2. Where is that seized hard disk?
Based on search and seizure on 9 November 1993, three SCNs for mis-declaration and under-invoicing of imported electronic goods were issued to M/s. Vintron Industries Ltd., M/s Vintron Electronics Pvt. Ltd. and M/s Ritika Electronics Pvt. Ltd. in July/August 1994 demanding duty of Rs.23.97crore. The SCNs were also issued to nine other persons. The importers filed writ petition in Kolkata High Court against the SCNsand also challenged the competency of adjudicating authority of Commissioner of Customs, Delhi (Air cargo) who was appointed to adjudicate these SCNs. As per panchanama of search and seizure, the resumed documents included four hard discs but during hearing (7 August 1999) DRI informed that no hard discs were seized at all. High Court vide order dated 20 September 2001 dismissed the writ petition and ordered that “the petitioner shall apply before the authorities to get the copies of the hard discs and authorities shall hand over these within three weeks of such application, copies of the relied upon documents to the petitioner requiring him to reply to the SCNs within a month from the date of receipt of such documents.
During the course of hearing on 2 February 2005, it was noticed that five noticees had not received SCNs whereas another two got orders from High Court for issue of SCNs. DRI was requested (16 February 2005) to expedite the process of providing SCNs. The noticee has been insisting on supply of seized hard discs and the adjudicating authority has not been able to resolve the issue of hard/floppy discs. As a result, the case was still pending leading to non-realisation of revenue to the tune of Rs.23.97crore for the last 13 years.
These are the observations of the CAG in his 7th Report to Parliament. Some more interesting Customs competence cases noted by CAG are given below.
Delay in denovo adjudication led to risk of revenue realisation:
Scrutiny of records of eight commissionerates revealed that in 22 cases involving revenue of Rs.22.09crore, denovo adjudication was made after delays ranging from 12 to 151 months. In addition, recovery particulars of Rs.19.95crore out of this confirmed demand could not be ascertained from the department.
Non/delay in issue of SCN led to loss of revenue:
Test check of records revealed that issue of SCN in four cases involving revenue of Rs.4.64crore was delayed from five months to 18 years while in two cases SCNs were not issued at all. Thus non/delayed issue of SCN resulted in loss of revenue of Rs.7.31crore, essentially because of time bar.
Violation of Board’s instruction by issue of corrigendum to order in original:
Based on opinion of the Law Ministry, Board had issued circular on 16 December 1999 that corrigendum to order in original tantamounts to review of the decision, which is not legally sustainable. Issue of corrigendum to order in original in eight cases noticed in audit, has, thus questioned the legality of adjudication and caused risk of recovery of revenue of Rs.30.98crore, in four commissionerates.
An illustrative case:- The Adjudicating Authority forgot to convert US Dollars!
A demand issued on 7 February 2003 under Section 28 (1) (b) of Customs Act to M/s. Akash Trading Co. for recovery of anti dumping duty of Rs.2.10lakh, on import (15 November 2002) of 75000 pieces of electrical goods was confirmed on 15 June 2003 by the DC (Imports), Custom House, Kochi. Subsequently, on realisation of error in computing anti dumping duty, DC (Imports) issued a corrigendum on 25 August 2003 increasing the demand to Rs.1.02crore under Section 154, as the corrigendum was necessary due to non conversion of short levied amount from U.S. dollars to Indian rupees. On appeal by the importer, Commissioner (Appeals) Kochi in his order dated 30 March 2004 set aside the demand for antidumping duty on the ground that Section 154 can be invoked only for the correction of errors. Confirmed demands cannot traverse beyond the scope of SCN/original demand and held that modified demand under corrigendum order is not sustainable in law. Department’s appeal before CESTAT, Bangalore bench was also dismissed terming the departmental action in issuing corrigendum order under Section 154 as ‘bad in law’. This has resulted in loss of revenue of Rs.99.89lakh.
The Ministry replied (January 2007) that there was a mistake in conversion of currency. Ministry further replied that no corrigendum increasing the duty liability were to be issued after the issue of adjudication orders.
Non decision by Board risking realisation of revenue:
Two SCNs issued by Jamnagar Commissionerate demanding duty of Rs.505.04crore on crude oil/natural gas/gas condensates produced at platforms and brought from off shore fields (non designated areas) were kept in call book on directions (August 2001) of the Board not to take any action in enforcing demand till a final view is taken. These cases are still pending adjudication for more than 55 months for want of decision from Board, leading to blockage of revenue of Rs.505.04crore. There is an immediate need for the Board to finalise its decision on the issue.
The Ministry replied (January 2007) that Board was pursuing the matter with Ministry of External Affairs. Ministry further replied that Board had decided to put in place a framework that would indisputably treat production from the continental shelf/EEZ as ‘indigenous production’ and should not treat production from these areas as an ‘import’. The implementation of the same was being worked out in consultation with relevant wings of CBEC.
APPEALS: Nobody has any idea as to how many appeals are pending where.
Recommendation No.8:
Board should reconcile the number of appeal cases and amount involved therein which are pending at departmental level in all commissionerates, as first step to strengthen its internal control mechanism to monitor these pending appeal cases.
The Ministry accepted (January 2007) the recommendation and stated that reconciliation would be undertaken.
Dismissal of appeal due to delay in filing, leading to loss of revenue:
Test check in audit revealed that 33 appeal cases filed by the department in five commissionerates were dismissed by the Supreme Court/High Court/CEGAT on the ground of delay or the department could not stake its claim on revenue due to belated action/non submission of proper evidence justifying its stand. This resulted in non realisation/loss of revenue to the tune of Rs.160.38crore to the Government.
An example:
Twenty three SCNs issued by nine commissionerates to M/s. Visakhapatnam Steel Plant Ltd., and 22 others demanding duty of Rs.139crore for misuse of DEEC scheme were dropped by CC (I) NCH, Mumbai (November 1996). CEGAT rejected the appeal of department (November 2001) and Supreme Court dismissed the special leave petition (SLP) filed belatedly by department, on ground of delay (January 2003). The delay in filing appeal had resulted in a probable loss of Rs.139crore to the exchequer. The original files of Visakhapatnam Steel Ltd. were not made available to audit, despite request having been made in April 2006.
Non receipt of judgement leading to non realisation of revenue:
M/s. Ultra Marine Pigments Ltd., filed a writ petition No.6392/94 in the High Court against demand of duty of Rs.5.58lakh, on account of rate of duty on bonded goods, lying in warehouse after the expiry of the bond period. The departmental representative stated (July 2001) that the case was dismissed by the High Court on 10 July 2001, in favour of revenue and copy of the order would be forwarded soon. In the meantime, the departmental representative was transferred and copy of the order was yet to be received by the department, in the absence of which department had not initiated any action to recover Rs.5.58lakh for more than four years.
Aggrieved by the demand notice issued by the department, based on withdrawal of the benefit under notification 64/88-cus dated 1 March 1988 by Director General of Health Services (DGHS), M/s. TrichurHeartHospital filed an appeal before CESTAT where the hospital was ordered to pre-deposit Rs.15lakh. The writ petition and writ appeal filed by importer against the interim order of CEGAT for pre-deposit were dismissed by the High Court on 4 September 2002. However, copy of judgement of High Court was yet to be received by the Commissioner, Chennai (Sea). The appeal involving revenue of Rs.1.66crore is pending in CESTAT for more than three years, after dismissal of the writ petition at the High Court due to non receipt of copy of judgement.
Pendency even after receipt of court’s orders:
M/s. Tamil Nadu Hospitals Ltd. filed a writ petition No.1095/97 against the adjudicating order dated 20 December 1996 demanding duty of Rs.30.09lakh by withdrawing the notification benefit due to non production of the installation certificate. The Madras High Court dismissed the appeal on 8 June 2001. However, the case was shown as pending till date in the ‘Register of cases pending in the Court’. The company was wound up and an official liquidator was appointed. The department is yet to file the petition to the official liquidator regarding the claim of duty, resulting in non realisation of revenue of Rs.30.09lakh for more than four years, after receipt of Court order.
Ineffective monitoring of cases pending in Courts/CESTAT:
Audit scrutiny revealed that 208 cases were pending in various appellate forums due to lack of adequate follow up action by the department, for periods ranging between 18 months to 36 years, leading to non realisation/loss/blockage of revenue of Rs.502.42crore.