The Commissioner of Customs (Imports), Customs House, Chennai-600 001 v. M/s.Flemingo (DFS) Pvt.Ltd.

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED :: 19-12-2009CORAMTHE HONOURABLE MR.JUSTICE V.DHANAPALANWRIT PETITION No.12703 OF 2008The Commissioner of Customs (Imports),Customs House,Chennai-600 001....Petitioner-vs-1.M/s.Flemingo (DFS) Pvt.Ltd., First Floor, Centre Berth Building, Chennai Port Trust, Chennai-600 001.2.Atul Abuja,Director3.P.A.Ponnappa,General Manager4.B.K.Senthil Kumar5.J.Raveendran6.V.Rajagopal7.John Willam, Manager8.Settlement Commission, No.60, Rajaji Salai, Customs and Central Excise, Chennai- 600 001....RespondentsPetition under Article 226 of the Constitution of India,praying for issuance of a writ of certiorari, to call for the recordson the file of eighth respondent herein in S.A.(C) No.57/2007-CUS,dated 04.06.2007,and quash the same.For petitioner : Prof.M.Udhaya BanuFor respondents : Mr.Habibullah Badsha,Senior Advocate,for Mr.C.Mani Shankar.O R D E RThe order of the eighth respondent, namely, SettlementCommission, dated 04.06.2007, settling the duty liability atRs.82,25,502.45 as against the demand of Rs.3,87,63,211/-, is underchallenge in this Writ Petition. https://hcservices.ecourts.gov.in/hcservices/

2. First respondent is a company, operating a Duty FreeShop within the premises of Chennai Port. It has been granted aprivate bonded warehouse by the Commissioner of Customs for storinggoods imported without payment of duty and permitted to sell suchgoods to international passengers and to members of the crew. On08.07.2006, Central Industrial Security Force (CISF) personnelintercepted an army vehicle found to be carrying cigarette cartonsand liquor bottles in bulk quantities. On questioning the driver ofthe vehicle, it came to light that those goods were supplied by theduty free shop of the first respondent. Subsequently, the customsofficers carried out extensive investigation, during which it wasknown that the first respondent was selling goods imported duty freeto unauthorised persons. It was also revealed that the firstrespondent was generating bills showing the sale to members of thecrew of various vessels. Some of the crew were not in the port andsome ships were on coastal run at the relevant time. In a largenumber of cases, the signatures of the buyers did not tally with thesignatures available with the department. Thus, altogether, it wasallegedly found that the first respondent had made unauthorised salesby about 5000 bills and the total value of such non-bonafide saleswas Rs.1,72,30,568/-. Accordingly, a show cause notice was issued,demanding a duty of Rs.3,87,63,211/- on the entire goods sold tounauthorised persons. Interest on the duty amount was also demanded.It was also proposed to impose penalty on the respondents 1 to 7 inaddition to revoking the licence to operate the duty free shop insidethe harbour.3. Aggrieved over the same, the respondents 1 to 7 filed anapplication for settlement before the eighth respondent, namely,Settlement Commission, admitting the duty liability ofRs.82,25,502.45.4. The stand of the respondents before the Commission wasthat the respondents made a verification of the records and thereuponthey were not able to accept any duty liability more thanRs.82,25,502.45.5. The only dispute was with regard to the allegation inthe show cause notice that the signatures of buyers on 3004 salesbills did not tally with the signatures available with thedepartment, for which it was contended by the learned Senior Counselfor the respondents, that at the point of sale, it was not possibleto verify the signature of each customer. The regulations raised bythe department under Facility Circular No.6, dated 11.03.2005 did notrequire that the signature of every customer should be verifiedbefore any goods were sold to a customer. Further, the signatures inthe customs declaration forms were solely in possession of thecustoms department over which the duty free shop had no access.Therefore, the Duty Free Shop personnel had no means to ensure that https://hcservices.ecourts.gov.in/hcservices/ the signatures were tallied. All the particulars required under theregulations had been noted down in the sales bills and it was ensuredthat the bills were signed by the crew members, as required underpara 4.1 of the said circular. Therefore, it could not be said thatthe crew members' signatures in the bills did not tally with those inthe declarations made to the department, that too when thedeclaration forms were not available with the duty free shop of therespondents. The normal practice in any duty free shop is to enterthe passport number and the name of the passenger, which was followedby the respondents. The requirements of regulations in para 4.1,4.4and 4.5 of the Circular were all complied with. Under para 5.2,there was a requirement that the internal audit department of theCustoms House should carry out checks regularly on the stocks andverify the sales. During the various checks, no questions wereraised and no allegations of forgery were made. 6. The contention of the Revenue before the SettlementCommission was that as per the facility circular, para 4.1, theapplicants should have ensured that the full signature of the buyerwas put on the cash bills; the escort officers had already admittedthat they were giving escort reports on a periodical basis and thatthe respondents could not take shelter under the audit done by thedepartment, as the violations done by them were beyond the scope ofaudit. It was also the stand of the Revenue that they had done ameticulous investigation and, in 1246 bills, they found that thesignatures of the buyers tallied with those available with thedepartment and, therefore, they did not include them for demandingduty, whereas in 3004 bills, the signatures did not tally; hence, theduty was demanded and, as such, the entire duty demand was correctand no immunity should be granted to the respondents.7. Dispelling the stand of the Revenue and justifying theact of the Settlement Commission, learned Senior Counsel for therespondents has cited the following authorities :(i) New Bharat Rice Mills v. Union of India, 2008 (229)E.L.T.502 (P&H) :"4. The Settlement Commission has inexercise of its powers under sub-section (5) ofSection 127C of the Customs Act,1962 settledthe customs duty qua the petitioner forRs.1,46,75,646/- and interest payable on thisamount as Rs.3,26,400/- which stood paid by thepetitioner. A penalty of Rs.25,00,000/- hasonly been imposed and immunity from prosecutionunder the Customs Act,1962 has also beengranted subject to the conditions that thepenalty of Rs.25 lakhs is paid within 30 daysof the order. Had this order not been passed,the petitioner would have been liable to pay https://hcservices.ecourts.gov.in/hcservices/ much higher penalty and would have facedprosecution under the Customs Act as well. Theimmunity from the prosecution and the reductionin penalty has been granted to the petitionerby the Settlement Commission as per theprovisions of Section 127 C of the CustomsAct,1962, for the benefit of the petitioner.The Statute has bestowed Settlement Commissionwith discretionary powers and if such powershave been exercised diligently and reasonably,the same cannot be faulted with. Each order ofsettlement is based on the facts andcircumstances of each case which may bepeculiar to itself and, therefore, cannot bemade the basis for terming an orderdiscriminatory unless violative of theStatute."(ii) Alluminium Profiles Limited v. Union of India, 2009(242) E.L.T.9 (Bom.) :"6. Considering the above, it is clearthat as the order of settlement commission isfinal and mode of recovery is also set outtherein, it will not be open to the Collector ofCentral Excise assuming that the circular of 5thAugust 1985 and 11-4-1994 to interfere with theorder passed by the Settlement Commission, whichis exercising quasi judicial powers. In thecircumstances, can a writ court exercising extraordinary jurisdiction, when the settlementcommission has thought it fit not to grant anyinstalment, grant instalments assuming thatunder Section 32F(8) there is an implied powerto grant instalments. This court ordinarily,ought not to interfere in the exercise of itsextra ordinary jurisdiction with the orderpassed by the Settlement Commission."8. I have heard the learned counsel for the parties andalso gone through the records.9. The investigation conducted by the Department concludedthat 3004 cash bills were issued to non-eligible persons and thegoods diverted to the local market. The defence of the respondentswas that they were only required to ensure that the full signaturesof the buyers were put on the cash bills. The circular issued by theDepartment in respect of the operations of the duty free shop did notspecify that they should verify the signatures of the buyers andensure that the signatures were correct. The case of the respondentswas also that they had complied with all the requirements of the https://hcservices.ecourts.gov.in/hcservices/ regulations. Therefore, it could not be said that the sales wereeffected to ineligible persons. 10. On an analysis of the allegations made in the showcause notice and also the submissions of the learned Senior Counselfor the respondents, what transpires is that the Department had madeallegations on the basis of visual comparison of the signatures onthe bills with the signatures in the declaration forms available withthe Department, which was objected to by the respondents. Beforecoming to the conclusion that the signatures in the sales bills didnot tally with those available in the declaration forms available,the Department should have got the opinion of a forensic expert or ahandwriting expert, for certification.11. It is true, the task of comparing the signatures in3004 cash bills is huge and it might not have been possible to verifyall the signatures by a handwriting expert. However, what is foundis that not even one signature was verified by a forensic expert or ahandwriting expert to ascertain whether it tallied with the signatureavailable with the department. In the normal course, at least, asmall percentage of these signatures should have been got verified byan expert before the allegation was made. Further, it was alsonoticed that the department did not take the statements from any ofthe buyers, whose signatures were under dispute. Here again, itmight not have possible to take the statements from all persons, but,at least, a few would have been sufficient to prove a substantialdegree that those were not the correct signatures.12. In the absence of any statement and in the absence ofany opinion from the expert, the allegation regarding non-matching ofsignatures appear to have been made on the basis of a presumption,which cannot be sustained. There is a every possibility that thesignatures of the same individual may vary slightly from place toplace. Further, at the time of purchase, the buyer may not takeadequate care to ensure that he has put in his correct signature onthe bill. Therefore, the mere allegation of mismatch on the basis ofvisual examination without any supporting documents or expert opinioncannot be countenanced. This is also due to the fact the respondentshad complied with all the other requirements under the facilitycircular issued by the department for the operation of duty freeshop. There is no dispute that all the details required as per thecircular had been mentioned in the bills. It is also not disputedthat the amounts were collected in foreign exchange and remitted asrequired.13. It is well settled that when an allegation is made, theburden is on the person who alleges, to prove it beyond doubt and theburden can be discharged only on the basis of concrete evidence andadmission statements from the persons concerned or opinion from atechnical expert. When there are variations in the signatures, a https://hcservices.ecourts.gov.in/hcservices/ technical expert could have certified whether both the signaturesbelonged to the same person or not, which is admittedly not done inthis case. 14. It is also a settled law that the show cause noticeissued without any tangible evidences and based only on inferencesinvolving unwarranted assumptions is vitiated by an error of law. Inthis case, the Department has presumed that the signatures on thebills were forged on the basis of a mere visual examination. Such apresumption, unless reinforced with specific and clear evidences,would vitiate the proceedings and result in miscarriage of justice.The respondent had also stated that they placed the goods on boardthe various ships under proper customs escort, for which they placedescort slips before the Commission. It has been mentioned in theshow cause notice that the officers signed those escort reportsperiodically but actually they did not accompany the goods. Theofficers, who certified the escort reports, are the proper officersauthorised to escort and place the goods on board the vessels. It isalso seen that the said officers were posted on cost recovery basisat the duty free shop. In other words, they were exclusively in-charge of the duty free shops and their services were paid for by therespondent company. Hence, they should have been entrusted with noother work but instead dedicated to ensure the smooth and properfunctioning of the duty free shop in accordance with the guidelinesissued by the Department. If there was any failure on the part of theDepartment, it cannot be held against the respondent company. 15. As for the respondent company, they were required toplace the goods on board the vessel and get such placement certifiedby the officers concerned. Since the respondents had complied withthe said requirement, the allegation of the Department has no merit.All these factors would clinchingly establish that all the salesunder the disputed cash memos were made to eligible persons and therewas documentary evidence to prove that they had been placed on boardthe vessel.16. The respondent company had also pointed out that theiroperations were subject to audit by the Department. The Revenue hadpleaded that the violations alleged in the Show Cause Notice werebeyond the scope of audit. Even admitting the said contention of theDepartment, it is seen that the audit department did not find anydefect in the records kept by the duty free shop. In the givensituation, the irresistible conclusion that could be arrived at wasthat there was no evidence to prove the allegation with regard to3004 cash bills under dispute and there was also no evidence toindicate that there was any departure from the regulations,warranting demand of duty in respect of such sales.17. It was only under the said circumstances, the eighthrespondent, namely, Settlement Commission, vide the order impugned, https://hcservices.ecourts.gov.in/hcservices/ held the total liability of the respondents was the amount admittedby them i.e., Rs.82,25,502.45. By the said order, the Commissionawarded simple interest at 10% p.a. on the admitted amount from thedate of sale of the goods till the date of actual payment. 18. Above all, in the Division Bench decision cited by thelearned Senior Counsel for the respondents in New Bharat Rice Millscase, cited supra, the High Court of Punjab & Haryana has held thatthe Statute has bestowed Settlement Commission with discretionarypowers and if such powers have been exercised diligently andreasonably, the same cannot be faulted with. Similarly, in the otherDivision Bench decision in Alluminium Profiles Limited, the BombayHigh Court has held that the writ court, ordinarily, ought not tointerfere, in the exercise of its extraordinary jurisdiction, withthe order passed by the Settlement Commission. 19. Therefore, the order of the Settlement Commission,dated 04.06.2007, impugned herein, in the considered opinion of thisCourt, is perfectly valid and does not suffer from any infirmity. Asa result, this Writ Petition is dismissed. No costs. Consequently,the connected M.P.Nos.2 and 3 of 2008 are also dismissed.Sd/-Asst.Registrar/True Copy/Sub.Asst.RegistrardixitTo.The Settlement Commission,No.60, Rajaji Salai,Customs and Central Excise,Chennai - 600 001.+ 1 cc to Mr.C.Manishankar,Advocate,SR.70107+ 1 cc to M/s.Prof.M.Udaya Banu, Advocate,SR.70063W.P.No.12703 OF 2008PKB(CO)EM/4.1.10