Customs, Excise and Gold Tribunal - Delhi
Naveenjain vs Commissioner Of Customs on 5 October, 2000
Equivalent citations: 2000(122)ELT895(TRI-DEL)
ORDER
K. Sreedharan, J. (President)
1. Appellant herein Shri Naveen Jain was Noticee No. 4 in the show cause notice C. No. VIII (CARGO PREV.)10/1798/290 dated 14.07.98 issued by Commissioner of Customs, Air Cargo, New Delhi. As per the said notice, appellant and other noticees were called upon to explain why 4, 908 pieces of 'Computer Software CD ROMs Lotus Smart Suite-97' seized from the godown and office premises of M/s. Somerset International Ltd. on 16.04.98 should not be confiscated under Section 111(m) of the Customs Act, 1962 and why penalty should not be imposed on them for contravention of the provisions of the Customs Act, 1962 under Section 112 of the Act. In reply to the notice, appellant herein raised a contention that he was not connected with the import of disputed CD ROMs and that he is not liable for any penalty. By order-in-original No. ACU/VS/27/99 dated 08.09.99, adjudicating authority imposed a penalty of Rs. 5 lakhs on the appellant under Section 112(a) of the Customs Act. The penalty so imposed is under challenge.
2. Learned counsel representing the appellant raised following contentions for our consideration :-
(a) The allegations made against the appellant in the show cause notice were vague inasmuch as it was not stated that appellant contravened any of the provisions of the Customs Act;
(b) Adjudicating authority could not have initiated any action against the noticees on the allegation that the noticees imported computer software at highly inflated value causing foreign currency to go out of the country illegally;
(c) The show cause notice did not specify the specific clause of Section 112 of the Customs Act under which penalty was sought to be imposed; and
(d) The penalty imposed on the appellant is too excessive. We shall proceed to deal with these arguments hereinbelow.
3. Show cause notice stated that noticees were importing computer software at highly inflated values and were availing duty exemption for clearance of the same at nil rate of duty under notification No. 11/97-Cus. Appellant herein was a Director of M/s. Somerset International Ltd. As per the allegations in the show cause notice, he looked after the work of that firm in Delhi area. The company in which he was working was owned by Mahesh Thakkar whose wife was running another company in Singapore from where the computer softwares were imported into India. It was alleged in the notice that as Director, he took active part in the import of the goods and executed documents for its release and issued cheques towards payment of its value. It was also stated in the notice that the goods imported were over valued and payments effected at highly inflated rate. Show cause notice went on to state that the goods imported by M/s. Somerset International, New Delhi were liable for confiscation under Section 111(m) of the Customs Act. As a result of such import, it was further stated therein that noticees were liable for penalty for contravention of the provisions of the Customs Act as provided by Section 112 of the Act.
4. Appellant submitted reply to the show cause notice through his counsel Shri Rohit P. Ranjan. In that reply, it was admitted that appellant was a Director of M/s. Somerset International Ltd. It was further stated therein that he ceased to be a Director with effect from November, 1996. This averment has not been substantiated by any of the documents produced in the case. Appellant did, in fact, issue cheques towards payment of the value of the goods imported and also sent various documents under his signatures. If there was any iota of truth in the allegations that he relinquished his position as Director in November 1996, he could not have sent documents under his signatures which concerned the import in question. To counter this, a case has been put forth by him stating that his signed papers were in the possession of the company and those papers were utilised for getting the software imported. This contention is only to be stated to be rejected for no prudent man could have allowed his signed blank papers to be left with by the company. Further, this contention is belied by the fact that cheques were issued by him to effect payments for the import of these goods. Taking into consideration the official transactions undertaken by the appellant, by issuing letters and cheques, we have no hesitation in overruling his contention that he ceased to be a Director of the company in November, 1996. The notice gave sufficient material to bring out the present appellant's involvement in the import of software at inflated rates. On going through the show cause notice as a whole, it cannot be said that the notice was vague and that the appellant herein was disabled from putting forth an effective defence. Therefore, we overrule the first contention raised by the appellant.
5. The second contention raised by the appellant was that action was initiated on the ground that appellant's action allowed foreign currency to go out of the country. If foreign currency happened to be sent out of the country, according to learned counsel representing the appellant, that may constitute an offence under the Foreign Exchange Regulation Act. For such a violation, authorities contemplated to take action are not those contemplated by the Customs Act. officers of the Customs department should have referred the matter to the concerned officers to proceed under the relevant provisions of the other Act. This argument appears to be quite attractive but, we do not find any substance in this contention. The main thrust in the show cause notice was that goods were imported into India at an inflated value making the goods liable to confiscation for violation of the provisions contained in Section 111(m) of the Act. In explaining the situation, the notice further stated the resultant flow of foreign currency out of India. That statement, under no circumstance, can be taken as an action undertaken by the authorities under the Customs Act without jurisdiction.
6. Learned counsel representing the appellant also raised a contention that the CD ROMs imported were stated to be not genuine. They were duplicate. In such a case, the Lotus Smart Suite-97 could have taken action for violation of the copyright or patent. Instead of that Company taking any action, according to the counsel, Customs authorities sought to proceed against the noticees by initiating the impugned proceedings. This argument advanced by counsel is also not at all appealing to us. On the basis of the evidence in this case (brought out on examination of the witnesses and on the letters written by Rahul Nanda and Martin Chee), adjudicating authority has rightly come to the conclusion that the CD ROMs imported were not genuine and were over valued. Goods brought into India which do not correspond in respect of value with the entry made in the document contemplated by the Customs Act are liable to confiscation. The duplicate CD ROMs imported into India by the noticees were found to be over valued. In other words, the value shown in the import documents did not correspond to its actual value. Import of goods in such a situation leads to confiscation of it under Section 111(m) of the Act. The consequence of such import was flow of foreign exchange out of India. This fact was stated in the show cause notice. That statement by itself will not go to invalidate the notice issued to the appellant and others. Viewed in this light, we do not find any illegality or impropriety in the action initiated by the adjudicating authority.
7. In the show cause notice, noticees were called upon to state why penalty should not be imposed upon them for contravention of the provisions of the Customs Act under Section 112 of the Act. This was the second point on which noticees' explanation was sought for. The first point on which their reply was called for was why the computer software CD ROMs "Lotus Smart Suite-97" should not be confiscated under Section 111(m) of the Customs Act, 1962. Reading the notice as a whole, it is clear that noticees were told that they imported goods which are liable to be confiscated under Section 111(m) and consequently, why they should not be imposed penalty. For violating the provision contained in Section 111(m), penalty that can be imposed on any person will certainly be under Section 112(a) of the Act. Clause (a) was not mentioned in the notice. This, according to the counsel, is fatal. In the absence of specific mention of Clause (a) or (b) of Section 112, it is contended, no penalty could have been imposed on any of the noticees. In support of this contention, learned counsel brought to our notice a Single Bench decision of the Madras High Court in the case of B. Lakshnichand v. Government of India [1983 (12) E.L.T. 322 (Mad.)]. On the facts of that case, the learned single Judge held that the departmental authorities have not made up their mind at the earlier stage or at the subsequent stage of the proceedings and the passing of the order as to which of the clause of Section 112 would be attracted in the case. On the ground that the authorities dealt the whole matter in a sphere of ambiguity, the action of the department was interfered with. Unlike the facts in that case, the noticees in the instant case were told that they violated the provisions contained in Section 111(m) of the Act in getting goods by over-valuing it. It was in such a situation, noticees were called upon to explain why penalty under Section 112 should not be imposed. So, according to us, the above quoted decision of the Madras High Court is not of any assistance to the appellant herein.
8. Learned counsel then relied on the decision rendered by a single Member of this Tribunal in Jogendra Prasad Vadav v. Collector of Customs [1990 (50) E.L.T. 250 (Tribunal)] in support of his contention that the failure in mentioning the specific clause of Section 112 is fatal to the adjudication proceedings. In this decision, the learned single Member of this Tribunal, following the above quoted decision of the Madras High Court, opined "if a penal action is proposed to be taken and proceedings initiated which are likely to culminate in the imposition of penalty then the authorities must be clear in mind as to whether Clause (a) or Clause (b) of Section 112 will apply or both, and the order must make specific reference to the provisions failing which the order of penalty is not sustainable". Learned Member then quashed the order of the authorities under the Act imposing the penalty. We do not find our way to subscribe to this view expressed by the learned single Member because of the decision of the Supreme Court in J.K. Steel Ltd. v. Union of India and Ors. [1978 (2) E.L.T. (J 355)]. In that decision, their Lordships, after referring to various decisions of that Court, stated the law in the following terms :-
"If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. This is a well-settled proposition of law".
On the facts of this case, penalty was sought to be imposed under Section 112 for violation of the provisions contained in Section 111(m). All details pertaining to the violation of the provisions of Section 111(m) were specifically stated in the show cause notice. So, the noticees were aware of the factual situation. On the said set of facts, they were called upon to show cause why penalty should not be imposed. In such a situation, there was no vagueness or ambiguity in the allegations made in the show cause notice. The noticees were never disabled from putting forth their contention. All contentions that could have been raised by the appellant were raised in the reply to the show cause notice which was filed through an advocate. In the final order passed by the adjudicating authority, penalty was imposed on the appellant herein and other noticees under Section 112(a) of the Act. In these circumstances, we are clear in our mind that the absence of mention of Clause (a) or Clause (b) of Section 112 in the show cause notice cannot be taken as a ground for quashing the order of the adjudicating authority.
9. Software CD ROMs valued at Rs. 6,10,02,7897- (4,908 pieces) were imported into India by over invoicing it. These goods were recovered from the possession of the noticees. Noticees were called upon to show cause why these goods should not be confiscated. In the reply to the show cause notice, the advocate of this appellant stated "since the goods do not belong to my client he has no objection for its confiscation and he is nowhere concerned with the said imports". Since the appellant did, in fact, issue cheques towards the payment of the value of the imported goods and also other letters under his signatures, he cannot be treated as a complete stranger to the transaction. When he was so involved in the transaction concerning goods valued more than Rs. 6 crores, imposition of penalty of Rs. 5 lakhs does not appear to be excessive or too harsh. On the facts and circumstances of this case, we do not find any ground to interfere with the said penalty.
10. In view of what we have stated above, we find no merit in this appeal. It is, accordingly, dismissed.