Commissioner of Customs (Imports), Bombay v. M/s Hico Enterprises

Case Details & Bench

Court: High Court
Hon'ble Judges: Dr. Arijit Pasayat
P. Sathasivam
Dr. Mukundakam Sharma
Judgment Date: 2008-04-29
Court Decision / Holding: Appeal dismissed.
Final Disposition: Appeal dismissed.

Parties to the Case

Appellants / Petitioners

M/s Hico Enterprises

Respondents

Commissioner of Customs (Import) Bombay

Case Synopsis & Summary

This civil appeal arises from a dispute under the Customs Act, 1962 concerning a transferable Value Based Advance Licence (VABAL) purchased by the appellant, M/s Hico Enterprises, from the original licensee, Amar Taran Exports, on 20 April 1994. The licence, though issued in January 1993-94, enabled duty-free imports conditioned upon export obligations under Notification No. 203/92-Cus dated 19 May 1992. A show-cause notice dated 4 March 1999 alleged contravention of the notification and sought to recover amounts under Section 28(1) proviso, with interest and penalties, and potentially confiscation of goods. The Commissioner of Customs (Import) confirmed the demand, but the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), West Zonal Bench, Mumbai, held that the transferee could not be required to prove export obligations fulfilled by the original licensee, and that the transferee is not bound to fulfil condition (v)(a) of the notification; the original licensee must satisfy that condition. The Revenue challenged the CESTAT order before the Supreme Court. The Supreme Court examined the show-cause notice and found no reference to an alleged infraction by the transferor, Amar Taran Exports. Consequently, the CESTAT’s view that the transferee is not liable stood, and the appeal was dismissed. The Court thus affirmed the Tribunal’s reasoning and upheld the transferee’s non-liability for the export obligation under the notification.

Provisions of Law Cited

Section 28(1) of the Customs Act, 1962 (Proviso to Section 28(1))Notification No. 203/92-Cus dated 19 May 1992Section 111 of the Customs Act, 1962Section 112(a) of the Customs Act, 1962Proviso to Section 28(1)

Submissions & Arguments

Contentions of Appellants / Petitioners

The transferee-applicant argued that under Notification No. 203/92-Cus the export obligation and related conditions bind the original licensee, not the transferee, unless the notice explicitly so states. Since the show-cause notice dated 4 March 1999 did not refer to any alleged infraction by Amar Taran Exports, the transferee cannot be compelled to fulfil export obligations by the original licensee. The CESTAT correctly held that the transferee cannot be called upon to fulfil condition (v)(a) and that responsibility lies with the original licensee. The transfer of licence does not automatically transfer liabilities, particularly where the notice does not allege the transferor’s violation. The Revenue’s demand under Section 28(1) and penalties cannot be sustained against the transferee without a clear reference to transferor’s act and without appropriate notice.”,

Contentions of Respondents

The respondents contended that the transferee cannot be compelled to meet export obligations attributed to the original licensee unless the notice specifically implicates the transferor. They argued that the show-cause notice did not name Amar Taran Exports as having violated the notification, so the CESTAT’s conclusion—holding the transferee not liable and directing the licensee to satisfy the condition—aligns with the statutory framework. They maintained the need to avoid shifting liability to the transferee absent explicit allegations in the notice, and that the tribunal’s approach ensures fairness in enforcement, limiting liability to the party clearly responsible under the notice.

Extracted Judgment Text

Exact text extracted from official judgment records.

[2008f10 S.C.R. 1 A . COM~SSIONER OF CUSTOMS (IMPORTS) BOMBAY \/. > MIS. HICO ENTERPRISES . . (Civil Appeal No. 2418 of 2006) APRIL 29; ·2008 B # [DR. ARIJIT PASAYAT, P .. SATHASIVAM AND DR. MUKUNDAKAM SHARMA, .JJ] · ## _Customs Act, 1962:_ C s. 28(1)_ - _Transferable Value Based Advance Licence·-_ C _Purchased by assessee_ - _Show cause notice to assessee alleging contravention of conditions of Notification no. 2031 92_ - _Tribunal holding in favour of assessee ....: HELD: In view_ - _of the fact that in the Notification there was no reference to alleged infraction by the original licence holder, judgment of_ D . _the Tribunal does not suffer from any infirmity_ - _Notification-_ · _no. 203192_ - _Gus._ - _dated 19.-5. 1992._ · -.. : The respondent:-assessee purchased transferable, · Value· Based Advance Licence from the original iicence holder on 20.4.1994. A show cause and demand notice E dated"4.9.1999 was issued to the assessee_a:Ueging contravention of conditions of Notification no .. 203/92-Cus date·d 19.5.1992. The Commissioner of Customs (Import) confirmed the demand. However, the Customs, Excise .. and se·rvice Tax Appellate Tribunal held that the tran~feree F could not be once again compelled to prove ·that export obligation under· the. Notification was fulfilled by the original licence holder; and that the transferee could not be . . called upon to fulfil condition (v)(a)".of the Notification. Aggrieved,_ the Revenue filed the instant appeal. G ---~-~DlSml ing the appeal, the Court · . -- ' • ---H_l:J.D: In view of the fact that in the show cause notice issued c:>n 4.3.1999, there was no reference to th~ . H 1 [2008] 10·S.C.R. SUPREME COURT REPORTS 2 · A alleged infraction by the transferor of the licence in question, the judgment of the CESTAT does not suffer from any infirmity to warrant interference. [para 6] [3-G] CIVILAPPELLATE JURISDICTION: Civil Appeal No. 2418 ·of 2006 -- B From the final Order No. M/1152/WZB/2004/C-1dated20/ 9/2005 of the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench, Mumbai in Appeal No. C/1345/2002-Mum. ## WITH c C.A. Nos. 2447, 4009 of 2007, 4680 of 2006 and 645 and 2529 of 2008. ·<[0] ~ V. Shekhar, T.R. Andhyarujina, D.A. Dave, S.K. Bagaria, S. Ganesh, Abh.igya, Alka Sharma, Arvind Kumar Shukla, D P.Parmeswaran, B. Krishna Prasad, T§lrun Gulati, Jaive.er Shergill, ,Tushar Jarwal, Praveen Kumar, V.M. Dopiphode, Nitin Mehta,' Rajesh Kumar, Chandra Shekhar, Himanshu. Shekhar, An:inabh Chowdhary, Anupam Lai Das, Ruqy Singh Ahuja,' Javed MiJzaffar, Pranav Sen, Umesh K. Khaitan, Rohina Nath and Dipti E S~rin for the c:ippearing parties. E The Judgment of the Court was delivered .by . ~ . Dr. AR.IJ!T PASAYAT,J. Heard. ·. Challenge in this appeal isJo the order passed by Customs, · F ·Excise & Service Tax Appellate Tribunal, West Zohal Bench, Mumbai (i~ s_ho_rf'CESTAT') allowing the appeal filed by the appellan.t. . . · Background_ facts in a nutshell a~e as follows: ' · . Appellant acquired and/or i:>urch·ased transferable Value G Based Advance Licenses (in short"'VAB.AL') including a license dated 19.1.1993-94 Issued in the name of M/s. Am"ar Taran Exports, New Delhi. Same was purchased on 20.4.1994. Appellant on the basis of that imported consignment vide Bill of Entry . no. 881 dated 30.3.1994. Same was allowed duty free allowH ance. By show cause notice dated· 04.03.1999 appellant was ~~ ~ _J.-_ A ~ 8 c COMMSSIONER OF CUSTOMS (IMPORTS) BOMBAY 3 _v._ M/S. HICO ENTERPRISES [Dr. ARIJIT PASAYAT,J.] called upon to show cause why an amount of Rs. 16, 7 4, 702/- could not be recovered and demanded in terms of proviso to Section 28(1) of the Customs Act, 1962 (in short the 'Act') for alleged contravention of certain conditions of Notification No. 203/92-Cus dated 19.05.1992. Noticee denied the allegations. However, Commissioner of Customs (Import) confirmed the demand along with interest and penalty of Rupees One lakh. Same was held to be jointly payable by the original license holder and licensee. It was held that goods were liable in confiscation under Section 111 of the Act. As the goods w_ere not available penalties of Rs. 3 lakhs and Rs. 1 lakh were levied under Section 112 (a) of the Act. In view of divergence of views, the matter was referred to a larger Bench of the Tribunal. The Tribunal inter alia held as follows: "Hence, the satisfaction arrived at in the above manner is final and binding on the customs department. The D Customs department cannot compel the appellants impqrter, who are the transferee, to once again prove that the export obligation has been fulfilled by the original licence-holder in accordance with the notification aRd with9ut availing input stage credit" E E "The transferee cannot be called upon to fulfill the condition (v) (a) of the Notification No. 203/92-Cus. It is the original licencee, who has to satisfy the above referred condition, but-not the transferee of the licence. In the result, the reference is answered accordingly". F In this appeal challenge is to the aforesaid conclusions. Learned counsel for the respondent pointed out that no role was ascribed to it in the show cause notice. It is seen that in view of the fact that in the show cause notice issued on 4.3.1999, there was no reference to the alleged infraction of M/s. Amar Taran Exports, the transferor of the license in question, the judgment of the CESTAT does not suffer from any infirmity to warrant interference. The appeal is dismissed. G R.P. Appeal dismissed. H