Madras High Court
R.Kishore Nagaarur vs The Addl. Commissioner Of Customs ... on 24 September, 2014
Bench: R.Sudhakar, G.M.Akbar Ali
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATE : 24.09.2014
CORAM
THE HONOURABLE MR. JUSTICE R.SUDHAKAR
AND
THE HONOURABLE MR. JUSTICE G.M.AKBAR ALI
C.M.A. NO. 2705 OF 2014
R.Kishore Nagaarur .. Appellant
- Vs -
1. The Addl. Commissioner of Customs (Exports)
Custom House, No.60, Rajaji Salai
Chennai 600 001.
2. The Customs, Excise & Service
Tax Appellate Tribunal
South Zonal Bench, Shastri Bhavan
No.26, Haddows Road
Chennai 600 006. .. Respondents
Appeal filed under Section 130 (1) of the Customs Act, against the Final Order No.40676/2013, dated 22.11.2013 passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Chennai, made in Appeal No.C/356/2012-SM.
For Appellant : Mr. B.Satish Sundar
For Respondents : Mr. A.P.Srinivas, AGP (Taxes)
JUDGMENT
(DELIVERED BY R.SUDHAKAR, J.) The Final Order passed by the Tribunal confirming the penalty imposed on the appellant is under challenge before this Court in the above appeal.
2. The appellant in this case challenges the portion of the order of the Tribunal confirming the levy of penalty imposed under Section 114 (i) of the Customs Act. In such view of the matter, this Court proposes to deal only with respect to that one issue and nothing more.
3. Though many questions of law are sought to be raised for consideration in this appeal, learned counsel for the appellant limited his prayer to the following questions of law alone.
a) Whether the Tribunal was right in coming to the conclusion that the appellant is liable for penalty in terms of Section 114 (i) of the Customs Act in the absence of any tangible evidence against the appellant?
b) Whether the Tribunal was justified in confirming the penalty under Section 114 (i) of the Customs Act when it has dropped the penalty on the appellant under Section 114-AA of the Customs Act on the ground that the appellant had not signed or used the declaration for export of goods?
4. The brief facts leading to the filing of the present appeal are summarised as hereunder :-
One Sharmi Exim Co., Chennai, filed Shipping Bill No.3440204 dated 23.7.2009 (IE Code No.0404008470) for export of 'Industrial Salt Chemical Grade (Sodium Chloride)'. The details of the said shipping bill are set out as hereunder :-
Declared RTC Code 25010090 Declared DESCRIPTION INDUSTRIAL SALT CHEMICAL GRADE (SODIUM CHLORIDE) Declared QUANTITY 110 MTS TOTAL PACKAGES 2200 Declared INVOICE VALUE Rs.8,98,535/= Declared FOB VALUE Rs.8,27,421/= CONSIGNEE Aston International, 5657, West Wood Lane, The Collany, Texas 75056, UNITED STATES PORT OF DISCHARGE PASIR GUDANG CHA BHOLU KUMAR PARMAR
5. On information, the Docks Intelligence Unit (DIU), Custom House, detained the said goods on the reasonable belief that the exporter has misdeclared the goods in the consignment and attempted to export the same contrary to the restrictions imposed by law. Representative samples were drawn and on analysis it was found that it was not 'Industrial Salt Chemical Grade (Sodium Chloride)', but Muriate of Potash, a fertilizer, which is a restricted item vide Notification No.30 (RE-2003)/2002-2007 New Delhi, dated 28.01.2004 issued by the Director General of Foreign Trade, where Straight Potassic Fertilizers such as Potassium Chloride (Muriate of Potash) all grades, is restricted, subject to certain conditions.
6. In the course of investigation, statements were recorded from the appellant Kishore Nagaarur, S.Babu Proprietor of R.B. Trades, L.Subash Proprietor of Sharmi Exim Co., S.Senthilnathan Export Executive with the Custom House Agent, Bholu Kumar Parmar Custom House Agent and Manikandan Driver. Based on the statements recorded during investigation and after receipt of report of the chemical analyst and coming to know that the goods attempted to be exported, is Muriate of Potash and not Industrial Salt Chemical Grade (Sodium Chloride) by way of mis-declaration, show cause notice was issued on 1.2.2010 to L.Subash Proprietor, Sharmi Exim Co., Kishore Nagaarur appellant, and also on other persons, viz., S.Senthilnathan Export Executive with the Custom House Agent, S.Babu Proprietor, R.B. Trades and Bholu Kumar Parmar Custom House Agent, the relevant portion of which is extracted hereunder :-
(i) the 110 MTS of fertiliser grade Potassium Chloride (Muriate of Potash) attempted to be exported by misdeclaring it as 'Industrial Salt Chemical Grade (Sodium chloride)', with a declared FOB value of Rs.8,27,421/= should not be confiscated under Section 113 (d), (h) and (i) of the Customs Act, 1962;
(ii) penalty should not be imposed on them under Section 114 (i) and Section 114AA of the Customs Act, 1962.
7. Each one of the recipient of the notice denied the allegation and they were given opportunity to appear before the adjudicating authority alongwith their counsel for hearing and the adjudicating authority, viz., Addl. Commissioner of Customs (Exports), considered the issue at length and came to the conclusion that 110 MTS of fertilizer grade Potassium Chloride (Muriate of Potash) was attempted to be exported by misdeclaring the same as 'Industrial Salt' and is liable to be confiscated in terms of Sections 113 (d), (h) and (i) of the Customs Act read with Section 3 (3) of the Foreign Trade (Development and Regulation) Act, 1992. The Original Authority also held that Subash Proprietor of Sharmi Exim Co. and Kishore Nagaarur Managing Director, Sri Chemicals are liable for penalty under Sections 114 (i) and 114AA of the Customs Act and, accordingly, passed the following order :-
(i) I order the confiscation of the 110 MTS of MOP declared as 'industrial salt' with FOB value of Rs.8,27,421/= sought to be exported by Shri L.Subash through his firm Sharmi Exim Co., under shipping bill No.3440204 dated 23.07.2009 under Section 113 (d), (h) and (i) of Customs Act, 1962, read with Section 3 (3) of the Foreign Trade (Development and Regulation) Act, 1992. However, I give an option to redeem the same on a redemption fine of Rs.10,00,000/= (Rupees Ten Lakhs only).
(ii) I impose a personal penalty of Rs.2,00,000/= (Rupees Two Lakhs only) on Shri L.Subash, Proprietor of Sharmi Exim Co., under Section 114 (i) of Customs Act, 1962.
(iii) I impose a personal penalty of Rs.2,00,000/= (Rupees Two Lakhs only) on Shri Kishore Nagaarur, Proprietor of Sri Chemicals, Chennai, under Section 114 (i) of Customs Act, 1962.
(iv) I impose a penalty of Rs.1,00,000/= (Rupees One Lakh only) on Shri Kishore Nagaarur, Proprietor of Sri Chemicals, Chennai, under Section 114AA of Customs Act, 1962.
(v) I impose a penalty of Rs.1,00,000/= (Rupees One Lakh only) on Shri Senthilnathan, Export Executive, M/s.Bholu Kumar Parmar, under Section 114 (i) of Customs Act, 1962.
(vi) I impose a personal penalty of Rs.50,000/= (Rupees Fifty Thousand only) on Shri S.Babu of R.B.Trades, Chennai 106, under Section 114 (i) of Customs Act, 1962.
(vii) I impose a personal penalty of Rs.50,000/= (Rupees Fifty Thousand only) on Shri Bholu Kumar Parmar, CHA, under Section 114 (i) of Customs Act, 1962.
8. Aggrieved against the said order imposing personal penalty of Rs.2,00,000/= (Rupees Two Lakhs only) under Section 114 (i) and penalty of Rs.1,00,000/= (Rupees One Lakh only) under Section 114AA of the Customs Act, 1962, the appellant herein preferred appeal to the Commissioner (Appeals), who, after considering the merits of the matter, dismissed the appeal holding as hereunder :-
12. Thus, the appellant's role in the attempted illegal export gets established and the goods have been confiscated under Section 113 of the Customs Act, 1962, he becomes automatically liable for penal action under Section 114 (i) ibid. Actually speaking this section prescribes a maximum of three times the value of the goods, i.e., three times of Rs.8,27,421/=. But the lower authority has restricted himself to imposing only Rs.2 Lakhs.
13. As for penalty under Section 114 AA ibid, it has come to be established that the appellant was the brain in this aborted illegal mission and has caused the de jure exporter to sign false declaration in the shipping bill, therefore, invoking the same can be said only proper. Ever here, five times the value of goods, i.e., 5 times of Rs.8,27,421/= can be imposed. The lower authority for reasons known only to him has restricted to only Rs.1 Lakh.
14. Being a man acting behind the screen also inciting others to commit illegal acts by dangling before them inducements of money or business prospects notwithstanding its nefariousness, the appellant has to be penalised more severely than what has been done to others. Further, devising escape routes and subterfuges if being caught, brings out his hard core criminality of mind. Surely, these types of persons deserve no leniency.
In view of the discussion above, I find no merit in the appeal and the appeal is dismissed.
9. Aggrieved by the said order of the Commissioner (Appeals), the appellant herein pursued the matter before the Tribunal. The Tribunal allowed the appeal in part upholding that the penalty levied under Section 114 (i) is justified, but, however, set aside the penalty under Section 114AA of the Customs Act. Against the said order of the Tribunal, the present appeal has been filed.
10. Learned counsel appearing for the appellant contends that there is a contradiction in the finding of the Tribunal, more particularly, in para-5 of the order, where there is a clear finding that Sharmi Exim Co., signed and used the cheque for export of the goods and even then penalty under Section 114-AA was dropped. Since the abovesaid finding is in favour of the appellant and against Sharmi Exim Co., there is no justification for confirming the penalty against the appellant under Section 114 (i) of the Customs Act and, therefore, the order passed by the Tribunal, confirming penalty, is liable to be set aside.
11. Heard Mr.Satish Sundar, learned counsel appearing for the appellant and Mr.A.P.Srinivas, learned Addl. Government Pleader (Taxes) appearing for the respondents.
12. Before proceeding to consider the complicity of the appellant in the attempted export, it would be useful to advert to Section 114 (i) and 114-AA of the Customs Act, which is extracted hereunder for easy reference :-
114. Penalty for attempt to export goods improperly, etc. Any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 113, or abets the doing or omission of such an act, shall be liable, -
(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding three times the value of the goods as declared by the exporter or the value as determined under this Act, whichever is the greater.
* * * * * * * * * 114AA. Penalty for use of false and incorrect material. - If a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purposes of this Act, shall be liable to a penalty not exceeding five times the value of goods.
13. For deciding the appeal, the short facts, relevant for considering the complicity of the appellant in the admitted illegal export, are culled out hereinbelow :-
The appellant Kishore Nagaarur has an IE code in the name of Sri Chemicals, and he is the Managing Director. One L.Subash, who is the proprietor of Sharmi Exim Co., filed the shipping bill mis-declaring 110 MTS of Potassium chloride (Muriate of Potash) as Industrial Salt Chemical Grade (Sodium Chloride). It is the case of the department that though Kishore Nagaarur has an IE Code in the name of Sri Chemicals, but has used the IE code of Sharmi Exim Co., for illegal acts of smuggling prohibited goods out of the country under the guise of 'Industrial Salt'. The department relies upon the statement of S.Babu, proprietor of R.B. Trades, Chennai, who stated that he raised six fictitious invoices in his firm's name for having supplied for export to Sharmi Exim co., 110 MTS of 'Industrial Salt' for monetary consideration. S.Babu has, in his statement, recorded under Section 108 of the Customs Act on 26.08.2009 clearly stated that he raised six bills, totaling to 110 MTS on instructions from the appellant Kishore Nagaarur and raised the bills in the name of Sharmi Exim Co., for monetary consideration. It is also the further statement of Babu of R.B. Trades that he handed over the six invoices to the office of Sri Chemicals owned by the appellant. The statement of S.Babu is corroborated by the statements of Senthilnathan and Bholu Kumar Parmar, CHA. The further statement of Senthilnathan, working for the CHA would reveal that he collected the invoices and packages from the appellant's office for the purpose of export. The statement of the persons who were involved in the transaction as above have implicated the appellant and his complicity in the attempt to illegally export goods by way of mis-declaration. The further investigation by the department also shows that Rajagopal, father of the appellant, in his statement recorded on 5.9.09 has stated that the consignee address, Aston International, 5657, West Wood Lane, The Collany, Texas 75056, United States, as shown in the shipping bill is the address of Smt.Aruna Murugesh, daughter of N.Rajagopal and sister of the appellant Kishore Nagaarur. The investigation also reveals that the statement of the bank accounts of M/s.Sharmi Exim Co., the exporter, shows that inward remittances for the goods sought to be exported was made by Aston International is that of Smt.Aruna Murugesh, the daughter of N.Rajagopal and sister of the appellant. On the basis of these incriminating statements and evidence on record, the original authority came to the conclusion about the complicity of the appellant in the attempt to illegally export the goods contrary to the restriction imposed by law and by way of mis-declaration. This resulted in the order of adjudication with penal consequence.
14. The involvement of the appellant in the attempt to illegally export is further fortified by the statement of L.Subash, who in his statement has categorically stated that for a consideration of Rs.5000/= per container, he had allowed the appellant the proprietor of Sri Chemicals, to use his IE code and further stated that he had given signed blank cheque leaves to the appellant and that the appellant had misused the same. L.Subash, proprietor of Sharmi Exim Co., further stated that he has not contacted Senthilnathan and Bholukumar, CHA. Though L.Subash disowned his direct complicity in the alleged improper export, it is evident from the materials on record that his IE code, documents like shipping bills were signed and used for the purpose of illegal export by mis-declaration of the goods. The original authority has held that L.Subash cannot extricate himself from his involvement in the attempt to illegally export the goods by mis-declaration. Therefore, the original authority held that the said L.Subash Proprietor of Sharmi Exim Co., rendered himself liable for penal action under Sections 114 (i) and 114-AA of the Customs Act.
15. Similarly, in the case of the appellant, it is the clear finding of the original authority that he is the mastermind behind the attempted illegal export of goods by way of mis-declaration and, consequently, penalty was imposed under Sections 114 (i) and 114-AA of the Customs Act.
16. The Commissioner (Appeals) confirmed the order of the original authority and dismissed the appeal filed by the present appellant by appreciating all the evidence on record, the statement recorded from the persons and the findings of the original authority to come to the conclusion that the appellant is the real brain behind the transaction, who masterminded the export and L.Subash Proprietor of M/s.Sharmi Exim Co. is only a de jure exporter. The so-called supplier of the goods, R.B. Trades is also de jure supplier and both of them have colluded with the present appellant in his attempt to illegally export Muriate of Potash under the guise of 'Industrial Salt'.
17. The appellate authority, taking note of the relationship of the appellant with the consignee, viz., Aston International, United States, which is the address of the sister of the appellant and the payments received therefrom, supported by the statement of Rajagopal, the father of the appellant, was of the clear view that the appellant was the man behind the scene inciting others to commit illegal acts by dangling before them inducements of money or business prospects and, therefore, the appellant deserves to be penalised. The original authority as well as the appellate authority were of the clear view that the appellant had, in relation to the goods, committed acts, which would render such goods liable for confiscation under Section 113 of the Customs Act knowing fully well that the goods, which are attempted to be exported was subject to prohibition in force under the Act. It is also clear that there was a restriction in terms of Notification 30/RE/2003 dated 28.1.2004 as well. In the result, it was held that the goods are liable for confiscation under Sections 113 (d), (h) and (i) of the Customs Act. As a consequence, the appellant becomes liable for penalty since the complicity of the appellant in the alleged attempt to export stands proved and further renders the goods liable for confiscation under Section 113 (i) of the Customs Act. Similarly, Section 114-AA was invoked on the appellant as well, as he was the main cause for the attempt to export goods by way of mis-declaration of particulars both in the invoice as well as shipping bills by placing reliance on the statement of the CHA and the supplier of the false invoice for the mis-declared goods, viz., R.B. Trades.
18. On appeal before the Tribunal, the Tribunal, however, has taken a different view insofar as the penalty levied under Section 114-AA is concerned. However, in the present appeal, we do not wish to dwell on the said finding or order of the Tribunal since the Revenue is not on appeal against the said portion of the order of the Tribunal. The only point that needs to be considered is whether the appellant is liable for penalty under Section 114 (i) of the Customs Act.
19. From the narration of facts as above, the fact that the appellant was responsible for sourcing the bogus bill for the mis-declared goods from R.B. Trades as 'Industrial Salt' to support the unlawful attempt to export Muriate of Potash is evident from the materials available on record. The further fact that payments were made by the consignee, who is none other than the sister of the appellant, is also confirmed by the statement of Rajagopal, the father of the appellant and the consignee, Ms.Aruna Murugesh the sister of the appellant. The above fact clearly shows the active involvement of the appellant in the transaction. That the appellant is responsible for the attempt to illegally export by way of mis-declaration, contrary to prohibition in law is further evident from the statement of L.Subash Proprietor of Sharmi Exim Co., whose statement is to the effect that he consented to the said improper export only for the purpose of individual gain of Rs.5,000/= per container. The complicity of the appellant further gets confirmed by the statement of the Custom House Agent, who stated that the false/bogus invoice of R.B. Trades were handed over to him by the appellant and that he proceeded to file the shipping bills on the instructions of the appellant.
20. In view of the clear and categorical evidence available on record, there appears to be no error in the order passed by the Tribunal confirming the findings of the original authority as well as the Commissioner (Appeals) on levy of penalty under Section 114 (i) of the Customs Act.
21. The further issue that requires consideration in the present appeal is the involvement of the appellant in the attempted export by way of mis-declaration contrary to prohibition imposed by law.
22. Section 114-AA of the Customs Act deals with penalty for use of false and incorrect materials in the process of export. Though an argument is advanced by the learned counsel for the appellant that since the Tribunal has set aside the penalty imposed under Section 114-AA of the Customs Act, the proof with regard to the complicity of the appellant in the alleged improper export is doubtful and, therefore, the order passed by the Tribunal with regard to penalty under Section 114 (i) of the Customs Act has to be set aside. Just because the Tribunal has given a different reasoning for setting aside the penalty imposed under Section 114-AA of the Customs Act, the reasoning of the Tribunal with regard to penalty imposed under Section 114 (i) of the Customs Act wherein the complicity of the appellant has been proved by clear and categorical statements and materials can be found fault. Therefore, the said portion of the order of the Tribunal upholding the penalty imposed under Section 114 (i) of the Customs Act is justified and there is no error. The penalty leviable in respect of each offence will have to be considered on the nature of violation alleged therein in the light of the relevant provision of law. We are not inclined to import the reasoning from one into the other. We find, in the facts of the present case, all the authorities have considered the material evidences available on record, including the statements and have given a clear finding that the appellant was actively involved in the improper and illegal attempt to export goods by way of mis-declaration contrary to prohibition imposed by law and, therefore, this Court sees no reason to differ with the findings of the authorities below. The finding on guilt of the appellant on the basis of the materials available on record is uniform in all proceedings below. The appellate court is not inclined to reappreciate the evidence unless it is shown that the impugned order is perverse, arbitrary and against the well established legal principles. There is no sound legal principle that appellant relies upon to interfere with the impugned order.
23. The issues raised by the appellant in the present appeal are purely questions of fact and this Court finds no question of law, much less substantial questions of law, arising for consideration in this appeal.
24. Accordingly, there being no merits in the present appeal, the appeal fails and the same is dismissed. However, there shall be no order as to costs.
(R.S.J.) (G.M.A.J.)
24.09.2014
Index : Yes/No
Internet : Yes/No
GLN
To
1. The Addl. Commissioner of Customs (Exports)
Custom House, No.60, Rajaji Salai
Chennai 600 001.
2. The Customs, Excise & Service
Tax Appellate Tribunal
South Zonal Bench, Shastri Bhavan
No.26, Haddows Road
Chennai 600 006.
R.SUDHAKAR, J.
AND
G.M.AKBAR ALI, J.
GLN
C.M.A. NO. 2705 OF 2014
24.09.2014