M/S INTEGRAL TRADERS V. THE COMMISSIONER OF CUSTOMS

WP(C)/843/2015

AI Insights

The case involves M/S Integral Traders, a small trading firm, challenging an order from the Appellate Tribunal which required them to deposit Rs.50 lakhs as a pre-condition for entertaining their appeal against a customs duty demand of Rs.1,96,57,499 and a penalty exceeding Rs.1 crore. The Tribunal had found a strong case in favor of the customs department regarding a part of the demand (approximately Rs.86,00,000). The petitioner argued that the financial burden was excessive, given their status as a small trader facing severe financial difficulties. The respondent defended the Tribunal's decision, emphasizing the leniency already shown and the substantial amount involved in the original demand.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 726978 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 28-06-2016
• Assessment Year: misc
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: THOMAS MATHEW NELLIMOOTTIL
• Assessee Lawyers: P RADHAKRISHNAN; MADHU RADHAKRISHNAN; NELSON JOSEPH; M D JOSEPH
• Keywords: Appeal; Customs Duty; Financial difficulty; Pre-deposit

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE TUESDAY, THE 28TH DAY OF JUNE 2016/7TH ASHADHA, 1938 WP(C).No. 843 of 2015 (E) ------------------------------------ PETITIONER(S): ---------------------- M/S INTEGRAL TRADERS, REPRESENTED BY PROPRIETOR, VATHAKKAL LINE, EDAVANAKKAD, ERNAKULAM-682 502. BY ADVS.SRI.P.RADHAKRISHNAN (1) SRI.MADHU RADHAKRISHNAN SRI.NELSON JOSEPH SRI.M.D.JOSEPH RESPONDENT(S): ------------------------- THE COMMISSIONER OF CUSTOMS, CUSTOM HOUSE, COCHIN-682 009. BY ADV. SRI.THOMAS MATHEW NELLIMOOTTIL,SC THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 28-06-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: PJ WP(C).No. 843 of 2015 (E) ------------------------------------ APPENDIX PETITIONER(S)' EXHIBITS ------------------------------------- EXHIBIT P1: TRUE COPY OF THE SHOW CAUSE NOTICE ALONG WITHY ANNEXURES C1 AND C2 DATED 21/4/2011 EXHIBIT P2: TRUE COPY OF REPLY DATED 6.8.2011 TO THE SHOW CAUSE NOTICE SUBMITTED BY THE PETITIONER. EXHIBIT P3: TRUE COPY OF THE CORRIGENDUM TO THE SHOW CAUSE NOTICE DATED 29.9.2011. EXHIBIT P4: TRUE COPY OF THE ADDITIONAL REPLY SUBMITTED BY THE PETITIONER TO THE CORRIGENDUM TO THE SHOW CAUSE NOTICE. EXHIBIT P5: TRUE COPY OF THEORDER IN ORIGINAL BEARING ORDER NO:15/2012. EXHIBIT P6: TRUE COPY OF THE APPEAL MEMORANDUM FILED BEFORE THE CESTAT BY THE PETITIONER. EXHIBIT P7: TRUE COPY OF THE APPLICATION FOR DISPENSATION OF PRE- DEPOSIT OF DIFFERENTIAL DUTY, INTEREST AND PENALTY. EXHIBIT P8(A): TRUE COPY OF THE INCOME TAX RETURNS FOR THE YEAR 2012-2013. EXHIBIT 8(B): TRUE COPY OF THE INCOME TAX RETURNS FOR THE YEAR AND 2013- 2014. EXHIBIT P9: TRUE COPY FO THE INCOME TAX RETURNS FOR THE YEAR 2014-2015. EXHIBIT P10: TRUE COPY OF THE MISCELLANEOUS ORDER NO:22385/2014 PASSED BY THE CESTAT DATED 22.9.2014. RESPONDENT(S)' EXHIBITS --------------------------------------- NIL. / TRUE COPY / P.S. TO JUDGE PJ A.M. SHAFFIQUE, J. ------------------------------------- W.P.(C) No. 843 of 2015 -------------------------------------- Dated this the 28th day of June, 2016 JUDGMENT Petitioner challenges Ext.P10 by which he is called upon to deposit Rs.50 lakhs within twelve weeks and report compliance on or before 15.1.2015 in order to entertain the appeal. The order is passed in an application submitted by the petitioner for waiver for predeposit for entertaining the appeal. Petitioner had preferred an appeal before the Appellate Tribunal, in regard to claim for differential customs duty of Rs.1,96,57,499/- and penalty of more than Rs.1 Crore 72 lakhs. The Appellate Authority while considering the application for waiver for redeposit, observed that the Revenue has made out a strong case in favour of the demand and at least in respect of approximately Rs.86,00,000/-, the demand is sustainable. Taking into consideration the aforesaid facts, the direction was issued to make a predeposit of Rs.50 lakhs. W.P.(C) No. 843 of 2015 -2- 2. Learned counsel for the petitioner submits the issues pertaining to the respective contentions of the petitioner has not been considered in detail by the appellate authority while directing remittance of Rs.50 lakhs. Petitioner being a small trader, has severe financial difficulty and is unable to remit the amount as directed. 3. On the other hand, the learned counsel for the respondent authorities submits that the writ petition itself is not maintainable and it has been held by the Apex Court as well as this Court that an appellate remedy is available against an order passed directing predeposit of amount while considering the application for waiver of pre-deposit. It is further contended that the appellate authority had considered the entire matter on merits and had shown absolute leniency in favour of the petitioner. The entire demand was roughly about Rs.4 Crores and the appellate authority had only directed predeposit of Rs.50 lakhs on a clear finding that a strong case had been made out as far as the claim for Rs.86 W.P.(C) No. 843 of 2015 -3- lakhs is concerned. 4. Having heard the learned counsel on either side and having perused the records, in regard to the question of maintainability, I do not think that this Court will be justified in conducting an enquiry regarding the maintainability of the writ petition at this stage, especially when the writ petition has been admitted as early as on 19.1.2015 and an interim direction had been issued by this Court, not to reject the appeal during the pendency of this writ petition. 5. Coming to the facts in issue, there is no dispute about the fact that the appeal has to be filed after depositing the amount demanded in terms of the assessment made by the concerned officer. However, there is a provision which enables the appellate authority to consider an application for waiver. Perusal of Ext.P10 order would show that the appellate authority had with due application of mind and in consonance with the principles of natural justice, observed that there is a strong case made out as far as the demand for W.P.(C) No. 843 of 2015 -4- Rs.86 lakhs is concerned. Paragraph 6 of the order, is relevant, which reads as under: “6. After considering the submissions and the impugned order and the submissions of the learned AR, we find that in respect of nine Bills of Entry, it may be said that Revenue has been able to show that the actual transaction value i.e. the payment made for the consignments received to the exporter abroad is more than what was declared and excess amounts were transferred by other means. The fact that there was no evidence to show that exporter had received the money or the methodology followed for transfer of money and there is no evidence for that, does not mean that appellant had not paid excess amount in addition to what was declared to the customs department. If all the transactions were to be recorded and kept available for recovery, by the officers, investigating officers work would have been very simple. The evidence can never be 100% accurate or there can never be 100% proof. In our opinion, the department has been able to show that transaction value was more than what was declared by producing supporting evidences and by applying principle of preponderance of probability it can be definitely stated that the transaction value was more than what was declared. As regards valuation, once transaction value is available, the question of resorting W.P.(C) No. 843 of 2015 -5- to contemporaneous value does not arise. In view of the above we consider that the Revenue has made out a strong case in favour of the demand and at least in respect of approximately 86,00,000/- the demand is ₹ sustainable. At this stage the learned counsel submits that appellant is a small trader and is facing serious financial difficulties and produces income tax returns in support of the same which show negligible income for the appellant. He submits that the appellant has stopped import and export business and has no resources. We do not expect a person who has evaded tax to bring all his assets in to books of accounts in view of the fact that whatever value was paid over and above the amount declared was illegal and could not have been brought tinto account at all. In illegal transactions, the money earned is never reflected totally. Nevertheless in this case, invoice value has been under-declared and payments are in black, the profit earned within India if properly accounted increases and therefore the financial position indicated cannot be totally disbelieved. In any case when such malafide actions are undertaken, accounts are also not properly maintained and therefore the submissions with regard to financial difficulty have to be taken with a spoon of salt. Moreover, the income tax returns do not show the assets but only the income liable to tax. Nevertheless we take into consideration the financial difficulties also and therefore even though W.P.(C) No. 843 of 2015 -6- the appellants should have been required to deposit the entire amount of customs duty with interest and a portion of the penalty, we consider that if the appellant deposits an amount of 5,00,000- (rupees fifty lakhs ₹ only) within twelve weeks and reports compliance on 15.01.2015, that would be sufficient for hearing the appeal. Accordingly, if the amount is deposited as mentioned above and compliance reported, the requirement of predeposit of balance dues is waived and stay against recovery is granted during the pendency of appeal.” 6. On a bare reading of the aforesaid order would clearly indicate that there is no infirmity or perversity for this Court to interfere with the impugned order. 7. Then the only question is whether there was any justification on the part of the appellate authority to have directed deposit of Rs.50 lakhs. The learned counsel for the petitioner justifies the request for reduction of the predeposit on the ground that the petitioner is not in a position to deposit the said amount. In fact, such an issue was also considered by the appellate authority. 8. The learned counsel for the respondent further W.P.(C) No. 843 of 2015 -7- submits that compared to the total amount involved, the amount directed to be deposited is reasonable. That apart, the sustainability of the writ petition itself is in question. At this stage, it may not be proper for this Court to interfere with the direction to deposit Rs.50 lakhs. 8. Heard the learned counsel on either side and perused the records. I am of the view that the contentions urged by the petitioner apparently is to be decided on merits. If the direction to pay Rs.50 lakhs cannot be acceded by the petitioner, he will not be in a position to prosecute the appeals. It is trite, that the quasi judicial authority will have to decide the matter on merits. However, predeposit is a statutory restriction imposed on the petitioner. It is argued that substantial contentions are to be urged in the appeals and if the said opportunity is not available, the petitioner will suffer severe hardship. In the said circumstances, taking into consideration an overall view of the matter, especially, the contentions urged on W.P.(C) No. 843 of 2015 -8- merits, I am of the view that it would suffice that the petitioner deposits an amount of Rs.30 lakhs instead of Rs.50 lakhs. This shall be done within two months from the date of receipt of a copy of this judgment. On such deposit, the appellate authority shall consider the appeal on merits and dispose of the same in accordance with law. Writ petition is disposed of as above. Sd/- A.M. SHAFFIQUE JUDGE Scl/28.06.2016 "