Customs, Excise and Gold Tribunal - Mumbai
Borivli Hosiery Mills vs Collector Of Customs And Central Excise on 18 January, 1991
Equivalent citations: 1991(56)ELT76(TRI-MUMBAI)
ORDER R. Jayaraman, Member (T)
1. All the three appeals are directed against the same order passed by the Collector of Customs & Central Excise, Rajkot bearing No. 13/Collr/1988 dated 13-5-1988.
2. The appeal filed by M/s. Borivli Hosiery Mills and Shri Jamnadas G. Merchant, Partner of the aforesaid firm, was argued by Shri Anil Balani, the Ld. Advocate and was heard separately. The appeals filed by Shri Nilesh V. Shah and Shri Suresh V. Shah were argued by Shri A.K. Jain, the Ld. Advocate and were heard separately. Heard Shri K.M. Mondal, the Ld. SDR on behalf of the Department.
3. However, we propose to dispose of all the three appeals by this common order, since the issue involved relates to imposition of penalties on the aforesaid appellants with regard to import of the same consignment declared to be "electronic spares for VCRs" consigned in the name of the appellant M/s. Borivli Hosiery Mills, Bombay. At the outset, it is necessary to mention that the goods ordered absolute confiscation are not claimed by any of the appellants herein before us and the Department earlier moved a miscellaneous application seeking permission of this Bench for disposal of the goods ordered absolute confiscation. This miscellaneous application was heard by this Bench after giving due notice to the present appellants. In the hearing, which took place on 8-6-1990, all the aforesaid three appellants herein duly represented by the Advocates S/Shri Balani and Shroff clearly indicated that they were not interested in the goods and they had no objection for the disposing of the goods by the Department. Based on the submissions, Order No. 899/90 was passed allowing the application of the department and permitting them to dispose of the goods, in accordance with the law. It is also not disputed that no Bill of Entry has been filed by M/s. Borivli Hosiery Mills, in whose name the goods have been manifested and no licence has been produced before the original authority for considering the valid nature of the import. This is an undisputed position as on date and the appeals of the appellants and the arguments advanced by the either sides with regard to the liability of penalty on the appellants are required to be considered in the context of the aforesaid undisputed factual position.
4. Brief facts of the case for the purpose of disposal of the appeal can be stated as below.
5. The consignment declared to be electronic spares for VCRs as per the manifest and consigned to M/s. Borivli Hosiery Mills was imported at Kandla Port on 12-8-1986. Since no Bill of Entry has been filed for clearance of the aforesaid consignment, the customs authorities after waiting for the prescribed period as laid down under Section 48 of the Customs Act, opened the container containing the goods in the presence of the panchas and representative of the Steamer Agents for detailed examination. On examination, the goods were allegedly found to be 325 pieces of National N V-G-10 VCRs manufactured by M/s. Mitsubishi & Co. Ltd., Japan in SKD condition except for the loaded PCBs. But for this PCBs, the other parts would constitute the VCRs in disassembled condition. As a result of the further investigation, the statements of the appellants herein were recorded and it was also revealed that identical number of PCBs were imported by M/s. Dipen Enterprises (alleged to be related to Jolly Enterprises) claiming the benefit under OGL as an actual user and they have been warehoused. As a result of this investigation, the department alleged that complete VCRs, a prohibited consumer item, have been imported in SKD condition by splitting them into two consignments one being imported at Kandla Port and another at Ahmedabad and both these imports were at the behest of the appellants S/Shri Nilesh V. Shah and Suresh V. Shah, Partners of M/s. Jolly Enterprises. In so far as the import at Kandla Port is concerned, parts of VCRs minus PCBs have been landed alongwith operating manual instructions and even the equal number of original packing cartons of the VCRs were found. Hence, it was alleged that this is nothing but a camouflage for importation of prohibited consumer items. The goods are also in the nature of disposal goods. Moreover, no Bill of Entry has been filed. The goods cannot be imported without a valid licence and hence they are liable to confiscation and the appellants herein, who were concerned with the import are also alleged to be liable to penalty. In the adjudication proceedings held by the Collector of Customs & Central Excise, Rajkot, the goods valued at CIF value Rs. 4,39,317/- were ordered absolute confiscation and the following penalties were imposed on the appellants :-
Name of appellant Penalty amount --------------------- ---------------- (i) M/s. Borivli Hosiery Mills Rs. 2.00 lacs (ii) Shri Jamnadas v. Merchant Rs. 1.00 lac (iii) Shri Nilesh V. Shah Rs. 1.00 lac (iv) Shri Suresh V. Shah Rs. 1.00 lac
The present appeals confine only to the imposition of penalties on the aforesaid appellants, since they have categorically indicated that they are not interested in the goods.
6. Shri Anil Balani, the Ld. Advocate on behalf of the appellants M/s. Borivli Hosiery Mills and Shri Jamnadas G. Merchant contended that they imported the goods only at the behest and on behalf of M/s. Nilesh V. Shah and Suresh V. Shah, Partners of M/s. Jolly Enterprises. He referred to the sale contract, before import of material, dated 31-7-1986 to point out that the import could not have been made in the aforesaid manner without motivation being provided by M/s. Jolly Enterprises. He also contended that even an amount of Rs. 3.75 lacs was received from Shri Nilesh Shah towards value of the goods, as soon as the goods were landed and the import documents were handed over to him for facilitating clearance. This contract clearly is worded as a contract of sale before importation. It is evident that the import was only at the behest of S/Shri Nilesh V. Shah and Suresh V. Shah. Neither M/s. Borivli Hosiery Mills nor Shri Jamnadas G. Merchant were aware of the designs of M/s. Jolly Enterprises to import identical number of PCBs through M/s. Dipen Enterprises at Ahmedabad. Since they were not party to such a design, penalty imposed on them, more than that imposed on the other two appellants, is unduly harsh. Moreover, separate penalties have been imposed on the firm as well as on the partner in this case, whereas in respect of Nilesh V. Shah and Suresh V. Shah only individual penalties have been imposed on the partners and no separate penalty on the firm has been imposed.
7. Shri A.K. Jain, the Ld. Advocate on behalf of Shri Nilesh V. Shah and Shri Suresh V. Shah advanced elaborate arguments with regard to the admissibility of the statements without cross-examination and the adjudication has been done only on that basis. He also contended that the goods imported at Kandla Port are not complete VCRs and they cannot function without PCBs and PCB? are admittedly not imported at Kandla Port. There is no justification to club the consignment imported at Kandla, with the PCBs imported at Ahmedabad in the light of this Bench decision in the case of imports by M/s. Dipen Enterprises in respect of PCBs imported at Ahmedabad holding that clubbing of these consignments is not correct. This decision has been given, following the decision of this Bench earlier in the case of Sushma Electronics and also the Supreme Court decision in the case of Tarachand Gupta. In view of this position, the major thrust of the allegation regarding the scheming of import of complete VCRs is taken away. As regards the contention of M/s. Borivli Hosiery Mills, he contended that the orders have been placed by only M/s. Borivli Hosiery Mills and the shipment has been done in their name only. M/s. Borivli Hosiery Mills claim to have imported the goods under their licence No. 3148243 which is valid for import of OGL items under Para 263(1)(b) of the AM Policy 1985-88 in which case there cannot be any illegality of import of the goods at Kandla against that licence. Since the import is not illegal, there cannot be any penalty imposed on any person behind the import. Shri Jain also vehemently opposed the claim of the other appellants M/s. Borivli Hosiery Mills that the indent was placed by his clients. He also produced the original of the order placed by M/s. Borivli Hosiery Mills. On a query, he indicated that originals of these orders were in the possession of S/Shri Nilesh V. Shah and Suresh V. Shah since long. However, he pleaded that all the import documents were recovered from M/s. Borivli Hosiery Mills only. Even the contract cited by M/s. Borivli Hosiery Mills, though dated 31-7-1986, has been accepted by Shri Nilesh V. Shah only on 7-8-1986 and even before this, the goods have arrived at Kandla. Moreover, the contract is for sum of Rs. 2,86,5007-, whereas the payments are reported to have made to the extent of Rs. 3.75 lacs. The contract is for future import and is not in respect of the present import. They are only buyers of the goods, after import, by M/s. Borivli Hosiery Mills, and hence no penal liability can be attracted since their interest in the goods is only after clearance of the goods and they are not the persons concerned with the import.
8. Shri K.M. Mondal, the Ld. SDR, contended that the undisputed facts are that the goods are not claimed by any of the appellants. It is not disputed by M/s. Borivli Hosiery Mills that the goods have been consigned in their names and the import documents were recovered from their premises. Even as on date, it is not disputed by them that the goods have been imported by them but their plea is at the behest and on behalf of M/s. Jolly Enterprises. They have not chosen to file any Bill of Entry and they have not produced any licence before the original authority. Moreover, the goods imported are nothing but VCRs minus PCBs along with original cartons for packing and also the operating manuals of equal number of sets. This is nothing but a colourable devise to import the prohibited goods in the guise of components by dis-assembling complete VCRs at Hongkong and getting them assembled here and selling them, putting them in the same cartons of the original manufacturers. He also contended that this plan was actually engineered by S/Shri Nilesh Shah and Suresh Shah, Partners of M/s. Jolly Enterprises, who managed to import equal number of PCBs at Ahmedabad through another related concern M/s. Dipen Enterprises. Since they are also concerned with the import of the goods and they have entered into the contract even prior to importation of these goods, they are liable to be penalised.
9. After hearing Shri Anil Balani, the Ld. Advocate for M/s. Borivli Hosiery Mills and Shri Jamnadas G. Merchant and Shri A.K. Jain, the Ld. Advocate for S/Shri Nilesh V. Shah and Suresh V. Shah and also after hearing Shri K.M. Mondal, the Ld. SDR, for the Department, we find that the only issue to be determined is whether the appellants herein are liable to penalty under Section 112(a)(i) of the Customs Act, 1962. For this limited purpose, we propose to go into the undisputed facts involved in this case. The goods imported are 325 sets of components of National NV-G-10 VCRs manufactured by M/s. Mitsubishi & Co. Ltd., Japan, which on assembling alongwith PCBs (which are not imported in the present consignment) would go to make a complete set of VCR and these components minus PCBs have been imported alongwith the original packing cartons of the Japanese manufacturers and also the operating manual instructions. It is also an undisputed fact that no Bill of Entry has been filed for the clearance and no valid licence claiming for import under OGL have been made before the original authority. It is also affirmed before us that none of the appellants herein are interested in the goods and after hearing them, this Bench has permitted the department to dispose of the goods ordered for absolute confiscation. Even accepting the argument of the Ld. Advocate Shri A.K. Jain that equal number of PCBs sets imported at Ahmedabad cannot be clubbed together for purpose of confiscation or for assessing penal liability, fact remains undisputed that these goods cannot be cleared without a valid licence or a valid claim for OGL made on a declaration in the Bill of Entry. In the circumstances, the goods become liable to confiscation under Section 111(d) of the Customs Act, since no such B/E containing OGL claim or production of import licence is noticed.
The Collector's order on this ground, even if not on any other ground, has to be sustained. It is not the case of the appellant M/s. Borivli Hosiery Mills that the import was not consigned in their name. It is also not disputed that all the import documents were recovered from their premises. It is not their contention that somebody has mischievously imported the goods in their name. The admitted position by them is that the goods have been imported by them in their name but on the basis of indents placed by Shri Nilesh V. Shah and Shri Suresh V. Shah, Partners of M/s. Jolly Enterprises. In view of this position, when the imports have become unauthorised and are held liable to confiscation, penal liability devolves on the persons, behind such import. It is also pertinent to note that no attempt was made to file the Bill of Entry or to produce the licence and the parties concerned abandoned the goods after examination and seizure. Thus having engineered the import of the goods on a massive scale, the persons behind the import cannot get away by saying that they have abandoned the goods after seizure. Of course a plea is made that the appellants M/s. Borivli Hosiery Mills are in possession of import licence bearing an additional endorsement for import of OGL items under Para 263 (1)(b) and (c) of the Import/Export Policy AM 1985-88. It is needless for us to consider the validity of this import licence, a photo copy was only produced before us, especially when none of the appellants herein has produced the licence before the original authority; No Bill of Entry even has been filed claiming clearance under OGL. It is not for us to consider a hypothetical question as to whether the said licence, if existing, is valid to cover their import or otherwise. If it was so valid and the import is perfectly legal, nothing prevented them from filing the Bill of Entry and producing the licence claimed to be valid. Hence it will be an exercise in futility to consider the hypothetical question as to whether, if the licence had been produced, the import would have been legal or otherwise. The undisputed position is that restricted goods in 325 sets of all the parts of VCRs minus PCBs but with equal number of original packing cartons of manufacturer of VCRs and operating manuals have been landed. This, on the face of it, indicates the possibility of the goods being marketed as National NV-G-10 VCRs in their original packings, after assembly. This inference is inescapable, because, if these are imported as spares (as claimed by them) there was no need to get the operation manuals and original cartons of VCRs of equal number. Moreover, "spares" as claimed to be covered by the licence held by M/s. Borivli Hosiery Mills, have a special connotation and meaning in the ITC Policy; "spares" mean an assembly, part or sub-assembly etc. ready to replace an identical worn out parts/assembly etc. The complexion of the present import in 325 sets of all parts of VCR (minus PCBs) but with equal number of packing cartons and operating manuals, does not appeal to us about the claim of bona fide of import against this licence claimed to be in their possession. However, as we have already stated, when the licence has not been produced before the adjudicating authority and no claim for clearance against such a licence has been considered by the original authority, we, at the appeal stage, would not like to go into this hypothetical question in greater detail for giving a positive finding. We also note that the order placed does not indicate any licence number and the supplier's confirmation states as 'OGL item'. These factors do not inspire confidence even on the face of it for upholding their claim of innocence.
10. Now, in the context of the above position, we would proceed to consider the inter se claims of innocence of the appellants. In so far as M/s. Borivli Hosiery Mills and Shri Jamnadas G. Merchant are concerned, the undisputed position is that the goods have been consigned in their name and orders also have been placed in their name/The only argument is that the imports have been made as per the prior importation contract for the material and hence the import is on behalf of M/s. Jolly Enterprises. M/s. Borivli Hosiery Mills are the primary importers and the goods have been consigned only for them. Hence they are the persons directly concerned with the import of goods brought from a place outside India. It is immaterial for us to consider as to whether they were aware of the scheme of S/Shri Nilesh V. Shah and Suresh V. Shah. The undisputed fact is that M/s. Borivli Hosiery Mills have imported the goods and they have not produced any valid licence nor have filed any Bill of Entry with OGL declaration. Hence having been the person ordering the import of the goods, they cannot escape the penal liability.
11. Now as regards the penal liability on the other two appellants Shri Nilesh V. Shah and Shri Suresh V. Shah, it is vehemently contended that the contract has been accepted by them only on 7-8-1986. However, they do not dispute the oral discussions prior to that written contract and even the contract is worded referring to the earlier discussions. Moreover, we have to take note of the fact that even the original copies of the orders placed with the suppliers were in the custody of the appellants Nilesh V. Shah/Suresh V. Shah and they were produced during the hearing before us for our perusal to substantiate their contention that the orders were placed only by M/s. Borivli Hosiery Mills. This fact itself indicate that right from the placing of the order, they were having control over the documents to monitor this import. Hence their plea that the contract is not with regard to this import but for some future import does not convince us. It is also not disputed that an amount of Rs 3.75 lacs was paid and on that basis the import documents were handed over to them for clearance. It is however contended that these documents were handed over only for the purpose of carrying to the Customs House Agent; they have only acted as a carrier. Even this argument does not convince us because of the fact that the appellants admittedly were in possession of even the original purchase orders to keep track of the goods. No explanation is forthcoming as to why they have not handed over these documents to Customs House Agent. Hence the conclusion is inescapable that these appellants received import documents for clearance of goods. Thus, we are lead to conclude that M/s. Jolly Enterprises have entered into pre-import contract with M/s. Borivli Hosiery Mills and were party to the import, though not directly in their name but as an abetter. Hence penalties on the partners of M/s. Jolly Enterprises are to be upheld.
12. An argument was advanced that the show cause notice did not indicate the relevant sub-section of Section 112 of the Customs Act and hence the order passed by the Collector under Section 112 (a) is not legally sustainable. We are not much impressed with this argument, because of the fact that the adjudication order clearly indicate the subsection (a) of Section 112 for imposing penalty. The show cause notice gives sufficient materials and the evidences on the basis of which the proposed penal action is taken against them.
13. We would like to point out that the conclusion regarding penal liability on S/Shri Nilesh V. Shah and Suresh V. Shah has been arrived at by us without even going by their retracted statements or the statement of Shri Jamnadas G. Merchant. It is evident from the documents like sale contract and other undisputed facts.
14. Now coming to the question of quantum of penalties, we have to take note of the position that the goods have been absolutely confiscated. In the circumstances, penalties imposed seem to be somewhat on the higher side. Accordingly we reduce the penalties as detailed below:
Name of the appellant Penalty reduced
--------------------- ------------------
from to
-------- --------
(i) M/s. Borivli Hosiery Mills Rs. 2.00 lacs Rs. 80,000/- (Rupees Eighty
thousand only)
(ii) Shri Jamnadas G. Merchant Rs. 1.00 lac Rs. 50.000/- (Rupees Fifty
thousand only)
(iii) Shri Nilesh V. Shah Rs. 1.00 lac Rs. 80,000/- (Rupees Eighty
thousand only)
(iv) Shri Suresh V. Shah Rs. 1.00 lac Rs. 40,000/- (Rupees Forty
thousand only)
15. All the three appeals are otherwise rejected, but for the modification referred to above.
P.K. Desai, Member (J)
16. I have the privilege of going through the order proposed to be passed by Brother Jayaraman, Member (Technical) and I concur with the finding reached. I would however observe, that in the present set of appeals, we have to consider the legality of the subject import and consequent liability of the appellants to penalty.
17. Before going to the other points, it is worth clarifying that in considering the present set of appeals, though the specific allegation is made by the Department that there is also a corresponding import of equal number of PCBs for M/s. Jolly Enterprise, through one M/s. Dipen Industries, we do not club both the imports to ascertain the legality of the subject import and consequent penal liability, and we have examined this aspect, independently of the same, and for the reasons given by Brother Jayaraman, as also viewing it from the angle that I specify hereafter, we are convinced and conclude that the subject import by itself is not legal.
18. As per the manifest, the items imported in the subject import are electronic spares for VCR. It is undisputed that all the spares are in equal number, and when fitted in PCBs, 325 VCRs would come into existence. Emphasising on the fact that the items are imported as "spares", and considering the word "spares" as defined in the Policy Book for the relevant period, the only rational conclusion that can be drawn is that imported items were complete sets without PCBs, as otherwise, one has to stretch the imagination beyond limitation that the importers wanted to have the same number of each of the component, notwithstanding their durability and future necessity of replacement, to be kept as spares. The uniformity in number of each part leads to an only inevitable conclusion that they were intended to be converted into distinct sets we get fortified in the said conclusion by the facts that besides the said items, the import is also made of equal number of operational manuals and cartons, which, unless the complete sets are intended to be put in the markets, are absolutely unnecessary. Undisputedly, those operational manuals and cartons do not fall within the category of "spares". We have therefore no hesitation in concluding that the subject import cannot be styled as import of "electronic spares" but is of all parts and assemblies of VCR and intended to be imported as such in SKD condition.
19. As regards personal penalties also, facts are duly discussed by Brother Jayaraman, and they need no repetition. Considering, however, the way in which the relevant documents, which ought to be in custody of one party are found from the other, and also the other evidence in regard to the placing of the order, there hardly remains any iota of doubt that there was complicity amongst all the parties for the subject import, and the effort now made to throw the entire blame on the other one, is a futile attempt to save themselves. I, therefore, concur with Brother Jayaraman in that regard also.
20. I, therefore, agree with the order proposed by Brother Jayaraman, and also order accordingly.