Kerala High Court
M/S Southern Gold Private Limited vs Commissioner Of Customs (Appeals) on 8 April, 2025
Author: A.K.Jayasankaran Nambiar
Bench: A.K.Jayasankaran Nambiar
WA NO. 97 OF 2025 1 2025:KER:30463
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR
&
THE HONOURABLE MR. JUSTICE EASWARAN S.
TUESDAY, THE 8TH DAY OF APRIL 2025 / 18TH CHAITHRA, 1947
WA NO. 97 OF 2025
AGAINST THE JUDGMENT DATED 18.11.2024 IN WP(C) NO.40658 OF 2024 OF
HIGH COURT OF KERALA
APPELLANTS/PETITIONERS IN WP(C):
1 M/S SOUTHERN GOLD PRIVATE LIMITED
2/573-A1, CHRISTOPHER NAGAR ANCHERY P.O, THRISSUR
REPRESENTED BY ITS DIRECTOR MR. COLLINS C.A., PIN - 680006
2 MR. COLLINS C.A.
AGED 54 YEARS
S/O LATE C.T.ANTONY 2/573-A1, CHRISTOPHER NAGAR, ANCHEY P.O,
THRISSUR, PIN - 680006
BY ADV AKHIL SURESH
RESPONDENTS/RESPONDENTS IN WP(C):
1 COMMISSIONER OF CUSTOMS (APPEALS)
CUSTOMS HOUSE WILLINGDON ISLAND COCHIN, PIN - 682009
2 ADDITIONAL COMMISSIONER OF CUSTOMS
CUSTOMS HOUSE, WILLINGDON ISLAND COCHIN, PIN - 682009
3 ASSISTANT COMMISSIONER OF CUSTOMS
CUSTOMS HOUSE, WILLINGDON ISLAND COCHIN, PIN - 682009
BY ADV SRI.GIRISH KUMAR V
THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 08.04.2025, THE
COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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(CR)
JUDGMENT
Dr. A.K.Jayasankaran Nambiar, J.
The petitioners in WP(C).No.40658 of 2024 are the appellants before
us aggrieved by the judgment dated 18.11.2024 of a learned Single Judge that
dismissed the Writ Petition.
2. The brief facts necessary for the disposal of the Writ Appeal are as
follows:
The appellant company had bought imported gold bullion (free of
duty) from M/s. Bank of India and manufactured gold ornaments for export in
terms of the foreign trade policy that was in vogue. A consignment covered by
Shipping Bill No.7996621 dated 14.08.2017 was intercepted by the Customs
Authorities, who assessed the purity of gold and weight of gold in the jewellery
and found it to be less than what was declared in the shipping bill. The
Department, therefore, issued Ext.P1 show cause notice in relation to the
current consignment of gold jewellery that was intercepted and also in relation
to 71 earlier shipping bills under cover of which gold jewellery had been
exported by the appellants in the past, on the ground that there had been mis-
declaration of the purity and weight of gold occasioned by the appellant
company while effecting the said export. The show cause notice so issued
culminated in Ext.P3 order dated 27.03.2018, whereby the consignment of gold
jewellery covered by the shipping bills mentioned above was subject to
confiscation but permitted to be released on payment of redemption fine. A
separate penalty was also imposed. A further show cause notice (Ext.P2) was
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also served on the appellants in relation to the gold allegedly diverted to the
domestic market, and the adjudication of the said show cause notice resulted in
Ext.P4 order dated 27.03.2018 by which penalties were imposed on the
appellants.
3. Against Exts.P3 and P4 orders, appeals were preferred both by the
Department as well as by the appellant company and its Managing Director.
By Ext.P7 order, the four appeals preferred by the appellant company and its
Managing Director were dismissed as time-barred. By Ext.P8 order, the two
appeals that were preferred by the Department were allowed by enhancing the
penalties from Rs.1,50,00,000/- to Rs.4,94,96,65,375/-. The appellants,
therefore, approached this Court through WP(C).No.33787 of 2018 impugning
Exts.P7 and P8 orders. The said Writ Petition was disposed by a learned Single
Judge of this Court who set aside Exts.P7 and P8 orders and directed a fresh
consideration of the appeals against Exts.P3 and P4 orders on merits. Ext.P10
is the judgment of this Court in the Writ Petition aforementioned.
4. Pursuant to Ext.P10 judgment, the First Appellate Authority
proceeded to reconsider the appeals preferred by the appellant company, its
Managing Director, and the Department against Exts.P3 and P4 orders. This
time around, the First Appellate Authority passed Exts.P11 and P12 orders
dismissing the appeals preferred by the appellant company and its Managing
Director but allowing the Department appeals on a point that was never urged
therein, after dismissing the Department appeal on the grounds urged in the
appeal. In a sense, what the First Appellate Authority did was to enhance the
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redemption fine and penalty imposed by the original authority on the appellant
company and its Managing Director, in the appeals that were preferred by the
appellant company and its Managing Director, where no show cause notices
were issued by the First Appellate Authority before enhancing the penalty and
redemption fine. Similarly, when it came to the Department Appeals, the First
Appellate Authority did not advert to the question as to the premise on which
the Department was permitted by the Review Cell under the Customs Act to file
the appeals. It is seen that the Review Cell had recommended the filing of an
appeal only on the limited point of insisting on an absolute confiscation of the
gold jewellery covered by the shipping bills aforementioned. It had not
specifically recommended for any enhancement of the redemption fine or
penalty imposed on the appellants.
5. The appellants, therefore, once again approached this Court
through the present Writ Petition (WP(C) No.40658 of 2024) challenging
Exts.P11 and P12 orders. However, the learned Single Judge by the impugned
judgment relegated the appellants to their alternate remedy of preferring a
further appeal before the Customs, Excise and Service Tax Appellate Tribunal
in a challenge against Exts.P11 and P12 orders. It is, therefore, that the
appellants are now before us through this Writ Appeal.
6. We have heard the learned Senior counsel Sri.Joseph Kodianthara
assisted by the learned counsel Sri.Akhil Suresh, on behalf of the appellants
and Sri.Girish Kumar the learned Standing counsel for the Customs
Department, on behalf of the respondents.
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7. At the outset, it is the submission of the learned Senior counsel for
the appellants that while under normal circumstances, the learned Single
Judge cannot be faulted for relegating an assessee to the alternate remedy
under the statute, in a challenge against original orders passed in
assessments/penalty proceedings, in the instant case, the orders impugned
have the effect of mulcting the appellant assessees with an exaggerated
demand of penalty and redemption fine that would greatly prejudice them
while resorting to the alternate remedy of preferring a further appeal before
the Customs, Excise and Service Tax Appellate Tribunal as directed by the
learned Single Judge. In particular, it is pointed out that the enhancement of
penalties and redemption fine in appeals preferred by the appellant company
and its Managing Director was not legal and proper inasmuch as the show
cause notice that was issued to the appellant company in its appeal was merely
to respond to the contents of the Department Appeals and there were no
proposals in the show cause notice for enhancement of the redemption fine and
penalty. As for the appeals preferred by the Managing Director of the
company, no show cause notice was issued to the Managing Director proposing
an enhancement of the penalty and redemption fine imposed on him by the
Original Authority. It is the case of the appellants, therefore, that they could
not have been prejudiced to a greater extent than what they were before the
filing of their appeals, more so when the Department Appeals itself was only on
a limited point of seeking an absolute confiscation of the goods and did not
consent to a clearance of the goods on payment of redemption fine.
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8. It is the further contention of the learned Senior counsel that
when it comes to the Department appeals against Exts.P3 and P4 orders, they
were purportedly based on the Review Cell's recommendations for filing of
appeals, and a perusal of the same reveals that the recommendation was only
to seek an absolute confiscation of the gold jewellery that was exported under
cover of the shipping bills mentioned above. It is the submission of the
learned Senior counsel that it was, therefore, not open to the First Appellate
Authority to unilaterally expand the grounds of appeals of the Department and
proceed to adjudicate the same and grant the Department a relief, which it
did not have the authority to seek, and which in fact was not sought in the
appeals.
9. On a consideration of the rival submissions, we must point out at
the outset that the aforementioned points specifically urged by the learned
Senior counsel were not averred either in the Writ Petition or in the Writ
Appeal. The said points were urged only before the First Appellate Authority
and do find a place in the proceedings before the First Appellate Authority.
When this was pointed out to us during the consideration of this Writ Appeal,
we permitted the appellants to amend the Writ Appeal so as to incorporate
the additional grounds, and thereafter, afforded an opportunity to the
respondents to counter the same. The amendments have since been carried
out, and the respondents have also filed their reply to the said contentions of
the appellants. On a consideration of the points urged by the learned Senior
counsel, we find that this appeal has to be allowed and Exts.P11 and P12
orders set aside. As rightly urged by the learned Senior counsel for the
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appellants, in Ext.P11 order that was passed in the assessee's appeals, no
show cause notice was issued proposing an enhancement of penalty and
redemption fine. The said enhancement could not, therefore, have been done
to the prejudice of the assessee in appeals preferred by it against the order of
the Original authority. It is trite that an assessee cannot be prejudiced to a
greater extent than what he was at the time of preferring an appeal before
the First Appellate Authority. As for Ext.P12 order, we find that although a
reference was made to a show cause notice that was issued to the assesees in
the appeals preferred by the Department, we find on a perusal of the show
cause notice that it was merely seeking a response from the assessee to the
contents of the appeals preferred by the Department where the prayers were
only seeking an absolute confiscation of the gold jewellery that was exported.
As already noticed, the said appeals were based on the Review Cell's
recommendations on similar lines, and therefore, could not have been
unilaterally expanded by the Department or by the First Appellate Authority.
This aspect is borne out from the statutory provisions of Section 129 D(2) of
the Customs Act.
10. We must, in this context, also notice the Department's
response as contained in their affidavit dated 24.02.2025. The stand of the
Department in response to the points urged by the appellants as above is
that notices were issued to the assessees, who raised the question of penalty
under Section 114 and 114 AA, and the Appellate Authority had examined
the issue in totality and found it appropriate to enhance the penalty under
the provisions of the Customs Act. In clarification, the affidavit goes on to
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state that inasmuch as notices were served to the appellants raising the
question of penalty, even though the Department categorically did not raise
the issue of penalty, the Appellate Authority had found it appropriate to
examine the facts of the case in its entirety and enhance the penalty. We are
afraid we cannot accept the said justification given by the Department. In
matters of taxation the principles of fairness have to be adhered to and
notices proposing enhancement have to be clear and unambiguous so as to
enable an assessee to meet the case against it, effectively. Show cause
notices proposing enhancement not having been served on the appellants,
we are of the view that the orders enhancing the penalty and redemption
fine could not have been passed in the instant case. We, therefore, allow this
appeal by setting aside Exts.P11 and P12 orders impugned in the Writ
Petition and by remitting the matter back to the First Appellate Authority for
a fresh consideration of the appeals against Exts.P3 and P4 orders, on
merits, and strictly based on the grounds raised in the respective appeals.
We make it clear that all contentions open to both sides are left open for
consideration by the First Appellate Authority.
Sd/-
DR. A.K.JAYASANKARAN NAMBIAR
JUDGE
Sd/-
EASWARAN S.
JUDGE
mns
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PETITIONER ANNEXURES
ANNEXURE A13 TRUE COPY OF THE APPEALS FILED BY THE DEPARTMENT
NUMBERED COC-CUSTM-000-APP-42/2018-19 DATED
25.05.2018
ANNEXURE A14 TRUE COPY OF THE APPEALS FILED BY THE DEPARTMENT
NUMBERED COC-CUSTM-000-APP-43/2018 DATED
25.05.2018
ANNEXURE A-15 A TRUE COPY OF THE SHOW CAUSE NOTICE DATE
17.08.2018 AGAINST ORDER IN ORIGINAL NO. 30/2018
ANNEXURE A-16 A TRUE COPY OF THE SHOW CAUSE NOTICE DATE
17.08.2018 AGAINST ORDER IN ORIGINAL NO. 31/2018
RESPONDENT ANNEXURES
ANNEXURE R1(A) TRUE COPY OF THE NOTICE F. NO. C27/66-
69/SIIB/2018AU CUS. DATED 01.08.2024
ANNEXURE R1(B) TRUE COPY OF THE LETTER DATED 12.08.2024 OF THE
APPELLANTS
ANNEXURE R1(C) TRUE COPY OF THE NOTICE NO. C27 55 56 DEPT 2018AU
CUS DATED 13.08.2024
ANNEXURE R1(D) TRUE COPY OF THE LETTER DATED 22.08.2024 OF THE
APPELLANTS
ANNEXURE R1(E) A TRUE COPY OF THE NOTICE NO. C27/66-69/SIIB/2018
AU CUS. DATED 03.09.2024
ANNEXURE R1(F) A TRUE COPY OF THE NOTICE F. NO.C27/66-
69/SIIB/2018 AU CUS. DATED 10.09.2024
ANNEXURE R1(G) TRUE COPY OF THE PH RECORD NOTE EVIDENCING THE
APPEARANCE OF THE COUNSEL BEFORE THE APPELLATE
AUTHORITY DATED 24.09.2024
