M/s Southern Gold Private Limited Vs Commissioner Of Customs (Appeals)

M/s Southern Gold Private Limited vs Commissioner Of Customs (Appeals)

High Court Of Kerala · Decided on 8 April 2025

HON’BLE JUDGES

Dr. A.K. Jayasankaran Nambiar, J · Easwaran S., J

RESULT

Allowed

CASE NUMBER

Writ Appeal No. 97 Of 2025 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 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 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. 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. WA NO. 97 OF 2025 6 2025:KER:30463 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 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 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.

Ask AI about this case

AI Structured Summary

Not yet generated for this judgment

Judgment

12 paragraphs · 1,835 words

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.

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 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.

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.

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 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.

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.

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.

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.

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.

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 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 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.