Penalty demand and proposal of confiscation cannot be separated from Customs duty demand

By:

The Hon’ble Customs, Excise & Services Tax Appellate Tribunal, Bangalore (“CESTAT”) in the matter of M/s. Dhiren Enterprise v. Commissioner of Customs (Adjudication), Mumbai [Final Order No. A/87107/2021 dated November 09, 2021], ruled that the proposal for confiscation and penalty cannot be segregated from duty demand and therefore the proceedings for confiscation and imposition of penalty cannot be sustained. Further the Additional Director General, DRI did not have the jurisdiction to issue the show cause notice as the said officer was not the proper officer under Section 29 of the Customs Act, 1962 (“the Customs Act”) and therefore all proceedings undertaken by the Department on this show cause notice is without jurisdiction.

M/s. Dhiren Enterprise (“the Appellant”) filed the current appeal being aggrieved of the order dated May 31, 2012 passed by the Commissioner of Customs (Adjudication), by which the demand raised in the show cause notice issued by the Additional Director General, Directorate of Revenue and Intelligence (“DRI”) Mumbai under Sections 28 and 124 of the Customs Act has been confirmed.

The Appellant submitted that the Additional Director General, DRI did not have the jurisdiction to issue the show cause notice as he was not the proper officer under section 28 of the Customs Act to issue the notice and relied upon decisions of the Supreme Court in Canon India Pvt. Ltd. v. Commissioner of Customs [2021 (376) E.L.T. 3 (S.C.)] and Commissioner of Customs, Kandla v. M/s. Agarwal Metals and Alloys [2021 (9) TMI 316- Supreme Court].

Department however submitted that the Additional Director General, DRI had the jurisdiction to issue the show cause notice and also submitted that the Department has filed a review petition against the judgment of the Supreme Court in Canon India Pvt. Ltd. v. Commissioner of Customs [2021 (376) E.L.T. 3 (S.C.]) India on April 07, 2021 and it is pending. Moreover the notice has been issued both under Sections 28 and 124 of the Customs Act and, therefore, even if the notice issued under Section 28 ibid is held to be without jurisdiction, the notice issued under Section 124 of the Customs Act would still survive.

The Hon’ble CESTAT, Mumbai held that the show cause notice dated January 30, 2009 issued by the Additional Director General, DRI is without jurisdiction as the said officer was not the proper officer and therefore all proceedings undertaken by the Department on this show cause notice is without jurisdiction resultantly the order dated May 31, 2012 passed by the Commissioner of Customs (Adjudication) cannot be sustained. Further, answering the submission advanced by the Department that the hearing of this appeal should be deferred till the review petition filed by the Department in Canon India is decided. CESTAT placed reliance upon the decision that was considered by the Karnataka High Court in Shri Mohan C. Suvarna Director (Finance and Admin) M/s Givaudan India Pvt. Ltd. vs. The Principal Commissioner of Customs, Additional Director General Directorate of Revenue Intelligence, Bangalore 2021 (8) TMI 178- Karnataka High Court and rejected the same.

Further, CESTAT relied upon the case Bakeman’s Home Products Pvt. Ltd. vs. Collector of Cus., Bombay 1997 (95) E.L.T. 278 (Tribunal) held that the demand of duty on allegation of misdeclaration of value cannot be segregated from the action of confiscation and penalty based also on misdeclaration of value. Consequently, since the demand of duty fails, action for confiscation and penalty cannot survive. Therefore, the proceedings for confiscation and imposition of penalty cannot be sustained.

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