Customs, Excise and Gold Tribunal - Bangalore
Mysore Silk International, Mr. Murali ... vs Commissioner Of Customs on 24 March, 2004
Equivalent citations: 2004(97)ECC106, 2004(178)ELT739(TRI-BANG)
ORDER K.C. Mamgain, Member (T)
1. The following appeals have been filed by the appellants mentioned below against the Order-in-Original No. 40/2002 COMMR/CUS. ADJN dated 23.11.2000 passed by the Commissioner of Customs, Bangalore:
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1. C/23/2001 M/s. Mysore Silk International, Bangalore
2. C/24/2001 Shri Murali Punjabi, M/s Mysore Silk International
3. C/8/2000 Shri B.K. Narendra Babu, No. 22/1, 5th Cross, Jayanagar, Bangalore.
4. C/9/2000 Shri Mangilal, M/s Kozy Silks & M/s, Roopali Silks (P) Ltd., Pobbathi Market, Bangalore.
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2. The facts in brief are that on the basis of specific information that M/s. Mysore Silk International and M/s. Mysore Novelties International both situated at No. 9, Appaji Rao, C.T. Street, Bangalore-2 had obtained several advance licences under DEEC Scheme for importation of Viscose Silk Yarn and Mulberry Raw Silk Yarn and sold the same to Shri Shanthilal and Shri Gopal Soni of M/s. Krishna Textiles, their business as well as residential premises of the partners of these firms were searched on 16.7.98 and certain incriminating documents, Cheques, DDs and Viscose Silk Yarn were found and seized. Subsequently, further investigation was conducted. From the investigation prima facie, it appeared that Shri Muralidhar K. Punjabi had started two firms, namely M/s. Mysore Silk International and M/s Mysore Novelty International with the intention of obtaining advance licences under DEEC Scheme to import Mulberry Raw Silk Yarn free of duty and selling these goods in local market without fulfilment of export obligation thereby making huge profit within short time. Accordingly he obtained 04 advance licences, three in the name of M/s Mysore Silk International for import of Art Silk Yarn and Mulberry Silk Yarn and one in the name of M/s Mysore Novelties International for import of Art Silk Yarn. 02 Advance licences obtained in the name of M/s Mysore Silk International and one in the name of M/s Mysore Novelties International for import of Art Silk Yarn were sold to Shri Shantilal and Shri Gopal Soni of M/s Krishna Textiles without fulfilling the export obligation. One advance licence in the name of M/s Mysore Silk International for import of 2500 kgs of Mulberry Silk Yarn under DEEC Scheme was sold in the local market to Shri Mangilal of M/s Koshy Silk, Bangalore without fulfilling export obligation as required under Notification No. 31/97 dated 1.4.97. The advance licenses sold to Shantilal & Gopal Soni were used for import of goods through Madras Part. For these licenses separate proceedings were initiated by the Commissioner of Customs, Chennai,
3. In the present proceedings, the advance license sold to Mangilal of M/s Koshy Silk and M/s Roopali Silk Exports (P) Ltd. is being dealt with. The advance licence No. 07001024 dated 27.8.97 sold to Mangilal was used to import free of duty 2319.990 kgs. of Mulberry Raw Silk under Bill of Entry No. 05130 dt 13.11.97 and 05005 dt 13.1.98 under Notification No. 31/97-Cus dated 1.4.97 for discharge of export obligation within a period of 18 months in the name of M/s Mysore Silk International. However, M/s Mysore Silk International have failed to fulfil any of the conditions of the undertaking given by them before the Customs Authority at the time of importation and clearance of goods under Notification No. 31/97 dated 1.4.97. The duty foregone on these import was Rs. 8,89,656.
4. After conducting investigation and recording statements of concerned persons, show cause notice was issued to M/s Mysore Silk International, Bangalore, Shri Muralidhar K. Punjabi, Partner of M/s Mysore Silk International proposing denial of benefit of duty exemption under Notification No- 31/97 Cus dated 1.4.97 for duty free imports against advance licence No. 07001024 dated 27.8.97 and Bill of Entry Nos. 5130 dated 13.11.97 and 5005 dated 13.1.98 and demanding duty foregone amounting to Rs. 8,89,656 for the above said duty free imports under proviso to Section 28 (1) of the Customs Act, 1962 and imposing penalty on M/s Mysore Silk International under Section 114A and Section 112 of the Customs Act, 1962. Penalty was also proposed in the show cause notice on Shri Muralidhar K. Punjabi and Shri Mangilal of M/s Kozy Silks and M/s Roopal Silk Exports (P) Ltd. under Section 112(a) of the Customs Act for abetment in committing the contraventions of the Customs Act. Penalty was also proposed on Shri Narendra Babu under Section 112(b) for having purchased the advance licence and causing loss of customs duty to the tune of Rs. 8,89,656.
5. The case was adjudicated by the Commissioner of Customs, Bangalore who denied the exemption under Notification No. 31/97 dated 1.4.97 to M/s Mysore Silk International in respect of the imports under Bill of Entry Nos. 5130 dated 13.11.97 and 5005 dated 13.1.98 against the advance licence No. 07001024 dated 27.8.97. He also demanded duty of Rs. 8,89,656 from M/s Mysore Silk International, Bangalore and also interest as applicable on duty amount, under Section 28AB of Customs Act, 1962. He also imposed penalty of Rs. 8,89,656 on M/s Mysore Silk International, Bangalore under Section 114A of the Customs Act, He also imposed penalty of Rs. 2 lakhs on Shri Muralidhar K. Punjabi, Rs. 1 lakh on Shri B.K. Narendra Babu and Rs. 75,000 on Shri Mangilal of M/s Kozy Silks and M/s Roopali Exports Pvt. Ltd., Bangalore.
6. Shri Lakshminarayan, Ld. Advocate appeared for the appellants, M/s Mysore Silk International, Bangalore and Shri Muralidhar K. Punjabi and Shri S. Raghu, Ld. Advocate appeared for the appellants, Shri B.K. Narendra Babu and Shri Mangilal of M/s Kozy Silks and M/s Roopali Exports (P) Ltd. Shri M.K. Madhystha, Ld. SDR appeared for the Respondents.
7. On behalf of the appellants, M/s Mysore Silk International, Bangalore, it was pleaded that one of the allegations is of violation of licencing conditions which was not a charge at all and consequently penalty on that score could not be levied. Show cause notice only alleges that advance licences obtained by them were sold in violation of condition of exemption Notification and Advance Licence Scheme but the impugned order has proceeded to record a finding that there was no manufacturing facility and therefore the licences were obtained only with an intention to sell them. The impugned order was passed without obtaining confirmation from the Licencing Authority regarding the completion of export obligation. In terms of Board Circular No. 24/96-Cus dated 19.4.96, the Licencing Authority is the monitoring agency for the discharge of export obligation under DEEC and the Commissioner should have obtained confirmation of the Licencing Authority before passing the impugned order. The goods were imported on the basis of a valid licence at the time of the importation of the goods and therefore it cannot be said to have been improperly imported under Section 111 of the Customs Act.
8. On behalf of Shri Muralidhar K. Punjabi, it was pleased that no finding was given for imposition of penalty on the appellants when the basic requirements of the provisions of Section 112 of Customs Act were not existing. No corroborative material had been brought on record to establish nexus in respect of the appellant and the alleged violation. He also pleaded that once penalty was imposed on partnership, penalty cannot be imposed on the appellant again.
9. On behalf of the appellant, Shri B.K. Narendra Babu, it was pleaded that the appellant was not quite conversant with the niceties of DEEC Scheme as well as the provisions of Notification No. 31/97 and that he bonafidely believed that the licence holder would fulfil the export obligation as they were regular exporters.
10. On behalf of the appellant, Shri Mangilal, it was pleaded that the deposition of the appellant in his statement dated 26.3.99 was not properly appreciated. Shri Muralidhar K. Panjabi and Shri Narendra Babu have connived with each other and indulged in the illicit activity and it was with a view to escape from the clutches of law, they tried to implicate the appellant. Shri Muralidhar K. Punjabi and Shri Narendra Babu are co-accused and there is no other independent evidence to implicate him.
11. Finally, both the Counsels on behalf of the appellants stated the penalty may be reduced.
12. The Ld. JDR appearing for Revenue re-iterated the findings of the Commissioner and further pleaded that in this case the goods were imported by the appellants under the DEEC Scheme by obtaining advance licence without payment of duty for manufacture and export of the goods out of Silk Yarn. However the appellants instead of manufacturing the goods out of the Silk Yarn, sold the licence and Silk Yarn in the market and did not fulfil the export obligation. They utilised the facility for their personal gains and defrauded the Government of its revenue. Therefore, they are liable for heavy penalty and duty is also required to be recovered from them. He relied on the following decisions in support of his contention --
(i) Inter Trade v. Commissioner of Customs, Calcutta, 2001 (137) ELT 394 (Tri.-Kol.)
(ii) Commissioner of Customs, Mumbai v. Macnair Exports (P) Ltd., 2002 (143) ELT 167 (Tri.-Mum.)
(iii) A.R. Gupta v. Commissioner of Customs, Mumbai, 2004 (91) ECC 413 (T) : 2004 (164) ELT 321 (Tri.-Mum)
(iv) K.R. Shenoy and Ors. v. Union of India and Ors., 2004 (92) ECC 298 (Karn.)
13. We have carefully considered the submissions made by both the sides. We find that in these appeals, it is not disputed that M/s Mysore Silk International, Bangalore had obtained advance licences for import of Art Silk Yarn and Mulberry Silk Yarn under DEEC Scheme and they sold these licenses in violation of the provisions of EXIM POLICY 1997-2002. We find that during the investigation in respect of Advanced License No. 07001024 dated 27.8.97 for import of Mulberry Raw Silk, the said license was issued, as a 'Manufacturer Exporter' to M/s Mysore Silk International. Shri Muralidhar K. Punjabi in his statement dated 4.2.99 has stated that although this license was obtained as 'Manufacturer Exporter', he had no manufacturing facility. He obtained the said license with an intention of selling it in the local market. Shri Mangilal of M/s Kozy Silks and M/s Roopali Exports Pvt. Ltd. was known to him in the business for several years. He met Shri Mangilal and discussed his intention of selling the licence. After negotiations, he sold the said license to him for a consideration of Rs. 50,000, sometimes in October 1997. He also signed all the papers to facilitate the import in the name of M/s Mysore Silk International. The Bank Guarantees were obtained and given out of the money given for this purpose to him. To cover up the transactions, the amounts were given to him to deposit the same in his SB account maintained with Union Bank of India, Avenue Road Branch and subsequently these amount were transferred to his current account maintained in the same Bank and returned to Shri Mangilal through cheques, as if it was a payment towards purchase of Raw Silk from him. The statement of Shri v. Krishna Rao, Director of M/s Pawar Agencies (P) Ltd. was recorded on 3.2.99 wherein he stated that one Shri Narendra of M/s Roopali Exports (P) Ltd. used to visit them for clearance of goods in the name of M/s Roopali Export (P) Ltd. Bangalore, Sometimes in November 1997, he approached them for clearance of Mulberry Raw Silk from ICD, Bangalore under DEEC scheme. He gave them DEEC Books and TRA's executed at Madras to ICD Bangalore alongwith relevant papers and requested for clearance of goods from Customs ICD, Bangalore. They accordingly filed two Bills of Entry Nos. 05130 dated 13.11.97 and 5005 dated 13.1.98 in the name of M/s Mysore Silk International, Bangalore. Two DEEC Books used in clearance of goods in the said Bills of Entry were in the name of M/s Wood Stock Silk Exports and M/s Harmoriey Silks (P) Ltd., and the same were transferable one. The documents were given by Shri Narendra in the name of M/s Mysore Silk International which were also signed and duly endorsed. After these goods were brought to their office, these were collected by Shri Narendra. Statement of Shri Narendra was recorded on 23.4.99 wherein he stated that he knew M/s Pawar Agencies who is customs clearing agent of M/s Kozy Silks. Shri Mangilal was the main person of in-charge of M/s Kozy Silks and his son Shri Jaikumar was partner for day-to-day business. He has cleared several consignments of M/s Kozy Silk. He stated that he was asked by Shri Mangilal whether he (Narendra) was interested in buying an advance license and clearing Mulberry Raw Silk of 2500 kgs. He showed interest in buying the same and after negotiations to purchase the advance licence issued in the name of M/s Mysore Silk International, he borrowed money from his friends and paid to Shri Mangilal of the M/s Kozy Silk. He requested to Shri Mangilal to help him to clear the consignment for the said advance license No. 07001024 dated 27.8.97. Shri Mangilal informed him that he has some goods of Mulberry Raw Silk to be sold on High Sea Sales basis. After negotiations with him, he agreed to pay Rs. 1150 per kg. only after clearances from the Customs. Shri Mangilal agreed to give the documents on credit basis on the conditions that he would pay him money immediately on sale of goods. Shri Murali K. Punjabi had come to the office of M/s Kozy Silk and signed on all the relevant documents to facilitate the clearance to be effected in the name of M/s Mysore Silk International. Thereafter, Shri Mangilal gave him the High Sea Sales documents of M/s Roopali Exports (P) Ltd. He again borrowed some money as advance from some known weavers against sale of Mulberry Raw Silk Yarn to them and the money was deposited in the name of M/s Mysore Silk International for obtaining the Bank Guarantees. Shri Murali K. Punjabi fully co-operated for obtaining the Bank Guarantees. As regards to payment to Shri Mangilal, money was deposited in to SB account of Shri Murali K. Punjabi in Union Bank of India, Avenue Road Branch and later on the same was transferred to Current Account of M/s Mysore Silk International maintained in the same Branch and Shri Murali Punjabi issued different cheques to Shri Mangilal in the name of M/s Roopali Silks. Two Bills of Entry No. 05130 dated 13.11.97 and 5005 dated 13.1.98 were filed through M/s Pawar Agencies and goods were cleared and brought to M/s Pawar Agencies from where the goods were taken by him to his residence and sold to different customers at the rate of Rs. 1400 to 1410 per kg. He named some of the weavers to whom goods were sold as Shri S. Satish and Shri Raju whose statements were recorded on 1.9.99 and 6.9.99 respectively, who confirmed the purchase of Mulberry Raw Silk from Shri Narendra Babu at the rate of Rs. 1,400 per kg. Shri Mangilal in his statement dated 23.6.97 stated that he has seen the statement dated 24.3.98 of Shri B.K. Narendra Babu and agreed to the contents of the same. He stated that services were utilised for clearance of the goods from Customs and M/s Roopali Exports Ltd. sold 2500 kgs. of Mulberry Raw Silk Yarn at ICD, Bangalore on High Sea Sales basis to M/s Mysore Silk International and payment was also received through cheques issued by M/s Mysore Silk International. He has no involvement of purchase of advance license. Shri Narendra Babu has only informed that he has purchased the advance licence from M/s Mysore Silk International.
14. From these statements, it is quite clear that Shri Murali K. Punjabi sold advance licence No. 07001024 dated 27.8.97 for import of 2500 kgs. of Mulberry Raw Silk Yarn free of duty under DEEC scheme by selling the advance licence and giving relevant documents for clearance of the goods. We find that M/s Mysore Silk International have contravened the provisions of Notification No. 31/97 dated 1.4.97. We find that the Notification No. 31/97 dated 1.4.97 was issued under the Customs Act, exempting the material imported against the advance licence issued on or after 1.4.97 subject to conditions mentioned in the Notification. The conditions mentioned in the Notification are to implement the policy relating to duty exemption scheme for export production. One of the condition of the Notification is that the exemption material shall not be disposed of or utilised in any manner except for utilization in discharge of export obligation. Where benefit of this Notification is sought by a person other than the licencee, such benefit shall be allowed against the said licence and the said certificate only if it bears endorsement of transferability by the Licensing Authority. We find that in this case, Shri Murali K. Punjabi in his statement has clearly admitted that he obtained the license by representing him as 'Manufacturer Exporter' with an intention to sale the licence in the market. This fact is clearly mentioned in Para 6 of the show cause notice that even though they had no manufacturing facility, the advance licence was sold by them in violation of the conditions (VII) of the Notification without endorsement of the Licensing Authority. Therefore, the Commissioner has imposed penalty on M/s Mysore Silk International, under Section 114A of the Customs Act. Since M/s Mysore Silk International has sold the license without manufacturing goods for export therefore, the Commissioner has correctly come to the conclusion that there was no need of referring the matter to the Licensing Authority. Therefore we do not find any merits in the arguments made by the M/s Mysore Silk International.
15. We find that in Para 45 of the impugned order, the Commissioner has given clear finding for imposition of penalty on Shri Murali K. Punjabi under Section 112(a) of the Customs Act. According to Section 112(a), 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 111, or abets the doing or omission of such an act, shall be liable to penalty. Shri Murali K. Punjabi has clearly violated the conditions of the Notification No. 31/97 by selling the license without producing the goods for export and rendering the imported goods liable for confiscation and himself for imposition of penalty under Section 112(a) of the Act. The penalty has been imposed on Shri Murali K. Punjabi for his action and the penalty has been imposed on M/s Mysore Silk International for their action as a firm. The act of Shri Murali K, Punjabi was in his individual capacity for negotiating the sale of the license and getting money in to his account from Shri Mangilal and Shri Narendra Babu and transferring to the account of M/s Mysore Silk International shows that he has acted beyond the capacity of the partner and therefore penalty has been correctly imposed on him.
16. In the case of smuggling or dealing with the smuggled goods where the things are kept closely secret, it is not possible in every case to get the corroborative evidence. In the present case, the license which was issued to M/s Mysore Silk International was sold by Shri Murali K. Punjabi and he also given the relevant papers to Shri Mangilal, who in turn used these papers for clearing the goods from the Customs through Shri Narendra Babu and the goods were taken by Shri Narendra Babu who finally disposed of all these goods., The customers have given their statements that the imported goods are Mulberry Raw Silk Yarn purchased from Shri Narendra Babu clearly established the total link. The licence which was issued in the name of M/s Mysore Silk International and on which all goods were cleared through Shri Narendra Babu and M/s Pawar Agencies from the Customs and goods were taken by Shri Narendra Babu are corroborated by M/s Pawar Agencies. It clearly corroborated the version of Shri Murali K. Punjabi that the license in the name of M/s Mysore Silk International was sold by him. Thus there is corroborative material.
17. We find that it is pleaded on behalf of Shri Narendra Babu that he was not quite conversant with the niceties of the DEEC Scheme and the provisions of Notification No. 31/97 dated 1.4.97. We find that the ground that taken by Shri Narendra Babu is not tenable. From the statement of Shri v. Krishna Rao of M/s Pawar Agencies, it is quite clear that Shri Narendra Babu used to visit for clearance of goods in the name of M/s Kozy Silks and M/s Roopali Exports Pvt. Ltd. Shri Narendra Babu in his statement categorically admitted that he was doing commercial business as a Consultant and assisting the importers in clearing the consignments. The Commissioner has given clear finding in Para 39 of the impugned order that this issue has already been considered by the Apex Court and accordingly he correctly rejected the claim of Shri Narendra Babu.
18. Shri Mangilal has claimed that he has been framed by Shri Murali K. Punjabi and Shri Narendra Babu. We find that this is not a correct position. The Commissioner in Para 40 of the impugned order has clearly brought out the position. The negotiations of the sale of the advance licence were made by Shri Murali K. Punjabi with Shri Mangilal only. Shri Mangilal has actually brought Shri Narendra Babu into transaction and got the goods cleared through him. He has arranged all the documents for clearance of the goods and gave to Shri Narendra Babu, Shri Narendra Babu and Shri Murali K. Punjabi were not known each other. Therefore, their framing Shri Mangilal does not arise when the advance licence was sold by Shri Murali K. Punjabi to Shri Mangilal and Shri Mangilal has got cleared the goods through Shri Narendra Babu. Shri Mangilal was the person who not only arranged for sale of the licence of Shri Murali K. Punjabi but got cleared the goods through Shri Narendra Babu. For arranging money for Bank Guarantee, he arranged for documents for High Sea Sales of 2500 kgs. Mulberry Raw Silk yarn to M/s Mysore International on paper only. The sale was in fact made to different customers/users through Shri Narendra Babu to obtain money for Bank Guarantee. The money so obtained was deposited in the account of Shri Murali K. Punjabi and transferred to current account of M/s Mysore Silk International and then by cheques to Shri Mangilal. Thus, Shri Mangilal has played a very important role in abetting the commission of office (sic) by Shri Narendra Babu as well as M/s Mysore Silk International. Therefore penalty has been correctly imposed on him. There was no reason for M/s Mysore Silk International to purchase the Mulberry Raw Silk Yarn on High Sea Sales basis from M/s Kozy Silks, when they were themselves selling the licence to Shri Mangilal. Thus, we come to the conclusion that penalty has been correctly imposed on the appellants and none of them deserve any reduction of penalty. We, accordingly, reject all these 4 (four) appeals.