Customs, Excise and Gold Tribunal - Bangalore
Mns Exports Private Limited vs Commissioner Of Customs on 8 April, 2005
Equivalent citations: 2005(190)ELT124(TRI-BANG)
ORDER T.K. Jayaraman, Member (T)
1. These 7 appeals have been filed against OIO dated 18-9-2000 passed by the Commissioner of Customs, Bangalore.
The following are the appellants :
1. M/s. MNS Exports Ltd.
2. Shri Narayana Bhatt
3. Shri Ravi Prakash
4. Shri B. Prasad
5. Shri Srinivasa Rao
6. Smt. Shilla Shree
7. Shri Vikram Jain
2. In the impugned order, the Adjudicating Authority has demanded duty amounting to Rs. 7,29,572/- under Section 72 of the Customs Act, 1962 from M/s. MNS Exports in respect of the goods seized on 26-4-1999, which were clandestinely removed and kept outside the licence premises. Further, he demanded duty of Rs. 34,54,338/- from M/s. MNS Exports under Section 28 of the Customs Act, 1962 in respect of the consignments imported under the cover of 12 AWBs and the related Bills of Entry. He imposed a penalty of Rs. 7 lakhs on M/s. MNS Exports, Bangalore under Section 112 of the Customs Act, 1962. He ordered cancellation of EOU Licence bearing No. 55/96 granted to M/s. MNS Exports in terms of Section 58(3) of the Customs Act, 1962. He imposed a penalty of Rs. 1,00,000/- on Shri Narayana Bhatt, Managing Director of M/s. MNS Exports under Section 112 of the Customs Act. He imposed a penalty of Rs. 10,00,000/- on Shri H. Bhaskar, Inspector of Customs, under Section 112(b)(ii) of the Customs Act, 1962. He imposed a penalty of Rs. 50,000/- on Smt. Shilla Shree, w/o of Shri H. Bhaskar under Section 112 of the Customs Act, 1962. He imposed a penalty of Rs. 5,00,000/- on Shri Vikram Jain of M/s. Texworth International, Bangalore under Section 112(b)(ii) of the Customs Act, 1962. He imposed a penalty of Rs. 5,00,000/- each on Shri Ravi Prakash, Shri B. Prasad and Shri Srinivasa Rao employees of M/s. MNS Exports Pvt. Ltd. under Section 112(b)(ii) of the Customs Act, 1962. The appeal of Shri H. Bhaskar appears to have been dismissed on account of non-compliance of Stay Order. In this order, we are disposing of the appeals of all the appellants excepting Shri H. Bhaskar.
3. Shri M. Chandrasekaran, the learned Sr. Advocate a/w Shri V.J. Sankaram, the learned Advocate appeared for M/s. MNS Exports and Shri Narayana Bhatt. Shri Kesava lyengar, the learned Advocate appeared for Smt. Shilla Shree. Shri S. Ragu, the learned Advocate appeared for Shri Ravi Prakash, Shri B. Prasad and Shri Srinivasa Rao. Shri Laxminarayana, the learned Advocate, appeared for Shri Vikram Jain. Shri Pramod Kumar Roy, the learned JDR appeared for the Revenue.
4. Before taking up the case of each appellant, we narrate briefly the facts of the case.
5. M/s. MNS Exports Pvt. Ltd., Bangalore, a 100% EOU, were engaged in the manufacture of readymade garments. The Headquarters (Preventive), Bangalore, on the basis of specific information, visited the premises of M/s. MNS Exports on 26-4-1999. At that time, they found that certain duty free goods had been deposited in the adjoining premises. The value of the goods so removed from the bonded premises is Rs. 11,17,674/-. The goods were seized on the ground of unauthorised removal. S/Shri Ravi Prakash, EOU officer of the appellant's firm, V. Prasad, Import Officer, and Srinivasa Rao, another officer were summoned by the Department and they gave their voluntary statements under Section 108 of the Customs Act, 1962 on 12-5-1999. Shri H. Bhaskar, Inspector of Customs, in-charge of M/s. MNS Exports Pvt. Ltd. was also summoned. His statements were also recorded. The statements of Shri Vikram Jain, Proprietor of M/s. Texworth International, Bangalore were also recorded. The statements of all the above persons revealed a deep-seated conspiracy. Shri H. Bhaskar, the Inspector in charge of M/s. MNS Exports Pvt. Ltd. promised to help Shri Vikram Jain clear certain consignments whose imports from Singapore would be arranged by him (Jain) in the name of M/s. MNS Exports Pvt. Ltd. free of duty. The consignments though cleared from the Air Cargo Complex (ACC) in the name of M/s. MNS Exports, would not reach the bonded premises. They would be delivered to Shri H. Bhaskar in his residence. Later, the consignments would be delivered to Shri Vikram Jain. Shri Vikram Jain would export these consignments to Singapore after re-cycling. The export would enable him to fulfil the export obligations in respect of the DEEC Licences obtained by him. The role of the three employees of M/s. MNS Exports would be to file the required documents with the ACC, Bangalore, for clearance of the consignments in the name of M/s. MNS Exports, but actually meant for Shri Vikram Jain. Shri Bhaskar would get certain consideration at the rate of Rs. 11/- per metre. The three employees of M/s. MNS Exports would also in turn receive certain consideration from Shri H. Bhaskar. The company at Singapore also would receive some commission. As per the records, all these activities had been carried out without the knowledge of M/s. MNS Exports. When M/s. MNS Exports learnt the nefarious activities of their employees, they took immediate action to dismiss them from service. In all, 12 consignments of imports have been cleared from ACC, Bangalore in the name of M/s. MNS Exports. The goods were described as lining material. The statements reveal that actually the goods would be silk fabrics. The same imported goods along with some additional goods were exported by Shri Vikram Jain. This is in a nutshell what has happened.
6. Revenue proceeded against the appellants by issue of Show Cause Notice. After adjudication, the Commissioner has issued the impugned order.
7. Now let us take up the appeal of each appellant.
1. & 2. M/s. MNS Exports Pvt. Ltd. and Shri Narayana Bhatt:
The learned Sr. Advocate took up the issue of removal of duty free goods from the licenced premises to the adjoining premises. He said that there was absolutely no intention to clear the duty free goods clandestinely to divert them to local markets. On 24-4-1999, there was a severe thunderstorm and rain. The asbestos sheets of the godown developed a crack and as a result, there was seepage of water. In order to prevent damages to the bonded goods meant for export, as an emergency measure, the materials were moved to the nearby premises. 24-4-1999 was Saturday and 25-4-1999 was Sunday and hence the appellants were not in a position to get immediate permission from the Customs. On 26-4-1999, the Customs officers visited the premises and seized the goods. The learned Adjudicating Authority has not properly appreciated the facts in demanding duty on these goods and also penalised M/s. MNS Exports and Shri Narayana Bhatt. With the permission of the Customs Commissioner, the seized goods were used in export production and, therefore, the demand of duty of Rs. 7,29,572/- is not sustainable. The imposition of penalties on M/s. MNS Exports and Shri Narayana Bhatt for this violation is not sustainable in the circumstances of the case. The cancellation of licence issued under Section 58(3) of the Customs Act is also very harsh. Hence, he prayed for setting aside the demand of duty and the imposition of penalty on account of the removal of the goods from the bonded warehouse as an emergency measure to prevent damage to the goods. Further, the learned Advocate pointed out that in identical proceedings against 2 other EOUs viz. M/s. Kannika Apparels and M/s. Next Fashion Creations through whom also Shri Bhaskar and Shri Vikram Jain had got the goods cleared, the EOU licences were not cancelled by the same learned Commissioner. The Managing Director, Shri Narayana Bhatt was not available in the factory either on 24th April, 1999 or 26th April, 1999. There is no statement attributing personal knowledge to him regarding the removal of the goods. The only statement of Shri Chandrasekar does not incriminate Shri Narayana Bhatt.
8. The learned JDR reiterated the findings of the learned Adjudicating Authority.
9. On a very careful consideration of the circumstances leading to the removal of the goods to the adjoining premises, we are satisfied that there is no mala fide. There was no intention on the part of Shri Narayana Bhatt or M/s. MNS Exports to divert the goods to local market. Due to severe thunderstorm, the goods were removed to the adjoining premises to prevent damages. Hence, there is absolutely no justification in levying penalties on M/s. MNS Exports and also Shri Narayana Bhatt. Inasmuch as the goods were used with the permission of the Commissioner in the manufacture of goods, which were later exported, the demand of duty is not sustainable.
10. As regards the demand of duty of Rs. 34,54,338/- from M/s. MNS Exports, the learned Advocate adduced the following arguments :
(i) Section 2(26) of the Customs Act defines 'Importer' as a person including any owner or any person holding himself out to be the importer. In the present case, the learned Commissioner himself has come to the conclusion in the impugned order that Shri Vikram Jain was the owner of the goods since the goods, which were imported in the name of M/s. MNS Exports were the same goods which were re-exported back to the same Singapore supplier. M/s. MNS Exports, at no time, were the owner of the goods. In para 105 of the impugned order, the learned Commissioner has referred to Shri Vikram Jain's statement dated 13-5-1999, identifying the import consignments covered in all the Air way Bills to the same goods which have been exported by him. In the light of the Commissioner's findings, M/s. MNS Exporters cannot be construed to be the importer for fastening duty liability on them.
(ii) The investigations of Revenue revealed that Shri Vikram Jain arranged for the imports from Singapore for re-cycling on payment of a commission of 3% to Singapore supplier establishing the ownership even when the goods were required to be cleared. It was Shri Jain who received the import documents from Singapore. Once ownership is established during the time between the importation and the time when goods were cleared and the goods were ultimately delivered to him through Shri Bhaskar, no one can be construed as the importer other than Shri Vikram Jain.
(iii) M/s. MNS Export did not even know the Singapore supplier who never had any transaction with the appellants at any point of time.
(iv) M/s. MNS Exports never placed any orders with the Singapore supplier for the import of the consignment inputs.
(v) M/s. MNS Exports never paid for the imported goods to anyone.
(vi) The goods never came into the Factory of M/s. MNS Exports at any time.
(vii) The appellants never knew of the transactions till the 3 employees of the M/s. MNS revealed that they had entered into certain illegal deals with the Customs Inspector upon which the appellants immediately suspended that and informed the Department about the said illegal deals and the involvement of the Customs Inspector whereupon the department suspended him.
(viii) Signing of the Bill of Entry by the 3 authorised cannot make M/s. MNS the importer in view of the factual position that the letter of authority given to them can only be for clearance of the goods imported by M/s. MNS Exports and not in respect of goods imported by someone else.
(ix) The 3 employees, in the facts and circumstances of the case, had acted as Agents of Shri Jain. As per Section 147(2) of the Customs Act, the liability of the Principal for the acts of an Agent is not unconditional. If the contrary is proved, then the principal is not liable for the act of the Agent. In this case, the categorical statements of the 3 errant employees and also the immediate action taken by the appellants to terminate their services go to establish that the acts of the 3 employees were without the knowledge and consent of the principal viz. M/s. MNS. Hence, no liability could be fastened on the MNS for the wrongful acts committed by the employees at their own risk and responsibility for their pecuniary gain. Strangely, the Commissioner, in the impugned order, has omitted the reference to "unless the contrary is proved" while dealing with Section 147(2) and deemed knowledge and consent of the owner/importer.
(x) The learned Advocate cited the following case-laws to hold that the principal is not liable for the action of the Agent outside the authority given to him.
(1) Plastchem Industries v. CC, Nhava Sheva - 2000 (120) E.L.T. 775
"The importer is the person, who has caused the import to be made".
(2) CCE, Mumbai v. JAC Enterprises - 2001 (129) E.L.T. 179
"When employees of CHA have to carry on job on their own without the consent or knowledge of the employer, those acts are not in the course of their employment."
(3) K. Krishnakumar v. CC, Cochin -
"When no evidence is found to implicate the involvement of the appellant in importing the goods by way of making the payments for the goods imported, no penalty can be imposed."
(4) Patel on Board Courier v. CC, Mumbai -
"Merely because of involvement of employees, panel proceeding against the employer are not justified in the absence of any evidence of involvement of the employer."
(5) K. Chavda v. CC, Kandla -
"Bonded cargo diverted to local markets by the employees without the knowledge of the warehouse licence holder. Penalty and order of cancellation of licence imposed, were set aside."
(6) M. Shashikant & Co. and Ors. v. UOI and Ors. -
"A principal can never by guilty for wrongful acts of agents, which were done without notice to the principal."
(7) Sitaram Motilal Kalal v. Santanuprasad Jaishanker -
"The wrong must be committed by the servant in the course of doing the master's business, for making the employer liable."
(8) A. Thangal Kunju Musaliar v. M. Venkitachalam Potti and Anr. -
"Mis-representation by an agent in matters outside the authority cannot affect the principal."
(9) Skypack Service Specialists Ltd. v. CC, Mumbai - 2002 (149) E.L.T. 1464 (T) "Three employees involved in smuggling goods for illegal gains. Company cannot be held responsible for the misdemeanour of their employees."
(10) Hetero Drugs Ltd. v. CC, Airport, Chennai -
"CHA liable to pay the duty as the importer is liable only for bona fide acts of CHA and not those which are in excess of their authority."
(11) Hetero Drugs Ltd. v. CCE, Hyderabad -
"Importer not implicated in unauthorised removal of goods and not having any knowledge about same - No penalty."
11. The learned SDR said that the 3 employees were authorised to sign and clear goods on behalf of M/s. MNS Exports. Since the goods were cleared by the authorised employees in the name of M/s. MNS, the goods should be deemed to have been imported by M/s. MNS. Moreover the 3 employees caused the imports during the course of their employment. Therefore, the learned SDR urged that the Commissioner was right in demanding duty from M/s. MNS Exports.
12. After going through the records of the case, we are neither convinced by the learned SDK's arguments nor the reasoning adopted by the learned Adjudicating Authority in demanding duty on the imported consignments from M/s. MNS Exports. The learned Adjudicating Authority himself has given a clear finding that the goods were imported for Shri Vikram Jain by the 3 employees of M/s. MNS for certain monetary consideration. After clearance from the Air Cargo Complex, the goods were not sent to the factory of M/s. MNS Exports. The goods were delivered to Shri Bhaskar who, in turn delivered the goods to Shri Vikram Jain. Moreover, no liability can be fastened on M/s. MNS Exports, as the employees acted beyond the authorisation given to them. They mis-used their position to import goods free of duty for Vikram Jain. It is very clear that the learned Adjudicating Authority has failed to interpret Section 147(2) of the Customs Act properly. As pointed out by the learned Advocate, he has omitted to interpret the words "unless the contrary is proved". We have no hesitation in holding that in the facts and circumstances of the case, M/s. MNS Exports are not the importer. There is absolutely no iota of evidence against Shri Narayana Bhatt. The Revenue Authorities have committed a serious blunder in not demanding duty on the persons who have actually imported the goods. In any case the demand of Rs. 34,54,338/- on M/s. MNS Exports is not sustainable.
13. In view of the above observations, the demands of duty of(i) Rs. 7,29,572/- and Rs. 34,54,33s/- under Section 28 from M/s. MNS Exports are set aside. Penalty of Rs. 7,00,000/- under Section 112 on M/s. MNS Exports Pvt. Ltd. is set aside. Penalty of Rs. 1,00,000/- on Shri Narayan Bhatt, Managing Director, under Section 112 is set aside. The order of cancellation of EOU licence under Section 58(3) is also set aside.
Appeals of Shri Ravi Prakash, Shri B. Prasad & Shri Srinivasa Rao
14. Shri S. Raghu, the learned Advocate appeared for S/Shri Ravi Prakash, B. Prasad and Srinivasa Rao, employees of M/s. MNS Exports. He urged the following.
15. All the three persons had to deal with Shri H. Bhaskar, an officer posted in the EOU. When the Customs Officer threatened, the appellants had to concede to the dictates and the evil designs of the said Customs Officer. The appellants did not know as to how the imported goods would be disposed of by Shri H. Bhaskar. They bona fidely believed that the said Customs officer would not act against the interest of the Revenue. The connection between Shri Vikram Jain and Shri Bhaskar was only known when the Show Cause Notice was issued. At the insistence of the officials of M/s. MNS, the appellants voluntarily went to the Customs and disclosed the facts and co-operated in the investigation. This is the first instance in which the appellants are involved. In view of the cooperation of the appellants with the investigation, and also the financial difficulties of the appellants having lost their jobs, the learned Advocate pleaded for a lenient treatment.
16. After going through the records of the case, we find that the 3 employees for monetary gain, betrayed the trust reposed in them by M/s. MNS Exports. They undertook clearance of goods in the name of M/s. MNS by filing documents. It is also on record that the goods were not brought into the factory and were delivered to Shri Bhaskar. There is also evidence that Mrs. Shilla Shree gave a cheque of Rs. 15,000/- to Shri Ravi Prakash. All these indicate that the employees were not that innocent as they plead now. Moreover, they have not retracted from their statements. Therefore, the imposition of penalties on them is justified. We are not inclined to show any lenient treatment to the 3 appellants. The Adjudicating Officer's order imposing penalties is justified. Under these circumstances, the three appeals filed by S/Shri Ravi Prakash, B. Prasad and Srinivasa Rao are dismissed.
Appeal of Smt. Shilla Shree
17. Shri Kesava lyengar, the learned Advocate appeared for Smt. Shilla Shree w/o Shri H. Bhaskar. The learned Advocate urged that Smt. Shilla Shree was not at all concerned with the import of the consignments in question. She was owning a car. The Adjudicating Authority has penalised her on the ground that her car was used for clearing the imported goods and also she paid Rs. 15,000/- by way of Cheque to Shri Ravi Prakash, being the commission payable by Shri H. Bhaskar for clearance and delivery of the impugned goods from Air Cargo Complex, Bangalore. The Adjudicating Authority has, in para 19 of his order, has stated the facts of the use of the car belonging to Smt. Shilla Shree in transportation of the impugned consignments and also the issue of Cheque 13-11-1997 to Shri Ravi Prakash an amount of Rs. 15,000/-. He has not discussed whether the car was used for transportation of the goods with her knowledge. In other words, the role of Smt. Shilla Shree in the import and transport of the consignments had not been brought out in the Adjudication Order. Moreover, the fact that she issued a cheque for Rs. 15,000/- to Shri Ravi Prakash itself will not be evidence against her in the import of the impugned goods. Being the wife of Shri H. Bhaskar, she had given the cheque on his instruction. There is no evidence that she had knowledge of all the murky dealings. In view of these facts, the penalty on Smt. Shilla Shree is not justified. We set aside the same and allow her appeal.
Appeal of Shri Vikram Jain
18. The learned Advocate Shri Laxminarayana made the following points :
There is no evidence to implicate Shri Vikram Jain in the import of the consignments in the name of M/s. MNS Exports. There is no evidence for the receipt of the goods by Shri Vikram Jain. When Shri Jain wanted to cross-examine the officers who recorded his statement, the same was not allowed. This is a gross denial of the Principles of Natural Justice. Moreover, Shri Jain had immediately retracted from the statements he made before the Customs Officer. Under these circumstances, the penally of Rs. 5,00,000/- is not justified. Moreover, Shri Vikram Jain did not know Shri Bhaskar at all. In his statement, he has referred only to one Shri Mohan. Revenue has not at all investigated the role of Shri Mohan in the entire episode.
19. The learned SDR urged that there is enough evidence to implicate Shri Jain. Even though Shri Jain retracted from his first two statements, he gave a statement after retraction in which he confirmed the facts of the earlier statements. In any case, there is no allegation that the statements have been made under coercion. When Shri Jain was arrested and produced before the Magistrate, he never stated that the statements were not voluntary and were given under duress. Hence, the learned SDR requested that the Bench may uphold the penalty of Shri Jain.
20. We have gone through the records very carefully. There is overwhelming evidence that the imports made in the name of M/s. MNS Exports were meant only for Shri Vikram Jain. Shri Bhaskar had clearly stated that the consignments were meant only for Shri Vikram Jain. Shri Vikram Jain also had identified the consignments referred in the 12 Airway Bills as the same, which were exported by him to the Singapore party. The statements of both Shri Vikram Jain and Shri H. Bhaskar give a wealth of information, which could not have been the imagination of the investigating officers. There is also evidence that Shri H. Bhaskar was receiving huge amounts as consideration for the help he rendered to Shri Jain. There is evidence that the 3 employees of M/s. MNS Exports received monetary consideration from Shri Bhaskar. The Adjudicating Authority has considered the totality of the circumstances and came to the conclusion that Shri Jain is liable for penalty under Section 112. The fact that the goods had been delivered to Shri Bhaskar is corroborated by the statement of the transporter Shri Govindaraj. Under these circumstances, we have no reason to set aside the findings of the Adjudicating Authority. Moreover, the penalty imposed is not very harsh considering the gravity of the offence. Hence, the appeal is rejected.
(Pronounced in open Court on 8-4-2005)