The Customs, Excise and Service Tax Appellate Tribunal, Eastern Zonal Bench at Kolkata, has held that the Customs Act does not permit recovery of customs duty on a joint and several basis from persons who are not the statutory importers, and that a director of companies which sold goods on high seas basis cannot be treated as the importer liable for duty or penalties. The Tribunal set aside a demand of Rs. 2,17,60,744.72 and penalties totalling Rs. 4,17,60,744 confirmed against the appellant jointly and severally with five others.
Background & Facts
The Dispute
The appellant, Shri Rajendra Jain, a director of Topsia Estate Private Limited and RK Impex Private Limited, challenged an Order-in-Original dated 09.03.2026 passed by the Commissioner of Customs (Adjudication), Mumbai. The order confirmed customs duty of Rs. 2,17,60,744.72 jointly and severally from the appellant and five other persons, along with a penalty of Rs. 2,17,60,744 under Section 112(a) and Rs. 2,00,00,000 under Section 114AA of the Customs Act, 1962. The demand arose from 13 consignments of silk yarn and polyester fabric imported by M/s Kamla Exports at Kolkata Port under Advance Licenses during 2004-2005.
Key Facts
- M/s Kamla Exports, a merchant exporter of silk fabric and garments, imported 13 consignments at Kolkata Port during 2004-2005 under Advance Licenses issued in 2002
- Export obligations were discharged by DGFT authorities through deemed exports via M/s SAI International in 2005; Mr. Shammi Chanana was a partner of M/s SAI International
- Of the 13 consignments, 9 were procured directly by M/s Kamla Exports from foreign suppliers, and 4 were imported on high seas basis
- Three of the four high seas consignments were purchased by M/s Kamla Exports from Topsia Estate Private Limited and RK Impex Private Limited; the appellant was a director of both companies
- DRI investigation alleged that M/s Kamla Exports obtained Export Obligation Discharge Certificates by filing bogus deemed export documents and failed to fulfil export obligations, thereby evading customs duty
- DRI also investigated imports at Tuticorin and Nhava Sheva Ports
- The appellant was summoned by DRI and deposed on 15.02.2008 denying any transaction with M/s Kamla Exports, stating the high seas sales were made by the companies, not by him personally
- The appellant denied being the "Raju Bhai" referenced in Mr. Shammi Chanana's statement regarding sale of an advance license of 50,000 sq. meters
- Customs Broker Mr. Bansi Badan Mandal deposed that he was introduced to M/s Kamla Exports through Mr. Raju Mohta (not the appellant), obtained documents from M/s Kamla Exports' proprietor Mr. Krishna Khote, filed Bills of Entry, received payment from Mr. Krishna Khote, and dispatched goods to Mumbai and Delhi per M/s Kamla Exports' directions
- Transporters M/s Karni Transport and M/s Inland Road Transport Corporation confirmed delivery of goods to M/s Kamla Exports with statutory transit documents
Procedural History
- 09.02.2009: Show Cause Notice issued alleging imports made by appellant jointly and severally with others, relying on retracted statement of Mr. Shammi Chanana
- 09.03.2026: Commissioner of Customs (Adjudication), Mumbai passed Order-in-Original No. 57/DSR(57)CC(ADJN.)/Mumbai/2025-26 confirming duty demand of Rs. 2,17,60,744.72 jointly and severally, penalty of Rs. 2,17,60,744 under Section 112(a), and penalty of Rs. 2,00,00,000 under Section 114AA
- 2026: Customs Appeal No. 75535 of 2026 filed before CESTAT Eastern Zonal Bench, Kolkata
- 28.10.2026: Hearing concluded
- 30.10.2026: Judgment pronounced (Final Order No. 76568/2026)
Relief Sought
The appellant sought setting aside of the customs duty demand confirmed jointly and severally against him, and setting aside of penalties imposed under Sections 112(a) and 114AA of the Customs Act, 1962.
The Legal Issue
The central questions were: (1) Whether Section 28 of the Customs Act, 1962 permits recovery of customs duty on a joint and several basis from multiple persons including those who are not the statutory importers; (2) Whether a director of companies that sold goods on high seas basis to the actual importer can be treated as the "importer" liable for customs duty and penalties; (3) Whether penalties under Sections 112(a) and 114AA can be imposed on a person who neither filed Bills of Entry nor dealt with the goods in any manner.
Arguments Presented
For the Appellant
The appellant contended that the impugned order relied solely on the retracted statement of co-accused Mr. Shammi Chanana, who allegedly stated he sold an advance license to "Raju Bhai" - a person not identified as the appellant. The appellant argued that no charge was made against the two companies (Topsia Estate and RK Impex) which actually sold the goods on high seas, and that sale of a license has no bearing on imports unless it is proved goods were released on that license. He submitted that no license number was mentioned in the Show Cause Notice, and that he had denied Mr. Chanana's statement with material evidence, which went unchallenged. The appellant relied on Section 2(26) of the Customs Act defining "importer," and cited Mohan Kumar More v. Commissioner of Customs, Kolkata (137 ELT 225) holding that a high sea seller cannot be treated as importer when duty is paid by the buyer; Baba Baidya Nath Trading Co. v. Commissioner of Customs (23 CENTEX 320) holding no provision exists for joint and several demand of duty or penalty; and Commissioner of Customs v. Virendra Hans Raj Gandhi (155 ELT 128) holding only the person chargeable with duty can be proceeded against, not a high sea seller.
For the Respondent
The Department submitted that M/s Kamla Exports was a fictitious firm with a residential declared premises, and that Mr. Shammi Chanana's statement dated 26.11.2008 disclosed sale of the Advance License to the appellant ("Rajubhai @ Rajendra Jain") against premium. The Department contended the three Advance Licenses used for imports were non-transferable under Notification No. 43/2002-Cus dated 19.04.2002, and were fraudulently obtained and sold. The appellant's own statement under Section 108 dated 15.12.2008 admitted dealing in polyester fabrics, knowing Mr. Shammi Chanana for over 20 years, and disclosed high-sea-sale transactions. The Department argued the appellant was the actual person behind all 13 consignments and used M/s Kamla Exports' IEC for imports. Regarding joint and several demand, the Department cited Sundaram Finance Ltd. v. Commissioner of Customs (CESTAT, order dated 02.03.2012) where joint filing of Bills of Entry supported joint demand, and Danavarshini Exports (P) Ltd. v. Commissioner of Customs (Final Order Nos. 41502-41527/2025 dated 18.12.2025) and R. Dewakar v. Commissioner of Customs (Final Order No. 41067/2026 dated 06.10.2026) where Tribunals set aside joint demands but remanded or fixed duty on actual importers.
The Court's Analysis
The Tribunal first addressed the sustainability of the joint and several demand. It held that Section 28 of the Customs Act does not envisage recovery of customs duty on a joint and several basis from persons who are not the importers, and does not provide for collective recovery. The impugned order failed to specifically identify the person liable to pay customs duty and demanded it from many persons, which is not permissible.
"We find that there is no provision available in the Custom Act to demand duty jointly and severally from many persons. It is a fact on record that the Appellant Shri Rajendra Jain was not the statutory importer. We observe that Section 28 of the Customs Act, does not envisage recovery of customs duty on a joint and several basis from persons who are not the importers. Section 28 of the Customs Act does not provide for collective recovery."
The Tribunal relied on Baba Baidya Nath Trading Co. v. Commissioner of Customs (23 CENTEX 320), which held there is no provision under the Customs Act for joint and several demand of duty, imposition of penalty or fine. It also followed Commissioner of Customs v. Virendra Hans Raj Gandhi (155 ELT 128) and Mohan Kumar More v. Commissioner of Customs, Kolkata (137 ELT 225), establishing that only the person chargeable with duty can be proceeded against, and a high sea seller cannot be held as importer when the buyer has paid duty.
The Tribunal distinguished Sundaram Finance Ltd. on facts - there, Bills of Entry were jointly filed, unlike the present case where only M/s Kamla Exports filed Bills of Entry. It also found Danavarshini Exports and R. Dewakar inapplicable, as those cases involved remand or fixation of duty on the actual importer from existing records, whereas here the appellant never filed Bills of Entry or paid duty.
On the merits, the Tribunal found M/s Kamla Exports was the actual importer for all 13 Bills of Entry. The appellant was only a director of two companies that sold three consignments on high seas basis. The allegation that the appellant was the "Raju Bhai" in Mr. Chanana's statement was unsupported - the name "Raju Bhai" could not be presumed to be the appellant, especially when Mr. Raju Mohta, a dealer in transferable advance licenses, was identified by the Customs Broker as the person who introduced him to M/s Kamla Exports.
"We find that there is no evidence brought on record to establish that Raju Bhai mentioned in the statement of Shammi Channa and the Appellant Rajendra Jain are one and the same."
The Tribunal noted no charge was made against the two selling companies in the Show Cause Notice, and the sale of license had no bearing on imports unless proved that goods were released on that license. The Customs Broker's statement confirmed he received documents from M/s Kamla Exports, dealt with advance licenses given by M/s Kamla Exports, delivered goods to M/s Kamla Exports, and obtained transit permissions on statutory documents sent by M/s Kamla Exports. All evidence indicated the appellant was not the importer.
Regarding penalties under Sections 112(a) and 114AA, the Tribunal held the ingredients were not satisfied. The appellant neither dealt with the goods, filed Bills of Entry, nor dealt with any documents relating to Bills of Entry. The advance licenses were valid at the time of import; suspension occurred in 2009 after expiry and after export obligations were discharged. No material evidence showed the license allegedly sold to the appellant was used for clearance.
The Verdict
The appellant succeeded fully. The Tribunal held: (i) The appellant was not the importer in respect of goods covered under all 13 Bills of Entry; (ii) The demand of customs duty of Rs. 2,17,60,744.72 confirmed jointly and severally against the appellant is legally not sustainable and is set aside; (iii) The penalties of Rs. 2,17,60,744 under Section 112(a) and Rs. 2,00,00,000 under Section 114AA imposed on the appellant are not sustainable and are set aside; (iv) The appeal is allowed with consequential relief.
What This Means For Similar Cases
Joint Several Demand Has No Statutory Basis
The Customs Act contains no provision authorising recovery of duty on a joint and several basis from multiple persons. Section 28 contemplates recovery only from the person chargeable with duty - the statutory importer. Practitioners must challenge any show cause notice or adjudication order that lumps together multiple noticees without individually establishing each person's liability as importer. The Tribunal's reliance on Baba Baidya Nath Trading Co. (23 CENTEX 320) provides direct authority: "There is no provision of demanding duty and imposing penalty jointly and severally from the Appellants."
- Actionable takeaway: In every show cause notice proposing joint and several demand, file a preliminary objection citing Section 28 and Baba Baidya Nath Trading Co.; demand separate adjudication for each noticee based on their individual role.
- Actionable takeaway: If an order confirms joint and several demand, appeal on the ground that the adjudicating authority failed to identify the specific importer for each consignment, rendering the order perverse and without jurisdiction.
High Sea Seller Is Not the Importer
A person who sells goods on high seas basis to the actual importer cannot be treated as the "importer" under Section 2(26) of the Customs Act, even if they are a director of the selling company. The Tribunal reaffirmed Mohan Kumar More (137 ELT 225) and Virendra Hans Raj Gandhi (155 ELT 128): duty liability attaches only to the person who files the Bill of Entry and clears the goods. Mere directorship in a high sea selling company, without more, does not constitute importation.
- Actionable takeaway: When a client is a director/shareholder of a company that effected high seas sales, argue that the corporate veil cannot be pierced absent specific allegations of fraud or benami importation pleaded in the show cause notice.
- Actionable takeaway: Obtain and rely on the Customs Broker's statement and transporter records - these statutory documents create a presumption that the named importer (the Bill of Entry filer) is the true importer, which the Department must rebut with concrete evidence.
Retracted Statements and Vague Identities Cannot Sustain Demand
The Tribunal refused to equate "Raju Bhai" in a co-accused's retracted statement with the appellant Rajendra Jain, especially when another identifiable person (Raju Mohta) fit the description. A vague alias in an uncorroborated, retracted statement cannot substitute for proof of identity and participation in importation. The Department bears the burden of linking the specific person to the specific act of importation.
- Actionable takeaway: Where the Department relies on a co-accused's statement identifying a person by nickname or alias, demand production of corroborating evidence (bank records, communication records, witness testimony) linking the client to that alias; mere presumption is legally insufficient.
- Actionable takeaway: Highlight any alternative identifiable persons who could match the alias (as the appellant did with Raju Mohta) to break the chain of identification.
Penalties Require Direct Nexus to Offence
Penalties under Sections 112(a) and 114AA require the person to have been involved in the contravention - filing false declarations, evading duty, or dealing with goods liable to confiscation. Where the person neither filed the Bill of Entry, nor dealt with the goods, nor submitted documents for clearance, penalties cannot be imposed based solely on an unproven allegation of license purchase. The validity of the license at the time of import further weakens the penalty case.
- Actionable takeaway: In penalty proceedings, map each ingredient of the penal provision to specific acts attributed to the client; if the show cause notice does not allege the client committed the specific act (e.g., filing Bill of Entry, misdeclaring value), argue the charge is not made out.
- Actionable takeaway: Establish the timeline - if licenses were valid at the time of import and suspension/cancellation occurred later, argue the import was not "without payment of duty" at the relevant time, negating the basis for penalty under Section 114AA.
