DEPB Purchased on Fraudulent TRA - Purchaser Liable to Customs Duty
as well as Interest - Customs Mistake in Debiting DEPB cannot be Encashed by Purchaser
(2012)
249 KLR 259
IN THE HIGH COURT
OF KERALA AT ERNAKULAM
PRESENT: THE HONOURABLE
MR.JUSTICE C.N.RAMACHANDRAN NAIR & THE HON'BLE MR. JUSTICE BABU MATHEW
P.JOSEPH
TUESDAY, THE 10TH
DAY OF APRIL 2012/21ST CHAITHRA 1934
Cus.Appeal.No. 1 of 2011 ( )
----------------------------
(AGAINST ORDER
NO.138/2009 of CUSTOMS,EXCISE& SERVICE TAX
APP.TRIBUNAL,BANGALORE)
APPELLANT/APPELLANT:
----------------------
M/S.NEPTUNE TRADE LINKS PVT.LTD. 3,CALCUTTA DISPOSAL STORE,BAZAR ROAD
KOCHI 682 002 REPRESENTED BY ITS DIRECTOR SRI.HEMANT VYAS THROUGH POWER OF
ATTORNEY HOLDER RAVI.N.MENON 48/18, MEERA NIVAS VADAKKAMTHARA PO,PALAKKAD
DISTRICT.
BY ADVS.SRI.G.L.RAWAL (SR.)
SRI.GEORGE POONTHOTTAM SRI.SUJITH MATHEW JOSE SRI.M.PRAVEESH SRI.N.ANAND
RESPONDENTS/RESPONDENTS:
--------------
1. COMMISSIONER OF CUSTOMS,IN THE OFFICE OF THE COMMISSIONER OF CUSTOMS,COCHIN 682
002.
2. ASSISTANT COMMISSIONER OF CUSTOMS,
IN THE OFFICE OF THE COMMISSIONER OF CUSTOMS COCHIN 682 002.
BY ADV. SRI.SAIBY JOSE KIDANGOOR, SC
THIS CUSTOMS APPEAL HAVING BEEN
FINALLY HEARD ON 09.03.2012, THE COURT ON 10-04-2012 DELIVERED THE FOLLOWING:
C.R.
C.N.RAMACHANDRAN
NAIR, & BABU MATHEW P. JOSEPH, JJ.
....................................................................
Cus. Appeal No.1 of 2011
....................................................................
Dated
this the 10th day of April, 2012.
Head Note:-
Customs Act, 1962 - Sections 28AA
& 28(2) - levy and demand of interest
-Belated payment of customs duty for the goods imported - Held, When liability for payment of customs duty is admitted, interest
for delay in payment which is statutory is automatic.
J U D G M E N T
Ramachandran Nair, J.
This is an appeal filed under Section
130 of the Customs Act against the order of the Customs, Excise and Service Tax
Appellate Tribunal with a delay of 705 days. The reason for the inordinate
delay is the filing of appeal against the order of the Tribunal before the
Karnataka High Court thinking that since the Tribunal which issued the order is
located at Bangalore, jurisdiction over it is in the Karnataka High Court. Even
though Standing Counsel opposed the delay condonation
petition stating that delay is beyond condonable limit under the provisions of
the Customs Act, we feel since the provisions of CPC are made applicable for
appeals filed under the Customs Act, this court has the authority to condone
delay. It is seen from the judgment of the Karnataka High Court that within the
statutory period appellant filed the appeal and the matter was pending there
for long period. We, therefore, condone the delay and proceed to consider the
appeal on merits. We have heard Senior counsel Sri.G.L.Rawal
appearing for the appellant and Standing Counsel Sri.Saiby
Jose Kidangoor for the respondents.
2. The dispute is only against levy
and demand of interest under Section 28AB (now Section 28AA) read with Section
28(2) of the Customs Act (hereinafter called "the Act") for belated
payment of customs duty for the goods imported by the appellant through the
Cochin Customs. The facts leading to the controversy are the following. The
appellant purchased duty credit available under the DEPB scheme from M/s.Bhagya Laxmi Exports which had
DEPB credit registered on exports at Nhava Sheva Custom House, Mumbai. Based on the Telegraphic
Release Advice (TRA) purportedly issued by Nhava Sheva Custom House and produced by the appellant, the
Cochin Customs set off the customs duty payable on import made by the appellant
against duty credit purchased and produced by the appellant. Much after import
and release of the goods, the Cochin Customs verified with the Nhava Sheva Custom House at
Mumbai about the genuineness of the DEPB credit purchased and produced by the
appellant through Telegraphic Release Advice (TRA) purportedly issued by the Nhava Sheva Custom House. It was
confirmed that the Telegraphic Release Advice of duty credit under DEPB scheme
produced by the appellant was forged and bogus leading to customs duty evasion.
Consequent upon this fraud, the Commissioner demanded the duty evaded by the
appellant together with interest and also levied penalty under Section 114A of
the Act for misdeclaration and suppression of fact
that led to evasion of duty. The appellant promptly paid the duty demanded
without contest but questioned the levy of interest as well as penalty in
appeal before the CESTAT. The Tribunal accepting appellant's theory that it is
the seller of the DEPB credit M/s.Bhagya Laxmi Export that committed the deceit and also accepting
that the appellant had made payment for the purchase of DEPB credit through
cheque issued, cancelled the penalty levied, but sustained the demand of
interest for belated payment against which this appeal is filed. 3. Senior
counsel appearing for the appellant contended that interest under Section 28AB
(now 28AA) read with Section 28(2) is payable only for default in payment of
customs duty and since duty is paid as and when demanded by the Commissioner of
Customs, the appellant is not at default. Standing Counsel appearing for the
respondent on the other hand submitted that customs duty was payable at the
time of clearance of goods in the course of import and it is only because of
appellant's fraud that they managed to get duty demand set off against bogus
DEPB credit purchased through Telegraphic Release Advice and as and when such
duty credit is found to be bogus, department will be justified in demanding
interest for the delay that happened which is the period between the date of
clearance of goods till date of actual payment. In support of the contentions
raised counsel for the appellant relied on decision of the Supreme Court in
STAR INDIA (P) LTD. Vs. COMMISSIONER OF CENTRAL EXCISE, MUMBAI & GOA
reported in (2005) 7 SCC 203, decision of the Bombay High Court in UNION OF
INDIA Vs. VALECHA ENGINEERING LIMITED reported in 2010 (249) E.L.T. 167 (Bom.) and also decision of the Gujarat High Court in
COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS, DAMAN Vs. NIRMALA DYECHEM (Tax
Appeal No.1341 of 2011).
4. Standing
Counsel appearing for the respondents on the other hand relied on decision of
the Calcutta High Court in ICI INDIA LIMITED Vs. COMMISSIONER OF CUSTOMS
(PORT), CALCUTTA reported in 2005(184) E.L.T. 339 (Cal.). After considering the
above decisions what we notice is that the decision rendered by the Calcutta
High Court above referred is exactly on the same set of facts in as much as
party in that case against whom interest is sustained also produced forged DEPB
credit and the High Court held that the fraud perpetuated in a transaction of
this type should automatically lead to demand of duty and interest. We are in
complete agreement with the decision of the Calcutta High Court for more than
one reason. In the first place, admittedly, appellant committed an irregularity
because Telegraphic Release Advice is basically not for transfer of DEPB credit
but for transfer of import licence registered in another Custom House.
Secondly, Telegraphic Release Advice has to be issued by the Custom House and
it was the duty of the appellant to verify it's genuineness with the Custom
House which issued it before making huge payment of above Rs.47 lakhs to the
seller which according to the appellant played the fraud. Thirdly, the
appellant's transaction of purchase of DEPB credit from another concern namely,
Bhagya Laxmi Export has
nothing to do with the Customs Department which cannot be held liable for the
fraud, if any, committed by the Mumbai Exporter against the appellant. Whatever
is the recourse and remedy available to the appellant is against M/s.Bhagya Laxmi Export, Mumbai and
not against the Customs Department. The only mistake committed by the Customs
is that before verifying the genuineness of the Telegraphic Release Advice
produced on the DEPB credit with the Nhava Sheva Custom House at Mumbai, the Customs allowed
adjustment of duty credit against duty payable by the appellant for the
imported goods released to him. We do not think the mistake committed by the
Customs can be encashed by the appellant by avoiding
statutory interest which is mandatory and payable at the prescribed rate for
delay in payment of customs duty. When liability for payment of customs duty is
admitted, interest for delay in payment which is statutory is automatic and we
do not think the appellant can raise even a contest against levy and demand of
interest for the belated payment, when the delay is attributable only for the
fraud played on the department, whether it be with the complicity of the
appellant or not.
In our view, the Tribunal was very
considerate to the appellant in waiving the penalty. Since interest is compensatory
in nature for the belated payment of customs duty and the delay also having
admitted by the appellant, we do not find any justification for the appellant
even to challenge the same. Consequently we dismiss the appeal as devoid of any
merit.
C.N.RAMACHANDRAN
NAIR Judge
BABU MATHEW P.
JOSEPH Judge
pms