Customs, Excise and Gold Tribunal - Delhi
Omex (India) vs Collector Of Customs on 13 September, 1990
Equivalent citations: 1991(51)ELT573(TRI-DEL)
ORDER G.A. Brahma Deva, Member (J)
1. This appeal arises out of and is directed against the Order-in-Original No. 135/89-Addl. Collr (A) dated 28-12-1989 passed by the Additional Collector of Customs, Customs House, Calcutta.
2. The appellants M/s. Omex (India), Ghaziabad, imported one consignment of 192 cases of BMZ Brand ball bearings of Bulgarian origin and sought their clearance against I.T.C. licence in the name of M/s. Rastriya Casting Works, Rajasthan, with a letter of authority executed in their favour by the licensee. The value of the goods was declared at Rs. 1,87,634.94 Paise C.I.F and these goods were assessed in the Customs House on 25-10-1988 and duty amounting to Rs. 12,91,935/- was also realised from the appellants. Subsequently, an investigation was started by the D.R.I. Zonal Unit suspecting the declared weight of bearing No. 62067 and also the origin of all the bearings. During examination it was found that some of the ball bearings had not been correctly declared and hence they were not entitled to the benefit of concessional rate of duty in terms of Notification No. 146/86-Cus. resulting into the disclosure of an attempt to evade duty to the extent of Rs, 1,28,606.49 and observed that the goods were of different origin. Further on enquiries it was noticed that licence stand in the name of M/s. Rashtriya Casting Works had been suspended by the Licensing Authority on 21-10-1988. Accordingly, D.R.I, held that importation as unauthorised being not covered by import licence and thereby rendering the goods liable for confiscation Under Section. Ill (d) of the Customs Act, 1962. Apart from rendering the goods liable for confiscation Under Section. 111 (m) and 111 (d) of the Customs Act, 1962, penalty was initiated under Section 112 of the Customs Act, 1962.
3. The Additional Collector who adjudicated the proceedings after considering reply to the Show Cause Notice and submissions made during the course of adjudica-tion proceedings accepted the declared value and dropped the charge against the appellants in respect of origin of the ball bearings. But, however, he held that the appellants attempted to evade duty to the extent of Rs. 1,28,606.49 by misdeclaring the weight of bearing No. 62067 as 200 gms. each instead of 195 gms. by claiming the benefit of Notification No. 146/86 Cus dated 26-10-1986. He also held that the licence as void-ab-initio on account of non-existence of the licence arid appellants guilty of their complicity in obtaining the import licence or in fabricating the letter of authority. In view of these findings the Additional Collector confiscated the ball bearings but allowed redemption thereof on payment of a fine of Rs. 8,00,000/- Under Section. 125 (1) of the Customs Act, 1962 and penalty of Rs. 2,00,000/- was also imposed on the appellants. Feeling aggrieved by this order the appellants have come before us by way of this appeal.
4. We have heard Sri A.K. Jain, learned Advocate, for the appellants and Sri G. Bhushan, learned SDR for the respondent. '
5. Shri A.K. Jain appearing for the appellants submitted that there is no dispute regarding the levy of duty on the said goods but he questioned the validity of the impugned order in imposing the redemption fine as well as penalty on the appellants on the. charge of complicity in their obtaining the licence or in fabricating the so-called licence on mere suspicion without proof. He raised number of legal propositions on this issue which can be summarised as follows :-
(i) Mens rea is an essential ingredient in imposition of fine and penalty. In the absence of any proof of mens rea no confiscation/fine can be ordered. Penalty and confiscation proceedings being quasi-criminal strict proof is a must. Suspicion, however, grave may be, can not take a place of proof. He said that appellants have imported the goods under the bonafide belief that the importation was covered by valid licence. The party cannot be penalised by drawing an inference that they should have exercised due care to satisfy themselves about the genuineness of the licence. The appellants obtained licence believed to be genuine through agents whose existence is undisputed and that is how contract would be completed normally in the trade practice. Further neither the Department nor the appellants were aware of the suspension of the licence when the bill of entry was filed. In the absence of strict proof of mens rea the penalty and confiscation proceedings were not sustainable in the eye of law and in support of his contention he cited the following decisions :-
1. AkbarBadniddin Giwani v. C. C. Bombay - 1919-2-SCC-203 .
2. Ravula Hariprasad Rao v. The State - AIR (38) 1951 SCR - 322
3. Merck Spares v. Collector of Central Excise & Customs, New Delhi -1983 (13)ELT 1261 (Tribunal).
4. Vishnu B. Seemani v. K. Narsimhan -1987 (27) ELT 266 (Guj.)..
5. Jain Exports Pvt. Ltd. v. Union of India -1990 (47) ELT - 213 (S.C.) .
6. Shanti Parshad Jain v. Director of Enforcement - AIR 1962 - S.C. -1764.
7. Indian Handicrafts v. Collector of Customs -1990 (45) ELT 503.
8. Uma Textiles v. Collector of Customs -1990 (15) ETR - 369.
(ii) His next proposition is that a licence obtained by fraud is only voidable and is good till it is avoided. He said assuming that it was obtained by fraud at the original instance, it remained valid in the hands of the transferee till it is suspended. In this case the licence dated 13-1-1988 was suspended only on 21-10-1988 but ship was landed on 25-8-1988 and importation took place on 4-10-1988. In view of this fact and as per explanation given in paragraph 75 of the Hand Book, Procedures 1988-91 - Import & Export Promotion, Date of shipment is the date of Bill of Entry for the purpose of import. Accordingly the importation was valid under licence as licence was not suspended on the date of importation. On this proposition he relied upon the following cases :-
1. East India Commercial Co. Ltd. v. Collector of Customs, Calcutta -1983 (13)ELT 1342 (SC) .
2. Chemi Colour Agency and Anr. v. C.C.I. & E. -1987 (30) ELT 175 (Cal.) .
3. Bansilal Jesasingh v. Union of India -1988 (36) ELT 52.
4. Lallubhai & Co. v. Collector of Customs, Bombay - 1989 (22) ECR - 573 (CEGAT - WRB) .
(iii) Further he urged that when the importation was covered under valid licence for breach of any condition of a licence, no order confiscating goods and imposing penalty in lieu thereof could be made as it was held in the case of Addl. Collector of Customs v. Best & Co., 1971-2-SCR-681.
(iv) Next, he contended that when the main person, viz., Shri Aasheet Ruparell as well as other two co-accused R.K. Sharma and Rakesh Seth have been exonerated from all allegations based on certain evidence, the same evidence could not be used against the appellants and cited the following decisions in support of his contention :-
(1) Orient Enterprises v. C.C. Cochin -1986 (23) ELT - 507.
(2) Great Eastern Shipping Co. Ltd. and Ors. v. Collector of Customs -1984 (17) ELT 482.
He drew our attention to the Show Cause Notice where it was alleged that Shri Ruparell was the main person for alleged transaction and statements of other two Brokers who have taken part in negotiating the licence. He emphasised that appellant being an accomplice, they cannot be penalised on the charge of complicity when main accused was exonerated. Further charge of complicity was not alleged in the Show Cause Notice.
(v) He contended that penalty was imposed without mentioning Section under which it was imposed and non-mentioning Section itself vitiates penalty as it was decided in the following cases :-
1. B. Lakshmi Chand v. G.O.I. -1983 (12) ELT 322 (Mad.) .
2. C.C.E. v. Ajit Singh - 1987 (14) ECC T-360
3. J.P. Yadav v. C.C, Muzaffarpur -1990 (29) ECR - 456 (Tribunal).
He said that neither Under Section. 111 (o) was invokable nor was mentioned in the Show Cause Notice but straightaway finds place in the impugned order. Goods cannot be confiscated either under Section 111 (o) or under Section 111 (d) & 111 (m) of the Act as there was no prohibition when the goods imported under a valid licence.
(vi) As regards quantum of redemption fine, he urged that Additional Collector grossly erred in taking market price on the date of passing orders as basis while determining the redemption fine, forgetting that there was a gap of more than one year and for working out fine, market price as prevailing on the date of import alone is to be taken into account. In support of this proposition, he cited the decision in the case of Ashwin Vanaspati Indus. Pvt. Ltd. v. Collector of Customs, reported in 1987 (29) ELT 991. Further he said that details of market enquiries shown in the impugned order were not disclosed to the appellants for their rebuttal which amounted to denial of principles of natural justice.
6. On the other hand Sri G. Bhushan, learned S.D.R. for the Revenue while countering the arguments justified the action of the Department in imposing the redemption fine as well as penalty. While reiterating the grounds adopted in the impugned order in holding that licence was invalid he said that not only importation was illegal but there was a misdeclaration of the goods with an attempt to evade duty to the extent of Rs. 1,28,606.49. This misdeclaration would have gone unnoticed but for the detection by the Department and subsequently, this misdeclaration was accepted by the appellants as per their letter dated 13-11-1988.
He said that this is a clear case of illegal importation in fabricating the letter of authority. He contended that letter of authority must know the license-holder before obtaining authority. He strongly relied upon the decision of the Supreme Court in the case of Collector of Customs, Madras and Ors. v. D. Bhoormull, reported in 1983 (13) ELT 1546 (S.C.) wherein it was held that Department is hot required to prove its case with mathematical precision and penal action was justified where the Department furnishes prima facie proof of the goods being smuggled goods. He argued that Section 111 (o) is applicable to the facts of the case as the condition specified in the licence was not complied with and the condition is not only applicable to baggages but to others as it was held in the case of R.K. Industries v. Collector of Customs & Central Excise [1989 (39) ELT 316] .
As regards omission of Section 112 in the impugned order and non-mentioning of Section lll(o) in the Show Cause Notice he stated that demand could be raised based on the allegation and contents of the order and it does not vitiate the exercise of power in question as it was held in the case of J.K. Steel Ltd. v. Union of India and Ors. [1978 (2) ELT (J-355)].
7. In reply, Shri Jain submitted that letter dated 3-11-1988 was not acceptance of misdeclaration but stated therein that weight was declared on the basis of S.K.F. International catalogue and the appellants, however, agreed to pay the difference of customs duty on particular item on information by the Clearing Agent. Further he said that Department should prove beyond reasonable doubt for taking penal action as it was held in the recent cases of the Supreme Court and if there are two conflicting decisions of Supreme Court, later of two decisions should be followed by the High Court and other Courts as it was observed in the case of Gujarat Housing Board v. NagajibhaiLaxmanbhai and Ors. (AIR-1986-Gujarat-81) following the previous decisions of the Supreme Court.
8. We have carefully considered the arguments advanced on both sides, perused the records and citations cited by respective sides. The main issue to be decided in this case is whether the importation is illegal and if so, whether knowledge is essential ingredient for imposition of fine and penalty. The propositions on point of law placed before us by the learned counsel for the appellants are sound principles of law laid down by the Courts. But how far those decisions are relevant and applicable to the facts of the present case is our concern. The contention of the appellants is that they have imported the goods under valid licence as the licence was suspended subsequent to the date of importation and licence was valid on the date of importation. Further this suspension was not known either to the Department or to the appellants on the date of importation. On the other hand the finding given by the Adjudicating Authority is that the licensee is nonexistent and therefore, the licence is ab-initio void. The Department has come to this conclusion after making detailed enquiry about the non-existence of the licensee. The appellants have not come out with any evidence to show that the real person was in existence at the time of issue of licence or licence was obtained under fraud by any person to show that it was voidable transaction except arguing legal proposition that a licence obtained by fraud is only voidable and is good till it is avoided. This is correct proposition of law that voidable transaction is good till it is avoided but it is not so in the case of void transaction. Void transaction is null and void from the beginning, i.e., void ab-in-ilio. It cannot be made good at any time. It confers no rights and creates no obligation at any time like in the case of voidable transaction till it is avoided. If the licence is issued in the name of person whose existence is not there or if it is issued in the name of dead person either by mistake of fact or by mistake of law that licence cannot be considered to be valid and it is void since its inception. Any importation under such void licence cannot be considered as legal importation or it cannot be claimed as legitimate on the ground that importer acted in a bonafide manner and believed that licence was valid one. Even if he has acted innocently or unknowingly still it confers no right as he was in possession of void licence. Law will not come into rescue of a person who pleads ignorance of law. According to Maxim 'Ignorantia Juris Non Excusat' (ignorance of law is no excuse). Citizens are deemed to know law of the land, particularly, the persons who carry on business/trade must be well versed with law relating to trade and mercantile transaction. In the view we have taken we hold that goods imported are not covered by a valid licence and as such, goods are liable for confiscation. When once we hold that licence itself was not valid and void, consequently such importation was illegal, the question of considering fulfilment or non-fulfilment of conditions specified in the licence or invoking Section 1ll(o) of the Customs Act does not arise.
9. Then next question comes whether knowlege is essential ingredient in imposing the redemption fine and penalty. Redemption fine and penalty cannot be equated at par while considering imposition of both fine and penalty under different Sections though both of them are penal in nature. Since the redemption fine in lieu of confiscation is a fine in rem which is enforced against the goods and the second kind of penalty is one in personam which is essential against the person concerned either in smuggling the goods or in illegal importation. Section 125 of the Customs Act deals with fine in rem concerned to such illegal importation irrespective of the knowledge of the person who imports and Section 112 of the Act deals with penalty in personam applicable to persons involved in such illegal importation. While considering the imposition of fine under Section 125 of the Act it is not necessary for the Customs authorities to prove that any particular person is concerned with illicit importation or exportation. But in the case of penalty under Section 112 of the Customs Act the Department has to prove further that the person proceeded against was concerned in such illegal importation. With these observations and in the view we have taken that importation was illegal in the present case we hold that redemption fine in lieu of confiscation under Section 125 was justified. We are unable to convince with the arguments advanced by the appellants' counsel that one Sri Ruparell was the main accused who has been exonerated and on the same evidence appellants have been penalised. After going through the Show Cause Notice and contents it is clear that main charges of illegal importation was against the appellants but it was alleged against Ruparell that he was the main person in helping to gel such fabricated licence to the importers as an abettor. However, we observe that charge of complicity against the appellants in their obtaining the licence or in fabricating the so-called letter of authority is not sustainable at it was not proved and others were exonerated from same charges. The other charge against the appellants was that they have mis-declared the goods in respect of item bearing No. 62067 with the intention to evade duty. However, after taking into consideration the letter dated 3-11-1988 explaining how mistake has crept in and in view of the fact that they voluntarily admitted for payment of difference in duty even before issue of Show Cause Notice, we are dropping charges for misdeclaration. In view of the facts and circumstances of the case and in the absence of strict proof of mens rea which is essential ingredient for the imposition of personal penalty under Section 112 of the Act, we set aside the penalty as it was not justified.
10. As regards quantum of redemption fine though we hold that the imposition was justified under Section 125 of the Act on facts and circumstances and as per provisions of Section 125 of the Customs Act, we feel it is on higher side. Further we concur with the appellants' counsel that Adjudicating Authority erred in not disclosing the details of market enquiries to the appellants before determining the redemption fine. This aspect requires reconsideration. Accordingly, we are remanding the matter to the concerned Additional Collector on this limited issue with a direction to redetermine redemption fine as per the provisions of Section 125 of the Customs Act after giving opportunity to the appellants to adduce evidence, if any, in support of their contention, in addition to the documentary evidence produced before us which are on record. Since the goods are still lying with the Customs authorities, the Additional Collector is directed to dispose of this matter at the earliest possible time on receipt of this order.