CUS A.A. 6/2008 Page 1 of 43 * THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on : 13.02.2009 CUS A.A 6/2008 JASJEET SINGH MARWAHA ..... APPELLANT versus UNION OF INDIA & ORS. ..... RESPONDENT Advocates who appeared in this case: For the appellant : Ms Jyoti Singh, Mr Ankur Chibber & Ms Kimmi Brara Marwaha. For the Respondent : Mr Rajan Sabharwal. CORAM :- HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE RAJIV SHAKDHER 1. Whether the Reporters of local papers may be allowed to see the judgment ? Yes 2. To be referred to Reporters or not ? Yes 3. Whether the judgment should be reported in the Digest ? Yes RAJIV SHAKDHER, J 1. This is an Appeal under Section 130 of the Customs Act, 1962 (hereinafter referred to as the „Act‟) against the judgment of the Customs Excise & Service Tax Appellate Tribunal, Principal Branch, New Delhi (hereinafter referred to as the „Tribunal‟) passed in Custom Appeal No. 484/2007-Cus. 2. The main grievance of the appellant which is a proprietorship concern, is that, its licence as a Custom House Clearing Agent (hereinafter referred to as the „CHA‟) has been suspended by Respondent no.2. CUS A.A. 6/2008 Page 2 of 43 2.1 By an order dated 12.11.2008, we had admitted the Appeal and framed the following substantial questions of law:- “1. Whether any violation under the Customs Act, 1962 or imposition of penalty can be a ground to suspend Clearing House Agent License under regulation 20 of the Customs House Agents Licensing Regulation, 2004 without there being any violation of the provisions of the said Regulations? 2. Whether the suspension order can be sustained solely on the basis of the confessional statement recorded under Section 108 of the Customs Act, 1962? 3. Whether the delay of 4-1/2 years on the part of the Department for not taking immediate action against the alleged violation would not cause the suspension order to be revoked? 4. Whether the Clearing House Agent can be penalized for the mis-declaration, if any, even though it is not his duty/obligation under the Customs House Agents Licensing Regulation, 2004, while the importer is left free to work?” 3. In order to adjudicate upon the Appeal, it would be necessary to note the facts given hereinafter to the extent they are relevant for the said purpose. 3.1 In the year 1996-97, the appellant had applied to get appointed as a CHA under the then prevailing Custom House Agent Licensing Regulations Act, 1984 (hereinafter referred to as „CHALR, 1984‟). The appellant‟s application was processed and he was issued a licence. 3.2 It appears that in 2002-03, the appellant acted as a CHA for certain importers, including, E.I. Dupont India Ltd, M/s Sight & Sound India and M/s Sound Terrific. The appellant in his capacity as the CHA filed 14 bill of entries in respect of imports made by E.I. Dupont India Ltd. The CUS A.A. 6/2008 Page 3 of 43 description of the goods was given as tags/labels. Similarly, in the case of M/s Sight & Sound India and M/s Sound Terrific, 4 bill of entries each were filed by the appellant, again in his capacity as CHA, wherein, the description set out was Flat Panel Display for Automatic Data Processing Machine, under tariff item 8531.80, and Plasma Monitor for Computer, under tariff item 8471.60. 3.3 It is not disputed that the said goods after appraisal were cleared by the Customs Department upon payment of requisite customs duty. 3.4 On 15.09.2003, the Directorate of Revenue Intelligence (hereinafter referred to as the „DRI‟) conducted a raid at the office premises of the appellant based on an information, that the appellant, was evidently clearing Heat Transfer Printing Paper and other miscellaneous goods, through ICD, Tughlakabad by resorting to undervaluation and misdeclaration. It seems that the information received by the DRI suggested that the goods were cleared through customs by forging and fabricating invoices with an intent to evade customs duty. As a result, the records available at the office of the appellant were taken away, and a Panchnama was drawn, in the presence of, the witnesses present at the time of the raid. The officials of the DRI also recorded, the statement of, Shri Jasjeet Singh Marwaha, i.e, the appellant under Section 108 of the Act. It is important to note that in the statement given under Section 108 of the Act, the appellant has accepted the fact that he had misdeclared the goods at the time of clearance. However, in subsequent proceedings, CUS A.A. 6/2008 Page 4 of 43 both before the Additional Commissioner (Customs), as well as, before the Commissioner and other fora including this Court, it has been averred that the said statement was made under coercion. 3.5 Continuing with the narration, immediately after the DRI raid, that is, within two days thereafter, on 17.09.2003 the appellant on behalf of the three importers i.e, M/s E.I. Dupont India Ltd, M/s Sight & Sound India and M/s Sound Terrific, deposited the differential duty, the details of which are as follows:- Name Differential Duty paid M/s E.I.Dupont India Ltd Rs 3,03,416/- M/s Sight & Sound Rs 3,18,181/- M/s Sound Teriffic Rs 2,37,985/- 3.6 As a consequence of the aforesaid events, on 17.08.2004 a show cause notice was issued by the DRI to not only the three importers, but also, to the appellant. By way of the said notice, the afore-mentioned noticees were, inter alia, called upon to show cause as to why: (i) differential duty ought not to be recovered from them which was proposed to be levied on the ground of evasion by resorting to mis- declaration and suppression of facts; (ii) duty already deposited ought not to be appropriated towards the demand of differential customs duty; (iii) goods imported/cleared be not confiscated under Section 111(d)(m) of the Act; (iv) penalty under Section 112(a) and 114A be not imposed for CUS A.A. 6/2008 Page 5 of 43 various offences of omission and commission and; (v) lastly, interest be not recovered on duty under Section 28AB of the Act. The noticees were given an opportunity to file their response and also to indicate as to whether they were desirous of being heard in person. 3.7 Accordingly, the appellant filed a reply and also availed of an opportunity of personal hearing. 3.8 After considering the reply of the appellant and the submissions made before him, the Additional Commissioner (Customs), by an order dated 20.10.2006 sustained the show cause notice. The three noticees- importers were called upon to pay customs duty, interest and penalty. In so far as, the appellant, was concerned, a penalty of Rs 5 lacs was imposed. It is important to note that in coming to the conclusion in respect of the each of noticees/importers the Additional Commissioner (Customs) inter alia made the following observations:- “…..Now I first take up the issue of import of hangtags or paper tags of „Lycra‟ brand by M/s E. I. Dupont (hereinafter refer to as Noticee-1). On examination of Bill of Entry filed by Noticee -1, it is observed that they have cleared the Tags at nil rate of duty under Notification No. 21/2002 dated 01.03.02 and prior to 01.03.02 under Notification No. 17/2001 dated 01.03.01. On going through these Noticees I find that Tags are mentioned at S. No. 140 of Notification No. 21/02 and it description of goods is given as; “Tags, labels, printed bags, stickers, belt, buttons or hangers, imported by bonfides exporters” therefore the paper tags of Noticee - 1, are covered under this CUS A.A. 6/2008 Page 6 of 43 description if they are bonafides exporter. In the present case the Noticee 1 is not bonafide exporter. In his reply dated 21.09.04, the Noticee-1, had stated that they are supplying free of cost Lycra brand hangtag to various manufacturers of readymade garments. Though the Noticee-1 has claimed that these hangtags are supplied to manufacturer exporters for fixing on articles but had failed to give any documentary evidence regarding these hangtags being used only in garments meant for export. It appears that the Noticee 1 is not supplying these imported hangtags on such condition to various persons that the same are to be used only in goods for export. Therefore it cannot be held that the hangtags were meant only for garments to be exported. Now coming to the exemption claimed by the Noticee 1 under Notification No. 17/2001 and 21/2002, I find that they are not doing any export and are also not even registered with Apparel Export Promotion Council (AEPC), as such they are not bonafide exporter, and submitted forged AEPC certificate and claimed exemption from Customs duties under above Noticee on the basis of forged documents and misdeclaration on Bill of Entries as they were aware that the exemptions under Notification No. 17/01 and 21/02 are not admissible to them on hangtags imported by them as they are not doing any export. In reply to show cause notice, the Noticee I have claimed that they are entitle to get exemption under Notification No. 153/94 dated 13.07.94. The exemption under this Notification No. 153/94 is admissible only when. (i) the said goods have been imported for fixing on articles for export or for the packaging of such article, (ii) the importer by execution of a bond in such form and for such same as may be prescribed by the Assistant Commissioner of Customs or Deputy Commissioner of Customs binds himself to pay on demand in respect of the said goods as are not proved to the satisfaction of the Assistant Commissioner of Customs or Deputy CUS A.A. 6/2008 Page 7 of 43 Commissioner of Customs to have been used for the aforesaid purposes, an amount equal to the duty leviable on such tags or labels or printed bags but for the exemption contained herein; (iii) the importer satisfies the Assistant Commissioner that the articles so imported have been exported within six months of the date of importation or within such extended period as may be permitted by the said Assistant Commissioner. But the Noticee 1, have(has) not fulfill(ed) any of the conditions mentioned above nor he had claimed exemption under Notification No. 153/94 in Bill of Entry filed by them and as such they are not entitle to the exemption available under Notification No. 153/94…….” “……..Now, I take up the issue of import of Plasma monitor by M/s Sight & Sound India (hereinafter refer to as “Noticee 3”) and by M/s Sound Terrific (hereinafter refer to as “Noticee 4”). I find that both in their statements recorded under Section 108 of Customs Act, 1962 have admitted that they have actually imported Television and had misdeclared them as “Flat Panel Display for Automatic Data Processing Machine/Plasma Monitor for Computer just to evade customs duty. As the Television attract(s) higher rate of duty, the Noticee 3 & 4 have also deposited the differential amount of duty voluntarily after admitting that they have paid lesser rate of duty. However, in reply to show cause notice, they denied that they have imported Television and again claimed that their product is “Flat Panel Display for Automatic Data Processing Machine”. This appear to be only after thought on part of Noticees 3 & 4 and it is not understood how they will use 61” and 42” screen plasma monitor in computer. They have also not given any printed literature of these plasma monitor showing that these plasma monitor can be used only as computer monitor. To get further detail of plasma monitor, the Web-site www.plasmaconcepts.com was CUS A.A. 6/2008 Page 8 of 43 also seen. At this various models of plasma monitor were seen and it found that all are nothing but Television system with many attached systems. Therefore, it is quite clear that Noticees 3 & 4 actually imported Plasma Television system and misdeclared the same just to evade customs duty. By misdeclaring the Noticees 3 & 4 are also liable to penal action. The Noticees 3& 4 have contended that penalty cannot be imposed on both company and its Proprietor and have relied upon this issue on…….” “…….Now, I discuss the issue of involvement of CHA M/s J. D. Enterprises in evasion of Customs Duty by Noticees 1 to 4. In reply to the notice issue to CHA, he had denied the allegation leveled against him in the notice. He had denied the contents of his statement and have stated that he was made to tender a statement as per the whims and wishes of officers. Such claim by the CHA appears after thought as for clearing hangtags from Customs he submitted forged certificates which he had not denied even in reply to the show cause notice. As regard Plasma Monitors, as discussed above, it is quite clear that there was misclassification of same to evade Customs duty. In view of above there appear to be no ground to believe that his statement recorded under Section 108 of Customs Act 1962 was not given voluntarily without any pressure. In his reply the CHA have stated that in case of M/s Sound Terrific and M/s Sight and Sound India the goods were examined and catalogues were seen but I find that the party has not produced any catalogues during reply to SCN or at the time of personal hearing. Even the examination of goods does not exclude the possibility of that not being able to be used as Reception apparition for Television, more over as already discussed above the same are used as T.V. being of size 42” to 61” and on verification through internet it has been found that these are actually T. V. of various sizes. The CHA the Noticee is Customs House Agent and by involving himself in evasion of Customs Duty in case of M/s E. I. Dupont India Pvt. Ltd. M/s Sound Terrific and M/s CUS A.A. 6/2008 Page 9 of 43 Sight & Sound India have become liable for penalty under Section 112 (a) of the Customs Act 1962…..” 3.9 It transpires that in view of the order of adjudication dated 20.10.2006, a communication dated 28.12.2006 was sent by the DRI to Respondent no. 2, bringing this fact to his notice and requesting that necessary action against the appellant be initiated under the CHALR, 2004. It is important to note that the said communication, which is, annexed as Annexure A-6 at Page 102 of the paper book has several dates affixed on it, beginning from 02.01.2007 to 05.01.2007. Suffice it to say that this communication would have been received in the office of Respondent no. 2, if at all, not earlier than 02.01.2007. The appellant has asserted in the Appeal that despite the aforesaid adjudication order dated 20.10.2006, on 29.12.2006, an order was passed renewing the appellant‟s licence under the extant CHALR, 2004 for a period of 10 years. It is also averred that such endorsement on the licence was made on 02.01.2007. The submissions based on these facts which have been made by the counsel for the appellant shall be referred to and dealt with in the latter part of our judgment. 3.10 In view of the communication of the DRI dated 28.12.2006, Respondent no. 2, by an order dated 29.01.2007, in exercise of his power under Regulation 20(2) of the CHALR, 2004, ordered an immediate suspension of the appellant‟s licence. Aggrieved by the same, the appellant filed an appeal bearing No. 73/2007 with the Tribunal. The Tribunal by an order dated 29.03.2007 disposed of the Appeal with a CUS A.A. 6/2008 Page 10 of 43 direction that the appellant be accorded a post-decisional hearing by the Commissioner even while keeping in view the totality of the facts and circumstances and the gravity of situation in mind. Accordingly, the appellant was directed to appear before the Commissioner on 09.04.2007 at 11.00 am for a hearing. The Commissioner after hearing the Appellant was required to pass an order within a period of one week from the date of the hearing. 3.11 In view of the Tribunal‟s direction on 17.04.2007, Respondent no. 2 after noting the fact that the appellant had asked for postponement of the date of hearing from 09.04.2007 to 10.04.2007, passed a reasoned order whereby, he confirmed the order suspending the licence of the appellant taking into account the findings recorded against the appellant in the adjudication order dated 20.10.2006. 3.12 As a consequence, a show cause notice dated 18.07.2007 was also issued to the appellant calling upon the appellant to demonstrate as to why the CHA licence be not revoked. The appellant being aggrieved by both; the order dated 17.04.2007, whereby Respondent no. 2 had confirmed the order of suspension dated 29.01.2007, as well as, by the show cause notice dated 18.07.2007 calling upon him to furnish an explanation, in respect of, proposed revocation of his CHA licence; filed a statutory Appeal with the Tribunal, in so far as order dated 17.04.2007 was concerned. While, in respect of, show cause notice dated CUS A.A. 6/2008 Page 11 of 43 18.07.2007, the appellant preferred to file a writ petition bearing No. 8168/2007 under Article 226 of the Constitution of India. 3.13 The writ petition bearing No. 8168/2007 was disposed of by a single Judge of this Court by an order dated 7.11.2007. By the said order, the respondents were restrained from taking any further action with respect to the show cause notice dated 18.07.2007 seeking to revoke the CHA licence of the appellant till such time the result of the appeal against the adjudication order dated 20.12.2006 which, at the relevant time was pending before the Commissioner (Appeals), was known. The operative portion of the learned Single Judge‟s order is set out in Paragraph 10 of the said order. The relevant extract is given hereinbelow:- “In view of the above, the best course of action would be, in my opinion, to direct the respondents not to take any further action upon the impugned show cause notice awaiting the result by the appeal pending before the Commissioner (Appeal) under Section 128. The said Commissioner shall, therefore, endeavour to decide the petitioner‟s Appeal against the adjudicatory order dated 20.12.2006 pending before him at the earliest and in any case within four months from today. The respondents shall, in the meanwhile, not proceed with the impugned show cause notice and make any final order. The continuation and resumption of the said proceedings shall be guided by the final order of the CESTAT” 3.14 The respondents being aggrieved by the aforesaid order of the learned Single Judge preferred an appeal to the Division Bench being, LPA No. 1368/2007. CUS A.A. 6/2008 Page 12 of 43 3.15 The Division Bench by an order dated 07.02.2008 noted that, in the interregnum, the Commissioner (Appeals) by an order dated 31.12.2007 had disposed of the appellant‟s Appeal whereby he had partly allowed the appeal by holding in favour of the appellant. Consequently, the Division Bench observed that it would be open to the respondents to now file a reply to the show cause notice dated 18.07.2007. It also noted the fact that, against the order of the Commissioner (Appeals), an appeal had been preferred to the Tribunal, both by the appellant, as well as, one of the importers M/s Sound Terrific being Appeal Nos. 79/2008 and 80/2008 respectively. The Division Bench, therefore, observed that the authority, while taking a decision on the show cause notice would not only take into consideration the contention of the respondents as contained in the reply to the show cause notice but would also take into consideration the effect of the order dated 31.12.2007 passed by the Commissioner (Appeals) as also any other order which the appellate authority may pass in Appeal Nos. 79/2008 and 80/2008. 3.16 To complete the narration of facts on 27.02.2008, the Tribunal in Customs Appeal Nos. 79/2008 and 80/2008 disposed of the interlocutory application for stay by observing that in view of the fact that the dispute was in respect of classification of goods imported by M/s Sound Terrific and given the fact that the differential rate of duty had already been paid by the importer, the condition of pre-deposit of penalty was required to be CUS A.A. 6/2008 Page 13 of 43 waived. With these observations, the interlocutory applications were allowed. 3.17 We are informed that on 14.03.2008 the appellant alongwith M/s Sound Terrific had moved an application for early hearing of their respective Appeals being Appeal Nos. 79/2008 and 80/2008, which was rejected by the Tribunal. 3.18 By the impugned judgment dated 04.06.2008, the Tribunal dismissed the Appeal of the appellant against the Commissioner‟s Order dated 17.04.2007, thereby confirming the order suspending the appellant‟s licence. The Appellant being aggrieved by the impugned judgment as noted hereinabove, has preferred the present appeal before us. 4. In the background of the aforesaid facts, the counsel for both the Petitioner and the Respondents made their respective submissions before us. 4.1 It was contended by the counsel for the petitioner, that the, impugned judgment of the Tribunal deserves to be set aside as it had failed to appreciate the following issues which arose in the matter; (i) there was no urgency to pass an order dated 29.01.2007 suspending the licence by invoking powers under Regulation 20(2) of CHALR, 2004 in view of the fact, that the suspension related to imports which took CUS A.A. 6/2008 Page 14 of 43 place in 2002-03. The delay of 4-1/2 years was writ large on the impugned order of suspension and hence was bad in law; (ii) the goods which had been imported had admittedly been cleared by the Customs Department after due appraisal. There was nothing on record to show that the description of goods in the bills of entries pertaining to M/s Sight & Sound and M/s Sound Terrific to the effect that, they were flat panel display for computers and automatic data processing machines, was incorrect. It was contended that the Customs Department had no evidence whatsoever to demonstrate that they were in fact capable for being used as television sets; (iii) the basis for suspension of the licence was the purported forgery of the All-India Export Promotion Council (AEPC) Certificate, in respect of, the goods imported by E.I. Dupont India Limited; a charge which stood refuted by virtue of the order of the Commissioner (Appeals) dated 31.12.2007. In these circumstances, the order of suspension could not have been sustained by the Tribunal; (iv) the Tribunal failed to appreciate that the statement of the appellant i.e, Shri Jasjeet Singh Marwaha recorded under Section 108 of the Act cannot be used in evidence. If that be so, the Tribunal failed to appreciate that there was no material whatsoever, available with the Customs Department, to justify the continued suspension of the appellant‟s licence. Reliance in this regard was placed on the judgment of the Tribunal in Varma & Sons vs CC (G), Mumbai: 2008 (88) RLT 749; CUS A.A. 6/2008 Page 15 of 43 (v) and lastly, it was contended that the Tribunal failed to appreciate that no penalty was imposable once duty was paid before the issuance of show cause notice. In this case, the duty was paid on 17.09.2003 whereas the show cause notice was issued on 17.08.2004. In support of this submission, reliance was placed on the judgment of the Tribunal in the case of Rashtriya Ispat Nigam Ltd vs CCE; 2003 (161) ELT 285 and 2004 (163) ELT A53 (SC). 4.2 As against this, the learned counsel for the respondents submitted that the impugned judgment of the Tribunal deserved to be sustained as: (i) the respondent no. 2 had correctly exercised the power under Regulation 20(2) of the CHALR, 2004. It was submitted that in view of the adjudication order dated 20.12.2006 the Customs Department could not have but passed the order of suspension of the appellant‟s licence. It was, thus, submitted that there was not an inordinate delay, as alleged, by the learned counsel for the