Rajasthan High Court

M/S Purshottam Kumar Jain vs Union Of India ... on 22 August, 2023

Bench: Augustine George Masih, Sameer Jain

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        HIGH COURT OF JUDICATURE FOR RAJASTHAN
                    BENCH AT JAIPUR

                    D.B. Custom Appeal No. 1/2023

M/s Purshottam Kumar Jain, T-16, Mayur Tower, Nehru Bazar,
Jaipur-302001 (Through Its Proprietor Shri Purshottam Kumar
Jain, Aged 67 Years, S/o Shri Kalyan Mal Jain R/o 8393, Vaishali
Nagar, Jaipur.)
                                                                      ----Appellant
                                       Versus
Union Of India, Commissioner Ofcustoms Preventive Jodhpur
Hqrs At NCR Building Statue Circle C Scheme Jaipur-302002
                                                                    ----Respondent

For Appellant(s) : Mr. Arun Goyal

HON'BLE THE CHIEF JUSTICE AUGUSTINE GEORGE MASIH HON'BLE MR. JUSTICE SAMEER JAIN

Judgment

22/08/2023

1. Present appeal is filed under Section 130 of the

Customs Act, 1962 against the final order dated 17.10.2022 and

further misc. order dated 03.01.2023 (ROM) passed by the Single

Member of the Customs, Excise and Service Tax Appellate Tribunal

(for short "CESTAT") Principal Bench, New Delhi in Customs

Appeal No. 50303/2022.

2. Brief facts of the case, as per the record, are that the

Department of Directorate of Revenue Intelligence, Jaipur got an

information about the various importers to have been importing

rough precious stone by making huge overvaluation, and that

these are not the actual importers but the imports are being

managed by someone else behind them. Accordingly, some

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consignments of rough precious stones were seized at Jaipur

Gemstone Exchange, Diggi House, Jaipur and Air Cargo Complex

at Customs Station. On examination, huge overvaluation was

noticed in those consignments as per the Valuation Certificate

given by Expert Valuer. One of such consignment was imported

vide Bill of Entry No. 5980998 dated 14.04.2018 by M/s

Rishipushp Trading LLP and from Air Cargo Complex, Sanganer,

Jaipur. For want of documents the consignment was examined.

The goods contained were declared as rough precious stone

'Sapphire' and the Country of origin was declared as Hong Kong.

The declared value was found highly overvalued. The consignment

was accordingly seized. Searches were conducted on 16.10.2018

at the office of the appellant being the Customs Broker for M/s

Rishipushp Trading LLP for the import of the impugned

consignment. Premised of the partners (Shri Hemant Kumar

Bhambi and Shri Rajendra Byawat) of the importers were also

searched on 17.10.2018. Their statements also got recorded.

Based upon those statements and the documents recovered

during search, department found that one Shri Pukhraj R Padiyar

used the firm M/s Rishpushp Trading LLP for the impugned import

by declaring the overvalue of Rs. 1,93,68,899.75 instead of its

actual value of Rs. 9,47,510/-. As such, he was alleged to have

abetted the act which has rendered the seized rough precious

stones 'Sapphire' liable to confiscation and himself liable for

penalties under the Customs Act. With respect to the appellant,

the Department observed that he as Customs Broker of the

importing firm has failed to fulfill its obligation and had

deliberately/knowingly ignored the fact that the importer is not

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the actual importer and the importer is the one who is not the IEC

holder. With these observations, show cause notice No. 02/2019

dated 23.08.2019 was served not only upon the importing firm

and its partners but also upon the appellant proposing the

imposition of penalty under Section 112 (a) and (b) and under

Section 114A of the Customs Act, 1962. The said proposal was

initially confirmed vide the Order-in-Original No. 38/2020 dated

01.06.2020. The appeal there against had been rejected by the

aforesaid order-in-Appeal and order impugned of the CESTAT.

Being aggrieved, the appellant is before this Court.

3. Learned counsel for the appellant has challenged the

impugned order(s), primarily, on the following grounds:

3.1. That the initial adjudication authority had imposed a

penalty under Section 112 (a) (b) (iii) of the Customs Act, when

no such provision exists in law and nor did the SCN propose such

a penalty. Neither the SCN nor the Adjudication Order clearly spell

out the offence alleged to be committed was under Clause (a) or

(b) of Section 112 of the Customs Act and as per Apex Court

judgment of Amrit Foods v. CCE: (2005) 13 SCC 419, when

the statute specifies different types of offences under different

clauses, invoking a clause for penalty is necessary so as to put a

party to notice the exact nature of contravention for which it was

liable.

3.2. That in the first appeal, the Appellate Authority

modified the provisions of penalty under Section 112 (a) (iii)

without giving any reasons and in the second appeal, the CESTAT

held the appellant liable for penalty under Section 112 (b) (iii),

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when no such penalty was even vaguely mentioned in the order in

challenge before the CESTAT.

3.3. That even otherwise, none of the ingredients mentioned

in Section 112 (a) or 112 (b) of the Customs Act were present

against the appellant. The appellant is merely a Customs Broker

and the valuation aspect is not in the domain of Customs Broker.

There is nothing on record which shows that the appellant was

aware about the mis-declaration or overvaluation of imported

goods. It is contended that the appellant was not supposed to

conduct investigation in each and every matter and find out the

correct classification of goods. The appellant is not an expert to

value goods, especially jewellery items. Thus the appellant

Customs Broker cannot be fastened with any liability of mis-

declaration of the goods in respect of value, especially rough

precious stones whose value determination would require technical

expertise.

3.4. That as per Apex Court judgment of Canon India

Private Limited vs. Commissioner of Customs (Neutral

Citation: 2021/INSC/169) reported in AIR 2021 SC 1699,

officers of DRI are not proper officers to raise demand or issue

SCN under Customs Act.

4. Heard and considered.

5. The issue in the present case pertains to imposition of

penalty under Section 112 of the Customs Act. Section 112 of the

Customs Act is reproduced as under:

"Section 112 - Penalty for improper importation of goods, etc Any person, -

(a) who, in relation to any goods, does or omits to do any act which act or omission would render

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such goods liable to confiscation under section 111, or abets the doing or omission of such an act, or

(b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111, shall be liable, -

(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding the value of the goods or five thousand rupees, whichever is the greater;

(ii) in the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding ten per cent. of the duty sought to be evaded or five thousand rupees, whichever is higher:

Provided that where such duty as determined under sub-section (8) of section 28 and the interest payable thereon under section 28AA is paid within thirty days from the date of communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent. of the penalty so determined.

(iii) in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty not exceeding the difference between the declared value and the value thereof or five thousand rupees, whichever is the greater;

(iv) in the case of goods falling both under clauses

(i) and (ii), to a penalty not exceeding the value of the goods or the difference between the declared value and the value thereof or five thousand rupees, whichever is the highest;

(v) in the case of goods falling both under clauses

(ii) and (iii), to a penalty not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the

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value thereof or five thousand rupees, whichever is the highest."

5. It is noted that in the SCN issued to the appellant,

there was a specific reference of Section 112 (a) and Section 112

(b) of the Customs Act. The relevant para 24 of the SCN is

reproduced below:

"24. The Customs Broker M/s Purshottam Kumar Jain had failed to fulfill its obligations and deliberately and knowingly ignored this fact and had performed the import related activities at the behest of the persons who were not the IEC Holders. Furthermore, the Custom Broker has filed to verify antecedent, correctness of Importer Exporter Code (IEC) number, identify of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information. As such, the Bill of Entry was filed in contravention of the provisions of the Customs Act, 1962, Foreign Trade (Development and Regulation), Act, 1992 and the Foreign Trade (Regulation) Rules, 1993. Thus, he has abetted an act, which had rendered the aforesaid goods liable to confiscation under Section 111 of the Customs Act, 1962. Hence M/s Purshottam Kumar Jain has rendered themselves liable to penalty under Section 112(a) and 112 (b) of the Customs Act, 1962. M/s Purshottam Kumar Jain has knowingly and intentionally made signed and used a declaration, statement and document which are false and incorrect in material particular, in the transaction of business for the purposes of the Customs Act, 1962 therefore, he appears liable to penalty under Section 114AA of the Customs Act, 1962."

Vide order dated 29.05.2020, penalty of Rs. 1,00,000/-

(Rupees One Lakhs only) was imposed on the appellant under

Section 114AA of the Customs Act and of Rs. 1,00,000/- (Rupees

One Lakhs only) under Section 112 (a)(b) of the Customs Act. It is

further noted that in the original order dated 29.05.2020, there

was a specific reference of Section 112 (iii) of the Customs Act.

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The relevant portion of order dated 29.05.2020 is reproduced as

under:

"From the circumstances evidences available on records and discussed in foregoing paras, it is established that the noticee No. 5 Shri Purshottam Kumar Jain has filed to verify the address/antecedent etc. of the importing firm M/s Rishipusp Trading LLP rather he was very much aware that noticee No. M/s Rishipusp Trading LLP was not actual importer of the impugned seized goods but IEC of M/s Rishipusp Trading LLP was used for namesake only. Thus, from these circumstances evidences, it is proved that Shri Purshottam Kumar Jain failed to fulfill its obligations and deliberately and knowingly performed the import related activities at the behest of the noticee No. 2, Shri Pukhraj Padiyar who was not the IEC holder and abetted an act, which had rendered the impugned goods liable for penal action under the provisions of Section 112 (iii) of the Customs Act, 1962. As such I hold that noticee No. 5 Shri Purshottam Kumar Jain is liable for penalty under Section 112 (iii) of the Customs Act, 1962.

The subject notice dated 08.02.2019 has also proposed penal action under Section 114AA of the Customs Act, 1962 against noticee No. 5 Shri Purshottam Kumar Jain which stipulates that if a person knowingly or intentionally makes, signs or use, or causes to be made, singed or used any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business shall be liable for penal action. I observe that noticee No. 5 Shri Purshottam Kumar Jain was knowingly and intentionally involved in fraudulent transaction of import under Bill of Entry No. 5980998 dated 14.04.2018, by using the declaration, statement and document which are false and incorrect. Therefore, noticee No. 5 Shri Purshottam Kumar Jain is also liable for penal action under Section 114AA of the Customs Act, 1962."

The appellate authority, vide order dated 07.09.2021,

maintained the levy of penalty under Section 112 (a) (iii) and

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under Section 114AA of the Customs Act. The relevant portion of

order dated 07.09.2021 is reproduced as under:

"6.5 I observe that the appellant has contested that his request for cross examination of Shri Hemant Kumar Bhambi (Partner), Shri Dinesh Kumar Meghwanshi (Partner) and Shri Pukhraj Padiyar was not considered by the adjudicating authority. I find that the allegations levelled against the appellant are based on his own statement dated 19.12.2018 and not based upon the statements of the persons, whose cross examination was sought for by him. From his statement dated 19.12.2018, it is clear that all the works of M/s Rishipusp Trading LLP including fee payment of Custom clearance work and IGST payment were being done by Shri Pukhraj Padiyar and he has contacted the appellant for Custom clearance work. And the was also done by Shri Pukhraj Padiyar. Moreover, the KYC documents for the said firm was submitted to the appellant by Shri Pukhraj Padiyar and the KYC documents of were also signed by Shri Pukhraj Padiyar. It is admitted fact that the appellant was aware that Shri Padiyar was no more partner in the firm. Thus, I find that the appellant was required to verify antecedent, correctness of 'Importer Exporter Code (IEC) number, identify of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information. It is is also on record that when the search was conducted at another firm M/s Aayushrishi Multi Trade LLP premises 205, 2nd Floor, Kishor Niwas, Tripoliya Bazar, Jaipur on 27.12.2018 in a case that was booked by the DRI, Mumbai Zonal Unit in Mumbai.

Shri Hemant Kumar Bhambi and Shri Dinesh Kumar Meghwanshi were shown partners of this firm. The office was found locked and the owner of the premises Shri Ashok Kedia said that the premises were taken on rent by the notice No. 2 Shri Pukhraj Padiyar and no business activities was carried out at the premises from last six months. The address i.e. 205, 2 nd Floor, Kishor Niwas, Tripoliya Bazaar, Jaipur was incidentally the branch office of M/s Rishipusp Trading LLP also. This clearly indicates that the appellant had deliberately ignored this fact and had performed the import related activities at the behest of the Shri Pukhraj and abetted

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an act, which had rendered the impugned goods liable to confiscation under Section 11(m) of the Act. I therefore hold that the appellant is liable for penal action under the provisions of Section 112(a)(iii) of the Act. I further find that the facts as discussed above clearly indicate that appellant was knowingly and intentionally involved in fraudulent transaction of import by using the declaration, statement and document which are false and incorrect. Therefore, the appellant is also liable for penal action under Section 114AA of the Act."

The CESTAT, vide impugned order dated 17.10.2022,

had set aside the penalty under Section 114AA of the Customs Act

but maintained the penalty under Section 112 (iii) of the Customs

Act. The relevant portion of the order dated 17.10.2022 is

reproduced as under:

"9. From the above discussion, it stands apparently clear that the appellant has deliberately and intentionally has not provided any such information which was false or incorrect. As such, in my opinion that penalty under Section 114AA of the Customs Act, 1962 has wrongly been imposed upon him.

10. However with respect penalty under Section 112

(a) and (b) (iii) of the Customs Act, penalty is the consequence to a wrong declaration of the value of the goods in the Bill of the Entry. Since there is no denial that Bill of Entry were filed by the appellant, under his obligation it was mandatory for him to have the documents showing the value of imported consignment. Nowhere appellant has stated about the said document and the valuation thereof nor any such document in the form of invoice has been produced on record which would have been verified by the appellant at the time of processing of the impugned consignment. Accordingly, I hold that the penalty under Section 112 of Customs Act has rightly been imposed.

11. As the outcome of entire above discussion, the penalty under Section 114AA of the Customs Act, 1962 is hereby set aside. However, penalty under Section 112 (a) and (b) (iii) is hereby confirmed. Appeal consequently stands partly allowed."

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Upon filing of the rectification application, the CESTAT passed

the impugned order dated 03.01.2023 and clarified that the

penalty was imposed under Section 112 (b)(iii) of the Customs

Act. The relevant portion of impugned order dated 03.01.2023 is

reproduced as under:

"3. It is observed that penalty as was proposed in the show cause notice was on the allegations of declaring the higher value of the goods in question as compared to the value thereof. Accordingly, the penalty on the basis of such allegations is impossible in terms of Section 112(b)(iii). In the show cause notice the appellant was also alleged to have committed such an act that had rendered the goods liable to be confiscation. The proposal was confirmed by both the adjudicating authorities below. However, vide the impugned final order, it has been held that the higher value of the goods was shown in the Bills of Entry and the Bills Entry were filed by the appellant. Resultantly, I do not find any error when the imposition of penalty under Section 112 of Customs Act has been confirmed except I observe that the act of the appellant is held to be one which invites penalty under Section 112(b)

(iii) of the Customs Act, but, Section 112(a) has also been mentioned in the order. I also observe that in para 8, both the provisions have been specifically mentioned i.e. Section 112(b)(iii) and Section 114AA of the Customs Act, 1962 except that instead of 112(b)(iii), it is mentioned as 112(a) and (b)(iii). The perusal thereof shows that the penalty as imposable under Section 112(b)(iii) and under Section 114AA has been discussed. In the final order the penalty under the former Section 112(b)(iii) has been confirmed whereas the penalty of the later Section 114AA has been set aside. Para 9 has a reasoning about setting aside the penalty of Section 114AA that the act of appellant was not found to be intentional.

4. In view of the observations as above, I do not find any reason to modify the order. The modification otherwise will amount to review and the Tribunal has no inherent power to review its decisions. However,

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simultaneously I observe that mention of sub- clause (a) of Section 112 along with mention of 112(b)(iii) is a typographical error. Similarly, mentioning Section 114A instead of Section 114AA is again a mere typographical error which is apparent on the face of the impugned final order. This is definitely an error which strikes on mere looking and does not need a long drawn out process of reasoning on points where there may conceivably be two options. The typographical error is so manifest and clear that it should not remain on record of the impugned final order. Accordingly, I hold that wherever Section 112(a) & b(iii) is mentioned in the final order, the same may be substituted with Section 112(b)(iii). Similarly, whenever Section 114A is mentioned in the order, the same shall be substituted with Section 114AA."

6. An appeal under Section 130 of the Customs Act, from

the order of the CESTAT, can only be admitted on a 'substantial

question of law'. The law on admitting an appeal from an order of

the Tribunal, on substantial question of law, has been clarified by

the Hon'ble Supreme Court in Steel Authority of India Ltd.

(SAIL) vs. Designated Authority, Directorate General of

Anti-Dumping and Allied Duties and Ors. (Neutral Citation:

2017/INSC/356) reported in (2017) 13 SCC 1, wherein the

Apex Court has held that if the tribunal, on consideration of the

material and relevant facts, had arrived at a conclusion which is a

possible conclusion, the same must be allowed to rest even the

higher Courts are inclined to take another view of the matter.