Purchase Of ATM within India: CESTAT Deletes Penalty Under Customs Act Against CitiBank

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has deleted the penalty under the Customs Act against CitiBank on the purchase of an ATM within India.

The two-member bench of Suvendu Kumar Pati (Judicial Member) and Sanjeev Shrivastava (Accountant Member) has observed that a transaction concerning the purchase of an item within India, which is unrelated to its importation and to the importer as the transaction is confined between the Appellant Citibank and Philips India, does not support the imposition of a penalty under Section 112 of the Customs Act against Citibank.

The appellant/assessee is engaged in carrying out activities related to banking services at its various branches located in India, and it purchased 12 numbers of ATMs and 6 ATM Controllers in July 1998 from Philips India. The show-cause notice was issued by the then Collector of Customs, Air Cargo Complex, Sahar, Mumbai, on the allegation that those ATMs and ATM controllers were supplied by Philips India to the appellant after they were imported by a company or firm of Mr. Jiten P. Mody by mis-declaration of description and value of goods in violation of import policy and without import license.

The notice also proposed the confiscation of machines under Section 111(d) and (m) of the Customs Act, 1962. The matter was adjudicated, and a penalty of Rs. 1,50,00,000 was imposed on Citibank. The penalties of Rs. 40, 000 for each of the two consignments were also imposed on the customs broker without any show-cause notices being issued to him.

The assessee argued that Citibank is just a purchaser who purchased those ATMs through local sale invoices raised by Philips India, and it has nothing to do with the importation of goods made by Jiten P. Mody and allegedly supplied to Philips India. No statement of any officer or executive employee of the appellant bank was recorded and based on the statements of Mr. Jiten P. Mody as well as some employees of Philips of India, the appellant has been implicated in this case, and after the appellant tendered its reply to the show-cause notice, nothing was done by the department between 1992 and 2007 till an order-in-original was issued on November 30, 2007.

The department contended that the investigation by DRI had unearthed the evil design of the appellants in importing ATM machines without an import license and with misdeclaration for the purpose of evading the customs duty.

The tribunal has held that Citibank is a subsequent purchaser of the goods from Philips India, which had allegedly purchased the imported goods from Jiten P. Mody. Except for the statement of Ramamrutham, a former Philips India employee, it is stated that they considered the possibility of importing ATMs from Philips Holland to Philips India through third-party suppliers and, after obtaining quotations from the said importer, Jiten P. Mody, quoted the price of the machine to banks namely Citibank and HSBC with a 40% profit margin.

Case Title: M/s. Citibank N.A. Versus Commissioner of Customs

Citation: Customs Appeal No. 86696 of 2013

Date: 25.11.2022

Counsel For Appellant: Advocate J.C. Patel with Raveena Kinkhabwala

Counsel For Respondent: A.R. Ashiwini Kumar

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