By TIOL News Service

MUMBAI, APR 15, 2014: SHRI Rajesh Atmanand Agarwal is seeking waiver of pre-deposit of penalty of Rs.75,00,000/- imposed on him under Section 112(b)(i) of the Customs Act, 1962 by way of this stay application.

When the Stay application was listed, none appeared on behalf of the applicant and on the submission of the Revenue that the applicant had imported the goods under Target Plus Scheme which were diverted into open market, the Bench had directed the applicant to make a pre-deposit of 20% of the penalty confirmed against him within a period of eight weeks.

In the matter of the Stay order, the applicant filed an application for modification on the ground that the same was passed on incorrect facts inasmuch as the applicant is not an importer in the case but he is only a commission agent.

The stay order was, therefore, recalled and the matter was heard.

It is submitted by the applicant that while considering the stay applications of the main party i.e. importer namely M/s Ansh Textiles (P) Ltd., ShriInderprit S. Sawhney and Ankh Textiles (P) Ltd., the Tribunal vide Order No. S/643-645/13/CSTB/C-I dated 20.03.2013 passed the following order:-

"Considering the fact that out of total demand of Rs.1,79,90,857/- the applicant has already paid Rs. 68 lakhs, same is sufficient in compliance to Section 129E of the Customs Act, 1962, we waive the requirement of pre-deposit of balance amount of duty and penalty on the applicant penalties on the co-applicants and stay recovery thereof during the pendency of the appeals."

Inasmuch as since the Tribunal had already granted un-conditional waiver of pre-deposit of penalties imposed on the co-noticees/co-applicantsin the same matter, the applicant also be granted waiver of pre-deposit of the penalty and recovery thereof be stayed. To support this submission, reliance is placed on the decisions in Sayaji Hotels - 2010-TIOL-735-HC-MP-ST and Wardha Coal Transport Pvt. Ltd. - 2009-TIOL-79-HC-MUM-ST . It is further submitted that the appeal be tagged with the appeals of the co-noticees for final hearing as per the practice followed by the Tribunal.

The Revenue representative strongly opposed this submission and submitted that each stay application is independent and the same has to be considered separately; that the applicant is the brain behind the diversion of the goods which were imported under Target Plus Scheme and hence the adjudicating authority had imposed heavy penalty on the applicant and so applicant be asked to make a pre-deposit.

The Member (Judicial) observed that while considering the stay applications, the general practice of the Tribunal is that if the main party to the same proceedings has been granted unconditional waiver of pre-deposit, the other co-noticee will also be granted waiver of pre-deposit.

Adverting to the decisions in Mercedes Benz India Pvt. Ltd. - 2010-TIOL-195-HC-MUM-CX, Gammon India Ltd. - 2011-TIOL-60-SC-CUS, Pearl Enterprises & Amandeep Kansal - 2012-TIOL-21-HC-HP-CX, the Member (J) held that t he applicant has made out a case of 100% waiver of pre-deposit and accordingly ordered a stay in the matter.

The Member (T) had a differing view.

It was inter alia observed that the Stay order dated 20.03.2013 referred above is very brief order and the fact of diversion of the goods and the liability on the importer and other applicants are neither mentioned nor discussed in the said order not any reasoning is given ; as to how an amount of Rs.68 lakhs which was paid during investigation was found to be sufficient in compliance to Section 129E of the Customs Act, 1962 is also not explained.

After citing the apex Court decision in Benara Valves Ltd. - 2006-TIOL-156-SC-CX in the context of s.35F of the CEA, 1944, the Member(T) reiterated - ‘The basis on which the Tribunal has formed the opinion that Rs.68 lakhs is sufficient in compliance to Section 129E of the Customs Act is not clear from the earlier order of the Tribunal.'

The case laws relied upon by the Member (J) were held to be inapplicable to the facts of the case by noting that the issue involved in all the cases was relating to the assessment of duty; there were disputes between the Revenue and the assesses regarding dutiability or valuation of the service/goods produced; all the cases involved legal interpretation of various provisions of Service Tax Act/Customs Act/Central Excise Act whereas in the present case the issue is not relating to any legal interpretation but a case of defiance of law.

It was further observed - Cases of penalties imposed where legal interpretation is involved are not on the same footing as the cases of diversion of goods or out-right evasion of duty which is nothing but outright evasion of duty which is nothing but outright defiance of law. In case of outright evasion of duty, the role of each player is to be examined and thereafter the decision as to partly or fully waiver the penalty has to be taken. It is to be noted that in this particular order the adjudicating authority has imposed on the applicant the highest amount of penalty other than the DFCE holder, applicant being prima facie the main manipulator.

The Member (Technical) also had a differing view on the observation made by the Member (J)in the matter of practice followed in the matter of extending the benefit of waiver to co-noticees.

He observed - As per my experience both as Departmental Representative and also as Member (Technical), this practice is limited to the cases where interpretation of law is involved. Such cases are generally for assessment of tax liability or eligibility of CENVAT credit. In the cases of deliberate evasion of duty like the present one, the role of each individual is to be examined separately, and decision is to be taken based upon the facts/evidences.

Noting that the main applicant was given waiver for the reason that Rs.68 lakhs has been deposited during investigation, the Member (T) held that in the matter of the present applicant, total waiver of penalty will not be appropriate. He, therefore, held that the applicant is required to make a pre-deposit of Rs.15 lakhs.

In view of the difference in opinion, the matter was referred to the Third Member.

The third Member on reference viz. Member (T) cited the Stay order dated 20.03.2013 and observed -

"…The reading of the above order makes it clear that the said order does not lay down any ratio. It is a settled position in law that at the time of passing interim orders of stay, prima facie case, interest of revenue and financial hardships are the factors which merit consideration. The decision of the Hon'ble Apex Court in the case of Dunlop India Ltd. - 2002-TIOL-156-SC-CX and the decision of the Hon'ble Andhra Pradesh High Court in the case of SQL International Ltd. - 2012-TIOL-146-HC-AP-ST also support this view. However, in the order dated 20.3.2013, there is no discussion of these various factors, therefore, it cannot be said that there is binding precedent of the ratio which flows from the said order."

Noting that it is an admitted position that the appellant knowing fully well facilitated the diversion of the goods imported under Target Plus Scheme in complete disregard of the provisions of law, for which he received a consideration, the third Member on reference held that the appellant appeared to have actively aided and abetted evasion of customs duty and, therefore, penalty was imposable on the appellant under the provisions of Section 112(b) of the Customs Act, 1962 and further if penalty is imposable, there is no reason why at the interim stage, the applicant should not be put to terms.

Taking a view that the pre-deposit of Rs.15 lakhs ordered by the Member (T) cannot be faulted, the reference was returned to the referring Bench.

So, the Majority order is that the applicant is directed to make a pre-deposit of Rs.15 lakhs within eight weeks and report compliance.

(See 2014-TIOL-566-CESTAT-MUM)