2004 (97) ECC 657 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

Southern Regional Bench -- Chennai

Shri P.G. Chacko, Member (J) and Shri Jeet Ram Kait, Member (T)

D. Ankineedu Chowdry

Versus

Commissioner of Customs, Chennai

Appeal No. C/312/2002/Mas

[Arising out of Order-in-Original No. 25/2002 (ACC) dt. 30.3.2002 passed by the Commissioner of Customs, Chennai]

Final Order No. 757/04, dt. 26.8.2004, Certified on 10.9.2004

Penalty (Customs)

Doctrine of ejusdem generis -- Meaning of expression "in any other manner of dealing with" should be understood in a sense similar or comparable to how preceding words viz carrying, removing, depositing etc. are understood -- In other words, "any other manner of dealing with the goods is also some physical manner of dealing" with the goods -- In impugned order, no finding that appellant physically dealt with goods in question, nor way any allegation to this effect raised against him in the SCN -- Provisions of Section 112(b) not attracted -- Penalty imposed set aside -- Customs Act, 1962, Section 112(b).

[Paras 4, 5 & 6)

PRESENT :

Shri S. Murugappan, Adv. for the appellant.

Shri A. Jayachandran, JDR for the respondent.

Case Cited :

Thakur Amar Singhji v. State Of Rajasthan, AIR 1955 SC 504.............................. [Para 5]

Per : P.G. Chacko

This appeal is against a penalty of Rs. 15,000 imposed on the appellants by the Commissioner of Customs under Section 112 (b) of the Customs Act.

2. Examined the records and heard both sides. The above penalty was imposed in proceedings relating to clearance of certain goods imported by M/s. Stiles India Limited, Chennai. The imported goods were cleared on behalf of the said Company by their Custom House Agent, D. Ramesh working in the name and style of "Farport International". In the relevant show-cause notice issued to the importer, CHA and others, it was mainly alleged that the duty payment endorsements made on the relevant Bills of Entry (for home consumption) prior to clearance of the goods were forged. The duty on the goods as assessed in the Bills of Entry had not actually been paid and therefore, it was alleged, the goods were liable to be confiscated under Section 111 (j) of the Customs Act. In this connection, it was also alleged that penalties were liable to be imposed on the importer and the CHA. A penalty under Section 112 (a) of the Act was also proposed against the appellant, brother of the CHA. It was alleged that he had associated himself with the modus operandi of clearance of the goods and had helped his brother D. Ramesh (CHA) to misappropriate the duty amounts. The allegation was denied. In adjudication of the dispute, Ld. Commissioner of Customs imposed the aforesaid penalty on the appellant under Section 112 (b) of the Act, apart from holding the goods liable for confiscation and imposing penalties on the importer and the CHA.

3. In the present appeal, it is contended that no such penalty was liable to be imposed on the appellant under Section 112 (b) of the Act as the allegation against him had not been proved. There was no shred of evidence to show that he had previous knowledge of the alleged activities of his brother (CHA) involving misuse of funds. Ld. Counsel for the appellant reiterates these contentions and also submits that the appellant was not liable to be penalised as he had not dealt with any goods liable for confiscation. The subject goods were not liable to be confiscated under Section 111 (j) of the Act as alleged in the show-cause notice. Counsel has endeavoured to elaborate the point by submitting that the goods which were cleared as permitted by the proper officer of Customs did not, in any manner, attract clause (j) of Section 111 of the Customs Act. The show-cause notice did not allege that permission was not granted for clearance of the goods, nor did the adjudicating authority find to this effect. Therefore, according to the Counsel, clause (j) of Section 111 does not get attracted in this case and consequently Section 112 (b) is also not applicable.

4. Ld. JDR submits that, admittedly, no duty on the goods was paid or collected and therefore the clearance of the goods cannot be considered to have been made in terms of the permission endorsed on the relevant Bills of Entry by the proper officer of Customs. DR enumerates four stages at customs in relation to imported goods follows:

(i) Filing of Bill of Entry

(ii) Assessment

(iii) Payment of the duty assessed

(iv) Clearance of the goods

In this case, the third stage was not passed through as there was no payment of duty. Hence, the goods could not legitimately reach the clearance stage. The permission given in good faith by the proper officer of Customs for clearance of the goods was invalid ab initio for want of payment of duty thereon. DR therefore argues that the goods cleared without payment of duty attracted the provisions of Section 111 (j) of the Customs Act. The goods were correctly held liable for confiscation. As regards the penalty imposed on the appellant, DR reiterates the finding of the adjudicating authority.

5. We have carefully considered the submissions. The short question arising for consideration is whether the penalty imposed on the appellant under Section 112 (b) of the Customs Act is sustainable on facts and in law. The department's proposal was to impose penalty under Clause (a) of Section 112. But the Commissioner chose to invoke Clause (b) to impose the impugned penalty. The appellant was never called upon to show cause why a penalty should not be imposed on him under Clause (b) of Section 112. Hence, the Commissioner's decision suffers from the vice of negation of natural justice. This apart, as any penalty under Section 112 has a nexus to the confiscability of the imported goods, we have first to address the question whether the goods were liable to be confiscated under Section 111 (j) of the Customs Act. In this context, we find much force in the arguments of the Ld. DR. Admittedly, no duty was paid on the goods. At the time of clearance, it was not known to the proper officer that the duty payment endorsements in the Bills of Entry were forged. Later on, in the course of investigation, it turned out that those endorsements were forged and that there was no actual payment of duty. This forgery, which is not in dispute, rendered the clearance of the goods illegal inasmuch as law did not permit the goods to be cleared for home consumption without payment of duty, there being no exemption from payment of such duty. The permission for clearance, granted by the proper officer, was subject to payment of duty. As there was no payment of duty, there was no valid permission either. In the result, the clearance of the goods was unauthorised and illegal and this very fact rendered the goods liable for confiscation under clause (j) of Section 111 of the Customs Act. The confiscation ordered by the Commissioner is not to be faulted. However, whether the above penalty was liable to be imposed on the appellant would depend on whether his conduct satisfied the requirement of Clause (b) of Section 112 of the Act. This clause reads as under:

"(b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111......"

In order that a person is penalised under the above provision, it has to be established that he acquired possession of or was in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which, he knew or had reason to believe, were liable to confiscation under Section 111 of the Act. Ld. DR has harped on the expression underlined above and submitted that the appellant had dealt with the goods by associating himself with the modus operandi of clearance of the goods. Ld. Counsel has opposed this argument. We find that no physical act of the appellant in relation to the goods in question has been brought out to justify the penalty. The expression "in any other manner dealing with" has to be understood ejusdem generis with the preceding words/expressions in the Clause in terms of the Apex Court's ruling in Thakur Amar Singhji v. State of Rajasthan, AIR 1955 SC 504. The Court held thus:

"the true scope of the rule of `ejusdem generis' is that words of a general nature following specific and particular words should be construed as limited to things which are of the same nature as those specified and not its reverse; that specific words which precede are controlled by the general words which follow."

According to the above doctrine, the meaning of the expression "in any other manner of dealing with" should be understood in a sense similar or comparable to how the preceding words viz. carrying, removing, depositing etc. are understood. In other words, "any other manner of dealing" with the goods is also some physical manner of dealing with the goods. In the impugned order, there is no finding that the appellant physically dealt with the goods in question, nor was any allegation to this effect raised against him in the relevant show-cause notice. Therefore, the provisions of Section 112 (b) were not applicable to the case. It would follow that the penalty imposed on the appellant is not sustainable on facts or in law.

6. In the result, we set aside the penalty and allow the appeal with consequential relief.

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