[Order per : R.K. Singh, Member (T)]. - These appeals have been filed against order-in-original dated 8-6-2007 in terms of which the Commissioner passed the following order :-
(i) The correct description of the goods imported under Bill of Entry No. 389879, dated 28-10-2002 would be treated as “IS 1000 da vinci Surgical System” and not as “Fibre Optic Endoscope” as claimed by M/s. Escorts.
(ii) The said Bill of Entry dated 28-10-2002 assessed provisionally was assessed finally at normal rate of customs duty @ 25% + 16% + 4% (effective 50.8%) and the benefit concessional rate of duty claimed under Notification No. 21/2002-Cus. - S. No. 363A was denied.
(iii) The differential amount of duty of Rs. 3,47,63,531/- was ordered to be recovered from M/s. Escorts along with interest thereon under Section 28AB of the Customs Act, 1962.
(iv) Confiscation of the impugned goods - Da Vinci surgical system valued (assessable value) at Rs. 7,59,02,909/- under section 111(m) of the Customs Act, 1962 for misdeclaration of the impugned goods was ordered. However an option was given to redeem the same on payment of fine of Rs. 75 lakhs in lieu of confiscation under Section 125 ibid.
(v) Penalty of Rs. 3,47,63,531/- on M/s. Escorts Heart Institutes & Research Centre was imposed for misdeclaration of the impugned goods under Section 114A ibid. However, further penalty under Section 112 ibid was not imposed.
(vi) Penalty of Rs. 3 lakhs under Section 112(a) ibid was imposed on Shri Bhuvander Kaul, Dy. General Manager (Medical Materials) of M/s. Escorts for his active role in misdeclaration of the description of the impugned goods.
(vii) Penalty of Rs. 5 lakhs under Section 112(a) ibid was imposed on M/s. J. Mitra & Bros. was imposed for its active role in the misdeclaration of the description of the impugned goods.
(viii) Penalty of Rs. 1 lakh under Section 112(a) ibid was imposed on M/s. Elecon Cargo Agency, the CHA was imposed for its active role in misdeclaration of the description of the impugned goods.
2. The facts of the case, briefly stated, are as under :-
The appellant M/s. Escorts Heart Institute and Research Centre (hereinafter referred to as appellant No. 1) filed a Bill of Entry dated 28-10-2002 through its CHA M/s. Elecon Cargo Agency for the goods declared as “IS 1000 fibre-optic endoscope surgical system” classifying the same under Customs Tariff Heading 9018.90 and claimed the benefit of concessional rate of duty under Serial No. 363(A) - List 37 - Item No. 82 of Notification No. 21/2002-Cus., dated 1-3-2002 which covered various specific types of endoscopes. For the accessories of the equipment, concessional rate of customs duty at the rate of 5% was claimed under Serial No. 363 (B) - List 37 - Item No. 82 of the said Notification. The adjudicating authority observed that the invoice of the supplier described the goods as “Endoscopic Intuitive IS 1000 da vinci Surgical System” and based on this and the other evidence collected held that appellant No. 1 was guilty of misdeclaration and denied the benefit of the said exemption Notification and passed the order quoted above. As is evident from the order, the adjudicating authority also held the indenting agent M/s. J. Mitra & Bros. and the CHA liable to penalty and imposed penalties as above.
3. Ld. advocate for the appellant No. 1 fairly conceded that as regards the demand of duty, and confiscation of goods under Section 111(m) Customs Act, 1962 the issue has in effect been settled against it in similar set of circumstances vide CESTAT order in the case of J. Mitras & Bros. v. CC, New Delhi [ (Tri.-Del.)] and also by the judgment of Delhi High Court in the case of CC (I&G) v. Care Foundation [ (Delhi)]. The ld. advocate however contended that no interest under Section 28AB ibid was recoverable because the demand was not raised/confirmed under Section 28 ibid, adding that even if the impugned order is taken to be issued in the context of finalisation of the provisional assessment under Section 18 ibid no interest can be demanded as the provision for interest liability was introduced on 13-7-2006 wide insertion of Section 18(3) while in the present case, the Bill of Entry was provisionally assessed on 28-10-2002 and that the interest cannot be demanded upon finalisation even if such finalisation was done after 13-7-2006. It cited several judgments to that effect including the case of C.C. (Prev.) v. Goyal Traders [ (Gujarat)] and Sterlite Industries India Ltd. v. CC - (Tri.-Chennai).
4. The ld. advocate for J. Mitra Bros. (appellant No. 2) put forth various contentions to claim that penalty was not imposable upon it but fairly conceded that in similar circumstances in the case of similar imports by Care Foundation, after taking into account similar contentions, the penalty upon it had been upheld by CESTAT which was further upheld by Delhi High Court vide order dated 11-10-2013 [ (Del.)], except that the Delhi High Court reduced the penalty from 25 to Rs. 5 lakhs. Following the same ratio, the appellant pleaded that the penalty of Rs. 5 lakhs imposed upon it vide impugned order should be reduced to Rs. 1 lakh.
5. Ld. advocate for the CHA (appellant No. 3) strenuously argued that it had no role in the misdeclaration of the impugned goods and had faithfully prepared and submitted the documents to Customs based upon the documents it received from appellant No. 1. It also stated that it had duly enclosed the invoice which showed the description of the goods as given by the supplier and therefore, it could not be held guilty of any abetment. He cited a few judgments in support of this proposition which will be referred to later.
6. Per contra, ld. Departmental Representative stated that the demand was in effect confirmed under Section 28 ibid and therefore, interest was clearly leviable under Section 28AB ibid on the impugned differential demand confirmed. It also argued that if penalty under Section 114A is not held to be leviable then the penalty under Section 112 ibid would get revived. As regards penalty on the CHA, the ld. Departmental Representative contended that by not describing the goods exactly as given in the invoice, it was guilty of abetting mis-declaration and therefore, liable to penalty.
7. We have considered the contentions of all sides and perused the records. Para 47 of the show cause notice reads as under :-
“47. Hence, M/s. Escorts Heart Institute & Research Centre Limited, Okhla Road, New Delhi - 110025, Shri Bhuvander Kaul, M/s. J. Mitra & Bros., 20, Double Storey Market, New Rajinder Nagar, New Delhi & M/s. Elecon Cargo Agency, N-264-270, Raghubir Nagar, New Delhi are hereby called upon to show cause to the Commissioner of Customs (Import & General), New Custom House, Near IGI Airport, New Delhi-110037 as to why :-
(i) The correct description of the goods imported under Bill of Entry No. 389879, dated 28-10-2002 should not be treated as IS 1000 da Vinci Surgical System” and not as “Fibre Optic Endoscope”.
(ii) The Bill of Entry No. 389879, dated 28-10-2002, which was assessed provisionally, should not be finally assessed at the normal rate of customs duty @ 25% + 16% + 4% (effective 50.8%) by denying the benefit of claimed Customs Notification No. 21/2002-S. No. 363(A) and the differential duty amounting to Rs. 3,47,63,531/- should not be recovered from M/s. Escorts Heart Institute & Research Centre Limited along with interest.
(iii) The subject goods, i.e., “da Vinci Surgical System” of the declared assessable value of Rs. 7,59,02,909/- should not be confiscated under section 111(m) of the Customs Act, 1962 for misdeclaration of description.
(iv) Why penal action should not be taken against M/s. Escorts Heart Institute & Research Centre Limited, Shri Bhuvander Kaul, M/s. J. Mitra & Bros and M/s. Elecon Cargo Agency under section 112a)/114A of the Customs Act, 1962 for their respective active roles in the mis-declaration of the description of the goods in violations of the provisions of the Customs Act, 1962.”
It is evident from perusal of Para 47 of the show cause notice (quoted above) that the show cause notice was for the finalisation of assessment of Bill of Entry dated 28-10-2002 which had been assessed provisionally. The show cause notice does not mention Section 28 of the Customs Act, 1962 even in passing. The show cause notice also does not mention as to under what provisions of law, the interest was sought to be recovered although the impugned order confirms interest under provisions of Section 28AB ibid. Perusal of Section 28AB ibid as it existed during the relevant period leaves no scope for ambiguity that the interest thereunder is chargeable only when the demand has been confirmed under provisions of Section 28 ibid. Even if it is considered that the demand arises out of finalisation of provisional assessment in terms of Section 18 ibid, it has been settled by judicial pronouncements that no interest is recoverable on finalisation of provisional assessments made prior to 13-7-2006 when the provision for interest liability were introduced in Section 18 ibid by inserting Section 18(3) even if the finalisation of assessment took place after 13-7-2006. In the case of the Sterlite Industries v. C.C. [ (Tri. - Chennai)], it was held that no interest is payable on the differential duty determined on finalisation of provisional assessment made prior to 13-7-2006 even if such finalisation took place after 13-7-2006. Similar view is held in the case of C.C. (Prev.) v. Goyal Traders - (Gujarat).
8. It is evident from the foregoing analysis that the show cause notice did not raise the demand in terms of Section 28 ibid. The wording of Section 114A ibid makes it expressly clear that penalty under that Section is attracted when liability to pay duty or interest is determined under Section 28 ibid. Indeed, in the case CC (I&G) v. Care Foundation (supra), involving similar facts and circumstances, Delhi High Court held as under :-
“6. In the opinion of this Court, no exception can be taken to the finding that since there was no demand under Section 28(8) of the Customs Act for duty, no penalty could have been imposed under that provision and consequently the penalty under Section 114A was not sustainable. The further reasoning that there could have been penalty under Section 112 but since that provision was not invoked, the direction to pay penalty at Rs. 2.34 crores was not warranted in the circumstances, does not appear to be in error of law. For these reasons the Court is of the opinion that the question of law framed has to be answered against the revenue and in favour of the assessee.”
Thus in the facts and circumstances of the present case, penalty under the Section 114A ibid is simply not attracted. The above quoted para of the Delhi High Court judgment also deals with Revenue’s contention regarding penalty under Section 112 ibid which we (have to) respectfully follow.
9. For similar role of appellant No. 2 in the case of import of the same item by M/s. Care Foundation involving similar facts and circumstances, and after considering similar contentions put forth by it, CESTAT upheld the penalty on it. In that case, Delhi High Court vide its judgment dated 11-3-2014 in Customs Appeal No. 9/2013 also upheld the appellant liable to penalty but reduce the same from Rs. 25 lakhs to Rs. 5 lakhs. We are persuaded by the contention of appellant No. 2 that as the facts and circumstances of the present case are similar to those obtaining in the case of M/s. Care Foundation and its role in that case was similar to its role in the case of imports by the appellant No. 1, the penalty imposed should be reduced in the same ratio to Rs. 1 lakh.
10. As regards penalty on Mr. Bhuvander Kaul, Dy. General Manager (Medical Materials), it is clearly brought out in the impugned order that he was the one looking after the import of the said equipment and that he was having knowledge of the misdeclaration and was a part of the entire plan to misdeclare the impugned goods. Thus, penalty on him is attracted. But in the given circumstances and having regard to the fact that penalty on M/s. J. Mitra & Bros. (who was also aware of the misdeclaration and was part of the plan to misdeclare the impugned goods) has been reduced by us from Rs. 5 lakhs to Rs. 1 lakh for reasons given in preceding para, we are inclined to follow the same principle in the case of Mr. Bhuvander Kaul also.
11. As regards the penalty on the CHA, (M/s. Elecon Cargo Pvt. Ltd.) we find that it filed a Bill of Entry on the basis of the documents made available to it by the importer and it had duly enclosed the supplier’s invoice which described the goods as “Endoscopic Intuitive IS 1000 da Vinci Surgical System”. There is nothing on record to show that the CHA was deliberately trying to mislead Customs or was having any mala fide. The very fact that the relevant invoice was duly enclosed along with the Bill of Entry submitted to Customs is indicative enough that it was not the intention of the CHA in any way to hoodwink Customs. In the case of P.S. Bedi and Company [ (CESTAT)], it was held as under :-
“6. On careful examination of the record of evidence in this case, I am inclined to accept the plea of the appellants that, in filing the Bill of Entry on the basis of the records made available to them by the importer, they have only acted in a bona fide manner and not otherwise. There is absolutely no evidence of any incriminating conduct, in this case, as against the CHA. Therefore, on the facts and evidence also, there is no case for imposing any penalty on the CHA.”
Thus, penalty on the CHA is not attracted.
12. In the light of the aforesaid analysis, we (partially) allow the appeals inasmuch as the impugned order is modified only to the following extent :-
(i) The demand of interest against appellant No. 1 (M/s. Escorts Heart Institute & Research Centre) is set aside.
(ii) The penalty under Section 114A ibid imposed on appellant No. 1 is set aside.
(iii) The penalty on M/s. J Mitra & Bros. is reduced to Rs. 1 lakh.
(iv) Penalty on Mr. Bhuvander Kaul is reduced to Rs. 60,000/-.
(v) The penalty against M/s. Elcon Cargo Pvt. Ltd. is set aside.
13. The miscellaneous applications filed by the appellants also stand disposed of.