Customs, Excise and Gold Tribunal - Mumbai
Kishore Hemani And Mukesh Shah vs Commissioner Of Customs on 15 January, 2001
Equivalent citations: 2001(75)ECC442, 2002(148)ELT88(TRI-MUMBAI)
ORDER J.N. Srinivasa Murthy, Member (J)
1. In all these appeals, the appellants have challenged the above-captioned impugned order S/10-1/DRI/BZU/92/DRI/BZU/122/16/91 dated 2.4.93 by the Collector of Customs II, Mumbai, praying for quashing the same and setting aside the entire penaltyimposed under Section 112(a) and (b) of the Customs Act and declared that the value of the imported goods by Gulmohar Inds. as correctly declared at US $ 352 PMT as against the value of US $ 440 per MT held by the Collector, and for any other relief deemed fit.
2. In the Appeal No. C/1789/93 it is further requested by Shah and Mehta that the penalty imposed under Section 112 read with 147 of the Customs Act of Rs. 23 lakhs has to be set aside.
3. The facts of the case in brief, in all these appeals are that on gathering the intelligence by the DRI Bombay that Shri Mukesh Shah of Shah and Mehta was importing fast moving items like gum rosin, hydrogen peroxide, citric acid etc. by misdeclaring the value, unauthorisedly selling the goods in the market after clearing under OGL subject to actual user condition. He has imported 450 MT of gum rosin of declared CIF value of Rs. 28,70,865 on behalf of Shah and Mehta CHA No. 11/0613 in the name of Metal and Alloy Inds., and out of the said quantity 250 MTs are sold in the market and the balance of 198 MT of declared value of Rs. 12,63,181 has been placed under seizure under Section 110 of the Customs Act on 3.7.90, as the same are liable to confiscation under Section 111(d) and (m) of the Customs Act. He has also cleared and sold in the local market 414 MT of gum rosin of declared value CIF of Rs. 25,54,391 imported in the name of Gulmohar Industries, Calcutta. He has also cleared 79.8 MT hydrogen peroxide of the declared value of Rs. 6,21,910 in the name of Metal and Alloy Inds. and sold it in the market. All the aforesaid quantities are imported for home consumption as per Appendix 6, list 8, Part I, Serial No. 234 of AM 88-91 and Item No. 231 of the AM-93 and 262 of AM 88-89 subject to actual user condition. The above-said goods permitted to be imported to actual user by the Industrial and Export/Trading Houses. It is observed that these goods have been imported and cleared unauthorisedly by the appellants Mukesh Shah and Kamal Mehta in one-third partnership. Pursuant to the intelligence, the office premises of Shah and Mehta and the residential premises of its partners Kamal Mehta, Suresh Mehta, Mukesh R. Shah and Haresh Mehta were searched on 29.6.91 and 30.6.91 and seized the incriminating documents which included one Telex message bearing No. SF-4047 of 11.6.91 originating from 38144 TXCHM HX--Fax No. 7300946 addressed to Mukesh Shah, regarding outstanding list of accounts Jerry and invoice No. 786/86/91 (A) (B) (C) in Indian Rs. 5,58,000 with enclosed sheets containing details of 15 outstanding bills required to be paid in the serial mentioned therein, which include the bill No. 3660.09 of 19.2.91 for 5,257 US $ of Metal and Alloy Inds. and delivery challans book (SM-5) contained in the copies of the challan number 5749 to 5752 (827 and 828) dated 17.1.91 (54 to 57) relating to hydrogen peroxide covered by the bill of Entry No. 9/60 and 9/61.
4. The investigation revealed that 450 MT of gum rosin was imported as per the sales confirmation No. KNR 90026 of 28.9.90 issued by M/s. China National Native Produce and Animal By-Products Import and Export Corporation, China in favour of Metal & Alloy Inds., Assam. Out of the 450 MTs covered by into bond bill of entry No. 2613/58,78,80 and 81 dated 11.12.90.252 MTs of gum rosin was cleared and remaining 198 MT was pending for clearance. The value of the goods was declared as 352 US $ per MT CIF The statement of Mukesh Shah, Parmanand Sharma of Richa Roadlines and various persons, and of DS Deshmukh, manager of Parekh Warehouse Corporation were recorded. S.S. Sharma, partner in Metal and Alloy Inds., and Mukesh Shah and Kamal Mehta have not responded to the summons issued on 9.7.91 by personal attendance, but have sent letters according to which Mukesh Shah had no connection with the goods and Metal and Alloys Inds. had taken his help to represent the company on friendly relations, have come to know of the sale of the goods only after the receipt of seizure memo dated 3.7.91. The summons issued to Gulmohar Inds. on 11.9.91 returned unserved with the endorsement as "not known". It is a bogus company. The summons issued to Raju K. Doshi and Mayur Raja also were received back with the same endorsement. Kishore Hemani has filed his affidavit under letter dated 20.8.91 expressing no knowledge whatsoever about the goods and his communication anywhere. The value of the gum rosin at the material time have been found to be US $ 440 to 500 per MT CIF as against the declared value of US $ 352. By taking the minimum value, the loss of duty on account of Gulmohar Inds. comes to 9,60,138. On 30.6.91 Mukesh Shah has agreed to the loading of his invoice value at the rate what was passed through Hawala to Sampatrao Dugar, whose outstanding bill was seized in search of his house on 29.6.91. Mukesh Shah, Raju Doshi, Kishore Hemani failed to inform and explain about the payment of goods in question through Sampatraj Dugar. 198 MT of gum rosin seized appears to be liable for confiscation under the provisions referred above. For illegal sale of 252 MT of gum rosin and 79.8 MT of hydrogen peroxide and 414 MT action under Section 112 Act read with 111 (d) and (m) of the Customs Act has to be taken. Mukesh Shah the main person in this case as well as Kamal Mehta, Raju Doshi, Kishore Hemani, Mayur Raja are also responsible for omission and commission and illegal sale of the above material and they are also liable for action under Section 112 of the Customs Act.
5. On 31.12.91 the show cause notice under Section 124 of the Customs Act was issued by the Asst. Director calling upon Mukesh Shah, Kamal Mehta, Raju Doshi, Kishore Hemani, Niranjan, S.S. Sharma of Metal & Alloys Industries to show cause to the Collector of Customs, New Customs House, Mumbai within 15 days of the receipt of the notice as to why 198 MT of gum rosin (N-grade) declared at CIF value of Rs. 12,63,181 seized on 3.7.91 should not be confiscated and for causing unauthorised import of 450 MT of gum rosin and for misdeclaration of value and for illegal sale of gum rosin of CIF Rs. 15,07,684 and 79.8 MT of hydrogen peroxide of declared CIF Rs. 6,21,810 in the material and why penalty should not be imposed on them under Section 112 of the Customs Act, 1962. The said 252 MT of gum rosin and 79.8 MT of hydrogen peroxide not available for seizure. Mukesh Shah is also the main person behind the unauthorised import of gum rosin in the name of Gulmohar Inds. and illegal sale of the same in the market as he though being not authorised person of the CHA and importer, had looked after affairs. Therefore, Mukesh Shah, Kamal Mehta, R. Joshi, K. Hemani, Mayur Raja for Gulmohar Inds. are hereby called up' a to explain in writing and show cause to the above adjudicating authority within 15 days of the receipt of the notice as to why penalty should not be imposed on them for rendering the import of 414 MT of gum rosin of declared CIF value of 25,54,391 liable for confiscation under Section 111(d) of the Customs Act read with Section 3(2) of the Import and Export (Control) Act, 1947 and Section 111(m) of the Customs Act for illegal sale in the market which goods are not available for confiscation. On 25.5.92 addendum to the show cause notice was issued by the same authority to all the above persons substituted para 36 in page 31 of the show cause notice. The appellants have replied both the notices on 31.3.92 (K. Hemani), and on 6.5.92 (Mukesh Shah) and 6.7.92 (K.J. Mehta) and Shah and Mehta. The personal hearing was held on 1.8.92 and the appellants were heard through their counsels as per the impugned order. After going through the material available on records and considering the contention of the counsels the impugned order was passed on 17.9.92 by the Collector of Customs holding that the value of the gum rosin to be taken as US $ 440 PMT in terms of Rule 5 of Valuation Rules 1988 vide under Section 14 of the Customs Act. 198 MT of gum rosin valued at 15,78,976 was ordered to be confiscated under Rule 111(d) and (m) of the Customs Act with redemption fine of Rs. 4 lakhs. Since 252 MT of gum rosin and 79.8 MT of hydrogen peroxide which were illegally imported and were not available for confiscation, the value of which comes to Rs. 20,09,606 at 404 $ per MT resulting in the loss of duty of Rs. 6,04,022 and 6,21,910 the value of hydrogen peroxide. They are liable to action under Section 3 of the Import Export Act, 1947 read with Section 111(d) and (m) of the Customs Act as imported in contravention of the Import Control Order 1955 issued under Sections 3 and 4A of the Customs Act. Penalty of 13.5. lakhs was imposed under Section 112 of the Customs Act on Metal Alloy Inds. Gum rosin of 414 MT was also imported and cleared by Shah and Mehta in the name of Gulmohar Inds. on 352 US $ PMT as against the actual value of 440 US $ and the actual value works out to 31,92,989 as against the declared value of 25,54,381 and thus there is a duty evasion to the tune of 9,60,139 by the above parties. The import is also in contravention of the above provisions. Since the above two were not available for confiscation penalty of 23 lakhs was imposed under Section 112 of the Customs Act on Gulmohar Inds. read with 147 of the Customs Act on Shah and Mehta. He had acted as an authorised agent under Section 114 of the Customs Act on behalf of a non-existent company i.e. Gulmohar Inds. He was also one of the parties in importing the goods and the sale of the same in the local market. The personal penalty of Rs. 2 lakhs each under Section 112 of the Customs Act was imposed on Sriyuts Kamal J. Mehta, K. Hemani, S.S. Sharma, R.K. Doshi. Corrigendum was issued by the Collector on 2.4.93 to effect to substitute the imposition of penalty of Rs. 23 lakhs on Mukesh Shah from Gulmohar Inds. and Shah and Mehta. Hence these appeals.
6. In support of the Appeals 1770, 1789, 1792/93 Sri. J.C. Patel, Ld. Counsel has submitted that Shah and Mehta are the clearing agents and Kamal Mehta is the partner of the same and Mukesh Mehta is his brother. 450 MT of gum rosin was imported under Appendix 6(1) of 1990-93 Policy in December 1990 by Metal and Alloys Inds. 252 MT were cleared out of it. 150 MT of gum rosin was imported by Gulmohar Inds. under the above provisions and cleared in the same month. In January 199179.8 MT of Hydrogen peroxide was imported by Metal and Alloy Inds. under the same provision. The appraising group issued show cause notice on 6.5.91 to Metal and Alloy for enhancement of value of gum rosin. The investigation in respect of the above imports emerged that the goods so imported and cleared were sold in the market in June 1991 and thereafter. Balance of 198 MT of gum rosin of Metal and Alloy Inds. pending clearance was seized on 3.7.91 by the DRI. It is contended that imposition of penalty on Mukesh Shah by corrigendum to the impugned order is not permissible, as under Section 154 of the Customs Act, the correction of only clerical or authentic mistake or any accidental slip or omission is permitted, whereas the corrigendum in the present case goes beyond the same. It changes the entire basis and the complexion of the entire order. In earlier order, imposing penalty of 23 lakhs under Section 112 of Customs Act on Gulmohar Inds. and read with Section 147 of Customs Act on the firm Shah and Mehta. The corrigendum changes the basis and the person on whom the penalty is imposed. There is no proposal in the notice to impose a penalty on the customs house agent firm of Shah and Mehta and imposition of penalty by resorting to the Section 147 of the Act is legally not sustainable. 198 MT of gum rosin imported by Metal and Alloy is not liable to confiscation which are not cleared, on the ground that they were going to be sold. The violation of the condition of actual user after clearance of the goods cannot attract Section 111(d). The violation of post-importation condition cannot render the import invalid or contrary to law. The finding regarding under-valuation of gum rosin is bad in law. As the Commissioner has based on the tele fax recovered from the premises of the appellant, which does not relate to the goods in question. The finding that the payment of difference in value is established by tele fax recovered from the appellant's premises is wrong. The letter dated 14.8.92 of the appellant's counsel to the Commissioner regarding the explanation of the facts is ignored. The facts itself is clear that it relates to some other goods. The alleged invoice of the contemporary imports were not furnished to the present appellants. The question of valuation was pending before the appraising group as per the notice dated 6.5.91. The DRI was not competent to issue a notice to that question. The imposition of penalty on Kamal Mehta is not supported by any specific reason.
7. Kishore Hemani who was earlier represented by Sri Nankani and later personally appeared did not attend hearing, when the arguments were heard. But from the appeal memorandum it is seen that he is a man from Calcutta having independent activities of his business. He is no way connected with the instant case or with any business in Bombay nor with anybody in business organisation or in Assam relating to import and export activities. He has some relatives and friends in Bombay which are purely personal family connection and friendship. In response to the summon dated 9.7.91 he has sent a telegram and letter dated 20.7.91 stating that he had no knowledge in the matter and he was sick. In response to another summons dated 9.8.91 he has sent an affidavit sworn before a Magistrate dated 20.8.91 to the DRI reiterating the above facts. He had pleaded ignorance of Mukesh Shah of Bombay attached to the clearance house. The show cause notice was received by him on 18.2.92. The appellant was named by Mukesh Shah in his statement, and also named other few persons for the same purpose. The show cause notice was not supported by any document showing the involvement of the appellant with him in the alleged imports and the sale of the imported goods. The issue of show cause notice on the basis of a purported statement charging him is illegal and untenable. On 9.7.92 he appeared in the personal hearing before the Collector of Customs, Judicial and he sought the copies of the reply of the show r 'use notice by Shah and Mehta Mukesh Shah K.J. Mehta, in which the earlier statement were contradicted contending that under the threat the statements were given by Mukesh Shah and it does not hold good. He submitted before the Collector that except the personal acquaintance with Mukesh Shah he had no connection with the imports or with any persons alleged. No documents were produced to show that the appellant was an investor or otherwise. The impugned order does not give any reasons for imposing penalty of Rs. 2 lakhs on the appellant. The impugned order is passed without application of mind with the erroneous finding about the innocence of the appellant as regards to the alleged sale of the imported goods by Mukesh Shah, and the alleged import by the appellant. The available documents on records were not properly appreciated. Even though the impugned order holds Mukesh Shah that he has sold imported goods, he was set free for the clandestine sale of the subject goods but punished the appellant by confiscating the goods and imposing personal penalty on its partner even though there was no finding in the Order-in-Original that the appellant is responsible for the same. The Ld. adjudicating authority has erred in not appreciating the zerox copy of the SSI registration certificate granted by the Director of Cottage and Small Scale Industries Assam and relied upon the same without asking for the production of the original by the appellant which was always in his custody and could be produced at any point of time. He has merely disbelieved the zerox copy of the said certificate. The appellant is not responsible for any omission or commission for the purpose of evasion of customs duty to the tune of 9,60,138. It is surprising that the finding by the adjudicating authority that the answering respondent are nowhere responsible for the same. The real culprit Mukesh Shah has done all the acts and omissions as held by the Collector of Customs, Judicial Mumbai and is solely responsible for the same, but the other parties are punished without their acts or omissions under the Customs Act. Department's case is that the goods reported under the OGL but the department has considered the post-importation condition which is not to be decided under the Customs Act and beyond jurisdiction. It is to be dealt with by Import Trade Control Act, 1947 and Rules framed there under by appropriate authority, as per , Eastlndia Commercial Ltd. v. M.H. Mehta the principal condition of the licence is to be looked into by the import control department, and not by Customs department. The Customs authorities and licensing authorities are acting differently in different spheres of works. The Customs authorities have released the goods to Mukesh Shah who is not a Customs house agent, but posed as the partner of Shah and Mehta, CHA and sold them in the market in violation of the Import Control Act and Rules, without the consent of the importer and considering the gravity of the offence. But the appellant is punished for no fault of him, when it is specifically stated that the goods have been imported on the basis of a licence granted by the licensing authority and sold by the clearing agent on the basis of the authority of sale in the local market is contrary to the actual user condition under which the goods are allowed to be imported. The finding of the adjudicating authority that the same has been sold in the open market by the agent to the appellant is not correct as there are no specific plea and/or order by the appellant to sell the same. Even though it is held that Gulmohar Inds. and its representative are fictitious non-existent but personal penalty is imposed on them and the partners, which is quite strange. The impugned order is passed without taking into consideration of the relevant facts and circumstances and the evidence on record.
8. As against the above contention of the appellants on behalf of the respondent, Shri J.M. George, the Ld. JDR has contended that the detection in this case was on a specific information that Mukesh Shah, a broker and seller of imported goods in association with Shah and Mehta customs clearing agents are importing fast moving industrial chemicals like gum rosin hydrogen peroxide unauthorisedly in the name of certain industrial units and selling at a higher profit in the market contrary to the provisions in the ITC Policy. The investigations have shown that Mukesh Shah was acting in unison with the clearing agent firm Shah and Mehta in which his two brothers Kamal J. Mehta and Satish J. Mehta are partners. They have imported 450 MT of gum rosin on 11.12.90 under 5 bill of entry bearing No. 2613/58 78 to 81 valued at 28.7 lakhs CIF in the name of Mehta and Alloy Inds. There is a clear admission by them of selling 250 MT in the local market under the instructions of the importers. Mukesh Shah has clearly admitted in his statement of selling another quantity of 414 MT of gum rosin of the declared value of 25.54 lakhs imported in the name of Gulmohar Inds. and 79.8 MT of Hydrogen peroxide valued at 6.22 lakhs of Metal and Alloys Inds. and sold in the Mumbai market. The importers Metal and Alloy Inds. have admitted the import of the chemicals and the clearance job was entrusted to the agents Shah and Mehta. After clearance the goods should have been sent to Assam for consumption in the factory, but they have unauthorisedly sold the same, for which criminal proceedings are being taken. The summon issued to Gulmohar Inds. and letters to its partner and firm returned undelivered as the firm was non-existent. It is further contended by the Ld. JDR that the above goods appear in appendix 6 list 8 part I of the Exim Policy 1988-91 and the chemicals can be imported as raw materials by actual industrial users. Within limit, provided they have got a valid manufacturing licence for using the chemicals and the goods are meant for consumption in the factory. At the time of import, the bill of entry were filed on behalf of the industrial units possessing valid registration certificate. The clearance was permitted to the importers with the clear understanding that the above goods were meant for actual user condition of the respective parties. Investigation has shown that after clearance at the Bombay Port the goods have not reached the destination at all but sold on very high profit and fake lorry vouchers were produced by the clearing agent showing that they were actually transported to the destination. These facts are not in dispute in the case. The contention of the appellant that this constitute violation of post-importation and so the customs authorities have no jurisdiction is not proper and correct. When actual user condition relating to the import under OGL is violated, the import is unauthorised rendering the goods liable to confiscation under Section 111(d) of the Customs Act read with Section 3(2) of the Import and Export Control Act, 1947 and the persons who have imported and the owner and the other concerned persons are liable to appropriate action, for which the customs authorities are entitled to take action, without prejudice to any other action to be taken by the competent authority in that regard. Paragraph 20 of the ITC Policy AM-1993 is very clear. So the customs authorities have got the jurisdiction in dealing with these aspects. The import of such goods is totally invalid as unauthorised and the goods available are liable for confiscation and in the case of the goods already cleared the persons concerned with the import and sale are liable to the penalty under Section 112 of the Act.
9. Ld. JDR has further contended that as per the show cause notice there is an under-invoicing in respect of gum rosin imported and cleared in the light of contemporaneous value of gum rosin--N grade by others during the material period for 440 to 500 US $ PMT as against 352 $ PMT at CIF price by Metal and Alloy Inds. and Gulmohar Inds. This is admitted by the importer Mukesh Shah in his statement under Section 108 of the Customs Act. The party has failed to produce any material in support of the contention that the invoice cited by the department are not comparable to the present import. There is a clear admission by Mukesh Shah regarding the issue of the outstanding bills from his house. On 29.6.91 during the search by the DRI a fax message received from Sampatrao Dugar showing certain entries regarding the name of the party who imported the goods, invoice number, differential amount to be paid to the party in Hong Kong were found. These things are not contested by the appellant before the adjudicating authority. Nothing further was submitted after the undertaking by the counsel. It says that they have no defence as such against the above material. The finding of the Ld. Adjudicating authority of enhancing the value from US $ 352 to US $ 440 is just and proper. The goods were liable for confiscation under Section 111(m) for misdeclaration and under-invoicing.
10. Regarding the penalty imposed on the appellants he has further argued that the prime role is played by Mukesh Shah behind the unauthorised import and sale of gum rosin, hydrogen peroxide. Being the broker for sale of such goods as sought, the importers are persons connected with these two firms. There is a one-third share contribution for the business by Mukesh Shah and K.H. Mehta, Raju Doshi, and Kishore Hemani the investment is equal. Mukesh Shah and K.J. Mehta are from Mumbai, and the physical activity were conducted by them. The statement of Mukesh Shah and Kamal Mehta has clearly explained regarding the obtaining of fake lorry receipts. The retraction is only to avoid such facts which goes against them, i.e. partially which cannot be accepted. As per admissions, he has sought assistance from the Metal and Alloys Inds. and Gulmohar Inds. who were only to be given 10% of the profit made in the sale for lending their names and necessarily registration certificate for import. Original SSI certificate was not produced at any stage. The importers have changed their stand only after the issue of the show cause notice about taking action against the clearing agent for acting contrary to their instruction to send the imported goods to their factory. But no complaint has been made when the investigation started. There are no bona fide in their action and it cannot be upheld. There are clear admissions by the transport owners of the issue of fake lorry receipts showing the consignee's name as Gulmohar Inds. for gum rosin, and Metal Alloy Inds. for hydrogen peroxide on monetary consideration at the request of Mukesh Shah. The statement of manager, D.S. Deshmukh of Parekh Corporation Bombay clearly supports the case of the department about the understanding between him and Mukesh Shah regarding the storage of 400 MT of gum rosin in September 1990 and 250 MT gum rosin in January-February 1991 and 80 MT of hydrogen peroxide from the same period and 20 MT of trioxide in April, May 91 in their godown and subsequently releasing on the basis of the delivery letter they sent from Mukesh Shah. All the available material on record have been duly considered by the adjudicating authority in passing the impugned order. Penalty imposed is commensuarate with the value of the goods involved and the activities of the appellants in dealing with them violating the provisions of Customs Act and Import Control Act and Rules as discussed in the impugned order. There is no justifiable ground to disturb the same.
11. Perused the show cause notice dated 31.1.91 and reply filed by the appellants on 6.5.92, 6.7.92, 25.5.92 and also to the addendum to show cause notice dated 25.5.92,31.3.92 and the documents produced and the impugned order dated 17.9.92 and the appeal memorandum filed in all these cases and Section 111(d) and (m), 112, 147 of the Customs Act. So also Appendix 6(1) of 1993 Policy. The appellants have challenged the corrigendum issued on 2.4.93 by the Collector to the Order-in-Original substituting the imposition of penalty of 23 lakhs from Gulmohar Inds., Shah and Mehta to Mukesh Shah under the original order dated 18.1.93. Rs. 23 lakhs was imposed under Section 112 on Gulmohar Inds., and Section 112 read with 147 on Shah and Mehta. It is contended by the appellant that the corrigendum issued to the Order-in-Original after the lapse of the appeal period, after the filing of the appeal by Shah and Mehta is not permissible. The invocation of Section 154 of the Customs Act in that regard is not legal and proper. Because it deals with only correction of clerical errors. The corrigendum is not correction but a substitution. It is an after-thought. The show cause notice or the Order-in-Original does not give any basis for the said corrigendum. So also the corrigendum itself.
12. On the perusal of the corrigendum and the impugned order Section 154 of the Customs Act it is seen that the appellants contention deserves to be accepted. Section 154 permits only the clerical or arithmetical mistakes in any decision or order passed by the Central Government, the Board or any office of the customs under this Act or errors arising therein from any accidental slip or omission at any time be corrected by the concerned. From this it is clear that there is only a correction of the errors or mistake. As contended by the appellants in this case, this corrigendum substitute line No. 3 to 10 in page 18 of the Order-in-Original. According to that corrigendum under "Section 112(a) and (b) of the Customs Act, 1962 on Mukesh K. Shah (a) 12/0 Azad Nagar, Wadala, Mumbai, (b) 2907, Shaheed Bhagat Singh Rd, 2nd floor, Mumbai-38 while imposing heavy penalty on Mukesh Shah I have taken into consideration the fact that he had acted as an authorised agent on behalf of non-existent company Gulmohar Inds. Calcutta. He was main party in importing of the goods and sale of the same in the local market" In page 18 of the Order-in-Original it is observed that "While imposing heavy penalty on Mr. Shah, I have taken into consideration the fact that Mr. Shah had acted as an authorised agent under Section 147 of the Customs Act, 1962 on behalf of non-existent company i.e. Gulmohar Inds. He was also one of the party in importing of the goods and sale of the same in the local market." In the previous paragraph it is observed that "since the goods are not available for confiscation I have no other option than to impose personal penalty of Rs. 23 lakhs under Section 112 of the Customs Act on Gulmohar Inds. read with Section 147 of the Customs Act on Shah and Mehta." From the above, it is seen that in the Order-in-Original, no separate penalty was imposed on Mukesh Shah. Page 17 of the Order-in-Original did not disclose anything in that regard. There is an order of confiscation of 198 MT of gum rosin under Section 111(d) and (m) of the Customs Act with redemption fine of Rs. 4 lakhs. Penalty of 13.5 lakhs is imposed on Metal Alloy Inds. as 252 MT of gum rosin and 79.8 MT of hydrogen peroxide were not available for confiscation. Duty evasion is also pointed out. In paragraph 42 and 43 in the main show cause notice Mukesh Shah and others were called upon to show cause in writing within 15 days of the receipt of the notice as to why 198 MT of gum rosin N grade valued at 12,63,181 seized on 3.7.91 should not be confiscated and for causing unauthorised import of 450 MT of gum rosin and for misdeclaration of value and for illegal sale of 252 MT of gum reason (sic) frosin of declared CIF value of 16,07,684 and 79.8 MT of hydrogen peroxide of declared CIF 6,21,910 in the market, why penalty should not be imposed on them under Section 112 of the Customs Act. In paragraph 43 of the show cause notice they were called upon to show cause why penalty should not be imposed upon them on the ground that Mukesh Shah is also the main person behind the unauthorised import of gum rosin in the name of Gulmohar Inds. and the illegal sale in the market as being authorised person of CHA and importers had looked after the entire affairs. In the corrigendum paragraph 36 in page 31 of the original show cause notice is substituted. It is alleged therein that the goods have been imported in unauthorised manner rendering them liable to confiscation under Section 111(d) of the Customs Act read with Section 3(2) and Exports (Control) Act, 1947. However only 198 MT of gum rosin of declared CIF value of Rs. 12,63,181 is available for confiscation, and other goods have been sold unauthorisedly in the market.
13. From the above, it is clear that the corrigendum issued by the Collector to the Order-in-Original is a new development from the show cause notice and the Order-in-Original. The corrigendum is dated 2.4.93 and the Order-in-Original is 18.1.93. Shah and Metals have filed their appeal on 31.3.93. So as contended by the appellant, the corrigendum to the Order-in-Original issued is not legal and proper and it cannot be sustained. The contention of the appellant in that regard is upheld.
14. The appellants have challenged the jurisdiction of the adjudicating authority in exercise of his powers on the ground that the goods are imported under OGL with the actual user condition and if it is violated the provisions of import and Export Control Act and Rules therein takes care of it. It is a post-importation violation and the Chief Controller of imports and exports is the competent authority to deal with that aspect.
15. The adjudicating authority has considered the above contentions of the appellant in all these cases in page 11 and 12 of the impugned order by considering paragraph 19 and 20 of ITC Policy of 1993 and examined this case. He has come to the conclusion that the condition indicated with the import under OGL, have been bluntly violated so the imports are invalid. The goods have been imported in unauthorised manner rendering it liable for confiscation under Section 111(d) of the Customs Act read with Section 3(2) of Import and Export Control Act, 1947. He has further held that if any article requiring a licence/OGL is imported contrary the terms and conditions of the licence, the importer/owner of the goods as well as the other concerned are liable to proper action under the Import Control Act, 1947 and the order issued therein by the competent authorities. He has further observed that the action taken in this case is without prejudice to any other action that may be taken in this behalf by the concerned authorities under the concerned Act as per paragraph 20 of the Policy. Thus, he has negatived the contention of the appellant that he has no jurisdiction to deal with the licence.
16. From the perusal of the Import Export Policy for April 1990 to March 1993 in paragraph 19 and 20 in Chapter 2 under the heading General Licensing Matters reflected the same. Paragraph 20 Clause (2) says that in the matters relating to Import Export Policy and Procedures, the interpretation given by the Chief Controller of imports and exports is final, the customs authorities should consult the Import Trade Control authorities in case of doubt. This is the only hindrance for the Customs authorities in dealing with the imports. The consultation confines to the Policy and proceedings and the interpretation. In the instant case, the adjudicating authority has dealt with the imported goods from the angle of customs duty and the confiscation, which is vested only with the customs authorities. The question of interpretation, the procedure relating to the import and export policy does not arise in this regard Appendix 6 item 1 read with list 8 in part I, item 231 and 243 covers gum rosin and hydrogen peroxide involved in this case. The category of eligible importers are actual users (industrial). The Customs authorities have got jurisdiction to decide whether the import is authorised or not as per the above provisions. No question or consultation with the licensing authority arise while applying the above provision with the facts of the case. The impugned order clearly observed that the action under the Import Trade Control Act, 1947 is without prejudice anything other action taken on behalf of the Customs authorities on the Customs Act as per paragrah 20 Clause (2) of the Policy. Thus it is seen that the parallel jurisdiction is conferred on the Customs authorities to deal with the case on this account. The contention of the appellant in all these cases contrary to this cannot be upheld and it is rejected.
17. The question of under invoicing of the two items imported is also involved in this case. They were cleared and sold in the market. The contention of the appellant before the adjudicating authority is considered regarding the defence, and he has dealt with it in detail in paragraph 13 and 14 of the impugned order. The main contention of the appellant in both these cases is that the observation in the impugned order regarding the fax message Detaining to the differential value to be paid to the National Corporation of China during the Hong Kong intermediary and the documentary evidence relating to frequent telephone calls made by Mukesh Shah to the telephone No. of Sampat Raj in Hong Kong. The defence is not sustantiated in the personal hearing. It was pointed to the counsel appearing for the appellant Mukesh Shah he promised to check up and revert back, and nothing further was heard from him. This observations are challenged in the ground of appeal memorandum in all these 4 cases contending that appellant had written a letter to the adjudicating authority on 4.8.92 referring to the personal hearing held on 7.8.92 through their counsel H.R. Shetty, Advocate and have produced the invoice and the letter dated 29.9.90 to Metal and Alloy Inds., by ABJ International and the bill of entry and packing list and certificate of origin including, the policy and the bill of entry for home consumption which were not at all considered by the adjudicating authority while passing the impugned order on 17.9.92. All these documents relates to acrylic scrap. In the covering letter it is mentioned that the documents establishes that invoice referred to in the telephone communication Jerry account, refers to importation of acrylic scrap and not to gum rosin the value of invoices, challans with the value shown in the said communication. The documents relied upon by the department alleging under-invoicing is unaccpetable in facts and law. Apart from that, it is the main grouse of the appellant that contemporaneous imports documents were not produced in the proceedings and the appellant were not supplied with any such material to show that such identical have been cleared by the Mumbai Customs house at a higher price. As per the show cause notice contemporaneous value of the gum rosin N grade 440 to 500 US $ MT in support of which no documents were produced and supplied to the parties. The statement of Mukesh Shah dealt with in the impugned order has to be decided in the light of the above documents produced before the adjudicating authority, and also the allegation in the show cause notice with the supporting material. There admission is not sufficient to overload the value. The documents seized from the house of Mukesh Shah requires to be examined with the documents produced in the instant case. So, for the purpose of valuation the impugned order cannot be upheld for want of sufficient material. The contention of the appellant in that regard has to be upheld. The matters requires to be remanded to the adjudicating authority to consider the above material which were available before him, but were not considered.
18. Now coming to the question of imposition of penalty, the impugned order has discussed the same in pages 14 to 17. The penalty is imposed considering the fact 252 MT of gum rosin cleared by the party was not available for confiscation and the resulted loss of duty was worked out of 60422 and hydrogen peroxide 79.8 MT valued at 6,21,910 which were imported in contravention of Import Control order issued under Section 3 and 4 of the Customs Act. 414 MT of gum rosin imported in the industry of Gulmohar by Shah and Mehta, the appellant is also considered and the actual value is worked out at the enhanced rate and considered evasion of duty to the tune of 9,60,139. Penalty was imposed in the background on the above, that the goods are not liable for confiscation. So the penalty depends upon various factors as found from the impugned order when the question of loading of the value is pending consideration the value of the goods involved has to be determined afresh after considering the documentary evidence produced and other material in support of the show cause notice allegation and the penalty imposed has to be determined. So for this purpose the matter requires to be remanded to the adjudication authority. The confiscation of 198 MT of gum rosin in the impugned order on the ground of anticipated sale in the background of the precedent as discussed in the impugned order has to be accepted. The contention of the parties in dealing with the goods played important role in determining their liability to penalty. Now regarding the imposition of penalty on the appellant, the statement of the appellants coupled with the statement of Parmanand Sharma of Richa Roadlines and the statement of D.S. Deshmukh, the Manager of Parekh Corporation Bombay and the admissions of the appellants in the statement under Section 108 of the Customs Act and the goods transport receipts clearly supports the finding of the adjudication authority about the active role played by Mukesh Shah who was sitting in the premises of Shah and Mehta, the CHA and he is also the brother of one of the partners of the said firm i.e. Suresh K. Shah. He is a broker by profession, and admittedly has sold the imported chemicals commanding higher premium in the local market, imported under OGL. He has taken assistance of the importers to further his business. All the physical activities at Mumbai have been attended by Mukesh Shah and Kamal Mehta as per the statements recorded in these cases. The statement dated 30.6.91 of Mukesh Shah explained how fake lorry receipts were obtained. The admission by him coupled with their corroborative statement referred above makes out the capability of Mukesh Shah and Kamal Mehta in these transactions. As observed by the adjudicating authority the importers have also taken belated action against Mukesh Shah about the sale of the imported goods in the open market namely after the DRI entered the scene and exposed the fraud. No action was taken except writing to the CHA about the information received from the DRI regarding the disposal of the imported goods. No complaint seems to have been filed against the clearing agents or Mukesh Shah, S.S. Sharma on behalf of Metal and Alloys Inds. has not appeared in the course of the investigation and made out the case against Mukesh Shah regarding the genuine complaint he had. The documents now produced before the adjudicating authority regarding Gulmohar Inds. pertain for the period when the transaction took place and not at the stage when the investigating authorities issued summons to Gulmohar Inds. Manager Raju Doshi showing the existence of the firm at the relevant time. The above material clearly makes out the liability of the appellant for the penalty under Section 112 of the Customs Act. So the contention of the appellant contrary to the above material cannot be upheld and it is rejected. In view of the fact that the quantum of the penalty imposed depends upon the question of valuation of the imported goods the penalty now imposed cannot be maintained and it has to be set aside. We direct the adjudication authority to fix the same after hearing the parties on this aspect.
19. In view of these findings, the appeals are required to be allowed and the matter has to be remanded back to the adjudicating authority for giving an opportunity to the appellant for the production of any additional evidence, if required, in support of their case and hear afresh and determine actual duty to be levied, and penalty to be imposed and dispose of the matter according to law. Hence we pass the following order.
ORDER
1. the reasons discussed above, the appeals are allowed and the impugned order set aside along with the corrigendum. The appeals are remanded back to the adjudicating authority to readjudicate the matter in the light of the observations made in the above paragraphs.