AI Structured Summary
Not yet generated for this judgment
Judgment
V. Dhanapalan, J.—The order of the eighth respondent, namely, Settlement Commission, dated 04.06.2007, settling the duty liability at Rs. 82,25,502.45 as against the demand of Rs. 3,87,63,211/-, is under challenge in this Writ Petition.
First respondent is a company, operating a Duty Free Shop within the premises of Chennai Port. It has been granted a private bonded warehouse by the Commissioner of Customs for storing goods imported without payment of duty and permitted to sell such goods to international passengers and to members of the crew. On 08.07.2006, Central Industrial Security Force (CISF) personnel intercepted an army vehicle found to be carrying cigarette cartons and liquor bottles in bulk quantities. On questioning the driver of the vehicle, it came to light that those goods were supplied by the duty free shop of the first respondent. Subsequently, the customs officers carried out extensive investigation, during which it was known that the first respondent was selling goods imported duty free to unauthorised persons. It was also revealed that the first respondent was generating bills showing the sale to members of the crew of various vessels. Some of the crew were not in the port and some ships were on coastal run at the relevant time. In a large number of cases, the signatures of the buyers did not tally with the signatures available with the department. Thus, altogether, it was allegedly found that the first respondent had made unauthorised sales by about 5000 bills and the total value of such non-bonafide sales was Rs. 1,72,30,568/-. Accordingly, a show cause notice was issued, demanding a duty of Rs. 3,87,63,211/- on the entire goods sold to unauthorised persons. Interest on the duty amount was also demanded. It was also proposed to impose penalty on the respondents 1 to 7 in addition to revoking the licence to operate the duty free shop inside the harbour.
Aggrieved over the same, the respondents 1 to 7 filed an application for settlement before the eighth respondent, namely, Settlement Commission, admitting the duty liability of Rs. 82,25,502.45.
The stand of the respondents before the Commission was that the respondents made a verification of the records and thereupon they were not able to accept any duty liability more than Rs. 82,25,502.45.
The only dispute was with regard to the allegation in the show cause notice that the signatures of buyers on 3004 sales bills did not tally with the signatures available with the department, for which it was contended by the learned Senior Counsel for the respondents, that at the point of sale, it was not possible to verify the signature of each customer. The regulations raised by the department under Facility Circular No. 6, dated 11.03.2005 did not require that the signature of every customer should be verified before any goods were sold to a customer. Further, the signatures in the customs declaration forms were solely in possession of the customs department over which the duty free shop had no access. Therefore, the Duty Free Shop personnel had no means to ensure that the signatures were tallied. All the particulars required under the regulations had been noted down in the sales bills and it was ensured that the bills were signed by the crew members, as required under para 4.1 of the said circular. Therefore, it could not be said that the crew members'' signatures in the bills did not tally with those in the declarations made to the department, that too when the declaration forms were not available with the duty free shop of the respondents. The normal practice in any duty free shop is to enter the passport number and the name of the passenger, which was followed by the respondents. The requirements of regulations in para 4.1, 4.4 and 4.5 of the Circular were all complied with. Under para 5.2, there was a requirement that the internal audit department of the Customs House should carry out checks regularly on the stocks and verify the sales. During the various checks, no questions were raised and no allegations of forgery were made.
The contention of the Revenue before the Settlement Commission was that as per the facility circular, para 4.1, the applicants should have ensured that the full signature of the buyer was put on the cash bills; the escort officers had already admitted that they were giving escort reports on a periodical basis and that the respondents could not take shelter under the audit done by the department, as the violations done by them were beyond the scope of audit. It was also the stand of the Revenue that they had done a meticulous investigation and, in 1246 bills, they found that the signatures of the buyers tallied with those available with the department and, therefore, they did not include them for demanding duty, whereas in 3004 bills, the signatures did not tally; hence, the duty was demanded and, as such, the entire duty demand was correct and no immunity should be granted to the respondents.
Dispelling the stand of the Revenue and justifying the act of the Settlement Commission, learned Senior Counsel for the respondents has cited the following authorities:
(i) New Bharat Rice Mills v. Union of India 2008 (229) E.L.T. 502 (P&H):
The Settlement Commission has in exercise of its powers under Sub-section (5) of Section 127C of the Customs Act, 1962 settled the customs duty qua the petitioner for Rs. 1,46,75,646/- and interest payable on this amount as Rs. 3,26,400/- which stood paid by the petitioner. A penalty of Rs. 25,00,000/- has only been imposed and immunity from prosecution under the Customs Act, 1962 has also been granted subject to the conditions that the penalty of Rs. 25 lakhs is paid within 30 days of the order. Had this order not been passed, the petitioner would have been liable to pay much higher penalty and would have faced prosecution under the Customs Act as well. The immunity from the prosecution and the reduction in penalty has been granted to the petitioner by the Settlement Commission as per the provisions of Section 127C of the Customs Act, 1962, for the benefit of the petitioner. The Statute has bestowed Settlement Commission with discretionary powers and if such powers have been exercised diligently and reasonably, the same cannot be faulted with. Each order of settlement is based on the facts and circumstances of each case which may be peculiar to itself and, therefore, cannot be made the basis for terming an order discriminatory unless violative of the Statute.
(ii) Alluminium Profiles Limited v. Union of India 2009 (242) E.L.T. 9 (Bom.):
Considering the above, it is clear that as the order of settlement commission is final and mode of recovery is also set out therein, it will not be open to the Collector of Central Excise assuming that the circular of 5th August 1985 and 11-4-1994 to interfere with the order passed by the Settlement Commission, which is exercising quasi judicial powers. In the circumstances, can a writ court exercising extra ordinary jurisdiction, when the settlement commission has thought it fit not to grant any instalment, grant instalments assuming that u/s 32F(8) there is an implied power to grant instalments. This court ordinarily, ought not to interfere in the exercise of its extra ordinary jurisdiction with the order passed by the Settlement Commission.
I have heard the learned Counsel for the parties and also gone through the records.
The investigation conducted by the Department concluded that 3004 cash bills were issued to non-eligible persons and the goods diverted to the local market. The defence of the respondents was that they were only required to ensure that the full signatures of the buyers were put on the cash bills. The circular issued by the Department in respect of the operations of the duty free shop did not specify that they should verify the signatures of the buyers and ensure that the signatures were correct. The case of the respondents was also that they had complied with all the requirements of the regulations. Therefore, it could not be said that the sales were effected to ineligible persons.
On an analysis of the allegations made in the show cause notice and also the submissions of the learned Senior Counsel for the respondents, what transpires is that the Department had made allegations on the basis of visual comparison of the signatures on the bills with the signatures in the declaration forms available with the Department, which was objected to by the respondents. Before coming to the conclusion that the signatures in the sales bills did not tally with those available in the declaration forms available, the Department should have got the opinion of a forensic expert or a handwriting expert, for certification.
It is true, the task of comparing the signatures in 3004 cash bills is huge and it might not have been possible to verify all the signatures by a handwriting expert. However, what is found is that not even one signature was verified by a forensic expert or a handwriting expert to ascertain whether it tallied with the signature available with the department. In the normal course, at least, a small percentage of these signatures should have been got verified by an expert before the allegation was made. Further, it was also noticed that the department did not take the statements from any of the buyers, whose signatures were under dispute. Here again, it might not have possible to take the statements from all persons, but, at least, a few would have been sufficient to prove a substantial degree that those were not the correct signatures.
In the absence of any statement and in the absence of any opinion from the expert, the allegation regarding non-matching of signatures appear to have been made on the basis of a presumption, which cannot be sustained. There is a every possibility that the signatures of the same individual may vary slightly from place to place. Further, at the time of purchase, the buyer may not take adequate care to ensure that he has put in his correct signature on the bill. Therefore, the mere allegation of mismatch on the basis of visual examination without any supporting documents or expert opinion cannot be countenanced. This is also due to the fact the respondents had complied with all the other requirements under the facility circular issued by the department for the operation of duty free shop. There is no dispute that all the details required as per the circular had been mentioned in the bills. It is also not disputed that the amounts were collected in foreign exchange and remitted as required.
It is well settled that when an allegation is made, the burden is on the person who alleges, to prove it beyond doubt and the burden can be discharged only on the basis of concrete evidence and admission statements from the persons concerned or opinion from a technical expert. When there are variations in the signatures, a technical expert could have certified whether both the signatures belonged to the same person or not, which is admittedly not done in this case.
It is also a settled law that the show cause notice issued without any tangible evidences and based only on inferences involving unwarranted assumptions is vitiated by an error of law. In this case, the Department has presumed that the signatures on the bills were forged on the basis of a mere visual examination. Such a presumption, unless reinforced with specific and clear evidences, would vitiate the proceedings and result in miscarriage of justice. The respondent had also stated that they placed the goods on board the various ships under proper customs escort, for which they placed escort slips before the Commission. It has been mentioned in the show cause notice that the officers signed those escort reports periodically but actually they did not accompany the goods. The officers, who certified the escort reports, are the proper officers authorised to escort and place the goods on board the vessels. It is also seen that the said officers were posted on cost recovery basis at the duty free shop. In other words, they were exclusively in-charge of the duty free shops and their services were paid for by the respondent company. Hence, they should have been entrusted with no other work but instead dedicated to ensure the smooth and proper functioning of the duty free shop in accordance with the guidelines issued by the Department. If there was any failure on the part of the Department, it cannot be held against the respondent company.
As for the respondent company, they were required to place the goods on board the vessel and get such placement certified by the officers concerned. Since the respondents had complied with the said requirement, the allegation of the Department has no merit. All these factors would clinchingly establish that all the sales under the disputed cash memos were made to eligible persons and there was documentary evidence to prove that they had been placed on board the vessel.
The respondent company had also pointed out that their operations were subject to audit by the Department. The Revenue had pleaded that the violations alleged in the Show Cause Notice were beyond the scope of audit. Even admitting the said contention of the Department, it is seen that the audit department did not find any defect in the records kept by the duty free shop. In the given situation, the irresistible conclusion that could be arrived at was that there was no evidence to prove the allegation with regard to 3004 cash bills under dispute and there was also no evidence to indicate that there was any departure from the regulations, warranting demand of duty in respect of such sales.
It was only under the said circumstances, the eighth respondent, namely, Settlement Commission, vide the order impugned, held the total liability of the respondents was the amount admitted by them i.e., Rs. 82,25,502.45. By the said order, the Commission awarded simple interest at 10% p.a. on the admitted amount from the date of sale of the goods till the date of actual payment.
Above all, in the Division Bench decision cited by the learned Senior Counsel for the respondents in New Bharat Rice Mills case, cited supra, the High Court of Punjab & Haryana has held that the Statute has bestowed Settlement Commission with discretionary powers and if such powers have been exercised diligently and reasonably, the same cannot be faulted with. Similarly, in the other Division Bench decision in Alluminium Profiles Limited, the Bombay High Court has held that the writ court, ordinarily, ought not to interfere, in the exercise of its extraordinary jurisdiction, with the order passed by the Settlement Commission.
Therefore, the order of the Settlement Commission, dated 04.06.2007, impugned herein, in the considered opinion of this Court, is perfectly valid and does not suffer from any infirmity. As a result, this Writ Petition is dismissed. No costs. Consequently, the connected M.P. Nos. 2 and 3 of 2008 are also dismissed.