Customs Competence – CAG doubts!
Two classic cases:
Classification issue pending for more than twenty years!
M/s. Kasturi and Sons Ltd., imported laser press facsimile equipment in May 1984 which was cleared classifying it under CTH 8435. Subsequently, a notice under Section 28(1) for a differential duty of Rs.38.07lakh was issued on 29 May 1984 classifying the goods under different CTH 8515. On appeal, the Collector of Customs (Appeals) Madras-1, remanded (13 June 1985) the case back for reconsideration by the lower authority, after waiving pre-deposit.
Instead of completing denovo adjudication, department issued a SCN under Section 28(1) on 6 August 1985. The fresh SCN was challenged in High Court of Madras in 1985, on grounds of being time barred and disputing re-classification under different CTH. High Court directed (21 January 1998) the department after 13 years to pass appropriate orders on merit.
Department instead of completing denovo adjudication, once again issued a letter on 25 October 1998 calling for payment of arrears Rs.38.07lakh. On further writ petition of importer in 1998, High Court granted interim stay on 16 November 1998/absolute stay on 27 December 2002 and finally appeal was allowed on 10 August 2004 on grounds that duty demanded was not based on adjudication process. The order in original was passed on 30 September 2004 confirming demand of Rs.38.07lakh along with applicable interest. Lack of proper action, inadequate pursuance and demanding duty without adjudication process resulted in non realisation of revenue for nearly 20 years.
Demand of Rs. 1.78 Crores pending since 1995 – Legal ingenuity?
A SCN issued (August 1995) to M/s. Kusum Alloys demanding duty of Rs.1.78 crore with penalty of Rs.1.65 crore for misuse of DEEC scheme was confirmed (February 1998) after 29 months, despite Board’s circular No.79/88 requiring adjudication of cases involving duty of Rupees one crore and above within one year. On importer’s appeal, CEGAT remanded (March 1999) the case back with direction to pre-deposit Rs.50lakh. In May 2002, settlement commission also rejected the application of the party. However, despite rejection of application by settlement commission and non compliance of orders of CEGAT to predepositRs.50lakh, department filed application before CESTAT in November 2004 after a delay of 29 months for dismissal of appeal. Further outcome of the case is awaited.
Non-initiation of recovery action
Scrutiny of records in nine commissionerates revealed that after exhausting appeal channels, ten cases were fit enough for action for recovery due to non compliance of pre-deposit orders of the courts/dismissal of party’s appeals, but the department failed to initiate recovery action resulting in non realisation of revenue amounting to Rs.23.33crore even after delays ranging between eight months to nine years. Interest on delay in payment of duty is also recoverable.
These are some of the observations of the CAG in his 7th Report to Parliament.