Polyglass Acrylic Manufacturing Co Pvt Ltd v. Additional Director General, Directorate of Revenue Intelligence & Ors.

1. This hearing has been done through hybrid mode. Factual Background

2. The present writ petition has been filed under Articles 226 and 227 of the Constitution of India seeking inter alia issuance of an appropriate writ for quashing of the Show Cause Notice bearing No. F.No. DRI/AZU/INV- 11:32 17/2012 (hereinafter “SCN”) dated 20th March, 2014, issued by the Respondent No. 1 - Additional Director General, Directorate of Revenue Intelligence, Ahmedabad Zonal Unit (hereinafter “DRI”) and to declare the proceedings pending under the SCN before Respondent No. 2 – Principal Commissioner of Customs, ICD Patparganj, New Delhi, to be abated in terms of Section 28(9) of the Customs Act, 1962 (hereinafter, “Act”).

3. The case of the Petitioner Company is that it was engaged in the business of importing and trading of various goods including parts of water purifier such as RO Membrane, Booster Pump, Carbon Filter, Sediment Filter etc. (hereinafter “subject goods”). According to the Petitioner Company, the subject goods were being imported through various ports including CFS Mulund Maharashtra, JNCH Nhava Sheva Maharashtra, Kandla Port Gujarat, ICD Ballabhgarh Faridabad, Haryana, ICD Patparganj and ICD Tughlakabad, New Delhi. The DRI suspected mis-declaration and undervaluation in the import of the subject goods that were being imported allegedly by one Mr. Ashok Singhla, in the name of various name-sake “Import Export Code Holders” (hereinafter “IEC holder”) such as the Petitioner Company. Accordingly, on 16th April, 2012, the DRI conducted certain searches at the premises of the Petitioner Company as also the premises of the other namesake IEC holders who were alleged to be controlled by Mr. Ashok Singhla i.e., Ms. MKY Enterprises Pvt. Ltd. and Ms. KY Enterprises.

4. The impugned SCN was issued by the DRI, upon completion of its investigation, holding the Petitioners, inter alia, jointly and severally liable for payment of differential duty under Section 28(1) of the Customs Act. The allegations against the Petitioners in the impugned SCN are reproduced hereinunder for ease of reference: 11:32 “19.[1] From the facts discussed in the foregoing paras and material evidences available on records, it appears that Mis.

PAMCPL and Shri Ashok Singhla, de-facto owner of the imported goods, had imported various types of water purifier parts through their overseas suppliers by mis-declaring the actual l', transaction value and also willfully suppressing its complete description before the Customs, Kandla with an intention to evade payment of appropriate Customs duty. The value declared by them before the Customs Authority for clearance of the said imported goods was only a part amount paid for the imported consignment. The fact of undervaluation in the import of said consignment has been categorically admitted by Shri Kapil Dev Aggarwal and Shri Ashok Singhla in their statements, as discussed above. Thus, the value of Rs. 15,06,62,426/( assessable value) (as detailed in the Annexures-A[1],B[1],C[1],D[1],E[1] AND G[1] to the SCN) declared by M/s. PAMCPL before Indian Customs, as mentioned in the invoice and the import documents does not merit to be treated as correct transaction value in terms of the provisions of Section 14 of the Customs Act, 1962, read with Rule 3 of the Customs Valuation (Determination of Price of the Imported Goods) Rules, 2007 (hereinafter referred to as Customs Valuation Rules, 2007) and the same is liable for rejection in terms of Rule 12 of the Customs Valuation Rules, 2007 and actual transaction value requires to be re-determined in terms of Section 14 of the Customs Act 1962 read Rule 3 of the Customs Valuation Rules, 2007. 19.[2] Section 14 (1) of the Customs Act, 1962 provides that "for the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price 11:32 actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for at the time and place of exportation, where the buyer and seller of the are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf'. Further, Rule 3 of the Custom Valuation Rules, 2007 provides that subject to Rule 12, the value of imported goods shall be the transaction value adjusted in accordance with provisions of Rule 10. It appears that in the instant case Shri Ashok Singhla has explained all the material evidences available on record in the form of proforma invoices, e-mail communication etc. produced two Annexures showing actual price of respective consignments as shown in said Annexures and also confessed average actual the basis of available evidence on record in his statement. Therefore, it appears that the value confessed by Shri Ashok Singhla can be treated as transaction Therefore, it appears that after the rejection of the declared value, the assessable value for the types of water purifier parts needs to be redetermined on the basis of value confessed by Shri Asbok Singhla in his statements by taking recourse to the provisions of Section 14 of Customs Act, 1962 read with Rule 3 (1) and Rule 10 of the Customs Valuation Rules, 2007. Further, as per Rule 3(4) of the Customs Valuation Rules, 2007 if the value cannot be determined in terms of Rule 3(1) of Customs Valuation Rules, 2007, the value shall be determined by proceeding sequentially through Rule 4 to 9. In the instant case Rule 5 of Customs Valuation Rules, 2007 read with Rule 3 ibid is applied where the actual price of similar goods are available. Accordingly, the correct assessable value is worked out to be Rs. 52.64,80,439/- (re-determined value) (as detailed in the Annexures-A[2],B[2],C[2],D[2],E[2] & F[2] to the SCN) for the purpose of assessment of duty. 11:32 19.[3] The mis-declaration of the value was done with a willful intent to evade the payment of appropriate customs duty leviable thereon. All these acts on the part of M/s. PAMCPL and Shri Ashok Singhla, de-facto owner of imported goods, have also rendered the goods liable to confiscation under the provisions of the Section 111(m) of the Customs Act, 1962, in as much as, they misdeclared/ caused to mis-declare the true value of the goods while filing the bills of entry under Section 46 of the Customs Act 1962 in which they were required to declare the true value of the machines. Since, the said acts of omission and commission on the part of M/s. PAMCPL and Shri Ashok Singhla, de-facto owner of imported goods, have rendered the goods liable to confiscation under Section 111(m) of the Customs Act 1962, on account of undervaluation M/s. PAMCPL and Shri Ashok Singhla are liable to penalty under Section 112(a) of the Act ibid.

19.4. It also appears that M/s. PAMCPL and Shri Ashok Singhla, de-facto owner of imported goods, had declared the value of Rs. 15,06,62.426/- only at the time of seeking clearance of water purifier parts from various Customs authority (as detailed in the Annexures-A[1],Bl,C[1],Dl,El & F[1] to the SCN) instead of re-determined assessable value of Rs. 52,64,80,439/- (as detailed in the Annexures-A[2],B[2],C[2],D[2].E[2] & FZ to the SCN) thereby suppressing the value to the tune of Rs. 37,58,58,013/-. By declaring such suppressed value, Customs duty amounting to 8.81.92,681/- (as detailed in the AnnexuresA[2], B[2],CZ,D[2],EZ & F[2] to the SCN) was short paid by M/s. PAMCPL and Shri Ashok Singhla, de-facto owner of imported goods. It also appears that M/s. PAMCPL and Shri Ashok Singhla, de-facto owner of imported goods, have adopted the modus operandi of deliberate and willful suppression of actual value in contravention of various provisions of Customs Act and Rules made thereunder, with an intent to evade payment of Customs duty of Rs. 8,81,92,681/- (as detailed in the 11:32 Annexures-A[2],B[2],C[2].D[2].E[2] & F[2] to the SCN). Hence, Section 28 (4) [erstwhile proviso to Section 28(1)] of the Customs Act, 1962, for invoking the extended period for demand of duty is applicable in the instant case. Therefore, the differential Customs duty amounting to Rs. 8,81,92,681/- (as detailed in the Annexures- AZ,BZ,C[2],D[2],E[2] & F[2] to the SCN) is liable to be recovered jointly and severally from M/s. PAMCPL and 'Shri Ashok Singhla, de-facto owner of imported goods, under Section 28 (4) [erstwhile proviso to Section 28(1)) of the Customs Act, 1962, along with applicable interest under Section 28 AA [erstwhile Section AB] of the Customs Act 1962. 19.[5] Further, the said acts of willful mis-statement, collusion and suppression of facts by M/s. PAMCPL and Shri Ashok Singhla, de-facto owner of imported goods, have resulted in short levy of the appropriate custom duty of Rs. 8,81,92,681/- (Rs. Eight Crore Eighty One Lacs Ninety Two Thousand Six Hundred Eighty One only) (as detailed in the Annexures-A[2].B[2],C[2],D[2],E[2] & F[2] to the SCN). Hence, PAMCPL and Shri Ashok Singhla, have rendered themselves liable for penal action under the provisions of Section 114A. 19.[6] Further, M/s. PAMCPL have intentionally made declaration and used invoices that were false and incorrect in respect of actual transaction value whereas Shri Ashok Singhla, de-facto owner of imported goods knowingly caused M/s, PAMCPL to make declaration and use invoices that were false and incorrect in respect of actual transaction value declaration, Therefore, M/s, PAMCPL and Shri Ashok Singhla have rendered themselves liable for penal action under the provisions of Section 114AA of the Customs Act, 1962 also. 19.[7] Further, Shri.Kapil Dev Aggarwal, Director of M/s. PAMCPL, appears to be the person who was all 11:32 along aware and had in collusion with Shri Ashok SinghJa, de-facto owner of the imported goods, adopted the modus of under valuation of the said goods imported by them and appeared to be actively involved in evading the actual Customs duty payable thereon and pocketing the same for enrichment of the company. He managed in obtaining commercial invoices of low value from Shri Ashok Singhla and presented the said invoices before Indian Customs at the time of seeking clearance of imported goods, Thus, Shri Kapil Dev Aggarwal appears to have knowingly and deliberately indulged in mis-declaration of value of the imported water purifier parts in collusion of Shri Ashok Singhla, with malafide intention ·to evade payment of Customs duties amounting to Rs. 8,81,92,681/- Eight Crore Eighty One Lacs Ninety Two Thousand Six Hundred Eighty One only) (as detailed in the Annexures A[2], B[2],C[2],D[2],E[2] & F[2] to the SCN). Further, the omission and commission of the said acts on the part of Shri Kapil Dev Aggarwal have rendered the goods under the question liable for confiscation under Section 111(m) of the Customs Act, 1962 and therefore, Shri Kapil Dev Aggarwal have rendered himself liable for penal action under the provisions of Section 112(a) and 114M of the Customs Act, 1962.”

5. The Petitioner Company was made answerable to six different jurisdictional Assessing Officers i.e., (i) Commissioner of Customs (Mulund CFS 85 General), (ii) Additional/Joint Commissioner of Customs (Import), JNCH, Nava Sheva, (iii) Additional/Joint Commissioner of Customs, Kandla,

(iv) Commissioner of Central Excise, Delhi - IV (Faridabad), (v)

Additional/Joint Commissioner of Customs, Inland Container Depot, Patparganj and (vi) Commissioner of Customs, Inland Container Depot, Tughlakabad. On the basis of the allegations stated in the impugned SCN, the DRI raised various demands against the Petitioner Company and Mr. Ashok 11:32 Singhla. In addition, interest and penalty was also sought to be imposed on the Petitioner Company and Mr. Ashok Singhla.

6. The impugned SCN, however, was not adjudicated for a substantial period of time by the concerned assessing authorities, despite the SCN being made answerable to six separate authorities. In view of the fact that there were multiple adjudicating authorities a common adjudicating authority i.e., Commissioner of Central Excise, Delhi was appointed on 5th June, 2014 by the Central Board of Excise and Customs (hereinafter “CBEC”) to adjudicate the impugned SCN. Thereafter, on 7th June, 2016, the CBEC appointed the Commissioner of Customs, ICD, Patparganj, Delhi as the common adjudicating authority. Communication took place for exchange of ‘Relied Upon Documents’ (hereinafter “RUDs”) and as per the Respondent four personal hearings are stated to have been conducted on 24th May, 2017, 4th March, 2021, 11th March, 2021 and 18th March, 2021. In the meantime, the Petitioner Company is stated to have requested the concerned adjudicating authority to provide all the ‘Relied Upon Documents’ (hereinafter “RUDs”), which, as per the Petitioner Company, were provided only on 5th March, 2021. The Petitioner Company had filed its detailed reply to the SCN on 18th March,

2021.

7. It is the case of the Department that, in the meantime, the decision of the Coordinate Bench of this Court in Mangli Impex Ltd. v. Union of India & Ors. [2016:DHC:3435-DB] was rendered on 30th May, 2017, due to which the impugned SCN was put in the call book and the same was taken out from the call book sometime in November, 2017. It is stated that the Department had already provided the Petitioner Company with all the RUDs through speed post on 20th March, 2014, however, the Petitioner Company continued 11:32 to request for all RUDs and non-relied upon documents to delay the proceedings. Thereafter, as per the Department there was a halt on the adjudication proceedings during the 2019-2020 period due to the Covid-19 pandemic. As per the Respondents after the judgment of the Supreme Court in M/s Canon India Private Limited v. Commissioner of Customs, Civil Appeal No. 1827 Of 2018, the impugned SCN was again transferred to the call book sometime in March, 2021. The Petitioner Company was informed by the Department vide letter dated 14th February, 2022 that in light of the decision in Canon India (supra) and the instructions issued by the Central Board of Indirect Taxes and Customs (hereinafter “CBIC”) vide instruction 4/2021-Customs dated 17th March, 2021, the adjudication of the Petitioner Company’s case was kept in abeyance.

8. Thereafter, since the impugned SCN was not adjudicated by the concerned adjudicating authority for over 9 years since its issuance, the Petitioner Company filed the present petition challenging the same. Submissions of the Parties

9. The case of the Petitioner is that under Section 28(9) of the Act there is a specific time-period fixed for the purpose of adjudication of show-cause notices and determination of amount of duty or interest. The period specified in the said provision is six months and a maximum period of one year. Section 28(9) of the Act reads as under: Section 28(9) of the Customs Act, as in force prior to 29th March 2018 read as under: