Custom, Excise & Service Tax Tribunal
The Honkong And Shanghai Banking ... vs The Commissioner Of Customs (Adj) on 4 September, 2008
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No.II APPEAL No. C/318, 349, 352, 361, 362, 363, 364, 708, 319, 350, 351, 353, 354, 355, 356, 710, 359, 360, 357, 358, 709/08 Application No. C/S/451, 484, 487, 497, 498, 499, 500, 1031, 452, 485, 486, 489, 490, 491, 492, 1033, 495, 496, 493, 494, 1032/08 (Arising out of Order-in-Original No.CAO No.155/2007/CAC/CC/KS, 156 & 157/2007/CAC/CC/KS dated 27/12/2007 passed by Commissioner of Customs (Adjudication), Mumbai) For approval and signature: Honble Mr. M.V.Ravindran, Member (Judicial) Honble Mr. K.K.Agarwal, Member (Technical) ====================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy :
of the Order?
4. Whether Order is to be circulated to the Departmental :
authorities?
==================================================== The Honkong and Shanghai Banking Corporation Ltd., Shri K. Basu Shri V.Ramamrutham Shri Suketu J Mody Shri A.A.Ansari Appellants Shri JP Mody Hindustan Engineering Corporation Peico Electronics & Electricals Ltd., Dipali Electronics Pvt Ltd., Vs. The Commissioner of Customs (Adj), Mumbai Respondents Appearance:
Shri. Shri.V.S.Nankani, Advocate Shri S.S.Sekhon, Consultant - for Appellants Shri D.B.Shroff, Advocate Shri Anil Balani, Advocate Shri. Shri.B.K.Singh, Jt. CDR - for Respondents CORAM:
Shri. M.V.Ravindran, Member (Judicial)
Shri. K.K. Agarwal, Member (Technical)
Date of hearing : 01/09/2008 & 04/09/2008
Date of decision : /10/2008
O R D E R No:..
Per: Mr. M.V. Ravindran, Member (Judicial)
1. All these stay petitions are directed against the order-in-original No.CAO No.155/2007/CAC/CC/KS, 156 & 157/2007/CAC/CC/KS dated 27/12/2007 vide which the adjudicating authority has passed the order wherein he has confiscated the ATM machine and terminal computers with an option to redeem the same on payment of redemption fine, confirmed the demand of duty and imposed penalties on thirteen persons. Since all the stay applications are directed against the very same order-in-original and being interconnected, they are being disposed off by a common order.
2. The necessary facts that arise for consideration are in pursuance of information received by the officers of DRI, that one Shri JP Mody had floated several firms and had indulged in smuggling of large quantities of ATMs started investigations. The said ATMs were subsequently sold to Citi Bank and Hongkong & Shanghai Banking Corporation Ltd., (HSBC) at Mumbai. On search of the premises of the firms floated by Shri JP Mody, the authorities recovered incriminating documents. Further, during the course of investigation, statements of various persons were recorded, which included the statements of Shri Ramamrutham of Philip (India) Ltd., and Shri K Basu Patnaik and Shri JP Mody, etc., On conclusion of investigation, the lower authorities came to the conclusion that Shri JP Mody had imported 10 ATMs and 5 Terminal Computers in the name of his firms, indicated in the books on records that the same was purchased locally, and subsequently sold to M/s.Peico Electronics & Electricals Ltd., Bombay, who subsequently sold the same to HSBC/Citi Bank. The show cause notices were issued to 13 noticees. Show cause notice demanded the Customs duty, also proposed to confiscate the ATMs and Terminal Computers and also sought imposition of penalty under the provisions of Section 112 of the Customs Act, 1962. In another case, (Order-in-Original No.157/2007/CAC/CC/KS dated 27/12/2007) show cause notice was issued to M/s.Deepali Electronics Pvt Ltd., and others for the confirmation of demand of Customs duty on the modems imported and mis-declared in order to evade the payment of Customs duty. The adjudicating authority after considering the submissions made by the various noticees before him came to the conclusion that there was a systematic arrangements to evade Customs duty by importing ATMs and Terminal Computers in completely knocked down condition and selling them to HSBC as import of ATM and terminal computers needed import licence, while for imports of parts there was no requirement of import licence. The adjudicating authority came to the conclusion that the ATMs and terminal computers, which were imported were full machines as such, and there being mis-declaration came to the conclusion that there is a misdeclaration in respect of the modems imported by the importers. After coming to such conclusion, he ordered for the confiscation of the said goods with an option to redeem the same on payment of redemption fine, confirmed the demand of Customs duty, and imposed penalties under Section 112 of the Customs Act, on all the applicants. Hence, these stay petitions for waiver of the pre-deposit of the amounts.
3. Ld. Counsel appearing on behalf of the applicant Hindustan Engineering Corporation submits that the question of importing ATM, in CKD condition does not arise. It is his submission that the charge of importing ATMs in CKD condition is on three parties. While the confirmation of demand of duty is against only this applicant i.e. Hindustan Engineering Corporation. It is his submission that the goods, which were imported by the applicant cannot be considered as the ATMs in CKD condition as the items, which were imported could not have been assembled into an ATM. It is his submission that the applicant produced two certificates of Chartered Engineers, who after taking a look at the ATM and the goods imported by the applicant under the said bills of entry, gave a certificate that the said imported goods cannot be called as import of entire ATM in CKD condition, as they did not contain the entire parts of the ATM. It is his submission that they sold imported consignments to various people. It is the submission that the said goods were assessed finally by the authorities on presentation of the bill of entry at the time of clearances. As regards the confirmation of demand of duty in the case of modems, it is the submission of the Counsel that no evidence has been brought on record by the authorities that all parts required for a completion of modems are imported. It is his submission that there is a serious violation of principles of natural justice in this case as the adjudicating authority has not given documents, which are relied upon and which were sought by them. It is also the submission that the request for cross examination of Assistant Commissioner, who cleared the consignments at the first instance was not granted to them. It is the submission that the certificate issued by the experts i.e., Chartered Engineer has not been considered by the adjudicating authority. Hence, it is his submission that the matter may be remanded back to the adjudicating authority to reconsider the issue afresh.
4. Shri JP Mody appears in person and submits that the penalty imposed on him under Section 112 is incorrect. It is his submission that he is the Director of the JP Group of Companies on whom there is an allegation that he has floated different firm to import the ATMs in completely knocked down condition and declared them as parts of machinery. He submits that there were 248 bills of entry filed during the period 25/06/87 to 07/01/89 and the consignment was declared as parts/components. It is his submission that for fifteen years they have been fighting with the revenue to grant them the copies of the bills of entry on record with the revenue authorities, on which examination report is noted by authorities. It is his submission that revenue has not been able to supply the examination report and the said bills of entry. It is his submission that as per the examination report, which is on the reverse side of the original bills of entry are required for him for defending the case. It is the submission that examination report will indicate that the importer declared the goods as components/parts, which on inspection were found to be so by the examining authorities. He submits that the examination report would indicate whether the importer had imported only the parts or the entire ATM. He submits that the adjudicating authority has also not given cross examination of the witnesses and officers to defend his case. It is his submission that they have been writing various letters to the authorities to give the copies of the bills of entry along with examination report and the said letters have not even evoked any response from the adjudicating authority.
5. Shri DB Shroff, Advocate appearing on behalf of the applicant HSBC submits that they had agreed for purchase of 10 ATMs from M/s.Peico Electronics & Electricals Ltd. Ld. Counsel draws our attention to the entire order-in-original and submits that the show cause notice has been issued to them for aiding and abetting the illegal imports made by one Shri JP Mody of JP Group without even considering the facts that none of the officers of HSBC were called for recording any statement. It is his submission that the entire order, which has confiscated the ATM and the Terminal computer, which are in their possession is passed in violation of principles of natural justice in as much that the adjudicating authority has not considered their submission leave alone recording any findings. It is his submission that without considering their submission, adjudicating authority could not have confiscated the machines and imposed penalty on them. It is his submission that the entire order-in-original is verbatim reproduction of the show cause notice and has not considered the representation made by them. It is his submission that the bank was not at all concerned with the importation of said goods nor they had entered into contracts for import of ATMs in the guise of parts. It is his submission that the bank was not therefore required to ascertain either in law or otherwise how the goods were imported as long as they were being supplied by a local supplier, i.e., M/s.Peico Electronic & Electricals Ltd., (M/s.Philips India). It is his submission that the entire order-in-original could not bring out any role played by his clients as to aiding and abetting the import of the said ATM and terminal computers and, hence, they are not liable for penalization and the confiscation is also unwarranted.
6. Shri Anil Balani, Advocate, appearing for the applicant Shri AA Ansari submits that the applicant Shri Ansari is an employee of JP Group of companies. He draws our attention to the allegation leveled against the applicant and submits that the applicant herein being an employee was only carrying out the instructions of the employer i.e., to visit Belgium and inspect the consignment meant for export to India and did some re-packing. It is his submission that the adjudicating authority has not given any findings as to how the current applicant is liable for imposition of penalty under the provisions of Section 112 of the Custom Act. It is his submission that the applicant had no knowledge of the goods being sought to be imported on CKD condition is in order to evade payment of duty. It is his submission that activity of visiting Belgium and inspecting the cartons meant for export would in itself cannot be termed as aiding and abetting. Shri VS Nankani, Advocate appearing for the applicant M/s.Peico Electronics & Electricals Ltd., and their employees submits that the adjudicating authority has imposed penalty under Section 112 of the Customs Act on all the applicants. It is his submission that the said imposition of penalty is unwarranted for and submits that the entire adjudication order imposing penalty is passed in violation of principles of natural justice. It is his submission that the applicants had sought the cross examination of the appraising officer, CHA and had sought the copies of the bills of entry, which were in the possession of the revenue. It is his submission that these bills of entry are vital evidence in order to defend the case before the authorities as the bills of entry records the examination report, which indicated the examination done by the officers while clearing the consignments. It is his submission that when the consignments were cleared by the officers, there was no dispute and they were considered as parts of ATM/modem and not complete machines. He reads the parts of the order-in-original and submits that the entire activity of assembling ATM was done in India. It is his submission that there are no findings as to the prohibition of imports of parts. It is his submission that the CKD/SKD condition of the machines imported is not established, as the parts as indicated Bills of entry, when presented together will not result in import of complete ATMs. It is his submission that the nature and manner in which the goods were imported is important and, hence, there cannot be any dispute. It is his submission that goods imported should be assessed in the manner it they are presented. It is his submission that the parts themselves are not prohibited items. He submits that the decision of the Honble Supreme Court in the case of Phenix International would not apply in this case as in that case they were presented together, which could amount to complete shoes and there was also element of intention to evade as both the parts were imported in the same container.
7. Ld. JCDR in support of the adjudication order submits that the applicant Shri JP Mody, the main person behind the JP Group, was litigating this matter in High Court in various writ petitions. He draws our attention to the order-in-original for this submission. It is his submission that entire reading of the show cause notice would clearly indicate that there was a concerted effort on behalf of the applicant Shri JP Mody, his employees and M/s.Peico Electronics & Electricals Ltd., to import ATM in parts to evade payment of duty on full ATM/Modems. He takes us through the entire show cause notice to bring home this proposition. It is his submission, that the applicants grievance is that they were not given the bills of entry wherein the examination report is recorded is baseless as the applicants Shri JP Mody has their copies of bills of entry. It is his submission that the goods, which were imported were not parts but ATM. He submits that the certificate of the Chartered Engineer as was produced by one of the applicants i.e. Hindustan Electronics Corporation, were obtained by them without consulting the revenue and the revenue is not aware which ATM was seen by the Chartered Engineer to give this certificate. It is his submission that duty can be demanded from any one person even if three persons are charged with evasion of duty. He reads the statements of the so called supplier of the ATM. It is his submission that the said statements of the supplier, who purportedly manufactured the ATM in India clearly indicate that they had no facility or infrastructure to manufacture the ATM. It is his submission that the said supplier had categorically stated that the bills were only issued by them without any activity. It is his submission that applicant M/s.HSBC has accepted the different description on the invoice on the ATM and terminal computer, would itself would indicate that they were aiding and abetting to evasion of customs duty. It is his submission that the applicant Shri AA Ansari signed the bills of entry during the relevant period and, hence, he cannot escape from the penalty under Section 112 (a) as he was the person, who had visited the foreign country, segregated and repacked the consignments. As regards the penalty imposed on M/s.Peico Electronics & Electricals Ltd., and their employees, it is his submission that the said M/s.Peico Electronics & Electricals Ltd., had received the order for ATM and modems from HSBC and Citi Bank, they were aware that for import of ATM, specific import licence is required, hence, in order to by pass the condition put in the import and export policy, they involved JP Mody to bring the goods as parts and subsequently supplied ATM as being assembled in India. It is his submission that M/s.Peico Electronics & Electricals Ltd., and their employees knew entire issue well in advance. He would submit that the entire modus operandi was discussed and action plan was devised by the officials of M/s.Peico Electronics & Electricals Ltd. It is his submission that ATM was completely knocked down in Belgium, different house HWA were prepared to show that the goods, which are being imported are parts. It is his submission that statements indicated that Philips Holand sold the ATM to a company in Belgium. As regards the issue of modems, it is his submission that they were clearly misdeclared and, hence, the entire adjudication order would be incorrect. It is his submission that there is no violation of principles of natural justice by not giving the cross examination as the entire case is proved based upon the record and the statements.
8. We have considered the submissions made in detail and perused the records.
9. It is noted from the submissions made by the all the applicants counsel that the impugned order is challenged on various grounds and one of them is violation of principles of natural justice. We find that the entire issue in this case is regarding the import of entire machinery mis-declaring as parts and components. As the issue is based on the records, we find that the appeals themselves, could be disposed off at this juncture on the issue of violation of principles of natural justice, we waive the condition of pre-deposit of the amounts involved and take up the appeals for disposal.
10. It is to be noted that the charge against the main appellant Shri J P Mody and Hindustan Engineering Corporation that they have imported full ATM in CKD condition and cleared them as parts and components, indicated that these ATMs are manufactured in India and sold them to M/s.Peico Electronics & Electricals Ltd., who in turn sold the ATMs to HSBC and Citi.
11. We find that learned Jt CDR was right in his submission that the main applicant Shri J P Mody, has filed various writ petitions in Hoble High Court. However, it is appellants prerogative to take to recourse under article 276 for seeking documents which seemed relevant to appellant and were not being supplied by the department despite several requests. Be that as it may, this in itself cannot be a ground for denial of principles of natural justice.
12. The main applicant has been requesting for the copies of import documents, inspection of seized goods and cross examination of witnesses whose statements were being relied against them. It is departments case that the documents were destroyed in 1998, however these exists no tenable reason as to why copies of the documents were not provided when show cause notice was issued in 1992 and since then the appellant was consistently seeking copies thereof. If the documents are destroyed, it is also needs probed why documents were destroyed, when admittedly Shri JP Mody was litigating the issue in Honble High Court. To our mind, if any of these documents or the files concerned with the subject importation are still in the possession of the department cannot be denied, as we are of the opinion that the issue needs to be looked in to from the factual matrix whether the import documents and the examination report appended thereto, indicates import of those parts and components which are nothing but complete ATMs in CKD condition. Non-supply of these documents without any justifiable reason is violation of natural justice as is held by Honble High Court of Bombay in the case of Kellog India pvt. Ltd., - 2006 (193) ELT 385 (Bom). Moreover, in absence of all original import documents cross-examination of the examining officers become essential.
13. It is seen that the adjudicating authority has proceeded on the basis that consignments were imported together not over a period of time. It is seen that total number of bills of entry in dispute are 248 nos., obviously all these bills of entry were not presented together. Important question that has to be answered if parts and components are imported under different bills of entry over a period of time, can it be held that it was import of entire machine. Adjudicating authority needs to consider this issue keeping in mind the law as is settled by the Apex court in the case of Tarachand Gupta & Bros 1983 ELT 1455 (SC) and in the recent case of Sony India Ltd., - (2008-TIOL-183-SC-Cus). It is seen that the appellant M/s Peico Electronics & Electricals Ltd., has been taking this point before the adjudicating authority during the course of proceedings. We find force in the appellants submission that the adjudicating authority ought to have dealt with the outcome of cross-exami9nation of Assistant Commissioner Shri S.Mohan.
14. Adjudicating authority has also observed that appellant has delayed the proceedings for 13 years on one pretext or other by interpreting the Honble High Courts order in a casual manner. This we find highly unacceptable and objectionable as it is seen that the Honble High Court makes no such observations.
15. It is also seen that the adjudicating authority has not considered the submission made by the Counsel of HSBC, in as much that he has not given any findings as to how HSBC has aided and abetted mis-declaration of ATMs. There are no findings as to the role played by HSBC in aiding and abetting the imports of complete ATMs, in the guise of parts and components.
16. It is also seen that the adjudicating authority has not considered the certificates of chartered engineer produced by the appellant. It was fairly submitted by the counsel that these certificates were procured by them in the absence of the authorities as department failed to accept their requeswt of inspection in presence of departments representative. If it is the only grievance then appellant is ready to do joint inspection to ascertain and arrive at factual matrix of the case.
17. In view of the foregoing reasoning it is seen that there is violation of natural justice while passing the impugned order. It is settled law that when the case made out in the show cause notice is based on statements; the noticees must be provided opportunity to test the veracity of the statements on the anvil of examination. There is infirmity in the order in as much that it has not considered the total submissions made by the noticees. It is settled law that any order that is passed in violation of principles of natural justice is void-ab-initio.
18. Without expressing any opinion on the merits of the case and keeping all the issues open, we set aside the impugned orders and remit the matter back to the adjudicating authority to reconsider the issue, in accordance with law after:
(i) Providing documents/files
(ii) Cross-examination of persons as was sought by the appellant,
(iii) Thereafter providing a sufficient opportunity to submit complete defense,
(iv) Granting a personal hearing.
(v) Considering the issue of modems in the light of settled law as regards their classification.
19. Since the issue is of 1988, needless to say that all the appellants will co-operate with the adjudicating authority and adjudicating authority may complete the adjudication proceedings as expeditiously as possible.
20. All the appeals are allowed by way of remand.
(Pronounced in Court on..) (K.K.Agarwal) Member (Technical) (M.V.Ravindran) Member (Judicial) pj Per: Mr. K.K. Agarwal, Member (Technical) I have perused the above order of my learned brother. Since I am not in agreement with the same, I am recording a separate order. Though briefly, the facts involved in the case has been summarised by my learned brother, I still feel it necessary to add certain facts to bring out how the calculated fraud that has been played to circumvent the provisions of import policy which prohibits import of complete ATM and only permits import of parts of ATM.
2. The stay petitions filed by various applicants concerns three order-in-originals out of which two relates to import of ATM and ATMPs and the third with the import of modems. I shall first discuss the two order-in-originals dealing with the import of ATM and ATMPs.
3. Briefly the facts are that Philips India planned to introduce ATM somewhere in 1985-86 and received orders from Citibank as well as Hong Kong & Shanghai Bank (HSBC) in India. Their principal, Philips Holland had exclusive world marketing right except in USA for marketing ATMs manufactured by Diebold of USA under their Philips brand name. The ATM Processor/computer terminals/ATMPs were being manufactured by Philips Holland themselves and marketed as such. Finding that the import of complete ATM was prohibited and manufacture of ATMs out of imported parts was not economically viable and feasible, they entered into an agreement with one Shri JP Mody for supply of 43 ATMs and 21 ATM controllers/processors (ATMPs) in split consignments during 1987 to 1989 from Belgium in the name of some of Shri Modys firms like Hindustan Engineering Corpn (HEC) , Suku Computers P. Ltd., Suku Digital P. Ltd., Mumbai. The arrangement was that these machines will be shown as sold by Shri Mody to M/s Philips India under local bills against Rupee payments in India. M/s Philips India, in turn sold 43 ATMs and 18 ATMPs to Citibank and HK bank for installation at their different sites and kept 3 ATMPs for cannibalization with themselves. These machines were originally dispatched by M/s Philips Holland and from their various centres in Holland, Sweden, Germany, France etc. to a nominated party viz. M/s Exportek Belgium. In Belgium, these machines were split into 4 parts wherein the main machine was packed in a wooden case and the other parts were packed in 3 different cartons by one Shri Ansari, a mechanic in the employment of Shri Modys company who was sent specially for this purpose to Belgium. These machines in split consignments were invoiced by Exportek to the companies of Shri Mody like Hindustan Engineering, Suku Computers etc. in India with changed description and with very low value to India. Investigations revealed that with a view to provide a cover up to this modus of misdeclaration and smuggling of ATMs and ATMPs, Mr. Mody showed their acquisition and procurement in India against bogus bills of various firms such as M/s Welfab Engineers, M/s Mutha Steel & Alloy etc.
4. Out of 43 ATMs and 18 ATMPs, M/s Philips India sold 15 ATMs and 9 ATMP to Citibank, 28 ATM and 9 ATMPS to HSBC bank. These were found installed at different sites of these banks. These machines totally valued at Rs. 8,66,86,879/- were seized and provisionally released pending adjudication to the two banks viz. Citibank and HSBC bank.
5. Statement of Mr. Mody was recorded on various dates wherein he stated that he was the Chairman of the JPM Group of Companies comprising of M/s Suku Computers, HEC, Suku Digital, Dipali Electronics, Suku Engineers, & Vinesh Electricals Ltd. In his statements, he admitted about the agreement entered into with Philips wherein Philips were to identify the consignment, decide the price and his job was to clear the machine through customs and give them back to Philips. He suggested to Philips that Exportek, a firm in Belgium will invoice the ATMs/ATMPs differently and that firm will also show lesser price in invoices which will enable the JPM Group company to make more profit by saving custom duty. That after clearance the goods were to be supplied back to Philips India who will install the ATMs in the customers places. He admitted that the JPM group has shown the ATMs to have been locally purchased from certain firms, but that was not true and the bills were bogus. He also admitted the JPM group had neither the factory nor capability to manufacture ATMs and had wrongly stated that the components imported were sold to local parties and ATMs and controllers were supplied after procuring it from local parties. He also admitted that his employee Ansari had gone to Belgium to inspect the consignment and has signed all the Bills of entry. He admitted that he was directed by Philips India to take delivery of packages from Philips Holland and in turn he informed Philips India to send those packages to Exportek for onward shipment to India for which Exportek charged 5% commission along with freight and insurance. He further admitted after clearance from customs, the packages were delivered to Philips India without opening or tampering with the contents.
6. Shri Ansari admitted that he was authorised signatory for various companies owned by Shri Mody and on instruction of Shri Mody had gone to Belgium to inspect the goods for despatch to India and had disassembled the machine into 4 parts. He admitted that 112 import consignments made 43 ATMs and goods described as distributed control panel were in fact the main body of the ATM. He confirmed that in most of the cases consignment was delivered to Philips India directly but in some cases they were delivered to the site of the bank where they were to be installed.
7. Shri Suketu Mody in his statement admitted that none of the companies possess manufacturing licence or the technology for manufacture of ATMs. It was admitted by Welfab and Mutha Steel that they did not supply any goods or machines against their bills and that Mutha Steel was stockist and manufacturer in MS rod, steel pipes, alloy steel, hardware, etc. and has no knowledge of ATM machines nor had any industrial licence or registration for manufacture of such sophisticated high technology machines, nor were they registered with the Central Excise. No evidence of payment of CE duty was ever produced.
8. Shri Banerjee, GM Philips India, in his statement admitted that they could not import the ATMs directly due to licence restriction and entered into an agreement with Mody who agreed to import these ATMs and controllers from Philips Holland. On pricing he stated that they have worked out the CIF prices of the ATM in Dutch Guilders to Shri Mody who was asked to quote his price in Indian Rupees. Shri Mody arrived at a formula which after negotiation was fixed at 2.9 times of the CIF value and this price included the customs duty and licence premium, if any. He confirmed having supplied 28 ATMs and 9 controllers to HSBC as also 15 ATMs and 9 controllers to Citibank and all equipment were supplied by JP Mody who in turn has received it from Philips Holland which was the basis for Philips India giving guarantee to the banks of India regarding these machines. He also confirmed the FOB price of the machines on the basis of documents seized from the premises of Shri Mody.
9. Shri Ramamrutham of Philips India in his statements stated that Philips India considered the probability of importing ATMs against REP licences or in SKP/CKP condition but were advised against this as they did not have industrial licence for manufacture or assembly of ATMs and that Mody, on enquiry, agreed to arrange the import and clearance of ATM/processors and for finalising the modalities, he went to Holland, that CIF price of the ATMs based on the price list of Philips Holland was communicated to Mody who agreed to charge a price after multiplying the CIF value by 2.9 which included the duty and licence premium, if any. He admitted that companies controlled by JP Mody was to source and supply the equipment from Philips Holland to Peico for eventual supply to HSBC bank and Citibank.
10. Shri Basu, an employee of Philips India, in his statement has stated that as Philips India could neither manufacture ATMs nor import them, they accepted the offer of Mody to supply ATM kits to Philips India in its original packing for its installation at site and that the SKD kit of ATM comprise of various plugging modules and hence there was no need for soldering and that Mody has agreed to lift the full kit of ATM and controller from Philips Holland and got the import routed through Belgium.
11. It was on the basis of the above statement and documents that SCNs were issued demanding duty amounting to Rs. 1,45,51,948/- and 3,39,54,121/- on account of undervaluation, proposing confiscation and imposition of penalties on all the persons involved in the above transactions.
12. The above facts clearly bring out how a calculated fraud has been committed to overcome the restriction imposed by policy for import of complete ATM and how value has been misdeclared to save customs duty, a fact which is admitted by one and all concerned in the import of the same, including the officers of Philips India and none of these persons have retracted their statements. In fact in their grounds of appeal, they have not contested the matter on merits at all but have only tried to seek shelter on the fact that the department failed to supply them the original copies of Bills of entry which contained the examination order, and once the goods have been examined and found to tally with the description in the bills of entry, the benefit of doubt should be given to them regarding the actual imports made by them. This fact I may mention, has been agitated by the appellants before the Honble High Court also but the High Court has ordered to adjudicate the case on the basis of available records. Shri Mody wants us to ignore the entire evidence against him in the form of statement of the officers of Philips India, Philips Holland, the supplier of the ATMs, Shri Mody himself, Shri Ansari and the local companies supposed to have delivered the ATMs denying that any parts were either manufactured or that the imported parts were assembled by them to form a ATM. It is quite noteworthy that Shri Mody and the other noticees have not asked for the cross examination of any of these persons which conclusively proves that entire ATMs were imported and supplied. Shri Mody could not spell out the specific items which were imported and the items which were locally procured on the ground that he does not have the documents when the fact is that the bills of entry have been filed by him and a copy thereof is available with him. In view of this, there is an overwhelming evidence to show that Shri Mody and his companies have played a fraud on the revenue by undervaluing and misdescribing the goods to overcome the import policy restrictions. No purpose will be served by remanding the matter when the very documents which have been admittedly lost are being again directed to be resupplied. Shri Mody had asked for cross examination of departmental officers only, which is totally irrelevant because even if the officers had examined the goods and found them to be in order, may be by lack of knowledge, by negligence or otherwise, the conclusive evidence available as discussed above, clearly establishes that what was imported was a complete ATM, whose value was misdeclared to evade duty.
13. My Ld. Brother has suggested for remand of the entire order to the adjudicating authority on the ground that the relevant documents were not supplied, cross examination of Asst Commissioner was not allowed and it is not clear as to whether the entire ATM was imported in one consignment or different consignments over a period of time. I am not in agreement with this view. Firstly, I find that the order was reserved and during hearing remand aspect was never before the DR and the matter was argued only for stay petition. In such a situation, remand cannot be ordered without putting the other side to notice and noting his objections who may be ill prepared for such an eventuality. If the matter was of denial of principles of natural justice, a remand could have been suggested at the time of hearing itself and not after three months. Further, I find that the proceedings have been pending for 14 years and loss of documents was brought to the notice of the Honble High Court and the High Court directed the revenue to dispose of the proceedings with whatever material and documents available at any rate not later than 8 weeks from the date of the High Court order. In such a situation, to remand the matter for supply of documents which the revenue admits have been lost, will defeat the very purpose of High Court order and keep the proceedings pending. I further, find that no prejudice has been caused to the appellant by non-supply of the original copies of the bill of entry containing the examination order. The appellants case is that the goods were correctly declared by them in the bill of entry which description was examined by the customs officers and was found to be correct and therefore charge of misdeclaration cannot be upheld. I feel that even if it is accepted that the goods were found on examination as parts, the revenues case is not that what was imported were not parts but it is the case of the revenue that a complete ATM was split deliberately and sent in separate packing and these parts together form a complete ATM which fact could never have been established by examination of the consignment which was imported after splitting the machinery. The import of ATM was totally new at that time. No officer could have found that these parts together would form a complete ATM as installation of ATM etc. requires technical expertise. For that purposes, cross examination of any officer would have been of no help as even if it is admitted that what was imported were parts, the allegation is that these parts together constituted a full ATM or a mode in the other appeal. There is incontrovertible evidence with the revenue in the form of admission by Philips India/Philips Holland that what was imported was a complete ATM for which full payment was received and which was split as per directions of the importer and admission by Hong Kong bank that a complete ATM was installed. The appellants have shown total inability to indicate the specific parts which were missing. On a query from the bench, they were asked to give a list of the various parts which constitute an ATM and list of parts, which were imported and the parts which were indigenously procured, but they showed their inability to do so. There is no evidence regarding manufacture of any parts in India and the persons from whom Hindustan Engineering Corporation and others are supposed to have got the ATMs, i.e. Mutha Steel and Welfab Engineers have denied supplying anything nor do they have any industrial licence to manufacture any such parts. Shri Ansari has also admitted that what was imported under different bills of entry were complete ATMs.
14. The other ground for remand is regarding not discussing the expert opinion furnished by the appellants which stated that the goods declared in the bills of entry did not constitute a complete ATM. This evidence is of no meaning as firstly it has been taken after 15 years of import when the fact is that the ATMs have been installed and working at the banks premises. These experts have never seen the machines in working and the opinion was taken at the back of the revenue without indicating as to what bills of entry were shown to him and which were held back. When both the supplier and the recipient are admitting that what was ordered for was a complete ATM and what was received was a complete ATM and what was paid for was a complete ATM along with statement of Ansari, Welfab and Mutha Steel of having not supplied any part of ATM, the so-called expert opinion has no meaning.
15. I shall now deal with the pleadings made before us by the various appellants. So far as HEC is concerned, the plea taken by Shri Sekhon, Ld. Advocate was that the duty liability does not lie on HEC as once the goods have been confiscated with option to redeem the same, the duty liability is on the banks with whom the goods are lying and are supposed to be owner of the goods. This plea is not tenable as once the importer have misdeclared the value and have cleared the goods in violation of the import policy the liability to pay the duty lies on the original importer. It is only in the case of violation of post import conditions, that a person claiming to be the owner of the goods is liable to pay both fine and duty, if not already paid, as held by the Bombay High Court in the case of Wockhardt Hospital in 2006 (208) ELT 15 (Bom). The Honble Supreme Court in the case of Jain Shudh Vanaspati reported in 1996 86 ELT 460 (SC) has held that in case of misdescription and misdeclaration of value duty, can be demanded under section 28 of the Customs Act. The other plea is that while the imports have been affected i.e. from HEC, Suku Computers and Suku Digitals the duty has been demanded only from HEC which is not correct as duty can be demanded from the company which has actually imported. I find this is a case where fraud has been committed and the sole perpetuator of the fraud was one Shri JP Mody who controlled all the group companies, as has been admitted by him in his various pleadings and his statements made before the court where he has been filing writ petitions on behalf of all the companies. In fact, even before this bench, he was pleading on behalf of all the companies inspite of having engaged different advocates for different parties on the plea that he was controlling all the companies and was dissuaded by the bench in doing so and asked to confine his pleadings in respect of only penalty imposed on him. The entire fagade was created by Shri JP Mody in order to overcome the licensing requirement as well as for undervaluation of goods in order to evade payment of legitimate customs duty. It was M/s HEC, which was the front company of Shri JP Mody dealing with the supplier, the buyer and the intermediary in Belgium. Prima facie therefore, it is the HEC who is liable to the duty as well as penal action. We are supported in our finding by the observation of the Honble Supreme Court in the case of Phoenix International Ltd. reported in 2007 (216) ELT 503 in para 11. In view of this I hold that prima facie case has been made out for demand of duty and imposition of penalty. Since the applicant has not challenged the undervaluation of the goods neither in the grounds of appeal nor at the time of hearing of the stay petition in spite of specific query being put by the bench, the entire duty liability is required to be paid as pre deposit and the goods are to be held to be correctly confiscated.
16. As regards Peico Electronics, it was submitted by counsel Shri Nankani that goods have to be assessed in the form in which they have been presented, and once it is an admitted that the goods were imported in parts and it was parts which were presented for assessment, the same could not have been considered as an import of complete ATM and therefore the same cannot be held as liable to confiscation. He referred to the decision of apex court in case of Sony India 2008 TIOL 183 80 CUS in support of his argument. He further submitted the decision in Phoenix case will not be applicable as in that case all parts were imported in single container. It was further submitted that in any case Philips India was not a party to misdeclaration of the goods which was done by the companies of Shri Mody only, in which they had no role to play. In view of this, no penalty is imposable either on the company or its officers, Basu, Ramamrutham. He however fairly conceded that what was imported by Philips Holland was a complete ATM for which they have received the full value.
17. I have considered the plea of Shri Nankani and I find that this was a case of a fraud played on revenue to overcome restrictions of the policy and for undervaluation of the goods. In fact, undervaluation has been conceded by Shri Nankani when he states that full CIF value has been realised by them and it has come on record that the price declared by the three companies on whose name imports were made have declared price less than CIF value. Further, in the case of Phoenix the imports were made n the name of 2 companies, whereas in the present case the imports were in the name of one company only for a particular no. of ATMs. Therefore the decision of the SC in the case of Phoenix shall prevail along with Essar Oil reported in 2004 (172) ELT 433 (SC) wherein it has been stated fraud negates everything. In view of this, liability to confiscation of the goods cannot be challenged. Since this was a case where an entire conspiracy was hatched out between Philips India, Philips Holland, and JP Modys group companies to overcome the import restrictions and the fact that Philips India itself could not have imported the goods, Philips India could have certainly visualised that there was no way in which JP Group of companies could have done that and in spite of the same, they agreed to enter into agreement, even by paying a price equivalent to 2.85 times of the CIF value which shows their complete complicity in the matter. In view of this, prima facie, penalty is imposable on Peico and its officers who knew of all this conspiracy.
18. As regards HSBC bank, it was contended by Shri Shroff that they were in no way concerned with the misdeclaration of price and description of goods as they have placed order for supply of Philips brand of ATMs which have been supplied to them for which the agreed price has been paid. The commissioners order nowhere brings out any fact from which an inference can be drawn that they were also party to the misdeclaration. I prima facie find merit in the contention of the bank as there are no such findings in the Commissioners order and accordingly hold that they have been able to make a prima facie case so as to call for complete waiver of pre deposit of penalty imposed on it.
19. As regards Ansari who was represented by Shri Balani, it was submitted that there is no material in the order to show that Ansari was aware of the fact that all the parts put together will constitute a full ATM and his statement after being shown the catalogue he has stated that they will form an ATM. Therefore, in such a situation no penalty is imposable. This defence is hardly believable because Ansari is the man who himself has splitted the ATM into 4 parts and knew about the configuration and assembly thereof. He has also signed on all Bills of Entry. Therefore, prima facie he has also aided and abetted in the illegal import.
20. In view of the above, I order the following pre deposit from various applicants as under:
O-I-O no. 155/07/CAC/CC/KS dated 27.12.07:-
Hindustan Engineering Corporation Rs. 1,45,51,948/- towards duty and Rs. 50 lakhs towards penalty.
Peico Electronics Rs. 30 lakhs Shri J.P. Mody Rs. 10 lakhs Shri Suketu J. Mody Rs. 5 lakhs Shri A. Ansari Rs. 5 lakhs Shri V. Ramamrutham Rs. 5 lakhs Shri K. Basu Rs. 5 lakhs O-I-O no. 157/07/CAC/CC/KS dated 30.11.07:-
Hindustan Engineering Corporation Rs. 3,39,54,121/- towards duty and Rs. 1 crore towards penalty.
Peico Electronics Rs. 50 lakhs Shri J.P. Mody Rs. 20 lakhs Shri Suketu J. Mody Rs. 7 lakhs Shri A. Ansari Rs. 5 lakhs Shri V. Ramamrutham Rs. 5 lakhs Shri K. Basu Rs. 5 lakhs Though penalties have been imposed on others, but their appeals were not before us.
21. I shall now deal with the facts relating to third O-I-O no. 156/07/CAC/CC/KS dated 30.11.2007 where the facts are almost identical except for the fact that instead of ATMs and ATMPs what has been imported is modems in the garb of electricals, parts of control panels, control switches etc. Here also Philips India was considering a proposal for manufacture of modems in India as import of modems itself was prohibited and after finding the proposal to be economically unviable they resorted to the same modus operandi by routing the imports of modem through the companies of Shri Mody. There is evidence in the form of exchange of telexes between Philips India, Philips Holland, Exportek Belgium and Shri Mody regarding import of particular models of modem and the price was negotiated after ascertaining the CIF value of the goods imported. The purchase order were placed by Philips India on Dipali Electronics whereas the imports were made by HEC and on paper those were shown to have been sold to Dipali Electronics. On import, the goods were described as electrical, parts of control panels and control switches claiming classification under 8538.10 under the Customs Tariff. The value declared was almost 1/10th of the prevailing CIF value. The goods were initially cleared at the declared price and classification claimed by the importer HEC on whose behalf the bills of entry were filed and it was during the course of investigation relating to import of ATMs and ATMPs that a similar modus operandi in respect of modems was also discovered. Accordingly, show cause notice was issued proposing to confiscate the goods as import of modems was prohibited and for misdeclaring the value of the goods and duty was demanded on modems by classifying under heading 8471.99 of the Customs Tariff. The show cause notice has been adjudicated wherein the commissioner has demanded duty amounting to Rs.1,26,27,675/- from HEC and has imposed a penalty of Rs. 75 lakh each on HEC, Dipali Electronics and Peico Electronics. A personal penalty of Rs. 45 lakh each has been imposed on Shri JP Mody and SJ Mody.
22. Ld. Advocate for HEC, Shri Sekhon accepted that what was imported was a modem only and his only submission was that the modem should be classified under CH 8517 as held by the Tribunal in the case of TVS Electronics reported in 1996 (84) ELT 340, appeal against which has been dismissed by the Supreme Court as reported in 1997 (93) ELT A-185 (SC). It may be noteworthy that in this case original copies containing examination report in respect of 17 bills of entry out of total 53 bills of entry have been furnished to the appellants. Further, once the appellant himself has admitted that what was imported by them was a modem only and nothing else, the question of remanding the matter for ascertaining the correct classification does not arise. Though the appellants have not indicated the amount of differential duty involved in the case, if the modems are held classifiable under CH 85.17 instead of 8471.99 adopted by the department, the applicable rate of customs duty is 100% as against 200% applied by Adjudicating Authority for arriving at the differential duty demanded from the appellants. It may be stated that value has not been challenged by the appellant either in the grounds of appeal or in submissions made before us at the time of hearing of the stay application. Since the duties based only on enhanced value, the appellants are liable to pay at least 50% of Rs.1,26,27,675/- by allowing them the benefit of change of classification. The goods are liable to confiscation for misdeclaration of value under 111D and 111M of the customs Act and the confiscation is accordingly upheld.
23. As regards penalty imposed on Dipali Electronics, it was contended by the Ld. Advocate that penalty has been imposed under section 112 without specifying the sub-section under which it has been imposed. It was submitted penalty cannot be imposed under 112(a) as Dipali Electronics have themselves neither imported nor done any act or omitted to do any act which would render the imported goods liable to confiscation. As regards penalty under Section 112(b) it was submitted that penalty in such case can be imposed on individuals and not on a company as company cannot have mensrea. In support thereof he referred to the larger bench decision in the case of Steel Tubes reported in 2007 217 ELT 506.
24. I prima facie feel that penalty cannot be imposed on a company under section 112B and Section 112A is not applicable in the present case. I therefore waive the pre-deposit of the entire penalty imposed on Dipali Electronics and stay recovery thereof till the disposal of the appeal.
25. As regards Peico Electronics, the submissions are same as were in the case of import of ATM/ATMPs and in view of the reason stated therein which are equally applicable in the present case, penalty is liable to be imposed on Peico Electronics. For the same reason, penalty is also imposable on Shri JP Mody who was the mastermind of the entire fraud. Penalty is also prima facie imposable on Shri SJ Mody as he has dealt with the goods imported by HEC which have been held liable to confiscation.
26. In view of above, I direct the following applicants to pre-deposit a sum indicated against their names and on such payment there shall be waiver of deposit of the balance amount of duty and penalty imposed and recovery stayed thereof till the disposal of the appeal.
Hindustan Engineering Corporation Rs. 63 lakh towards duty and Rs. 37 lakhs towards penalty.
Peico Electronics Rs. 20 lakhs Shri J.P. Mody Rs. 9 lakhs Shri Suketu J. Mody Rs. 5 lakhs K.K. Agarwal Member (Technical) Since there is a difference of opinion between me and Member (J) the registry is requested to put up the file to President for nominating a third member for resolving the following difference of opinion.
Difference of opinion Whether all the appeals are required to be remanded back to the original authority without asking for any pre-deposit as held by Member (Judicial) or pre-deposits of various amounts of duties and penalties is required to be made as proposed by Member (Technical).
(Pronounced in Court on 30/12/2008) M.V. Ravindran Member (Judicial) K.K. Agarwal Member (Technical) sr 1 14 2