C. W. P. No. 19769 of 2008 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. Case No. : C. W. P. No. 19769 of 2008 Date of Decision : November 20, 2008. M/s Singh Overseas and another .... Petitioners Vs. Commissioner of Central Excise and another .... Respondents CORAM : HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE L. N. MITTAL * * * Present : Mr. O. P. Goyal, Senior Advocate with Ms. Priya Khurana, Advocate for the petitioners. * * * ADARSH KUMAR GOEL, J. (Oral) : 1. This petition seeks quashing of order dated 18.09.2008 (Annexure P-8) passed by the Customs, Excise and Service Tax Appellate Tribunal (in short, the Tribunal) requiring the petitioners to deposit a sum of Rs.1 crore towards duty and a sum of Rs.10 lacs towards penalty within eight weeks, failing which the appeal shall stand dismissed. 2. Even though against the impugned order, statutory appeal is provided under Section 130 of the Customs Act 1962, on a substantial question of law, we have heard learned for the petitioners on merits. 3. The petitioner no.1 is a proprietorship concern of petitioner no.2 and is a 100% Export Oriented Unit (EOU). It imported 18 consignments of polyster knitted fabrics and also procured 04 consignments C. W. P. No. 19769 of 2008 2 of the same material duty free from units in Domestic Tariff Area under CT-3 certificate. The duty free material so imported was required to be used for manufacture and export as per the Scheme framed under the provisions of the Customs Act. However, on inspection by the Officers of the department, it was found that imported stock/locally procured materials were diverted to the market and were used in the market, thus resulting in the evasion of duty. After issuing show cause notice and considering the interim reply of the petitioners, the adjudicating authority recorded findings against the petitioners and confirmed the demand of duty of Rs.2.5 crores and also imposed penalty. The petitioners preferred appeal to the Tribunal and inter alia submitted that no opportunity of personal hearing was given and there was denial of principles of natural justice. It was also submitted that the incriminating statements of the petitioners made before the officers of the department, on various dates, were immediately retracted and hence, could not be acted upon. 4. The petitioners failed to make the mandatory deposit under Section 129-E of the Act and sought waiver thereof. The Tribunal rejected the said prayer except to the extent already mentioned. 5. The findings of the Tribunal are as under :- “5. We have carefully considered the submissions from both sides. We are not able to appreciate the undue delay in submitting even an interim reply by M/s Singh Overseas. Having received a show cause notice proposing a demand of a sum of over Rs.2.5 crores, the fact that they did not file even an interim reply for such a long time looks rather strange. We have also been shown evidence to the effect that the personal hearing intimations were, in fact, dispatched from the office of the adjudicating authority. The claim C. W. P. No. 19769 of 2008 3 of the learned advocate that on earlier occasions the communications have been personally served on the appellant and the personal hearing intimations were not served personally may not deserve to be accepted. Intimations have been sent as provided for in the law. Taking totality of the circumstances, we are not, prima facie convinced of the violation of principles of natural justice. On merits of the case, prima facie, we find that on the date of visit by the officers, there was no evidence for any manufacturing activity; that there was admission by the proprietor of M/s Singh Overseas regarding diversion of the duty free materials procured by the 100% EOU; that the export consignments appears to be of very poor quality going by the wide variation in grammage recorded by the Commissioner. The admission by the proprietor of M/s Singh Overseas is further corroborated by very nominal value declared for the consignment for clearance at Dubai. 6. On going through the records and the submissions, we find, prima facie, that Shri Krishan Kumar had knowingly and intentionally involved himself in illegal diversion of duty free materials imported by M/s Singh Overseas and in exporting sub-standard items towards meeting the export obligations. 7. The nature of allegations and findings are, prima facie, serious and involve fraudulent activities. Under these circumstances, the claim of C. W. P. No. 19769 of 2008 4 poor financial status by the applicants have to be viewed with lot of reservations. The only evidence produced is the income tax returns filed by them and no assessed copies have been produced. In addition, no evidence relating to receipt of export sale proceeds by M/s Singh Overseas and further disposal thereof have been indicated. The claim that Shri Krishan Kumar returned Rs.15 lacs to M/s Singh Overseas is not corroborated as the same has not been reflected in the bank statements of M/s Singh Overseas: there is no plausible explanation for Rs.10 lacs said to have been received by the firm of Mr. Krishan Kumar.” 6. We have heard learned counsel for the petitioners and perused the record. 7. Learned counsel for the petitioners submitted that the Tribunal could not direct the appeal to be dismissed for non-deposit under the provisions of Section 129-E of the Customs Act. 8. We do not find any merit in the submission. Section 129-E of the Customs Act specifically mandates deposit. If deposit is not made, unless the same is waived, dismissal is the only consequence. 9. It is also submitted that the finding of the Tribunal that there was no violation of principles of natural justice, was perverse. We are unable to accept this submission. Inspite of service, the petitioners submitted their interim reply after a long time. The Tribunal, after examining the record, found that intimation for personal hearing was duly dispatched from the office of the adjudicating authority, which was sufficient compliance of the statutory procedure. The Tribunal also found sufficient material to sustain the findings of the adjudicating authority, prima facie. C. W. P. No. 19769 of 2008 5 10 The scope of appeal to this Court is limited to substantial questions of law, which fact cannot be ignored even if the petitioners have chosen to file a writ petition. 11. We do not find any ground to interfere. 12. The petition is dismissed. (ADARSH KUMAR GOEL) JUDGE November 20, 2008 ( L. N. MITTAL ) monika JUDGE