Serial No.1 sales not covered by sale voucher but debited in stock and sale register - Duty proposed and confirmed - Rs.6,646/-:
+ We are inclined to accept that this small amount of Rs.6,646/- can be a clerical mistake considering the voluminous transactions. It cannot be presumed to be willful. The goods were sold to out bound foreign passengers and therefore these are deemed exports. Hence the question of demanding duty does not arise.
Serial No.2 bonded goods not carried forward from one stock and sale register to next - Duty proposed and confirmed: Rs.28,490/-:
+ This allegation is not substantiated in the Show Cause Notice. In any event, there would be no question of paying any import duty unless it is proved by the Customs Department that the goods have been removed outside the bonded warehouse. Technical/ accounting error if any, which was not noticed even by the audit department which necessarily audits the sales registers as per the procedure set out in Annexure B of the licence, cannot lead to any adverse inference or duty demand without clandestine removal of goods.
Serial No.3 bonded goods diverted to local market by forging additional entries in duplicate and triplicate sale vouchers duty proposed and confirmed -Rs. 9,031/-:
+ Barring a statement of Mr. G.V.S. Kondala Rao, the requisite details to substantiate this allegation are not in the adjudication order or the show cause notice. Revenue has chosen not to examine any person including Mr. G.V.S. Kondala Rao. Sales vouchers have been necessarily attested by the Customs (bond) officers. It is settled law as held in G-Tech Industries versus Union of India - 2016-TIOL-2749-HC-P&H-CX in light of Section 9D of Central Excise Act, 1944 or pari materia Section 138B of the Customs Act, 1962 that, if Revenue chose not to examine any person in the adjudication proceedings, it amounts to giving up that witness and such statement cannot be considered relevant. Thus, even this demand of Rs. 9,031/- solely based on such statement, not admitted in evidence after his examination, is not sustainable.
Sl.no.4 - sales allegedly made to crew members of vessel in coastal run Duty proposed : Rs. 3,86,141, Duty confirmed - Rs. 3,61,047/-:
+ The allegation was made without providing details of the ships' final destination. It is only the ships' final destination which would determine their status. The annexure relied upon merely gave the next port and not the final destination of the ship. The department gave copies of IGM and EGM register, but gave incomplete details insofar as it did not reflect the port of final destination or origin of the port for the voyage. Hence, in the absence of material particulars the allegation is not proved.
Sl. No.5 - sales allegedly made to crew members of vessel not arrived or already sailed Duty proposed -Rs. 6,18,650/-, Duty confirmed Rs. 55,130/-.
+ The allegations made are vague without giving details of the ships. It cannot be ascertained as to on what basis the adjudicating authority has arrived at a finding that the Appellant was liable to pay duty of Rs.55,130/- under this category. No duty liability can be fastened on the Appellant in such vague manner.
Sl.No.6 - sales allegedly made to crew members of non existing vessels duty demand- Rs. 1,53,301/-, Duty confirmed- Nil
+ The Respondent accepted the contention of the Appellant that on verification with relevant registers no duty was required to be paid by the Appellant on the allegation of sales made to crew members of non-existing vessels.
Serial No.7 - excess sales in one transaction- duty demand-Rs.23,60,410/-, Duty confirmed- Rs 14,38,823/-:
+ In Para 8(b) of the Show Cause Notice it is alleged to the effect that the Appellant made sales more than the permissible limits to a single individual crew member/passenger more than once within the week of his initial purchase which was also in excess of the permissible allowance. Show Cause Notice however does not set out the details of the alleged violation. There is no provision in the Customs Act to claim duty from the Appellant on alleged excess sales. If any crew member / passenger has bought the goods in excess he has to pay the duty. Neither under Section 28 nor under Section 72, the alleged demand is sustainable.
+ There is no dispute that the alleged excess sales are only for exportation. Once the goods pass into the custody of crew member / passenger he becomes the owner and only he is liable to pay duty, if he takes the goods beyond the customs barriers. Further, no penalty can be levied under section 112, in respect of exports.
Sl.8 - repeat sales allegedly made within one week of initial purchase duty demanded Rs. 6,57,614/-, Duty confirmed- Rs. 3,51,037/-:
+ There is no evidence forthcoming regarding the alleged repeat sales, and even the dates of the alleged 1st sale are not given. Para 8(b) and Annexure V do not indicate as to how many such repeat sales were made to same crew member. The allegation is arbitrary.
Sl.9 - excess sales allegedly made to crew members of the vessel proceeding to a coastal port - Duty demanded Rs. 15,43,918/-, Duty confirmed- Rs. Nil:
+ Show Cause Notice alleged that the ships were not foreign going ships, without ascertaining what the ultimate destination is.
+ Even if the ship touches any intermediate port in India, if its destination is outside India, it is not a coastal vessel but only foreign vessel.
Sl.no.10 - sales allegedly made without quantitative restrictions on a date preceding the date of sailing- duty demanded - Rs. 32,66,481/-, Duty confirmed- Rs. 19,91,565/-:
+ The DFS is opened from 10 a.m to 9 p.m only. There is absolutely no rationale for disallowing sale to the ships which sailed after 6 a.m. It is submitted that even where the adjudicating authority held that issues made to the vessels which has sailed before 6 a.m on the next day of the sale date of the cash memo are to be considered as proper, he failed to extend the benefit of Rs. 12,74,916/- solely on the ground that goods were not placed on board with preventive escort, which is again beyond the scope of Show Cause Notice. The demand is, therefore, unsustainable.
Sl. No. 11 - Sales allegedly made to crew member while sign on or in transit without preventive escort Duty demanded Rs. 1,19,14,950/-, Duty confirmed- Rs. 1,67,03,863/- [Rs. 1,19,14,950/- + Rs. 47,88,913/- (duty benefit denied for Sr. No. 4,5,6,7,8,9 and 10):
+ Show Cause Notice did not substantiate with particulars as to how the proposed demand of duty amounting to Rs.1,19,14,950/- was arrived at. It is admitted that the sale is permissible to crew members who are embarking. There is no reason to deny direct sales to the crew members who are in transit.
+ Sale of non-duty paid bonded goods from DFS is permissible to individual crew members who are embarking or disembarking. Placing them on ship with preventive escort is not necessary.
+ If the passengers /crew are disembarking there is no question of the goods being taken on ship under preventive escort and placing them on board the ship. The show cause notice does not state as to how many crew members had disembarked or embarked.
+ It is neither possible nor practical that every individual sale of goods is to be taken on ship under preventive escort. Only when the Master places an order with the Appellant that the goods are to be placed on board the vessel under preventive escort.
+ The allegations made do not show whether the crew member / passengers were disembarking crew members or embarking passengers. The adjudicating authority ignored that even the Custom officers have stated that there is no need for any customs escort in respect of purchases made by individual crew member.
+ Undisputedly, all sales were under Customs supervision, which was necessary to see that only bona fide crew members/Passengers purchase the goods. All the cash memos were attested by the bond officers. All such sales were made to crew members / Passengers who boarded a foreign bound vessel. Hence all these sales would be exports. No duty would thus be leviable.
+ We have given our view in the earlier paragraphs on the erroneous and impractical view taken by the adjudicating authority in mechanically holding that DFS was liable to ensure that every sale even to individual crew member was to be taken to ship under customs preventive escort. Hence, the entire demand on this count fails.
