiency, if any, between the duty as may be finally assessed and the duty provisionally assessed. Section 18(2) of the said Act, empowered the proper officer for final assessment on such provisional assessment. In terms of Section 18(2) (a) of the said Act, when such goods is assessed finally by the proper officer, in the case of goods cleared for exportation, if the amount so paid falls short of the duty finally assessed, the exporter of the goods shall pay the deficiency. In the present case, as revealed from letter dated 13.10.2015 as stated above, the assessment of two Shipping Bills in each cases, were finalised at the time of exportation of the goods. So, the proposal of finalisation of provisional assessment and consequent demand of duty alongwith interest in the show cause notices and confirmation of demand of duty and imposition of penalty by the adjudicating authority can not be sustained. In the present case the issuance of show cause notice is prescribed by the law as a condition precedent to the commencement of proceedings and it must be addressed correctly, otherwise it will be treated as an invalid one. In Commissioner of Income Tax, Gujarat vs. Kurban Hussain Ibrahimji Mithiborwala [(1971) 82 ITR 821 (SC), a notice under Section 34 of the Indian Income Tax Act, 1922 was found by the Supreme Court to be invalid as referring to a wrong year and the entire proceedings were held to be void for want of jurisdiction. It is significant to note that the statutory notice is notice made by legislative enactment.

9. The other issue is undervaluation of the export goods vide Shipping Bill Nos. 5529529 dated 27.09.2011, 4696772 dated 25.7.2011 and 3508730 dated 03.5.2011 in the case of M/s. Terapanth and Shipping Bills Nos. 5455422 dated 17.09.2011, 5599565 dated 27.09.2011 and 5739005 dated 07.10.2011, in the case of M/s. Kutch. The learned Advocate submits that the addition of 10US$ PDMT on the price is only on the basis of statements without considering the documents. Further, they are entitled to benefit of deduction of actual freight on the invoice value. They have produced the documents of actual freight, which were not considered. Furthermore, FOB value would be treated as cum-duty FOB price. He fairly submits that the cum-duty FOB price decided against them by the Tribunal in the case of Sesa Goa Limited vs. CCE, Cus. & ST, Bhubaneswar  2014 (313) ELT 317 (Tri. Kolkata). The appeal was filed before the Appellate authority against the said order, which is pending. He further submits that the appellant No. 2 has merely signed the contract and therefore, he has no involvement in the matter and imposition of penalty is unwarranted.

10. On the other hand, the learned Authorised Representative on behalf of the Revenue reiterates the findings of the adjudicating authority. He submits that the appellants had not disclosed the actual freight at the time of export. Therefore, the adjudicating authority has rightly rejected the actual freight. He further submits that the Tribunal has already held cum-duty price in FOB value against the appellant and therefore, there is no requirement to interfere in this issue.

11. We find that the main contention of the learned Advocate is that they have submitted documents on the actual freight before the adjudicating authority, which were not examined. Further, demand of duty on additional amount of US$ 10 PDMT as commission to their overseas agents cannot be levied mainly on the basis of statement, without examining documents. In our considered view, the appellant should be given an opportunity to place the documents before the adjudicating authority in respect of actual freight and commission on their agents, in the interest of justice. However, the demand of FOB price as cum-duty price for determination of export duty, as held by the Tribunal in the case of Sesa Goa Limited (supra), is liable to be upheld.

12. The adjudicating authority imposed penalty on Shri Babulal Singhvi as he knew that the contract was incorrect with regard to the value of the goods. We find that the issue of FOB price treating as cum-duty price was decided by the Tribunal and the appeal is pending before the Honble Supreme Court. The appellant Company is entitled to the benefit of actual freight. Further, the part of the demand of duty alongwith interest and penalty cannot be sustained. In such situation, imposition of penalty on the Director of the appellant Companies is not justified.

13. In view of the above discussion, we set-aside the demands of differential duty alongwith with interest and penalty on Shipping Bill Nos. 8410415 and 8412947 both dated 10.04.2012 in the case of M/s. Terapanth Foods Limited and Shipping Nos. 8374036 dated 07.4.2012 and 8412749 dated 10.04.2012 of M/s. The Kutch Salt & Allied Industries Limited. We direct the adjudicating authority to re-quantify the demand of duty alongwith interest and penalty on the undervaluation in respect of the other Shipping Bills on the basis of above observations and to pass order in accordance with law. Needless to say that the adjudicating authority shall give proper opportunity of hearing before passing the order.

14. The appeals filed by the appellant companies are disposed of in the above terms. The appeals filed Shri Babulal Singhvi, Appellant No. 2 are allowed.

(Dictated and pronounced in the open Court)

(P.M. Saleem) (P.K. Das) Member (Technical) Member (Judicial) ..KL

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